On May 8, 2009, the Kansas Legislature approved the Senate substitute for House Bill 2365. Governor Parkinson is expected to sign the legislation. Among other things, the omnibus bill: reduces many tax credits manufacturers may have by 10%; shortens the time for claiming sales and use tax refunds for overpayments from three years to one year; clarifi es deadlines for fi ling income tax refund claims and grants settlement authority to the Secretary of Revenue to resolve some audit related assessments.

Tax Credits

For the tax years 2009 and 2010, many state tax credits, including the Business and Jobs Development credit and the High Performance Incentive Program credit, are affected. The bill provides that the credit shall not exceed 90% of credits earned in the current year or carried forward. Potential pitfalls for manufacturers include underpayment of estimated taxes due to accruals based on receiving 100% of the applicable credit.

Sales & Use Tax

The legislation reduces the time for claiming overpayments of sales and use taxes from three years to one year. Opportunities to recoup sales and use tax payments mistakenly paid on exempt items such as manufacturing equipment or items purchased for expansion projects may be lost. The reduction is effective for all claims fi led after June 15, 2009. Consequently, manufacturers may wish to contact BKD as soon as possible if there is a chance an older refund opportunity may be lost.

Income Tax Refund Deadlines

The bill clarifi es a taxpayer has three years from the date the original return is due, including any extensions allowed, to file an income tax refund claim.

Settlement Authority

The bill contains language granting the revenue secretary additional authority to equitably resolve any assessment resulting from an audit, or any portion of such assessment that is pending in the administrative appeals process, or state and federal court. The authority includes the ability to resolve the amount of tax, penalty or interest due. Manufacturers facing assessments may wish to contact BKD to represent them in settlement negotiations with the secretary to resolve assessments as effi ciently as possible.

About BKD

BKD, LLP is the top-tier U.S. CPA and advisory fi rm that delivers its experience and service with a deep understanding of your business, your needs and what it takes to improve your business performance. BKD’s approximately 2,100 personnel, including approximately 250 partners, are based in 32 offi ces serving clients in 50 states.

To learn more about how this act may affect you and your business, contact your BKD advisor.