Kansas House Bill 2231 was signed into law by Gov. Laura Kelly on April 24, 2025. This bill makes several changes to the state’s corporate, individual, and property tax laws. Many of the important changes to the state tax laws do not take effect until 2027 or 2028, although some updates and changes take effect later this year.
Corporate Tax Law Changes
Single Sales Factor Apportionment and Market-Based Sourcing beginning in 2027. Perhaps the most significant change is a switch from three-factor to single sales factor apportionment, effective Jan. 1, 2027, which is the apportionment method now used by most states. Historically, Kansas used an equally weighted three-factor formula, which is still used in only a few states today, and alcoholic liquor manufacturers continue to use the old formula. Publicly traded corporations that face an increase in deferred tax liability (where deferred tax liabilities exceed deferred tax assets) or a decrease in deferred tax assets (where deferred tax assets exceed deferred tax liabilities) as a result of this change are permitted to take a special deduction over 10 years to offset the impact of the change to the law completely, provided a statement announcing the intent to do so is filed by the taxpayer with the department no later than July 1, 2027.
Also effective on Jan. 1, 2027, sales of services and income from intangible property will follow market-based sourcing, where sales are sourced to the location where the benefit is received, versus the location where the services were performed, the sourcing method historically used by the state.
Provision for Potential Corporate Tax Rate Reductions. Beginning after Dec. 31, 2028, the new law allows for reductions to the corporate income tax rate, provided certain revenue targets are met. These reductions are ultimately dependent on the amount of tax revenue increase over the prior year.
Individual Tax Law Changes
An additional exemption of $2,320 is provided for head of household filers effective for 2024 and all subsequent tax years. An additional exemption of the same amount is provided for those honorably discharged from the U.S. military who receive disability compensation at the highest rate, as a result of a permanent disability or disease sustained while in the military, effective for 2025 and all subsequent tax years.
Property Tax Law Changes
Effective for all tax years beginning after Dec. 31, 2025, a number of items are specifically exempt from personal property taxation. Off-road vehicles not operated on highways (i.e., golf carts, snowmobiles, motorized bicycles, scooters, and others), trailers weighing 15,000 pounds or less for personal use, watercraft trailers and motors, and other watercraft will no longer be subject to personal property taxes.
These changes to corporate, individual, and property tax laws represent fairly significant changes to Kansas’ current tax laws. For any questions or assistance in complying, please contact a CBIZ SALT professional.
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