Kansas Bar Journals
66 J. Kan. Bar Assn. August, 24 (1997).
1997 LEGISLATIVE UPDATE
Journal of the Kansas Bar AssociationAugust, 19971997 LEGISLATIVE UPDATERon Smith [FNa1]Copyright (c) Kansas Bar Association; Ron Smith
One of the first duties when doing an article on legislation is to give the reader some semblance of the tone of the session from which new law springs. Describing the 1997 Kansas Legislature is difficult. How Kansans govern themselves perhaps was best summed up 93 years ago by Secretary of War William Howard Taft, in remarks to a large crowd in Topeka:
There has been on the part of good Kansas people the strong conviction that men and women can be made morally greatly better by legislation. Such a feeling always possesses an agricultural people of strong moral convictions, but as cities grow, and as the population becomes more dense, the truth steals over the clear-headed, however moral and high-minded, that there are limits to the making or keeping of people good by law, and that when the law essays more than it can really effect, public morals are not improved and the authority and sacredness of enacted law suffer. [FN1]
Taft was describing how lawmakers come to Topeka with lots of new ideas and then see them ground down under the relentless machinations of the political process. The 1997 Legislature, like many before it, went about proving Taft to be correct. Several issues surfaced that fired the imaginations--and anger--of lawmakers and the public. Legislators were upset by Gov. Bill Graves' veto of a concealed carry bill after it had passed both houses by large but not-veto-proof margins. [FN2] The Legislature came in for criticism of its own when its leaders floated a trial balloon for a 96 percent pay increase, a balloon whose life among public issues was so short they did not assign a bill number to the idea. Lawmakers genuflected at the alter of tax reform but not until after a squabble that resembled the recent Tyson-Holyfield fight, complete with ear-biting, ancestry-questioning and genuine unsavoriness.
Another perennial issue--getting tough with criminals--was in full bloom during the session. Since adultery was being talked about openly on talk shows with the contributing assistance of U.S. Air Force captains and generals, 18-year-olds (and older) convicted of adultery with someone younger than 18 years of age will now see their name added to the sexual predator list maintained by the Kansas Bureau of Investigation on the Internet. [FN3] The same bill applies the "listing" punishment to flashers (lewd and lascivious conduct) and consenting sex between gay and lesbian adults. As Taft might have said, this law will catch a lot of dolphins with the tuna.
Let's get right to what interests us the most--money. We've got it, lawmakers covet it, and they find ways to extract it from us.
For a family-oriented bunch of lawmakers, our legislators certainly have us scratching our heads over 1997 state tax policy.
The Legislature allowed the first $20,000 of valuation on single-family residences to be exempt from valuation for the state property tax levied in support of school districts, [FN4] (which puts more of the education property tax burden on upper-income families and businesses) then lawmakers ignored the fact the Kansas Supreme Court said it was perfectly OK to tax singles at a higher rate than married folks. The Legislature made everyone equally upset--at least on how much income tax they pay the state. [FN5] After a four-year phase in, a married couple and two folks living together without benefit of clergy will pay the same state tax on their combined incomes. [FN6] The only difference is one tax partner is lovingly referred to as the politically-incorrect "old lady" and the other is a PC-perfect "significant other."
Last year the Legislature said that gays and lesbians cannot validly marry anywhere and have the marriage recognized in Kansas, [FN7] even though the homosexual community argued all they wanted to be was to be treated like married, monogamous heterosexuals. This year, the Legislature made live-together couples the equivalent of married folks for income tax purposes.
Certainly the specter of paying higher income taxes as a single person will no longer deter divorce in Kansas. Will the supportive votes for the income tax decrease for singles be labeled as "pro-divorce" in the messianic diatribes that pass for campaign advertising in the 1998 legislative elections?
Major tax reform was thought to be accomplished this year. It all depends on your vantage point.
In addition to the income tax change for singles and the $20,000 exemption in property tax for schools, additional "reform" meant:
The state's uniform mill rate for school districts general fund levies is reduced to 27 mills from 33 mills; and The homestead refund program was expanded by increasing the ceiling on household income to $25,000 from $17,200. Whether this is "reform" depends on your status. If you are married, live in an apartment, do not own your own business and do not qualify for the homestead property tax refund. your reform quotient is zero.
The May issue of The Journal of the Kansas Bar Association erroneously reported that the Legislature had adopted a pick-up tax in lieu of our inheritance tax. While not true, we may be simply a year ahead of the curve. The governor and legislative leaders are close to recommending a pick-up tax or in the alternative substantial increases in the deductions afforded the three classes of beneficiaries and devisees under the current inheritance tax code. The question in 1998 will be how much revenue loss can the state stand if it went to a simple pick-up tax or heightened inheritance tax deductions.
Estate planning default provisions
Limited partners and members of limited liability companies formed after July 1, 1997, have a new statutory default provision governing their right of withdrawal from the partnership or L.L.C. Unless there is a specific written agreement granting a right to withdraw, there is no right to withdraw from these entities. [FN8] The bill resolves some textual concerns estate planners had with the IRS on the revocability of L.P. and L.L.C. business formats used for estate planning purposes and provide additional authority to minimize the value of a deceased's limited partnership interest for computation of estate taxes. Most other uses of L.P. and L.L.C. structures contain written provisions on rights of withdrawal and thus are unaffected.
Speaking of estate planning, lawyers with clients who are law and order buffs may want to spread the word that the
KBI is authorized to accept grants or donations for the purpose of carrying out the powers and duties of the bureau. [FN9] We are not exactly sure that the authority extends to grants or devises from private individuals but there does not appear to be a prohibition. Closer scrutiny is warranted.
Adoption tax credit
Lawyers representing couples involved in an adoption will also have to brush up on the tax code in order to fully advise them. The state now allows an adoption tax credit equal to 25 percent of the amount of credit on Section 23 expenses under the Internal Revenue Code or an alternative $1,500 credit for certain expenses of adopting children with special needs in custody of state Department of Social and Rehabilitation Services. [FN10]
The 104th Congress created a $5,000 federal tax deduction for those who adopt a child. Graves suggested Kansas award a $2,500 tax credit for such adoptions.
Excess credits carry over to succeeding tax years.
One bill made a number of administrative changes in tax policy administration. [FN11]
Delinquency rates for property taxes was changed from 12 percent to a floating rate found in K.S.A. 79-2968, plus 2 percent.
The secretary of revenue must "make available in a medium readily accessible to taxpayers" all Kansas Department of Revenue (KDR) administrative rulings affecting the duties and responsibilities of taxpayers under Kansas tax law. "Administrative rulings" include revenue notices, revenue rulings, information guides, policy directives, private letter rulings and Property Valuation Division directives.
Rather than a formal hearing, taxpayers making income-and excise-tax appeals must now request an informal conference to be conducted by the secretary of revenue or the secretary's designee. All facts and issues underlying the proposed liability or refund denial may be reconsidered. The informal reconsideration conferences will not be adjudicative proceedings under the Kansas Administrative Procedure Act. The rules of evidence will not apply. Legal representation will not be required. However, the taxpayer may bring an attorney, certified public accountant or other representative. No written record will be made of the conference, except at the request and expense of the taxpayer or the secretary (or designee). A final determination must be made within 270 days of the conference. This determination will constitute a final agency action subject to administrative review by the Board of Tax Appeals. The taxpayer may appeal directly to BOTA if a final determination is not rendered within 270 days. Hopefully this change will speed up BOTA processing of appeals. [FN12]
The Legislature enacted a requirement that a separate agreement be entered into between a taxpayer...