Committee Eyes New Sources of Revenue:
Architects & Construction Industry Should Be on Alert
By Terry Humphrey, Executive Director
On Friday, November 6, the Special Committee on Taxation finished a two-day review of tax policy. The committee was formed to “review the policy, rationale, and justification for all exemptions and credits within the state’s tax code; and establishing a potential time table to sunset many of those provisions.”
In short, this committee is charged with finding new sources of revenue to shore up the state’s very serious revenue shortfall. Several items on their agenda are of particular significance to our members: the sales tax on professional services, the sales tax exemption on building construction materials, and the historic tax credit program.
Sales Tax on Services. Currently, there is no law to impose sales tax on professional services, including services provided by architects. If the committee decides to recommend a sales tax on professional services, they or another lawmaker would first have to draft a bill to impose such a tax. AIA Kansas would strongly oppose any effort to tax professional services.
Sales Tax Exemption on Building Construction Materials. The committee also reviewed existing tax exemptions, including those for building materials used in construction. This is not new territory. Last session, you may recall, a bill was introduced (House Bill 2435) to repeal the building material sales tax exemption for all public projects. The bill is still alive in the House Tax Committee for consideration in 2016.
Historic Tax Credit. During the committee meeting, the Division of Legislative Post Audit summarized a 2010 audit of the historic tax credit program. The report (using 2007 data) described the program as “burdensome” to the Kansas Department of Revenue (KDOR) and the transfer option as not cost-effective for the state. However, the report concluded that the historic tax credit program accomplished its intended goal: contributing to economic development and revitalizing neighborhoods. According to KDOR, the historic tax credit program issued $14 million in tax credits in 2012. AIA Kansas will continue to fight to preserve the historic tax credit program, which has been a boon to Kansas communities.
The Special Committee on Taxation will meet one more time to determine how to proceed. The committee could agree on new tax policy and prepare a bill for introduction in the 2016 session. Given the state’s serious revenue shortfall, tax exemptions and credits may be on the chopping block. Therefore, it’s important that you tell your legislators to oppose a sales tax on professional services and support preserving the historic tax credit.
The next tax committee meeting is scheduled for December 9. If you have any questions, please let me know.