Which Kansas income tax deductions did HB 2117 limit to C corporations starting in tax year 2013?

Plain-English summary

Kansas Notice 12-03 explains that 2012 House Bill 2117 limits two income tax deductions to C corporations beginning in tax year 2013.

Beginning in tax year 2013, the following deductions are not available to individuals, S corporations, partnerships, limited liability companies, or other pass-through entities, and are available only to C corporations (corporations subject to the Kansas corporate income tax):

1. The net operating loss deduction (Section 17, amending K.S.A. 79-32,143).
2. The additional expense deduction for purchase of certain business property (Section 18, amending K.S.A. 79-32,143a).

For how the new law affects existing net operating losses held by individuals, the notice refers readers to Notice 12-08.

Date note. The notice bears no printed issue date; it is dated to mid-2012 by its position in the 2012 notice sequence (after Notice 12-01, June 11, 2012, and before Notice 12-15, July 19, 2012).

What this means for you

Individuals and pass-through owners

• Starting in tax year 2013, you cannot claim the net operating loss deduction or the additional business-property expensing deduction on Kansas returns.
• See Notice 12-08 for the treatment of net operating losses you carried into 2013.

C corporations

• These deductions remain available to corporations subject to the Kansas corporate income tax.

Tax preparers

• Reclassify these deductions as C-corporation-only beginning with tax year 2013 returns.

Common questions

Which deductions became C-corporation-only? The net operating loss deduction and the additional expense deduction for certain business property.

When did the change take effect? Beginning in tax year 2013.

Do individuals or S corporations still get these deductions? No -- after the change they are available only to C corporations.

Where can I read about existing individual net operating losses? Notice 12-08.

Citations and references

• K.S.A. 79-32,143 -- net operating loss deduction; amended by Section 17 of 2012 House Bill 2117 to limit it to C corporations beginning in tax year 2013.
• K.S.A. 79-32,143a -- additional expense deduction for certain business property; amended by Section 18 to limit it to C corporations.
• Notice 12-08 -- Department guidance on existing individual net operating losses.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 12-03

Original ruling text

Policy & Research Phone: 785-296-3081
915 SW Harrison St FAX: 785-296-7928
Topeka KS 66612-1588 www.ksrevenue.org
Nick Jordan, Secretary Department of Revenue Sam Brownback, Governor
Richard Cram, Director

                                      NOTICE 12-03

         CERTAIN DEDUCTIONS LIMITED TO CORPORATE INCOME TAXPAYERS

  During the 2012 Legislative Session House Bill 2117 was passed and signed into law. The

Bill provides that, beginning in tax year 2013, certain deductions will only be available to
corporations that are subject to the Kansas corporate income tax, i.e. C corporations.

  Beginning in tax year 2013, the following deductions will not be available to individuals, S

corporations, partnerships, limited liability companies, or other pass-through entities, and will be
available only to C corporations:

 1.     The net operating loss deduction. (Section 17, amending K.S.A. 79-32,143)

 2.     The additional expense deduction for purchase of certain business property.
        (Section 18, amending K.S.A. 79-32,143a)

  For additional information regarding the effect of the new law on existing net operating

losses held by individuals, please see Notice 12-08.

                                  Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about income tax, please contact:

                              Taxpayer Assistance Center
                             Kansas Department of Revenue
                             915 SW Harrison St., 1st Floor
                               Topeka, KS 66612-1588
                                 Phone: 785-368-8222
                                  Fax: 785-291-3614