Did Kansas repeal the 2012 partner and S corporation basis rules?

Plain-English summary

Kansas Notice 13-02 announces that a troublesome 2012 basis statute was repealed before it ever took effect.

Background. Section 37 of 2012 House Bill 2117 added K.S.A. 79-32,117n, addressing how to determine and compute the basis of a partner's interest in a partnership and a shareholder's stock and indebtedness in an S corporation. It was to become effective for tax year 2013.

The problem and fix. Shortly after enactment it became apparent the statute did not achieve the Legislature's intent and would produce a clearly unintended result. The Department therefore delayed implementation and sought repeal. Section 19 of House Substitute for Senate Bill 83 (2013) repealed K.S.A. 79-32,117n.

Effect. Because House Sub for SB 83 is effective upon publication in the Kansas Register, the Department interprets the repeal to mean K.S.A. 79-32,117n will have no effect for tax year 2013 or any other year -- it proceeds as if the statute had never been enacted.

Date note. The notice bears no printed issue date; House Substitute for Senate Bill 83 took effect on its publication in the Kansas Register on April 25, 2013.

What this means for you

Partners and S corporation shareholders

• The 2012 Kansas basis rules do not apply. Compute basis as you did before -- as if K.S.A. 79-32,117n never existed.

Tax preparers

• Disregard K.S.A. 79-32,117n for all years; the Department will not implement it.

Common questions

What was repealed? K.S.A. 79-32,117n, the 2012 partner/S corporation basis provision.

When would it have applied? It was set to take effect for tax year 2013.

Why was it repealed? It did not achieve the Legislature's intent and would have produced an unintended result.

Does it apply to any year? No -- the Department treats it as if never enacted.

Citations and references

• K.S.A. 79-32,117n -- the 2012 basis provision (2012 House Bill 2117, Section 37), repealed by Section 19 of 2013 House Substitute for Senate Bill 83.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 13-02

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 13-02

                     KANSAS INCOME TAX - CHANGES TO BASIS RULES

                             REPEAL OF K.S.A. 79-32,117n

  During the 2012 Legislative Session HB 2117 was passed and signed into law. Section 37

of the Bill addressed the determination and computation of the basis of a partner's interest in a
partnership and the basis of a shareholder's stock and indebtedness in an S corporation. Section
37 was codified in K.S.A. 79-32,117n, and became effective for tax year 2013.

 Shortly after it was enacted, it became apparent that the provisions of K.S.A. 79-32,117n

did not achieve the result intended by the Legislature. In fact, it became apparent that a clearly
unintended result would be achieved. In light of this the Department of Revenue decided to
delay implementation of the provisions of K.S.A. 79-32,117n, and to seek repeal of the statute
during the 2013 Legislative Session.

 House Substitute for Senate Bill 83 has been passed by the 2013 Legislature and has been

signed into law. Section 19 of the Bill provides that K.S.A. 79-32,117n is repealed.

  House Sub for SB 83 indicates it is effective upon publication in the Kansas Register. The

Department of Revenue is interpreting this to mean that the provisions of K.S.A. 79-32,117n will
not have any effect, for tax year 2013 or any other tax year. In other words, the Department
intends to proceed as if K.S.A. 79-32,117n had never been enacted.

                                 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