How does the Kansas Disability Employment Act tax credit work?

Plain-English summary

Kansas Notice 24-02 explains changes 2024 Senate Bill 15 (Section 4) made to the Kansas income tax credit for purchases from a qualified vendor that employs individuals with disabilities. The bill amended K.S.A. 79-32,273 and gave the statute a name: the disability employment act. The most important change is that the credit's December 31, 2023 sunset was removed, so the credit continues.

Key features of the credit:

• Amount. 15% of the taxpayer's expenditures for goods and services purchased from a qualified vendor certified by the Secretary of Commerce. Expenditures made on or after January 1, 2024 (but before Senate Bill 15's effective date) qualify.
• Per-vendor cap. The credit awarded to any one taxpayer cannot exceed $500,000 per qualified vendor per tax year.
• Overall cap. The cumulative cap on all taxpayers' credits rose from $5 million for the five-year period 2019-2023 to $8 million for 2024-2028, and $8 million for each following five-tax-year period starting with tax year 2029.
• Carryforward. The credit is nonrefundable, but unused amounts carry forward until used -- not beyond the fourth tax year after the year the expenditures were incurred.

The definitions of "qualified vendor" and "individuals with disabilities" (used by Commerce during certification) were also updated. The Kansas Department of Commerce handles vendor certification.

What this means for you

Businesses buying from qualified vendors

• You can claim a Kansas income tax credit equal to 15% of what you spend on goods and services from a Commerce-certified qualified vendor.
• Your credit for any single qualified vendor is capped at $500,000 per tax year, and the statewide pool is capped ($8 million for 2024-2028).
• If your credit is larger than your tax, carry the unused amount forward -- but not past the fourth tax year after the expenditures.
• The Secretary of Commerce must annually certify that your purchases were made from a qualified vendor, so work with the Department of Commerce on certification and the updated definitions.

Common questions

How large is the credit? 15% of expenditures for goods and services purchased from a certified qualified vendor.

Did the credit expire? No. Senate Bill 15 removed the December 31, 2023 sunset.

Is there a limit? Yes -- $500,000 per qualified vendor per tax year, within a cumulative statewide cap ($8 million for 2024-2028).

Can I carry unused credit forward? Yes, until used, but not beyond the fourth tax year after the expenditures were incurred.

Who certifies the vendor? The Kansas Secretary of Commerce.

Citations and references

• Senate Bill 15 (2024) -- Section 4 amended and renamed the credit as the disability employment act and removed its sunset.
• K.S.A. 79-32,273 -- the disability employment act income tax credit.
• K.S.A. 79-32,273(a) -- names the act and restructures the credit's subsections.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 24-02

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                        NOTICE 24-02

                          DISABILITY EMPLOYMENT ACT TAX CREDIT

                                        (JUNE 5, 2024)

   During the 2024 Legislative Session Senate Bill 15 was passed and signed into law. Section

4 of the Bill amended K.S.A. 79-32,273, to make changes to the income tax credit for expenditures
of goods and services purchased from a qualified vendor, and to remove the sunset provision for
the credit.

   Specifically, K.S.A. 79-32,273(a) was amended to provide the provisions of the statute shall

be known and may be cited as the disability employment act. The subsection was also divided to
insert new subsection (b) and label former subsections (b), (c), (d), and (e) as subsections (c), (d),
(e), and (f)..

   Amendments to new subsection (b) retained language providing the amount of the income

tax credit is 15% of the amount of expenditures of goods and services purchased by a taxpayer
from a qualified vendor that is certified by the Secretary of Commerce, but eliminated the
December 31, 2023, sunset provision, and specifically provides expenditures made on or after
January 1, 2024, but prior to the effective date of Senate Bill 15, qualify for purposes of calculating
the credit. Subsection (b) retained language providing the amount of the credit awarded to each
taxpayer shall not exceed $500,000 per qualified vendor per tax year, but also increased the cap
on the total amount of cumulative credits for all taxpayers from $5,000,000 for the five-year period
of tax years 2019 through 2023, to $8,000,000 for the five-year period of tax years 2024 through
2028, and $8,000,000 for each consecutive five tax year period thereafter, starting with tax year
2029.

    New subsection (c) was not changed, and still provides the tax credit is to be deducted from

the taxpayer's income tax liability for the year in which the expenditures are made. The credit is
not refundable, but any unused credit may be used in the next succeeding tax year or years until
the total amount of the credit has been taken, except that no credit may be carried over deduction
after the fourth tax year succeeding the tax year in which the expenditures were incurred.

   New subsection (d), which requires the Secretary of Commerce to annually certify that

expenditures for goods and services purchased by a taxpayer subject to the credit were made from
a qualified vendor, and to provide such certification to the Secretary of Revenue, was not changed.

    New subsection (e) was amended to change the definitions of the terms "qualified vendor",

and "individuals with disabilities" or "individual with a disability", the Department of Commerce
will use during its certification process. For additional information regarding these terms and the
certification process, please contact the Kansas Department of Commerce.

                               TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                            Taxpayer Assistance Center
                           Kansas Department of Revenue
                           Scott Office Building, 1st Floor
                                  120 SE 10th Ave
                                   P. O. Box 3506
                              Topeka, KS 66601-3506
                                Phone: 785-368-8222
                                 Fax: 785-291-3614