Will Kansas income and privilege tax rates drop under the 2025 revenue-triggered law?

Plain-English summary

2025 Senate Bill 269 created a mechanism for future income and privilege tax rate cuts that happen only if the state hits revenue and reserve targets. This notice both explains the mechanism and reports the first-year result: no rate cut for tax year 2026.

How the trigger works (New Section 1).

• Each August 15 (starting 2025), the Director of the Budget, with the Director of Legislative Research, checks two tests: (1) whether the prior fiscal year's adjusted general revenue fund collections exceed the inflation-adjusted base-year revenues, and (2) whether the budget stabilization ("rainy day") fund is at least 15% of the prior year's state general fund tax receipts.
• If both are met, the Director certifies the excess to the Secretary of Revenue, who then calculates and publishes an income and privilege tax rate reduction.
• Order of cuts (Section 1(d)): first, individual income tax rates are proportionally reduced until the lowest rate hits 4%, then the next-highest rate down to 4%; after individual rates reach 4%, cuts go to the corporate income tax surtax (until the combined corporate rate is 4%), the bank privilege tax (until combined normal + surtax is 2.6%), and the savings-and-loan/trust-company privilege tax (until combined is 2.62%). Once those are made, no further reductions occur.
• Sections 2–4 cross-reference these provisions into K.S.A. 2024 Supp. 79-1107 (banks), K.S.A. 79-1108 (S&Ls/trust companies), and K.S.A. 79-32,110 (individual/corporate income tax). The law took effect July 1, 2025.

The first determination (tax year 2026). On August 15, 2025, the Director of the Budget reported:

• FY 2025 adjusted general revenue fund collections: $6,038,279,792.
• FY 2024 base-year revenues of $5,969,395,529, adjusted to $6,126,761,315 using an adjusted consumer price ratio of 1.0264.
• FY 2025 collections were $88,481,523 below the inflation-adjusted base-year revenues.
• The rainy-day fund held $1,907,520,483 — 19.1% of prior-year receipts (above the 15% threshold).

Result: the rainy-day test was met, but the revenue test was not (collections fell short). So the Secretary of Revenue will not publish new rates, and there is no rate reduction for tax year 2026.

What this means for you

Individual taxpayers

• No income tax rate cut for 2026. Rates only fall in a year when Kansas revenue exceeds its inflation-adjusted baseline and the reserve fund is at least 15% full — 2025's numbers didn't clear the revenue bar.
• If future years trigger cuts, individual rates get reduced first, heading toward a 4% floor.

Banks, savings and loans, and trust companies

• Privilege tax rate cuts are back in line behind individual and corporate income cuts, and only kick in after individual rates reach 4% — targets are a 2.6% combined bank rate and 2.62% combined S&L/trust-company rate.

Businesses / tax planners

• Don't bank on automatic annual rate drops — they're contingent and are checked each August 15 for the following tax year. Watch the Department's future notices for whether a trigger is met.

Common questions

Q: Is there a Kansas income tax rate cut for 2026?
A: No. The revenue test was not met for FY 2025, so there is no rate reduction for tax year 2026.

Q: What are the two conditions for a rate cut?
A: Prior-year adjusted general revenue fund collections must exceed inflation-adjusted base-year revenues, and the budget stabilization fund must be at least 15% of the prior year's state general fund tax receipts.

Q: Which rates get cut, and in what order?
A: Individual income tax rates first (toward a 4% floor), then the corporate surtax (to 4% combined), the bank privilege tax (to 2.6% combined), and the S&L/trust-company privilege tax (to 2.62% combined).

Q: When is the determination made?
A: Each August 15, by the Director of the Budget with the Director of Legislative Research.

Citations and references

• Senate Bill 269 (2025) — the enacting law; effective July 1, 2025 (2025 Session Laws of Kansas, Chapter 116).
• New Section 1(b)–(d) — annual August 15 determination; revenue-excess and 15% rainy-day-fund tests; proportional rate reductions in order (individual income to 4%, corporate surtax to 4% combined, banks to 2.6%, S&Ls/trust companies to 2.62%).
• K.S.A. 2024 Supp. 79-1107 (Section 2, banks), K.S.A. 79-1108 (Section 3, S&Ls/trust companies), K.S.A. 79-32,110 (Section 4, individual/corporate income) — cross-reference the reduction provisions.
• FY 2025 determination (August 15, 2025): collections $6,038,279,792 vs. inflation-adjusted base of $6,126,761,315 (short by $88,481,523); rainy-day fund $1,907,520,483 (19.1%). Result: no rate reduction for tax year 2026.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 25-06

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 25-06

    DECREASES OF INCOME AND PRIVILEGE TAX RATES – CONTINGENT ON REVENUE

                                     (OCTOBER 2, 2025)

  During the 2025 Legislative Session, Senate Bill 269 was passed and signed into law. New

Section 1 of the Bill provides for future income and privilege tax rate decreases, contingent upon
revenues exceeding inflation adjusted base year revenues and retaining a certain amount in the
budget stabilization fund.

  New Section 1(a) of the Bill is a definitional section which defines the terms "adjusted

consumer price ratio", "adjusted general revenue fund collections", "base year revenues", "base
year consumer price index", "excess fiscal year general revenue fund collections", "fiscal year
consumer price index", and "inflation adjusted base year revenues".

   New Section 1(b) provides that, commencing on August 15, 2025, and every August 15th

thereafter, the Director of the Budget, in consultation with the Director of Legislative Research,
shall determine whether the total fiscal year adjusted general revenue fund collections from the
immediately preceding fiscal year are in excess of the inflation adjusted base year revenues and if
the amount of moneys in the budget stabilization fund (the "rainy day" fund) is equal to or exceeds
15% of the prior fiscal year's state tax receipt revenues to the state general fund. If that
determination is positive, the Director of Budget will certify the amount of excess to the Secretary
of Revenue.

  New Section 1(c) provides that if the Secretary of Revenue also certifies the amount of

excess, the Secretary shall calculate and publish an income and privilege tax rate reduction that
occurs because of the excess.

   New Section 1(d) provides that any reduction shall first apply to individual income tax rates

and shall proportionally decrease all rates in effect until the lowest rate is reduced to 4%. Once
the lowest rate is reduced to 4% the next highest rate will be reduced until it is reduced to 4%.

   After the individual income tax rates have been reduced to 4%, reductions will then occur to

the corporate income tax surtax rate, the privilege tax rate for banks, and the privilege tax rate for
savings and loans, and trust companies. New Section 1(d)(1), (2), and (3) provides the Secretary
will compute decreases to: (1) the surtax rate imposed on corporations until the combined normal
and surtax rates for corporations is 4%; (2) the normal tax imposed on banks until the combined
normal and surtax rates are reduced to 2.6%; and, (3) the normal tax imposed on savings and loans
and trust companies, until the combined normal and surtax rates are reduced to 2.62%.

  After the various reductions provided for in New Section 1(d) have been made no further

reductions shall occur.

 Section 2 amends K.S.A. 2024 Supp. 79-1107 regarding banks, Section 3 amends K.S.A. 79-

1108 regarding savings and loans and trust companies, and Section 4 amends K.S.A. 79-32,110
regarding individual and corporate income tax, to reference the tax rate reduction provisions of
New Section 1.

 The provisions of the Bill take effect and are in force from and after publication in the statute

book, which is July 1, 2025.

  In accordance with the new statutory provisions, on August 15, 2025, the Director of the

Budget notified the Secretary of Revenue the total fiscal year adjusted general revenue fund
collections from the immediately preceding fiscal year were $6,038,279,792 in FY 2025. The base
year revenues of $5,969,395,529 in FY 2024 are adjusted to $6,126,761,315 after applying an
adjusted consumer price ratio of 1.0264. The total fiscal year adjusted general revenue fund
collections in FY 2025 are $88,481,523 lower than the inflation adjusted base year revenues for
FY 2025. The amount of monies in the Budget Stabilization Fund is $1,907,520,483 which is 19.1
percent of the prior fiscal year's state tax receipt revenues to the State General Fund.

  The Director of the Budget further notified the Secretary of Revenue that, pursuant to The

2025 Session Laws of Kansas, Chapter 116, Section 1(b), the Director of the Budget has consulted
with the Director of Legislative Research and together certified the amount of monies in the Budget
Stabilization Fund is equal to or exceeds 15.0 percent of the prior fiscal year's state tax receipt
revenues to the State General Fund; however, the amount of total fiscal year adjusted general
revenue fund collections from FY 2025 are not in excess of the inflation adjusted base year
revenues for FY 2025.

 As a result of this certification, the Secretary of Revenue will not calculate and publish new

income tax rates, and there will be no rate reduction for tax year 2026.

                                  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, as it pertains to the specific
provisions of Senate Bill 269, 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
                          Hearing Impaired TTY: 785-296-6461
                                   Fax: 785-291-3614

 If you have any questions on the bases of the certification made by the Director of the Budget,

please contact: [email protected].