Does Kansas give fuel retailers a tax credit for selling higher ethanol blends?

Plain-English summary

2026 Senate Bill 82 added a new ethanol retailer income tax credit to K.S.A. 79-32,201 (subsection (h)). A retail fuel dealer earns $0.05 for every gallon of "higher ethanol blend" it sells at retail and dispenses through metered pumps at its service station. The credit runs for tax years 2026 through 2028, is not refundable, and any unused amount can be carried forward up to three years. Statewide, the credit is capped at $2,500,000 per tax year — if total claims exceed the cap, each dealer's credit is cut back proportionally. The same section of the bill also winds down Kansas's older alternative-fuel vehicle and fueling-station credit: no new credits for property placed in service on or after January 1, 2027, though taxpayers who already have unused carryover from that older credit can still use it. The provisions take effect July 1, 2026.

What this means for you

Fuel retailers / gas stations

• If you sell higher ethanol blends through metered pumps, you can earn a credit of 5 cents per gallon sold at retail, for tax years 2026–2028.
• The credit is nonrefundable — it can reduce your Kansas income tax to zero, and leftover credit carries forward for up to three years, but it is never paid out as cash.
• Because there's a $2.5 million statewide annual cap, the credit you actually receive may be less than 5 cents per gallon if total claims across all dealers exceed the cap that year (the notice says an apportionment method reduces each claim).
• The notice references reporting requirements (new K.S.A. 79-32,201(h)(4)) and definitions (h)(5) — watch for the Department's forms and the statutory definition of "higher ethanol blend."

Buyers of alternative-fuel vehicles or charging/fueling stations

• Kansas's older alternative-fuel credit under K.S.A. 79-32,201(a) is being discontinued for property placed in service on or after January 1, 2027. If you were counting on it, plan around that date.
• If you already claimed that credit and have unused carryover, the notice says those carryover provisions still apply.

Common questions

Q: How big is the ethanol credit?
A: $0.05 (five cents) per gallon of higher ethanol blend sold at retail through metered pumps — subject to the statewide $2.5 million annual cap.

Q: Is the credit refundable?
A: No. The notice states the credit "shall not be refundable," but unused amounts carry forward for up to three years.

Q: Which tax years?
A: Tax years 2026, 2027, and 2028.

Q: What happens to the old alternative-fuel vehicle/station credit?
A: It's discontinued for property placed in service on or after January 1, 2027. Existing unused carryovers survive.

Citations and references

• K.S.A. 79-32,201(h)(1) (added by 2026 Senate Bill 82, Section 4) — the ethanol retailer credit: $0.05 per gallon of higher ethanol blend sold at retail and dispensed through metered pumps, tax years 2026–2028.
• K.S.A. 79-32,201(h)(2) — credit is not refundable; unused amounts carry forward up to three taxable years.
• K.S.A. 79-32,201(h)(3) — total credits under subsection (h) capped at $2,500,000 per tax year, with proportional apportionment if claims exceed the cap.
• K.S.A. 79-32,201(h)(4)–(5) — reporting requirements and definitions for the new credit.
• K.S.A. 79-32,201(a) and (f) — the older alternative-fuel vehicle/fueling-station credit is discontinued for property placed in service on or after January 1, 2027, though pre-2027 carryovers still apply.
• Effective date: July 1, 2026.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 26-04

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 26-04

                             ETHANOL RETAILER TAX CREDIT

                                        (JULY 1, 2026)

   During the 2026 Legislative Session Senate Bill 82 was passed and signed into law. Section

4 of the Bill amends K.S.A. 79-32,201 which provides a corporate income tax credit for certain
alternative-fuel motor vehicles or alternative-fuel fueling stations.

    K.S.A. 79-32,201(a) is amended to discontinue the existing alternative fuel tax credit for

alternative-fuel vehicles or alternative-fuel fueling stations that are placed in service on or after
January 1, 2027. K.S.A. 79-32,201(f) is amended to provide that while no new tax credits will be
allowed under the discontinued provisions of K.S.A. 79-32,201(a) through (g), for tax years
commencing after December 31, 2026, taxpayers who have excess unused credit pursuant to a
credit initially claimed under the discontinued provisions for a tax year commencing before
January 1, 2027, may rely on the credit carry over provisions of the discontinued law, which will
still apply.

   Newly enumerated K.S.A. 79-32,201(h)(1) provides, for tax years 2026 through 2028, a

credit against the tax liability imposed under the Kansas income tax act for a retail dealer that sells
higher ethanol blend at such retail dealer's retail service station. The amount of the credit equals
$0.05 per gallon of higher ethanol blend sold by the retail dealer on a retail basis and dispensed
through metered pumps at the retail dealer's retail service station during the tax year for which the
tax credit is claimed.

   Newly enumerated K.S.A. 79-32,201(h)(2) provides any unused credit amounts may be

carried forward for up to three taxable years immediately following the taxable year for which the
credits were allowed, and that the credit shall not be refundable.

  Newly enumerated K.S.A. 79-32,201(h)(3) provides the total amount of credits provided

under subsection (h) shall not exceed $2,500,000 per tax year, and sets forth an apportionment
method to be used if total claims exceed that amount.

   Newly enumerated K.S.A. 79-32,201(h)(4) establishes certain reporting requirements for

those claiming the credit.

   Newly enumerated K.S.A. 79-32,201(h)(5) provides definitions for subsection (h).

   The provisions of the Bill are effective on July 1, 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, 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