What did Kansas change about the High Performance Incentive Program (HPIP) investment tax credit in 2021?

Plain-English summary

Kansas Notice 21-12 explains two changes to the High Performance Incentive Program (HPIP) investment tax credit made by 2021 Senate Bill 65 (Section 2), which amended K.S.A. 79-32,160a.

No more KIT/KIR requirement. The bill removed participation in the Kansas Industrial Training (KIT) program or the Kansas Industrial Retraining (KIR) program as a requirement to qualify for the HPIP investment tax credit.

Credit transferability. The bill allows a taxpayer to transfer up to 50% of its HPIP investment tax credit to another entity or individual. Transferability applies only to projects placed into service on or after January 1, 2021, and the transfer or transfers must occur within a single tax year. New subsection (f) provides that the credit may be transferred to any individual or entity and is claimed in the year of the transfer against the transferee's liability for the Kansas income tax, the premium tax or privilege fees under K.S.A. 40-252, or the privilege tax on financial institutions (Chapter 79, Article 11). If the credit exceeds the transferee's liability that year, the excess may be carried forward until used, but not beyond the 16th taxable year after the credit was initially claimed.

Repayment if disallowed. Under new subsection (g), if a credit that was earned and then transferred is later disallowed in whole or part by the Secretary of Revenue, the taxpayer who originally earned the credit is liable for repaying the disallowed amount to the state. More information about transferring an HPIP investment credit is available from the Kansas Department of Commerce.

What this means for you

Businesses earning HPIP credits

• You no longer need to participate in the KIT or KIR training programs to qualify for the HPIP investment tax credit.
• For projects placed in service on or after January 1, 2021, you can transfer up to 50% of the credit -- but you remain liable to repay any transferred credit the Secretary later disallows.

Credit transferees

• A transferred HPIP credit is claimed in the year of transfer against your Kansas income tax, premium tax, or financial-institution privilege tax.
• Excess credit carries forward until used, but not beyond the 16th year after the credit was first claimed.

Common questions

What qualification requirement was removed? Participation in the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) program is no longer required for the HPIP investment tax credit.

How much of the credit can be transferred? Up to 50% of the HPIP investment tax credit.

Which projects are eligible for transfer? Only projects placed into service on or after January 1, 2021, with the transfer made within a single tax year.

What can a transferee apply the credit against? Kansas income tax, the premium tax or privilege fees under K.S.A. 40-252, or the financial-institution privilege tax; excess carries forward up to the 16th year.

What if the credit is later disallowed? The taxpayer who originally earned the credit is liable for repaying the disallowed amount.

Citations and references

• Senate Bill 65 (2021), Section 2 -- amended K.S.A. 79-32,160a to remove the KIT/KIR requirement and allow transfer of up to 50% of the HPIP credit.
• K.S.A. 79-32,160a -- the HPIP investment tax credit statute; new subsections (f) and (g) govern transfer and repayment.
• K.S.A. 40-252 -- premium tax and privilege fees, one of the liabilities a transferee may apply the credit against.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 21-12

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.org
Mark A. Burghart, Secretary Laura Kelly, Governor

                                        NOTICE 21-12

         HIGH PERFORMANCE INCENTIVE PROGRAM (HPIP) CHANGES
                                       (JULY 19, 2021)

   During the 2021 Legislative Session Senate Bill 65 was passed and signed into law. Section

2 of the Bill amends K.S.A. 79-32,160a to remove participation in the Kansas Industrial Training
(KIT) program or the Kansas Industrial Retraining (KIR) program as a requirement to qualify for
the High Performance Incentive Program (HPIP) investment tax credit.

   Section 2 of the Bill also allows an entity to transfer up to 50 percent of its HPIP investment

tax credit to another entity or individual. Transferability is allowed only for projects placed into
service on or after January 1, 2021, and must occur within a single tax year.

   A transferee must claim the credit transferred to them in the year of the transfer. In the event

a transferee's tax liability is less than the amount transferred, the transferee may carry the credit
forward to the succeeding taxable year or years until the total amount of the tax credit is used,
except that no such credit shall be carried forward for deduction after the 16th taxable year
succeeding the taxable year in which such credit was initially claimed. The bill states in the event
the Secretary of Revenue determines a tax credit, or portion thereof, is not allowable, the taxpayer
who originally earned the credit is liable for the amount that is disallowed. The new language,
found in subsections (f) and (g) states:

          (f) For projects placed into service on and after January 1, 2021, a taxpayer may
   transfer up to 50% of the tax credit allowed under subsection (e), as provided in this
   subsection. The taxpayer may make a transfer to one or more transferees, but the total
   of all transfers shall not exceed 50% of the taxpayer's tax credit. The taxpayer shall
   make the transfer or transfers within a single tax year. The credit may be transferred
   to any individual or entity and shall be claimed in the year the credit was transferred
   against the transferee's tax liability for the income tax under the Kansas income tax
   act or the premium tax or privilege fees imposed pursuant to K.S.A. 40-252, and
   amendments thereto, or the privilege tax as measured by the net income of financial
   institutions imposed pursuant to article 11 of chapter 79 of the Kansas Statutes
   Annotated, and amendments thereto. The amount of the credit that exceeds the
   transferee's tax liability for such year may be carried forward for credit in the
   succeeding taxable year or years until the total amount of the tax credit is used, except
   that no such credit shall be carried forward for deduction after the 16th taxable year
   succeeding the taxable year in which such credit was initially claimed. The taxpayer
   or transferee shall provide such documentation of the tax credit transfer to the
   secretary of revenue as may be required by the secretary.

       (g) In the event the tax credit earned by the taxpayer and transferred to a
 transferee is later disallowed in whole or in part by the secretary of revenue, the
 taxpayer that originally earned the tax credit shall be liable for repayment to the state
 in the amount disallowed.

 To learn more about transferring an investment credit earned through the High Performance

Incentive Program, please visit the Kansas Department of Commerce website at:
kansascommerce.gov/program/business-incentives-and-services/hpip/

                                 TAXPAYER ASSISTANCE

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

www.ksrevenue.org. 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