What Kansas income tax credits are available for aviation and aerospace employers and employees?

Plain-English summary

Kansas Notice 22-10 explains new aviation and aerospace income tax credits created by 2022 House Bill 2239 (New Sections 10-15), beginning in tax year 2022. Section 10 defines a "qualified employer" (a business whose principal activity involves the aviation sector) and a "qualified employee" (someone newly employed full-time on or after January 1, 2022 who has earned a qualifying undergraduate, graduate, technical degree, or certificate). There are three separate credits:

1. Employer tuition reimbursement credit (Section 11). A qualified employer may claim a nonrefundable credit of up to 50% of tuition or certain program-specific course-fee reimbursements paid for a full-time qualified employee who graduated from a qualifying engineering, technology, applied-science, or career-technical program (within one year before or after starting employment). It is claimable each year up to the employee's fourth year of employment, applied after all other credits, and cannot be carried forward.

2. Employer compensation credit (Section 12). A qualified employer may claim a nonrefundable credit equal to 10% of the compensation paid to qualified employees in each of the first five years of employment, not to exceed $15,000 per year. Compensation excludes benefits and reimbursable expenses. It cannot be claimed after the fifth year and cannot be carried forward.

3. Employee credit (Section 13). An individual who becomes a qualified employee may claim a nonrefundable credit of up to $5,000 per year -- for the first year they become a qualified employee and each of the next four years. An employee with tax liability under $5,000 may carry any unused credit forward for up to four additional years.

Sunset (Section 15). No new credits may be issued or earned after December 31, 2026.

The credits are claimed on Kansas Schedule K-26.

What this means for you

Aviation and aerospace employers

• You can offset Kansas income tax by reimbursing a qualified employee's tuition (up to 50%, through their fourth year) and by claiming 10% of compensation paid to qualified employees in their first five years (up to $15,000 per year each).
• These credits are nonrefundable and cannot be carried forward, so plan to use them in the year earned.
• No new credits are earned after December 31, 2026.

Aviation and aerospace employees

• If you become a qualified employee, you may claim up to $5,000 per year for up to five years, and carry unused amounts forward up to four years if your tax liability is under $5,000.

Common questions

Who is a "qualified employer"? A business whose principal activity involves the aviation sector.

Who is a "qualified employee"? Someone newly employed full-time on or after January 1, 2022 who has earned a qualifying degree or technical certificate.

How large are the credits? Up to 50% of tuition reimbursement; 10% of compensation (max $15,000/year) for employers; and up to $5,000/year for qualifying employees.

When do they end? No new credits may be issued or earned after December 31, 2026.

What form is used? Kansas Schedule K-26.

Citations and references

• House Bill 2239 (2022), New Sections 10-15 -- created the aviation and aerospace income tax credits, effective for tax year 2022 and sunsetting for new credits after December 31, 2026.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 22-10

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 22-10

                          AVIATION AND AEROSPACE TAX CREDITS

                                      (OCTOBER 28, 2022)

   During the 2022 Legislative Session House Bill 2239 was passed and signed into law. New

Sections 10-15 of the Bill create new income tax credits for certain qualified aviation and
aerospace employers for tuition or certain program-specific course-fee reimbursements paid to a
qualified employee, for compensation paid to qualified employees in each of the first five years of
employment, and for individuals who become qualified employees of aviation or aerospace
employers.

    New Section 10 of the Bill defines a "qualified employer" to be "a sole proprietorship,

general partnership, limited partnership, limited liability company, corporation, other legally
recognized business entity or public entity whose principal business activity involves the aviation
sector". The term "qualified employee" is defined as "any person newly employed on a full-time
basis by or first contracting with a qualified employer on a full-time basis on or after January 1,
2022, who has been awarded an undergraduate or graduate degree, or a technical degree or
certificate from a qualified program by an institution."

   New Section 11 of the Bill allows qualified employers whose principal business activity

involves the aviation sector to receive a nonrefundable income tax credit, beginning in tax year
2022, for tuition or certain program-specific course-fee reimbursements paid to a full-time
"qualified employee". To qualify for the credit the qualified employee must have graduated from
an accredited engineering or technology undergraduate or graduate degree program, an associate
of applied science degree program, or a career technical program. The credit can be claimed if the
qualified employee, within one year prior to or following the commencement of employment with
a qualified employer, graduated from a qualified program. The credit is capped at 50% of the total
amount of tuition reimbursement paid and can be claimed each year, up to the fourth year of the
qualified employee's employment with the qualified employer. The credit is applied against the
qualified employer's income tax liability after all other credits have been allowed, is not
refundable, and, once created in a particular tax year, cannot be carried forward.

    New Section 12 of the Bill also creates, beginning with tax year 2022, a nonrefundable tax

credit for qualified employers for an amount equal to 10% of the compensation paid to qualified
employees in each of the first five years of employment, not to exceed $15,000 per year. The
credit cannot be claimed after the 5th year of employment. Compensation does not include benefits
or reimbursable expenses. The credit is applied against the qualified employer's income tax
liability after all other credits have been allowed, is not refundable, and, once created in a particular
tax year, cannot be carried forward.

   New Section 13 of the Bill creates, beginning with tax year 2022, a nonrefundable tax credit

for employees who become qualified employees during the taxable year. A credit will be allowed
for the first year the taxpayer becomes a qualified employee, and for each of the next four years
during which the employee achieves the status of a qualified employee. The maximum amount of
the credit is $5,000 per year. The credit should be deducted from the employee's income tax
liability for the taxable year in which the employee is or has been a qualified employee. Employees
with income tax liability less than $5,000 are eligible to carry any unused credit forward for up to
four additional tax years following the year in which the credit is first allowed.

New Section 15 of the Bill provides that no new tax credits are to be issued or earned after

December 31, 2026.

   To claim the credit, the taxpayer should complete Kansas Schedule K-26 and submit it with

their tax return.

                                 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