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Senate Bill 65, enacted on April 15, eliminates certain requirements from the High Performance Incentive Program (HPIP). Effective upon enactment, taxpayers no longer have to qualify for the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) workforce training tax credits, or make required investments in employee training, to qualify for the HPIP.
For projects placed in service on and after January 1, 2021, a taxpayer may transfer up to 50% of HPIP tax credits to another taxpayer.
For consideration. Taxpayers planning on investing or expanding in Kansas should review the potential benefits of the HPIP. The changes implemented by S.B. 65 make the HPIP certification process more accessible to companies considering locating or expanding in Kansas and to those with existing operations within Kansas. Most importantly, the changes allow for HPIP credit carryforwards to be utilized by taxpayers without the annual requirement of applying for and receiving approval for separate state training agreements such as the KIT and KIR.
The HPIP encourages taxpayers to expand capital investment and raise employee wage and training levels within the state. There are three state tax benefits available under the HPIP: (1) a 10% income tax credit on eligible investments, (2) a sales tax exemption on eligible capital investments, and (3) a training tax credit of up to $50,000. An HPIP qualifying taxpayer must be a for-profit company, satisfy wage thresholds, and be a qualifying business.
Prior to S.B. 65, qualifying taxpayers were required to make investments in eligible employee training in order to take advantage of the HPIP benefits. A taxpayer could meet this requirement by participating in the state’s KIT or KIR programs, or by investing an amount in employee training that exceeds at least 2% of the taxpayer’s Kansas payroll.
The KIT and KIR programs require separate application and agreement with the state of Kansas. The KIT program is designed to support companies creating at least one net new job in the state. The KIR program is designed to support companies with restructuring business operations or retraining due to the implementation of new technologies. These programs provide their own benefits separate from the HPIP, including reimbursement of training expenses for qualifying projects. The training contracts under the KIT and KIR programs are 12 months in duration.
Once a taxpayer receives HPIP certification for a project, the investment credit generated by the program may be carried forward for 16 years. Taxpayers with HPIP investment credit carryforward must annually certify that the taxpayer continues to meet the HPIP requirements under K.S.A. 74-50,131 in order to utilize the available carryforward. This certification previously included the requirement that the taxpayer participate in the KIT or KIR programs, or incurred employee training costs in excess of 2% of Kansas payroll.
S.B. 65 allows taxpayers to transfer up to 50% of the HPIP investment tax credit to another taxpayer, for projects placed into service on or after January 1, 2021. A taxpayer may transfer the credit to one or more individuals or entities. The total of all transfers may not exceed 50% of a taxpayer's credit within a single tax year. The transferee may carry forward any unused credit for 16 years. .
S.B. 65 removes the requirement that taxpayers participate in the KIT or KIR programs or make required investments in employee training for purposes of being certified or recertified under the HPIP. The changes implemented by S.B. 65 make the HPIP certification process more accessible to companies considering locating or expanding within the state of Kansas. In addition, the changes allow for HPIP credit carryforwards to be utilized by taxpayers without the annual requirement of applying for and receiving approval for separate state training agreements such as the KIT and KIR.
Taxpayers unable to fully utilize HPIP investment credits that are generated for projects placed in service on or after January 1, 2021 have the option to transfer up to 50% of such credits each year to another company or individual. The transferee may carry the transferred credit forward for up to 16 years.