Kansas Senate OKs business relief for COVID losses. But how could it affect taxes?

The Kansas Senate has passed two bills to compensate businesses for lost income from the COVID-19 pandemic, despite concerns from counties, including Sedgwick, that it could become a local budget buster.

Both of the bills seek to use property tax refunds to compensate businesses for income they could potentially have made during periods when they had to comply with shutdown orders, capacity restrictions or curfews designed to slow the spread of the coronavirus that causes COVID-19 disease.

The first bill to pass, known as House Bill 2313, would establish a mechanism for businesses to file claims to the state Department of Revenue.

The bill would give refunds of up to $7,500 for tax years 2020 and 2021 to businesses that were shut down or otherwise restricted during the pandemic, including bars, restaurants and some retail stores.

The actual payments would be calculated using a formula based on the businesses’ tax liability and the number of days they were ordered to be restricted.

The bill would also discourage counties from ordering emergency closures or restrictions of businesses in any future disasters, by requiring counties to relieve all property taxes for any days a business is restricted.

The bill targets relief to relatively small businesses. Only those with 2019 income between $10,000 and $2.5 million could get a refund. Plus, any business that has already received more than $150,000 in COVID-19 government aid would be ineligible.

Several types of businesses would be automatically ineligible for relief, including grocery, home-improvement and hardware stores; real estate-related businesses, lending companies, and health care providers, except dentists.

The bill was amended at the request of Sen. Tom Holland, D-Baldwin City, to give some property tax relief to senior citizens and disabled veterans. The Holland amendment sets 2020 as the base year and future tax increases would be limited to an average of the percentage increase or decrease in property values over the preceding 10 years.

Folllowing a bipartisan 33-6 vote for approval, Sen. Mark Steffens, R-Hutchinson, praised the bill.

“It gives much-needed financial relief to our pandemic-response haggard small businesses,” he said. “It provides economic guide rails for decision-makers during future emergency declarations.”

Steffens has denied the seriousness of the pandemic in recent months. In committee hearings, he said that one of the goals of a business compensation bill would be to inflict financial pain on Gov. Laura Kelly’s administration and counties that passed restrictive health orders.

“If our leaders don’t feel some pain, they’re not gonna learn anything from this,” he said in a March hearing on Senate Bill 286.

That turned out to be the more controversial of the two measures and passed by a narrower 26-13 margin.

Originally, the bill would have forced the state and counties to set aside all COVD-relief funds they get from the federal government to be used solely for the paying businesses’ claims for damages.

That was amended to 35% on the Senate floor.

Any business could apply for relief and the decision would be made behind closed doors by a three-member panel under the supervision of Attorney General Derek Schmidt. The members of the committee would be appointed by the governor, the speaker of the House and the president of the Senate.

Unlike SB 2313, SB 286 explicitly includes mask mandates as a government restriction that would figure into the amount businesses would be awarded.

There would be no limit on the amount of relief that could be granted.

As the bill came out of the Senate taxation committee, the amount of relief in each case would have been kept secret.

The full Senate approved an amendment that would make the name, address and amount received by a business public.

Sen. Dinah Sykes, a Lenexa Democrat, offered a scathing criticism of the bill after it passed.

“Let’s put aside for a moment my issues with transparency, the composition of the board and the way the attorney general, who is running for governor in 2022 benefits politically from his role in administering this fund,” Sykes said.

While agreeing that businesses “do deserve help to recover from this pandemic,” she said “this bill ignores the very same impact the pandemic had on Kansas workers who ensured we had access to medical care, food, shelter, child care, critical infrastructure and other essential services.”

Sedgwick County viewed the two measures with alarm at a county commission meeting Tuesday morning before the Senate votes.

The county’s primary concerns are twofold:

One, the county is doubtful that the federal government will allow it to use its COVID allotment to offset business property taxes; and two, there’s no way of knowing how much revenue could be on the line for the county, which had bigger problems with COVID infection and was more aggressive with health orders than smaller, less densely populated counties.

If the revenue loss is large enough, it could force the county to cut back on important services or raise taxes.

There’s also a question of how much of the lost business was caused by the county shutdowns and restrictions and how much was caused by the disease threat.

“There were businesses that willingly shut down because their owner, for whatever reason, didn’t want to operate,” she said. “I think it’s important to understand there are people that didn’t even want to go out (to bars and restaurants or shopping).

“What percentage of the population of people decided not to go out on their own, which affected businesses? How does that factor into all of this?”

The two bills will likely go to a House-Senate conference committee that will work out the overlapping provisions and conflicts between the two measures and prepare the legislation for a final vote.