Kansas expands high performance incentive program


On April 15, 2021, Kansas Gov. Laura Kelly approved Senate Bill 65 (S.B. 65), which expands eligibility for the state’s High Performance Incentive Program (HPIP) by eliminating certain workforce training requirements and permits the transfer of unused tax credits.1 Effective July 1, 2021, these changes allow for more strategic use of HPIP incentives and increase the opportunities for currently eligible companies to fully realize the program benefits. The legislation also allows companies that were previously ineligible due to specific training requirements to participate.2




Background and HPIP overview


HPIP is an incentive program that promotes capital investment in addition to higher employee wages and training. HPIP offers employers three potential benefits:

  • A one-time Investment Tax Credit (ITC), an income tax credit equal to 10% of the eligible portion of capital investment that exceeds $1 million in Douglas, Johnson, Sedgwick, Shawnee and Wyandotte counties (the most populous counties in the state). For all other counties, capital investment must exceed $50,000. The credit may be carried forward for up to 16 years without limitations;
  • A Sales Tax Project Exemption (STPE) on purchases of materials and services related to a company’s capital investment at a qualified facility; and
  • An Employee Training Tax Credit (ETTC), a dollar-for-dollar state tax credit up to $50,000 for training and education expenditures that exceed 2% of total payroll at the worksite. Unused credits may not be carried forward.3

In order to qualify for HPIP benefits, a company must be a for-profit enterprise subject to state income, sales or property taxes; pay above-average wages;4 make a significant investment in eligible employee training; and be either a manufacturer or able to document that more than one-half of the company’s sales are made to Kansas manufacturers, out-of-state businesses or out-of-state government agencies.5 Domestic or multi-national corporations with any North American Industry Classification System (NAICS) designation are eligible if they have a headquarters or back-office operation located in Kansas.6

Before any formal investment commitment is made, an eligible taxpayer must submit a certificate of intent to invest and other detailed project information to the Kansas Department of Commerce.7 After review, the Department of Commerce establishes a measurement period and certification period. During the measurement period, the taxpayer documents that it meets certain wages and employee training requirements, and submits its application in order to certify the worksite for credits.8 The certification period is the time frame used to capture tax credits for new capital investment.9

Prior to the enactment of S.B. 65, applicants were required to satisfy a training requirement through participation in one of the following three designated workforce training programs:10

  • The Kansas Industrial Training Program (KIT) program, which provides training assistance to manufacturing, distribution, or regional or national firms and other businesses primarily engaged in the development or production of goods or the provision of services for out-of-state sale.11
  • The Kansas Industrial Retraining (KIR) program, which provides retraining assistance to employees of restructuring industries that are likely to be displaced because of obsolete skills.12
  • The State of Kansas Investments in Lifelong Learning (SKILL) program. Part of the IMPACT Act, this program provides funds for training assistance to businesses that create a large number of new jobs or create new jobs paying higher than average wages.13

As an alternative to satisfying the training requirement through participation in one of these training programs, an applicant could document and spend at least 2% of a worksite’s total payroll costs on eligible worksite employee training.14




Changes to HPIP


The enacted legislation makes several important changes to the HPIP. First, S.B. 65 removes the ongoing workforce training requirements needed to obtain a certification from the Department of Commerce.15 Therefore, applicants will no longer be required to participate in the KIT, KIR, or SKILL programs or spend 2% of payroll costs on training. This amendment also removes the need to meet the training requirement for recertification of carryover credits. Under current law, taxpayers must recertify that they continue to meet the definitions, qualification, certification of eligibility, and HPIP rules and regulations in order to use carryover credits in future tax years.16 In particular, the Department of Commerce certifies annually that a participating taxpayer remains eligible for HPIP benefits, which included the verification that the taxpayer participated in one of the eligible training programs.17 While the legislation removes the requirement that taxpayers must participate in the KIT, KIR, or SKILL programs, taxpayers are still required to certify under oath that they continue to meet the remaining requirements such as paying above the average wage base in order to utilize carryover credits each year.

Second, the legislation provides that taxpayers generating HPIP benefits on projects placed into service on and after January 1, 2021 may transfer up to 50% of benefits to one or more commercial or individual transferees.18 For taxpayers that do not have sufficient Kansas income tax liability to utilize HPIP credits, transferable HPIP credits provide an opportunity to realize monetary benefit from this incentive program. The tax credit must be applied during the year in which the transfer occurs.19 If the tax credit is more than the transferee’s tax liability, the credit may be carried forward for up to 16 years.20

Finally, if an HPIP credit transferred from the original taxpayer to the transferee is later disallowed by the Kansas Department of Revenue, the taxpayer originally earning the tax credit is liable for repayment of the credit amount that is disallowed.21






To date, neither the Department of Commerce nor the Department of Revenue have issued official guidance or updated regulations resulting from the changes enacted in S.B. 65.22 Additional time and analysis will likely be required in order to understand the full effect of the legislative amendments. In any event, the legislation should allow for greater usage of HPIP incentives to attract new and expanding businesses to Kansas and provide increased benefits for companies currently participating in HPIP.

1 Kan. S.B. 65, Laws 2021.
2 Press Release, Governor Laura Kelly Signs Bipartisan Legislation to Aid Kansas’s Economic Recovery, Kansas Office of the Governor, Apr. 15, 2021, published at https://governor.kansas.gov/governor-laura-kelly-signs-bipartisan-legislation-to-aid-kansass-economic-recovery/.
3 KAN. STAT. ANN. § 74-50,132(a). For additional information, see Kansas High Performance Incentive Program (HPIP) Overview, Kansas Department of Commerce, Aug. 3, 2020, published at https://www.kansascommerce.gov/wp-content/uploads/2020/08/HPIP_Overview.pdf.
4 The definition of “above average wage” is typically in relation to the wages paid by other firms within the company’s NAICS designation, dependent on the number of full-time equivalent employees. KAN. STAT. ANN. § 74-50,131(d).
5 KAN. STAT. ANN. § 74-50,131(a)–(e).
6 KAN. STAT. ANN. § 74-50,131(a).
7 KAN. ADMIN. REGS. 110-6-10(b).
8 KAN. ADMIN. REGS. 110-6-9(a).
9 KAN. ADMIN. REGS. 110-6-11.
10 KAN. STAT. ANN. § 79-50,133; KAN. ADMIN. REGS. 110-6-12.
11 KAN. STAT. ANN. §§ 79-5065(a); 79-5066.
12 KAN. STAT. ANN. §§ 79-5065(b); 79-5066.
13 KAN. STAT. ANN. §§ 74-50,102-112.
14 KAN. STAT. ANN. § 74-50,132(a).
15 S.B. 65, § 1, amending KAN. STAT. ANN. § 74-50,133; § 2, amending KAN. STAT. ANN. § 79-32,160a(e).
16 KAN. STAT. ANN. §§ 79-32,160a(e); 74-50,131.
17 KAN. STAT. ANN. § 74-50,131(g)(2).
18 S.B. 65, § 2, amending KAN. STAT. ANN. § 79-32,160a(f).
19 Id.
20 Id.
21 S.B. 65, § 2, amending KAN. STAT. ANN. § 79-32,160a(g).
22 While updated forms reflecting the changes to HPIP have not yet been released, the Department of Commerce is expected to provide additional information by July 2021.





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