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Minutes for HB2411 - Committee on Taxation
Short Title
Decreasing the penalties for employer failing to timely remit employee withholding income taxes.
Minutes Content for Tue, Mar 7, 2023
Chairperson Smith opened the hearing on HB2411.
Adam Siebers provided an overview of HB2411 that would change the penalties for employers that fail to timely remit withholding taxes. Under current law, the penalty is 15.0 percent of the amount of underpayment. The bill would change the penalty to a graduated amount whereby it would model the current federal withholding penalties. (Attachment 1) Mr. Siebers stood for questions from the Committee.
Chairperson Smith noted the fiscal note for HB2411 has the potential to increase the State General Fund revenues by negligible amounts beginning in FY 2024.
Proponents:
Representative Paul Waggoner, House District 104, testified as a proponent for HB2411 stating the genesis of this bill is small businesses do their own accounting and are either paying Kansas withholding bi-weekly or monthly. The penalty for failure of an employer to remit any amount of withholding taxes is 15.0 percent of the amount of underpayment. Representative Waggoner stated other states such as Oklahoma have a 10.0 percent penalty with a 15-day grace period noting if you catch the error within the 15 days there is no penalty. With HB2411 the penalties are 2.0 percent, 5.0 percent, or 10.0 percent based on the amount of time that has transpired. (Attachment 2) Representative Waggoner stood for questions from Committee members.
Dan Murray, National Federation of Independent Business, testified as a proponent for HB2411 that would reduce the penalties on employers who fail to timely remit withholding taxes. HB2411 proposes a reasonable stair stepped penalty method that mirrors federal code and brings Kansas in line with neighboring states. Mr. Murray noted small businesses do not have in-house tax experts or accountants to manage tax compliance and HB2411 simplifies compliance and allows business owners more time to comply before getting hit with a high penalty. (Attachment 3) Mr. Murray stood for questions from Committee members.
In response to a question, Edward Penner, KLRD, stated Oklahoma has a 10.0 percent penalty with a 15-day grace period. Nebraska is 5.0 percent for each month or portion of a month that the filing is late with a maximum of 25.0 percent. Colorado is 5.0 percent for the first month and a half percent for each month thereafter with a maximum of 12.0 percent. Missouri has a 5.0 percent penalty and if the return is filed but the payment doesn't accompany it and if no return is filed, it is a 5.0 percent penalty that escalates by 5.0 percent for each month to a maximum of 25.0 percent.
Eric Stafford, Kansas Chamber, testified as a proponent for HB2411 noting existing law places a 15.0 percent penalty on businesses in Kansas who fail to remit the proper amount of withholding taxes, which a is dramatic and static penalty. HB2411 creates a modified penalty structure based on how late the payment was made which is a fair approach to the employers who are responsible for remitting income taxes to the state. (Attachment 4) Mr. Stafford stood for questions from Committee members.
Written testimony was submitted by Michael Austin, Americans for Prosperity, as a proponent for HB2411. (Attachment 5)
Chairperson Smith closed the hearing on HB2411.
