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Angel Investor Tax Credit

The credit is 50 percent of the investor’s cash investment in the qualified securities of an eligible Kansas business. If the amount of the credit exceeds the investor’s tax liability in any one taxable year, the remaining portion of the credit may be carried forward until the total amount of the credit is used. The credit is limited to $50,000 for a single Kansas business or a total of $250,000 of tax credits for a single year per investor.

The cumulative aggregate amount of angel investor tax credits allowed shall not exceed $6 million for each tax year. The 2016 Legislature extended this tax credit until 2021. An accredited investor is a natural person or an owner of a permitted entity investor who is of high net worth, as defined in 17 C.F.R. 230.501(a) as in effect on the effective date of the act.

The SEC defines an accredited investor as any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000, or any natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person’s spouse in excess of $300,000 in each of those years, and who has a reasonable expectation of reaching the same income level in the current year. (Schedule K-30, K.S.A. 74-8133)

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Community Service Program Tax Credit

The Kansas Community Service Program authorizes tax credits against the state income tax, premium tax and privilege tax for businesses that make contributions toward state-approved community service capital projects. The awarded organizations or entities must engage in activities that meet demonstrated needs in the state in the areas of community service, health care, crime prevention and/or youth apprenticeship and technical training.

Contributions toward approved projects are eligible for up to a 50 percent credit. Contributions toward approved projects in designated rural areas are eligible for up to a 70 percent credit. The Community Development Division of the Kansas Department of Commerce administers this program, determining the eligibility of contributing recipients by process of application (Schedule K-60 K.S.A. 79-32, 194 et seq.).

Disabled Tax Credit

Any taxpayer who spends money to make all or any portion of an existing building or facility accessible to persons with a disability is entitled to a tax credit. The building or facility must be on real property located in Kansas and used in a trade, business or for the production of income.

The tax credit available is equal to 50 percent of expenditures of this kind, or $10,000, whichever is less. The tax credit is applied against the income tax, premium tax or privilege fees and shall be deducted from the taxpayer’s tax liability in the taxable year in which the expenditures are made.

This tax credit may be carried over for a period of four years after the year the credit was earned. Effective Tax Year 2013, this credit shall only be available to corporations subject to the Kansas corporate income tax, i.e. C Corporations. Effective Tax Year 2014 and forward, the credit becomes available to all taxpayers. (Schedule K-37, K.S.A. 79-32,177, K.S.A. 79-1117 and K.S.A. 40-2813)

Entrepreneurship Tax Credits

Taxpayers, including corporations that invest in the Kansas Center for Entrepreneurship, can claim a state tax credit of 75 percent of the amount donated. The minimum investment to claim the tax credit is $250, and the tax credit is limited to a total of $2 million for any fiscal year.

The tax credit is limited to $50,000 per individual contributor per tax year. Funds will be used for awards to regional and community organizations that provide seed capital to qualified entrepreneurs, especially those located in distressed and rural communities. (Schedule K-31, K.S.A. 74-99c09)

Tax Credit for Research and Development

In order to stimulate increased research and development activity by Kansas businesses, the state offers an income tax credit equal to 6.5 percent of a company’s investment in R&D, above an average of the actual expenditures in R&D in the taxable year and the two immediate preceding taxable years. Only 25 percent of the allowable annual credit may be claimed in any one year. Any remaining credit may be carried forward in 25 percent increments until exhausted.

Expenditures in research and development activities are defined by Kansas law as those expenses that are allowable as deductions under the federal Internal Revenue Code. Beginning in Tax Year 2013, this credit is only available to corporations subject to the Kansas corporate income tax, i.e. C Corporations. Beginning in Tax Year 2013, this credit shall not be available to individuals, partnerships, S Corporations, limited liability companies or other pass-through entities (Schedule K-53, K.S.A. 79-32, 182b).

Tax Credits for Day Care Facilities

Tax credits are offered against Kansas income tax liability for businesses providing child day-care services to employees. These credits apply to taxpayers who pay for or locate child day-care services for their employees or that provide facilities and necessary equipment for child day-care services.

The credit is equal to 30 percent of the amount spent in Kansas during the tax year for child day-care services purchased for the dependent children of the taxpayer’s employees. However, the credit for any taxpayer cannot exceed $30,000 for any tax year.

Employers wishing to establish a child day-care facility primarily for the employees’ dependent children can claim additional benefits. A credit of up to 50 percent of the amount spent in the establishment of such a facility can be taken, up to $45,000 per taxpayer, during the first year. One or more taxpayers may work together to establish such a facility. In the taxable years after the year of establishment, the annual credit available to the taxpayer would be 30 percent of the amount expended for the annual operation of the facility but not to exceed $30,000 for any tax year.

When computing the credit, amounts received by the taxpayer as payment for use of the child day-care services are subtracted from the annual cost of operating the facility.

In order to receive this tax credit, the child day-care facility or provider must be licensed or registered in Kansas. Should the taxpayer qualify for the credit, the amount of the credit in excess of the taxpayer’s liability for the tax year will be refunded. The aggregate amount of child day-care facility credits that may be claimed for any fiscal year cannot exceed $3 million statewide.

Beginning in Tax Year 2013, this credit shall only be available to corporations subject to the Kansas corporate income tax, i.e. C Corporations. This credit shall not be available to individuals, partnerships, S Corporations, limited liability companies or other pass-through entities. (Schedule K-56, K.S.A. 79-32,190 et seq.)

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Susan NeuPoth Cadoret Director, Business & Community Development Email (785) 296-5298 LinkedIn

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