February 4, 1998


Journal of the Senate


SEVENTEENTH DAY
______
Senate Chamber Topeka, Kansas 
Wednesday, February 4, 1998--2:30 p.m. 
 The Senate was called to order by President Dick Bond.

 The roll was called with thirty-nine senators present.

 Senator Hardenburger was excused.

 President Bond introduced as guest chaplain, Rev. Eva Brown, Chaplain with the Chap-
laincy Service, Stormont Vail Health Care, Topeka, who delivered the invocation:

       God of all creation we pray, grateful that you receive our prayers with a gracious
      and merciful heart. Today especially be with those senators who have challenges,
      illness or sadness in their lives or the lives of their loved ones. We take this moment
      to intentionally connect with You that we might be blessed with wisdom during this
      session. Give each senator the ability to focus on the business at hand. Help them
      listen to each other with the openness that allows for learning, honest debate, com-
      promise and even change of heart. Touch each senator as they speak that they would
      do so honestly and succinctly. As decisions are made draw each individual to re-
      member the impact upon the poor, the oppressed and those unable to speak for
      themselves. Give at least one senator the courage to be Your voice today in bringing
      greater justice and equality to the people of Kansas.

       I pray all these things to you, O God, our rock and our redeemer. Amen

INTRODUCTION OF BILLS AND CONCURRENT RESOLUTIONS
 The following bills and concurrent resolution were introduced and read by title:

 SB 585, An act relating to elections; concerning eligibility for voting at primary elections;
amending K.S.A. 25-205, 25-210, 25-211, 25-212, 25-213a, 25-216 and 25-1310 and K.S.A.
1997 Supp. 25-213, 25-1122d and 25-3301 and repealing the existing sections, by Senator
Steineger.

 SB 586, An act concerning intoxicating liquors and beverages; relating to microbreweries;
amending K.S.A. 1997 Supp. 41-308b and repealing the existing section, by Committee on
Federal and State Affairs.

 SB 587, An act concerning criminal procedure; relating to parole, release procedures and
the Kansas parole board; hearings and certain waivers; composition and qualifications of the
board; members pro tem; amending K.S.A. 75-5217 and K.S.A. 1997 Supp. 22-3707, 22-
3709, 22-3713 and 22-3717 and repealing the existing sections, by Committee on Judiciary.

 SB 588, An act concerning criminal procedure; relating to discovery; expert witness;
amending K.S.A. 1997 Supp. 22-3212 and repealing the existing section, by Committee on
Judiciary.

 SB 589, An act concerning electric cooperative public utilities; relating to jurisdiction of
the state corporation commission; amending K.S.A. 66-104d and repealing the existing sec-
tion, by Committee on Utilities.

 SB 590, An act establishing the Kansas student financial assistance fund in the state
treasury; requiring transfers to the fund from the economic development initiatives fund;
amending K.S.A. 79-4804 and repealing the existing section, by Committee on Education.

 SB 591, An act revising the special education for exceptional children act; amending
K.S.A. 38-1513a, 72-961, 72-963, 72-963a, 72-963c, 72-964, 72-965, 72-966, 72-967, 72-970,
72-971, 72-973, 72-973a, 72-975, 72-976, 72-977, 72-979 and 72-981 and K.S.A. 1997 Supp.
72-962, 72-968, 72-974, 72-978, 72-983 and 72-53,109 and repealing the existing sections;
also repealing K.S.A. 72-933, 72-963b, 72-969, 72-972 and 72-980, by Committee on
Education.

 SB 592, An act concerning civil procedure; relating to exemptions from legal process;
amending K.S.A. 60-2313 and K.S.A. 1997 Supp. 39-717 and repealing the existing sections,
by Committee on Ways and Means.

 SB 593, An act concerning the vehicle dealers and manufacturers licensing act; relating
to denial, suspension or revocation of license; liability for damages; prohibited acts; amend-
ing K.S.A. 8-2413 and 8-2416 and K.S.A. 1997 Supp. 8-2410 and repealing the existing
sections; also repealing K.S.A. 1997 Supp. 8-2431, by Committee on Judiciary.

SENATE CONCURRENT RESOLUTION No. 1616--

By Committee on Utilities


A CONCURRENT RESOLUTION urging the Congress to enact legislation providing relief
      from the order of the Federal Energy Regulatory Commission requiring Kansas natural
      gas producers to pay penalties and interest on certain refunds to customers.

          WHEREAS, Since 1974, the Federal Energy Regulatory Commission (FERC) and its
predecessor, the Federal Power Commission, had allowed natural gas producers in Kansas
to include the cost of state property taxes in their rates; and

    WHEREAS, In 1983 a petition challenging the inclusion of the costs of property taxes
in rates was filed with FERC and FERC affirmed its prior rulings allowing recovery of those
costs; and

    WHEREAS, In 1993, after the D.C. Circuit Court ordered FERC to review its rulings,
FERC reversed itself and ordered the payment of refunds retroactive to the year 1988; and

    WHEREAS, Kansas producers paid the refunds ordered, including interest, but in 1996
the D.C. Circuit Court reversed the FERC decision and required instead payment of re-
funds, including interest, back to 1983, the time of filing of the initial petition in the case;
and

    WHEREAS, The retroactive reversal of a practice that had been legal for 19 years places
an unjust and punitive financial burden, possibly exceeding $500 million, on the Kansas
natural gas industry; and

    WHEREAS, The ordered refunds threaten serious financial harm not only to the Kansas
natural gas industry but to the state and local economies and governmental budgets that
rely on the industry's economic base: Now, therefore,

    Be it resolved by the Senate of the State of Kansas, the House of Representatives concurring
therein: That the Kansas Legislature urges the Congress to enact S. 1388 and H.R. 2903,
providing relief from penalties and interest that FERC has ordered Kansas natural gas
producers to pay on refunds for property tax costs included in natural gas rates, retroactive
to 1983; and

    Be it further resolved: That the Secretary of State be directed to send enrolled copies
of this resolution to each member of the Kansas Congressional Delegation, to the chair-
person of the United States Senate Committee on Energy and Natural Resources and to
the chairperson of the United States House of Representatives Committee on Commerce.

REFERENCE OF BILLS AND CONCURRENT RESOLUTIONS
 The following bills were referred to Committees as indicated:

 Assessment and Taxation: SB 566.
 Commerce: SB 573, 580.
 Education: SB 568, 576.
 Elections and Local Government: SB 567.
 Energy and Natural Resources: SB 569.
 Federal and State Affairs: SB 581.
 Financial Institutions & Insurance: SB 574, 575.
 Judiciary: SB 565, 570, 571, 572, 577, 578, 579, 582, 583, 584.
CHANGE OF REFERENCE
 The President withdrew SB 530 from the Committee on Judiciary, and referred the bill
to the Committee on Ways and Means.

MESSAGE FROM THE HOUSE

 Announcing passage of HB 2636.

INTRODUCTION OF HOUSE BILLS AND CONCURRENT RESOLUTIONS
 HB 2636 was thereupon introduced and read by title.

REPORTS OF STANDING COMMITTEES
 Committee on Assessment and Taxation recommends HB 2707 be passed and, be-
cause the committee is of the opinion that the bill is of a noncontroversial nature, be placed
on the consent calendar.

 Also SB 493 be amended on page 1, in line 24, before ``city'' by inserting ``class B'';

    On page 4, in line 20, before ``.75%'' by inserting ``.25%, .5% or''; in line 21, by striking
``highway 24'' and inserting ``county roads 64 and 65'';

    On page 5, by striking all in lines 11 through 19;

    By relettering existing subsections accordingly;

    On page 6, after line 10, by inserting a new section to read as follows:

    ``Sec. 2. K.S.A. 1997 Supp. 12-188 is hereby amended to read as follows: 12-188. The
following classes of cities are hereby established for the purpose of imposing limitations and
prohibitions upon the levying of sales and excise taxes or taxes in the nature of an excise
upon sales or transfers of personal or real property or the use thereof, or the rendering or
furnishing of services by cities as authorized and provided by article 12, section 5, of the
constitution of the state of Kansas:

    Class A cities. All cities in the state of Kansas which have the authority to levy and collect
excise taxes or taxes in the nature of an excise upon the sales or transfers of personal or real
property or the use thereof, or the rendering or furnishing of services by cities.

    Class B cities. All cities in the state of Kansas having a population of more than 1,000 but
less than 2,000 located in a county having a population of more than 150,000 but less than
175,000 which has the authority to levy and collect excise taxes or taxes in the nature of an
excise upon the sales or transfers of personal or real property or the use thereof, or the
rendering or furnishing of services which have the authority to levy and collect excise taxes
or taxes in the nature of an excise upon the sales or transfers of personal or real property
or the use thereof, or the rendering or furnishing of services for the purpose of financing the
provision of health care services.

    Class C cities. All cities in the state of Kansas having a population of more than 290,000
located in a county having a population of more than 350,000 which has the authority to
levy and collect excise taxes or taxes in the nature of an excise upon the sales or transfers
of personal or real property or the use thereof, or the rendering or furnishing of services.

    Class D cities. All cities in the state of Kansas located in Cowley, Ellis, Ellsworth, Labette
or Montgomery county or in both Riley and Pottawatomie counties which have the authority
to levy and collect excise taxes or taxes in the nature of an excise upon the sales or transfers
of personal or real property or the use thereof, or the rendering or furnishing of services.''

    By renumbering existing sections accordingly;

    Also, on page 6, in line 13, after ``A'' by inserting ``, class B''; in line 16, by striking all
after the period; by striking all in lines 17 and 18; in line 19, by striking all before ``Except'';

    On page 7, in line 6, before ``2%'' by inserting ``1.5%, 1.75% or'';

    On page 10, in line 27, before ``12-189'' by inserting ``12-188,'';

    In the title, in line 9, before ``sales'' by inserting ``city and countywide retailers' ''; in line
10, after the semicolon by inserting ``classifying cities for health care services financing
purposes;''; in line 11, before ``12-189'' by inserting ``12-188,'' and the bill be passed as
amended.

 Committee on Elections and Local Government recommends SB 469 be passed.

 Committee on Judiciary begs leave to submit the following report:

    The following appointment was referred to and considered by the committee and your
committee recommends that the Senate approve and consent to such appointment:

    By the Governor:

Kansas Parole Board: K.S.A. 22-3707

    Marilyn Scafe, term expires January 15, 2002

 Also SB 429, 540 be passed and, because the committee is of the opinion that the bills
are of a noncontroversial nature, be placed on the consent calendar.

 SB 435, 532 be passed.

 Committee on Utilities recommends SB 436 be amended on page 1, in line 15, by
striking ``electric public utilities'' and inserting ``the electricity industry''; in line 42, by strik-
ing all after ``from''; by striking all of line 43;

    On page 2, in line 1, by striking ``ities'' and inserting ``restructuring of the electricity
industry and the relative tax impacts of restructuring on and among electricity providers,
with the goal of recommending a uniform tax policy that allows all electricity providers to
be taxed on a fair and equal basis'';

    In the title, in line 9, by striking ``the'' and inserting ``a''; also in line 9, by striking all after
``committee''; in line 10, by striking ``deregulated''; in line 11, by striking all before the period
and inserting ``the electricity industry''; and the bill be passed as amended.

 SB 491 be amended on page 2, in line 10, by striking ``or a utility'' and inserting ``, a
marketer or broker of electricity or an electric utility''; and the bill be passed as amended.

 Ways and Means recommends SB 495 be amended on page 2, following line 11, by
inserting the following:



``Greig, Dean, 103 South 5th, Osborne, KS 67473 254.66'';
    On page 3, in line 41, by striking ``$219,630.84'' and inserting ``$219,885.50'';

    On page 5, in line 1, by striking ``amounts'' and inserting ``amount''; in line 2, after ``of''
by inserting ``an''; also in line 2, by striking ``warrants'' and inserting ``warrant''; also in line
2, by striking ``claimants'' and inserting ``claimant''; by striking all in lines 7, 8 and 9; in line
10, before ``The'' by inserting ``(a)''; following line 19, by inserting the following material to
read as follows:

    ``(b) The department of social and rehabilitation services is hereby authorized and di-
rected to pay the following amount from the social welfare fund for payment of an expired
warrant to the following claimant:



Associated Orthopedics
10600 Quivira, #130
Overland Park, KS 66215 		$56.30'';
    Also on page 5, in line 27, before ``The'' by inserting ``(a)''; following line 35, by inserting
the following material to read as follows:

    ``(b) The state corporation commission is hereby authorized and directed to pay the
following amount from the energy conservation plan -- federal fund for materials and
services relating to energy conservation technical assistance provided to the state corporation
commission for which insufficient moneys were encumbered from appropriations for fiscal
year 1997 to pay the amounts owed to the following claimant:



Kansas State University
Controller's Office
102 Anderson Hall
Manhattan, KS 66506-0108 		$8,294.02'';
    On page 6, in line 19, by striking ``$243.00'' and inserting ``$100.00''; in line 39, before
``The'' by inserting ``(a)''; in line 42, by striking ``Department of Corrections'' and inserting
``department of corrections'';

    On page 7, following line 5, by inserting the following material:

    ``(b) The department of corrections is hereby authorized and directed to pay the follow-
ing amount from the central administration operations and parole and postrelease super-
vision operations account of the state general fund of the department of corrections for
services rendered in providing expert testimony in a deposition, an invoice for which was
not presented in the proper fiscal year, to the following claimant:



Dr. Linda W. Eddy
8080 Ward Parkway, Suite 334
Kansas City, MO 64114 		$326.25'';
and the bill be passed as amended.

REPORT ON ENGROSSED BILLS
 SB 373 reported correctly re-engrossed February 4, 1998.

COMMITTEE OF THE WHOLE
 On motion of Senator Emert, the Senate resolved itself into Committee of the Whole
Senate for consideration of bills on the calendar under the heading of ``General Orders''
with Senator Oleen in the chair.

 On motion of Senator Salisbury the following report was adopted:

 Recommended that SB 388, 399, 410, 486 be amended by adoption of the committee
amendments, and the bills be passed as amended.

 SB 446 be passed.

 Senator Lee moved to amend SB 446 on page 2, following line 4, by inserting a new
paragraph as follows:

 ``(3) Any pupil who is suspended from school for a short term consisting of more than
five days shall be provided, in consultation with the parent(s), an alternative educational
program or with information concerning services or programs offered by public and private
agencies within the community that work toward improving those aspects of the pupils
attitudes and behavior that contributed to the conduct upon which the suspension was
based.''

 The amendment was rejected.

 SB 416 be amended by adoption of the committee amendments, be further amended by
motion of Senator Salisbury on page 12, in line 19, by striking all after ``paying''; in line 20,
by striking all before the semicolon and inserting ``the premium tax and privilege fees im-
posed pursuant to K.S.A. 40-252, and amendments thereto'', and the bill be passed as further
amended.

 SB 500 be amended by adoption of the committee amendments, be further amended by
motion of Senator Kerr on page 16, in line 32, by striking ``actually'' and inserting ``levied
for property tax year 1998, and all such years thereafter, actually and timely'', and the bill
be passed as further amended.

 The following amendments offered to SB 500 were rejected:

 Senator Lee moved to amend the bill on page 23, in line 28, after the comma by inserting
``by any organization exempt from property taxation pursuant to paragraph ninth of K.S.A.
79-201, and amendments thereto,''; also, in line 28, after ``or'' by inserting ``by''; in line 39,
before the semicolon by inserting ``, but such tax shall not be levied and collected upon the
gross receipts received from dues charged by any organization exempt from property taxa-
tion pursuant to paragraph ninth of K.S.A. 79-201, and amendments thereto'';

    On page 25, after line 32, by inserting a new section to read as follows:

    Sec. 26. K.S.A. 79-3606 is hereby amended to read as follows: 79-3606. The following
shall be exempt from the tax imposed by this act:

    (a) All sales of motor-vehicle fuel or other articles upon which a sales or excise tax has
been paid, not subject to refund, under the laws of this state except cigarettes as defined
by K.S.A. 79-3301 and amendments thereto, cereal malt beverages and malt products as
defined by K.S.A. 79-3817 and amendments thereto, including wort, liquid malt, malt syrup
and malt extract, which is not subject to taxation under the provisions of K.S.A. 79-41a02
and amendments thereto, and motor vehicles as defined by K.S.A. 79-1017 and amendments
thereto;

    (b) all sales of tangible personal property or service, including the renting and leasing
of tangible personal property, purchased directly by the state of Kansas, a political subdi-
vision thereof, other than a school or educational institution, or purchased by a public or
private nonprofit hospital or nonprofit blood, tissue or organ bank and used exclusively for
state, political subdivision, hospital or nonprofit blood, tissue or organ bank purposes, except
when: (1) Such state or hospital is engaged or proposes to engage in any business specifically
taxable under the provisions of this act and such items of tangible personal property or
service are used or proposed to be used in such business, or (2) such political subdivision
is engaged or proposes to engage in the business of furnishing gas, water, electricity or heat
to others and such items of personal property or service are used or proposed to be used
in such business;

    (c) all sales of tangible personal property or services, including the renting and leasing
of tangible personal property, purchased directly by a public or private elementary or sec-
ondary school or public or private nonprofit educational institution and used primarily by
such school or institution for nonsectarian programs and activities provided or sponsored
by such school or institution or in the erection, repair or enlargement of buildings to be
used for such purposes. The exemption herein provided shall not apply to erection, con-
struction, repair, enlargement or equipment of buildings used primarily for human habita-
tion;

    (d) all sales of tangible personal property or services purchased by a contractor for the
purpose of constructing, equipping, reconstructing, maintaining, repairing, enlarging, fur-
nishing or remodeling facilities for any public or private nonprofit hospital, public or private
elementary or secondary school or a public or private nonprofit educational institution,
which would be exempt from taxation under the provisions of this act if purchased directly
by such hospital, school or educational institution; and all sales of tangible personal property
or services purchased by a contractor for the purpose of constructing, equipping, recon-
structing, maintaining, repairing, enlarging, furnishing or remodeling facilities for any po-
litical subdivision of the state, the total cost of which is paid from funds of such political
subdivision and which would be exempt from taxation under the provisions of this act if
purchased directly by such political subdivision. Nothing in this subsection or in the pro-
visions of K.S.A. 12-3418 and amendments thereto, shall be deemed to exempt the purchase
of any construction machinery, equipment or tools used in the constructing, equipping,
reconstructing, maintaining, repairing, enlarging, furnishing or remodeling facilities for any
political subdivision of the state. As used in this subsection, K.S.A. 12-3418 and 79-3640,
and amendments thereto, ``funds of a political subdivision'' shall mean general tax revenues,
the proceeds of any bonds and gifts or grants-in-aid. Gifts shall not mean funds used for the
purpose of constructing, equipping, reconstructing, repairing, enlarging, furnishing or re-
modeling facilities which are to be leased to the donor. When any political subdivision of
the state, public or private nonprofit hospital, public or private elementary or secondary
school or public or private nonprofit educational institution shall contract for the purpose
of constructing, equipping, reconstructing, maintaining, repairing, enlarging, furnishing or
remodeling facilities, it shall obtain from the state and furnish to the contractor an exemption
certificate for the project involved, and the contractor may purchase materials for incor-
poration in such project. The contractor shall furnish the number of such certificate to all
suppliers from whom such purchases are made, and such suppliers shall execute invoices
covering the same bearing the number of such certificate. Upon completion of the project
the contractor shall furnish to the political subdivision, hospital, school or educational in-
stitution concerned a sworn statement, on a form to be provided by the director of taxation,
that all purchases so made were entitled to exemption under this subsection. As an alter-
native to the foregoing procedure, any such contracting entity may apply to the secretary of
revenue for agent status for the sole purpose of issuing and furnishing project exemption
certificates to contractors pursuant to rules and regulations adopted by the secretary estab-
lishing conditions and standards for the granting and maintaining of such status. All invoices
shall be held by the contractor for a period of five years and shall be subject to audit by the
director of taxation. If any materials purchased under such a certificate are found not to
have been incorporated in the building or other project or not to have been returned for
credit or the sales or compensating tax otherwise imposed upon such materials which will
not be so incorporated in the building or other project reported and paid by such contractor
to the director of taxation not later than the 20th day of the month following the close of
the month in which it shall be determined that such materials will not be used for the
purpose for which such certificate was issued, the political subdivision, hospital, school or
educational institution concerned shall be liable for tax on all materials purchased for the
project, and upon payment thereof it may recover the same from the contractor together
with reasonable attorney fees. Any contractor or any agent, employee or subcontractor
thereof, who shall use or otherwise dispose of any materials purchased under such a certif-
icate for any purpose other than that for which such a certificate is issued without the
payment of the sales or compensating tax otherwise imposed upon such materials, shall be
guilty of a misdemeanor and, upon conviction therefor, shall be subject to the penalties
provided for in subsection (g) of K.S.A. 79-3615, and amendments thereto;

    (e) all sales of tangible personal property or services purchased by a contractor for the
erection, repair or enlargement of buildings or other projects for the government of the
United States, its agencies or instrumentalities, which would be exempt from taxation if
purchased directly by the government of the United States, its agencies or instrumentalities.
When the government of the United States, its agencies or instrumentalities shall contract
for the erection, repair, or enlargement of any building or other project, it shall obtain from
the state and furnish to the contractor an exemption certificate for the project involved, and
the contractor may purchase materials for incorporation in such project. The contractor
shall furnish the number of such certificates to all suppliers from whom such purchases are
made, and such suppliers shall execute invoices covering the same bearing the number of
such certificate. Upon completion of the project the contractor shall furnish to the govern-
ment of the United States, its agencies or instrumentalities concerned a sworn statement,
on a form to be provided by the director of taxation, that all purchases so made were entitled
to exemption under this subsection. As an alternative to the foregoing procedure, any such
contracting entity may apply to the secretary of revenue for agent status for the sole purpose
of issuing and furnishing project exemption certificates to contractors pursuant to rules and
regulations adopted by the secretary establishing conditions and standards for the granting
and maintaining of such status. All invoices shall be held by the contractor for a period of
five years and shall be subject to audit by the director of taxation. Any contractor or any
agent, employee or subcontractor thereof, who shall use or otherwise dispose of any ma-
terials purchased under such a certificate for any purpose other than that for which such a
certificate is issued without the payment of the sales or compensating tax otherwise imposed
upon such materials, shall be guilty of a misdemeanor and, upon conviction therefor, shall
be subject to the penalties provided for in subsection (g) of K.S.A. 79-3615 and amendments
thereto;

    (f) tangible personal property purchased by a railroad or public utility for consumption
or movement directly and immediately in interstate commerce;

    (g) sales of aircraft including remanufactured and modified aircraft, sales of aircraft
repair, modification and replacement parts and sales of services employed in the remanu-
facture, modification and repair of aircraft sold to persons using such aircraft and aircraft
repair, modification and replacement parts as certified or licensed carriers of persons or
property in interstate or foreign commerce under authority of the laws of the United States
or any foreign government or sold to any foreign government or agency or instrumentality
of such foreign government and all sales of aircraft, aircraft parts, replacement parts and
services employed in the remanufacture, modification and repair of aircraft for use outside
of the United States;

    (h) all rentals of nonsectarian textbooks by public or private elementary or secondary
schools;

    (i) the lease or rental of all films, records, tapes, or any type of sound or picture tran-
scriptions used by motion picture exhibitors;

    (j) meals served without charge or food used in the preparation of such meals to em-
ployees of any restaurant, eating house, dining car, hotel, drugstore or other place where
meals or drinks are regularly sold to the public if such employees' duties are related to the
furnishing or sale of such meals or drinks;

    (k) any motor vehicle, semitrailer or pole trailer, as such terms are defined by K.S.A.
8-126 and amendments thereto, or aircraft sold and delivered in this state to a bona fide
resident of another state, which motor vehicle, semitrailer, pole trailer or aircraft is not to
be registered or based in this state and which vehicle, semitrailer, pole trailer or aircraft will
not remain in this state more than 10 days;

    (l) all isolated or occasional sales of tangible personal property, services, substances or
things, except isolated or occasional sale of motor vehicles specifically taxed under the pro-
visions of subsection (o) of K.S.A. 79-3603 and amendments thereto;

    (m) all sales of tangible personal property which become an ingredient or component
part of tangible personal property or services produced, manufactured or compounded for
ultimate sale at retail within or without the state of Kansas; and any such producer, manu-
facturer or compounder may obtain from the director of taxation and furnish to the supplier
an exemption certificate number for tangible personal property for use as an ingredient or
component part of the property or services produced, manufactured or compounded;

    (n) all sales of tangible personal property which is consumed in the production, man-
ufacture, processing, mining, drilling, refining or compounding of tangible personal prop-
erty, the treating of by-products or wastes derived from any such production process, the
providing of services or the irrigation of crops for ultimate sale at retail within or without
the state of Kansas; and any purchaser of such property may obtain from the director of
taxation and furnish to the supplier an exemption certificate number for tangible personal
property for consumption in such production, manufacture, processing, mining, drilling,
refining, compounding, treating, irrigation and in providing such services;

    (o) all sales of animals, fowl and aquatic plants and animals, the primary purpose of
which is use in agriculture or aquaculture, as defined in K.S.A. 47-1901, and amendments
thereto, the production of food for human consumption, the production of animal, dairy,
poultry or aquatic plant and animal products, fiber or fur, or the production of offspring for
use for any such purpose or purposes;

    (p) all sales of drugs, as defined by K.S.A. 65-1626 and amendments thereto, dispensed
pursuant to a prescription order, as defined by K.S.A. 65-1626 and amendments thereto,
by a licensed practitioner;

    (q) all sales of insulin dispensed by a person licensed by the state board of pharmacy to
a person for treatment of diabetes at the direction of a person licensed to practice medicine
by the board of healing arts;

    (r) all sales of prosthetic and orthopedic appliances prescribed in writing by a person
licensed to practice the healing arts, dentistry or optometry. For the purposes of this sub-
section, the term prosthetic and orthopedic appliances means any apparatus, instrument,
device, or equipment used to replace or substitute for any missing part of the body; used
to alleviate the malfunction of any part of the body; or used to assist any disabled person in
leading a normal life by facilitating such person's mobility; such term shall include acces-
sories attached or to be attached to motor vehicles, but such term shall not include motor
vehicles or personal property which when installed becomes a fixture to real property;

    (s) all sales of tangible personal property or services purchased directly by a groundwater
management district organized or operating under the authority of K.S.A. 82a-1020 et seq.
and amendments thereto, which property or services are used in the operation or mainte-
nance of the district;

    (t) all sales of farm machinery and equipment or aquaculture machinery and equipment,
repair and replacement parts therefor and services performed in the repair and maintenance
of such machinery and equipment. For the purposes of this subsection the term ``farm
machinery and equipment or aquaculture machinery and equipment'' shall include machin-
ery and equipment used in the operation of Christmas tree farming but shall not include
any passenger vehicle, truck, truck tractor, trailer, semitrailer or pole trailer, other than a
farm trailer, as such terms are defined by K.S.A. 8-126 and amendments thereto. Each
purchaser of farm machinery and equipment or aquaculture machinery and equipment
exempted herein must certify in writing on the copy of the invoice or sales ticket to be
retained by the seller that the farm machinery and equipment or aquaculture machinery
and equipment purchased will be used only in farming, ranching or aquaculture production.
Farming or ranching shall include the operation of a feedlot and farm and ranch work for
hire and the operation of a nursery;

    (u) all leases or rentals of tangible personal property used as a dwelling if such tangible
personal property is leased or rented for a period of more than 28 consecutive days;

    (v) all sales of food products to any contractor for use in preparing meals for delivery
to homebound elderly persons over 60 years of age and to homebound disabled persons or
to be served at a group-sitting at a location outside of the home to otherwise homebound
elderly persons over 60 years of age and to otherwise homebound disabled persons, as all
or part of any food service project funded in whole or in part by government or as part of
a private nonprofit food service project available to all such elderly or disabled persons
residing within an area of service designated by the private nonprofit organization, and all
sales of food products for use in preparing meals for consumption by indigent or homeless
individuals whether or not such meals are consumed at a place designated for such purpose;

    (w) all sales of natural gas, electricity, heat and water delivered through mains, lines or
pipes: (1) To residential premises for noncommercial use by the occupant of such premises;
(2) for agricultural use and also, for such use, all sales of propane gas; (3) for use in the
severing of oil; and (4) to any property which is exempt from property taxation pursuant to
K.S.A. 79-201b Second through Sixth. As used in this paragraph, ``severing'' shall have the
meaning ascribed thereto by subsection (k) of K.S.A. 79-4216, and amendments thereto;

    (x) all sales of propane gas, LP-gas, coal, wood and other fuel sources for the production
of heat or lighting for noncommercial use of an occupant of residential premises;

    (y) all sales of materials and services used in the repairing, servicing, altering, maintain-
ing, manufacturing, remanufacturing, or modification of railroad rolling stock for use in
interstate or foreign commerce under authority of the laws of the United States;

    (z) all sales of tangible personal property and services purchased directly by a port
authority or by a contractor therefor as provided by the provisions of K.S.A. 12-3418 and
amendments thereto;

    (aa) all sales of materials and services applied to equipment which is transported into
the state from without the state for repair, service, alteration, maintenance, remanufacture
or modification and which is subsequently transported outside the state for use in the trans-
mission of liquids or natural gas by means of pipeline in interstate or foreign commerce
under authority of the laws of the United States;

    (bb) all sales of used mobile homes or manufactured homes. As used in this subsection:
(1) ``Mobile homes'' and ``manufactured homes'' shall have the meanings ascribed thereto
by K.S.A. 58-4202 and amendments thereto; and (2) ``sales of used mobile homes or man-
ufactured homes'' means sales other than the original retail sale thereof;

    (cc) all sales of tangible personal property or services purchased for the purpose of and
in conjunction with constructing, reconstructing, enlarging or remodeling a business or retail
business which meets the requirements established in K.S.A. 74-50,115 and amendments
thereto, and the sale and installation of machinery and equipment purchased for installation
at any such business or retail business. When a person shall contract for the construction,
reconstruction, enlargement or remodeling of any such business or retail business, such
person shall obtain from the state and furnish to the contractor an exemption certificate for
the project involved, and the contractor may purchase materials, machinery and equipment
for incorporation in such project. The contractor shall furnish the number of such certificates
to all suppliers from whom such purchases are made, and such suppliers shall execute
invoices covering the same bearing the number of such certificate. Upon completion of the
project the contractor shall furnish to the owner of the business or retail business a sworn
statement, on a form to be provided by the director of taxation, that all purchases so made
were entitled to exemption under this subsection. All invoices shall be held by the contractor
for a period of five years and shall be subject to audit by the director of taxation. Any
contractor or any agent, employee or subcontractor thereof, who shall use or otherwise
dispose of any materials, machinery or equipment purchased under such a certificate for
any purpose other than that for which such a certificate is issued without the payment of
the sales or compensating tax otherwise imposed thereon, shall be guilty of a misdemeanor
and, upon conviction therefor, shall be subject to the penalties provided for in subsection
(g) of K.S.A. 79-3615 and amendments thereto. As used in this subsection, ``business'' and
``retail business'' have the meanings respectively ascribed thereto by K.S.A. 74-50,114 and
amendments thereto;

    (dd) all sales of tangible personal property purchased with food stamps issued by the
United States department of agriculture;

    (ee) all sales of lottery tickets and shares made as part of a lottery operated by the state
of Kansas;

    (ff) on and after July 1, 1988, all sales of new mobile homes or manufactured homes to
the extent of 40% of the gross receipts, determined without regard to any trade-in allowance,
received from such sale. As used in this subsection, ``mobile homes'' and ``manufactured
homes'' shall have the meanings ascribed thereto by K.S.A. 58-4202 and amendments
thereto;

    (gg) all sales of tangible personal property purchased in accordance with vouchers issued
pursuant to the federal special supplemental food program for women, infants and children;

    (hh) all sales of medical supplies and equipment purchased directly by a nonprofit skilled
nursing home or nonprofit intermediate nursing care home, as defined by K.S.A. 39-923,
and amendments thereto, for the purpose of providing medical services to residents thereof.
This exemption shall not apply to tangible personal property customarily used for human
habitation purposes;

    (ii) all sales of tangible personal property purchased directly by a nonprofit organization
for nonsectarian comprehensive multidiscipline youth development programs and activities
provided or sponsored by such organization, and all sales of tangible personal property by
or on behalf of any such organization. This exemption shall not apply to tangible personal
property customarily used for human habitation purposes;

    (jj) all sales of tangible personal property or services, including the renting and leasing
of tangible personal property, purchased directly on behalf of a community-based mental
retardation facility or mental health center organized pursuant to K.S.A. 19-4001 et seq.,
and amendments thereto, and licensed in accordance with the provisions of K.S.A. 75-3307b
and amendments thereto. This exemption shall not apply to tangible personal property
customarily used for human habitation purposes;

    (kk) on and after January 1, 1989, all sales of machinery and equipment used directly
and primarily for the purposes of manufacturing, assembling, processing, finishing, storing,
warehousing or distributing articles of tangible personal property in this state intended for
resale by a manufacturing or processing plant or facility or a storage, warehousing or dis-
tribution facility:

    (1) For purposes of this subsection, machinery and equipment shall be deemed to be
used directly and primarily in the manufacture, assemblage, processing, finishing, storing,
warehousing or distributing of tangible personal property where such machinery and equip-
ment is used during a manufacturing, assembling, processing or finishing, storing, ware-
housing or distributing operation:

    (A) To effect a direct and immediate physical change upon the tangible personal property;

    (B) to guide or measure a direct and immediate physical change upon such property
where such function is an integral and essential part of tuning, verifying or aligning the
component parts of such property;

    (C) to test or measure such property where such function is an integral part of the
production flow or function;

    (D) to transport, convey or handle such property during the manufacturing, processing,
storing, warehousing or distribution operation at the plant or facility; or

    (E) to place such property in the container, package or wrapping in which such property
is normally sold or transported.

    (2) For purposes of this subsection ``machinery and equipment used directly and pri-
marily'' shall include, but not be limited to:

    (A) Mechanical machines or major components thereof contributing to a manufacturing,
assembling or finishing process;

    (B) molds and dies that determine the physical characteristics of the finished product
or its packaging material;

    (C) testing equipment to determine the quality of the finished product;

    (D) computers and related peripheral equipment that directly control or measure the
manufacturing process or which are utilized for engineering of the finished product; and

    (E) computers and related peripheral equipment utilized for research and development
and product design.

    (3) ``Machinery and equipment used directly and primarily'' shall not include:

    (A) Hand tools;

    (B) machinery, equipment and tools used in maintaining and repairing any type of ma-
chinery and equipment;

    (C) transportation equipment not used in the manufacturing, assembling, processing,
furnishing, storing, warehousing or distributing process at the plant or facility;

    (D) office machines and equipment including computers and related peripheral equip-
ment not directly and primarily used in controlling or measuring the manufacturing process;

    (E) furniture and buildings; and

    (F) machinery and equipment used in administrative, accounting, sales or other such
activities of the business;

    (ll) all sales of educational materials purchased for distribution to the public at no charge
by a nonprofit corporation organized for the purpose of encouraging, fostering and con-
ducting programs for the improvement of public health;

    (mm) all sales of seeds and tree seedlings; fertilizers, insecticides, herbicides, germi-
cides, pesticides and fungicides; and services, purchased and used for the purpose of pro-
ducing plants in order to prevent soil erosion on land devoted to agricultural use;

    (nn) except as otherwise provided in this act, all sales of services rendered by an ad-
vertising agency or licensed broadcast station or any member, agent or employee thereof;

    (oo) all sales of tangible personal property purchased by a community action group or
agency for the exclusive purpose of repairing or weatherizing housing occupied by low
income individuals;

    (pp) all sales of drill bits and explosives actually utilized in the exploration and produc-
tion of oil or gas;

    (qq) all sales of tangible personal property and services purchased by a nonprofit mu-
seum or historical society or any combination thereof, including a nonprofit organization
which is organized for the purpose of stimulating public interest in the exploration of space
by providing educational information, exhibits and experiences, which is exempt from fed-
eral income taxation pursuant to section 501(c)(3) of the federal internal revenue code of
1986;

    (rr) all sales of tangible personal property which will admit the purchaser thereof to any
annual event sponsored by a nonprofit organization which is exempt from federal income
taxation pursuant to section 501(c)(3) of the federal internal revenue code of 1986;

    (ss) all sales of tangible personal property and services purchased by a public broad-
casting station licensed by the federal communications commission as a noncommercial
educational television or radio station;

    (tt) all sales of tangible personal property and services purchased by or on behalf of a
not-for-profit corporation which is exempt from federal income taxation pursuant to section
501(c)(3) of the federal internal revenue code of 1986, for the sole purpose of constructing
a Kansas Korean War memorial;

    (uu) all sales of tangible personal property and services purchased by or on behalf of
any rural volunteer fire-fighting organization for use exclusively in the performance of its
duties and functions;

    (vv) all sales of tangible personal property purchased by any of the following organiza-
tions which are exempt from federal income taxation pursuant to section 501 (c)(3) of the
federal internal revenue code of 1986, for the following purposes, and all sales of any such
property by or on behalf of any such organization for any such purpose:

    (1) The American Heart Association, Kansas Affiliate, Inc. for the purposes of providing
education, training, certification in emergency cardiac care, research and other related serv-
ices to reduce disability and death from cardiovascular diseases and stroke;

    (2) the Kansas Alliance for the Mentally Ill, Inc. for the purpose of advocacy for persons
with mental illness and to education, research and support for their families;

    (3) the Kansas Mental Illness Awareness Council for the purposes of advocacy for per-
sons who are mentally ill and to education, research and support for them and their families;

    (4) the American Diabetes Association Kansas Affiliate, Inc. for the purpose of elimi-
nating diabetes through medical research, public education focusing on disease prevention
and education, patient education including information on coping with diabetes, and pro-
fessional education and training;

    (5) the American Lung Association of Kansas, Inc. for the purpose of eliminating all
lung diseases through medical research, public education including information on coping
with lung diseases, professional education and training related to lung disease and other
related services to reduce the incidence of disability and death due to lung disease;

    (6) the Kansas chapters of the Alzheimer's Disease and Related Disorders Association,
Inc. for the purpose of providing assistance and support to persons in Kansas with Alzhei-
mer's disease, and their families and caregivers; and

    (ww) all sales of tangible personal property purchased by the Habitat for Humanities
Humanity for the exclusive use of being incorporated within a housing project constructed
by such organization; and
    (xx) all sales of tangible personal property and services purchased by a parent-teacher
association or organization, and all sales of tangible personal property by or on behalf of
such association or organization.'';

    In line 41, before ``and'' by inserting ``, 79-3606'';

    By renumbering existing sections accordingly;

    In the title, in line 16, before ``and'' by inserting ``, 79-3606''.

 Upon the showing of five hands a roll call vote was requested.

    On roll call, the vote was: Yeas 13, nays 26, present and passing 0; absent or not voting
1.

    Yeas: Barone, Biggs, Downey, Feleciano, Gilstrap, Gooch, Goodwin, Hensley, Jones,
Karr, Lee, Petty, Steineger.

    Nays: Becker, Bleeker, Bond, Brownlee, Clark, Corbin, Donovan, Emert, Harrington,
Huelskamp, Jordan, Kerr, Langworthy, Lawrence, Morris, Oleen, Praeger, Pugh, Ranson,
Salisbury, Salmans, Schraad, Steffes, Tyson, Umbarger, Vidricksen.

    Absent or not voting: Hardenburger.

    The motion failed and the amendment was rejected.

 Senator Lee moved to amend the bill on page 1, by striking all in lines 27 through 43;

    By striking all on pages 2 through 14;

    On page 15, before line 1, by inserting a new section to read as follows:

    ``Section 1. K.S.A. 79-1537 is hereby amended to read as follows: 79-1537. (a) A tax is
hereby imposed on the privilege of succeeding to the ownership of any property, corporeal
or incorporeal, and any interest therein within the jurisdiction of this state.

    (b) Distributees of estates shall be classified as follows:

    (1) Class A shall consist of the lineal ancestors, lineal descendants, step-parents, step-
children, adopted children, lineal descendants of any adopted child or step-child, the spouse
or surviving spouse of a son or daughter, or the spouse or surviving spouse of an adopted
child or step-child of the decedent. In the case of an adopted child or step-child, a spouse
or surviving spouse of an adopted child or step-child or the lineal descendant of an adopted
child or step-child of the decedent, such person shall file with the department of revenue
an affidavit setting forth the relationship of such person to the decedent. Such affidavit shall
be sufficient proof of the adoptive or step-child relationship in question, and the department,
or any officer or employee thereof, shall not require any additional proof of such relationship.
As used in this paragraph, ``step-child'' means a child of a spouse or former spouse of the
decedent.

    (2) Class B shall consist of the brothers and sisters of the decedent.

    (3) Class C shall consist of relatives of all degrees of consanguinity, except those included
in classes A and B, and shall also include strangers in the blood of the decedent.

    Notwithstanding the foregoing provisions of this subsection, with respect to qualified
terminable interest property includable in the decedent's estate under K.S.A. 79-1557a, and
amendments thereto, the relationship of the distributees of such property shall be deter-
mined by their relationship to the individual whose estate made an election with respect to
such property pursuant to subsection (b)(3) of K.S.A. 79-1537b, and amendments thereto.

    (c) (1) From the value of the shares of the distributable estate, as ascertained under
the provisions of this act and succeeded to by the several distributees, deductions shall be
allowed as follows: (A) To each member of class A, $30,000 $1,000,000; and (B) to each
member of class B, $5,000 $100,000.

    (2) The tax herein provided for shall be charged upon the value of the shares of the
distributable estate after deduction of the amounts herein provided, except that when one
or more of the shares of the distributable estate shall consist of property within and property
without the state, only such percentage of the deductions above named shall be allowed in
the percentage that the Kansas share bears to the total shares of the distributee.

    (d) The tax herein imposed shall be an amount equal to a percentage of the value of
the shares of the distributable estate of the decedent succeeded to by the distributees
thereof, reduced by any deductions authorized pursuant to subsection (c):

    (1) Upon the value of shares succeeded to by members of class A reduced by such
deductions, the following rates of tax are hereby imposed: On the first $25,000, or fraction
thereof, 1%; on the second $25,000, or fraction thereof, 2%; on the next $50,000, or fraction
thereof, 3%; on the next $400,000, or fraction thereof, 4%; on all over $500,000, 5%;

    (2) upon the value of shares succeeded to by members of class B reduced by such
deductions, the following rates of tax are hereby imposed: On the first $25,000, or fraction
thereof, 3%; on the second $25,000, or fraction thereof, 5%; on the next $50,000, or fraction
thereof, 71
2/%; on the next $400,000, or fraction thereof, 10%; on all over $500,000, 1212/%;
and

    (3) upon the value of shares succeeded to by members of class C, the following rates
of taxes are hereby imposed: On any amount up to $100,000, 10%; on any amount in excess
of $100,000 and up to $200,000, 12%; on all sums in excess of $200,000, 15%.

    Sec. 2. K.S.A. 79-1542 is hereby amended to read as follows: 79-1542. As used in this
act unless the context otherwise requires:

    (a) Any term used in this act shall have the same meaning as when used in a comparable
context in the internal revenue code. Any reference in this act to the ``internal revenue code''
shall mean the provisions of the United States internal revenue code of 1986, as such code
exists on December 31, 1992 1997. Any reference in this act to a specific provision of the
internal revenue code shall be to such provision as it exists on December 31, 1992 1997.

    (b) ``Deemed executor'' includes any person in actual or constructive possession of any
property of the decedent.

    (c) ``Director'' means the director of taxation.

    (d) ``Distributee'' means a beneficiary, legatee, devisee, heir, next of kin, grantee, donee,
vendee, joint tenant or any other successor in interest, whether outright or in trust.

    (e) ``Distributive share'' or ``distributive shares'' means the share or shares of the dis-
tributive estate passing to a distributee or distributees.

    (f) ``Domicile'' refers to that place where a person resides, has an intention to remain
and to which they intend to return following any absence.

    (g) ``Estate'' and ``property'' shall mean the real, personal and mixed property or interest
therein of the testator, intestate, grantor, bargainor, vendor or donor which shall pass or be
transferred to legatees, devisees, heirs, next of kin, grantees, donees, vendees, or successors
and shall include all personal property within or without the state.

    (h) ``Executor'' and ``administrator'' mean the duly appointed, qualified and acting ex-
ecutor or administrator of the decedent in this state.

    (i) ``Nonresident decedent'' means a decedent who was not a resident decedent at the
time of death.

    (j) ``Personal representative'' means the executor, administrator or deemed executor of
the decedent.

    (k) ``Resident decedent'' means a decedent who was domiciled in this state at the time
of death.

    (l) ``Secretary'' means the secretary of revenue, or the secretary's designee.

    (m) ``Tax'' includes tax, penalty and interest, unless the context of a particular section
otherwise requires.

    (n) ``Transfer'' shall include the passing of property or any interest therein in possession
or enjoyment, present or future, by inheritance, descent, devise, succession, bequest, grant,
deed, bargain, sale, gift or appointment in the manner herein prescribed.'';

    By renumbering existing sections accordingly;

    On page 25, in line 33, by striking all after the third comma and inserting ``79-1542,''; by
striking all in lines 34 through 40; in line 41, by striking all before ``79-32,121'';

    In the title, in line 14, by striking all after the second comma; by striking all in line 15;
in line 16, by striking all before ``79-32,110'' and inserting ``79-1537, 79-1542,''; in line 18,
by striking all after ``sections''; by striking all in lines 19 through 23; in line 24, by striking
all before the period;.

 Upon the showing of five hands a roll call vote was requested.

    On roll call, the vote was: Yeas 13, nays 25, present and passing 0; absent or not voting
2.

    Yeas: Barone, Biggs, Downey, Feleciano, Gilstrap, Gooch, Goodwin, Hensley, Jones,
Karr, Lee, Petty, Steineger.

    Nays: Becker, Bleeker, Bond, Brownlee, Clark, Corbin, Donovan, Emert, Harrington,
Huelskamp, Jordan, Kerr, Langworthy, Lawrence, Morris, Praeger, Pugh, Ranson, Salis-
bury, Salmans, Schraad, Steffes, Tyson, Umbarger, Vidricksen.

    Absent or not voting: Hardenburger, Oleen.

    The motion failed and the amendment was rejected.

 Senator Steineger moved to amend the bill on page 25, after line 32, by inserting four
new sections to read as follows:

    ``Sec. 26. K.S.A. 79-3634 is hereby amended to read as follows: 79-3634. The right to
file a claim for a refund under K.S.A. 79-3620 and 79-3632 ;ø 79-3639 shall be personal to
the claimant and shall not survive his or her death, but such right et seq. may be exercised
on behalf of a claimant by his or her legal guardian, conservator or attorney-in-fact. When
a claimant dies after having filed a timely claim the amount thereof shall be disbursed to
another member of the household as determined by the director of taxation. If the claimant
was the only member of his or her household, the claim may be paid to his or her executor
or administrator, but if neither is appointed and qualified, the amount of the claim may be
paid upon a claim duly made to any heir at law. In the absence of any such claim within
two (2) years of the filing of the claim, the amount of the claim shall escheat to the state.
When a person who would otherwise be entitled to file a claim under the provisions of this
act dies prior to filing such claim, another member of such person's household may file such
claim in the name of such decedent, subject to the deadline prescribed by K.S.A. 79-4505,
and amendments thereto, and the director shall pay the amount to which the decedent would
have been entitled to such person filing the claim. If the decedent was the only member of
his or her household, the decedent's executor or administrator may file such claim in the
name of the decedent, and the claim shall be paid to said executor or administrator. In the
event that neither an executor or administrator is appointed and qualified, such claim may
be made by any heir at law and the claim shall be payable to such heir at law. Any of the
foregoing provisions shall be applicable in any case where the decedent dies in the calendar
year preceding the year in which a claim may be made under the provisions of this act, if
such decedent was a resident of or domiciled in this state during the entire part of such year
that such decedent was living. Where decedent's death occurs during the calendar year
preceding the year in which a claim may be made hereunder, the amount of the claim that
would have been allowable if the decedent had been a resident of or domiciled in this state
the entire calendar year of his or her death shall be reduced in a proportionate amount equal
to a fraction of the claim otherwise allowable, the numerator of which fraction is the number
of months in such calendar year following the month of decedent's death and the denominator
of which is 12.

    Sec. 27. K.S.A. 79-3635 is hereby amended to read as follows: 79-3635. (a) A claimant
shall be entitled to a refund of retailers' sales taxes paid upon food during the calendar year
1997 and each year thereafter in the amount hereinafter provided. For households having
a household income of less than $5,000, a refund in the amount of $40 $80 shall be allowed
for the head of household and a refund of $30 $60 shall be allowed for each additional
member of the household. For households having a household income of at least $5,000
but less than $10,000, a refund in the amount of $30 $60 shall be allowed for the head of
household and a refund of $25 $50 shall be allowed for each additional member of the
household. For households having a household income of at least $10,000 but not more
than $13,000 $15,000, a refund in the amount of $20 $40 shall be allowed for the head of
household and a refund of $15 $30 shall be allowed for each additional member of the
household. For households having a household income of at least $15,000 but not more than
$20,000, a refund in the amount of $30 shall be allowed for the head of the household and
a refund of $20 shall be allowed for each additional member of the household. For households
having a household income of at least $20,000 but not more than $25,000, a refund in the
amount of $20 shall be allowed for the head of household and a refund of $10 shall be
allowed for each additional member of the household. All such claims shall be paid from the
sales tax refund fund upon warrants of the director of accounts and reports pursuant to
vouchers approved by the director of taxation or by a person or persons designated by the
director.

    (b) A head of household shall make application for refunds for all members of the same
household upon a common form provided for the making of joint claims. All claims paid to
members of the same household shall be paid as a joint claim by means of a single warrant.

    (c) No claim for a refund of taxes under the provisions of K.S.A. 79-3632 et seq. shall
be paid or allowed unless such claim is actually filed with and in the possession of the
department of revenue on or before April 15 of the year next succeeding the year in which
such taxes were paid. The director of taxation may: (1) Extend the time for filing any claim
under the provisions of this act when good cause exists therefor; or (2) accept a claim filed
after the deadline for filing in the case of sickness, absence or disability of the claimant if
such claim has been filed within four years of such deadline.

    New Sec. 28. (a) Any taxpayer described in K.S.A. 79-1106 and amendments thereto
which owns stock in a subsidiary that owns, holds or manages all or part of the taxpayer's
securities portfolio, shall file consolidated returns for purposes of determining the tax liability
under article 11 of chapter 79 of the Kansas Statutes Annotated as if such taxpayer and
subsidiary were one entity.

    (b) (1) Any taxpayer required to file a consolidated return under section 1 and amend-
ments thereto, and required to determine an apportionment percentage under K.S.A. 79-
1129 and amendments thereto shall not include in either the numerator or the denominator
of the receipts factor described in K.S.A. 79-1130 and amendments thereto amounts re-
ceived from or provided to a subsidiary described in subsection (a) as consideration from
investment assets and activities and trading assets and activities that represent inter-company
transactions between the taxpayer and such subsidiary; and

    (2) receipts as described in subsection (m) of K.S.A. 79-1130 and amendments thereto
received by a subsidiary described in subsection (a) shall be treated by a taxpayer required
to file a consolidated return under section 1 and amendments thereto as receipts of the
taxpayer.

    (c) For taxpayers described in K.S.A. 79-1106 and amendments thereto, the secretary
of revenue may require returns on a consolidated basis or may distribute or allocate gross
income, deductions, credits, or allowances between two or more organizations, trades or
businesses, whether or not incorporated, or organized in the United States or Kansas or
affiliated, owned or controlled directly or indirectly by the same interests, if the secretary
of revenue determines such allocation is necessary to prevent evasion of taxes or to clearly
reflect income of the organizations, trades or businesses.

    (d) This provisions of this section shall be applicable to all taxable years commencing
after December 31, 1997.

    (e) This section shall be and constitute a part of and shall be supplemental to the priv-
ilege tax statutes enacted in K.S.A. 79-1106 et seq. and amendments thereto.

    New Sec. 29. (a) There shall be allowed as a credit against the tax liability of a resident
individual imposed under the Kansas income tax act an amount equal to 10% for tax year
1998, and 15% for tax year 1999, and all tax years thereafter, of the amount of the earned
income credit allowed against such taxpayer's federal income tax liability pursuant to section
32 of the federal internal revenue code for the taxable year in which such credit was claimed
against the taxpayer's federal income tax liability.

    (b) If the amount of the credit allowed by subsection (a) exceeds the taxpayer's income
tax liability imposed under the Kansas income tax act, such excess amount shall be refunded
to the taxpayer.

    (c) The provisions of this section shall be applicable to all taxable years commencing
after December 31, 1997.'';

    By renumbering existing sections accordingly;

    Also, on page 25, in line 41, before ``and'' by inserting ``, 79-3634, 79-3635'';

    In the title, in line 16, before ``and'' by inserting ``, 79-3634, 79-3635''.

 Upon the showing of five hands a roll call vote was requested.

    On roll call, the vote was: Yeas 13, nays 25, present and passing 0; absent or not voting
2.

    Yeas: Barone, Biggs, Downey, Feleciano, Gilstrap, Gooch, Goodwin, Hensley, Jones,
Karr, Lee, Petty, Steineger.

    Nays: Becker, Bleeker, Bond, Brownlee, Clark, Corbin, Donovan, Emert, Harrington,
Huelskamp, Jordan, Kerr, Langworthy, Lawrence, Morris, Praeger, Pugh, Ranson, Salis-
bury, Salmans, Schraad, Steffes, Tyson, Umbarger, Vidricksen.

    Absent or not voting: Hardenburger, Oleen.

    The motion failed and the amendment was rejected.

 Senator Karr moved to amend the bill on page 16, by striking all in lines 6 through 25;
after line 25, by inserting three new sections to read as follows:

    ``Sec. 19. K.S.A. 79-32,119 is hereby amended to read as follows: 79-32,119. The Kansas
standard deduction of an individual, including a husband and wife who are either both
residents or who file a joint return as if both were residents, shall be equal to the sum of
the standard deduction amount allowed pursuant to this section, and the additional standard
deduction amount allowed pursuant to this section for each such deduction allowable to
such individual or to such husband and wife under the federal internal revenue code as in
effect for tax year 1988. For tax year 1998, and all tax years thereafter, the standard de-
duction amount shall be as follows: Single individual filing status, $3,200; married filing
status, $5,600; and head of household filing status, $4,800. For tax year 1998 and all tax
years thereafter, the additional standard deduction amount shall be as follows: Single indi-
vidual and head of household filing status, $850; and married filing status, $700. For pur-
poses of the foregoing, the federal standard deduction allowable to a husband and wife filing
separate Kansas income tax returns shall be determined on the basis that separate federal
returns were filed, and the federal standard deduction of a husband and wife filing a joint
Kansas income tax return shall be determined on the basis that a joint federal income tax
return was filed.

    Sec. 20. K.S.A. 79-32,121 is hereby amended to read as follows: 79-32,121. (a) An
individual shall be allowed a Kansas exemption of $1,950 for tax year 1988, and $2,000 for
each tax year thereafter $2,100 for tax year 1998, and tax years thereafter for each exemption
for which such individual is entitled to a deduction for the taxable year for federal income
tax purposes. In addition to the exemptions authorized in the foregoing provision, an indi-
vidual filing a federal income tax return under the status of head of household, as the same
is defined by 26 U.S.C. 2(b), shall be allowed an additional Kansas exemption of $1,950 for
tax year 1988, and $2,000 for each tax year thereafter $2,100 for tax year 1998, and all tax
years thereafter.

    (b) For tax year 1987, there shall be allowed as a credit against the tax liability of a
resident individual imposed under the Kansas income tax act who except for the operation
of the provisions of K.S.A. 79-32,121 resulting from amendments to the federal internal
revenue code would have been allowed an additional exemption for blindness or age or both
pursuant to such section in tax year 1987, an amount equal to $60 for each such exemption.
The total amount of such credits shall not exceed the amount of tax imposed by K.S.A.
79-32,110, and amendments thereto, reduced by the sum of any other credits allowable
pursuant to law.

    New Sec. 21. (a) There shall be allowed as a credit against the tax liability of a resident
individual imposed under the Kansas income tax act an amount equal to 10% for tax year
1998, and all tax years thereafter, of the amount of the earned income credit allowed against
such taxpayer's federal income tax liability pursuant to section 32 of the federal internal
revenue code for the taxable year in which such credit was claimed against the taxpayer's
federal income tax liability.

    (b) If the amount of the credit allowed by subsection (a) exceeds the taxpayer's income
tax liability imposed under the Kansas income tax act, such excess amount shall be refunded
to the taxpayer.

    (c) The provisions of this section shall be applicable to all taxable years commencing
after December 31, 1997.'';

    By renumbering existing sections accordingly;

    On page 25, in line 41, before ``79-32,121'' by inserting ``79-32,119,'';

    In the title, in line 16, before ``79-32,121'' by inserting ``79-32,119,''.

 Upon the showing of five hands a roll call vote was requested.

    On roll call, the vote was: Yeas 13, nays 25, present and passing 0; absent or not voting
2.

    Yeas: Barone, Biggs, Downey, Feleciano, Gilstrap, Gooch, Goodwin, Hensley, Jones,
Karr, Lee, Petty, Steineger.

    Nays: Becker, Bleeker, Bond, Brownlee, Clark, Corbin, Donovan, Emert, Harrington,
Huelskamp, Jordan, Kerr, Langworthy, Lawrence, Morris, Praeger, Pugh, Ranson, Salis-
bury, Salmans, Schraad, Steffes, Tyson, Umbarger, Vidricksen.

    Absent or not voting: Hardenburger, Oleen.

    The motion failed and the amendment was rejected.

 Senator Hensley moved to amend the bill on page 1, by striking all in lines 27 through
43;

    By striking all on pages 2 through 14;

    On page 15, before line 1, by inserting a new section to read as follows:

    ``Section 1. K.S.A. 79-1537 is hereby amended to read as follows: 79-1537. (a) A tax is
hereby imposed on the privilege of succeeding to the ownership of any property, corporeal
or incorporeal, and any interest therein within the jurisdiction of this state.

    (b) Distributees of estates shall be classified as follows:

    (1) Class A shall consist of the lineal ancestors, lineal descendants, step-parents, step-
children, adopted children, lineal descendants of any adopted child or step-child, the spouse
or surviving spouse of a son or daughter, or the spouse or surviving spouse of an adopted
child or step-child of the decedent. In the case of an adopted child or step-child, a spouse
or surviving spouse of an adopted child or step-child or the lineal descendant of an adopted
child or step-child of the decedent, such person shall file with the department of revenue
an affidavit setting forth the relationship of such person to the decedent. Such affidavit shall
be sufficient proof of the adoptive or step-child relationship in question, and the department,
or any officer or employee thereof, shall not require any additional proof of such relationship.
As used in this paragraph, ``step-child'' means a child of a spouse or former spouse of the
decedent.

    (2) Class B shall consist of the brothers and sisters of the decedent.

    (3) Class C shall consist of relatives of all degrees of consanguinity, except those included
in classes A and B, and shall also include strangers in the blood of the decedent.

    Notwithstanding the foregoing provisions of this subsection, with respect to qualified
terminable interest property includable in the decedent's estate under K.S.A. 79-1557a, and
amendments thereto, the relationship of the distributees of such property shall be deter-
mined by their relationship to the individual whose estate made an election with respect to
such property pursuant to subsection (b)(3) of K.S.A. 79-1537b, and amendments thereto.

    (c) (1) From the value of the shares of the distributable estate, as ascertained under
the provisions of this act and succeeded to by the several distributees, deductions shall be
allowed as follows: (A) To each member of class A, $30,000 $1,000,000; and (B) to each
member of class B, $5,000 $100,000.

    (2) The tax herein provided for shall be charged upon the value of the shares of the
distributable estate after deduction of the amounts herein provided, except that when one
or more of the shares of the distributable estate shall consist of property within and property
without the state, only such percentage of the deductions above named shall be allowed in
the percentage that the Kansas share bears to the total shares of the distributee.

    (d) The tax herein imposed shall be an amount equal to a percentage of the value of
the shares of the distributable estate of the decedent succeeded to by the distributees
thereof, reduced by any deductions authorized pursuant to subsection (c):

    (1) Upon the value of shares succeeded to by members of class A reduced by such
deductions, the following rates of tax are hereby imposed: On the first $25,000, or fraction
thereof, 1%; on the second $25,000, or fraction thereof, 2%; on the next $50,000, or fraction
thereof, 3%; on the next $400,000, or fraction thereof, 4%; on all over $500,000, 5%;

    (2) upon the value of shares succeeded to by members of class B reduced by such
deductions, the following rates of tax are hereby imposed: On the first $25,000, or fraction
thereof, 3%; on the second $25,000, or fraction thereof, 5%; on the next $50,000, or fraction
thereof, 712/%; on the next $400,000, or fraction thereof, 10%; on all over $500,000, 1212/%;
and

    (3) upon the value of shares succeeded to by members of class C, the following rates
of taxes are hereby imposed: On any amount up to $100,000, 10%; on any amount in excess
of $100,000 and up to $200,000, 12%; on all sums in excess of $200,000, 15%.

    By renumbering existing sections accordingly;

    On page 16, in line 8, by striking ``$2,350'' and inserting ``$2,100''; in line 15, by striking
``$2,350'' and inserting ``$2,100'';

    On page 21, in line 42, before the colon by inserting ``, unless otherwise specifically
provided, upon'';

    On page 25, in line 30, by striking ``and''; in line 32, before the period by inserting ``; and

    (u) the gross receipts received from sales of food for human consumption which shall
be taxed at the rate of 3.4%. As used in this subsection, ``food for human consumption''
means only that food which is eligible for purchase with food stamps issued by the United
States department of agriculture pursuant to regulations in effect on January 1, 1998, re-
gardless of whether the retailer from which the food is purchased is participating in the food
stamp program. Such phrase shall not include: (1) Meals prepared for immediate consump-
tion on or off premises of the retailer; or (2) food sold through vending machines'';

    Also on page 25, in line 33, by striking all after the third comma; by striking all in lines
34 through 40; in line 41, by striking all before ``79-32,110'';

    In the title, in line 14, by striking all after the second comma; by striking all in line 15;
in line 16, by striking all before ``79-32,110'' and inserting ``79-1537,''; in line 18, by striking
all after ``sections''; by striking all in lines 19 through 23; in line 24, by striking all before
the period;.

 Upon the showing of five hands a roll call vote was requested.

    On roll call, the vote was: Yeas 13, nays 25, present and passing 0; absent or not voting
2.

    Yeas: Barone, Biggs, Downey, Feleciano, Gilstrap, Gooch, Goodwin, Hensley, Jones,
Karr, Lee, Petty, Steineger.

    Nays: Becker, Bleeker, Bond, Brownlee, Clark, Corbin, Donovan, Emert, Harrington,
Huelskamp, Jordan, Kerr, Langworthy, Lawrence, Morris, Praeger, Pugh, Ranson, Salis-
bury, Salmans, Schraad, Steffes, Tyson, Umbarger, Vidricksen.

    Absent or not voting: Hardenburger, Oleen.

    The motion failed and the amendment was rejected.

 Senator Karr moved to amend the bill on page 25, after line 32, by inserting a new section
to read as follows:

    ``Sec. 26. K.S.A. 79-201w is hereby amended to read as follows: 79-201w. The following
described property, to the extent specified by this section, shall be exempt from all property
or ad valorem taxes levied under the laws of the state of Kansas:

    (a) Any item of machinery, equipment, materials and supplies which, except for the
operation of the provisions of this section, would be required to be listed for the purpose
of taxation pursuant to K.S.A. 79-306, and amendments thereto, and which is actually and
regularly used exclusively for business purposes to earn income for the owner thereof in the
conduct of such owner's business, or in the conduct of activities by an entity not subject to
Kansas income taxation pursuant to K.S.A. 79-32,113, and amendments thereto, whose
original retail cost when new is $250 $500 or less.

    (b) The provisions of this section shall apply to all taxable years commencing after
December 31, 1995 1997.''

    By renumbering existing sections accordingly;

    Also, on page 25, in line 33, before ``79-201x'' by inserting ``79-201w,'';

    In the title, in line 14, before ``79-201x'' by inserting ``79-201w,''.

 The amendment was rejected.

 On motion of Senator Emert the Senate adjourned until 2:30 p.m., Thursday, February
5, 1998.

HELEN A. MORELAND, Journal Clerk. 
PAT SAVILLE, Secretary of the Senate.