Kansas — Corporate Income / Franchise Tax

Kansas imposes a corporate income tax on every corporation doing business within Kansas or deriving income from sources within Kansas. The tax consists of a normal tax and a surtax computed on Kansas taxable income.

Source: K.S.A. 79-32,110(c)

The normal tax is 4% of Kansas taxable income. The surtax is 3% of Kansas taxable income in excess of $50,000. These rates apply unless modified by specific statutory provisions under K.S.A. 74-50,321 or 79-32,110d.

Source: K.S.A. 79-32,110(c)(1)-(2)

A Kansas corporate income tax return must be filed by all corporations doing business in or deriving income from sources within Kansas who are required to file a federal income tax return, whether or not a Kansas tax is due. Corporations file on Form K-120.

Source: Kansas Corporate Tax Booklet 2024, Filing Requirements

## Entities excluded from corporate income tax

S corporations that have elected under Subchapter S of the Internal Revenue Code are not subject to Kansas corporate income tax. These entities file Kansas Form K-120S (Partnership or S Corporation return), and the shareholders include their proportionate share of the corporation's income on their individual Kansas returns.

Source: K.S.A. 79-32,139

Banks, trust companies, savings and loan associations, and federally chartered savings banks are exempt from Kansas corporate income tax and instead file privilege tax returns on Form K-130. This exemption applies even if the entity has elected S corporation status for federal purposes.

Source: Kansas Corporate Tax Booklet 2024, Exempt Organizations

Insurance companies are also exempt from Kansas corporate income tax under Kansas law.

Source: Kansas Corporate Tax Booklet 2024, Exempt Organizations

Corporations exempt from federal income tax under the Internal Revenue Code that file Form 990 or 990-EZ are exempt from Kansas corporate income tax in each year they satisfy the federal exemption requirements. However, a federally exempt corporation subject to unrelated business income tax that files federal Form 990-T must also file Kansas Form K-120 to report unrelated business income for Kansas purposes.

Source: Kansas Corporate Tax Booklet 2024, Exempt Organizations

Certain utilities are exempt from Kansas corporate income tax: (1) any utility that is a cooperative as defined in K.S.A. 66-104d, or owned by one or more such cooperatives; and (2) effective for tax years ending on or after January 1, 2021, every electric and natural gas public utility as defined in K.S.A. 66-104 that is subject to rate regulation by the Kansas Corporation Commission.

Source: Kansas Corporate Tax Booklet 2024, Exempt Organizations

## Unitary groups — Department of Revenue administrative position

The Kansas Department of Revenue's Corporate Tax Booklet states that for taxable years after December 31, 1990, if any member of a unitary group has activity in Kansas exceeding the protection of 15 U.S.C. § 381 (Public Law 86-272), all unitary group members having Kansas property, payroll, or sales must file Kansas returns and pay the tax due.

This administrative position is published in the Kansas Department of Revenue's Corporate Tax Booklet. Kansas statutes do not contain a parallel provision expressly codifying this unitary group filing requirement tied to P.L. 86-272 protection. The statutory filing obligation under K.S.A. 79-32,110(c) applies to "every corporation doing business within this state or deriving income from sources within this state," but the statute does not separately address the filing obligation of unitary group members when one member exceeds P.L. 86-272 protection.

Practitioners should be aware that this represents the Department of Revenue's administrative interpretation and filing requirement as stated in published guidance, not a directly codified statutory mandate.

Source: Kansas Corporate Tax Booklet 2024, Unitary Groups

For tax years commencing after December 31, 2019, Kansas corporate income tax returns are due one month after the federal corporate return due date. For calendar-year corporations, if the federal return is due April 15, the Kansas return is due May 15. The same one-month offset applies to extended federal due dates; Kansas automatically honors federal extensions without requiring a separate state application.

Source: K.S.A. 79-3221(c)(2)

For tax years beginning before January 1, 2027

For tax years beginning before January 1, 2027, Kansas generally uses an equally weighted three-factor apportionment formula. Business income is multiplied by a fraction; the numerator is the sum of the property factor, payroll factor, and sales factor, and the denominator is three.

Corporations may elect a two-factor formula (property and sales only) if their payroll factor exceeds 200% of the average of the property and sales factors. The election is made by including a statement with the original tax return and is irrevocable for ten years.

Source: K.S.A. 79-3279(b)(1)–(2)

For tax years commencing on or after January 1, 2027

For tax years commencing on or after January 1, 2027, all business income shall be apportioned to Kansas by multiplying the business income by the sales factor. This is a mandatory single sales factor apportionment formula that applies to all corporations subject to apportionment, eliminating the property and payroll factors from the calculation.

The change to mandatory single sales factor apportionment also applies to railroads and interstate motor carriers of persons or property for hire, which previously used a mileage-based apportionment formula under K.S.A. 79-3279(a). The pre-2027 mileage formula (freight car miles for railroads; total miles operated for interstate motor carriers) is repealed effective for tax years beginning on or after January 1, 2027, and these entities will use the general single sales factor formula.

Source: K.S.A. 79-3279(c)

Alcoholic liquor manufacturer exception

Manufacturers of alcoholic liquor as defined in K.S.A. 41-102 who sell to distributors as defined in K.S.A. 41-102 continue to apportion business income using the three-factor formula (property, payroll, and sales, equally weighted) even for tax years commencing on or after January 1, 2027. This exception from the single sales factor apportionment is not time-limited by the statute.

Source: K.S.A. 79-3279(f)

For tax years commencing on or after January 1, 2027, Kansas requires all business income subject to corporate income tax to be apportioned using a mandatory single sales factor formula. Business income is apportioned to Kansas by multiplying the business income by the sales factor. This marks a shift from the prior three-factor apportionment formula (property, payroll, and sales, equally weighted) that applied for tax years beginning before January 1, 2027.

The change to single sales factor apportionment was enacted by House Bill 2231, signed by Governor Laura Kelly on April 24, 2025, and codified in K.S.A. 79-3279(c). The statute mandates this method for all corporations subject to apportionment, eliminating the property and payroll factors from the calculation.

Source: K.S.A. 79-3279(c)

Elimination of prior two-factor election

The optional two-factor formula (property and sales only) that was available under pre-2027 law for qualifying taxpayers is no longer available for tax years commencing on or after January 1, 2027. Under prior law, corporations whose payroll factor exceeded 200% of the average of the property and sales factors could elect to use a two-factor formula by filing a statement with the original return; that election was irrevocable for ten years. For tax years beginning in 2027 and later, all corporations (except the alcoholic liquor manufacturer exception discussed below) must use the single sales factor formula, regardless of their prior elections or factor distributions.

Source: K.S.A. 79-3279(b)(2), (c)

Railroads and interstate motor carriers — shift from mileage formula

The single sales factor requirement also applies to railroads and interstate motor carriers of persons or property for hire. Prior to January 1, 2027, these taxpayers apportioned income using a mileage-based formula under K.S.A. 79-3279(a): freight car miles for railroads; total miles operated for interstate motor carriers. That mileage-based provision was repealed effective for tax years commencing on or after January 1, 2027, and these entities now use the same single sales factor formula as other corporations.

Source: K.S.A. 79-3279(a), (c)

Alcoholic liquor manufacturer exception

One category of taxpayers is exempt from the mandatory single sales factor apportionment. Manufacturers of alcoholic liquor as defined in K.S.A. 41-102 who sell to distributors as defined in K.S.A. 41-102 continue to apportion business income using the three-factor formula (property, payroll, and sales, equally weighted) even for tax years commencing on or after January 1, 2027. The statute does not impose a time limit on this exception.

Source: K.S.A. 79-3279(f)

Concurrent sourcing change

The shift to single sales factor apportionment was enacted alongside a concurrent change to market-based sourcing for sales other than sales of tangible personal property, also effective for tax years commencing after December 31, 2026. Under K.S.A. 79-3287(b), Kansas replaced its historic cost-of-performance sourcing methodology with market-based sourcing rules that assign sales of services to Kansas if and to the extent the service is delivered to a location in Kansas, and sales of intangible property to Kansas based on where the property is used. These two changes — single sales factor apportionment and market-based sourcing — operate together to fundamentally reshape Kansas corporate income tax liability for multistate corporations beginning in tax year 2027.

Source: K.S.A. 79-3287(b)

Deferred tax impact deduction for publicly traded corporations

Kansas provides a deferred tax impact deduction to mitigate the financial statement effect on publicly traded corporations from the shift to single sales factor apportionment. Eligible corporations that experience an aggregate increase in net deferred tax liability, an aggregate decrease in net deferred tax asset, or an aggregate change from a net deferred tax asset to a net deferred tax liability as a result of the apportionment change may claim a deduction calculated over a 10-year period beginning with tax years commencing on or after January 1, 2035. Any taxpayer intending to claim this deduction must file a statement with the Kansas Secretary of Revenue on or before July 1, 2027, specifying the total amount of the deduction claimed. Failure to file by that deadline results in permanent forfeiture of the deduction.

Source: K.S.A. 79-3279(e)

Kansas imposes corporate income tax on every corporation doing business within Kansas or deriving income from sources within Kansas. Either standard creates a filing obligation. A Kansas return must be filed by all corporations meeting either test who are required to file a federal income tax return, whether or not Kansas tax is due. The statute does not define "doing business" or "deriving income from sources within Kansas."

Source: K.S.A. 79-32,110(c)

Kansas imposes corporate income tax on "every corporation doing business within this state or deriving income from sources within this state" under K.S.A. 79-32,110(c), but neither the statute nor Kansas administrative regulations define what constitutes "doing business" or "deriving income from sources within Kansas." The Kansas Department of Revenue has not published comprehensive administrative guidance, a detailed nexus regulation, or a nexus policy statement interpreting these statutory terms.

Administrative regulation

Kansas Administrative Regulation 92-12-8 defines "corporation" to include "every corporation doing business within this state or deriving income from sources within this state," but the regulation does not further define either phrase. The regulation's definition is circular—it repeats the statutory language from K.S.A. 79-32,110(c) without adding substantive interpretation of what activities constitute "doing business" or when a corporation is deemed to derive income from Kansas sources.

Public Law 86-272 protections

Kansas recognizes the protections of federal Public Law 86-272 (15 U.S.C. § 381), which prohibits a state from imposing a net income tax on a corporation whose only activity in the state is the solicitation of orders for sales of tangible personal property, provided the orders are approved and filled from outside the state. The Kansas Corporate Tax Booklet references P.L. 86-272 in limited contexts:

1. Activity wholly within Kansas: If a corporation's activities outside Kansas are such that federal P.L. 86-272 prohibits another state from imposing a tax, then the entire net income is subject to Kansas income tax.

1. Unitary groups: For taxable years after December 31, 1990, if any member of a unitary group has activity in Kansas exceeding the protection of 15 U.S.C. § 381 (P.L. 86-272), all unitary group members having Kansas property, payroll, or sales must file Kansas returns and pay the tax due.

These references confirm that Kansas follows the federal P.L. 86-272 safe harbor for corporations engaged solely in protected solicitation activities, but the Department of Revenue has not published additional guidance interpreting the scope of P.L. 86-272 protections or clarifying what activities exceed the federal protection and create Kansas nexus.

Source: Kansas Corporate Tax Booklet 2024

Absence of comprehensive nexus guidance

Kansas has not adopted nexus regulations similar to those in states that enumerate specific activities creating or not creating nexus, establish bright-line quantitative thresholds (other than for sales tax economic nexus), or provide factor-presence standards for corporate income tax purposes. Corporations must apply the statutory language—"doing business within Kansas" or "deriving income from sources within Kansas"—in light of general constitutional nexus principles (substantial nexus under Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), and economic presence under South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)) without Kansas-specific administrative interpretation.

Practitioners should note that Kansas's references to P.L. 86-272 appear in the context of apportionment and unitary group filing requirements, not as comprehensive nexus policy statements. Kansas does not publish a matrix of activities that create or do not create nexus, nor does it issue nexus-specific rulings, bulletins, or notices interpreting the "doing business" or "deriving income from sources within Kansas" standards.

Source: K.S.A. 79-32,110(c)

Kansas taxable income for corporations is computed by starting with federal taxable income and applying Kansas-specific addition and subtraction modifications. Subtractions include interest on U.S. government obligations and certain modifications that mirror those available to individual taxpayers under K.S.A. 79-32,117(c). For corporations deriving all income from Kansas sources, the result after applying additions and subtractions is Kansas taxable income. Multistate corporations must apportion business income using the formula in K.S.A. 79-3279 after computing net income before apportionment.

Source: K.S.A. 79-32,138

Every corporation doing business in Kansas must pay estimated tax for the taxable year if its Kansas income tax liability can reasonably be expected to exceed $500. This threshold applies to the total combined normal tax and surtax computed under K.S.A. 79-32,110(c).

Source: K.S.A. 79-32,101(a)(2)

## Payment schedule and installment amounts

Corporate estimated tax is paid in four equal installments. For a calendar-year corporation, the installments are due on:

• April 15 (with the declaration of estimated tax)
• June 15
• September 15
• December 15 (note: corporations pay the fourth installment on December 15, not January 15 as individuals do)

For fiscal-year corporations, substitute the corresponding months—the 4th, 6th, 9th, and 12th months of the taxable year.

Source: K.S.A. 79-32,103(a)(1)

If a corporation files its declaration after the April 15 due date but on or before June 15, it must pay three equal installments (on filing, September 15, and December 15). If filed after June 15 but on or before September 15, two equal installments are required (on filing and December 15). If filed after September 15, the full estimated tax is due at the time of filing.

Source: K.S.A. 79-32,103(a)(2)-(4)

## First-year exemption

Any corporation that began business in Kansas during the taxable year is not required to pay estimated tax for that initial year, and no underpayment of estimated tax penalty will be imposed for the first year of Kansas operations. This exemption applies only to the year the corporation commences business in Kansas, not to subsequent years.

Source: Kansas Corporate Tax Booklet 2024, Estimated Tax

## Limitation on offset

Current year estimated payments cannot be used to offset prior year tax liabilities. Estimated payments are applied only to the taxable year for which they are made. Any overpayment remaining after the current year return is filed may be refunded or credited to the following year's estimated tax liability at the taxpayer's option, but estimated payments made for the current year do not satisfy prior-year underpayments.

Source: K.A.R. 92-11-22(c)

## Underpayment penalty

If a corporation underpays its estimated tax, it may be subject to an underpayment penalty computed on Schedule K-220. The penalty is based on the amount by which each required installment falls short of the lesser of: (1) 90% of the tax shown on the current year return, or (2) 100% of the tax shown on the prior year return (if the prior year was a 12-month year and a return was filed). Corporations that annualize their income to calculate required installments must indicate this election on the return.

Source: Kansas Corporate Tax Booklet 2024, Line 44

Pre-2027: Cost-of-performance sourcing

For tax years commencing before January 1, 2027, Kansas sources sales other than sales of tangible personal property using cost-of-performance rules. Sales are in Kansas if (1) the income-producing activity is performed in Kansas, or (2) the income-producing activity is performed both in and outside Kansas and a greater proportion of the income-producing activity is performed in Kansas than in any other state, based on costs of performance.

Source: K.S.A. 79-3287(a)

Post-2026: Market-based sourcing

For tax years commencing after December 31, 2026, Kansas replaced cost-of-performance sourcing with market-based sourcing for sales other than sales of tangible personal property. Under K.S.A. 79-3287(b), sales are in Kansas if the taxpayer's market for the sales is in Kansas. This change was enacted by House Bill 2231 (2025) alongside the shift to mandatory single sales factor apportionment and fundamentally reshapes how multistate corporations assign receipts to Kansas.

Source: K.S.A. 79-3287(b)

Services

Sales of services are in Kansas if and to the extent that the service is delivered to a location in Kansas. The statute does not define "delivered to a location" or provide further guidance on what constitutes delivery to Kansas for various service types (professional services, consulting, data processing, cloud computing, or other common service transactions). As of June 1, 2026, the Kansas Department of Revenue has not published regulations or guidance interpreting this delivery standard.

Source: K.S.A. 79-3287(b)(1)

Intangible property — rental, lease, or license

Sales of intangible property that is rented, leased, or licensed are in Kansas if and to the extent that the property is used in Kansas. For intangible property utilized in marketing a good or service to a consumer, the property is used in Kansas if the good or service is purchased by a consumer who is in Kansas.

The statute provides one additional specific rule for certain location-based intangibles: a contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is used in Kansas if the geographic area includes all or part of Kansas.

Source: K.S.A. 79-3287(b)(2)(A)

Intangible property — sale (not rental, lease, or license)

For sales of intangible property (not rental, lease, or license), net gains or other proceeds are assigned to Kansas if and to the extent that the property was used in Kansas. This backward-looking "was used" standard differs from the "is used" standard for rentals, leases, and licenses.

Net gains from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property are treated as receipts from the rental, lease, or licensing of such intangible property and sourced under the rental/lease rules described above, not as a sale.

Source: K.S.A. 79-3287(b)(2)(B)

Dividends

Dividends are in Kansas if and to the extent the payor's commercial domicile is located in Kansas. This is a domicile-based rule, not a use-based or delivery-based rule. The statute does not define "commercial domicile."

Source: K.S.A. 79-3287(b)(2)(C)

Interest from loans — not addressed by statute

K.S.A. 79-3287(b) does not contain a separate provision addressing the sourcing of interest from loans, interest income from debt instruments, or similar financial receipts for tax years commencing after December 31, 2026. The statute enumerates specific categories (services under subsection (b)(1); intangible property under subsection (b)(2)(A) and (b)(2)(B); and dividends under subsection (b)(2)(C)), but is silent on interest income sourcing.

As of June 1, 2026, the Kansas Department of Revenue has not published guidance on whether interest income is sourced under general market-based sourcing principles, whether it is treated as a type of intangible property receipt under subsection (b)(2), or whether some other method applies.

Reasonable approximation and throwout rule

If the state or states of assignment of receipts under subsection (b)(1) or (b)(2) cannot be determined, the state or states of assignment shall be reasonably approximated. If the state or states of assignment of receipts or net gains cannot be reasonably approximated, such assignment of receipts shall be excluded from the denominator of the sales factor (throwout rule). This throwout rule applies when the taxpayer genuinely cannot determine or reasonably approximate the market state, not when the taxpayer merely lacks complete information.

Source: K.S.A. 79-3287(d)

Communications service provider exception

Notwithstanding the market-based sourcing provisions, a communications service provider may elect to assign sales, other than sales of tangible personal property, to Kansas using the pre-2027 cost-of-performance methodology under K.S.A. 79-3287(a).

"Communications service" means telecommunications service as defined in K.S.A. 79-3602, internet access as defined in section 1105(5) of the Internet Tax Freedom Act (47 U.S.C. § 151 note), and cable service as defined in 47 U.S.C. § 522. "Communications service provider" means a person that is primarily engaged in the business of providing communications service. The statute does not specify how the election is made or whether it is irrevocable.

Source: K.S.A. 79-3287(e)

Relationship to single sales factor apportionment

The shift to market-based sourcing was enacted alongside the change to mandatory single sales factor apportionment under K.S.A. 79-3279(c), also effective for tax years commencing after December 31, 2026. These two changes operate together: the single sales factor formula eliminates property and payroll from the apportionment calculation, and market-based sourcing changes how the sales factor numerator (Kansas sales) is calculated for receipts other than tangible personal property sales. Together, they fundamentally reshape Kansas corporate income tax liability for multistate corporations beginning in tax year 2027.

Source: K.S.A. 79-3279(c), 79-3287(b)

For tax years commencing on or after January 1, 2027, Kansas requires all business income subject to corporate income tax to be apportioned using a mandatory single sales factor formula under K.S.A. 79-3279(c). This formula replaced the prior three-factor formula (property, payroll, and sales) that applied before 2027. However, one category of taxpayers is expressly exempted from this mandatory single sales factor requirement.

Alcoholic liquor manufacturers

Manufacturers of alcoholic liquor as defined in K.S.A. 41-102 who sell to distributors as defined in K.S.A. 41-102 are exempt from the mandatory single sales factor apportionment. These taxpayers continue to apportion business income using the three-factor formula (property, payroll, and sales, equally weighted) even for tax years commencing on or after January 1, 2027. The statute does not impose a time limit on this exception.

Source: K.S.A. 79-3279(f)

Railroads and interstate motor carriers

Railroads and interstate motor carriers of persons or property for hire do not have an exception to the mandatory single sales factor apportionment. Prior to January 1, 2027, these taxpayers apportioned income using a mileage-based formula under K.S.A. 79-3279(a) (freight car miles for railroads; total miles operated for interstate motor carriers). That mileage-based provision was repealed for tax years commencing on or after January 1, 2027, and these entities now use the general single sales factor formula under K.S.A. 79-3279(c).

Source: K.S.A. 79-3279(a), (c)

Financial institutions

Financial institutions (banks, trust companies, savings and loan associations, and federally chartered savings banks) are not subject to the Kansas corporate income tax apportionment provisions in K.S.A. 79-3279 at all. These entities are exempt from corporate income tax under K.S.A. 79-32,110 and instead pay Kansas privilege tax under the separate statutory regime in K.S.A. 79-11 et seq., filing on Form K-130 rather than Form K-120.

Source: Kansas Corporate Tax Booklet 2024, Exempt Organizations

Financial institutions subject to the privilege tax apportion income under K.S.A. 79-1129, not K.S.A. 79-3279. For privilege tax purposes, financial institutions used a three-factor apportionment formula (receipts, property, and payroll) for tax years commencing before January 1, 2027. For tax years commencing on or after January 1, 2027, financial institutions apportion business income using a single receipts factor, parallel to the corporate income tax move to single sales factor.

Source: K.S.A. 79-1129(b)(1), (b)(2)

Kansas enacted a deferred tax impact deduction to mitigate the financial statement effect on publicly traded corporations from the mandatory shift to single sales factor apportionment beginning in tax year 2027. This deduction addresses the book-tax timing differences that arise when corporations must revalue their deferred tax assets and liabilities under Generally Accepted Accounting Principles (GAAP) due to the apportionment method change.

Eligibility

Only publicly traded companies are eligible for this deduction. The statute defines eligible taxpayers as publicly traded companies, including affiliated corporations participating in the filing of a publicly traded company's financial statements prepared in accordance with generally accepted accounting principles, as of July 1, 2025. For purposes of this deduction, the term "taxpayer" includes a unitary group of businesses that is required to file a combined report. The deferred tax impact deduction for a unitary group is calculated using unitary net deferred tax assets and liabilities and deducted against unitary group income.

Source: K.S.A. 79-3279(e)(2), (e)(3)

Triggering conditions

A taxpayer is entitled to the deduction only if the change to single sales factor apportionment under K.S.A. 79-3279(c) results in one of three aggregate changes to the taxpayer's deferred tax position:

1. An aggregate increase in the taxpayer's net deferred tax liability;
2. An aggregate decrease in the taxpayer's net deferred tax asset; or
3. An aggregate change from a net deferred tax asset to a net deferred tax liability.

"Net deferred tax liability" means deferred tax liabilities that exceed the deferred tax assets of the taxpayer, as computed in accordance with generally accepted accounting principles. "Net deferred tax asset" means that deferred tax assets exceed the deferred tax liabilities of the taxpayer, as computed in accordance with generally accepted accounting principles.

The increase, decrease, or change is computed based on the change that would result from the imposition of the single sales factor requirements pursuant to K.S.A. 79-3279(c), excluding the deduction itself, as of the end of the tax year prior to tax year 2025 (i.e., as of the end of the 2024 tax year for calendar-year taxpayers).

Source: K.S.A. 79-3279(e)(3), (e)(4), (e)(9)

Calculation of the deduction

The annual deferred tax deduction amount is calculated as follows:

1. Divide by the corporate income tax rate: The deferred tax impact determined under paragraph (4) is divided by the income tax rate for corporations in effect for the tax year pursuant to K.S.A. 79-32,110.

1. Divide by the Kansas apportionment factor: The resulting amount from step 1 is further divided by the Kansas apportionment factor that was used by the taxpayer in the calculation of the deferred tax assets and deferred tax liabilities.

1. Multiply by 1/10 for annual deduction: The result from step 2 is multiplied by 1/10. This represents the total net deferred tax deduction available for the first tax year beginning on or after January 1, 2035, and the next nine successive tax years.

The deduction calculated under this formula shall not be adjusted as a result of any events subsequent to such calculation, including, but not limited to, any disposition or abandonment of assets. The deduction is calculated without regard to any tax liabilities under the federal Internal Revenue Code and does not alter the tax basis of any asset.

Source: K.S.A. 79-3279(e)(5), (e)(6)

Deduction timing — begins 2035

The deduction is claimed over a 10-year period beginning with tax years commencing on or after January 1, 2035. Each year, the taxpayer may claim 1/10 of the total calculated deduction amount. No portion of the deduction is available for tax years 2027 through 2034, even though the apportionment change takes effect in 2027.

Source: K.S.A. 79-3279(e)(5)(C)

Carryforward and timing flexibility

If the deduction in any year is greater than the taxpayer's net business income before apportionment, any excess deduction shall be carried forward and applied as a deduction for future tax years until fully utilized. There is no expiration on the carryforward period.

At the taxpayer's discretion, the taxpayer is allowed to claim other available tax credits before claiming the deferred tax deduction calculated under this section. Any deferred tax deduction not claimed on a return shall be carried forward and applied as a deduction for future tax years until fully utilized.

Source: K.S.A. 79-3279(e)(6), (e)(7)

Mandatory filing deadline — July 1, 2027

Any taxpayer intending to claim a deduction under this provision must file a statement with the Kansas Secretary of Revenue on or before July 1, 2027, specifying the total amount of the deduction that the taxpayer claims. The statement must be made on such form and in such manner as prescribed by the Secretary and shall contain such information or calculations as the Secretary may specify.

No deduction is allowed under this section for any taxable year except to the extent claimed in the manner prescribed on or before July 1, 2027. This filing deadline is absolute. Failure to file the required statement by July 1, 2027, results in permanent forfeiture of the deduction, even if the taxpayer otherwise meets all eligibility requirements.

Source: K.S.A. 79-3279(e)(8)

Relationship to market-based sourcing change

The deferred tax impact deduction is available only for the financial statement effect of the change to single sales factor apportionment under K.S.A. 79-3279(c). It does not apply to any deferred tax impact arising from the simultaneous change to market-based sourcing for sales of services and intangible property under K.S.A. 79-3287(b), which also became effective for tax years commencing after December 31, 2026.

Source: 2025 Kansas Tax Legislation and Related Guidance Documents, House Bill 2231

For tax years commencing after December 31, 2026, Kansas replaced cost-of-performance sourcing with market-based sourcing for sales other than sales of tangible personal property. Under K.S.A. 79-3287(b), sales are in Kansas if the taxpayer's market for the sales is in Kansas. This change was enacted by House Bill 2231 (2025) alongside the shift to mandatory single sales factor apportionment and fundamentally reshapes how multistate corporations assign receipts to Kansas.

Services

Sales of services are in Kansas if and to the extent that the service is delivered to a location in Kansas. The statute does not define "delivered to a location" or provide further guidance on what constitutes delivery to Kansas for various service types. Practitioners should expect Kansas Department of Revenue guidance on how to apply this standard to specific service categories such as professional services, consulting, data processing, cloud computing, and other common service transactions.

Source: K.S.A. 79-3287(b)(1)

Intangible property — rental, lease, or license

Sales of intangible property that is rented, leased, or licensed are in Kansas if and to the extent that the property is used in Kansas. For intangible property utilized in marketing a good or service to a consumer, the property is used in Kansas if the good or service is purchased by a consumer who is in Kansas.

The statute provides one additional specific rule for certain location-based intangibles: a contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is used in Kansas if the geographic area includes all or part of Kansas.

Source: K.S.A. 79-3287(b)(2)(A)

Intangible property — sale

For sales of intangible property (not rental, lease, or license), net gains or other proceeds are assigned to Kansas if and to the extent that the property was used in Kansas. This backward-looking "was used" standard differs from the "is used" standard for rentals, leases, and licenses.

Importantly, net gains from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property are treated as receipts from the rental, lease, or licensing of such intangible property and sourced under the rental/lease rules described above, not as a sale.

Source: K.S.A. 79-3287(b)(2)(B)

Dividends

Dividends are in Kansas if and to the extent the payor's commercial domicile is located in Kansas. This is a domicile-based rule, not a use-based or delivery-based rule. The statute does not define "commercial domicile."

Source: K.S.A. 79-3287(b)(2)(C)

Interest from loans — not addressed by statute

K.S.A. 79-3287(b) does not contain a separate provision addressing the sourcing of interest from loans, interest income from debt instruments, or similar financial receipts for tax years commencing after December 31, 2026. The statute enumerates specific categories (services under subsection (b)(1); intangible property under subsection (b)(2)(A) and (b)(2)(B); and dividends under subsection (b)(2)(C)), but is silent on interest income sourcing.

Practitioners should expect Kansas Department of Revenue guidance on whether interest income is sourced under general market-based sourcing principles, whether it is treated as a type of intangible property receipt under subsection (b)(2), or whether some other method applies. Until guidance is issued, taxpayers may need to apply general market-based sourcing principles by analogy or seek a ruling for significant interest income items.

Reasonable approximation and throwout

If the state or states of assignment of receipts under subsection (b)(1) or (b)(2) cannot be determined, the state or states of assignment shall be reasonably approximated. If the state or states of assignment of receipts or net gains cannot be reasonably approximated, such assignment of receipts shall be excluded from the denominator of the sales factor (throwout rule). This throwout rule applies when the taxpayer genuinely cannot determine or reasonably approximate the market state, not when the taxpayer merely lacks complete information.

Source: K.S.A. 79-3287(d)

Communications service provider exception

Notwithstanding the market-based sourcing provisions, a communications service provider may elect to assign sales, other than sales of tangible personal property, to Kansas using the pre-2027 cost-of-performance methodology under K.S.A. 79-3287(a). "Communications service" means telecommunications service as defined in K.S.A. 79-3602, internet access as defined in section 1105(5) of the Internet Tax Freedom Act (47 U.S.C. § 151 note), and cable service as defined in 47 U.S.C. § 522. "Communications service provider" means a person that is primarily engaged in the business of providing communications service. The statute does not specify how the election is made or whether it is irrevocable.

Source: K.S.A. 79-3287(e)

Relationship to single sales factor apportionment

The shift to market-based sourcing was enacted alongside the change to mandatory single sales factor apportionment under K.S.A. 79-3279(c), also effective for tax years commencing after December 31, 2026. These two changes operate together: the single sales factor formula eliminates property and payroll from the apportionment calculation, and market-based sourcing changes how the sales factor numerator (Kansas sales) is calculated for receipts other than tangible personal property sales. Together, they fundamentally reshape Kansas corporate income tax liability for multistate corporations beginning in tax year 2027.

Source: K.S.A. 79-3279(c), 79-3287(b)

Kansas law provides for three distinct mechanisms that may reduce the normal tax rate or surtax rate on corporations below the statutory baseline of 4% normal tax and 3% surtax: (1) revenue-growth-triggered reductions under K.S.A. 79-32,110c; (2) a one-time revenue-growth-triggered reduction under K.S.A. 79-32,110d at the end of fiscal year 2028; and (3) APEX-qualified-project-triggered reductions under K.S.A. 74-50,321. Each operates under different triggering conditions and applies to different rate components.

## Revenue-growth-triggered surtax reduction (K.S.A. 79-32,110c)

Commencing on August 15, 2025, and every August 15 thereafter, the Director of the Budget, in consultation with the Director of Legislative Research, determines whether the total fiscal year adjusted general revenue fund collections from the immediately preceding fiscal year exceed the inflation-adjusted base year (2024) revenues and whether the amount of monies in the Budget Stabilization Fund equals or exceeds 15% of the prior fiscal year's state tax receipt revenues to the state general fund. If both conditions are met, the Secretary of Revenue computes and publishes a tax rate reduction.

Under this mechanism, rate reductions are applied in a statutory priority order. First, individual income tax rates are reduced until both individual income tax bracket rates reach 4%. Only after individual rates reach 4% do corporate income tax reductions begin. The statute then reduces the corporate income tax surtax rate until the combined normal tax and surtax rate for corporations equals 4%. The normal tax rate for corporations (currently 4%) is not reduced under K.S.A. 79-32,110c; only the surtax (currently 3% on Kansas taxable income in excess of $50,000) is reduced. Once the combined rate reaches 4%, the corporate surtax has been eliminated and no further corporate income tax reductions occur under this provision.

For tax year 2026, no rate reduction occurred. On August 15, 2025, the Director of the Budget certified that the Budget Stabilization Fund met the 15% threshold, but the total fiscal year adjusted general revenue fund collections from FY 2025 did not exceed the inflation-adjusted base year revenues. Because both conditions must be satisfied, no reduction was triggered.

Source: K.S.A. 79-32,110c (enacted by Senate Bill 269, effective July 1, 2025); Kansas Department of Revenue Notice 25-06

## One-time revenue-growth-triggered normal tax reduction (K.S.A. 79-32,110d)

At the end of fiscal year 2028, the Director of the Budget, in consultation with the Director of Legislative Research, shall certify the amount of actual corporate income tax receipt revenues generated under K.S.A. 79-32,110(c) that is in excess of the prior fiscal year's corporate income tax receipts. The Director of the Budget transmits this certification to the Secretary of Revenue. Upon receipt, the Secretary computes a reduction of the corporate income tax rate. The certified excess amount is converted by the Secretary into a percentage reduction, rounded down to the nearest 0.1%, that would reduce the corporate income tax rate in an amount approximately equal to the certified excess revenue.

The Secretary reduces the normal tax on corporations. The rate reductions remain in effect unless further reduced pursuant to law. The Secretary publishes the new income tax rates to take effect for all taxable years commencing after December 31, 2028, by October 1, 2028.

Unlike the K.S.A. 79-32,110c mechanism (which is annual and contingent on general revenue growth), K.S.A. 79-32,110d is a one-time evaluation at the end of FY 2028 based solely on corporate income tax receipts growth. It reduces the normal tax, not the surtax. The statute does not specify a floor below which the normal tax cannot be reduced.

Source: K.S.A. 79-32,110d (enacted by House Bill 2231, 2025)

## APEX-triggered normal tax reduction (K.S.A. 74-50,321)

Under the Attracting Powerful Economic Expansion (APEX) Act, commencing with fiscal year 2022, in any fiscal year that a qualified firm enters into an agreement with the Secretary of Commerce for the first time under the APEX Act and commences construction on a qualified business facility, the Secretary of Commerce certifies such event to the Secretary of Revenue. Upon receipt of such certification, the Secretary of Revenue adjusts the corporate income tax rate imposed under K.S.A. 79-32,110 to go into effect for the next tax year by reducing the rate by 0.5%.

The maximum reduction to be applied for one taxable year is 0.5% regardless of the number of eligible qualifying firms that may have satisfied the triggering condition in that fiscal year. The 0.5% rate reduction is applied to reduce the normal tax on corporations imposed under K.S.A. 79-32,110, and the reduction continues to apply until the normal tax is reduced to 0%. Once triggered, the reduction remains in effect for all subsequent tax years unless further reduced by law.

The Secretary of Revenue reports any reduction in corporate income tax rates under this section to the chairpersons of the senate standing committees on assessment and taxation and commerce, the chairpersons of the house of representatives standing committees on commerce, labor and economic development and taxation, and the governor. The Secretary causes notice of any such reduction to be published in the Kansas register prior to September 15 of the calendar year immediately preceding the tax year in which the reduction takes effect.

On August 31, 2023, the Kansas Department of Revenue published notice in the Kansas Register that the normal corporate income tax rate set forth in K.S.A. 79-32,110(c)(1) was reduced to 3.5% of Kansas taxable income, effective January 1, 2024. This reduction was triggered by an APEX-qualified firm commencing construction under K.S.A. 74-50,321. As a result, for tax years commencing on or after January 1, 2024, the corporate income tax normal rate is 3.5% (reduced from the statutory 4%), and the surtax remains 3% of Kansas taxable income in excess of $50,000.

Source: K.S.A. 74-50,321; Kansas Department of Revenue Notice 23-10; Kansas Register Notice (August 31, 2023)

## Interaction of the three mechanisms

The three rate-reduction mechanisms apply to different rate components and operate independently:

• K.S.A. 74-50,321 (APEX) reduces the normal tax (already triggered; normal tax currently 3.5% as of January 1, 2024).
• K.S.A. 79-32,110d (FY 2028 one-time) also reduces the normal tax (not yet evaluated; will be determined by October 1, 2028).
• K.S.A. 79-32,110c (annual revenue growth) reduces the surtax (evaluated annually; no reduction yet triggered as of August 15, 2025).

All three mechanisms may reduce rates cumulatively. For example, if the normal tax were reduced to 3.5% by K.S.A. 74-50,321 (as occurred effective January 1, 2024), and then further reduced by K.S.A. 79-32,110d at the end of FY 2028, and the surtax were later reduced under K.S.A. 79-32,110c once individual income tax rates reach 4%, the combined corporate income tax rate would reflect all three reductions.

Practitioners should consult the Kansas Department of Revenue's annual notices published each August (for K.S.A. 79-32,110c determinations) and September (for K.S.A. 74-50,321 APEX certifications), as well as the October 1, 2028 publication of any K.S.A. 79-32,110d reduction, to confirm the applicable rates for a given tax year.

General rule: mandatory single sales factor

For tax years commencing on or after January 1, 2027, Kansas requires all business income subject to corporate income tax to be apportioned using a mandatory single sales factor formula. Business income is apportioned to Kansas by multiplying the business income by the sales factor only. This replaces the prior three-factor formula (property, payroll, and sales, equally weighted) that applied for tax years beginning before January 1, 2027.

Source: K.S.A. 79-3279(c)

Industry-specific exceptions and special rules

Kansas law provides the following exceptions or special treatment for specific industries:

Alcoholic liquor manufacturers

Manufacturers of alcoholic liquor as defined in K.S.A. 41-102 who sell to distributors as defined in K.S.A. 41-102 are exempt from the mandatory single sales factor requirement. These taxpayers continue to apportion business income using the three-factor formula (property, payroll, and sales, equally weighted) even for tax years commencing on or after January 1, 2027. The statute does not impose a time limit on this exception.

Source: K.S.A. 79-3279(f)

Railroads and interstate motor carriers

Railroads and interstate motor carriers of persons or property for hire do not have an exception to the mandatory single sales factor apportionment for tax years beginning on or after January 1, 2027. Prior to January 1, 2027, these taxpayers apportioned income using a mileage-based formula under K.S.A. 79-3279(a): freight car miles for railroads and total miles operated for interstate motor carriers. That mileage-based provision was repealed effective for tax years commencing on or after January 1, 2027, and these entities now use the general single sales factor formula under K.S.A. 79-3279(c).

Source: K.S.A. 79-3279(a), (c)

Financial institutions

Financial institutions (banks, trust companies, savings and loan associations, and federally chartered savings banks) are not subject to Kansas corporate income tax or the apportionment provisions in K.S.A. 79-3279. These entities are exempt from corporate income tax and instead pay Kansas privilege tax under a separate statutory regime in K.S.A. 79-11 et seq., filing on Form K-130 rather than the corporate income tax Form K-120.

For privilege tax purposes, financial institutions apportion income under K.S.A. 79-1129, not K.S.A. 79-3279. For tax years commencing before January 1, 2027, financial institutions subject to privilege tax used a three-factor apportionment formula (receipts, property, and payroll, equally weighted). For tax years commencing on or after January 1, 2027, financial institutions apportion business income using a single receipts factor, parallel to the corporate income tax move to single sales factor.

Source: K.S.A. 79-1129(b)(1), (b)(2); Kansas Corporate Tax Booklet 2024, Exempt Organizations

Other industries

Kansas statutes do not provide apportionment exceptions for other industries such as insurance companies (which are exempt from Kansas corporate income tax), telecommunications companies, or manufacturers generally. The mandatory single sales factor formula under K.S.A. 79-3279(c) applies to all corporations subject to Kansas corporate income tax that apportion income, with the sole exception being alcoholic liquor manufacturers who sell to distributors.