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.

Current rate (as of January 1, 2024): For tax years beginning on or after January 1, 2024, the normal corporate income tax rate is 3.5% (reduced from the statutory 4%) on Kansas taxable income. The surtax remains 3% on Kansas taxable income in excess of $50,000. This reduction from 4% to 3.5% was triggered under the APEX Act (K.S.A. 74-50,321), with formal notice published by the Kansas Department of Revenue, and will remain in effect for subsequent years unless further modified by statute or triggered reductions.

See the section "Contingent corporate income tax rate reductions" for details on all current and potential future rate changes or triggers under current Kansas law.

Source: K.S.A. 79-32,110(c), Kansas Register Notice (August 31, 2023), K.S.A. 74-50,321

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 taxable income for corporations is computed by starting with federal taxable income and applying Kansas-specific addition and subtraction modifications pursuant to K.S.A. 79-32,138. Subtractions include interest on U.S. government obligations and other adjustments permitted by statute.

Pre-2027 computation and apportionment: For tax years starting before January 1, 2027, after Kansas-specific adjustments, corporations deriving all income from Kansas sources use the post-modification amount as Kansas taxable income. For multistate corporations, business income is apportioned to Kansas using the traditional three-factor formula based on property, payroll, and sales. This formula, as set forth in K.S.A. 79-3279 (before amendments effective 2027), divides business income by the average of the property, payroll, and sales factors unless an exception applies.

Transition to single sales factor and market-based sourcing (2027 forward): Beginning with tax years commencing on or after January 1, 2027, two major changes apply to the computation and apportionment of Kansas taxable income:

• Apportionment shifts to a mandatory single sales factor formula for all corporations subject to apportionment, replacing the weighted three-factor method. All business income is apportioned to Kansas by multiplying by the sales factor only. Some exceptions for particular industries (e.g., alcoholic liquor manufacturers) remain.
• Market-based sourcing is adopted for sales other than sales of tangible personal property. Services are sourced to Kansas based on where delivered. Intangible property is sourced to Kansas based on use in the state, and dividends are sourced by payor’s commercial domicile. (See K.S.A. 79-3287(b), as amended by HB 2231.)

Deferred tax impact deduction (beginning 2025): Publicly traded companies experiencing an increase in net deferred tax liability due to the apportionment change may claim a deduction over a 10-year period, provided they file a required statement by July 1, 2027. The deduction begins with tax years starting January 1, 2035. (See K.S.A. 79-3279(e), as amended by HB 2231.)

Contingent corporate tax rate reductions (2029 forward): For tax years beginning after December 31, 2028, contingent reductions in the corporate tax rate may be triggered by revenue growth, with rate announcements due by October 1, 2028. (See HB 2231 summary and K.S.A. 79-32,110d.)

Sources:

• K.S.A. 79-32,138
• K.S.A. 79-3279 (pre- and post-2027 apportionment)
• K.S.A. 79-3287(b) (market-based sourcing)
• 2025 Kansas HB 2231, summary of legislative changes
• Kansas Session Laws, Ch. 123 (HB 2231, 2025)

Direct answer: As of June 23, 2026, the Kansas Department of Revenue has issued no formal or informal written guidance—statute, regulation, bulletin, notice, FAQ, administrative ruling, or taxability matrix—addressing the Multistate Tax Commission’s August 4, 2021 revised interpretation of Public Law 86-272 as applied to internet-based business activities (including remote solicitation, online customer support, or web-based services). No public documentation confirms that Kansas references or applies the MTC’s position in audit practice, correspondence, or unofficial guidance since 2022.

Why: The MTC’s revised Statement on P.L. 86-272 (adopted August 4, 2021) addresses activities conducted via the Internet, offering detailed categories and examples of online activities that may exceed federal protection. Adoption or application of this framework by a state requires either legislation, regulation, or published revenue authority. A review of the Kansas Department of Revenue’s Policy Information Library, Notices, FAQs, Tax Forms & Publications, and official guidance—as accessed on June 23, 2026—finds no reference to the 2021 MTC revision or a corresponding Kansas position on internet business activities within P.L. 86-272’s scope or its exceptions.

No evidence is available in any publicly released KDOR source since 2021 that Kansas has referenced or relied upon the MTC’s internet-activity framework when interpreting Kansas nexus standards for corporate income tax purposes. Search of the KDOR Policy Library (including all available written guidance), bulletins, and administrative positions yields no mention of the current MTC view.

Source support:

• The MTC Statement itself is not Kansas authority, but is cited for background on the multistate position.
• KDOR Policy Library, Notices, and FAQs (authority for absence of Kansas-specific guidance as of June 23, 2026).

Caution / review status: Not yet human confirmed. Absence of guidance is based on review of KDOR’s published resources as of 2026-06-23; practitioners should periodically check for new or revised administrative publications.

Source: MTC Statement on P.L. 86-272 (Aug. 4, 2021) Source: Kansas Department of Revenue Policy Library (absence of guidance as of June 23, 2026)

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), as established by HB 2231 (2025). This formula replaced the prior three-factor formula (property, payroll, and sales) that applied before 2027. However, there are nuanced exceptions and recent statutory amendments affecting certain taxpayers from 2027 forward.

Alcoholic liquor manufacturers (initial rule and narrowed exception)

Under HB 2231, manufacturers of alcoholic liquor (as defined in K.S.A. 41-102) who sell to distributors (as defined in K.S.A. 41-102) were initially excepted from mandatory single sales factor apportionment and allowed to continue using the three-factor formula (property, payroll, and sales, equally weighted) for tax years commencing on or after January 1, 2027. This exception was not time-limited by statute.

Material change — SB 300 (2026) narrows the exception

Effective for tax years commencing on or after January 1, 2027, Kansas SB 300 (enacted April 2026) materially amended the exception for alcoholic liquor manufacturers. Manufacturers meeting both of the following thresholds must now use single sales factor apportionment:

• Kansas property valued at more than $5 million, and
• Kansas compensation (payroll) exceeding $2 million.

Only manufacturers of alcoholic liquor that do not exceed both thresholds continue to use the three-factor apportionment formula. All others (i.e., large in-state liquor manufacturers) must use single sales factor for Kansas corporate income tax apportionment beginning in 2027, just like all other non-excepted corporations.

Source: K.S.A. 79-3279(f), as amended by HB 2231 and SB 300 Kansas SB 300, 2026 Session Summary

Railroads and interstate motor carriers

There is no exception to mandatory single sales factor apportionment for railroads or interstate motor carriers effective for tax years beginning on or after January 1, 2027. These entities previously used a mileage-based formula but as of 2027 use the general single sales factor formula.

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 corporate income tax apportionment provisions in K.S.A. 79-3279. Instead, they pay Kansas privilege tax and apportion income as set forth in K.S.A. 79-1129.

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

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 multiple contingent mechanisms that can lower the corporate income tax rates below their statutory baselines, most notably under K.S.A. 79-32,110c (recurring revenue-growth trigger), K.S.A. 79-32,110d (one-time contingent reduction), and K.S.A. 74-50,321 (APEX-triggered reduction). As of 2026, the most significant change relates to the timeline and implementation of the one-time normal rate reduction under K.S.A. 79-32,110d due to legislative amendment.

Material change as of 2026 — HB 2336 (2026 Session) accelerates the rate reduction trigger year

Originally, under K.S.A. 79-32,110d (L. 2025, ch. 123 § 1), the contingent normal rate reduction would have been triggered based on corporate income tax receipts exceeding those of the previous year at the end of fiscal year 2028, with the Secretary of Revenue required to publish new reduced rates by October 1, 2028, effective for tax years beginning on or after January 1, 2029.

However, House Bill 2336 (2026 Session) amended K.S.A. 79-32,110d to move the trigger year up to the end of fiscal year 2026. As amended, the Director of the Budget now certifies, at the end of fiscal year 2026, the extent to which corporate income tax receipts exceed the previous year's receipts. The Secretary of Revenue then computes and publishes the new reduced normal tax rate by October 1, 2027, for tax years beginning on or after January 1, 2028.

The contingent normal rate reduction calculation methodology remains unchanged (excess receipts converted to a percentage, rounded down to 0.1%, as the rate cut). The new lower rate remains in effect until amended or further reduced by law. All other previously described contingent mechanisms under K.S.A. 79-32,110c and K.S.A. 74-50,321 continue to operate as before for surtax and APEX-linked reductions.

Practitioners should consult the Department of Revenue’s annual notices (especially October 2027) for the latest published rates. As of July 2026, no further contingent reductions have been triggered under these mechanisms.

Source: K.S.A. 79-32,110d, as amended by 2026 HB 2336 Source: 2026 HB 2336 - Kansas Legislative History

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.

Kansas applies a worldwide combined reporting method for unitary business groups and does not offer a water’s-edge or domestic-only election for corporate income tax purposes. Statutory authority under K.S.A. 79-32,141 empowers the Secretary of Revenue to require or permit a combined report to fairly apportion income of corporations “owned or controlled directly or indirectly by the same interests,” without reference to geographic limits. The Kansas Department of Revenue’s published guidance affirms combined reporting for unitary groups, with the focus on whether members have Kansas property, payroll, or sales exceeding the protections of P.L. 86-272 (15 U.S.C. § 381).

Foreign (non-U.S.) affiliates and tax treaty entities: Neither Kansas statute nor KDOR guidance provides for a statutory exclusion of foreign affiliates or treaty-protected entities from the unitary group. Instead, KDOR guidance in the Corporate Tax Booklet explains that all unitary group members with Kansas factor presence (property, payroll, or sales) and activity in Kansas beyond P.L. 86-272 protection are expected to file in the combined report. Entities (whether foreign or domestic) lacking a Kansas apportionment factor are not required to be included in the Kansas return, regardless of federal consolidated return treatment or tax treaty residency. Kansas’s scheme stands in contrast to states with a water’s-edge election, which allows for limitation of the unitary group to domestic entities or those with at least 20% U.S.-source income (such as in California or Illinois).

Practical application: KDOR has not published administrative rules, bulletins, or safe harbors providing a de minimis or treaty-specific carveout for foreign affiliates; the determinant remains whether the entity has inclusion-triggering activity or factor presence in Kansas. While legislative commentary and historical practice suggest a domestic combination approach, binding authority rests on K.S.A. 79-32,141 and the Department's annual tax booklet.

Open statutory questions: Kansas law does not explicitly address every scenario (e.g., a foreign entity with minimal U.S. activity or explicit treaty protections but some Kansas-sourced apportionment factor). In the absence of express guidance, practitioners should expect inclusion in the combined group only where KDOR guidance or the apportionment statutes require it—that is, when a unitary affiliate exceeds P.L. 86-272 protection and has Kansas property, payroll, or sales. Absent Kansas nexus or factor presence, inclusion of non-U.S. affiliates, regardless of treaty status, is not required by current published practice, but future administrative developments remain possible.

Source: Kansas Corporate Tax Booklet 2025, Unitary Groups/Combined Income Method Source: K.S.A. 79-32,141

Kansas authorizes a broad set of income tax credits against the corporate income tax, codified throughout Article 32, Chapter 79 of the Kansas Statutes Annotated. These credits apply to corporations filing the Kansas Form K-120 and are awarded only to the extent provided by statute. Statutes directly authorizing individual credits include, but are not limited to:

• Qualified business facility investment credit (K.S.A. 79-32,153 et seq.).
• Alternative-fuel vehicle credit (K.S.A. 79-32,201) (Repealed for tax years beginning after December 31, 2026 per 2026 SB 82).
• Machinery and equipment property tax credit (K.S.A. 79-32,206).
• Plugging abandoned oil/gas well credit (K.S.A. 79-32,207).
• Historic structure rehabilitation credit (K.S.A. 79-32,211c).
• Adoption, childcare, and employer health insurance credits (K.S.A. 79-32,201, 211–211c, various).
• Angel investor, apprenticeship, and research/development credits (various post–2010 statutes; see Form K-120 schedules K-24 through K-94 for full list).

Material change: Pursuant to 2026 SB 82, the alternative-fuel vehicle credit (K.S.A. 79-32,201), agribusiness liability insurance, assistive technology contributions, environmental compliance, and certain other credits are repealed or discontinued for tax years beginning after December 31, 2026. For tax years starting 2027 and forward, these credits are no longer available to corporate taxpayers. The lockable gun storage and higher-ethanol fuel credits created by SB 82 are only available to individual (not corporate) filers.

Eligibility and application: Each credit has statute-specific eligibility rules. Most require that investment, employment, or activity occur in Kansas and be appropriately documented. Most credits are claimed by attaching the relevant Kansas Schedule (matching the statute) to the annual corporate tax return (Form K-120). The Department of Revenue’s K-120 booklet and the DOR website enumerate available credits and required schedules each year. For example, Schedule K-35 claims the Historic Preservation Credit (K.S.A. 79-32,211c); K-120 schedules K-24 through K-94 cover the currently active statutory credits.

Claiming and limitations: Credits are generally nonrefundable and may not exceed the claimant’s Kansas corporate income tax liability for the year. For corporations filing as part of a combined or unitary group, credits may only be used to offset the liability of the entity that earned them—there is no statutory authority for pooling nonrefundable credits among group members. Statutory limits, carryforward periods, and application procedures differ by credit; taxpayers should consult the enabling statute and DOR instructions for each credit’s detail.

A list of all currently available credits, corresponding schedules, and further instructions is published in the annual Kansas Corporate Tax Booklet. These documents, along with citation to the underlying statutes and legislative changes, are available from the Kansas Department of Revenue.

Material update: The alternative-fuel vehicle credit and several other credits have been repealed/discontinued for tax years beginning after December 31, 2026, pursuant to SB 82 enacted in 2026. Practitioners must confirm credit availability each year based on current statutes and the annual Corporate Tax Booklet.

Source: K.S.A. 79-32,153 et seq. (Qualified Business Facility Credit) Source: Kansas Corporate Tax Booklet 2025, Tax Credits and Schedules Source: Kansas Schedule K-120, List of Current Credit Schedules Source: 2026 SB 82, Corporate Credit Repeals and New Credits, Legislative Summary

Kansas corporate income tax audit, assessment, and appeals procedures are governed by statute and agency practice, involving distinct steps through the Kansas Department of Revenue and the Board of Tax Appeals (BOTA).

Assessment and statute of limitations Kansas law does not provide a fixed, general statute of limitations for all corporate income tax assessments. If a taxpayer's federal income tax liability is changed (e.g., through an IRS audit or amendment), the taxpayer must notify the Director of Taxation within 180 days. If this notice is not given, the Kansas Department of Revenue may assess tax for those years at any time, and the statute of limitations for those years remains open indefinitely. This rule is statutory and applies specifically to years impacted by unreported federal changes. The general assessment period for other circumstances is not specified by statute or regulation as of June 16, 2026.

Source: K.S.A. 79-3230(f); Kansas amended return instructions

Protest and administrative appeal process A taxpayer may protest a corporate income tax assessment or refund denial by submitting a written protest to the Kansas Department of Revenue. If unsatisfied by the Department’s final determination, the taxpayer may appeal to the Kansas Board of Tax Appeals (BOTA).

BOTA hears corporate income tax appeals in its Regular Division. Smaller disputes may qualify for the Small Claims Division if they fall within applicable statutory thresholds (see K.S.A. 74-2433f). The Small Claims Division is generally available for cases involving assessed liabilities or refund denials within dollar limits prescribed by statute.

Source: K.S.A. 74-2433, 74-2433f

Judicial review After a final decision from BOTA, the taxpayer may seek judicial review by filing a petition in Kansas District Court within 30 days of certification of the Board’s final action. (Property tax decisions are appealed to the Court of Appeals, but corporate income/franchise tax appeals are heard in District Court.)

Source: K.S.A. 77-613(c)

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Process summary:

• Department of Revenue assessment
• Protest (written) to Department
• Appeal to Board of Tax Appeals (Regular or Small Claims Division)
• Judicial review in Kansas District Court (within 30 days of BOTA final decision)

Authority is current as of June 16, 2026.

Source: K.S.A. 79-3230(f) Source: K.S.A. 74-2433, 74-2433f Source: K.S.A. 77-613(c)

Direct answer: As of July 9, 2026, the Kansas Department of Revenue has not published any regulations, bulletins, FAQ guidance, or other official interpretations clarifying ambiguous aspects of the market-based sourcing regime for services and intangibles under Kansas corporate income tax law—including what constitutes "delivered to a location in Kansas," reasonable approximation standards, or documentation/safe harbor procedures.

Why: The Kansas market-based sourcing regime for services and intangibles is codified in K.S.A. 79-3287(b) and (d), effective for tax years beginning after December 31, 2026. The statute specifies that services are sourced to Kansas to the extent delivered to a location in the state and intangibles by use, but does not elaborate on operational details such as what constitutes delivery, accepted forms of documentation, or reasonable approximation methods. As of this update, no official Kansas Department of Revenue regulations or published guidance expand upon, clarify, or supplement the statutory language in K.S.A. 79-3287(b) and (d) for these ambiguities. Recent legislative implementation presentations from KDOR reference the statute but do not supply additional guidance on practical application. The KDOR Corporate Tax Booklet and notice archives likewise do not provide new post–June 16, 2026 guidance on these implementation details.

Source support:

• K.S.A. 79-3287(b), (d) (statutory regime—operative but not expanded by post–June 16, 2026 guidance)
• Absence review: Kansas Department of Revenue published regulations, bulletins, FAQs, tax booklet, and legislative presentations as of July 9, 2026

Caution / review status: Not yet human confirmed. Practitioners should periodically review the Kansas Department of Revenue’s official website and published resources for future guidance, as further regulatory action remains possible, especially as taxpayers and the Department address market-based sourcing uncertainties in audit or informal administrative practice.

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