Notice

Notice Number:12-12
Tax Type:Individual Income Tax
Brief Description:S Corporations Owning Banks, Savings and Loans, or Federal Savings Associations
Keywords:
Approval Date:08/30/2012


Body:
KANSAS DEPARTMENT OF REVENUE
OFFICE OF POLICY AND RESEARCH

Notice 12-12

S Corporations Owning Banks, Savings and Loans,
Or Federal Savings Associations


Generally

The calculation of an individual’s Kansas income tax starts with federal adjusted gross income. Certain modifications, either additions or subtractions, required by K.S.A. 79-32,117 are then made to arrive at Kansas adjusted gross income.

During the 2012 Legislative Session House Bill 2117 was passed and signed into law. Provisions in Section 12 of the Bill add five new addition modifications and one new subtraction modification to K.S.A. 79-32,117. The overall effect of these new provisions is to exempt certain categories of income from Kansas income tax. For additional information about addition modifications for losses and deductions and subtraction modifications for income, please see Notice 12-11.


Subtraction Modifications Affecting Income From A Bank, Savings and Loan, or Federal Savings Association

Section 12 of the Bill amends K.S.A. 79-32,117 to add language to the subtraction modification found in paragraph (c)(xiv), and to add a new subtraction modification in paragraph (c)(xx). The italicized language below indicates the changes made and new language:
The new subtraction modification at K.S.A. 79-32,117(c)(xx), specifically (c)(xx)(2), allows taxpayers who are stockholders of S corporations to subtract income properly reported on federal Schedule E and on line 17 of the federal Form 1040 in computing their Kansas adjusted gross income. This applies to both distributed and undistributed income.

The subtraction modification at K.S.A. 79-32,117(c)(xiv) allows taxpayers who are stockholders of S corporation banks, savings and loans, or federal savings associations to subtract any undistributed S corporation bank, savings and loan, or federal savings association income in computing their Kansas adjusted gross income. The new language found in K.S.A. 79-32,117(c)(xiv) provides that the subtraction modification found in this paragraph cannot include income or loss properly reported on federal Schedule E and on line 17 of the federal Form 1040. This limiting language prevents a taxpayer from claiming two subtraction modifications for the same income. In other words, taxpayers who are stockholders of S corporation banks, savings and loans, or federal savings associations cannot subtract undistributed S corporation bank, savings and loan, or federal savings association income under the provisions of both K.S.A. 79-32,117(c)(xiv) and (c)(xx).

Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site, www.ksrevenue.org. If you have questions about income tax, please contact:
Taxpayer Assistance Center
Kansas Department of Revenue
915 SW Harrison St., 1st Floor
Topeka, KS 66612-1588
Phone: 785-368-8222
Hearing Impaired TTY: 785-296-6461
Fax: 785-291-3614




Date Composed: 08/30/2012 Date Modified: 08/30/2012