Pub 12 2023 Issue 6

any banks have heard interest income in Kansas may not be taxable for the coming year, and you may be wondering, is it all interest? Interest is a broad term. Is it interest from new loans? Is it cash or accrualbased interest? Good news! The Kansas Department of Revenue (KDOR) and the Kansas Bankers Association have worked together to provide guidance on these questions and others like them. If you have not heard, during the 2021 Legislative Session, Senate Bill 15 was passed and signed into law. Section 10 of the Bill amended K.S.A. Section 79-1109 to add a new deduction on form K-130 for certain interest income. The deduction is available for tax years starting after Dec. 31, 2022, and is specifically available to national banking associations, state banks, trust companies and savings and loan associations. So, what is “certain interest income,” and how is the deduction calculated? For this purpose, Kansas defines interest as: “…interest on indebtedness attributed to Kansas and incurred in the ordinary course of the active conduct of any business and interest on indebtedness incurred that is secured by a single-family residence.” 1 The KDOR additionally stated that origination fees on the applicable loans constitute interest income for the computation of this deduction. The interest income used in the calculation will need to follow the same method of accounting that is used on the tax return, and the applicable loans apply to more than just loans created after Dec. 31, 2022 (although the deduction only applies to the interest earned on the loan during the year). Are You Ready to Lower Your Privilege Tax Obligation This Filing Season? By FORVIS M 21