Kansas High Performance Incentive Program (HPIP) Overview

The Kansas High Performance Incentive Program (HPIP) offers valuable incentives that can significantly benefit qualifying businesses that increase capital investment, offer higher-than-average wages and provide employee training and education. HPIP provides a 10% tax credit for companies that spend at least $50,000 of eligible capital investment at their facility. The threshold is $1 million in the five metro counties of Douglas, Johnson, Sedgwick, Shawnee and Wyandotte.

Qualifications for the HPIP

To qualify for the HPIP a company must:

• Be a for-profit company subject to state taxes.
• Pay wages that exceed the average wage standard (compared to similar firms in the same geographical area with matching NAICS codes).
• Be a manufacturer or able to document that 51% or more of its sales are to either Kansas manufacturers and/or out-of-state businesses or government agencies. 

A business in any industry can qualify if it is a headquarters or back-office operation of a national or multi-national corporation in any NAICS category.

Key features of the Kansas HPIP 

Companies that become eligible for the HPIP can take advantage of benefits, including an investment tax credit, sales tax exemption and training credit.

Investment tax credit (ITC)

The ITC is a 10% corporate income tax credit on qualified net new capital investment that exceeds the minimum threshold mentioned above based on the respective county. The credit can reduce or eliminate a company’s Kansas corporate income tax liability and be carried forward for up to 16 years. All program criteria must be met to obtain HPIP certification for a tax year in which the credits are taken against Kansas income tax liability. After HPIP certification, discussed below, the company can capture their eligible tax credit on their respective income tax filing.

For projects placed into service on or after January 1, 2021, the taxpayer can transfer up to 50% of the tax credit allowed to one or more transferees. The total of all transfers cannot exceed 50% of the taxpayer’s tax credit. A HPIP-certified company can request up to two transfers a year. This is a significant improvement to the credit by allowing a company to realize the benefits faster if it does not have sufficient income tax liability to offset.

Sales tax project exemption (STPE)

Eligible companies can apply for a sales tax project exemption certificate (STPE), issued upon HPIP certification, granting a 100% sales tax exemption on items used to construct, build-out, remodel and equip the new worksite. This exemption could cover the eligible taxable purchases of capital investment made by the legal entity applying. This exemption is at the point of sale, eliminating the need for seeking reimbursements; however, several procedural requirements, invoice management and reporting are part of the process.

Training tax credits

Eligible businesses may receive training tax credits for costs incurred for employee training related to the qualified HPIP project. These credits help offset workforce development and skill enhancement expenses, including tuition fees and materials directly related to the training program. The training credit offers a dollar-for-dollar state tax credit of up to $50,000 for training and education expenditures that exceed 2% of the total payroll at the worksite, but it cannot be carried forward.

Steps to becoming HPIP certified

The most crucial step in becoming HPIP certified is completing and submitting the project description form, which estimates the project's impact on capital investment, headcount, and wages. This form must be submitted to the Kansas Department of Commerce before formal investment commitments are made. The certification process includes the following steps:

1. Complete the project description form.
2. If applicable, request the sales tax project exemption certificate from the Department of Revenue.
3. Determine the measurement period: the four quarters a company uses to meet the program requirements to document above-average wages and employee training. This period directly precedes the certification period in which the company plans to capture the tax credits for new capital investment.
4. Complete the HPIP application and submit it along with the required supporting documentation.

HPIP awards over the prior five years

On average, 300 companies have taken advantage of HPIP over the past five years. The estimated capital investment has increased each year, leading to a corresponding rise in the value of the credit. Since the legislative change in 2021, several companies are beginning to take advantage of the option to transfer credit, which we expect to continue to increase moving forward. The performance metrics of the HPIP as reported in the Department of Commerce’s recent incentive program review are reflected below:

Source: https://www.kansascommerce.gov/kansas-commerce-transparency-database/ 

Conclusion

For more information or assistance with the HPIP, including navigating the process, preparing necessary project descriptions and applications, and getting HPIP certified, contact Site Selection Group’s economic incentive experts.