Senate votes down health club tax exemption

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Lawmakers on Friday voted down a property tax exemption for fitness centers, property tax refunds for businesses closed during the pandemic and property tax breaks for seniors and disabled veterans.

The proposed package of tax breaks failed to get out of the Senate after they were voted down 27-11 late Friday night with a bipartisan coalition of opposition that included Democrats along with conservative and moderate Republicans.

The bill included an extension of the state’s 20-mill property tax for schools, which was retained in a scaled-back version of the legislation that was approved early Saturday morning. It was approved unaninmously in the Senate and 108-3 in the House.

The Senate had previously passed a bill giving property tax relief for businesses hurt during the COVID-19 pandemic as well as seniors and disabled veterans.

But another controversial proposal was added at the last minute Friday, putting all of the tax proposals at risk.

The bill rejected by the Senate contained a proposal to exempt for-profit health clubs from property taxes that had been sought by the Kansas Health and Fitness Association, whose board members include Genesis Health Clubs.

Genesis Health Clubs is run by Rodney Steven, a frequent contributor to Kansas lawmakers who unsucessfully pushed similar legislation to tax nonprofit health clubs like YMCAs in 2013 and 2014.

While lawmakers said there were many positive components of the bill, the health club tax exemption was seen as particularly onerous.

“When I look at the bill as a whole, the good to me outweighs the potential bad and even the bad I think most would say is a property tax issue with our health clubs,” said Republican state Sen. Renee Erickson of Wichita.

“Government should not be in the business of picking winners and losers and that’s what this does,” Erickson said.

“Government is giving tax benefits to some and not others. That’s not right. Is this the right way to deal with it? I don’t know,” she said.

The health clubs had argued that they are are increasingly facing competition from nonprofit and municipally owned gyms that don’t have the burden of paying taxes.

They claimed that local governments had spent more than $100 million in the last 15 years on “gigantic facilities,” causing private competitors to close.

Republican Sen. Rob Olson defended the health clubs’ claims for relief, saying they are competing against facilities that are subsidized with local tax dollars or tax exemptions because they are organized as nonprofits.

“We’ve got these for-profit businesses that are trying to do the right thing, they’re paying taxes, but we’ve got these other facilities that are tax-exempt and they’re able to sell their services at a lower rate,” Olson said.

“In my mind, this is the only option we have,” he said.

Other parts of the bill that were defeated included:

  • Property tax rebates to some businesses with yearly revenues between $10,000 and $2.5 million and have not received more than $150,000 in federal COVID-19 relief aid. The rebate amount would have been capped at $7,500 with cities and counties picking up some of the claims made for relief. Estimates indicated that claims could total $44.3 million for tax year 2020 and $24.8 milion in 2021. The rebates are similar to another bill that the Legislature was set to consider early Saturday morning compensating businesses for losses during the pandemic.
  • The bill would have frozen property taxes for Kansans 65 years and older as well as veterans with at least a 50% permanent disability rating.The maximum amount that could have been claimed under the bill was $5,000. The home must be appraised at $395,000 or less, and household income must be $50,000 or less.