Kansas revenue woes leave some businesses questioning ‘LLC loophole’

Among a legion of well-off Kansans, open objection to the state’s so-called “LLC loophole” is growing.

Passed by the Kansas Legislature in 2012 on the promise of creating jobs, the provision allows about 300,000 independent business owners to pay no state tax on the bulk, if not all, of their income.

According to estimates, Kansas is forgoing tax revenues on $7.5 to $11 billion of annual business income, which would raise at least $260 million in needed revenue each year.

Just last May state lawmakers faced a $290 million budget gap projected through June 2017. To close it they slashed funding for highways, higher education and other programs.

Concerns of revenue aside, many argue that the loophole works against entrepreneurs taking investment risks to launch startups, since they can’t claim losses as they could before tax reform.

Despite all its complexity, the income tax exemption has become a hot button — especially as Kansas schools, roads, law enforcement and health care delivery endure the strains of budget belt-tightening.
Read more: Kansas City Star

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