Kansas auditors don’t know how much in tax breaks has gone to incentives for megaprojects in the state, prompting a call for economic development officials to start tracking such data.

When the nonpartisan Kansas Legislative Division of Post Audit performed their legally mandated evaluation of new economic development incentive programs, they had little to report to the Legislative Post Audit Committee about the Attracting Powerful Economic Expansion program.

That APEX megaproject legislation was designed to attract Panasonic’s new $4 billion electric vehicle battery plant in De Soto. The governor’s office previously estimated the state’s incentive package totaled $829 million.

Auditor Josh Luthi told lawmakers Dec. 12 that so far, Panasonic has only used the sales tax exemption.

But no one at the Kansas Department of Commerce or the Kansas Department of Revenue knows how much that tax break has cost.

“At the time we were doing this work, neither Commerce nor Revenue had a way to track how much sales taxes Panasonic had been exempted from,” Luthi said. “We think some agency needs a way to track this.

“Commerce officials told us they were working on such a system. But we do think it’s important that somebody, Commerce or Revenue, have a way to track that so agencies like Commerce and LPA can tell you all how much in incentives these businesses have gotten. But also in the event that the state should need to claw back benefits from business, it would know how much to claw back. Especially with sales tax, that’s a little trickier to track than other things.”

Payroll reimbursements to begin when Panasonic hires more employees

Bob North, the Commerce Department’s chief counsel, explained to the Legislative Budget Committee on Dec. 14 why the sales tax exemption is the only incentive Panasonic has received so far.

“They haven’t filed any tax returns to claim any investment tax credit,” North said. “They don’t have enough critical mass of employees to seek the payroll reimbursements.”

But construction is well underway, with construction costs totaling $322 million as of June 30, he said.

“It is moving extremely aggressively,” North said. “There’s approximately 600 construction workers on site. Some of you may have had the opportunity to drive past that. All the concrete is poured, a lot of the steel is up and that project is moving quite rapidly. We anticipate that the hiring arc for those 4,000 or so employees is going to pick up significantly late spring and early summer, and then continue on for quite some time.”

He said that the Commerce Department is working with the Revenue Department “to come up with a process that lets us track that more frequently than annually. Candidly, it’s a bit of a challenge because it’s not just Panasonic, it’s its contractors and subcontractors also get a sales tax exemption on the construction components.”

Integra will also receive tax breaks from state of Kansas

The APEX law authorizes taxpayer-funded incentives to two megaprojects with at least $1 billion in private investment. In addition to Panasonic, the state plans to give tax breaks to Integra.

Integra is a Wichita area project with nearly $2 billion in capital investment creating 1,900 jobs. Officials previously put the state incentive total at $304 million.

Integra has not yet received any of those incentives, Luthi said. That’s because construction of the facility has not yet begun.

“That is contingent upon the federal government approving that project for CHIPS Act funding,” North said. “This involves semiconductor supply chain and supports domestic semiconductor production. We are very, very hopeful that we will hear something positive in that regard, again, 45 to 60 days. Federal government moves relatively slowly.”

Jason Alatidd is a statehouse reporter for the Topeka Capital-Journal. He can be reached by email at jalatidd@gannett.com. Follow him on X @Jason_Alatidd.