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Kansas’ broad tax exemption proposal would benefit the fitness club mogul

TOPEKA — Though he has not actually read the legislation in question, Senate President Ty Masterson has spoken out in favor of wide-ranging tax exemptions for companies deemed to compete with government entities.

The property and sales tax exemption plan has been teased for years, starting when Kansas fitness club magnate Rodney Steven started a campaign to get the Kansas Legislature to exempt his business, Genesis Health Clubs, from property taxes.

Steven, who owns more than 50 Genesis facilities in six Midwestern states, has been a proponent of property tax breaks for fitness businesses like his since Gov. Sam Brownback was in office. He has defaulted on hundreds of thousands of dollars in pre-COVID 19 property taxes owed to Shawnee, Johnson and Douglas counties.

During a Senate Evaluation and Taxation Committee hearing on Tuesday, Masterson said companies like Genesis were suffering from unfair government competition.

“I think everyone likes to talk about the spa thing, right?” Masterson said. “So this is an example. If you have a private company that has that situation, and then you use those resources from that company to build competition, right next door, that’s unfair and explicitly against the Republican platform. So we’re looking for a solution.”

The bill under discussion, Senate Bill 252, would exempt ambulance services, child care centers, entertainment, exercise and recreation businesses, and restaurants from paying property taxes if at least one government facility exists compete with the business in the county. Some entities would also be exempt from sales taxes, among other statutory provisions.

Several lawmakers at the meeting questioned whether businesses actually need the tax cuts and criticized the bill’s broad scope. Senator Ethan Corson, a Democrat from Prairie Village, said passing the tax exemptions would only burden homeowners, especially in areas like Johnson County.

“Johnson County is basically a county full of restaurants and fitness centers,” Corson said. “So if everyone stopped paying property taxes, all that burden would fall on residential property owners. I’m just afraid that this will really roll back on much of the good work the committee has done, because I don’t see where there is fat in the budget to cut millions and millions of dollars from basic services.

The tax note of the legislation has not been released, but the financial impact on the state would most likely be significant.

Other lawmakers raised an audit of the Kansas Legislature conducted into tax advantages or disadvantages for a variety of child care, mental health and health care centers. The audit findings were inconclusive as to whether or not non-profit, for-profit, and government entities compete.

Mike Taylor, who spoke on behalf of the Kansas County Commissioners Association, said the bill is not well defined.

“If you look back at the history of this bill, it’s been around for five or six years,” Taylor said. “It started because the Steven family in Wichita own Genesis Health Clubs and they didn’t think it was fair that they had to pay taxes and the YMCA didn’t. The bill has gone through many changes over the years and has now grown so broadly that I don’t know how you would decide which businesses are or are not tax-exempt.

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