‘Doesn’t seem quite fair’: Kansas business owners seek tax refund for COVID-19 shutdowns

Ryan Bramhall said the money his Manhattan sports bar has lost in the last year is “sickening.”

Tubby’s, his Aggieville bar, closed like most other businesses last March as the coronavirus spread and the state locked down. Even when they reopened over the summer, Bramhall and other restaurateurs struggled as county governments restricted their hours or capacity.

“I’m just trying to make it,” he said.

Now, business owners like Bramhall are looking to the government for help as they near the one-year mark trying to survive in a pandemic.

Lawmakers heard their testimony last week on a bill that would reimburse them for property taxes paid to county governments when they were shut down or had operations limited.

For Bramhall, it would mean thousands back in his pocket — a small amount compared to what was lost, but still significant. He and his wife haven’t had a paycheck in months and are taking money from retirement funds to keep Tubby’s afloat.

The bill would reimburse property taxes for months when businesses were closed entirely, and would return payments proportionally based on capacity limitations once businesses were able to reopen.

The biggest losers under the proposal would be county governments. Property tax revenue from businesses funds a large portion of county budgets. The loss of funds would strain basic public services like police, fire and EMT.

Moreover, counties would have to claw back money already budgeted and dispersed to cities, townships, water districts, and more.

Jay Hall, a lobbyist for the Kansas Association of Counties, said homeowners would be forced to make up the losses by paying more in residential property taxes.

“The county is going to have to get that money from somewhere in order to meet the obligations under this bill, and the only place to get that money is going to be by getting it from the other taxpayers,” he told legislators Feb. 9.

County commissions throughout the state submitted testimony against the bill, echoing Hall.

Kansas counties distributed more than $57 million in CARES funding to small businesses and nonprofits, Hall said. However, they could not legally be used for tax reimbursements. He said if the bill passed, Johnson County could take a revenue hit of $177 million or more.

It’s unclear if the bill will pass out of the Taxation Committee to the full House, as it will likely undergo several changes before a vote. As written, it is ambiguous on what constitutes a tax reimbursement. Legislators said they fear businesses shut down for health violations or other issues unrelated to the pandemic would also be able to take advantage of the policy.

It also fails to address shutdowns caused by the state government. Businesses were initially closed in March 2020 by an executive order from Gov. Laura Kelly, making the bill unclear on who is responsible for the lost revenue — the counties or the state.

Some states have adopted similar plans. In Michigan, legislators passed a relief measure with $330 million in grants to business owners as a way of offsetting property tax costs while closed due to shutdowns. But that relief would come from the state and would help with taxes paid while shut down by an executive order from Michigan’s governor.

Kansas’ bill would look much different, with the burden remaining on the counties. Kevin Timmons, a co-owner of Nick and Jake’s restaurant in Johnson County, testified as a proponent of the bill, but said he recognized the impact it would have on counties.

“I’m a big fan of the Johnson County Sheriff, and so it’s hard for me to say if I pay less real estate taxes, does that mean we’re going to be pulling out of their pocket?” he said.

He said he doesn’t know what another solution could look like, aside from easing restrictions on businesses and hoping for a quick vaccine rollout.

“We’re in a position that we’re just kind of holding our breath, hoping that a new wave of viruses is not going to happen with these vaccinations,” Timmons said.

For Jay Ives, owner of The Blind Tiger Brewery and Restaurant in Topeka, the money back would be huge, especially after revenue was down 80% during his restaurant’s two and a half month closure. Revenue is still down 40%, he said, and the tax reimbursement would put money in his bank account for employee paychecks.

“I understand that they need the money but when one layer of the government takes away our ability to make money and then demands that we pay them anyway, it just doesn’t seem quite fair,” he said. “It doesn’t seem like the American way.”

This story was originally published February 18, 2021 at 12:00 PM.