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Kansas health-club tax break unlikely to survive

  • Eagle Topeka bureau
  • Published Wednesday, April 30, 2014, at 8:18 p.m.
  • Updated Wednesday, July 23, 2014, at 1:12 p.m.

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— The owner of Wichita-based Genesis Health Clubs suffered a setback Wednesday in his long quest for property tax exemptions for private fitness centers.

That proposed tax exemption was the first item to hit the cutting-room floor in a House-Senate conference committee, which took up several tax measures as lawmakers returned to Topeka for their annual wrap-up session.

No specific action was taken to kill the health club measure, which had been passed by the Senate but not the House.

But on Wednesday, House conferees left no doubt they wanted it gone from an otherwise uncontroversial bill that clarifies some tax rules for businesses and for active-duty National Guard and Reserve military personnel.

A tax break for health clubs “is just a tax policy I wouldn’t care to pursue,” said Rep. Richard Carlson, R-St. Marys, the chairman of the House Taxation Committee. “That’s the one (provision) I have a problem with.”

Without Carlson’s support, it is highly unlikely the measure could get voted out of the six-member conference committee and sent to the House floor.

The prime movers behind the provision are Genesis owner Rodney Steven II and Greg Ferris, a business consultant and former Wichita City Council member who now lobbies for a state health club association.

Their main argument is that health clubs provide a public service by promoting fitness and helping prevent obesity, but must compete for customers with tax-free fitness centers run by the YMCA and other nonprofits.

Carlson said he didn’t find that argument very convincing.

“I don’t find it acceptable, I guess, for the House to look at that, because I feel that it’s a road that if we start down, giving property tax exemptions, that there’s no justification for ending it,” Carlson said.

It’s not much different than for-profit hospitals competing with nonprofit hospitals, or private country clubs competing with public golf courses, he said.

Sen. Les Donovan, R-Wichita, chairman of the Senate Assessment and Taxation Committee, indicated the Senate could be willing to drop the health club exemption in exchange for House support on another bill that would change the way fees are collected for mortgage registration.

At present, fees for recording mortgages are based on the amount of the mortgage.

The plan the Senate passed would phase that fee out over five years, while phasing in higher per-page charges to partially offset the loss of revenue for counties.

“There’s a lot of support in the Senate for it, there’s a lot of support from different entities out there, the bankers and real-estate people,” Donovan said.

A legislative staff report shows the change would be a net gain for some counties and a net drain for others.

Sedgwick County would see its mortgage fee income decline by about $2 million a year at the end of the phase-in period, according to the projection.

Donovan said he sees it a matter of fairness, because the fee only hits people who are not wealthy enough to buy property with cash.

Carlson indicated he might be willing to deal on that.

“Maybe we can do a little bargaining on the health club and mortgage registration tax,” he said.

Replied Donovan: “That would be something we can discuss here.”

Reach Dion Lefler at dlefler@wichitaeagle.com or 785-296-3006.

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