TOPEKA — Congresswoman-turned-lobbyist Lynn Jenkins renewed an effort to muscle across the political finish line a bill delivering to for-profit fitness clubs in Kansas the same property tax exemption relied upon by charitable or educational organizations.
The campaign to deliver this unprecedented tax break to the for-profit fitness facility owners began in 2013 when executives of Genesis Fitness Clubs based in Wichita hired a tag-team of lobbyists and leveraged donations to dozens of House and Senate members. That bid fizzled in 2014, but the effort was renewed in January with Jenkins taking charge of selling the idea to legislators on behalf of Genesis and other privately owned clubs in the Kansas Health and Fitness Association. The quest is to blur the distinction for property tax purposes between a nonprofit YWCA and for-profit Genesis.
Jenkins initially tried to insert the fitness-club exemption into a Senate tax transparency bill, but that floundered after it was reported Genesis had neglected to pay at least $549,000 in property taxes owed in Johnson, Douglas and Shawnee counties.
On Tuesday, she told legislators her clients were uniquely deserving of the exemption because too many YWCAs and municipal recreational facilities were operating in Kansas.
While the bill would help the bottom line of for-profit fitness businesses by shedding property tax payments, Jenkins and other advocates of the bill also indicated a legitimate argument could be made for exempting these companies from sales tax.
“These facilities fully expect a competitive industry. Increasingly, their competition isn’t private-sector clubs, but government-owned health clubs that pay no taxes at all,” Jenkins said. “We think fairness is equality across the board. But we’re not here, honestly, seeking fairness. We’re just trying to correct one small piece, and that’s the property tax.’”
Jenkins’ incarnation of reform sits in House Bill 2445, which was introduced Friday and subject of the House Tax Committee hearing Tuesday. The Kansas Department of Revenue couldn’t estimate potential loss of tax revenue, but cities, counties and the state could potentially lose millions of dollars annually.
The narrowly targeted exemption outlined in the bill for fitness business wouldn’t extend to weight-control facilities, health spas, dance studios, martial arts facilities, self-defense studios nor tennis, racquet or basketball facilities, swimming pools and golf clubs.
Real money
Stuart Little, representing the cities of Mission, Merriam, Prairie Village and Westwood in Johnson County, expressed opposition to the bill by exploring how the Genesis facility in Merriam would benefit from avoidance of property taxes and how entities making use of those tax dollars would suffer. The company’s fitness facility in Merriam was obligated to pay $81,000 annually in local property taxes, he said. Of that total, $18,000 would go to the city of Merriam and $36,000 would be forwarded to local public schools.
Trey Cocking, deputy director of the Kansas League of Municipalities, said House Bill 2445 exempting for-profit fitness clubs from the property tax would make it difficult for cities to deliver affordable services to residents. (Noah Taborda/Kansas Reflector)
“Creating a property tax exemption for for-profit businesses sets a dangerous precedent that could compromise the ability of cities, school districts, special districts and other jurisdictions to collect adequate funding to provide essential services in the future,” Stuart said.
The bill also was opposed by the League of Kansas Municipalities and the Kansas Association of Counties.
“Government operations and not-for-profit organizations are not taxed since they are providing public goods and programming which anyone can access,” said Trey Cocking, deputy director of the League of Kansas Municipalities. “Absence of a profit motive allows them to focus on providing affordable programming and the ability to serve disadvantaged communities.”
Jay Hall, of the Kansas Association of Counties, said the precedent of establishing a property tax exemption for a certain for-profit corporation would fundamentally change the approach to property taxation in Kansas. Granting the exemption to fitness clubs could open the door to other sectors of the economy, he said.
