Session of 2025

HOUSE BILL No. 2235

By Committee on Financial Institutions and Pensions

Requested by Representative Hoheisel

2-4

AN ACT concerning financial institutions; relating to the technologyenabled fiduciary financial institutions act; making the act part of the state banking code; defining certain terms; reducing the fiduciary financial institution charter application fee; providing due dates for reports to the office of the state bank commissioner; exempting fiduciary financial institutions from certain records retention requirements; authorizing the issuance of certificates and trust certificates; providing for the supervision of fiduciary financial institutions by the bank commissioner; including Kansas nonprofit corporations as qualified charities for purposes of the fiduciary financial institution income tax credit; amending K.S.A. 9-542, 9-2303, 9-2307, 9-2309, 9-2310, 9-2311, 9-2312 and 9-2322 and K.S.A. 2024 Supp. 9-2301 and 79-32,283 and repealing the existing sections.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 9-542 is hereby amended to read as follows:

9-542. Articles 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 ~~and~~ , 21 and 23 of chapter 9 of the Kansas Statutes Annotated, and K.S.A. 74-3004, 74-3005, 74-3006, 75-1304, 75-1305 ~~and~~ , 75-1306, and 75-1308, ~~and K.S.A. 9-814, 9-815, 9-816, 9-1141, 9-1409, 9-1725, 9-1726, 9-1810, 9-1811, 9-1919, 9-1920, 9-1921 and 9-2019,~~ and amendments thereto, shall constitute and may be cited as the state banking code.

Sec. 2. K.S.A. 2024 Supp. 9-2301 is hereby amended to read as follows:

9-2301. (a) The provisions of K.S.A. 9-2301 through 9-2327, and amendments thereto, shall be known and may be cited as the technologyenabled fiduciary financial institutions act. The technology-enabled fiduciary financial institutions act shall be a part of and supplemental to chapter 9 of the Kansas Statutes Annotated, and amendments thereto.

(b) For purposes of the technology-enabled fiduciary financial institutions act:

(1) "Act" means the technology-enabled fiduciary financial institutions act;

(2) "alternative asset" means professionally managed investment assets ~~that are not publicly traded~~, including, but not limited to, private equity, venture capital, leveraged buyouts, special situations, structured credit, private debt, private real estate funds and natural resources, including any economic or beneficial interest therein and any items that may be held by an alternative asset custody account;

(3) "alternative asset custody account" means an account created by the owner of an alternative asset that designates a fiduciary financial institution as custodian or agent and into which the owner transfers, electronically or otherwise, content, materials, data, information, documents, reports and contracts in any form, including, without limitation, evidence of ownership, subscription agreements, private placement memoranda, limited partnership agreements, limited liability company agreements, stock agreements in companies and attendant documents (including investor questionnaire, side letters, regulatory filings, confidentiality agreements, legal opinions, capitalization tables, joinder agreements, business plans and offering memorandums), certificates, depositary receipts, currency, operating agreements, financial statements, annual and quarterly reports, capital account statements, tax statements, correspondence from the general partner, manager or investment advisor of the alternative asset, an investment contract as defined in K.S.A. 17-12a102(28)(E), and amendments thereto, any digital or hard copy representation of the foregoing, including smart contracts, and any digital asset as defined in K.S.A. 58-4802, and amendments thereto, controllable electronic record, controllable account or controllable payment intangible whether such information and evidence of ownership is in hard copy form or a representation of such ~~information that~~ ownership is stored in a computer readable format from which the custodian may create and issue a certificate to the beneficial owner;

(4) "charitable beneficiaries" means one or more charities, contributions to which are allowable as a deduction pursuant to section 170 of the federal internal revenue code that are designated as beneficiaries of a fidfin trust "certificate" means a certificate representing the beneficial ownership of a trust or an asset held in an alternative asset custody account that may be implemented by a digitization process, including a machine-based system in which a record of ownership and transactions is maintained with the use of distributed ledger technology, smart contracts, peer-to-peer networks or other technologies that can generate a digital replication of the certificate which digital replication may be divided by such machine-based system as necessary to represent one or more beneficial owners and which may be secured, accessed or transferred by means of private keys, electronic signatures or other analogues comprised of code, script or programming language. Each digital certificate or divided replication thereof, may, depending on its terms, constitute a digital asset as defined in K.S.A. 58-4802, and amendments thereto, a controllable electronic record, a controllable account or a controllable payment intangible and to the extent involved in a transaction shall be subject to K.S.A. 84-1-301, and amendments thereto;

(5) "controllable account" means an account as defined in K.S.A. 84-9-102(a)(2)(A) through (D), and amendments thereto, evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person who has control of the controllable electronic record;

(6) "controllable electronic record" means a record as defined in K.S.A. 84-9-102(a)(69), and amendments thereto, stored in an electronic medium that may be subject to control by:

(A) Giving a person:

(i) Power to avail such person of substantially all the benefit from the electronic record; and

(ii) exclusive power to:

(a) Prevent others from availing themselves of substantially all the benefit from the electronic record; and

(b) transfer control of the electronic record to another person or cause another person to obtain control of another controllable electronic record as a result of the transfer of the electronic record; and

(B) enabling the person readily to identify in any way, including by name, identifying number, cryptographic key, office or account number, as having the powers specified in subparagraph (A).

"Controllable electronic record" does not include a controllable account, a controllable payment intangible, a deposit account, an electronic copy of a record evidencing chattel paper, an electronic document of title, electronic money, investment property or a transferable record.

(7) "controllable payment intangible" means a payment intangible as defined in K.S.A. 84-9-102(a)(61), and amendments thereto, evidenced by a controllable electronic record that provides that the account debtor undertakes to pay the person who has control of the controllable electronic record;

(8)"custodial services" means the safekeeping and management of an alternative asset custody account, including the execution of customer instructions, serving as agent, issuing depositary receipts, fund administrative services and overall decision-making and management of the account by a fiduciary financial institution and "custodial services" shall be deemed to involve the exercise of fiduciary and trust powers;

~~(6)~~ (9)"director" means a person designated as a member of the board of directors pursuant to K.S.A. 9-2306, and amendments thereto;

~~(7)~~ (10)"economic growth zone" means an incorporated community with a population of not more than 5,000 people located within one of the following counties: Allen, Anderson, Barber, Bourbon, Brown, Chase, Chautauqua, Cherokee, Cheyenne, Clark, Clay, Cloud, Coffey, Comanche, Decatur, Doniphan, Edwards, Elk, Ellsworth, Gove, Graham, Grant, Gray, Greeley, Greenwood, Hamilton, Harper, Harvey, Haskell, Hodgeman, Jackson, Jewell, Kearny, Kingman, Kiowa, Labette, Lane, Lincoln, Linn, Logan, Marion, Marshall, Meade, Mitchell, Montgomery, Morris, Morton, Nemaha, Neosho, Ness, Norton, Osborne, Ottawa, Pawnee, Phillips, Pratt, Rawlins, Republic, Rice, Rooks, Rush, Russell, Scott, Sheridan, Sherman, Smith, Stafford, Stanton, Stevens, Sumner, Trego, Thomas, Wabaunsee, Wallace, Washington, Wichita, Wilson or Woodson;

~~(8)~~ (11)"excluded fiduciary" means a fiduciary financial institution in its capacity as trustee of a fidfin trust, provided that a fiduciary financial institution shall only be deemed an "excluded fiduciary" to the extent the fiduciary financial institution is excluded from exercising certain powers under the instrument that may be exercised by the trust advisor or other persons designated in the instrument;

~~(9)~~ (12)"fidfin," "fidfin services" or "fidfin transactions" means the financing of a fidfin trust or the acquisition of alternative assets on behalf of and through a fidfin trust, or both, as provided in K.S.A. 9-2311, and amendments thereto, including loans, extensions of credit and direct investments;

~~(10)~~ (13)"fidfin trust" means a trust created to facilitate the delivery of fidfin services by a fiduciary financial institution;

~~(11)~~ (14)"fiduciary" means a trustee, a trust advisor or a custodian of an alternative asset custody account appointed under an instrument that is acting in a fiduciary capacity for any person, trust or estate;

~~(12)~~ (15)"instrument" means any document creating a fidfin trust or alternative asset custody account;

~~(13)~~ (16)"officer" means a person who participates or has authority to participate, other than in the capacity of a director, in major policymaking functions of a bank, trust company or fiduciary financial institution, whether or not the officer has an official title or if the officer is serving without salary or other compensation. "Officer" includes the chairperson of the board, president, vice president, cashier, secretary and treasurer of a bank, trust company or fiduciary financial institution;

~~(14)~~ (17)"organizer" means a person who filed the fiduciary financial institution formation documents;

~~(15)~~ (18)"out-of-state bank" means a national or state bank, savings and loan association or savings bank not incorporated under the laws of Kansas;

~~(16)~~ (19)"out-of-state financial institution" means an out-of-state bank or an out-of-state trust company;

~~(17)~~ (20)"out-of-state trust company" means a national or state trust company not incorporated under the laws of Kansas;

~~(18)~~ (21) "qualified charities" means the same as defined in K.S.A. 79-32,283, and amendments thereto;

(22) (A) "qualified investment" means the purchase or development, in the aggregate, of at least 10,000 square feet of commercial, industrial, multiuse or multifamily real estate in the economic growth zone where the fiduciary financial institution maintains its principal office pursuant to K.S.A. 9-2309, and amendments thereto, provided that such community has committed to develop the necessary infrastructure to support a "qualified investment." A "qualified investment":

(i) May include, as part of satisfying the square footage requirements, the suitable office space of such fiduciary financial institution, as provided in K.S.A. 9-2309, and amendments thereto, if owned by the fiduciary financial institution;

(ii) shall be exempt from the provisions and limitations of K.S.A. 9-1102, and amendments thereto;

(iii) may be retained by a fiduciary financial institution for as long as the fiduciary financial institution operates in this state; and

(iv) may be sold, transferred or otherwise disposed of, including a sale or transfer to an affiliate of the fiduciary financial institution, if the fiduciary financial institution continues to maintain its principal office in an economic growth zone pursuant to K.S.A. 9-2309, and amendments thereto;

(B) notwithstanding the foregoing provisions, if a fiduciary financial institution leases any portion of a qualified investment made by another fiduciary financial institution as the lessee fiduciary financial institution's suitable office space:

(i) The lessee fiduciary financial institution shall make, or cause to be made, a qualified investment in an economic growth zone other than the economic growth zone where such fiduciary financial institution maintains its principal office;

(ii) the leased square footage shall count toward the square footage requirement applicable to a qualified investment under this section, if such lease has an initial term of not less than five years; and

(iii) the square footage requirement otherwise applicable to a qualified investment of the lessee fiduciary financial institution shall be reduced from 10,000 square feet to 5,000 square feet;

~~(19)~~ (23)"technology-enabled fiduciary financial institution" or "fiduciary financial institution" means any limited liability company, limited partnership or corporation that:

(A) Is organized to perform any one or more of the activities and services authorized by this act;

(B) has been authorized to conduct business as a fiduciary financial institution under this chapter pursuant to the provisions of K.S.A. 9-2302, and amendments thereto;

(D) has committed, in or as a part of the application provided in K.S.A. 9-2302, and amendments thereto, to conduct any fidfin transactions in accordance with K.S.A. 9-2311, and amendments thereto, including the distributions required therein;

~~(20)~~ (24)"trust" means a trust created pursuant to the Kansas uniform trust code, K.S.A. 58a-101 et seq., and amendments thereto, or a trust created or otherwise authorized to transact business pursuant to the Kansas business trust act of 1961, K.S.A. ~~17-2707 et seq.~~ 17-2030, and amendments thereto , the beneficial ownership of which may be represented by a trust certificate;

~~(21)~~ (25)"trust advisor" means a fiduciary granted authority by an instrument to exercise, consent, direct, including the power to direct as provided in K.S.A. 58a-808, and amendments thereto, or approve all or any portion of the powers and discretion conferred upon the trustee of a fidfin trust, including the power to invest the assets of a fidfin trust or make or cause distributions to be made from such fidfin trust; and

~~(22)~~ (26)the definitions of K.S.A. 9-701, and amendments thereto, apply to fiduciary financial institutions except as otherwise provided in this act.

Sec. 3. K.S.A. 9-2303 is hereby amended to read as follows:

9-2303. (a) An application for a fiduciary financial institution charter shall include a nonrefundable fee to be remitted in a manner prescribed by the commissioner. Until July 1, 2025, the application fee shall be $250,000. On and after July 1, 2025, the application fee shall be ~~$100,000~~ $50,000. The expense of every annual regular fiduciary financial institution examination, together with the expense of administering fiduciary financial institution laws, including salaries, travel expenses, third-party fees for consultants or other entities necessary to assist the commissioner, supplies and equipment, shall be paid by the fiduciary financial institutions of this state. Prior to the beginning of each fiscal year, the commissioner shall make an estimate of the fiduciary financial institution expenses to be incurred by the office of the state bank commissioner during such fiscal year in an amount not less than $1,000,000. The commissioner shall allocate and assess each fiduciary financial institution in this state on the basis of such fiduciary financial institution's total fidfin transaction balances, consisting of the aggregate fidfin financing balances of the fiduciary financial institution reflected in the last December 31 report filed with the commissioner pursuant to K.S.A. 9-1704, and amendments thereto. If a fiduciary financial institution has no fidfin transaction balances, but such fiduciary financial institution is otherwise providing custodial services or trust services, the commissioner shall allocate and assess such fiduciary financial institution in a manner the commissioner deems reasonable and appropriate. A fiduciary financial institution that has no fidfin transaction balances and no alternative asset custody accounts reflected in the last December 31 report filed with the commissioner may be granted inactive status by the commissioner. The annual assessment shall not exceed $10,000 for such an inactive fiduciary financial institution. The annual fee shall be first assessed for the year immediately following the year the fiduciary financial institution received authority to engage in fidfin transactions, custodial services and trust business and for each year thereafter.

(b) (1) A statement of each assessment made under the provisions of subsection (a) shall be sent by the commissioner on July 1 or the next business day thereafter to each fiduciary financial institution. When the commissioner issues such a statement, payment shall be made within 15 business days after the date the statement was sent in a manner prescribed by the commissioner, which may include such installment periods as the commissioner deems appropriate but not more frequently than monthly.

(2) The commissioner shall remit all moneys received from such fees and assessments to the state treasurer in accordance with the provisions of K.S.A. 75-4215, and amendments thereto. Upon receipt of each such remittance, the state treasurer shall deposit the entire amount in the state treasury and credit 75% of each remittance to the bank commissioner fee fund and 25% to the technology-enabled fiduciary financial institutions development and expansion fund established in K.S.A. 9-2324, and amendments thereto.

Sec. 4. K.S.A. 9-2307 is hereby amended to read as follows:

9-2307. (a) A fiduciary financial institution shall make a report to the commissioner pursuant to the provisions of K.S.A. 9-1704, and amendments thereto , except that such report required by K.S.A. 9-1704(b), and amendments thereto, shall not be due until March 1 of each year. All other financial reports of a fiduciary financial institution shall be due not earlier than 60 days after the request for such report is made by the commissioner. In making such a report, a fiduciary financial institution shall:

(1) Report the fiduciary financial institution's fidfin transactions pursuant to generally accepted accounting principles; and

(2) calculate such fiduciary financial institution's capital solvency by including the value of all tangible and intangible assets owned by the fiduciary financial institution, regardless of use.

(b) In regulating, supervising and examining a fiduciary financial institution, the state banking board and the commissioner shall:

(1) Consider that the collateral or underlying assets associated with fidfin transactions are volatile in nature and that such volatility has been accepted by the members and customers of the fiduciary financial institution;

(2) respect the form, treatment and character of fidfin transactions under the laws of this state notwithstanding the treatment or characterization of such transactions under generally accepted accounting principles or for tax purposes;

(3) evaluate whether available capital, including the agreement of a fiduciary financial institution's members to contribute capital pursuant to K.S.A. 9-2305, and amendments thereto, exceeds the fiduciary financial institution's obligations, determined in accordance with generally accepted accounting principles;

(4) evaluate the background and qualifications of a fiduciary financial institution's executive officers and directors, the internal controls and audit processes enacted by the fiduciary financial institution and adherence to its policies and procedures;

(5) evaluate the profitability of a fiduciary financial institution in accordance with subsection (c);

(6) evaluate a fiduciary financial institution's compliance with applicable state and federal laws; and

(7) evaluate a fiduciary financial institution's information technology systems, policies and practices.

(c) Profitability shall not be a consideration in evaluating a fiduciary financial institution if sufficient capital and equity exist in the business, including, without limitation, membership capital, surplus, undivided profits and commitments by members to contribute additional capital to the fiduciary financial institution pursuant to K.S.A. 9-2305, and amendments thereto, to satisfy the fiduciary financial institution's obligations.

(d) The provisions of K.S.A. 9-1130(b), and amendments thereto, and K.A.R. 17-12-2 shall not apply to a fiduciary financial institution.

Sec. 5. K.S.A. 9-2309 is hereby amended to read as follows:

9-2309. (a) A fiduciary financial institution shall:

(1) Maintain suitable office space in an economic growth zone, as defined in K.S.A. 9-2301, and amendments thereto, for fidfin transactions, custodial services and trust business and for the storage of, and access to, fiduciary financial institution records;

(2) employ, engage or contract with at least three employees to provide services for the fiduciary financial institution in Kansas related to the powers of the fiduciary financial institution and to facilitate the examinations required by this act; and

(3) perform fidfin transactions, custodial services and trust business in Kansas, and a fiduciary financial institution may also engage in fidfin transactions, custodial services and trust business in other states to the extent permitted by applicable law.

(b) As used in this section, the term "suitable office space" means at least 2,000 square feet of class A office space located in an economic growth zone selected by the fiduciary financial institution that the fiduciary financial institution utilizes as such fiduciary financial institution's principal office.

(1) Be in premises distinct and divided from the office space of any other entity;

(2) be located in an economic growth zone selected by the fiduciary financial institution;

(3) have the name, charter and certificate of authority of the fiduciary financial institution prominently displayed;

(4) have access to premises in or adjacent to the office space sufficient to facilitate on-site examinations and supervision by the state banking board or commissioner;

(5) to the extent the fiduciary financial institution maintains hard copies of any documents required to be maintained under this chapter, have a secure fireproof file cabinet that contains all such hard copies; and

(6) to the extent the fiduciary financial institution maintains any record electronically, have a secure computer terminal or other secure electronic device that provides access to such records, including account information, as necessary to facilitate an efficient and effective examination.

(d) Fidfin transactions, custodial services and trust business is deemed to have been performed in Kansas for purposes of this section if fidfin transaction or custodial service agreements are approved or signed in this state on behalf of the fiduciary financial institution and at least three of the following acts are performed by a technology platform wholly or partly operated in this state:

(1) Annual account reviews;

(2) annual investment reviews;

(3) trust or custodial accounting;

(4) account correspondence;

(5) reviewing and signing trust account or custodial account tax returns; or

(6) distributing account statements.

Sec. 6. K.S.A. 9-2310 is hereby amended to read as follows:

9-2310. Any fiduciary financial institution is hereby authorized to exercise by its board of directors or duly authorized officers or agents, subject to law, the following powers:

(a) To engage in fidfin transactions in accordance with K.S.A. 9-2311, and amendments thereto;

(b) to receive, retain and manage alternative asset custody accounts in accordance with K.S.A. 9-2313, and amendments thereto, and to issue certificates associated with such accounts or the underlying alternative assets; and

(c) to engage in trust business as defined in K.S.A. 9-701, and amendments thereto, as incidental to the activities in subsections (a) and (b), including, as trustee, issuing trust certificates on behalf of a trust.

Sec. 7. K.S.A. 9-2311 is hereby amended to read as follows:

9-2311. (a) If authorized by the terms of an instrument as such term is defined in K.S.A. 9-2301, and amendments thereto, a fiduciary financial institution may:

(1) Extend financing, such as through loans or extensions of credit to a fidfin trust when:

(A) The fiduciary financial institution serves as trustee of the borrowing fidfin trust;

(B) the financing is collateralized or supported by the assets of such fidfin trust;

(C) the financing is nonrecourse as to the fiduciary financial institution's customer and is not otherwise guaranteed by such customer;

(D) the fiduciary financial institution agrees, in the applicable financing agreement or other written document, that the fiduciary financial institution is providing financing in a fiduciary capacity; and

(E) the fiduciary financial institution agrees that such fiduciary financial institution will manage the collateral or assets underlying the financing in a fiduciary capacity; ~~and~~

(2) acquire or invest in an alternative asset on behalf of and through a fidfin trust ; and

(3) undertake such actions with regard to a trust as defined in K.S.A. 9-2301, and amendments thereto.

(b) The financing of a fidfin trust pursuant to subsection (a)(1) and (a)(2) shall be considered a fiduciary finance or fidfin transaction.

(c) If authorized or directed by the terms of an instrument, no fiduciary financial institution shall be deemed to have a conflict of interest, to have violated a duty to a fidfin trust or the beneficiaries thereof or to have engaged in self-dealing by entering into a fidfin transaction.

(d) The ~~combination rules~~ provisions of K.S.A. 9-1104(f), and amendments thereto, shall be inapplicable to a fiduciary financial institution's fidfin transactions regardless of the identity of the fidfin trust beneficiary if:

(1) The borrower is a fidfin trust; and

(2) the fiduciary financial institution serves as trustee of the borrowing fidfin trust.

(e) A fiduciary financial institution that engages in a fidfin transaction shall be a fiduciary. Subject to the duties and standards of utmost care and loyalty that are associated with serving as a fiduciary, a fiduciary financial institution shall be deemed to be exercising fiduciary powers. All income generated by such fidfin transactions, including interest and investment income, shall be deemed to be income derived from the exercise of such fiduciary powers.

(f) A fiduciary financial institution that engages in fidfin transactions shall distribute, cause to be distributed or otherwise facilitate the distribution of the required distribution amount as provided by this section. For purposes of this section, "required distribution amount" means cash, beneficial interests or other assets with a value equal to 2.5% of such fiduciary financial institution's fidfin transactions originated during the calendar year. Such transactions shall exclude any renewals, extensions of credit or accruals associated with transactions made in a prior calendar year, less any credit available to such fiduciary financial institution pursuant to K.S.A. 9-2302, and amendments thereto. The required distribution amount shall be distributed as follows:

(1) (A) To the department of commerce:

Required distribution amount	Percentage to department of commerce
$0 to $500,000	90%
$500,001 to $1,000,000	50%
Above $1,000,000	10%

(B) the amounts specified in subparagraph (A) shall apply to fiduciary financial institutions chartered prior to January 1, 2023. For fiduciary financial institutions chartered after such date, the department of commerce may publish one or more schedules in the Kansas register as the department of commerce deems reasonably necessary to facilitate economic growth and development in one or more economic growth zones. No such schedule shall be effective until after its publication in the Kansas register. The department of commerce shall timely submit any schedule published under this section to the commissioner. The commissioner shall provide a copy of such schedule to any applicant for a fiduciary financial institution charter prior to the issuance of such charter. A fiduciary financial institution shall be subject to the schedule in existence on the date such fiduciary financial institution's charter is issued and shall not be subject to any schedules published after such date; and

(C) the department of commerce shall remit all distributions under this subsection to the state treasurer in accordance with the provisions of K.S.A. 75-4215, and amendments thereto. Upon receipt of each such remittance, the state treasurer shall deposit the entire amount in the state treasury to the credit of the technology-enabled fiduciary financial institutions development and expansion fund established in K.S.A. 9-2324, and amendments thereto; and

(2) the balance of the required distribution amount shall be distributed to one or more qualified charities as defined in K.S.A. 2024 Supp. 79-32,283, and amendments thereto, as shall be selected by the fiduciary financial institution. An economic growth zone or qualified charity shall have no obligation to repay any distributions received under this act or to make any contributions to a fiduciary financial institution.

(g) The form, treatment and character of fidfin transactions under the laws of this state shall be respected for all purposes of this act notwithstanding the treatment or characterization of such transactions under generally accepted accounting principles or for tax purposes.

(h) A fiduciary financial institution shall disclose to a customer the information required by rules and regulations adopted by the commissioner pursuant to K.S.A. 9-2322, and amendments thereto, to ensure that the customer is informed regarding the nature of the customer's transactions with the fiduciary financial institution, taking into account the level of sophistication of the customer.

Sec. 8. K.S.A. 9-2312 is hereby amended to read as follows:

9-2312. (a) Subject to the requirements of K.S.A. 9-2309(d), and amendments thereto, a fiduciary financial institution may:

(1) Employ attorneys, accountants, investment advisors, agents or other persons, even if they are affiliated or associated with the fiduciary financial institution, to advise or assist the fiduciary financial institution in the performance of such fiduciary financial institution's fidfin transactions, custodial services and trust business and act without independent investigation upon such recommendations;

(2) employ one or more agents to perform any act of fidfin transactions, custodial services or trust business;

(3) license internet-related services, including web services, software, mobile applications, technology-enabled platforms and processes to or from affiliates, third parties, other fiduciary financial institutions and their affiliates;

(4) license fidfin products and forms, as defined in K.S.A. 9-2321, and amendments thereto, to or from other fiduciary financial institutions and their affiliates;

(5) perform any services that a fiduciary financial institution is authorized to perform under the laws of this state on behalf of another fiduciary financial institution; and

(6) employ another fiduciary financial institution to perform any services that a fiduciary financial institution is authorized to perform under the laws of this state.

(b) A party engaged by a fiduciary financial institution pursuant to subsection (a) shall not be deemed to have engaged in fidfin transactions, custodial services or trust business in this state nor shall such party be deemed a trust service office of the fiduciary financial institution under K.S.A. 9-2108, and amendments thereto, or a trust facility or out-of-state facility under K.S.A. 9-2111, and amendments thereto, by reason of providing services to a fiduciary financial institution or licensing products, platforms, systems or processes to such fiduciary financial institution.

(c) A fiduciary financial institution that provides services or licenses fidfin products or forms pursuant to subsection (a) shall not be deemed a trust service office of the fiduciary financial institution that has acquired such services or licensed such products or forms.

(d) If a fiduciary financial institution offers its technology-enabled platform to provide fidfin services to residents of other states, neither the marketing, use and deployment of such platform by parties in other states nor the origination of fidfin services through such platform shall constitute an out-of-state trust facility under K.S.A. 9-2111, and amendments thereto, if the fiduciary financial institution complies with the provisions of K.S.A. 9-2309, and amendments thereto.

(e) A fiduciary financial institution shall provide notice to the commissioner pursuant to the provisions of K.S.A. 9-2103(a)(12), and amendments thereto, if such fiduciary financial institution engages a party pursuant to the provisions of subsection (a).

(f) Whenever a fiduciary financial institution causes to be performed for such fiduciary financial institution, by contract or otherwise, any service authorized under this act or the state banking code, such performance shall be subject to regulation , supervision and examination by the commissioner to the same extent as if such service was being performed by the fiduciary financial institution itself.

Sec. 9. K.S.A. 9-2322 is hereby amended to read as follows:

9-2322. (a) Pursuant to K.S.A. 9-1713, and amendments thereto, the commissioner shall adopt rules and regulations ~~on or before January 1, 2022,~~ as are necessary to administer this act and supervise and examine a fiduciary financial institution.

(b) The office of the state bank commissioner may enter into contracts for technical assistance and professional services as are necessary to administer the provisions of this act and ~~to meet the deadline~~ for the adoption of rules and regulations provided by this section. Such contracts shall be exempt from the requirements of K.S.A. 75-3739, 75-37,102 and 75-37,132, and amendments thereto, or any other statute relating to the procurement of such services.

Sec. 10. K.S.A. 2024 Supp. 79-32,283 is hereby amended to read as follows:

79-32,283. (a) For taxable years commencing after December 31, 2020, there shall be allowed as a credit against the tax liability of a fiduciary financial institution imposed pursuant to the Kansas income tax act or the privilege tax imposed upon a fiduciary financial institution pursuant to article 11 of chapter 79 of the Kansas Statutes Annotated, and amendments thereto, in an amount equal to the qualified charitable distributions made in connection with the fiduciary financial institution's fidfin activities during such taxable year if the fiduciary financial institution maintained such fiduciary financial institution's principal office in an economic growth zone during such taxable year in accordance with the provisions of K.S.A. 9-2309, and amendments thereto.

(b) For purposes of this section:

(1) "Economic growth zone" and "fidfin" means the same as defined in K.S.A. 9-2301, and amendments thereto;

(2) "qualified charitable distributions" means distributions of cash, beneficial interests or other assets to one or more qualified charities having an aggregate value equal to at least 2.5% of the fiduciary financial institution's transactions originated during the taxable year. Such transactions shall exclude any renewals, extensions of credit or accruals associated with transactions made in a prior taxable year; and

(3) (A)"qualified charities" means one or more :

(i)Charities, in to which contributions are allowable as a deduction pursuant to section 170 of the federal internal revenue code ~~if such charities have:~~ ; or

(ii) Kansas nonprofit corporations regardless of their federal income tax treatment.

(B) Such "qualified charities" shall have:

~~(A)~~ (i) Been organized pursuant to a charter promulgated by the department of commerce for the purposes of making distributions for the benefit of economic growth zones;

~~(B)~~ (ii) committed in writing to utilize the entire amount of the qualified charitable distributions, excluding reasonable administrative expenses, exclusively for the benefit of charitable causes located in one or more economic growth zones or postsecondary educational institutions as defined in K.S.A. 74-3201b, and amendments thereto; and

~~(C)~~ (iii) agreed to provide an annual report to the department of commerce detailing qualified distributions received during such year, distributions made pursuant to this subparagraph ~~(B)~~ and the remaining balance of qualified distributions as of the end of the reporting year.

(C) The requirements of subparagraph ~~(A)~~ (B)(i) shall not apply to a charity~~, contributions to which are allowable as a deduction pursuant to section 170 of the federal internal revenue code,~~ that has committed in writing to utilize the entire amount of the qualified charitable distributions, excluding reasonable administrative expenses, exclusively for the benefit of the economic growth zone identified in K.S.A. 9-2325(a)(2), and amendments thereto.

(c) No credit shall be allowed under this section if the fiduciary financial institution's tax return on which the credit is claimed is not timely filed, including any extension.

(d) A distribution or remittance to the department of commerce pursuant to K.S.A. 9-2311, and amendments thereto, shall be deemed a qualified charitable distribution for purposes of this section.

(e) A fiduciary financial institution shall not be required to ensure that qualified charitable distributions are made solely for the benefit of the economic growth zones where such fiduciary financial institution has:

(1) Established such fiduciary financial institution's principal office pursuant to K.S.A. 9-2309, and amendments thereto; or

(2) made qualified investments as defined in K.S.A. 9-2301, and amendments thereto. Qualified charitable distributions may be made for the benefit of any one or more economic growth zones.

(f) If a fiduciary financial institution is a pass-through entity for Kansas tax purposes and the credit allowed by this section for a taxable year is greater than the fiduciary financial institution's tax liability against which the tax credit may be applied, a member of the entity or any other party who is required to report such income on a Kansas income tax return is entitled to a tax credit equal to the tax credit determined for the fiduciary financial institution for the taxable year in excess of the fiduciary financial institution's tax liability under the Kansas income tax act or privilege tax under article 11 of chapter 79 of the Kansas Statutes Annotated, and amendments thereto, for the taxable year multiplied by the percentage of the fiduciary financial institution's distributive income to which the member is entitled. Tax credits allowed and earned under this section shall not be sold, assigned, conveyed or otherwise transferred.

(g) If the amount of a tax credit allowed a member or other party under this section exceeds the taxpayer's income tax liability for the taxable year in which the tax credit is allowed, the amount thereof that exceeds such tax liability may be carried over for deduction from the taxpayer's income or privilege tax liability in the next succeeding taxable year or years until the total amount of the tax credit has been deducted from tax liability, except that no such tax credit shall be carried over for deduction after the 5 th taxable year succeeding the taxable year in which the tax credit is first allowed.

(h) In any taxable year, a fiduciary financial institution shall pay the greater of the qualified charitable distributions made during such taxable year or the tax liability of a fiduciary financial institution imposed pursuant to the Kansas income tax act or the privilege tax imposed upon a fiduciary financial institution pursuant to article 11 of chapter 79 of the Kansas Statutes Annotated, and amendments thereto.

(i) This section shall be a part of and supplemental to the Kansas income tax act.

Sec. 11. K.S.A. 9-542, 9-2303, 9-2307, 9-2309, 9-2310, 9-2311, 9-2312 and 9-2322 and K.S.A. 2024 Supp. 9-2301 and 79-32,283 are hereby repealed.

Sec. 12. This act shall take effect and be in force from and after its publication in the statute book.

Kansas H 2235

Technology Enabled Fiduciary Financial Institutions Act

2025 KA H 2235

Kansas H 2235

Technology Enabled Fiduciary Financial Institutions Act

2025 KA H 2235