Home Fitness guide Lack of relevant data blocks audit of competition between for-profit companies, government and non-profits

Lack of relevant data blocks audit of competition between for-profit companies, government and non-profits

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TOPEKA — The Kansas Legislature-ordered audit of competition between government agencies, nonprofits, and for-profit businesses hasn’t ended political wrangling over efforts by a franchise club to Wichita-based fitness to get a property tax exemption.

The Kansas Post-Audit Division, which works for the Legislative Assembly, presented a report on an attempt to assess the tax advantages or disadvantages of various child care centers, mental health centers and health centers. The results of the auditors were inconclusive due to the low response rate to a survey of operators in these sectors of the economy, the inability to fully examine tax records and the lack of recent national research on the subject.

Auditor Heidi Zimmerman said competition exists between for-profits, nonprofits, and governments in some areas. The toss-up between these entities was likely minimal, she said, because the services provided were generally aimed at different income levels.

“It’s a large and complex question,” Zimmerman said. “He doesn’t have a robust or reliable answer at this time.”

Wichita businessman Rodney Steven, owner and president of more than 50 Genesis Health Clubs locations in six Midwestern states, has been a supporter of property tax breaks for for-profit fitness businesses since Governor Sam Brownback is in operation. Ten years ago, the Senate passed a bill that was later rejected by the House. In that failed effort, Steven made campaign contributions to dozens of lawmakers.

In the 2021 legislative session, Steven made another run asking for a statewide property tax exemption for Genesis Health Clubs and comparable fitness businesses. He hired former U.S. Representative Lynn Jenkins to work on his behalf, but the project lost ground when leaked. Genesis Health Clubs neglected to pay at least $549,000 in property taxes in Johnson, Shawnee and Douglas counties.

Heidi Zimmerman, auditor for the Kansas Legislature’s post-audit division, said lack of complete tax information, poor survey response and outdated research undermined assessment of competition between organizations for profit, non-profit organizations and governments. (Screenshot/Kansas Reflector)

Senators and representatives of the Joint Legislative Audit Committee had a series of reactions this week to the report’s inconclusive findings.

Sen. Ethan Corson, a Fairway Democrat, said health club-related tax bills had bounced around the Capitol for years without passing because the proposals didn’t make sense to many lawmakers. The publication of the audit is an opportunity to put an end to the matter, he said.

“Now, in my mind, we wasted a lot of taxpayers’ money. We wasted the time of our very talented and award-winning audit staff. Hopefully we can finally put a fork in this bad idea,” Corson said.

Augusta Republican Rep. Kristey Williams said the issue will remain a hot topic in the Legislature and the audit could serve as a guide for lawmakers considering tax fairness.

“We need to find other ways to continue this,” said Senator Caryn Tyson, R-Parker, and chair of the Senate Committee on Assessment and Taxation. “That’s a real problem.”

The auditors got a 15% response from Kansas for-profits, nonprofits, and government entities, which prevented the auditors from drawing any firm conclusions. However, respondents highlighted a split in the perception of competition. Eighty-two percent of for-profit companies said they view government operators and non-profit organizations as competitors. Fifty-eight percent of nonprofit and government respondents said they compete with for-profit organizations.

Rep. Jim Gartner, D-Topeka, said passing property tax legislation for fitness clubs would open a Pandora’s box. The list of companies lining up for special tax treatment could grow, he said.

“If you get into government and for-profit corporations, the list goes on and on,” Gartner said. “From garbage services to golf courses. My God, where is he going?

Sen. Mike Thompson, a Shawnee Republican, said existing tax policy puts for-profit businesses at a disadvantage against government, which pays no taxes, and nonprofits, which may pay sales tax. on purchases. Business owners would be responsible for property, income and sales taxes.

He said for-profit fitness businesses contribute to the tax base and portions of that revenue have been used to build community centers with recreational facilities.