Queensland Premier Annastacia Palaszczuk is considering Katter's Australian Party's response to her demand for its state members to denounce Senator Fraser Anning's divisive maiden speech.
KAP replied on Friday to a letter from the premier calling for action by 5pm.
Senator Anning sparked fury among federal parliamentarians and the public when he used the Nazi-associated term "final solution" during his first speech last week.
Spokesmen for both the premier and KAP declined to comment about the contents of the letter sent by state leader Robbie Katter.
Mr Katter previously said he would not denounce Senator Anning's speech after the premier suggested a review of its staffing hinged on the party condemning the senator.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
"I think they're skating on very thin ice legally, appropriating money or misappropriating money in the parliament for the purposes of whether, or whether they do not, agree with someone's political view," Mr Katter said.
