KentuckyHB 8692026 Regular SessionHouseWALLET

AN ACT relating to fiscal matters and declaring an emergency.

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Bill Overview

Analyzed Economic Effects

44 provisions identified: 19 benefits, 4 costs, 21 mixed.

Angel investor credits with county boosts

Angel investor credits total up to $3 million a year statewide. An investor can get up to $200,000 a year. The credit is 40% of your qualified investment if the business is in a heritage county, or 25% if it is not. The authority did not approve applications received on or after January 1, 2019, but may approve applications received on or after January 1, 2021.

Sales tax refunds for pro golf

A sponsoring business can get back 100% of Kentucky sales tax from a qualifying pro golf series, minus vendor compensation. The series must run at least 3 straight days at one venue and total at least 100,000 admissions. File the initial application at least 60 days before the first event. Only one request is allowed per series. Events must be on or after July 1, 2026. The program ends November 30, 2036.

20% credit for mixed‑use rehabs

For tax years starting 2028 through 2031, you can get a 20% refundable, transferable credit for certified mixed‑use rehab of abandoned buildings. The cap is $25 million per taxpayer each year. Preliminary approvals are limited to $50 million total per calendar year and are split pro rata if oversubscribed. The credit can offset income, LLET, and certain insurance premium taxes; pass‑throughs may allocate shares to owners. Apply for preliminary approval by December 31 each year. Within 30 days after completion, file the final application and choose to use or transfer the credit; the authority rules within 60 days. When used against insurance taxes, nonrefundable credits are taken first, then this refundable credit.

Alternative jet fuel tax credits

For tax years 2029–2034, the law gives per‑gallon credits: $0.50 for eligible feedstock, $1.50 for fuel produced, $2.00 for agriculturally based fuel, and $2.50 when Kentucky‑grown feedstock is used. The fuel must meet ASTM standards, cut lifecycle greenhouse gases by at least 50%, and not come from palm fatty acid distillates. Agencies must issue rules and forms by October 1, 2028 and report before credits are approved. Starting in 2030, apply by January 15 each year; the Department reviews by February 15 and certifies by March 1. Each November 1 from 2030, the state publishes counts of returns, total credits, gallons by category, county totals, and income ranges.

Bigger skills training tax credit

The skills training credit pays up to 50% of approved training costs per trainee. The cap is $4,500 per trainee in heritage counties and $3,500 elsewhere. A company can get up to $500,000 each fiscal year. All companies combined are capped at $2,500,000 per year.

Bigger tourism sales tax incentives

Most tourism projects can get sales tax incentives up to 25% of approved costs over 10 years. Heritage county attractions can get up to 30% over 10 years. Small heritage‑county attractions (population 20,000 or less) considered after June 27, 2025 may get up to 50% over 20 years. Lodging projects may get up to 50% over 20 years. Yearly payments cannot exceed the project’s sales tax liability, and unused amounts can carry forward within the term. Entertainment destination centers that dedicated at least $30 million to public infrastructure may extend their agreement up to 2 years, but must reinvest all extension incentives and report yearly. Seasonal projects shut in 2020 by Governor orders can add one year to the agreement if they meet the law’s conditions.

Deferred tax deduction for combined groups

Beginning with the first tax year that starts on or after January 1, 2028, eligible publicly traded combined groups that filed by July 1, 2019 can deduct one‑tenth of an approved amount each year for 10 years. This offsets increases in net deferred tax liability tied to combined reporting.

New research write-off rules for individuals

For tax years starting January 1, 2026, Kentucky adds back the federal research expense deduction you claimed under section 174A. The state then lets you subtract an amortization amount computed under the older section 174 as of December 31, 2024. The net change equals the old amortization minus what you deducted under 174A, which can raise or lower your Kentucky taxable income.

Wage assessments and matching worker credits

Approved companies can require new project employees to accept wage assessments if the incentive deal includes them. In heritage counties, the assessment can be up to 100% of the state income tax rate. In other counties, levels depend on local rules and can reach 60% or more in some cases. If you pay a wage assessment, you get a dollar‑for‑dollar credit. The state share reduces your Kentucky income tax withheld, and the local share reduces your local occupational tax, split among localities as required.

Corporate research tax rules change 2026

For tax years starting January 1, 2026, Kentucky adds back corporate federal deductions under section 174A. The state lets corporations subtract the amortization under the older section 174 as of December 31, 2024. The net change equals that amortization minus the 174A deduction.

Film credits and $75 million pool

Kentucky offers refundable film credits you can use against income and LLET taxes. Productions filmed fully in a heritage county get a 35% credit on qualifying costs. In other counties, resident crew payroll gets 35% and nonresident costs get 30%. Above‑the‑line payroll counts up to $1,000,000 per person. Total film credits are capped at $75 million each year. Starting in 2024, $25 million is held for large “continuous” productions and any unused part is released on July 1. A continuous production must plan at least $10 million a year in qualifying spend with at least $1.5 million per production in Kentucky and have at least half the funds in hand.

Film tax credit caps and refunds

Total film incentives are capped at $100 million for 2018–2021 and $75 million for 2022 and after. Starting in 2024, $25 million of the cap is set aside for continuous productions; unused amounts are reallocated each April 1. Credits approved before April 27, 2018 are refundable. Credits approved from April 27, 2018 through December 31, 2021 are nonrefundable and nontransferable. Credits approved on or after January 1, 2022 are refundable if filming starts within six months and finishes within two years.

New business tax credits and rules

Starting in 2026, approved companies can claim refundable, nontransferable credits against income and LLET, within a $4 million yearly cap statewide and a $1 million sub‑cap for non‑heritage county wages. Projects may get credits up to 100% of Kentucky taxes on project income, with no estimated tax payments on that income and carryforwards within the agreement term. For approvals after July 1, 2026, a wage‑based credit equals 2.25% of wages in heritage counties or 1.25% in other counties, limited by the project’s annual approved costs and the statewide caps. Companies may recover eligible costs spent up to 90 days before preliminary approval. Each agreement must activate within 2 years and meet minimum jobs, investment, and wage/benefit levels or it is canceled. The authority monitors agreements yearly and can stop incentives if a company becomes ineligible. Pre‑2023 preliminarily approved projects with wage assessments may get a one‑time extension up to 5 years if they have received less than 75% of awarded incentives and scope and maximums do not change. Amended agreements may access listed inducements as allowed in law.

More funding for urban services and EMS

Starting July 1, 2025, a consolidated local government must pay fire districts for EMS runs into the urban service tax district: $300 when a person is transported and $150 when no one is transported. These payments are on top of insurance and rise each July 1 with the CPI‑U. The government cannot add new charges to the district for items it did not charge before January 1, 2024. If a fire district received payments before July 1, 2025, it is not eligible for these payments for the following fiscal year. Also, the urban service tax district must use most of its differential tax to fund extra services in the district: at least 85% (7/1/2025–6/30/2028), 90% (7/1/2028–6/30/2031), 95% (7/1/2031–6/30/2034), and 100% after 6/30/2034, excluding the central business district defined on April 1, 2024.

New Department for workers' claims

The law creates the Department of Workers’ Claims in the Governor’s office with a Senate‑confirmed commissioner. It runs claims processing, legal counsel, judges, compliance, funds, and medical services, and it administratively attaches the Workers’ Compensation Board. The Department must keep all jobs it had 14 days before the transfer. Employees keep their positions and cannot be penalized because of the transfer.

New product development grants

Beginning July 1, 2024, the state runs grant rounds for the Product Development Initiative. Local match rates depend on county rank: 10%, 12.5%, 15%, 17.5%, or 20%. Due diligence costs up to $200,000 need no local match. Projects can get up to $2,500,000 in heritage counties and $2,000,000 elsewhere. Regional projects can pool county allocations and local matches. Sites must be available, zoned (or rezone within 90 days), have road access, and be able to get electric, gas or propane, public water and wastewater (not septic), and fiber.

Fixed-odds horse bets: $1,000 minimum

Fixed‑odds horse race bets now have a $1,000 minimum per race. The host track still chooses the betting menu. Small‑stakes bettors face higher entry costs.

Caps on alternative jet fuel credits

You cannot carry these credits forward. Each eligible taxpayer is limited to $2,000,000 per year for the $0.50 and $1.50 rates. If an entity is both a provider and a producer, stacked credits cannot exceed $3.00 per gallon. Statewide, total certified credits are capped at $20,000,000 per year, and approvals are prorated if requests exceed the cap.

New rules for enterprise fund grants

The enterprise fund sets grant tiers: up to $50,000 for feasibility, $250,000 for concept work, and $500,000 for advancing companies. For new investments on or after July 1, 2021, a company’s total from the fund cannot exceed $500,000. Any single award over $30,000 must give the administering group an equity stake or convertible debt. Starting July 1, 2021, at least 20% of the yearly fund goes to companies in rural or heritage counties and at least 20% to companies in Opportunity Zones.

Tight oversight at Kentucky State University

The law declares a financial emergency at Kentucky State University for five years from when the law takes effect, unless the General Assembly later declares finances stable. KSU must get approval from the Council on Postsecondary Education for any $20,000+ obligation, including purchases, contracts, or personnel‑related increases. KSU must send monthly financial reports to the council, and the council must send quarterly updates to the Governor and the Legislative Research Commission. By July 1, 2027, KSU must report and reconcile all transactions monthly in the state EMARS system.

Tighter limits on local TIF deals

New development areas must be inside an existing area and exist independently. Contracts must send at least 10% of the increment to the original agency, 80% to the new area’s developer, and 10% to the Commonwealth or local government. Local and state approvals are required, and insurers may need to approve if bonds are involved. Two TIF programs end on this section’s effective date, and no new applications are allowed. The Signature Projects Program ends on December 31, 2028, and no new applications are allowed after that date. The law also blocks amendments and activation‑date extensions to certain existing TIF tax agreements.

Higher pay rules for incentives

Companies seeking training help must meet higher pay floors. In heritage counties, the minimum base hourly wage is 200% of the federal minimum wage; elsewhere it is 300%. An eligible employee must be full‑time, taxed under KRS 141.020, and get company‑paid benefits worth at least 15% of the minimum base wage, or total pay plus benefits of at least 115% with at least one company‑paid benefit. A full‑time job is 35 hours per week; remote jobs count only for Kentucky residents created by the project with payroll charged to the project, and jobs in reciprocal‑tax states do not count. Approved companies now have 3 years to finish training and certify completion. Wage targets for incentives are 200% of the federal minimum wage in heritage counties and 300% elsewhere, including benefits.

Broader incentives for targeted projects

Hospitals and research activities now qualify as eligible companies for incentives. Start‑up costs can include certain initial software and licensing costs tied to each new full‑time job and fixed telecom equipment; recurring software fees count only for up to 1 year from activation. Projects with more than $200,000,000 in eligible investment can get heritage‑county terms anywhere in the state. The law repeals the prior “enhanced incentive counties” statute.

Business jobs credit rules and reporting

To qualify, a project must spend at least $100,000 and create an annual average of at least 10 new full‑time jobs. At least 90% of new hires must meet the county wage target and get benefits worth 15% of that wage, or total pay of 115%. The law adds this credit to the order for applying refundable credits after any nonrefundable credits. By October 1 each year, the Department certifies total credits claimed, and within 90 days it certifies when a company has used all incentives. For this credit, the Department reports awards by county, lists each approved company, and shows wages used; this information can be shared with the legislature and is not confidential for these reports.

New limits and math for TIF areas

A TIF pilot lasts 20 years for existing areas and 30 years for new areas, with up to a 25‑year extension allowed. Starting in 2026, the percent used to compute modified new revenues from individual income tax for projects approved before 2023 changes: divide 5% by the year’s tax rate, then reduce by 3.3% in 2026 and by 1.1% more each year through 2048.

Tighter rules for jobs retention deals

An eligible company must have operated in Kentucky for at least 60 months and employ at least 250 full‑time people in a heritage county or 1,000 elsewhere. Many industries are excluded, including mining, utilities, construction, retail, real estate, education, hospitality, and public administration. A company can transfer unused credits from an older agreement to a new jobs retention agreement, but doing so ends the old agreement; transferred credits end at activation, expiration, or when used up. Cash recoveries are capped at a negotiated share up to 75% of eligible costs and are also limited by an annual maximum. Incentive agreement terms are limited to 15 years in heritage counties and 10 years elsewhere.

Local driving tests in 10 counties

From September 1, 2024 through December 31, 2028, Kentucky State Police run a pilot to give driver’s license skills tests in up to 10 counties without full‑time testing. Each pilot county offers testing at least once a month. Only residents of the pilot county who apply for an intermediate license can take these tests. Applications go through the State Police online portal. The agency must report results by October 31, 2025.

Small updates to inheritance and estates

Under Kentucky transfer tax rules, the Class B exemption is $1,000 and the Class C exemption is $500. For people who die after June 30, 1998, Class A beneficiaries (other than a spouse) receive each beneficiary’s full inheritable interest. Sections 40 and 41 apply to estates of people who died on or after January 1, 2026.

Clearer rules for notices and meetings

A “zoned edition” is a weekly regional newspaper used for legal notices. All times in notices must show both Eastern and Central time. A public meeting includes a video teleconference where members can see and hear each other.

Stronger cleanup bonds for energy sites

Developers must file a decommissioning plan to remove above‑ground equipment and, unless the landowner asks otherwise, underground parts, and to return land to a similar condition. An independent, licensed engineer with no financial interest sets the bond or security amount. The bond must equal the net present value of decommissioning costs or the higher local amount. For leased land, landowners and the Energy and Environment Cabinet are co‑beneficiaries; for owned land, the Cabinet is the primary beneficiary.

Stronger consumer-law investigations and penalties

The Attorney General can issue subpoenas, take oaths, and hold hearings for investigations. Information gathered stays confidential except as needed for law enforcement in the public interest. Knowingly violating the listed sections or knowingly filing false reports to the Attorney General is a Class D felony.

Stronger penalties for consumer fraud

It is a Class A misdemeanor to hide, change, destroy, or fake documents after you know a consumer investigation has begun or is about to begin. The Attorney General can collect up to $5,000 per willful violation. Courts must fine at least $500 for a first offense and at least $5,000 for later offenses and order restitution of money gained by the violation.

Stronger protections for online sports betting

You must register and verify your identity before betting online or moving money. Providers must block people under 21, verify your contact details, protect your data, and accept bets only from people located in Kentucky. Sportsbooks cannot offer proposition bets that hinge on a Kentucky college athlete performing poorly.

Community colleges linked to new jobs

The Cabinet for Economic Development must work with the community college system’s workforce liaison. They promote incentive‑created jobs and help place students and graduates into new roles and training. The system is included in related policy talks and planning.

No extra retaliatory tax on rehab credit

If you claim the certified mixed‑use rehabilitation credit against the listed insurance taxes, you do not owe an extra retaliatory tax under KRS 304.3‑270.

Tighter rules for betting companies and tracks

Sports betting servers used for in‑state wagers must be located in Kentucky. A racetrack may contract with no more than three service providers at a time, and sites or apps must use the track’s or provider’s brand. Tracks, racing groups, and their affiliates cannot take part in or invest in prediction market platforms in Kentucky; violators have 12 months to cure.

Operating rules to keep tourism incentives

Tourism projects must meet size and operating rules to keep incentives. Eligible costs must top $1,000,000, or $500,000 if the project’s county is a heritage county at approval. Attractions must be open at least 100 days a year and, after year three, draw at least 25% nonresident visitors. Theme restaurants must open 300 days a year, eight hours a day, draw 50% nonresident visitors after year three, and get no more than 50% of revenue from alcohol. Expansions count as new projects and need separate approval.

Easier add-on job retention projects

An approved company that adds investments can apply for a supplemental jobs retention project. The state can combine the original and the new project into one amended agreement. The supplemental project must activate within 3 years of final approval, unless extended for good cause. The 10‑year term starts at activation. The company must document actual costs within 3 months of completion. The authority may hire a consultant to verify costs, and the company must reimburse that expense.

KSU barred from running a deficit

While the financial emergency lasts, Kentucky State University may not incur a budget deficit. The rule forces a balanced budget and can lead to changes in services or staffing.

New siting rules and local control for plants

Power plant stacks and wind turbines must be at least 1,000 feet from adjoining property lines, and all generation structures must be 2,000 feet from neighborhoods, schools, hospitals, or nursing homes. Wind hub height is capped at 350 feet. Counties and cities with planning and zoning may set their own height, decommissioning, and setback rules, which override these state rules except for the minimum decommission bond. The board can allow closer distances if the project still meets listed statutory goals, and a waste‑coal project on a former coal processing site is exempt from the 1,000‑foot property‑line rule. Builders must secure a construction certificate that expires three years after the last required permit if work has not started, hold public meetings within 30 days of a request with two weeks’ notice, and notify key state agencies about planned research or testing by the meeting date.

Longer TIF bonds, stricter paydown rules

A TIF pilot can be extended up to 25 years with a new bond from the state finance authority. Borrowers must use all excess revenues to redeem the bond before maturity and apply them at least every 36 months once the bond is callable. If early payoff puts the project at risk, the borrower must present another payment plan to the oversight committee. No revenues go to the borrower after the bond term ends. The borrower must also report yearly to the Governor and the Capital Projects and Bond Oversight Committee.

Tougher rules for Signature Projects

To qualify as a Signature Project, a project must plan at least $500,000,000 in new capital and be owned by a 501(c)(3) nonprofit. If at least 50% of finished space is residential, two state reports and certifications are no longer required, reducing paperwork.

How heritage counties are defined

A “heritage county” is one that scores 97 or higher in the Cabinet for Economic Development’s population‑based ranking. This status is used across the law to set higher credit rates or lower thresholds for some projects. Counties that do not meet the score do not get those enhanced terms.

New film deadlines and spending rules

To keep film credits, you must start within 6 months of council approval and finish within 2 years of your start. You must track qualifying expenses by county or use a cabinet‑approved method. Minimum spending applies. Kentucky‑based companies qualify at $125,000 for features/TV/industrial, $20,000 for touring Broadway, and $10,000 for documentaries. Non‑Kentucky companies must spend at least $250,000 for features/TV/industrial and $20,000 for documentaries or touring Broadway.

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Sponsors & Cosponsors

Sponsor

Adam Bowling
Republican • House

Cosponsors

Jason Petrie
Republican • House
Phillip Wheeler
Republican • Senate

Roll Call Votes

All Roll Calls

Yes: 236 • No: 24

Senate vote • 4/15/2026

passed

Yes: 37 • No: 0

House vote • 4/15/2026