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Yes: 268 • No: 66
KentuckyHB 7572026 Regular SessionHouseWALLET
AN ACT relating to revenue measures and declaring an emergency.
Sponsored By: Jason Petrie (Republican)
Became Law
TaxationTaxation, Income--CorporateTaxation, Income--IndividualTaxation, Inheritance And EstateTaxation, PropertyTaxation, Sales And UseTaxation, SeveranceTechnical CorrectionsTelecommunicationsTobaccoVapingWills, Trusts, And EstatesAccountantsAdvertisingAgricultureAthleticsBudget And Financial AdministrationBusiness Entities And OrganizationsCapital ConstructionCitiesCoalCommerceCounty ClerksDeathsEconomic DevelopmentEducation, FinanceEffective Dates, DelayedEffective Dates, EmergencyEnergyEnvironment And ConservationFeesFundsHousing, Building, And ConstructionInvestmentsJails And JailersLiensLocal GovernmentMinerals And MiningPollutionPropertyPublic Buildings And GroundsPublic UtilitiesReal EstateReports MandatedRetroactive LegislationScience And TechnologySmall BusinessSpecial Purpose Governmental EntitiesState AgenciesSunset Legislation
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Bill Overview
Analyzed Economic Effects
99 provisions identified: 36 benefits, 45 costs, 18 mixed.
Tuition waivers expand for adopted students
Students later adopted by relatives gain access to tuition and mandatory-fee waivers at eligible postsecondary institutions. A court must have found the student dependent, neglected, or abused, followed by removal from parental custody. Students must meet the institution's entrance requirements and maintain academic eligibility.
Updated tax credits for historic buildings
For applications received on or after April 30, 2026, certified historic buildings qualify for credits based on rehabilitation costs. The rate is 30% for owner-occupied homes and commercial housing affordable to households earning no more than 80% of median family income; other property gets 20%. Project caps are $120,000 for owner-occupied homes and $10 million for other property, with two $50 million application rounds and a $100 million maximum per round including carryovers. Applicants must seek preliminary approval before April 15 or August 15 in the project's start year, then apply again after completion. Applicants choose a refundable credit or a nonrefundable credit they can transfer; recipients of transferred credits can carry unused amounts forward for seven tax years.
Buffalo farms gain sales tax relief
Farmers regularly engaged in farming can make qualifying buffalo-related purchases without Kentucky sales and use tax. Covered buffalo uses include work animals and production of hides, breeding stock, meat, and by-products. Qualifying water, feed, farm chemicals, on-farm facilities, and medicines are also covered. Purchases must serve the qualifying farming activity.
Farms deduct project equipment costs faster
Qualified farms can depreciate certain new buildings and equipment at twice the otherwise allowed rate. The property must be purchased to participate in a qualifying networking project. Total depreciation cannot exceed the taxpayer's basis in the property. This rule applies to tax years beginning before January 1, 2028.
Historic property owners face credit penalties
Historic property owners owe a penalty equal to 100% of their allowed rehabilitation credit when officials find disqualifying work. Owners also face this penalty when an affordability-based credit's housing requirements are not maintained. The Heritage Council determines work violations; it and the Kentucky Housing Corporation determine affordability failures. The penalty applies to the property owner, not someone who received a transferred credit.
Farm networking credits face an end
The law limits farm networking project credits to tax years beginning before January 1, 2028. Qualified farms can claim the nonrefundable income tax or limited liability entity tax credit during their first five project years. Annual credits are limited by approved costs and applicable project income, Kentucky gross profits, or Kentucky gross receipts. Unused credits can carry forward for up to five later tax years.
Taxi companies lose fuel tax refunds
Taxicab companies lose the refund of seven-ninths of Kentucky motor fuel taxes on fuel used for regularly scheduled service. Qualifying bus companies operating under state certificates remain eligible. Senior transportation programs using Title III Older Americans Act funds also remain eligible.
Estates get longer inheritance tax deadlines
For deaths on or after July 1, 2026, required inheritance tax returns and payments are due within 24 months, up from 18. Filing applies when a federal estate return is required and Kentucky-taxable property exists, or assets pass to a taxable beneficiary. Paying within 14 months earns a 5% discount, replacing the nine-month discount deadline. Unpaid tax begins accruing interest after 24 months. Beneficiaries owing more than $5,000 who choose ten equal installments also get a 24-month interest start, instead of 18 months.
Residents face fewer new school taxes
Starting January 1, 2027, districts without the school taxes covered by these restrictions cannot begin imposing them. Rates of existing covered taxes cannot increase. The law also raises a county population threshold for a school-tax exception from 300,000 to 500,000. That exception allows up to 0.25 percentage points above the usual 0.5% maximum, only before the section's effective date.
Residents no longer owe school income excise
The law repeals the school excise tax on individual income and its return, payment, collection, reporting, and penalty rules. Residents subject to that levy no longer owe it under the repealed provisions. School boards can still agree in writing to levy identical remaining authorized school taxes and pool the receipts. That joint authority no longer includes the repealed excise tax.
School personal-property tax rates face ceilings
Starting with assessment years on or after January 1, 2029, school boards can align personal-property revenue growth with real-property revenue growth. This applies when personal-property revenue growth would otherwise be lower. The personal-property rate cannot exceed either the prior-year rate or the rate for the January 1, 2028 assessment year.
Voters can challenge local property taxes
Three local qualified voters can start a challenge to covered property-tax rates within 45 days, or 50 days in qualifying districts primarily located in counties with at least 300,000 people. Petitions need signatures equal to 10% of the last presidential-election vote count; school-board petitions need 5,000 or 10%, whichever is less. A qualifying petition suspends the levy pending an election or a final finding that the petition is insufficient. Counties with at least 300,000 people can count qualifying electronic signatures when the committee pays the related costs. When this process delays a final rate past September 15, other bills go out first, and the affected district pays for later billing with an extended collection period.
Car buyers lose state interest deduction
You cannot use the federal deduction for qualified passenger vehicle loan interest when calculating Kentucky individual income. This applies when you claim that federal deduction. The supplied provision does not state an effective date or dollar amount.
Homeowners can deduct only main-home interest
For tax years beginning on or after January 1, 2026, Kentucky limits the qualified home-interest deduction to your main home. Only interest paid or accrued on debt used to acquire that home qualifies. You cannot claim the deduction for more than one home.
Workers cannot deduct overtime in Kentucky
You cannot use the federal deduction for qualified overtime pay when calculating Kentucky individual income. Claiming that federal deduction does not give you the same state tax break. The supplied provision does not state an effective date.
Workers cannot deduct tips in Kentucky
You cannot use the federal deduction for qualified tips when calculating Kentucky individual income. The federal tip deduction does not give you the same state tax break. The supplied provision does not state an effective date.
Tobacco sellers face stricter license rules
Covered cigarette, tobacco, and vapor vending operators must get a license costing $25 each year. Products must be subject to the act's specified product tax for this requirement to apply. Applicants with covered tobacco, fraud, false-record, or business-reporting convictions or pleas cannot get the tobacco-related license for ten years after the applicable probation, parole, or sentence endpoint. The restriction also reaches businesses with a covered partner, director, principal officer, or manager. It is no longer limited to licenses for periods beginning on or after July 1, 2015.
Farm tax licenses require regular renewal
Agriculture exemption license numbers expire December 31, 2026, and every four years afterward. They expire sooner when the holder stops the qualifying farm activity. Renewal requires continued eligibility and the required documents. The Department of Revenue can extend the first deadline by up to six months. Failure to renew can mean losing access to license-based sales tax exemptions.
New sales tax collection rules for retailers
Remote retailers must register and collect Kentucky tax when covered sales exceed $100,000 in the current or previous calendar year. Covered sales include physical goods, digital goods, and services supplied to Kentucky buyers. Collection must start by the first day of a calendar month no more than 60 days after crossing the threshold. The separate 200-transaction test is removed, easing requirements for sellers below the dollar threshold. All retailers remain responsible for collecting and sending the correct tax, regardless of how customers pay.
Kentucky updates its federal tax baseline
For tax years beginning on or after January 1, 2026, Kentucky uses the federal tax code dated December 31, 2025. Later federal changes are excluded, except changes extending provisions that were scheduled to end. The effect on state taxes depends on which federal rules apply to each taxpayer.
Counties get more assessor qualifying exams
If a county has no qualified property valuation administrator candidate before the primary filing deadline, the state must keep holding exams. Exams continue until at least two people are certified for that county. They stop earlier if the date reaches 30 days before regular-election candidate certification. This gives prospective candidates more chances to qualify.
Counties share local corrections assistance money
The local corrections assistance fund supports county correctional facilities and programs, including prisoner transportation. Each fiscal year, its first $3 million—or the full balance if less—is divided equally among counties. Remaining money is divided by each county's share of the statewide county inmate population. Population counts use the second Thursday in January of the prior fiscal year.
Election media liability requires deceptive intent
Media outlets and their advertising sales representatives face liability for turning election communications into synthetic media only with deceptive intent. The person must intend to deceive or mislead. A clear and conspicuous disclosure remains an available defense. This narrows liability for those handling election advertising.
Jail property proceeds stay in canteens
Money from disposing of property bought with a jail canteen account must return to that account. The jailer must report the year's proceeds to the Legislative Research Commission by December 1. The report goes to the legislative appropriations and revenue committee. This does not create a household payment or benefit.
Local voices join gas utility boards
Municipal interlocal gas utilities must include nonmember representatives selected by qualifying county judges/executives and city mayors. Counties and cities qualify through service, infrastructure, existing rights-of-way or easements, or requests for those access rights. These representatives generally do not vote. County representatives can cast one combined vote on actions directly affecting a represented county's unincorporated area, but all must agree.
More funding for county corrections
Beginning in fiscal year 2026–2027, the law directs $4.6302 million to the Local Corrections Assistance Fund, subject to appropriation. The fund distributes money annually to counties for correctional facilities and programs, including prisoner transportation.
More funding for treatment and justice
Beginning in fiscal year 2026–2027, the law directs $16.3835 million to treatment and justice programs, subject to appropriation. It supports treatment in detention facilities, Kentucky Agency for Substance Abuse Policy jail and community programs, and residential treatment for pregnant women. It also funds inmate medication-assisted treatment, social workers for alternative sentencing plans, and faster controlled-substance prosecutions. Specified treatment programs must use evidence-based behavioral health treatment or medication-assisted treatment.
Out-of-home care gets dedicated funding account
The law creates a restricted State Treasury fund for out-of-home care, administered by the Department for Community Based Services. Money cannot be spent until the General Assembly approves spending. Unspent balances carry forward to the next fiscal year.
Public health gets dedicated funding account
The law creates a restricted State Treasury fund administered by the Kentucky Department for Public Health. It accepts donations, grants, gifts, state appropriations, and federal money. The General Assembly must approve spending before money can be used. Unspent balances carry forward to the next fiscal year.
Rehab credits require five-year housing affordability
Commercial housing receiving the 30% historic rehabilitation credit based on affordability must remain affordable for at least five years. The rule covers housing affordable to households earning 80% or less of median family income. The Kentucky Housing Corporation, working with the Kentucky Heritage Council, must ensure compliance.
Agriculture plates support state farm programs
The law creates the Friends of Kentucky Agriculture fund for programs run by the Kentucky Department of Agriculture. The matching plate sends $10 of its $28 initial fee and $5 of its $23 renewal fee to the fund. The fund also accepts appropriations, gifts, grants, and federal money. Money is limited to these agricultural programs, and unspent balances carry forward each year.
Local gas utilities gain expansion powers
Public agencies working under interlocal agreements can buy or lease property outside their boundaries for natural gas facilities. This covers building, operating, repairing, and maintaining those facilities. Municipal interlocal gas utilities can also build or extend systems to sell gas inside or outside their member cities. Agencies must legally approve their agreements, and existing utility-law limits still apply.
Low-interest infrastructure loans for local governments
The Kentucky Infrastructure Authority administers a new revolving fund offering low-interest loans to local governments. Loans can build, upgrade, renovate, or expand infrastructure the borrower owns, maintains, or operates. Unspent fund money carries forward each year.
Municipal utilities gain limited regulatory exclusions
Cities and municipal interlocal gas utilities are excluded from the utility definition for specified public-utility provisions. The exclusion does not cover every part of Kentucky's public-utility law. This provision does not establish a change in household utility rates.
Water withdrawal fees support river studies
The Kentucky River Authority must use Tier 1 water withdrawal fee revenue for its operations. The money also supports contracted water supply and quality studies. The provision does not state a fee increase or funding amount.
Businesses can count more incentive costs
Approved economic development projects can count lab equipment, servers, software, capitalized leases, and leasehold improvements toward eligible incentive costs. Covered facilities include research and development, headquarters, high-technology, and service-sector operations. For owned projects, these investments must be integral to operating the facility. For leased projects, they must directly relate to establishing or expanding it. Start-up costs also include these investments when necessary to accommodate the facility.
Coal exporters get longer refund access
Kentucky coal severers and processors can seek refunds of coal tax paid on coal shipped directly outside the United States. The refund period extends to before July 1, 2028. Annual refunds cover up to 10 million tons shipped outside North America. A separate 2.5 million-ton annual limit covers exports outside the United States but within North America.
Districts gain more revenue spending options
Multicounty economic development districts formed through local agreements can use tax revenue to repay state funds appropriated for district development. They can also invest that revenue in future regional economic development projects. Those future projects must be within a participating local government's area. The law does not provide a direct household payment.
Government data sales remain tax exempt
Data brokering services sold by Kentucky state agencies, counties, cities, and special districts are exempt from sales and use tax. The exemption covers these government sellers, not all data brokering businesses.
Major sports sponsors receive tax incentives
Beginning July 1, 2026, qualifying sports sponsors can receive 100% of Kentucky tax from admissions and related eligible sales, minus vendor compensation. Professional event series must generally last at least three consecutive days and draw 100,000 admissions; minor league events are excluded. The Department of Revenue can waive those two thresholds when weather or extraordinary events beyond the parties' control make them impossible. Sponsors need an eligible venue, an agreement with its operator, public ticket access, and an initial application at least 60 days before the first event. One request is allowed per attraction each year, and the incentive expires November 30, 2036.
New tax credit for historic towers
For tax years beginning in 2027 through 2030, taxpayers get a separate credit for restoring certified historic towers. The building must have at least 25 stories, and qualified restoration costs must exceed $150 million. The credit is the smaller of the regular state percentage calculation or the federal credit for those costs. It is capped at $40 million, outside the regular state credit cap and property allocations. Taxpayers must apply through the historic rehabilitation credit process and complete a certified restoration.
Nonprofit schools and charities get exemptions
Resident nonprofit schools and charities qualifying under federal Section 501(c)(3) receive sales and use tax exemptions. Covered purchases include tangible property, digital property, and services used solely in Kentucky for their educational or charitable work. Resident single-member companies also qualify when wholly owned and controlled by such institutions and disregarded for federal income tax. Specified institutional sales, including admissions and fundraising events, are exempt. The sales exemptions exclude sales generated by or arising at an approved tourism development project.
Older large renovations retain special credits
Certain older historic rehabilitation projects use the credit percentages specified by the updated rehabilitation credit provisions. Projects must be in a consolidated local government or urban-county government and have qualified costs above $15 million. The building must be within one-half mile of a tax increment financing area with at least preliminary approval. Substantial rehabilitation must have started before July 1, 2015. Only the first $30 million of costs count, but this credit is outside the general credit cap.
Premium cigar distributors pay lower tax
Beginning July 1, 2026, premium cigars are taxed at 6% of the distributor's actual selling price, down from 15%. Premium cigars are excluded from the 15% tax on other tobacco products. The tax reduction applies to distributors; it does not guarantee lower retail prices.
Religious groups gain sales tax exemptions
Qualifying resident nonprofit religious institutions receive sales and use tax exemptions for sales made in Kentucky within their religious function. Purchases must be used solely in Kentucky within that function. Eligible groups include institutions with federal nonprofit status and certain wholly owned, controlled single-member companies disregarded for federal tax purposes. Institutions that have not applied for federal status can also qualify by meeting the law's listed religious-organization criteria.
Tax relief for some data services
Data brokering services fall outside Kentucky's taxable use definition when bought for use outside Kentucky, transferred electronically outside Kentucky, and used solely outside Kentucky. The added taxable-service treatment also excludes receipts from services fulfilling lump-sum, fixed-fee, or fixed-price contracts signed by February 25, 2026. Services arising from leases or rental agreements entered by that date also qualify for that exclusion. These contract protections do not create an exemption from every other tax.
Water withdrawal fees become tax exempt
Kentucky River Authority water withdrawal fees are exempt from state and local taxes. The exemption applies to tax on the fee itself, not to every water-related charge.
Fantasy contests require participants age 21
Participants must be at least 21 to enter fantasy sports contests in Kentucky. The state's general age of majority remains 18. Adults ages 18 through 20 cannot participate in these contests.
Regional gas utilities face household limits
A municipal interlocal gas utility generally cannot supply natural gas directly to a home. Direct service remains allowed under the specified statutory exception, at rates and minimum monthly charges set by the Public Service Commission. The interlocal utility can still supply gas to a municipal utility serving homes. No customer rate change is specified.
Covered services fall under use tax
Kentucky's use-tax definition now includes the right to benefit from the listed taxable services. Purchasers using those covered services in Kentucky fall within that definition. Kentucky's sales and use tax rate is 6%. The supplied provision does not list the individual services or state an effective date.
Historic credit applicants can face fees
The Kentucky Heritage Council can charge a fee to process a historic rehabilitation tax credit application. The fee cannot exceed the actual processing cost. The law does not set a fixed fee.
Payphone tax and service purchase rules
Kentucky applies a 6% sales tax to gross receipts from pay telephone service. Providers collect and remit the tax. The law also presumes services provided to Kentucky purchasers are retail purchases for use or consumption in the state. That presumption affects sales and use tax treatment; it does not set a separate tax rate.
Regional districts can assess workers' pay
Regional economic development districts can assess salaries, wages, commissions, and other compensation for work performed within their boundaries. This can reduce affected workers' take-home pay. Each assessment ends at the earliest of three points: 20 years after it starts, retirement of supported district bonds, or repayment of all state infrastructure assistance. The provision does not state an assessment rate.
Tire buyers face continued two-dollar fee
Beginning July 1, 2026, Kentucky continues a $2 retailer fee for each new motor vehicle, trailer, or semitrailer tire. Retailers can pass that fee to buyers. The fee ends July 1, 2034. If passed through, four covered tires carry $8 in fees.
Employers face deadline for hiring credit
The $100-per-worker hiring credit is limited to tax years beginning before January 1, 2028. Workers must have been classified as unemployed by the Office of Unemployment Insurance for at least 60 days before hiring. They must stay employed for at least 180 consecutive days during the year the credit is claimed. Federally funded on-the-job-training hires and specified related people or dependents are excluded.
Tax records reach more legislative reviews
The Department of Revenue can share tax information with the Legislative Research Commission for specified purposes. These include reviews involving film tax exemptions, hiring credits, farm credits, High School Equivalency Diploma credits, and coal transportation refunds. The authority expands permitted sharing; it does not make the records generally public.
Tougher penalties for special plate funds
Covered people and groups face a Class D felony and a mandatory $5,000 fine for intentional misuse of special plate funds. This includes spending against the stated purpose or on prohibited administrative or personnel costs. Failing to audit these funds carries the same penalties, but only when an audit is required.
Kratom businesses face bans and penalties
Kratom processors and retailers cannot prepare, manufacture, distribute, dispense, sell, or offer kratom, extracts, or kratom products for sale. Violations carry civil penalties of up to $5,000 for a first offense. The maximum rises to $10,000 for a second or later offense. These are maximum penalties, not fixed fines.
County infrastructure projects pay administration fees
Projects funded through the coal-producing county or tobacco county economic development infrastructure funds pay a 0.5% administration fee. The Kentucky Infrastructure Authority receives the fee when the project begins. The fee comes from the fund that allocated the project, leaving less money for project work.
Event sponsors pay state police charges
Sponsors of events that are not state-operated must pay for security services provided by the Kentucky State Police. The department must bill sponsors and accept their payments. The provision does not specify a charge amount.
Lobbyist employers pay higher registration fees
Employers of executive agency lobbyists pay $750 when filing an updated registration statement, up from $500. The same fee applies to each real party in interest—the party on whose behalf lobbying occurs. This is a $250 increase per covered filing.
State agencies fund Personnel Board operations
Executive branch agencies with employees covered by state personnel law pay annual assessments to operate the Personnel Board. The Finance and Administration Cabinet sets and collects the assessments. Each agency's assessment uses its authorized full-time positions on July 1 of each year in the two-year budget period.
State project transfers face tighter caps
State agencies generally cannot transfer more than 5% of a capital project's legislatively authorized amount into its funding account. That limit excludes private or federal funds and transfers required by unforeseen court or regulatory decisions. Ordinary biennial contingency transfers for authorized construction projects and major equipment drop from 15% to 5% of estimated cost. Higher contingency transfers require an unforeseen court or regulatory decision causing costs to exceed the estimate by more than 5%, plus committee review and certification.
Kentucky Access loses designated tax funding
The Kentucky Access fund loses a designated source of accident and health premium taxes and retaliatory taxes. The change covers collections above the amounts collected in calendar year 1997. The supplied text identifies no replacement funding source or direct change to household premiums, benefits, or eligibility.
Schools lose some facility funding support
The state cannot provide equalization funding for covered school facility tax rates levied on or after January 1, 2026. For covered rates levied earlier, support ends after 20 years or when supported bonds retire, whichever comes first. Remaining support also depends on state finances and General Assembly funding. These limits affect state help for local school facility financing.
Schools must repay recovered facility aid
School districts receiving urgent-needs aid under the covered authorizations must repay the state after later insurance or lawsuit recoveries. The recovered money must concern the original facility. When recoveries are less than the aid, repayment equals those recoveries minus the district's collection costs and legal fees. Repayments go to the state's General Fund.
Captive property trusts lose dividend deduction
Beginning January 1, 2018, captive real estate investment trusts cannot deduct dividends paid when calculating Kentucky taxable net income. The restriction applies to trusts meeting the law's captive-ownership requirements. A trust owned by another real estate investment trust is outside this definition.
Corporations lose certain federal tax deductions
Corporations must add back certain federal deductions when calculating Kentucky taxable income. These include deductions for qualified film, television, live theater, and sound recording productions. They also include the specified federal interest deduction for payments to qualified lenders on qualified real estate loans. These addbacks increase the income subject to Kentucky corporation income tax.
Direct-use ethanol counts as taxable gasoline
Fuel-grade ethanol counts as gasoline when sold for direct motor use or for buyers to blend for their own use. This includes ethanol, cellulosic ethanol, and ethanol flex fuel. Ethanol sold for blending or compounding into commercial gasoline is excluded. The classification brings covered transactions within gasoline tax rules.
Donated-goods refunds exclude religious institutions
The law limits donated-goods tax refunds to qualifying educational or charitable institutions; religious institutions are excluded. Eligible groups must routinely sell donated items and provide job training and employment to people with workplace disadvantages and disabilities. They must spend at least 75% of annual revenue on job training, placement, or related community services. The retained refund equals 25% of tax collected on donated-goods sales, limited to new Kentucky store construction costs and $1 million per location. Groups must apply within 60 days after opening and provide construction-cost records and other information required by Revenue.
Estimated tax refunds face tighter rules
Kentucky limits when estimated tax payments can be refunded, including payments by corporations and limited liability pass-through entities. A taxpayer or authorized officer must apply on the state's form, and Revenue must find the payment was made in error. Alternatively, a refund is available when the taxpayer files the required tax return.
Fluorspar businesses face state extraction tax
Businesses extracting fluorspar in Kentucky are subject to the state's natural-resource severance tax rules. The provision does not specify the tax rate or resulting bill.
Historic rehabilitation credits face application cutoff
The earlier historic rehabilitation credit rules cover only applications received before April 30, 2026. Later applicants must use the separate later-application credit rules to qualify. The law also places the Section 59 rehabilitation credit alongside existing rehabilitation credits in the required credit order. That ordering applies when multiple credits reduce individual income or limited liability entity taxes; it does not change credit amounts.
More charging sellers face tax duties
Anyone receiving payment for power supplied through an electric vehicle charging station is included in the power dealer definition. Newly covered sellers must follow the existing charging-power tax reporting and payment rules. This provision does not state the tax rate or amount owed.
New tax on data brokering services
Kentucky charges 6% sales tax on gross receipts from taxable data brokering services. Use or consumption of those services in Kentucky is also subject to 6% use tax on the sales price.
New taxes for contest market operators
Beginning January 1, 2027, paid fantasy contest providers owe 12% of entry fees collected minus winnings paid. Prediction market operators owe 14.25% of fees for event contracts bought by Kentucky residents or nonresidents in Kentucky. Both taxes use accrual accounting and are due monthly by the twentieth day of the next month. Prediction market late payments accrue interest, and violations carry civil penalties. Covered officers, managers, and partners with authority over tax collection, accounting, or payment share personal liability for covered taxes, interest, and penalties—even after leaving office or the business closes or leaves Kentucky.
Payphone providers face expanded tax coverage
Public payphone service is included in the communications services covered by the utility gross receipts license tax. This brings those service charges into the defined tax base for providers. The provision does not state a tax rate or require any change in customer prices.
Production businesses lose federal deduction treatment
Kentucky adds back federal deductions for qualified film, television, live theater, and sound recording productions. This applies to deductions under federal Section 181. Affected taxpayers must include those deducted amounts in Kentucky adjusted gross income.
Qualified property-loan deductions face state addback
Kentucky adds back interest deducted federally under Section 139L for a qualified real estate loan. The interest must concern amounts paid to a qualified lender. Taxpayers claiming that deduction must include it in their Kentucky adjusted gross income.
Regulated utilities pay a higher assessment
Utilities regulated by the Kentucky Public Service Commission pay an annual assessment of 0.23%, replacing the former 0.2% maximum rate. The assessment uses the previous calendar year's Kentucky earnings or receipts, with adjustments required by law. Each utility pays at least $50 annually. The commission can allow recovery through customer rates, but higher bills are not guaranteed.
Some companies must wait for deductions
The ten-year deduction for qualifying combined-reporting tax impacts starts with the first tax year beginning on or after January 1, 2028. The law delays the start from January 1, 2026. It covers specified increases in deferred tax liabilities or decreases in deferred tax assets caused by combined reporting. Eligible publicly traded companies and affiliates must have participated in the relevant financial statements as of January 1, 2019. Their combined group must have filed the required state statement by July 1, 2019.
Special energy facilities lose tax exemptions
Certified fluidized bed energy production facilities lose their state and local property-tax exemption and their sales and use tax exemption. The law also repeals the combustion-technology exemption definitions and certificate authority. For tax years beginning on or after January 1, 2021, these facilities also lose their limited liability entity tax exclusion. That entity tax applies when the affected entity otherwise falls within its coverage.
State ends three development financing programs
The law ends three Commonwealth tax increment financing participation programs on the relevant section's effective date. No new applications can be submitted or considered after that date. Previously approved projects keep their existing tax incentive agreements. The Commonwealth cannot approve agreement amendments or activation-date extensions after the effective date.
Cash payments can round five cents
When pennies are unavailable, cash debts to the state, local governments, and school districts must round to the nearest five cents. Cash purchases, sales, and covered lottery, racing, and charitable gaming transactions can use the same rounding, but it is optional. All charges are first calculated exactly; only the final settlement amount rounds up or down. Noncash payments stay exact to the cent. Following the rounding rule does not itself violate state or local requirements.
New tobacco distributor option carries fee
Businesses licensed as unclassified acquirers can also obtain a distributor's license to sell tobacco or vapor products in Kentucky. The added license costs $450 for each year or part of a year.
District businesses face fees and credits
Regional district occupational license fees no longer have to be the only occupational fees that apply there. Businesses can therefore face more than one applicable fee. A person paying both covered city and county license fees can credit the city fee against the county fee. All cities party to the agreement must approve a city license fee and its rate. District fee revenue can go to a participating local government's general fund as the local agreement provides.
Cities keep choices over district boundaries
A regional economic development district cannot include city territory unless the city approves participation by ordinance or resolution. The city keeps its occupational tax authority unless it voluntarily joins and agrees to the district tax. Separately, annexing territory within a district no longer requires consent from every government in the local agreement. These rules protect city participation choices while reducing partner governments' control over annexation.
Plate fund recipients face spending checks
Covered special plate recipients must keep money separate and use 100% for their stated purpose. Recipients getting at least $200,000 in a fiscal year must pay for an annual audit and submit it to the Transportation Cabinet. Smaller recipients must submit a compliance form. Agencies controlling statutory funds that receive mandatory fees are exempt from the separate-account requirement.
National Guard plate fees change recipients
The $5 environmental-fee share of National Guard plate fees goes to the National Guard Association of Kentucky. It no longer goes to the veterans' program trust fund. Total listed plate fees stay $23 initially and $11 for renewal. The Transportation Cabinet must send designated special-plate environmental fees to their recipients every three months.
State audits get revised payment rules
The Kentucky Auditor can receive General Fund support for certain statewide audits. Covered systems include personnel and payroll, cash and investments, revenue collection, and state accounting. Entities being examined must pay for other audits, investigations, examinations, and reviews, including required federal-fund audits. No appropriation or audit charge is specified.
Certain state labeling requirements end
The law repeals the state labeling requirements in KRS 217.2203, removing those duties for covered businesses. It also repeals related provisions about state regulations and federal rules overriding state requirements. Consumers lose those specific state labeling protections. The supplied text does not identify the covered products or any replacement requirements.
Public vehicle chargers face fees, inspections
Beginning January 1, 2027, public retail vehicle chargers with at least 20 kilowatts of capacity need an Agriculture Department license. Licenses last through January 31 of the following year, and holders pay $100 annually per covered charging port. Fees fund inspections at least every two years, covering measurement accuracy, electrical safety, payments, customer data, and security. National Electric Vehicle Infrastructure-funded stations are exempt from licensing and inspections until both five operating years pass and federal stewardship requirements expire.
Colleges gain authority to sell assets
Kentucky postsecondary boards can sell property bought partly or fully with capital construction funds, and equipment bought with state money. Within 30 days after a sale, institutions must send detailed accounts to state budget officials and the legislative appropriations committee. Sale proceeds must be assigned proportionately to the funding sources used to acquire and maintain the asset.
Businesses face different research deduction rules
For tax years beginning on or after January 1, 2026, Kentucky adds back federal domestic research deductions under Section 174A. It subtracts deductions under Section 174 as that section stood on December 31, 2024. These rules apply to Kentucky adjusted gross income and corporation income tax. The net tax effect depends on the research deductions claimed.
Corporations use fixed interest deduction rules
Corporations must use federal business interest deduction limits as they stood on December 31, 2024, for Kentucky income tax. Later federal amendments do not apply to this calculation. The provision does not establish whether a corporation's deduction increases or decreases.
Film credits continue with public reporting
Companies producing all or part of a motion picture in Kentucky can apply for the refundable sales and use tax credit. Revenue can accept new applications through June 30, 2030, but not on or after July 1, 2030. Beginning November 1, 2026, Revenue must report credit details annually to the legislature while the credit remains available. Reports cover available fiscal-year data, including company names, addresses, filming counties, and refund amounts. Those details are no longer confidential taxpayer information and can be disclosed publicly.
Loss carryback refunds change interest timing
Income tax refunds from net operating loss carrybacks no longer follow the special interest-timing rule. That rule treated the tax as paid when the refund claim was filed, with interest starting 90 days later. It still applies to net capital loss carrybacks. The change concerns refund interest, not the amount of the underlying tax overpayment.
Older development projects keep adjusted calculations
Projects approved before January 1, 2023, use a modified income tax revenue calculation for calendar years 2023 through 2048. This calculation applies to tax increment financing, which uses tax revenue to support development. Its multiplier is 1 plus 25% of the difference between 5% divided by that year's income tax rate and 1. The formula changes revenue attributed to projects, not the income tax rate households pay.
Online marketplaces face revised collection threshold
Marketplace providers must register and collect Kentucky tax when combined direct and facilitated Kentucky sales exceed $100,000. Covered sales are delivered, electronically transferred, or provided to Kentucky purchasers. Collection starts no later than the first day of a calendar month within 60 days after reaching the threshold. The law removes the separate 200-transaction trigger.
Sponsors & Cosponsors
Sponsor
Jason Petrie
Republican • House
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
House vote • 4/14/2026
passed
Yes: 66 • No: 18
Senate vote • 4/14/2026
passed
Yes: 31 • No: 5
House vote • 4/1/2026
passed
Yes: 65 • No: 25
Senate vote • 4/1/2026
passed
Yes: 37 • No: 0
House vote • 3/11/2026
3rd reading, passed
Yes: 69 • No: 18
Actions Timeline
delivered to Secretary of State (Acts Ch. 161)
4/14/2026enrolled, signed by President of the Senate
4/14/2026Houseenrolled, signed by Speaker of the House
4/14/2026Housereceived in House
4/14/2026Housepassed 31-5
4/14/2026Senatevetoes overridden
4/14/2026Senateposted for consideration of Governor's line vetoes
4/14/2026to Rules (S)
4/14/2026Senatereceived in Senate
4/14/2026Senatepassed 66-18
4/14/2026Housevetoes overridden
4/14/2026Houseposted for consideration of Governor's line vetoes
4/14/2026taken from Rules
4/14/2026Houseto Rules (H)
4/14/2026Housereceived in House
4/14/2026Houseline items vetoed
4/13/2026delivered to Governor
4/2/2026enrolled, signed by President of the Senate
4/2/2026Houseenrolled, signed by Speaker of the House
4/2/2026Housepassed 65-25
4/1/2026HouseFree Conference Committee report adopted in House
4/1/2026Houseposted for passage for consideration of Free Conference
4/1/2026Housetaken from Rules
4/1/2026Houseto Rules (H)
4/1/2026Housereceived in House
4/1/2026House
Bill Text
Current
4/14/2026
Introduced
2/25/2026
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