All Roll Calls
Yes: 99 • No: 23
KentuckyHB 7752025 Regular SessionHouseWALLET
AN ACT relating to fiscal matters.
Sponsored By: Jason Nemes (Republican)
Became Law
Economic DevelopmentState AgenciesCities, First ClassCounties with Cities of the First Class
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Bill Overview
Analyzed Economic Effects
29 provisions identified: 14 benefits, 7 costs, 8 mixed.
Farm sellers get capped tax credits
Farm sellers can claim approved credits up to $25,000 yearly and $100,000 lifetime for sales to actively engaged, non-beginning farmers. Sales to beginning farmers have higher caps: $50,000 yearly and $200,000 lifetime. Credits cannot exceed the approved amount or tax owed, cannot be transferred, and unused amounts carry forward up to five tax years. Sellers first claim the credit in the approval year against eligible Kentucky individual, corporate, or limited liability entity taxes. The program shares a $3 million annual cap with the Small Business Tax Credit Program.
More farm sales qualify for credits
The Selling Farmer Tax Credit no longer excludes buyers who previously owned farmland used for farming for more than 10 years. Buyers must still be Kentucky residents with required licenses, registrations, and experience. They cannot already own the assets being purchased. Applications can be reviewed before the sale closes and title and assets transfer, with enough information to decide eligibility.
Farm buyers face longer commitments
Buyers in Selling Farmer Tax Credit deals must intend to keep the purchased Kentucky land in for-profit farming for 10 years, up from five. They must provide most of the farm’s management and materially take part in its work. Buyers who fail program requirements owe a penalty equal to the seller’s awarded tax credit. The Department of Revenue can add another penalty, whose amount is not specified. The program accepts no new applications on or after December 31, 2031.
Lower income taxes for Kentucky households
Kentucky’s individual income tax rate falls from 4% in 2024 and 2025 to 3.5% for tax years beginning January 1, 2026. Savings depend on Kentucky net income. Beginning with 2027 tax years, further cuts require annual revenue and reserve-fund tests and approval by the General Assembly.
Licensed businesses can ship hemp drinks
Type B direct shipper license holders can ship cannabis-infused drinks to Kentucky consumers. Eligible applicants include Public Health-licensed manufacturers and qualifying manufacturers or suppliers authorized in their home state. Manufacturers can ship only brands they own or exclusively license and that they, or someone acting for them, produce or package. Direct shipper applications and renewals require the applicable annual fee rather than the former fixed $100 fee. This provision does not state the replacement fee.
Beer buyers receive brewer tax credits
The 50% malt beverage tax credit flows through to distributors or retailers buying directly from an in-state brewer. The credit covers no more than 300,000 barrels per year. This is a business tax benefit, not a required price cut for consumers.
Hemp drink businesses face new requirements
Covered cannabis drinks must be permitted, intoxicating adult-use liquids with no more than 5 milligrams of intoxicating cannabinoids per 12-ounce serving. Cannabinoids must come from USDA-sanctioned domestic hemp programs, not other substances; medical cannabis, tinctures, and solely nonintoxicating products are excluded. Manufacturers need a Public Health food-manufacturer permit and Revenue registration before selling, giving away, or importing drinks. Annual retail package licenses cost $2,000. Distributor and supplemental distributor licenses each cost $1,000 yearly.
New farm credit applications end
New Selling Farmer Tax Credit applications are not accepted or considered on or after December 31, 2031. Applications with preliminary or final approval by that date remain covered by the program rules.
Kentucky updates federal income tax rules
For tax years beginning January 1, 2025, Kentucky uses the federal tax code in effect on December 31, 2024. This replaces the December 31, 2023 reference date. Later federal changes generally do not apply, except extensions of provisions that otherwise expire. The effect on a taxpayer's bill depends on the federal rules involved.
Data center incentives reach more counties
Data center owners, operators, and colocation tenants need $450 million in investment in counties with at least 100,000 people. The minimum is $100 million above 50,000 but below 100,000 people, and $25 million at 50,000 or fewer. Project organizers need $150 million, and required investment must be made by the fifth anniversary of preliminary approval. Population uses the latest available five-year American Community Survey estimate when the application is filed. The law removes the former restriction to consolidated local governments with at least 500,000 people.
Microbreweries gain private selection options
A microbrewery holding a quota retail drink or package license can include a barrel-selected bottle in a private selection package. The bottle must come from barrels the microbrewery selected during a private selection event.
Gaming regulator faces limits on authority
Beginning July 1, 2025, the gaming corporation cannot regulate horse sales or require breeders to hold licenses as breeders. It cannot control matters within an entity's exclusive national authority under federal law. It also cannot restrict or ban games or charitable gaming activities in use in Kentucky on July 1, 2025. Changing that protection requires General Assembly action.
New state regulator oversees racing and gaming
The independent Kentucky Horse Racing and Gaming Corporation oversees live racing, pari-mutuel and sports wagering, and horse-breed integrity and development. It took the Horse Racing Commission's duties, staff, equipment, and funding on July 1, 2024, abolishing the commission. Its charitable gaming office took the Department of Charitable Gaming's duties and resources on July 1, 2025, abolishing that department. Beginning July 1, 2025, its programs cover horse, jockey, and driver safety, medical practices, equine growth and research, and wagering integrity. It can issue racing and charitable gaming rules and share wagering information with sports governing bodies; its authority excludes the lottery.
Public gains access to gaming records
Beginning July 1, 2025, the gaming corporation's records and board meetings are generally open to the public. It can withhold trade secrets, legally protected intellectual property, confidential business information, and operational security records. Meetings can close for applicable legal exceptions or specified confidential and security matters.
Beverage exporters get a tax exemption
Covered alcoholic and cannabis-infused drinks made in or imported into Kentucky are exempt from the state gallon tax when permanently shipped out. The drinks must be sold and consumed outside Kentucky.
Employer college credit lasts through 2037
The Metropolitan College employer tax credit is extended to April 15, 2037, unless lawmakers extend it again. Qualifying taxpayers receive 50% of eligible tuition and other education costs for up to 2,800 participating employees yearly. They must be consortium-agreement parties as of June 26, 2009, under the agreement approved November 5, 2005, and college partners. The credit cannot produce a refund and remains subject to tax-liability and carryforward rules. The direct tax benefit goes to qualifying taxpayers, not employee-students.
Large event sponsors share tax incentives
Beginning July 1, 2025, qualifying attractions receive an incentive equal to 50% of Kentucky sales tax from admissions and on-site goods and services. Half goes to the venue operator for operations and maintenance, and half goes to the sponsor. Each ticketed, public entertainment series must last at least two consecutive days and draw at least 60,000 admissions. Sponsors need an agreement for annual series over at least five consecutive years and must apply at least 60 days before the first event. Payment applications follow event completion, and the incentive expires June 30, 2035.
Older development projects can seek incentives
A narrow group of revised projects can reapply to the first Signature Project initiative for eligible cost recovery. The original project cannot have had the specified local development contract in effect on or before March 23, 2007. It must have had a project grant agreement signed before January 1, 2008. That agreement must have been voluntarily withdrawn before project completion.
Tourism developers gain broader tax incentives
Approved tourism attractions in enhanced incentive counties with 20,000 or fewer people can receive sales-tax incentives over 20 years. County population uses the latest decennial census when the company gains approval. Recovery cannot exceed the lower of company-and-lessee sales-tax liability or 50% of approved costs. The rule applies to applications considered after the law's effective date and covers related property transfers on or after March 1, 2025. Tourism project reviews also drop the test requiring no adverse effect on existing Kentucky employment.
Beverage businesses face new filing rules
Covered alcohol licensees, except retailers, and permitted cannabis-drink manufacturers must file monthly beverage activity reports by the 20th. Reports cover the prior month, including beverages destined for sale outside Kentucky; Revenue can require additional reports. Beginning July 1, 2026, qualifying microbreweries must electronically file and pay both wholesale sales and malt beverage excise taxes. This electronic requirement applies to microbrewery licensees authorized to sell malt beverages that owe both taxes; it does not change tax owed.
New electronic charity ticket sites limited
From July 1, 2025, through April 15, 2026, the gaming corporation generally cannot approve additional electronic charity ticket locations. New approvals are limited to charity offices, licensed bingo sites, and pre-approved fundraising events. Activities and sites operating before July 1, 2025, can be restocked or updated. The restriction does not apply once the corporation issues regulations governing these tickets.
New taxes on cannabis drinks
Kentucky taxes covered cannabis-infused drinks at $1.92 per gallon, with proportional amounts for smaller or larger containers. A separate 11% tax applies to covered wholesale sales and certain shipments to consumers at Kentucky addresses. Covered manufacturers must hold a Kentucky Department for Public Health permit. Covered sellers must report and pay by the 20th day of the month after the taxable transfer or sale. Distributors, retailers, and consumers handling untaxed drinks can each be held responsible for the full unpaid gallon tax.
Property classification changes limit refund claims
Qualifying utility mains, pipes, pipelines, and conduits count as real property beyond the former 2024–2025 assessment limit. This covers authorized infrastructure in public or private streets or places serving public heat, steam, water, sewage, gas, or electricity. The property-tax amendments in Sections 4 and 5 apply to property assessed on or after December 31, 2022. Refund or credit claims based on changes to subsection (3) of those sections are barred when filed on or after the law's effective date. The bar covers amended returns, refund applications, and other claims.
Gaming corporation gains flexibility, loses funding
Beginning July 1, 2025, the gaming corporation can set its own purchasing rules instead of following the standard state procurement chapter. Major personal-service procurements are exempt from a specified state rule, and its president can declare purchasing emergencies. After transfers of specified administrative appropriations for fiscal years 2024–2025 and 2025–2026, the corporation must fund its own expenses. General Fund money cannot pay or be committed to those expenses after the transfers.
Bonded spirits face taxes before exemption
Spirits stored or aging in barrels in qualifying bond-financed warehouses are taxed on 100% of value at January 1, 2023 rates. Warehouses must belong to tax-exempt governments or statutory authorities, with industrial revenue bonds issued before January 1, 2024. Some warehouse costs must remain bond-financed during at least part of the calendar year. These spirits become exempt from state and local property taxes for assessments on or after January 1, 2043. Spirits value exempted under the separate phaseout is excluded from school-funding local-effort and school tax-rate calculations.
Distillers get relief but replacement taxes
The taxable share of qualifying barrel-stored spirits falls from 96% on January 1, 2026, to 8% on January 1, 2042. These spirits become exempt from state and local property taxes on January 1, 2043. Starting in 2026, qualifying warehouse taxpayers also owe a replacement tax in jurisdictions that collected property tax in 2025. It uses historical collections, school-funding changes, and each taxpayer’s share of barrels stored on January 1 of the prior year. Local jurisdictions receive receipts within 60 days after assessment. Taxpayers can seek reductions for business-wide declines measured against 2025 production or extraordinary events beyond their control that prevent distilling or barreling. Revenue bond-financed warehouses are excluded from the replacement-tax warehouse definition before 2043.
Further income tax cuts need lawmakers
State budget officials must review fiscal tests and report by September 5, 2025, and September 5, 2026. Passing those tests permits lawmakers to consider income tax cuts for 2027 and 2028, respectively. Revenue officials cannot lower the rate without General Assembly action. Annual reviews continue until the rate reaches zero; this process does not itself lower the rate.
Local development areas gain financing options
In counties containing a consolidated local government or first-class city, qualifying development areas can be smaller than one square mile. They remain capped at six square miles, may include existing economic assets, and must meet public-improvement or project criteria. New areas can also be carved from areas established before March 23, 2007, with qualifying agreements signed before that date. The old project must remove the new area, with required local, state, agency, and applicable bond-insurer approvals. At least 10% of the new area's added tax revenue must go to the old area's agency, outside contract thresholds.
Lodging incentives come with new reviews
Specified approved lodging projects receive 20-year sales-tax incentives capped at the lower of company-and-lessee sales-tax liability or 50% of approved costs. One qualifying project type needs over $100 million in eligible costs and at least 100 public-open days yearly, including year one. After year three, at least 25% of its overnight visitors must be from outside Kentucky. That project type also needs an independent study of comparable lodging within 50 miles for the latest calendar year. Its net-positive-impact statement must exclude effects from state-funded infrastructure approved before its application.
Sponsors & Cosponsors
Sponsor
Jason Nemes
Republican • House
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
Senate vote • 3/14/2025
passed
Yes: 32 • No: 5
House vote • 3/11/2025
3rd reading, passed
Yes: 67 • No: 18
Actions Timeline
became law without Governor's Signature (Acts Ch. 98)
3/27/2025filed without Governor's signature with the Secretary of State
3/26/2025delivered to Governor
3/14/2025enrolled, signed by President of the Senate
3/14/2025Senateenrolled, signed by Speaker of the House
3/14/2025Senatepassed 61-23
3/14/2025SenateHouse concurred in Senate Committee Substitute (1) and Floor Amendment (4)
3/14/2025Senateposted for passage for concurrence in Senate Committee Substitute (1) and Floor Amendment (4)
3/14/2025Senateto Rules (H)
3/14/2025Housereceived in House
3/14/2025Housepassed 32-5 with Committee Substitute (1) and Floor Amendment (4)
3/14/2025SenateFloor Amendments (1), (2) and (3) withdrawn
3/14/2025Senate3rd reading
3/14/2025Senatefloor amendment (4) filed to Committee Substitute
3/14/2025Senateposted for passage in the Regular Orders of the Day for Friday, March 14, 2025
3/14/2025Senatereported favorably, to Rules with Committee Substitute (1)
3/14/2025Senatereturned to Appropriations & Revenue (S)
3/13/2025Senate2nd reading
3/13/2025Senatetaken from Appropriations & Revenue (S)
3/13/2025Senatefloor amendment (3) filed
3/13/2025Senatefloor amendments (1) and (2) filed
3/12/2025Senate1st reading
3/11/2025Senatereturned to Appropriations & Revenue (S)
3/11/2025Senatetaken from Appropriations & Revenue (S)
3/11/2025Senateto Appropriations & Revenue (S)
3/11/2025Senate
Bill Text
Current
3/14/2025
Introduced
1/30/2025
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