KentuckyHB 8692026 Regular SessionHouseWALLET

AN ACT relating to fiscal matters and declaring an emergency.

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Bill Overview

Analyzed Economic Effects

66 provisions identified: 26 benefits, 9 costs, 31 mixed.

Bigger angel investor credits

You can claim a state tax credit when you invest in a qualified small business. The credit is 40% of your investment if the business is in a heritage county, or 25% if not. The program can award up to $3 million in credits each year. Any one investor can get up to $200,000 per year.

Bigger tax credit for worker training

Approved companies can claim a skills training investment credit worth up to 50% of approved training costs. The credit is capped at $4,500 per trainee in heritage counties and $3,500 per trainee elsewhere. Each company can receive no more than $500,000 per fiscal year. The corporation approves only one application per company each year.

Sales tax rebate for pro golf events

For qualifying professional golf series held on or after July 1, 2026, the sponsoring entity gets a payment equal to 100% of Kentucky sales tax on admissions and related sales, minus vendor compensation. Apply at least 60 days before the first event. The department decides within 30 days and pays verified amounts within 45 days. The program runs through November 30, 2036, with yearly reporting.

10‑year deduction for deferred taxes

Eligible combined groups tied to publicly traded companies get a yearly deduction for 10 years starting with the first tax year on or after January 1, 2028. The annual amount equals one‑tenth of the total deferred tax offset, converted using the Kentucky tax rate and the apportionment factor. A statement with the total claimed had to be filed by July 1, 2019. Excess deductions can carry forward.

New credits for approved projects

Beginning in 2026, approved companies can claim a refundable, nontransferable Kentucky tax credit. Projects may also get up to a 100% credit on Kentucky taxes tied to the project. For projects preliminarily approved after July 1, 2026, the law adds an extra wage-based credit: 2.25% of full‑time wages in heritage counties and 1.25% in other counties. The statewide pool is capped at $4,000,000 a year, with no more than $1,000,000 from non‑heritage county wages. Companies preliminarily approved before January 1, 2023, can request one extension of up to five years if they have received less than 75% of their incentives and had wage assessments. Revenue publishes non‑confidential reports each year showing who claimed the credit, how much, and by county.

Mortgage interest limited to main home

Beginning January 1, 2026, you can deduct mortgage interest only on your principal home. It must be interest on acquisition or home equity debt. You cannot claim the deduction for a second home.

New tax rates for some inheritances

The law sets a new graduated tax on Class C inheritances. Rates are 6% up to $10,000; 8% on $10,001–$20,000; 10% on $20,001–$30,000; 12% on $30,001–$45,000; 14% on $45,001–$60,000; and 16% on amounts over $60,000. These rules apply to estates of people who die on or after January 1, 2026.

Mega-project aid now needs $500 million

Signature Project Program participation now requires at least $500 million in capital investment for projects considered on or after this section’s effective date. The project must be new economic activity in Kentucky. Smaller projects below $500 million no longer qualify.

Cap on skills training credits

The total skills training investment credits the state can approve are capped at $2.5 million per fiscal year. Any credits not allocated by year‑end lapse and do not carry forward.

New inheritance tax classes and rates

The law adds nephews, nieces, and half‑blood relatives to the Class A beneficiary list. It sets Class B rates by bracket, up to 16% on amounts over $200,000. A surviving spouse can elect to include certain trusts or life estates if they qualify for the federal marital deduction. File the spouse election by the return due date (including extensions) or with the first return filed, whichever is later.

New rules for R&D write‑offs

For tax years starting on or after January 1, 2026, noncorporate taxpayers must add back amounts deducted under federal IRC §174A for research. They may subtract amortization for domestic research computed under IRC §174 as it stood on December 31, 2024.

Job-retention incentives: higher bars, bigger caps

To qualify, a company must have operated in Kentucky for at least 60 months, have prior state incentive approval, and meet job floors (250 full-time jobs in a heritage county, 1,000 elsewhere). Many sectors are excluded, such as retail, real estate, construction, and utilities. Projects must meet minimum eligible costs of $25 million in a heritage county or $100 million in other counties. Inducements can cover up to 50% of initial eligible costs and up to 75% combined with a supplemental project. Agreements end at full recovery or in 10 years, with extensions allowed if less than 75% is claimed or a supplemental project is approved.

Site-readiness grants and local match rules

The Product Development Initiative starts July 1, 2024, with grants awarded in rounds. Projects can get up to $2.5 million in a heritage county or $2.0 million elsewhere. Counties must provide a local cash match based on rank: 10%, 12.5%, 15%, 17.5%, or 20%. The cabinet can pool county funds for regional projects and can pay up to $200,000 for due diligence when a site is not purchased. The cabinet must send annual reports and favor spreading 2024 awards before repeat 2022 recipients when scores tie or are higher.

Alternative jet fuel credits and rebates

From 2029 through 2034, eligible Kentucky producers and feedstock suppliers get per‑gallon income‑tax credits of $0.50, $1.50, $2.00, or $2.50, based on fuel and feedstock. Stacked credits for the same entity are capped at $3.00 per gallon. The state certifies no more than $20 million in credits each calendar year; if requests exceed that, credits are cut pro rata. Rules and forms must be in place by October 1, 2028. Each year, apply by January 15; the department reviews by February 15 and certifies by March 1, and publishes annual non‑confidential reports starting November 1, 2030. Starting August 1, 2026, airports can get up to 75% of the state sales tax paid on eligible fuel sales back, requested quarterly, and must reinvest rebates in airport facilities and operations.

Film and TV production incentives

Productions filmed fully in a heritage county get a 35% credit on qualified spending and payroll. In other counties, nonresident crew costs get 30% and resident crew payroll gets 35%. Above‑the‑line payroll counted is capped at $1,000,000 per person. Credits are refundable and can offset income and LLET taxes. Starting in 2024, $25 million a year is set aside for continuous productions; unused set‑aside rolls to others on July 1. To qualify, companies must meet minimum spend (for example, $125,000 for Kentucky‑based feature/TV/industrial or $250,000 if not Kentucky‑based) and must start filming within 6 months of approval and finish within 2 years.

Film credits capped; tax rules tighten

The film incentive pool was $100 million per year for 2018–2021 and is $75 million each year starting in 2022. Since 2024, $25 million a year is set aside for continuous productions. Refundability depends on approval date and if filming starts within 6 months and finishes within 2 years. Corporations must include federal §181 production deductions in Kentucky income, which raises taxable income.

Longer terms and mega‑project boost

Tax incentive agreements can run up to 15 years in heritage counties and up to 10 years elsewhere. Projects investing more than $200 million may be treated like heritage‑county projects for terms and incentives, at the authority’s discretion.

More projects and remote jobs qualify

Hospital operations and research and development now count as eligible activities for incentives. A full‑time job is at least 35 hours a week and can include a remote job if the worker lives in Kentucky, the job was created by the project, and the payroll is charged to the project. Start‑up costs now include first‑year software subscriptions and licenses, initial software per new job, and fixed telecom equipment.

More time to set project start

Most projects can set the activation date within two years after starting, with up to a four‑year window if extended in writing. Signature projects can set it anytime within ten years. For projects begun after July 14, 2018, the activation date starts the pledge of incremental revenues once the minimum investment is met and the office is notified.

Stronger penalties for consumer violations

Breaking an injunction under KRS 367.190 can cost up to $25,000 per violation. Violating KRS 367.175 brings a civil penalty of the greater of $5,000 or $200 per day. Falsifying or withholding nonprivileged subpoenaed documents is fined under KRS 367.990(2). For certain acts under KRS 367.665 and 367.667, fines include at least $500 for the first offense and at least $5,000 for later ones, plus restitution; the Attorney General and prosecutors can enforce. Violating KRS 367.310 is classified as an offense under that statute.

Tougher penalties for consumer fraud

The law makes odometer tampering to sell a car a Class D felony. It is a crime to hide or change documents after you know an investigation has begun. Some willful or knowing violations of listed consumer laws are now misdemeanors or felonies, including Class C felonies for certain offenses. Negotiating club memberships without the required bond is a Class D felony, and running a health spa illegally is a Class A misdemeanor. The Attorney General or the Commonwealth’s attorney can bring these cases.

Tougher penalties for scams and robocalls

The law raises enforcement against fraud and illegal telemarketing. Telemarketers can be fined up to $5,000 per offense, and three knowing calls in a year to a number on the zero call list is a Class D felony. Misusing the zero call list is a Class A misdemeanor. The Attorney General can subpoena, take oaths, and hold hearings in investigations. Dealers face up to $1,000 per falsified statement and $100 per missing notice, and violations of KRS 367.500 carry $2,500 per violation. Willful unlawful consumer practices face up to $2,000 per violation, or up to $10,000 when directed at people age 60 or older with known increased vulnerability. Violations of KRS 367.832 are Class C felonies.

Tourism and lodging sales‑tax refunds

Non‑lodging tourism projects can get a 10‑year sales‑tax refund up to the smaller of total sales tax owed or 25% of approved costs. In heritage counties, approved attractions can get up to 30% over 10 years. Small heritage counties (20,000 people or fewer) can get a 20‑year refund up to 50% for applications considered after June 27, 2025. Lodging projects that meet the law’s definitions can get a 20‑year refund up to 50% of approved costs.

Tourism projects: lodging and timelines

A full‑service lodging project in a heritage county that creates at least 50 new full‑time jobs now qualifies for tourism incentives. Unused sales‑tax incentives can carry forward during the agreement term until the agreed percent of project costs is reached. Entertainment destination centers that dedicate at least $30 million of incentives to public infrastructure can extend their agreement by up to two years, but must reinvest all incentives received in the extension and report yearly. Seasonal attractions closed in 2020 due to governor orders get a one‑year term extension if they missed the 100‑day rule only for that reason.

12% tax on fantasy sports

Starting January 1, 2027, fantasy contest providers pay a 12% tax on adjusted gross fantasy contest receipts. Use accrual accounting. File and pay monthly by the 20th of the next month. Late payments owe interest and penalties.

14.25% tax on prediction markets

Starting January 1, 2027, prediction market operators pay a 14.25% excise tax on transaction fees. Use accrual accounting. File and pay monthly by the 20th of the next month. Late payments owe interest and penalties.

State cuts tax‑increment financing programs

The state stops taking new applications for two tax‑increment participation programs now. The Signature Projects Program stops new applications after December 31, 2028. Existing agreements keep their terms, but they cannot be amended and activation dates cannot be extended. The law removes the statute for enhanced incentive counties and ends a past exception that let some Signature Projects lower the $200 million investment rule to $150 million. For projects approved before 2023, the income tax “modifier” used to compute project revenues is cut 3.3% in 2026 and by another 1.1 percentage points each year through 2048.

Limits on alternative jet fuel credits

For tax years 2029–2034, you cannot carry unused alternative jet fuel credits to later years. Each eligible taxpayer is capped at $2 million per year for certain rates. The Department of Revenue cannot approve credits until it and two other agencies report that the needed rules are in place.

Online betting: ID checks and bet limits

You must be at least 21, register, and have your identity verified before you can bet, deposit, or withdraw online. Providers must limit you to one account, use geolocation to confirm you are in Kentucky, protect your data, and keep in‑state servers. You must give a street address, phone, username, and email; funding can include cash, cards, ACH, and other approved methods. Sportsbooks cannot offer prop bets that win when a Kentucky college athlete fails to meet a stat or has a negative play. Fixed‑odds horse racing must set a minimum bet of at least $1,000 per race.

Wage assessments on project jobs

If you take a job created by an approved project in a heritage county, your employer can require a wage assessment up to your full state income‑tax rate. If more is collected than allowed for the year, collection stops and the extra is sent back to the state and local governments. When more than one local job license fee applies, the assessment credit is split among them, but not against school board–only fees.

New tourism deals must reinvest locally

Approved entertainment destination centers with expired agreements can enter a new deal if they had no such deal in the last five years. The company must reinvest 100% of new incentives back into the original center and report each year how the money was used.

Startup funding: set-asides, equity, and fees

At least 20% of the Kentucky Enterprise Fund goes each year to rural or heritage counties, and at least 20% to Opportunity Zones. If a company gets more than $30,000 from the fund, the state takes an equity stake (stock, LLC interest, convertible note, SAFE, or warrant). Angel investor applicants must pay a nonrefundable fee set by the authority. The authority may hire a science and technology group to run applications, and can award grants up to $500,000 per grant.

Leased‑project and cost rules updated

The law defines which lease agreements qualify and excludes capital leases. For leased projects, submitting a valid post‑approval lease lets future rent count as confirmed approved costs; estimated rent over the agreement term may be included. Confirmed costs cannot exceed approved costs, and if confirmed costs are lower, they become the recovery cap. Only costs within 90 days before preliminary approval are recoverable. The prior $20,000 per‑new‑job cap on equipment costs for certain leased projects is repealed.

Stricter steps for jobs‑retention deals

Before signing a jobs‑retention agreement, a company must get each affected local government to approve stopping or reducing its job license fees. A company can transfer unused credits from an old deal to a new jobs‑retention deal, but the old deal ends when it transfers. Total inducements across initial and supplemental projects cannot exceed 75% of eligible costs and remain subject to yearly caps. A supplemental project must activate within 3 years unless extended, and the company must document costs within 3 months and repay any independent cost‑check fees. Amended agreements can claim listed inducements if all rules are met.

EMS reimbursements limited to calls after 7/1/25

A consolidated local government must reimburse a fire district only for emergency medical responses on or after July 1, 2025. This rule applies retroactively to unresolved matters and appeals. It changes which responses are eligible for payment between local governments and fire districts.

New siting rules for power projects

Developers must get a construction certificate before building a merchant electric power facility. The law sets minimum distances: 1,000 feet from adjoining property lines for exhaust stacks or wind turbines, and 2,000 feet from neighborhoods, schools, hospitals, and nursing homes. Wind turbine hubs may not exceed 350 feet. Local planning and zoning may set stricter height, setback, and decommissioning rules, and those local rules control. The board may allow smaller setbacks if it finds the project still meets state goals. Projects already holding a construction certificate are exempt from new meeting/notice subsections, and a project on a former coal processing site using on‑site waste coal is exempt from the 1,000‑foot stack boundary. Applications must include public notice, a community meeting, detailed maps and studies, and a decommissioning plan with a bond set by an independent engineer.

When different parts take effect

The Act takes effect when it becomes law. Section 128 and Section 54 take effect on July 1, 2026. Many sections (18–21, 33–35, 36, 44, 51, 57–70, 71, 73–91, 108–113, 119, 127, 130–133) take effect upon passage. Section 60 takes effect on August 1, 2026. Sections 9, 10, 71, 72, 107, and 117 of HB 757 and Section 53 take effect on January 1, 2027. Sections 114 and 115 of HB 757 and Sections 30–34 take effect on July 1, 2027.

Energy projects: more notice, bonds, and fees

Project developers must mail and post public meeting notices at least two weeks in advance and alert key state agencies before the meeting. Decommissioning bonds must name landowners (for leases) and the Energy and Environment Cabinet as beneficiaries. The review board sets application fees and may charge a supplemental fee; not paying can lead to denial.

New licensing limits for sportsbooks and tracks

Tracks must have a sports wagering license before taking sports bets, and a supplemental license before offering fixed‑odds wagering. Each track may work with no more than three service providers at a time, and sites or apps must use the track’s or provider’s brand. Licensed tracks, associations, and fantasy operators cannot take part in or contract with prediction market platforms in Kentucky. If a company holds multiple licenses, only the specific license that broke the rules faces suspension or revocation.

New rules for sports betting

The state sets up a regulated sports betting system. Licensed racetracks can take bets at their facilities and online. Simulcast sites can offer betting through an agreement with a licensed track that uses that track’s approved service providers. The corporation can issue temporary licenses and set suitability and licensing rules. The corporation and the Department of Revenue can also regulate prediction markets. All activity must follow federal law and state rules.

Longer TIF terms, tighter bond paydowns

Pilot tax increment financing programs last 20 years in existing areas and 30 years in new areas, and may be extended up to 25 more years when a new KEDFA bond is issued. After extension, all excess revenues must go to redeem the bond early, at least every 36 months once callable, unless an approved alternative plan is granted. After the bond term ends, no further pilot revenues are remitted to the borrower. Borrowers must report yearly to the Governor and the oversight committee. For Signature Projects where housing is at least half of finished space, certain state participation reports and certifications are waived.

New tax split in redevelopment areas

Localities can create a new development area inside an existing one only if the old plan is amended to remove that new area. Tax increment from the new area must be split: at least 10% to the original agency, 80% to the developer, and 10% kept by the Commonwealth or local government. The amendment needs approval from the county or city, the state economic development authority, the agency, and any bond insurer. Any negotiation or agreement about these areas must be approved by the state authority.

Higher pay standards for incentive jobs

To qualify for state incentives, a company must spend at least $100,000 and create at least 10 new full‑time jobs, and keep an average of 10 during the project. At least 90% of new full‑time workers must be paid the required wage. The average total hourly pay for all new jobs must meet the wage target: at least 200% of the federal minimum wage in heritage counties or 300% in other counties. The company must provide benefits worth at least 15% of that wage, or else pay total hourly compensation of at least 115% of that wage.

Training help with stricter wage floors

Training grants and credits can cover instructor pay, training‑only supplies and equipment, and employee wages tied to the program. Approved companies must finish training within three years of approval to get grant money or final credits. Eligible trainees must be full‑time, taxed under KRS 141.020, and get at least the base wage plus benefits equal to 15% of that wage, or total hourly compensation of at least 115% including a company‑paid benefit. The base wage floor is 200% of the federal minimum wage in heritage counties and 300% in other counties. Full‑time status also includes certain remote Kentucky residents whose jobs were created or kept by, and charged to, the project. The Cabinet works with KCTCS to help recruit and place students into these jobs and training.

How sites are scored and 'heritage' status

Every two years the cabinet ranks counties by population density and 10‑year change. A county is a “heritage county” if it scores 97 or higher. Projects are scored on property availability, developability, zoning, transportation, and utilities. Sites must have clear access or a binding option, be outside major flood zones or mitigated, and fix environmental, wetland, species, or historic issues. Sites must be road‑served, prove rail service if marketed, and be able to get electric, gas or propane, public water, public wastewater (no septic), and fiber.

Who qualifies for state development projects

A “qualified company” includes manufacturing, agribusiness, certain service and tech firms, energy projects, pipelines, coal processing, and hospitals, but excludes retail, real estate, utilities, construction, and others. For Signature Projects considered now, the owner must be a 501(c)(3) nonprofit educational, charitable, or religious institution.

New corporate R&D and interest rules

Beginning January 1, 2026, corporations must include federal §174A research deductions in Kentucky income, but may subtract §174 amortization as it stood on December 31, 2024. Corporations must also include interest deducted under federal §139L for qualified real estate loans. Kentucky uses the business interest limit under §163(j) as of December 31, 2024.

Time limits for TIF and grants

Tax incentive agreements can last up to 20 years from activation, but never more than 40 years from when the development area was set up. Project grant agreements can last up to 30 years from activation, but also never more than 40 years from the development area’s establishment.

Monthly driving tests in some counties

From September 1, 2024 to December 31, 2028, the State Police run a pilot for driver’s license skills tests in up to ten counties without full‑time testing. Tests happen at least once a month in each county. Only county residents applying for an intermediate license may test, and sign‑ups go through the State Police portal. The State Police must report program data by October 31, 2025.

Small inheritance tax exemptions

Some heirs get a small exemption before tax applies. Class B heirs get $1,000 off the taxable amount. Class C heirs get $500 off.

Easier upgrades for power generating facilities

Replacing a merchant electric generating facility with a similar one, or repairing, modifying, retrofitting, enhancing, or reconfiguring it, does not count as new construction under these rules. Owners do not need new construction approvals for that work.

Advance deposit wagering now allowed

Licensed sports wagering providers, tracks, and fantasy contest operators may offer advance deposit account wagering. Offerings must follow the law’s definition. The change does not add duties for unlicensed groups.

Easier tourism projects in heritage counties

Tourism attraction projects normally must exceed $1,000,000 in eligible costs to qualify. In a heritage county, if the county status applies when the company becomes approved, the threshold drops to more than $500,000. This change applies only to those heritage‑county projects at that approval time.

Tax credit ordering and oversight

The new economic development credit is added to the list of refundable credits and is taken after nonrefundable credits. The Department of Revenue can share certain credit information with the Legislative Research Commission for oversight of named credit programs.

Clearer rules for public notices and meetings

The law defines “zoned edition” for legal ads and requires time to be shown in both Eastern and Central time. It updates the Open Meetings Act to include video teleconferences, defines who counts as a governing body member, and keeps time in both time zones. These changes make notices and meetings clearer to the public.

More urban service funding and EMS pay

Starting July 1, 2025, urban service tax districts must spend most of their extra tax money on added services within the district: at least 85% at first, 90% from 2028–2031, 95% from 2031–2034, and 100% after June 30, 2034. The rule excludes services in the central business district defined as of April 1, 2024. Also starting July 1, 2025, qualifying fire districts get $300 per EMS transport and $150 per EMS response without transport inside the district. These EMS payments rise each July 1 with the CPI‑U and are on top of insurance payments. The local government cannot add new charges it did not have before January 1, 2024.

New Workers' Claims department; jobs protected

The law creates the Department of Workers’ Claims under the Governor, led by a commissioner confirmed by the Senate. It organizes divisions for judges, claims processing, compliance, funds, and medical services, and attaches the Workers’ Compensation Board for administration. Employees who held positions 14 days before the transfer keep their jobs and cannot be penalized for the move. Positions are kept unless the department later creates or abolishes them.

Public posting of approved incentive deals

The economic development authority posts the company name, project location, and preliminarily approved incentives on its website. This gives the public timely details about approved projects.

Study on musicians and music venues

The Kentucky Film Leadership Council must study the needs of musicians and music venues. It must send findings to the Legislative Research Commission by November 1, 2026.

Apply for state participation before start date

A city, county, or local agency can apply for state participation in a development area project before this section takes effect. The application must name the requested program and include the creating ordinance, the local participation agreement, and required data.

State review of data center incentives

The Cabinet for Economic Development must report on Kentucky tax credits and incentives for hyperscale and other data centers. The report must compare nearby states and include recommendations. The cabinet must deliver it to the Legislative Research Commission by August 1, 2027.

Some incentive jobs take wage assessments

Approved companies may collect a wage assessment from the gross wages of each new employee who owes Kentucky income tax. The law authorizes the assessment mechanism; specific rates are set in other sections.

Stronger rules for merchant power sites

Merchant electric projects must post a decommissioning bond from an insurer or surety rated at least “Excellent” by AM Best or investment‑grade. Where available, the bond cannot be canceled until cleanup is done or replaced, and the surety must give 30 days’ notice to the applicant, landowners, the Energy and Environment Cabinet, and local governments. Landowners, or the Cabinet with their approval, can demand the bond and finish decommissioning, and the decommissioner keeps salvage proceeds; any state recovery over costs goes to a monitoring fund. Counties or cities without their own bond must be named as secondary beneficiaries if they consent. Wind turbines cannot be artificially lighted unless required by law and must be sited or mitigated to avoid significant shadow flicker. Applicants must also pay an application fee set by the board.

Angel investor credit caps and timing

Before 2021, total angel credits awarded across all years were limited to $40 million. Applications received from 2019 through 2020 were not approved. Starting January 1, 2021, the program resumes and can award up to the annual cap (currently $3 million per year).

How “heritage counties” are set

A county counts as a “heritage county” if its cabinet‑set population ranking score is 97 or higher. This label controls which counties get higher benefits across programs, including the angel investor credit rules.

New rules for gas tax base

The law treats fuel‑grade ethanol as gasoline for state fuel tax sections. It also sets a wholesale floor price of $2.177 per gallon for gasoline in those sections. These definitions can change how fuel taxes are calculated and who pays them.

Sponsors & Cosponsors

Sponsor

Adam Bowling
Republican • House

Cosponsors

Jason Petrie
Republican • House

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