Budget & Taxes

Create a new section of KRS Chapter 141 to establish a nonrefundable income tax credit for alternative jet fuel producers; require the Department of Revenue, in conjunction with the Department of Agriculture and the Energy and Environment Cabinet, to promulgate administrative regulations; require the department to report on the credit to the Legislative Research Commission; amend KRS 141.0205 to order the credit; amend KRS 131.190 to allow the Department of Revenue to report on the credit.

Create a new section of KRS Chapter 139 to annually transfer 80% of the sales and use taxes, interest, and penalties collected during the preceding fiscal year from sporting goods retailers from the general fund to the Kentucky Heritage Land Conservation fund.

Amend KRS 139.340 to redefine the sales and use tax nexus standard for remote retailers and marketplace providers to include a sales volume threshold only; amend KRS 131.383 and 141.044 to allow the Department of Revenue to refund an estimated tax payment in the event the payment was submitted to the department in error; amend KRS 96.895 to require reporting by the Department for Local Government to the Legislative Research Commission related to the Tennessee Valley Act in lieu of tax payments; amend KRS 154.30-030 to sunset the tax increment financing state-participation programs; allow TIF projects approved prior to this date to continue to be governed in accordance with the tax incentive agreement's terms and conditions; amend KRS 141.010, 141.019, and 141.039 to conform to the Internal Revenue Code in effect on December 31, 2025, for taxable years beginning on or after January 1, 2026; decouple from certain IRC provisions; delay the deferred tax deduction until January 1, 2028; create a new section of KRS Chapter 138 to define terms and impose an excise tax on fantasy contests; set requirements for administering the tax; amend KRS 139.010 to define "data brokering services"; amend KRS 139.200 to impose sales and use taxes on pay phones and data brokering services; amend KRS 139.202 to exempt from the tax pre-existing lease or rental agreements; amend KRS 224.50-868 to extend the fee currently imposed for each new motor vehicle, trailer, or semitrailer tire sold in Kentucky to July 1, 2028; amend KRS 224.50-872 to require reporting by the Energy and Environment Cabinet to the Legislative Research Commission on the waste tire trust fund; amend KRS 45.760 and 45.770 to limit the transfer of moneys for a capital project from 15% to 5%; amend KRS 45.345 and create new sections of KRS Chapters 65, 160, and 367 to define terms and require rounding of cash transactions to the nearest $.05 increment; amend KRS 139.210 to prohibit retailers from being relieved of their responsibility to collect the correct amount of sales tax regardless of the purchaser' s payment method; create new sections of KRS Chapter 65 in relation to regional industrial development districts to prioritize the purposes for organizing the district; exclude cities and school occupational license taxes from the single occupational license tax imposition restriction; require the fee to expire the earlier of date bonds issued are retired or 20 years; require notification to all local governments with territory in the boundaries of the multicounty region before interlocal agreement is executed; prohibit inclusion of any portion of a city that has not consented to participation; require reporting to the Department for Local Government and the Legislative Research Commission; amend KRS 143A.030 to tax fluorspar as a natural resource; amend KRS 143A.010 to add fluorspar to the definition of "natural resources"; amend KRS 140.160, relating to the inheritance and estate taxes, to extend the deadline for filing a tax return from 18 months to 36 months for deaths on or after July 1, 2026; amend KRS 140.210 to correspondingly extend the due date for payment of tax and discount; amend KRS 134.490 to modify notification requirements for third-party purchasers of delinquent taxes; amend KRS 138.130 to define "premium cigar," and amend "vending machine operator" to include cigarettes, tobacco products, vapor products, or a combination thereof; amend KRS 138.140 to tax premium cigars at the rate of 15% of the actual price up to 60 cents per cigar; require an annual CPI adjustment for the maximum rate and publication on the Department of Revenue's website; amend KRS 138.195 to require a vending machine operator to secure a license for dispensing tobacco products and vapor products in vending machines; amend KRS 141.0205 to order income tax credits; amend KRS 131.190 to allow the Department of Revenue to report on certain credits to the Legislative Research Commission; amend KRS 160.613 to impose the utility gross receipts license tax on the furnishing of pay phone service; amend KRS 139.538 to sunset sales and use tax exemptions for filming and producing motion pictures in this state July 1, 2028; amend KRS 132.096, 139.480, 139.4802, 139.481, 141.0401, 141.206 to delete tax exemptions for property certified as a fluidized bed energy production facility; amend KRS 139.481 to extend the agricultural exemption license number for sales and use taxes to 6 months; amend KRS 154.20-236 to end further applications for the Kentucky Angel Investment ; amend KRS 141.065 to sunset the credit for hiring the unemployed as of January 1, 2028; amend KRS 141.412 to sunset the qualified farming operation credit as of January 1, 2028; amend KRS 151B.402 to sunset the employer High School Equivalency Diploma program incentive credit as of January 1, 2028; amend KRS 171.396 to allocate 15% of the certified rehabilitation credit cap to owner-occupied residential property and 85% to all other property; define "commercial residential property" and "median family income"; amend KRS 171.397 to sunset the current application process; create a new section of KRS Chapter 171 to establish 2 application rounds by which the certified rehabilitation credit may be applied for; allow credit based on 30% of the qualified rehabilitation expenses if the commercial residential property is affordable to households earning 80% of the median family income; amend KRS 441.135 to require compensation received from disposal of property that was purchased from a jail canteen account to be returned to the canteen account; require reporting of proceeds by the jailer; create a new section of KRS Chapter 224A to require an administrative fee of 0.5% to be paid for each project funded by the Infrastructure for Economic Development Fund for Coal-Producing Counties and the Infrastructure for Economic Development Fund for Tobacco Counties; amend KRS 45.050 require audit expenses of audits with federal funds to be paid by the agency being audited; amend KRS 18A.080 Executive branch agencies assessed for the operation of the Personnel Board; require the amount to be determined and collected by Finance and Administration Cabinet based on the number of full-time employees of each agency on July 1; amend KRS 151.723 to prohibit state and local taxes on water withdrawal fees; amend KRS 304.17B-021 to require insurance premium and retaliatory taxes for accident and health and insurance premiums to be deposited into the general fund; amend KRS 11.068 to require the Office of State Budget Director to publish on its website by September 1 of each year an estimate of general fund and road fund revenue loss from tax expenditures; create a new section of KRS Chapter 16 to require billing of Kentucky State Police security services provided to nonstate-operated events; create a new section of KRS Chapter 138 to impose a new excise tax on predictive markets; define terms; amend KRS 160.470 to increase the publication requirements when a local board of education proposes to levy a general tax rate; amend KRS 132.017 to require the petition committee challenge information be published on the home page of the county clerk's website; amend KRS 160.473 to prohibit a personal property tax rate levied by a local board of education to be higher than the rate levied on January 1, 2026; amend KRS 160.607 to prohibit an occupational license tax from being imposed in a school district that does not currently have one imposed as of January 1, 2026; prohibit an occupational license tax rate levied for a school district to increase on or after January 1, 2026; amend KRS 160.613 to prohibit a utility gross receipts license tax from being imposed in a school district that does not currently have one imposed; prohibit a utility gross receipts license tax rate from increasing on or after January 1, 2026; amend KRS 11A.211 to increase the registration fee for each employer of one or more executive agency lobbyist and each real party in interest from $500 to $750; amend KRS 278.010 to define “municipal interlocal gas utility”; exempt “municipal interlocal gas utility” from the definition of “utility”; amend KRS 65.230 to define “municipal interlocal gas utility”; create a new section of KRS 65.210 to 65.300 to provide that municipal interlocal gas utilities shall be considered special purpose governmental entities and pay an annual fee to the Department for Local Government; amend KRS 65.240 to allow public agencies to enter into agreements to acquire natural gas facilities outside of its municipal jurisdictional boundaries; amend KRS 96.5375 to allow municipal interlocal gas utilities to extend or construct natural gas systems outside the constituents city’s boundaries; define municipal interlocal gas utility; allow for the selling or disposal of real property purchased with capital construction funds or equipment or state funds; require reporting of property sold or disposed; require school districts receiving urgent needs school allotments to reimburse the Commonwealth; amend various other sections to conform; make technical changes; repeal KRS 160.621, 160.625, 160.627, 160.633, 160.472, 211.390, and 211.392; EFFECTIVE, in part, August 1, 2026, and January 1, 2027; RETROACTIVE, in part to January 1, 2020; EMERGENCY.

Create new sections of KRS Chapter 336 to define terms; establish the Kentucky FLOW Program and specify eligible participants, activities, and uses of funds; establish the Kentucky FLOW Program fund; appropriate $1,347,500 in each fiscal year from the General Fund to the Kentucky FLOW Program fund; APPROPRIATION; EMERGENCY, effective, July 1, 2026.

Amend KRS 75.040 to establish conditions under which a fire protection district or volunteer fire department district may exceed the maximum established tax rate; create a new section of KRS Chapter 75 to establish the procedure by which a fire protection district or volunteer fire department district may exceed the maximum tax rate set in KRS 75.040 by requiring a public hearing and notification to the public; establish the methods by which the public may recall the portion of the levy that increases the tax beyond the previous year's rate; exempt the rates from the provisions of KRS 132.023; amend KRS 75A.050 to establish conditions under which a fire district may exceed the maximum established tax rate; create a new section of KRS Chapter 75A to establish the procedure by which a fire district may exceed the maximum tax rate set out in KRS 75A.050 by requiring a public hearing and notification to the public; establish the methods by which the public may recall the portion of the levy that increases the tax beyond the previous year's rate; exempt the rates from the provisions of KRS 132.023; amend KRS 75.015 to conform; EFFECTIVE January 1, 2027.

Amend KRS 158.4433 to move the school mapping data program to the Kentucky 911 Services Board, specify responsibility for mapping data accuracy walk-through; amend KRS 65.7629 and 158.442 to conform; APPROPRIATION; EMERGENCY.

Amend KRS 164.936 to establish maximum loan repayment awards under the Healthcare Worker Loan Relief Program for dentists and dentists in counties that do not have an actively practicing dentist; provide rural dental practice grant awards and criteria; establish distribution requirements for funds appropriated to the Center of Excellence in Rural Health for loan repayment awards for dentists and rural dental practice grants; amend KRS 164.937 to require information on the Healthcare Worker Loan Relief Program to be reported to the Council on Postsecondary Education and the Legislative Research Commission; amend KRS 313.035 to require the Kentucky Board of Dentistry to create a Rural Dental Fellows Network; require the Kentucky Department for Medicaid Services to increase Medicaid reimbursement rates by 25% for dental services in federally designated health professional shortage areas; appropriate $4,400,000 in each fiscal year of the 2026-2028 fiscal biennium to the Center of Excellence in Rural Health budget unit; appropriate $600,000 in each fiscal year of the 2026-2028 fiscal biennium to the Kentucky Board of Dentistry; appropriate $1,000,000 in each fiscal year of the 2026-2028 fiscal biennium to the Department for Medicaid Services; provide that the Act may be cited as the Rural Dental Incentive and Access Program Act; specify that the expanded award eligibility, required reporting on the Healthcare Worker Loan Relief Program, and the Rural Dental Fellows Network shall expire on July 1, 2036; APPROPRIATION; EMERGENCY.

Create a new section of KRS Chapter 91A to define terms; require 100% of the wages of an employee associated with the corporate office to be apportioned to the local government where the corporate office is located; exclude wages for work performed at a satellite office; require 100% of the wages of an employee assigned to a state government office to be apportioned to the local government where the state government office is located; allow a refund claim for occupational license fees paid for work physically performed outside of the local government's jurisdiction; establish requirements for refunds; apply the apportionment and refund requirements to incentive agreements entered into on or after January 1, 2001; amend KRS 67.780 to conform; provide that the Act may be cited as the Economic Development Incentive Retention Act.

HB 674 makes technical corrections to Kentucky's budget submission rules for government branches. It requires all budget recommendations to include specific dollar amounts for every item, banning vague terms like "necessary government expense" without them. The bill also mandates that when a fund's entire proceeds are assigned to specific budget units, agencies must provide annual revenue estimates for the current and prior two fiscal bienniums. This affects all state government branches submitting budget recommendations to the General Assembly. The changes clarify procedural requirements without altering funding levels or policy substance.

HB 533 formalizes Kentucky's 2026-2028 Biennial Highway Construction Plan as the official state highway project list and declares an emergency to expedite implementation. The bill directly affects state highway projects by designating specific road improvements, such as widening Aero Parkway and upgrading Dixie Hwy, with allocated funding totaling over $17 million. Key mechanisms include establishing the plan as binding and using an emergency declaration to allow immediate implementation upon approval, bypassing typical procedural delays. This focuses on concrete infrastructure updates for state transportation infrastructure, not broader policy changes.