Budget & Taxes (Income Tax)

Amend KRS 141.019, relating to income tax, to define terms; allow a deduction from gross income for professional membership dues paid for taxable years beginning on or after January 1, 2027, but before January 1, 2031; amend KRS 131.190 to allow the Department of Revenue to report on the deduction.

Create a new section of KRS Chapter 141 to define terms; establish a nonrefundable income tax credit for an employer that hires an eligible employee who holds a certificate of employability; provide that the credit is equal to the amount of wages paid to the eligible employee subject to certain limitations; amend KRS 141.0205 to order the credit; amend KRS 131.190 to allow the Department of Revenue to report on the credit.

Amend KRS 141.019, relating to income tax, to define terms; allow a deduction from gross income for professional membership dues paid for taxable years beginning on or after January 1, 2027, but before January 1, 2031; amend KRS 131.190 to allow the Department of Revenue to report on the deduction.

Amend KRS 141.071 and 141.072 to sunset the option to contribute to a political party from an individual's tax liability, effective for taxable years beginning January 1, 2026; amend KRS 121.180 and 121.230 to make conforming changes, repeal KRS 141.073, relating to rules and regulations for the administration of KRS 141.071 and 141.072.

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.

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 a new section of KRS Chapter 141 to establish a refundable Kentucky working credit equal to 30% of the federal earned income credit allowed for the taxable year; a taxpayer's modified gross income to be in excess of the amount eligible for the family size tax credit allowed in KRS 141.066(limit the credit to $2,000 per taxable year; make credit effective for taxable years beginning on or after January 1, 2027, but before January 1, 2031; 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 in KRS Chapter 141 to establish a nonrefundable individual income tax credit for an eligible child; define "eligible child"; allow credit for taxable years beginning on or after January 1, 2027, but before January 1, 2031; establish that the credit amount is equal to $4,000 per eligible child, not to exceed $8,000 per return, per taxable year; amend KRS 141.0205 to order the credit; amend KRS 131.190 to allow the Department of Revenue to report on the credit.

HB 183 increases Kentucky's tax exclusion for retirement income from $31,110 to $41,110 annually for tax years beginning January 1, 2027. It directly affects Kentucky residents receiving retirement distributions from pension plans, annuities, or retirement accounts by allowing more income to be tax-free. The key change raises the threshold at which these distributions become subject to state income tax. This policy adjustment applies automatically to qualifying retirement income without requiring additional filings or eligibility checks.

Create a new section of KRS Chapter 141 to establish an income tax credit for employers that maintain an apprenticeship program and hire apprentices; amend KRS 141.0205 to order the credit; amend KRS 131.190 to allow the Department of Revenue to report to the Legislative Research Commission on the credit.