Attention Investors:
KY General Assembly passes final revenue and tax bill
Late Thursday night, Kentucky lawmakers passed House Bill 360, a revenue bill containing technical corrections to last year’s tax reform legislation and new tax provisions for the state. Sponsored by House Appropriations & Revenue Chair Jason Petrie, HB 360 moved late in the 30-day short session, passing just hours before the General Assembly recessed for the Governor’s 10-day veto period.
Last week, HB 360 passed the House and Senate with changes on both sides before being placed in a conference committee to iron out differences. GLI advocated for many of these revisions based on feedback we received from many of our investors. The final version includes the following:
- Creates a pass-through entity tax and credit for tax paid on behalf of the individual partner, member, or shareholder, which is estimated to save Kentucky employers $40 million per year in reduced federal income taxes.
- Clarifies sales tax on services definitions and removes marketing as a taxable service.
- Extends governmental tax exemption to contractor purchases for all government water and sewer projects.
- Removes language included in the Senate version of the bill that would increase taxes on manufacturers.
- Directs 100% of electric vehicle ownership fee to be directed to the state’s road fund.
- Contains a short-term provision for Tax Increment Finance (TIF) districts that would use the modified new revenues for income tax to ensure that they are equal to the previously calculated rate for 2023 and 2024 only.
- Provides a valuation method for the assessment of multi-unit rental housing that is subject to government restriction on use.
- Updates Kentucky’s conformity to the Internal Revenue Code.
The 2022 tax reform bill modernized Kentucky’s tax structure, putting the state on a path to reduce and eventually eliminate personal income tax by broadening the base and extending sales tax or user fees to several services. With this year’s House Bill 1 already signed into law, lawmakers continued that momentum by codifying the personal income tax reduction to 4.5% for 2023 and 4% in 2024. These moves make Kentucky more competitive to attract top talent and businesses.