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March 14, 2019 1:57pm

Tax-reform “clean-up” bill passes the General Assembly

The General Assembly passed a tax-reform “clean-up” bill yesterday that included several pro-business measures and GLI priorities that improve the overall competitiveness of Kentucky’s tax code. The bill, HB 354, is the result of negotiations by a conference committee made up of House and Senate leadership from both sides of the aisle. Committee members were charged with hashing out the differences between the versions of the bill passed by each chamber but had wide latitude to incorporate other measures not included in earlier versions.

Some of the most important sections of the bill are as follows:

  • Nonprofit organizations are exempt from collecting sales taxes on the sales of admissions to events and most fundraising sales.
  • Clarification on the use of resale certificates when it comes to collecting sales taxes on services such as landscaping and janitorial services.
  • Conforms to the 2003 Internal Revenue Code Section 179 expensing provisions, allowing $100,000 to be expensed instead of the current amount of $25,000 – a big help for small and growing businesses.
  • Replaces the Bank Franchise Tax with the corporate income tax rate beginning in 2021.

Reforming Kentucky’s tax code into one of the most competitive, business-friendly tax codes in the nation is one of GLI’s top goals. Last year, we supported House Bills 366 and 487, which led the nonpartisan Tax Foundation to upgrade Kentucky’s business tax climate ranking from 33rd in the nation to 23rd. Our focus in 2019 has been on cleaning up unforeseen consequences of these bills and continuing to make forward progress. With HB354, the Greater Louisville business community was especially pleased to see relief for nonprofits and the repeal of the Bank Franchise Tax.

Looking ahead to 2020, much more work remains done. The legislature must continue working to decrease the tax burden on businesses, take a serious look at local government tax reform, give more flexibility to corporations when it comes to combined reporting, and explore additional improvements such as allowing the tax-exempt status of nonprofits to pass through to contractors for the purpose of purchasing materials for construction projects.

GLI appreciates the legislature’s passage of HB354 and thanks the members of the Louisville Metro Caucus who voted in favor of it. HB354 passed the House 87-8 and the Senate 34-3. Read the full bill here.