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On April 10, 2024, House Bill 8 (HB 8), a revenue bill, became law without Governor Andy Beshear's signature. Tax changes in the bill, among other things, update the state's date of conformity to the Internal Revenue Code (IRC) and delay the corporate deferred tax deduction.

The governor line-item vetoed provisions of HB 8 establishing a tax amnesty program and exempting sales of currency and bullion from sales and use tax. However, during the General Assembly's veto session on April 12, Speaker of the House David Osborne, citing the Kentucky Constitution, ruled "the attempt to veto only portions of HB 8 is of no effect."¹ As HB 8 is a revenue bill, the House took the position that the governor was not authorized to veto parts of HB 8 under Section 88 of the Kentucky Constitution, which allows the governor "to disapprove any part or parts of appropriation bills embracing distinct items."

Income tax provisions in HB 8 make the following changes:

• Update Kentucky's IRC conformity date to December 31, 2023, for tax years beginning on or after January 1, 2024. The conformity date excludes any IRC amendments made after that date, other than amendments to extend provisions that were already in effect on December 31, 2023, and would otherwise have terminated.
• Delay the deferred tax deduction for certain combined taxpayers (i.e., publicly traded companies and certain affiliates) until January 1, 2026. The deduction was designed to mitigate the financial statement effects of Kentucky's move to combined reporting in 2019 and was to begin on January 1, 2024. Taxpayers seeking the deduction would have had to file a statement with the Kentucky Department of Revenue (Department) by July 1, 2019 (see Tax Alert 2019-0688).
• Extend the corporate income tax exemption for disaster-response businesses to tax years beginning before January 1, 2027 (from January 1, 2025).
• Require the Department to publish income tax forms on its website 30 days before the end of the calendar year for which the form applies. All other tax forms and instructions must be published on the Department's website no later than 45 days before the date a taxpayer must file the form, make a payment or estimated payment of tax due, or electronically submit payment information.
• Require the Department to publish administrative writings on its website no more than 120 days after they are issued. Administrative writings include final rulings, manuals and training procedures, presentations, technical advice memoranda, general information letters, and private letter rulings.
• Require the Department and the Office of State Budget Director to consider sunsetting tax expenditures and provide analyses to the Interim Joint Committee on Appropriations and Revenue by September 1, 2024 and September 1, 2025. Along with the analyses, the Department must recommend tax expenditures that can be immediately sunset and tax expenditures that can be sunset within five years. The recommendations also must describe tax expenditures recommended for sunset, estimate the fiscal impact of the sunset, and list the taxpayers affected if the General Assembly acts on the recommendations. The information provided by these requirements would not be considered confidential taxpayer information under Kentucky law.

Implications

HB 8 contains no retroactive provisions nor were there additional expansions of the tax base, such as expanding Kentucky's sales tax base to business-to-business services, including professional services. Taxpayers should note the updated IRC conformity date. Taxpayers that applied for the deferred tax deduction should take note of the extension of its start date to January 1, 2026.

If the House determination stands that the governor's line-item vetoes are of "no effect," a tax amnesty program will run from October 1, 2024 through November 29, 2024, if the Department can procure services needed to implement the program; otherwise, it will run for two months during calendar year 2025. Amnesty generally applies to taxes administered by the Department for tax periods or transactions occurring on or after October 1, 2011, but before December 1, 2023. Amnesty would not apply to ad valorem taxes on real and personal property, motor vehicles and motorboats, and certain penalties for tax periods or transactions occurring on or after October 1, 2011, but before December 1, 2023.

This Alert does not discuss other, non-income tax changes in HB 8, including the sales and use tax exemption for data centers.