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SUMMARY OF 2022 KENTUCKY TAX REFORM LEGISLATION

March 4, 2022

By

Timothy J. Eifler
Member, Stoll Keenon Ogden PLLC
502.560.4208
timothy.eifler@skofirm.com

Stephen A. Sherman
Counsel to the Firm, Louisville
502.568.5405
stephen.sherman@skofirm.com

Cameron F. Myers
Associate, Louisville
502.568.5410
cameron.myers@skofirm.com

Republican leadership of the Kentucky General Assembly has announced its intent to pursue further “tax reform” during the legislature’s 2022 Regular Session.  It appears that reform will take the form of multiple pieces of legislation that independently will address various aspects of Kentucky’s existing state and local tax system. 

This document provides a summary of the various bills introduced in the current legislative session that have been identified to be part of this tax reform effort.  We will update this summary periodically as the various bills work their way through the legislation process. 

The bills identified to be part of the current tax reform effort and summarized in this document are as follows:

Bill Number

Subject

Status

H.B. 6

State and Local Property Taxes on Motor Vehicles

Passed House; received in Senate

H.B. 8

State Tax Changes

Introduced in House.

H.B. 475

Local Tax

Passed House; received in Senate.

H.B. 476

Local Tax

Passed House; received in Senate.

H.B. 555

Decontamination income tax credit

Introduced in House.

S.J.R. 99 State and Local Property Taxes on Motor Vehicles Adopted

 

 

 

The above-listed bills proposed to make the following changes to Kentucky’s current state and local tax system. 

I     State Excise Taxes

A.  Individual Income Tax Rate Reduction

Kentucky levies an income tax on all income earned by Kentucky residents and all income earned by nonresidents from Kentucky sources.   The tax is levied at 5% of net income. 

H.B. 8 proposes to phase down the individual income tax rate from its current 5% to 0%.[1]    The tax rate would be reduced to 4% for taxable years beginning on or after January 1, 2023.  The Kentucky Department of Revenue (the “Department”) thereafter is required to implement further tax rate reductions beginning January 1, 2024 and each following January 1st if certain economic growth targets are satisfied.  The individual income tax rate shall be reduced for taxable years beginning on the January 1 following the fiscal year in which receipts to Kentucky’s General Fund reach or exceed specified levels. 

The proposed rate reductions and associated General Fund receipts target levels are as follows:

 

Tax Rate

 

Effective Dates

 

Target

5.0%

Current

 

4.0%

January 1, 2023

N/A

3.5%

  January 1, 2024+

$13,750,000,000

3.0%

$14,500,000,000

2.5%

$15,500,000,000

2.0%

$16,500,000,000

1.5%

$17,500,000,000

1.0%

$18,500,000,000

0.5%

$19,500,000,000

0.0%

$20,500,000,000

H.B. 8 limits the maximum annual change in the individual income rate to one percent (1%).  The earliest the Kentucky individual income tax could phase out completely would be for taxable years beginning on or after January 1, 2031.

H.B. 8 does not propose any changes to the Kentucky corporate income tax.

B.  Sales and Use Taxes Expansion to New Taxable Services

Kentucky levies a sales tax of 6% of the gross receipts derived from retail sales of tangible personal property and digital property and the furnishing of certain services.  As a backstop, Kentucky also levies a use tax on the storage, use or other consumption in the state of tangible personal property, digital property, and extended warranty services.   The use tax is imposed at 6% of the sales price.

In 2018, the Kentucky General Assembly reduced the income tax rate and extended the sales tax to a number of additional services.[2]  H.B. 8 continues that trend by removing two existing exemptions and expanding the sales tax to thirty-nine (39) additional classes of services.  H.B. 8 also would levy the use tax on the services that became subject to sales tax in 2018 and the additional services H.B. 8 would make taxable.[3] 

Exempt certain limousine servicesThe General Assembly in 2018 imposed the sales tax on limousine services, if a driver is provided.[4]  H.B. 8 would exclude these services from sales and use tax but subject them to a new excise tax levied on the provision of motor vehicle for sharing or rent (discussed below in Section I.E.).[5] 

New taxable services. 

H.B. 8 imposes the Kentucky sales and use taxes on thirty-nine (39) new classes of services, some of which are defined and others the scope of which must be clarified by administrative regulation or the courts.  The new taxable classes are as follows:

Photography and photo finishing services”, defined to mean (i) the taking, developing, or printing of an original photograph, or (ii) image editing including shadow removal, tone adjustments, vertical and horizontal alignment and cropping, composite image creation, development, production, and refinement of a “master advertisement” prior to its reproduction as tangible personal property or digital property for the purpose of display or other advertising uses, including creative concept development, design, layout, consultation services, research, media monitoring and analysis, media planning or media buying, script and copy writing, graphic design, art preparation, public relations, placement of advertisements in print, broadcast, on billboards, or other media, and any other account management services (proposed new KRS 139.010(2)).  “Master advertisement” is defined to mean the original advertising or graphic design material created for reproduction as tangible personal property or digital property for the purpose of display or other advertising uses, including master commercials, camera-ready art, proofs, and corporate logos.

Advertising and graphic design services”, defined to mean all activities involved in the strategy, conceptualization, development, production, and refinement of a “master advertisement” prior to its reproduction as tangible personal property or digital property for the purpose of display or other advertising uses, including creative concept development, design, layout, consultation services, research, media monitoring and analysis, media planning or media buying, script and copy writing, graphic design, art preparation, public relations, placement of advertisements in print, broadcast, on billboards, or other media, and any other account management services. “Master advertisement” is defined as above.

Marketing services”, defined to mean developing marketing objectives and policies, sales forecasting, new product developing and pricing, licensing, and franchise planning.

Telemarketing services”, defined to mean services provided via telephone, facsimile, electronic mail, or other modes of communications to another person, which are unsolicited by that person, for the purposes of:  (a) (i) promoting products or services; (ii) taking orders; or (iii) Providing information or assistance regarding the products or services; or (b) soliciting contributions.

Public opinion and research polling services.

Lobbying services.

Executive employee recruitment services.

Website design and development services.

Website hosting services.

Facsimile transmission services.

Private mailroom services” which specifically includes (a) presorting mail and packages by postal code; (b) address barcoding; (c) tracking, (d) delivery to postal service: and (e) private mailbox rentals.

Bodyguard services.

Residential and nonresidential security system monitoring services.

Private investigation services.

Process server services.

Repossession of tangible personal property services.

Personal background check services.

Personal financial planning and investment management services.

Parking services” which specifically includes (a) valet services and (b) the use of parking lots and parking structures.

Road and travel services provided by automobile clubs” as defined in KRS  281.010 (defining “automobile club” to mean a person that, for consideration, promises to assist its members or subscribers in matters relating to the assumption of or reimbursement of the expense or a portion thereof for towing of a motor vehicle; emergency road service; matters relating to the operation, use, and maintenance of a motor vehicle; and the supplying of services which includes, augments, or is incidental to theft or reward services, discount services, arrest bond services, lock and key services, trip interruption services, and legal fee reimbursement services in defense of traffic-related offenses).

Travel arrangement and reservation services” which specifically includes (a) arranging or assembling tours; (b) providing guide services, including archeological, museum, tourist, hunting, and fishing; (c) Conducting scenic and sightseeing tours; and (d) providing reservation services, including accommodations furnished to transients, entertainment events, and travel services.

Condominium time-share exchange services.

Rental of space for meetings, conventions, short-term business uses, entertainment events, weddings, banquets, parties, and other short-term social events.

Social event planning and coordination services.

Pleasure watercraft docking, launching, and storage services.

Leisure, recreational, and athletic instructional services.

Recreational camp tuition and fees.

Personal fitness training services.

Massage services, except when medically necessary.

Cosmetic surgery services”, defined to mean modifications to all areas of the head, neck and body to enhance appearance through surgical and medical techniques, but expressly excluding reconstruction of facial and body defects due to birth disorders, trauma, burns, or disease.

Body modification services” which specifically includes (a) tattooing, (b) piercing, (c) scarification, (d) branding, (e) tongue splitting, (f) transdermal and subdermal implants, (g) ear pointing, (h) teeth pointing, and (i) any other modifications that are not necessary for medical or dental health.

Testing services”, except testing for medical or veterinary reasons.

Interior decorating and design services.

Household moving services.

Specialized design service” which specifically includes the design of clothing, costumes, fashion, furs, jewelry, shoes, textiles, and lighting.

Lapidary services” which includes cutting, polishing, and engraving precious stones.

Labor and services to repair or maintain commercial refrigeration equipment and systems when no tangible personal property is sold in that transaction”, including service calls and trip charges.

Labor to repair or alter apparel, footwear, watches, or jewelry when no tangible personal property is sold in that transaction.

Prewritten computer software access services”,  defined to mean the right of access to prewritten computer software where the object of the transaction is to use the prewritten computer software while possession of the prewritten computer software is maintained by the seller or a third party, wherever located, regardless of whether the charge for the access or use is on a per use, per user, per license, subscription, or some other basis (proposed new KRS 139.010(35)).

(H.B. 8, §§ 2 and 3, amending KRS 139.010 and 139.200).  H.B. 8 would exclude from tax gross receipts derived from these new taxable classes of services either (a) sold in fulfillment of a lump-sum, fixed-fee contract or a fixed price sales contract executed on or before February 25, 2022 (the date H.B. 8 was introduced) or (b) a lease or rental agreement entered into on or before February 25, 2022.[6]

Revise Existing Taxable Categories and Exemptions. 

Broaden taxable extended warranty services to include real propertyIn 2018, the General Assembly imposed sales and use taxes on extended warranty services.  “Extended warranty services” currently is defined to mean services provided through a service agreement between the contract provider and the purchaser where the purchaser agrees to pay compensation for the contract and the provider agrees to repair, replace, support or maintain tangible personal property or digital property according to the terms of the contract if (a) the service contract is sold or purchased on or after July 1, 2018; and (b) the tangible personal property or digital property for which the service contract agreement is provided is subject to sales or use tax or the motor vehicle usage tax.

H.B. 8 would broaden taxable extended warranty services to service agreements where the provider is to repair, replace, support or maintain real property.[7] 

Repeal exemption for admissions to historical site.  Kentucky currently levies the sales tax on the sale of admissions but provides certain exemptions.  H.B. 8 repeals the exemption for admissions to historical sites, subjecting such admissions to tax.[8]   

Revise exemption for residential utilitiesKentucky currently exempts from the sales tax gross receipts from the sale of sewer services, water, and fuel to Kentucky residents for use in heating, water heating, cooking, lighting, and other “residential uses”. H.B. 8 would limit the exemption to utilities purchased for use at a resident’s place of domicile, require the purchaser to provide a declaration and remove the automatic exemptions based on tariff or TVA classifications or those consistent with those classifications. 

Effective January 1, 2023, H.B. 8 would limit the exemption to sewer services, water, and fuel “purchased for and declared by the resident as used in his or her place of domicile.”[9]  “Place of domicile” is defined to mean the place where an individual has his or her legal, true, fixed, and permanent home and principal establishment, and to which, whenever the individual is absent, the individual has the intention of returning.[10]    

To simplify administration of the exemption, current law deems gross receipts derived from the following to be exempt purchases for “residential use”:

  • Those classified as “residential” by a utility company as defined by applicable tariffs filed with and accepted by the Public Service Commission;
  • Those classified as “residential” by a municipally owned electric distributor which purchases its power at wholesale from the Tennessee Valley Authority; and
  • Those classified as “residential” by the governing body of a municipally owned electric distributor which does not purchase its power from the Tennessee Valley Authority, if the “residential” classification is reasonably consistent with the definitions of “residential” contained in tariff filings accepted and approved by the Public Service Commission with respect to utilities which are subject to Public Service Commission regulation.

If the service is classified as residential under these rules, use other than for “residential” purposes by the customer shall not negate the exemption.

H.B. 8 would repeal these simplifying rules for determining residential use and require that vendors instead rely on customer declarations.[11] 

C.  Levy of a New Electric Vehicle Power Excise Tax

On or after January 1, 2023, H.B. 8 would levy a new excise tax (the “EVP Tax”) on (a) “electric vehicle power”; (b) “distributed” in Kentucky; (c) by an “electric vehicle power dealer” (an “EVP Dealer”); (d) “for the purpose of charging electric vehicles in this state.”[12]  The tax would be imposed at an initial base rate of three cents ($0.03) per kilowatt hour.[13] 

The EVP Tax would be administered by the Department.

Each EVP Dealer must add the tax to the selling price charged by the EVP Dealer at the “charging station” on electric vehicle power sold in Kentucky.  The EVP Tax imposed is to be paid by the EVP Dealer to the State Treasurer and credited to the state’s Road Fund.

Every EVP Dealer must report and pay the tax to the Department by the twenty-fifth (25th) day of each month.  The EVP Dealer must keep and preserve an accurate record of all receipts of electricity and tax together with invoices or other pertinent records and papers required by the Department for five (5) years.

The EVP Dealer is liable for the EVP Tax.  H.B. 8 also would impose personal liability for the EVP Tax on the EVP Dealer’s responsible corporate officers, limited liability company managers or officers and certain business entity owners. 

H.B. 8 provides the following definitions for the new EVP Tax:

Distribute” is defined to mean the delivery or transfer of electric power into the battery or other energy storage device of an electric vehicle at a location in Kentucky.

Electric vehicle power” is defined to mean electrical energy distributed into the battery  or other energy storage device of an electric vehicle to be used to power the vehicle.

Electric vehicle power dealer” is defined to mean a person who owns or leases an electric vehicle charging station.

Electric vehicle” is defined to mean any vehicle that has plug-in charging capability, regardless of whether the vehicle is powered by: (a) an electric motor only; or (b) a combination of an internal combustion engine and electric power. (This same definition applies for purposes of the new battery reclamation and mitigation fees below).

Electric vehicle charging station” or “charging station” means any place accessible to general public vehicular traffic where electric power may be used to charge a battery or other storage device of a licensed electric vehicle.

D.  Levy of New Battery Reclamation and Mitigation Fees

Effective January 1, 2023, H.B. 8 would require county clerks to collect “battery reclamation and mitigation fees” from registrants of “electric vehicles” and “hybrid vehicles” at the time of initial registration and each year upon annual vehicle registration.[14]  The battery reclamation and mitigation fee shall be: (a) one hundred forty dollars ($140) for electric vehicles; and (b) seventy dollars ($70) for hybrid vehicles.  County clerks are required to transfer these fees to the state General Fund.

Electric vehicle” is defined to mean any vehicle that has plug-in charging capability, regardless of whether the vehicle is powered by: (a) an electric motor only; or (b) a combination of an internal combustion engine and electric power.  (This same definition applies for purposes of the new EVP Tax above).

Hybrid vehicle” is defined to mean any vehicle that does not have plug-in charging capability and is powered by a combination of an internal combustion engine and an electric motor.

E.  Levy of New Excise Tax on Providing Motor Vehicle for Sharing or Rent

Effective January 1, 2023, H.B. 8 would impose a new excise tax for the privilege of providing a motor vehicle for sharing or for rent, with or without a driver, within Kentucky on every holder of any of the following certificates: (a) limousine; (b) “peer-to-peer car sharing”; (c) taxicab; (d) transportation network (i.e., rideshare platforms like Uber and Lyft); and (e) U-Drive-It (i.e., rent-a-car companies).[15]  Kentucky law currently provides for special licensing certificates to be issued by the Kentucky Department of Vehicle Regulation for limousine, taxicab, transportation network and U-Drive-Its.  H.B. 8 would create a new licensing certificate for “peer-to-peer car sharing” (think Airbnb, but for cars) and impose the new tax on specified gross receipts earned by these certificate holders.

The tax would be levied at the rate of 6% of the “gross receipts” derived from the: (a) rental of a “shared vehicle” by a “peer-to-peer car sharing company”; (b) rental of a vehicle by a motor vehicle renting company (U-Drive-It certificate holder); (c) sales of transportation network company services; (d) sales of taxicab services; and (e) sales of limousine services.

Gross receipts” is defined to mean the total consideration received for the (a) rental of a vehicle, including the daily or hourly rental fee, fees charged for using the services, charges for insurance protection plans, fuel charges, pickup and delivery fees, late fees, and any charges for any services necessary to complete the rental transaction made by a peer-to-peer car sharing company or motor vehicle rental company (a U-Drive-It certificate holder) and (b) charges made to provide the service to a user, including any charges for time or mileage, fees for using the services, and any charges for any services necessary to complete the transaction made by a transportation network company, taxicab, or limousine service provider.

Peer-to-peer car sharing” means the authorized use of a motor vehicle by an individual other than the vehicle’s owner through a peer-to-peer car sharing program, excluding the operation of a U-Drive-It or the sale or provision of rental vehicle insurance.

Peer-to-peer car sharing certificate” means a certificate granting the authority for the operation of a peer-to-peer car sharing program.

 “Peer-to-peer car sharing company” means a person that operates a peer-to-peer car sharing program.

Peer-to-peer car sharing program” means a business platform that connects shared vehicle owners with shared vehicle drivers to enable the sharing of motor vehicles for financial consideration, excluding a U-Drive-It, motor vehicle renting company, rental vehicle agent, or service provider that is solely providing hardware or software as a service to a person or entity that is not effectuating payment of financial consideration for use of a shared vehicle.

Shared vehicle” means a motor vehicle that is available for car sharing through a peer-to-peer car sharing program, excluding any motor vehicle leased or rented by a person operating under a U-Drive-It certificate.

Shared vehicle driver” means an individual who has been authorized to drive the shared vehicle by the shared vehicle owner under a car sharing program agreement.

Shared vehicle owner” means the registered owner, or a person designated by the registered owner, of a motor vehicle made available for sharing to shared vehicle drivers, through a peer-to-peer car sharing program, excluding a person operating a U-Drive-It, motor vehicle renting company, or rental vehicle agent.

The new tax would be administered and collected by the Department of Revenue and deposited in the General Fund.  The tax would be a direct obligation of the certificate holder but “may” be charged to and collected from the user of the service.  The tax would be remitted monthly.  H.B. 8 also would impose personal liability for the tax on the certificate holder’s responsible corporate officers, limited liability company managers or officers and certain business entity owners

H.B. 8 would expressly exclude peer-to-peer car sharing program agreements from the U-Drive-It tax (KRS 138.462 and 138.463).  U-Drive-It certificate holders would continue to be subject to the U-Drive-It tax. 

II.  State and Local Transient Room License Taxes on Online Travel Companies and Airbnb

Cities and counties are authorized by statute to levy local “transient room taxes” on the “the rent for every occupancy of a suite, room, or rooms, charged by all persons, companies, corporations, or other like or similar persons, groups or organizations doing business as motor courts, motels, hotels, inns or like or similar accommodations businesses.”  (See KRS 91A.390, 91A.392, 153.440 and 153.450.)  Money collected from the tax is used to establish convention and tourist commissions “for the purpose of promoting convention and tourist activity” or to fund the Kentucky Center for the Arts Corporation.

The state imposes a one percent (1%) state-level transient room tax on the same taxpayers and transactions as the local transient room taxes.  (See KRS 142.400).

The U.S. Court of Appeals for the Sixth Circuit rejected an attempt by the Louisville/Jefferson County Metro Government and the Lexington-Fayette Urban County Government to extend their local transient room taxes to fees charged by a number of online travel companies – Hotels.com, L.P., Expedia, Inc., Hotwire, Inc., Lodging.com, Orbitz, LLC,  Priceline.com, Site59.com, LLC, and Travelocity.com, LP.  See Louisville/Jefferson County Metro Gov’t v. Hotels.com, L.P., et al., 590 F.3d 381 (6th Cir. 2009) (affirming the U.S. District Court for W.D. Ky.); see similarly, City of Bowling Green  v. Hotels.com, L.P., et al., 357 S.W.3d 531 (Ky.App. 2011), disc. rev. den. (Ky., Feb. 15, 2012).  The Sixth Circuit held that online travel companies were not subject to the tax because they were not “like or similar accommodations businesses.”  The Court’s decision applies to the state transient room license tax because the state tax statute is identical to the local enabling statutes. 

H.B. 8 would amend the various transient room tax statutes effective August 1, 2022 to extend the scope of the local taxes and the state tax to online travel companies and Airbnb by including “any person that facilitates the rental of the accommodations by brokering, coordinating, or in any other way arranging for the rental of the accommodations.”   (H.B. 8, §§ 15 – 26, amending KRS 91A.360-.400, 153.4440-.450, 142.400 and KRS 65.060, and § 41).  H.B. 8 creates a uniform definition of “rent” for purposes of the various local enabling statutes.  “Rent” is defined to mean the total amount charged for the rental of an accommodation and any charges for any services necessary to facilitate the rental of accommodations whether the amount is charged by the provider of the accommodations or by a person facilitating the rental of the accommodations by brokering, coordinating, or in any way arranging for the rental of the accommodations.[16] 

III.  Expand General Assembly’s Authority to Authorize Local Taxes

The Kentucky Constitution provides that the authority of a local government to levy a tax must be authorized by statute.  Section 181 limits the General Assembly’s local tax authorizing authority to (i) ad valorem property taxes; and (ii) license taxes (a subset of excise taxes). See Driver v. Sawyer, 392 S.W.2d 52, 53 (Ky. 1965).  Excise taxes, such as income taxes and sales taxes, are not authorized.  City of Lexington v. Motel Developers, Inc., 465 S.W.2d 253 (Ky. 1971)). Local occupational license taxes on gross receipts, nets profits and/or wages have been upheld as license taxes measured by income, not unauthorized income taxes.  City of Louisville v. Sebree, 214 S.W.2d 248 (1948).

H.B. 475 and H.B. 476 seek to provide the General Assembly the authority to authorize any and all types of local taxes, including sales taxes and income taxes.  H.B. 475 proposes to amend Ky. Const. § 181 to permit General Assembly to authorize a county, city, town or municipal corporation to assess and collect local “taxes and license fees, including license fees on franchises” that are not in conflict with the Kentucky Constitution.  Section 181 would further be amended to provide that any local sales tax or use tax authorized must apply to the same base be administered in the same manner as any state sales of use tax.  This limitation is intended to ensure any local sales or use tax authorized complies with the Streamlined Sales and Use Tax Agreement, of which Kentucky is a full member.[17]   H.B. 476 would limit current local taxing authority to what currently is authorized by statute.

Because it proposes a constitutional amendment, H.B. 475 must be approved by 3/5ths of all members of both the Kentucky House and Kentucky Senate.[18]  If passed, the proposed amendment must be published statewide by the Kentucky Secretary of State and must be approved on the November statewide ballot by a majority of those voting.[19]   

IV.  Miscellaneous Changes

A.  Freeze Valuation of Motor Vehicles for State and Local Property Taxes

Motor vehicles are required by statute to be valued based on the “average trade-in value” as provided by a standard manual prescribed by the Kentucky Department of Revenue.  The Department issued a January 26, 2009 memorandum to the county property valuation administrators stating that the “clean trade-in value” most closely met the constitutional “fair cash value” standard.  See Ky. Const. § 172.  The clean trade-in value is higher than the average trade-in value.

Due production interruptions resulting from the COVID-19 shutdowns, used motor vehicle values have increased 40% between January 1, 2021 and January 1, 2022, resulting in a 40% increase in associated state and local property taxes.

The General Assembly has adopted Senate Joint Resolution 99 which exempts for the January 1, 2022 and January 1, 2023 assessment dates the portion of property taxes computed on any increase in a motor vehicle’s valuation from January 1, 2021 for all state and local property tax purposes.  The Resolution further directs the Governor to direct the Department of Revenue to “deviate from the standard value” in assessment motor vehicles for the January 1, 2022 and January 1, 2023 assessed dates “by not assessing the portion of property taxes” exempted and requires the Department to grant refunds.[20] 

Governor Beshear issued Executive Order 2022-096 (Feb. 16, 2022) to implement Senate Joint Resolution 99.  The Executive Order mandates that motor vehicle assessments for January 1, 2022 and 2023 shall be equal to the January 1, 2021 assessments.  It further orders the Department of Revenue and local taxing jurisdictions to establish procedures for refunds and requires county clerks to issue refunds within 180 days of the date the Executive Order was issued (i.e., August 15, 2022).

H.B. 6 would require beginning in 2023 that the average trade-in value (not the current rough trade-in or the clean trade-in value) to be used as the standard value of a motor vehicle for state and local property tax purposes.  The bill also would exempt from taxation for the January 1, 2022 assessment date, any increase in value from the January 1, 2021 assessment.  Finally, the bill would provide that taxpayers who overpaid could obtain refunds without written request and that such refunds be issued by the Department or county clerks within ninety (90) days H.B. 6 takes effect.

B.  Limit Use of the Department as General Collection Agent

Pursuant to KRS 131.130, the Department may enter agreements with any state agency, officer, board, commission, corporation, institution, cabinet, department, or other state organization to assume the collection duties for any debts due to such party. Additionally, pursuant to KRS 45.237 et seq. and 131.030, the Department has the power and obligation to collect certain other debts owed the state and its agencies.  The Department’s collection efforts may include imposition of a 25% collect fee and interest as well as garnishment of payments, bank accounts and tax refunds.

In Univ. of Ky. v. Moore, 599 S.W.3d 798 (Ky. 2019), the Kentucky Supreme Court held that the University was a state agency and therefore authorized to refer an individual’s delinquent UK HealthCare account to the Department of Revenue for collection.   H.B. 8 would legislatively nullify Moore by amending KRS 131.130 to prohibit the Department from collecting or continuing to collect any consumer debts owed for health care goods and services. “Consumer debt” is defined as debt incurred by an individual for a personal or family purpose, regardless of whether an obligation has been reduced to judgment.[21]

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[1] H.B. 8, § 1, amending KRS 141.020.

[2] The 2018 Kentucky General Assembly reduced the income tax rate from 6% to 5% and expanded the sales tax to the following ten classes of additional services: (i) landscaping services; (ii) janitorial services; (iii) small animal veterinary services; (iv) pet care services; (v) industrial laundry services; (vi) non-coin-operated laundry and dry cleaning services; (vii) linen supply services; (viii) indoor skin tanning services; (ix) non-medical diet and weight reducing services; and (x) limousine services.

[3] H.B. 8, §§ 3, 6 and 7, amending KRS 139.010, 139.310 and 139.340.

[4] See KRS 139.200(2)(p).

[5] H.B. 8 § 3, amending KRS 139.200.

[6] H.B. 8, § 13.

[7] H.B. 8, § 2, amending KRS 139.010.

[8] H.B. 8, §§ 3 and 4, amending KRS 132.200 and 139.482.

[9] H.B. 8, §§ 7 and 40.

[10] H.B. 8 § 7, amending KRS 139.470.

[11] H.B. 8, § 7.

[12] H.B. 8, § 29, enacting new statute in KRS Chapter 138.

[13] H.B. 8, § 29.

[14] H.B. 8, §§ 30 and 31.

[15] H.B. 8, §10-12.

[16] H.B. 8, § 14.

[17] That agreement requires (a) uniformity in state and local tax bases with certain exceptions; (b) simplification of state and local tax rates; and (c) state-level of collection of local taxes (including state-level audits only).

[18] Ky. Const. § 256; for other bills, a simple majority of those voting is all that is required.

[19] Ky. Const. §§ 256, 257; KRS 118.415.

[20] See Ky. Const. § 170 (providing that “[n]otwithstanding the provisions of Sections 3, 172, and 174 of this Constitution to the contrary, the General Assembly may provide by law an exemption for all or any portion of the property tax for any class of personal property.”).

[21] H.B. 8, § 28.

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