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AN ACT relating to regulatory innovations. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. SUBTITLE 53 OF KRS CHAPTER 304 IS ESTABLISHED, 3
AND A NEW SECTION THEREOF IS CREATED TO READ AS FOLLOWS: 4
As used in this subtitle, unless the context requires otherwise: 5
(1) "Applicable agency" or "applicable agencies" means an agency or agencies in 6
Kentucky that may have applicable regulatory overlap, oversight, or responsibility 7
relative to the particular innovation covered under this subtitle; 8
(2) "Applicant" means any person or persons that have filed an application under 9
this subtitle; 10
(3) "Artificial intelligence" or "AI" means technology that enables computer 11
systems to accomplish tasks that typically require a human's intelligent behavior; 12
(4) (a) "Big data" means unstructured or structured data used to influence or 13
determine underwriting, rating, pricing, forms, marketing, claims handling, 14
and any other applications to innovation. 15
(b) For purposes of this subsection: 16
1. "Structured data" means data in tables and defined fields; and 17
2. "Unstructured data": 18
a. Means data that is not in tables and defined fields; and 19
b. Includes social media postings, reports, recorded interviews, and 20
pictures, including satellite imaging; 21
(5) "Blockchain technology" or "blockchain" has the same meaning as in KRS 22
154.27-010; 23
(6) "Client" means a person, other than a consumer, utilizing a participant's 24
innovation during a test to carry on some activity regulated by the department or 25
an applicable agency; 26
(7) "Commissioner" means the commissioner of the Kentucky Department of 27 UNOFFICIAL COPY 22 RS BR 1657
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Insurance; 1
(8) "Cooperation agreement" means any memorandum of understanding or other 2
agreement that establishes the respective parties, rights, duties, and 3
responsibilities for any purpose necessary to implement, effectuate, or carry out 4
any provision of this subtitle between the following: 5
(a) The department and an applicable agency; or 6
(b) The department and as appropriate, an applicable agency and the 7
supervisory official of a reciprocity jurisdiction; 8
(9) "Cryptocurrency" has the same meaning as in KRS 154.27-010; 9
(10) "Cryptocurrency facility" has the same meaning as in KRS 154.27-010; 10
(11) "Department" means the Kentucky Department of Insurance; 11
(12) "Director" means the director of innovation; 12
(13) "Extended no-action letter" means a public notice setting forth the conditions for 13
an extended safe harbor beyond the test under which the department and any 14
applicable agency will not take any administrative or regulatory action against 15
any person using the innovation described in the extended no-action letter; 16
(14) "Fintech" means innovative products or services that support the provision of 17
banking or financial services; 18
(15) "Innovation" means any insurance product, process, method, procedure, or 19
service, or a substantial component thereof: 20
(a) That: 21
1. Uses, applies, or incorporates new or emerging technology, including 22
insurtech, fintech, blockchain technology, big data, artificial 23
intelligence, and predictive analytics; 24
2. Develops a new use of existing technology; or 25
3. Provides for a form of delivery; 26
(b) To: 27 UNOFFICIAL COPY 22 RS BR 1657
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1. Address a new or emerging risk; 1
2. Provide a benefit; or 2
3. Otherwise offer a product, service, business model, delivery 3
mechanism, or any combination thereof to the public; and 4
(c) That may have regulatory or statutory barriers that prevent its use, sale, 5
license, or availability; 6
(16) "Insurance portal" means access for placement of coverage through the 7
regulatory sandbox or regulatory hub; 8
(17) "Insurtech" means innovative products or services that support the provision of 9
insurance services; 10
(18) "Interstate innovation compact or memorandum of understanding" means an 11
interstate compact or memorandum of understanding with one (1) or more 12
reciprocity jurisdictions that grants reciprocal rights, treatment, or recognition in 13
the reciprocity jurisdiction to persons subject to Kentucky's jurisdiction in return 14
for reciprocal rights, treatment, or recognition being granted to persons subject to 15
the reciprocity jurisdiction in Kentucky's jurisdiction; 16
(19) "Kentucky Innovation Council" means the council created under Section 12 of 17
this Act; 18
(20) "Limited no-action letter" means a letter setting forth the conditions of a test and 19
establishing a safe harbor under which the department and any applicable 20
agency will not take any administrative or regulatory action against a participant 21
or a participant's client concerning the compliance of the innovation with 22
Kentucky law so long as the participant or client abides by the terms and 23
conditions established in the letter; 24
(21) "Participant" means an applicant that has been issued a limited no-action letter 25
or waiver under this subtitle; 26
(22) "Predictive analytics" means the use of big data to forecast future events through 27 UNOFFICIAL COPY 22 RS BR 1657
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techniques that include data mining, statistical modeling, machine learning, and 1
artificial intelligence; 2
(23) "Reciprocity jurisdiction" means any state or other qualified jurisdiction, 3
including a jurisdiction located outside of the United States, that has a regulatory 4
framework for any activity: 5
(a) Regulated under this chapter; or 6
(b) Authorized under this subtitle; 7
(24) "Regulatory hub" means a regulatory initiative where the director coordinates a 8
person to obtain: 9
(a) Regulatory guidance on regulatory and statutory provisions that may be 10
applicable to an innovation; 11
(b) The applicable process and approvals required for: 12
1. Use of the insurance portal; or 13
2. Other reciprocity jurisdictions; or 14
(c) Pre-application information prior to application to the regulatory sandbox; 15
(25) "Regulatory sandbox" or "sandbox" means the process and program established 16
under this subtitle by which a person may apply for: 17
(a) A waiver; or 18
(b) A limited no-action letter, potentially resulting in the issuance of an 19
extended no-action letter; 20
(26) "Test" means the testing phase of an innovation under a limited no-action letter 21
in the regulatory sandbox through the use, sale, license, or availability of the 22
innovation by or to clients or consumers under the supervision of the department 23
and any applicable agency; and 24
(27) "Waiver" means a document issued under this subtitle that allows a person to 25
make an innovation available in accordance with Section 5 of this Act. 26
SECTION 2. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 27 UNOFFICIAL COPY 22 RS BR 1657
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IS CREATED TO READ AS FOLLOWS: 1
The purpose of this subtitle: 2
(1) Is to provide a framework for innovation, and, as necessary, collaboration among 3
the department and applicable agencies, in Kentucky through a flexible 4
regulatory regimen and the testing of new products, services, and emerging 5
technologies, including the adoption of new taxonomy related to blockchain, 6
smart contracts, cryptocurrency pools, and other emerging technologies and 7
related risks, by: 8
(a) Providing legal and regulatory clarification; and 9
(b) Creating a more attractive jurisdiction for persons who aim to do business 10
in Kentucky; and 11
(2) Includes: 12
(a) Investment in, and support of, innovation in Kentucky; 13
(b) Development of infrastructure and a skilled and knowledgeable workforce 14
to support innovation that may further contribute to significant business 15
growth and economic development in Kentucky; 16
(c) Recommendation of provisions to modernize statutes and administrative 17
regulations; 18
(d) Provision of innovation to the fullest extent provided in this subtitle; 19
(e) Promotion of entrepreneurial development; and 20
(f) Encouragement and fostering of a regional innovation marketplace 21
through formation and participation in any interstate innovation compact 22
or memorandum of understanding. 23
SECTION 3. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 24
IS CREATED TO READ AS FOLLOWS: 25
(1) Other provisions of law shall not be interpreted to limit the powers granted in this 26
subtitle. 27 UNOFFICIAL COPY 22 RS BR 1657
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(2) This subtitle shall be liberally construed to effect the purposes set forth in Section 1
2 of this Act, which shall constitute an aid and guide to interpretation. 2
SECTION 4. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 3
IS CREATED TO READ AS FOLLOWS: 4
(1) (a) There shall be a director of innovation within the department, responsible 5
for: 6
1. Administering the regulatory sandbox; 7
2. Coordinating with applicable agencies and reciprocity jurisdictions; 8
and 9
3. Implementing the regulatory hub. 10
(b) The director shall be appointed by the secretary of the Public Protection 11
Cabinet with the approval of the Governor in accordance with KRS 12.050. 12
(2) The director shall: 13
(a) Review all regulatory sandbox and regulatory hub applications; 14
(b) Coordinate with any other applicable agency or reciprocity jurisdiction as to 15
the applications, which shall include initiating and obtaining any 16
cooperation agreements or interstate innovation compact or memorandum 17
of understanding that would promote or facilitate an application in 18
accordance with the purposes of this subtitle; 19
(c) Make recommendations to the commissioner as to any application; and 20
(d) Prior to submitting a final recommendation to the commissioner that, if 21
adopted, would be adverse or unfavorable to an applicant: 22
1. Submit to the applicant: 23
a. A draft of the recommendation; and 24
b. The specific reasons why the director proposes to make the 25
adverse or unfavorable recommendation; 26
2. Provide the applicant: 27 UNOFFICIAL COPY 22 RS BR 1657
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a. At least ten (10) days to respond to the draft recommendation in 1
writing; and 2
b. The opportunity for an in-person or virtual meeting to discuss 3
the draft recommendation; and 4
3. Take into consideration the response and meeting provided under 5
subparagraph 2. of this paragraph. 6
SECTION 5. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 7
IS CREATED TO READ AS FOLLOWS: 8
Notwithstanding any other provision of law: 9
(1) (a) Any person or persons that make an application under Section 6 of this Act 10
to make an innovation available to clients, consumers, or both clients and 11
consumers may be granted a waiver of specified requirements imposed by 12
statute or administrative regulation, or portions thereof. 13
(b) A waiver shall be: 14
1. No broader than necessary to accomplish the purposes set forth in this 15
subtitle, as determined by the department or any applicable agency; 16
and 17
2. Valid for the duration of participation in the regulatory sandbox, not 18
to exceed thirty-six (36) months from the date of the notice of 19
acceptance, unless an extension is granted under paragraph (c) of this 20
subsection. 21
(c) Extensions may be granted by the commissioner and any applicable agency 22
upon a showing that additional time is needed for regulatory modernization. 23
(2) (a) Waivers, limited no-action letters, and extended no-action letters shall 24
include any terms, conditions, and limitations that are deemed by the 25
commissioner and any applicable agency to be reasonably appropriate and 26
rationally based to the innovation. 27 UNOFFICIAL COPY 22 RS BR 1657
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(b) Any waiver granted under this subtitle shall limit an innovation's 1
availability to not more than ten thousand (10,000) clients or consumers, 2
unless: 3
1. The waiver is subject to an interstate innovation compact or 4
memorandum of understanding; or 5
2. The commissioner and any applicable agency determines, based on 6
the application made under Section 6 of this Act, that a higher 7
number is necessary to facilitate the innovation's success. 8
(c) A participant that has been issued a limited no-action letter shall not be 9
subject to any pre-defined limitation other than as required of the 10
participant while in the sandbox. 11
(3) An innovation that includes a product or service, or both a product and service, 12
offered to consumers: 13
(a) May include such written disclosures in clear and conspicuous form as may 14
be appropriate for the product or service; and 15
(b) Shall include: 16
1. The name and contact information of the person providing the 17
product or service; and 18
2. The contact information for the department and other applicable 19
agencies, including how a consumer may file a complaint with the 20
director regarding the product or service. 21
(4) (a) A person may make an application for a license to operate as an innovative 22
insurer. 23
(b) An innovative insurer shall be authorized to engage in the following 24
business while operating under a waiver, a limited no-action letter, or an 25
extended no-action letter: 26
1. Any insurance, or other activity or contracts, regulated under this 27 UNOFFICIAL COPY 22 RS BR 1657
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chapter; or 1
2. Any other activity or contracts authorized under this subtitle; 2
(c) An application under this subsection shall be submitted to the commissioner 3
in a form prescribed by the commissioner by administrative regulation, 4
which shall contain: 5
1. A business plan and pro forma projections, which shall take into 6
account the timeline for development of the innovation and 7
projections of business through the period to demonstrate that 8
adequate capital, surplus, risk-based capital, and cash flow will be 9
available and adequately secured through recognized forms of 10
security; and 11
2. Any additional information necessary to comply with the requirements 12
of this subsection and the purposes of the subtitle. 13
(d) Upon submission of an application under paragraph (c) of this subsection, 14
the commissioner may issue a license to the applicant if the applicant: 15
1. Is organized as a corporation or limited liability company; 16
2. Has a minimum capital or net worth of one hundred thousand dollars 17
($100,000); and 18
3. Maintains minimum capital and free surplus, or other forms of 19
security that may include one (1) or a combination of the items listed 20
in subsection (2)(a) of Section 7 of this Act, commensurate with its 21
business plan and pro forma projected over the life of the applicant's 22
sandbox participation. 23
(e) Within ninety (90) days of expiration of the waiver period or the limited or 24
extended no-action letter period, an innovative insurer may convert to any 25
other form of insurer authorized under this chapter upon making an 26
application to the commissioner, in a form prescribed by the commissioner, 27 UNOFFICIAL COPY 22 RS BR 1657
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and receiving authorization from the commissioner for the conversion. 1
(f) The commissioner shall promulgate administrative regulations to effectuate 2
this subsection. 3
SECTION 6. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 4
IS CREATED TO READ AS FOLLOWS: 5
(1) Subject to the provisions of this section, the commissioner and any applicable 6
agency may, in accordance with Sections 5 and 13 of this Act, issue a limited no-7
action letter, potentially resulting in the issuance of an extended no-action letter, 8
or a waiver, with respect to the specific requirements of any Kentucky law, to an 9
applicant subject to that law if the applicant reasonably demonstrates that: 10
(a) Application of Kentucky law would prohibit or restrict: 11
1. The introduction of the innovation; 12
2. A more efficient product or service; 13
3. Development or fulfillment of an emerging risk product or industry; 14
or 15
4. A developing risk product that the applicant intends to offer during 16
the period for which the proposed waiver or no-action letter is 17
granted; 18
(b) The public policy goals of Kentucky law will be or can be achieved by other 19
means; and 20
(c) The waiver or limited no-action letter will not substantially or unreasonably 21
increase any risk to clients or consumers. 22
(2) Except as provided in subsection (3) of this section, any person or persons may 23
make an application under this section by submitting to the department an 24
application form prescribed by the commissioner by administrative regulation 25
and accompanied by the following: 26
(a) A filing fee of: 27 UNOFFICIAL COPY 22 RS BR 1657
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1. Two hundred fifty dollars ($250) for a waiver; or 1
2. Five hundred dollars ($500) for a limited no-action letter; 2
(b) An explanation of how the innovation will: 3
1. Meet the requirements of subsection (1) of this section; 4
2. Be economically viable; 5
3. Provide suitable client or consumer protection; and 6
4. Not pose an unreasonable risk of client or consumer harm that cannot 7
by other means be mitigated or minimized; 8
(c) A detailed description of the statutory and regulatory issues, or impediments 9
or uncertainty of the department and any other applicable agency, that may 10
prevent or restrict the innovation from being developed, utilized, issued, 11
sold, solicited, distributed, or advertised in the market or in a manner that 12
addresses the nature of the risk; 13
(d) A detailed description of the innovation that the applicant proposes should 14
be permitted by a waiver or a limited no-action letter; 15
(e) If the innovation involves the use of software, hardware, fintech, insurtech, 16
AI, big data, blockchain, cryptocurrency, a cryptocurrency facility, 17
predictive analytics, or other technology, a technical white paper setting 18
forth a description of the operation and general content of the innovation, 19
including: 20
1. The problem addressed by that technology; and 21
2. The interaction between that technology and its users; 22
(f) If the innovation involves the issuance of a policy or contract that may 23
constitute insurance or be subject to regulation under this chapter, a 24
statement as to: 25
1. The innovation, risk product, or kind of insurance intended to be 26
issued, which may include new and unique forms of insurance or 27 UNOFFICIAL COPY 22 RS BR 1657
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other contracts subject to regulation under this chapter, together with 1
noninsurance provisions; and 2
2. The nature of the type or form of insurer or other entity, which may 3
include any form of insurer or other entity; 4
(g) The name, contact information, and bar number of the applicant's 5
insurance regulatory counsel, which shall be a person with experience 6
providing insurance regulatory compliance advice; 7
(h) Proposed terms and conditions to govern the waiver or limited no-action 8
letter, which shall include: 9
1. Citation to the provisions of Kentucky law that should be excepted in 10
the notice of acceptance issued under Section 7 of this Act; and 11
2. Any request for an extension of the time periods under Section 5 or 9 12
of this Act and the grounds for the request; and 13
(i) Any additional information as reasonably required by the commissioner or 14
any applicable agency. 15
(3) (a) The following persons shall not be authorized to make an application under 16
this section for a limited no-action letter or waiver: 17
1. Any person seeking to sell or license an innovation directly to any 18
federal, state, or local government entity, agency, or instrumentality as 19
the insured person or end user of the innovation; and 20
2. Any person seeking to make an application that would result in the 21
person having more than five (5) active tests ongoing within Kentucky 22
at any one (1) time. 23
(b) For the purposes of this subsection, "federal, state, or local government 24
entity, agency, or instrumentality" includes any county, city, municipal 25
corporation, urban-county government, charter county government, 26
consolidated local government, unified local government, special district, 27 UNOFFICIAL COPY 22 RS BR 1657
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special purpose governmental entity, public school district, or public 1
institution of education. 2
SECTION 7. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 3
IS CREATED TO READ AS FOLLOWS: 4
(1) (a) Unless extended under paragraph (b) of this subsection, the commissioner 5
and any applicable agency shall issue a notice of acceptance or rejection in 6
accordance with this section within sixty (60) days from the date an 7
application under Section 6 of this Act is received. 8
(b) The commissioner and any applicable agency may extend by not more than 9
thirty (30) days the period provided in paragraph (a) of this subsection if the 10
applicant is notified before expiration of the initial sixty (60) day period. 11
(c) An application that has not been accepted or rejected by a notice of 12
acceptance or rejection issued by the commissioner and any applicable 13
agency prior to expiration of the initial sixty (60) day period, or if 14
applicable, the period provided in paragraph (b) of this subsection, shall be 15
deemed accepted. 16
(2) The director and any applicable agency may request from the applicant: 17
(a) A form or forms of security in an amount and subject to such conditions 18
and for such purposes as the commissioner or applicable agencies may 19
reasonably determine is necessary for the protection of clients or 20
consumers, which may include one (1) or a combination of any of the 21
following: 22
1. A contractual liability insurance policy; 23
2. A surety bond issued by an authorized surety; 24
3. Securities of the type eligible for deposit by authorized insurers in this 25
state; 26
4. Evidence that the applicant has established an account payable to the 27 UNOFFICIAL COPY 22 RS BR 1657
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commissioner in a federally insured financial institution in this state 1
and has deposited money of the United States in an amount equal to 2
the amount required by this paragraph that is not available for 3
withdrawal, except by direct order of the commissioner; 4
5. A letter of credit issued by a qualified United States financial 5
institution as defined in KRS 304.9-700; or 6
6. Another form of security authorized by the commissioner; and 7
(b) Any additional material or information necessary to evaluate the 8
application. 9
(3) The director shall review the application to: 10
(a) Identify and assess: 11
1. The potential risks to clients or consumers, if any, posed by the 12
innovation; and 13
2. The manner in which the innovation would be offered or provided; 14
and 15
(b) Determine whether it satisfies the following requirements: 16
1. The application satisfies the requirements of subsection (2)(b)1. to 4. 17
of Section 6 of this Act; 18
2. The application proposes an innovation; 19
3. Approval of the application does not pose an unreasonable risk of 20
consumer harm; and 21
4. The application identifies statutory or regulatory requirements that 22
actually prevent the innovation from being utilized, issued, sold, 23
solicited, distributed, or advertised in Kentucky. 24
(4) Upon review of the application and receipt of the recommendation from the 25
director, the commissioner and any applicable agency shall, in their reasonable 26
discretion, which shall be rationally based, issue one (1) of the following: 27 UNOFFICIAL COPY 22 RS BR 1657
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(a) If the commissioner and any applicable agency determines that the 1
application fails to satisfy any of the requirements under subsection (3)(b) 2
of this section: 3
1. A notice of rejection to the applicant; and 4
2. A description in the notice of rejection of the specific defects in the 5
application; or 6
(b) If the commissioner and any applicable agency determines that the 7
application satisfies the requirements of subsection (3)(b) of this section, a 8
notice of acceptance to the applicant. The notice of acceptance shall: 9
1. Set forth the terms and conditions that will govern the applicant's 10
waiver or test, which shall include, at a minimum: 11
a. Requiring the applicant to: 12
i. Abide by all Kentucky laws, except where explicitly 13
excepted; and 14
ii. Utilize the innovation within Kentucky or in accordance 15
with any cooperation agreement or interstate innovation 16
compact or memorandum of understanding; 17
b. Notice of any agent licenses required to be obtained in 18
connection with the waiver or prior to commencement of the test; 19
c. Consumer protection measures deemed necessary by the 20
commissioner or any applicable agency to be employed by the 21
applicant; 22
d. The level of financial stability required. The commissioner and 23
any applicable agency may decrease or waive the requirements 24
for financial stability requested under subsection (2)(a) of this 25
section, commensurate with the risk of client or consumer harm 26
posed by the innovation; 27 UNOFFICIAL COPY 22 RS BR 1657
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e. Permitted conduct under the waiver or limited no-action letter; 1
and 2
f. Any limits established by the commissioner and any applicable 3
agency under Section 5 of this Act; and 4
2. Provide that the notice of acceptance shall expire unless: 5
a. It is accepted by the applicant in writing; and 6
b. The applicant's acceptance is filed with the department within 7
sixty (60) days of issuance of the notice of acceptance. 8
(5) An applicant may request a hearing pursuant to KRS 304.2-310 on: 9
(a) A notice of rejection; and 10
(b) A notice of acceptance, if the request is made prior to its expiration. 11
SECTION 8. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 12
IS CREATED TO READ AS FOLLOWS: 13
(1) Within ten (10) days following the timely receipt of an applicant's acceptance 14
pursuant to subsection (4)(b)2. of Section 7 of this Act, the commissioner and any 15
applicable agency shall issue a waiver or a limited no-action letter that: 16
(a) Sets forth terms and conditions for the participant that are the same as 17
those set forth in the notice of acceptance issued under subsection (4)(b) of 18
Section 7 of this Act; and 19
(b) Provides that so long as the participant and any clients of the participant 20
abide by the terms and conditions set forth in the waiver or limited no-21
action letter, no administrative or regulatory action concerning compliance 22
of the innovation with Kentucky law will be taken by the commissioner and 23
any applicable agency against the participant or any clients during the term 24
of the test. 25
(2) If the application is deemed accepted under subsection (1)(c) of Section 7 of this 26
Act, the proposed waiver or limited no-action letter included with the application 27 UNOFFICIAL COPY 22 RS BR 1657
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shall be deemed to have the effect of a waiver or limited no-action letter issued by 1
the commissioner. 2
(3) The safe harbor of a limited no-action letter shall remain in effect until the 3
earlier of: 4
(a) The early termination of the test under Section 9 of this Act; 5
(b) The issuance of an extended no-action letter; or 6
(c) The issuance of a notice declining to issue an extended no-action letter. 7
(4) A waiver or limited no-action letter issued by the commissioner and any 8
applicable agency under this section shall be exempt from the application of KRS 9
13A.130. 10
(5) The commissioner and any applicable agency shall publish any waiver or limited 11
no-action letter issued pursuant to this section on the department's and the 12
agency's Web site. 13
SECTION 9. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 14
IS CREATED TO READ AS FOLLOWS: 15
(1) (a) Except as provided in paragraph (b) of this subsection, the time period for a 16
test shall be not less than twenty-four months (24) or more than thirty-six 17
(36) months. 18
(b) The maximum time period in paragraph (a) of this subsection may be 19
extended by the commissioner and any applicable agency in the notice of 20
acceptance for a period that is not longer than one (1) year if a request is 21
made in accordance with subsection (2)(h)2. of Section 6 of this Act. 22
(2) During the test, the participant and any clients of the participant shall: 23
(a) Comply with all terms and conditions set forth in the limited no-action 24
letter; and 25
(b) Provide the department and any applicable agency with all documents, data, 26
and information requested by the commissioner and the applicable agency. 27 UNOFFICIAL COPY 22 RS BR 1657
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(3) (a) For any violation of the terms or conditions set forth in the limited no-1
action letter, the commissioner and any applicable agency may: 2
1. Either: 3
a. Modify the terms and conditions of the limited no-action letter; 4
or 5
b. Issue an order terminating the test and the safe harbor of the 6
limited no-action letter before the time period set forth in the 7
limited no-action letter has expired; and 8
2. Impose a fine of not more than two hundred fifty dollars ($250) per 9
violation if the participant has failed to reasonably cure the violation 10
or provide a written plan to remediate the violation within sixty (60) 11
days of receipt of a violation determination from the commissioner 12
and any applicable agency. 13
(b) The commissioner and any applicable agency may also issue an order 14
under paragraph (a)1. of this subsection if, following receipt of information 15
or complaints, the commissioner and any applicable agency determines the 16
test is causing consumer harm. 17
(4) (a) The commissioner and any applicable agency may issue an order requiring 18
a client to cease and desist any activity violating the terms or conditions set 19
forth in a limited no-action letter. 20
(b) The issuance of a cease and desist order to one (1) client shall not otherwise 21
impact the ability of the participant or any other clients to continue 22
activities relating to the innovation in a manner compliant with the 23
requirements of the limited no-action letter. 24
(5) A participant or client may request a hearing on any order issued under this 25
section pursuant to KRS 304.2-310. 26
SECTION 10. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 27 UNOFFICIAL COPY 22 RS BR 1657
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IS CREATED TO READ AS FOLLOWS: 1
(1) As used in this section, "innovation's utility" means an evaluation of the 2
innovation's ability to adequately satisfy the factors set forth in subsection (2)(b) 3
of Section 6 of this Act. 4
(2) (a) Within sixty (60) days of completion of a test, unless the time period is 5
extended up to thirty (30) days upon notice from the commissioner and any 6
applicable agency, the commissioner and any applicable agency shall issue 7
an extended no-action letter or a notice declining to issue an extended no-8
action letter. 9
(b) The participant may continue to employ the insurance innovation pursuant 10
to the terms and conditions of the limited no-action letter during the period 11
between the completion of the test and the issuance of either an extended 12
no-action letter or a notice declining to issue an extended no-action letter. 13
(3) The commissioner and any applicable agency shall review the results of the test 14
to determine whether the innovation satisfies the following requirements: 15
(a) The data presented demonstrates that the innovation's utility was 16
meritorious of an extension; 17
(b) Regulatory and statutory barriers prevent continued use of the innovation 18
within Kentucky; 19
(c) If applicable, the innovation provided a benefit to Kentucky consumers; and 20
(d) The issuance of an extended no-action letter: 21
1. Presents no risk of unreasonable harm to consumers or the 22
marketplace; and 23
2. Serves the public interest. 24
(4) Upon review of the results of the test, the commissioner and any applicable 25
agency shall, in their reasonable discretion, which shall be rationally based, issue 26
one (1) of the following: 27 UNOFFICIAL COPY 22 RS BR 1657
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(a) If the commissioner and any applicable agency determines that the 1
innovation fails to satisfy any of the requirements under subsection (3) of 2
this section, they shall: 3
1. Issue a notice declining to issue an extended no-action letter; 4
2. Describe in the notice the reasons for the declination; 5
3. Notify the participant of the notice; and 6
4. Publish the notice on the department's and agency's Web site; or 7
(b) If the commissioner and any applicable agency determines that the 8
innovation satisfies the requirements under subsection (3) of this section, 9
they shall issue an extended no-action letter. An extended no-action letter 10
issued by the commissioner and any applicable agency shall include: 11
1. A description of the insurance innovation and the specific conduct 12
permitted by the extended no-action letter in sufficient detail to enable 13
any person to use the innovation or a product, process, method, or 14
procedure not substantially different from the innovation within the 15
safe harbor of the extended no-action letter; 16
2. Notice of any certificate of authority, license, or permit the 17
commissioner determines is necessary to use, sell, or license the 18
innovation, or make the innovation available, in Kentucky; 19
3. An expiration date not greater than three (3) years following the date 20
of issuance; 21
4. Notice that the extended no-action letter may: 22
a. Only be modified by: 23
i. Promulgation of an administrative regulation, if the safe 24
harbor addresses a requirement established by 25
administrative regulation; or 26
ii. An act of the General Assembly; and 27 UNOFFICIAL COPY 22 RS BR 1657
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b. Be rescinded prior to its expiration if the commissioner or any 1
applicable agency receives complaints and the commissioner and 2
any applicable agency determine that continued activity poses a 3
risk of harm to consumers; 4
5. Clarification of required procedures related to the issuance and 5
cancellation of any policies of insurance or other contracts, if 6
applicable, due to the expiration period; and 7
6. Notice that, upon expiration, all persons relying on the extended no-8
action letter shall cease and desist operations related to the innovation 9
unless changes have been made to Kentucky law to permit the 10
innovation by: 11
a. The promulgation of an administrative regulation, if the safe 12
harbor address a requirement established by administrative 13
regulation; or 14
b. An act of the General Assembly. 15
(5) A hearing on a notice of declination may be requested in accordance with KRS 16
304.2-310. 17
(6) An extended no-action letter issued by the commissioner and any applicable 18
agency pursuant to this section shall be: 19
(a) Exempt from the application of KRS 13A.130; and 20
(b) Published on the department's and agency's Web site. 21
SECTION 11. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 22
IS CREATED TO READ AS FOLLOWS: 23
(1) All documents, materials, or other information in the possession or control of the 24
department or an applicable agency that are created, produced, obtained, or 25
disclosed in relation to this subtitle and that relate to the financial condition of 26
any person shall be confidential and shall not be subject to public disclosure 27 UNOFFICIAL COPY 22 RS BR 1657
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pursuant to the Kentucky Open Records Act, KRS 61.870 to 61.884. 1
(2) Notwithstanding any law to the contrary, the commissioner and any applicable 2
agency may disclose in an extended no-action letter any information relating to 3
the innovation necessary to clearly establish the safe harbor of the extended no-4
action letter. 5
SECTION 12. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 6
IS CREATED TO READ AS FOLLOWS: 7
(1) There is hereby created and established a Kentucky Innovation Council. 8
(2) The purpose of the council is to: 9
(a) Promote entrepreneurial development; 10
(b) Support innovation, investment, and job creation within Kentucky by 11
encouraging participation in the regulatory sandbox; 12
(c) Provide industry and consumer input to support and develop the purposes 13
of this subtitle; and 14
(d) Collaborate with other similar advisory councils. 15
(3) The council is: 16
(a) Empowered to recommend standards, principles, guidelines, and policy 17
priorities for the types of innovations that the regulatory sandbox will 18
support and other innovative provisions as set forth in this subtitle; and 19
(b) Shall: 20
1. Review and discuss: 21
a. The programs created under this subtitle; 22
b. Methods to effectuate the purposes of the subtitle; 23
c. Administrative regulations promulgated under this subtitle; and 24
d. Other issues at the request of the commissioner; and 25
2. Make recommendations: 26
a. Regarding applicable agency collaboration and cooperation 27 UNOFFICIAL COPY 22 RS BR 1657
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under this subtitle; 1
b. Regarding the marketing of: 2
i. Kentucky's regulatory sandbox, regulatory hub, and 3
insurance portal; and 4
ii. The benefits of Kentucky as a domicile state or jurisdiction 5
for innovation and conducting business; and 6
c. To the Interim Joint Committee on Banking and Insurance 7
regarding improvements to this chapter to develop Kentucky as 8
an insurance and financial center. 9
(4) The council shall consist of the following members: 10
(a) Three (3) or more regulatory members, which shall include: 11
1. The commissioner, who shall serve as chair of the council; 12
2. The commissioner of the Department of Financial Institutions; and 13
3. Representatives of other applicable agencies; and 14
(b) The following persons, who shall each serve two (2) year terms: 15
1. Three (3) persons appointed by the commissioner; and 16
2. Two (2) persons appointed by the commissioner of the Department of 17
Financial Institutions. 18
(5) The first meeting of the council shall take place within thirty (30) days of the 19
appointment of all the members. 20
(6) (a) The council shall meet at least quarterly, and may meet more frequently 21
upon the call of the commissioner. 22
(b) A majority of the members shall constitute a quorum. 23
(c) Recommendations of the council shall require a majority of the members 24
present, which shall include participation through distance communication 25
technology, and eligible to vote. 26
(7) The council shall be a budgetary unit of the department, which shall: 27 UNOFFICIAL COPY 22 RS BR 1657
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(a) Pay all of the council's necessary operating expenses; and 1
(b) Furnish all office space, personnel, equipment, supplies, and technical or 2
administrative services required by the council in the performance of the 3
functions established in this section. 4
(8) Members of the council, except the members serving under subsection (4)(a) of 5
this section, shall receive no compensation for service, but shall receive actual 6
and necessary travel expenses associated with attending meetings, which shall be 7
in accordance with state administrative regulations relating to travel 8
reimbursement. 9
SECTION 13. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 10
IS CREATED TO READ AS FOLLOWS: 11
(1) The commissioner and other applicable agencies shall, by administrative 12
regulation or cooperation agreement: 13
(a) Adopt uniform procedures for the administration of this subtitle; and 14
(b) Be authorized to attach reasonable conditions or limitations on conduct 15
permitted under this subtitle. 16
(2) The uniform procedures required under subsection (1) of this section shall 17
establish requirements for: 18
(a) The regulatory sandbox application process, which shall include: 19
1. A process for coordinating the review and processing of applications; 20
and 21
2. An expedited application process for an innovation that is 22
substantially similar to one for which a waiver or limited no-action 23
letter has been previously granted by the commissioner and any 24
applicable agency; 25
(b) Ongoing monitoring, examination, and supervision of, and reporting by, 26
sandbox participants; 27 UNOFFICIAL COPY 22 RS BR 1657
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(c) Use and implementation of the insurance portal and regulatory hub; and 1
(d) Coordination among applicable agencies. 2
(3) The commissioner and other applicable agencies shall consult with the Kentucky 3
Innovation Council to receive input on recommendations for improvement in the 4
purposes, process, procedure, and application of this subtitle. 5
SECTION 14. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 6
IS CREATED TO READ AS FOLLOWS: 7
(1) (a) The commissioner and as appropriate, other applicable agencies shall enter 8
into any cooperation agreement, or interstate innovation compact or 9
memorandum of understanding, necessary to carry out the purposes of this 10
subtitle. 11
(b) At a minimum, a cooperation agreement, or interstate innovation compact 12
or memorandum of understanding, with any reciprocity jurisdiction shall be 13
considered necessary to carry out the purposes of this subtitle if the 14
jurisdiction: 15
1. Provides protections substantially similar to or greater than the 16
requirements of this subtitle; 17
2. Is on the National Association of Insurance Commissioners' list of 18
reciprocal jurisdictions; or 19
3. Is in good standing with the National Association of Insurance 20
Commissioners as a qualified jurisdiction. 21
(2) Notice of any interstate innovation compact or memorandum of understanding, 22
or cooperation agreement, including any amendments thereto, shall be set forth 23
in a bulletin or other notice, which shall be available on the department's and 24
agency's Web site. 25
(3) The commissioner and any applicable agency may accept documentation in 26
accordance with: 27 UNOFFICIAL COPY 22 RS BR 1657
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(a) An interstate innovation compact or memorandum of understanding; and 1
(b) A cooperation agreement. 2
(4) When effectuating and carrying out the requirements of this subtitle, including 3
the review and acceptance of applications, the commissioner and any applicable 4
agency shall: 5
(a) Consider: 6
1. Implementation of any interstate innovation compact or memorandum 7
of understanding, or cooperation agreement, to carry out the purposes 8
of this subtitle, particularly with respect to a regional marketplace; 9
and 10
2. The appropriateness of any interstate innovation compact or 11
memorandum of understanding, or cooperation agreement, with 12
jurisdictions on the National Association of Insurance 13
Commissioners' list of qualified jurisdictions to carry out the purpose 14
of establishing Kentucky as a financial and insurance center for 15
innovation; and 16
(b) Consult with each other and reciprocity jurisdictions, through the director: 17
1. As part of the implementation of the regulatory hub and the insurance 18
portal; and 19
2. For determinations referenced under paragraph (a) of this subsection. 20
(5) The commissioner and any applicable agency may furnish, upon request, any 21
information to the insurance supervisory official of any state, province, or 22
country: 23
(a) That assists the implementation of this subtitle; or 24
(b) To communicate or collaborate with the official in connection with 25
applications or access to the regulatory sandbox, the regulatory hub, or the 26
insurance portal. 27 UNOFFICIAL COPY 22 RS BR 1657
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SECTION 15. A NEW SECTION OF SUBTITLE 53 OF KRS CHAPTER 304 1
IS CREATED TO READ AS FOLLOWS: 2
(1) One hundred twenty days (120) prior to the start of each regular session, the 3
commissioner shall submit a written report to the Interim Joint Committee on 4
Banking and Insurance that meets the requirements of subsection (2) of this 5
section. 6
(2) The report shall include the following: 7
(a) The number of: 8
1. Applications filed, abandoned, accepted, and rejected; 9
2. Tests conducted; 10
3. Waivers, limited no-action letters, and extended no-action letters 11
issued; 12
4. Interstate innovation compacts or memorandums of understanding 13
entered; and 14
5. Cooperation agreements entered; 15
(b) A summary of the operation of the regulatory sandbox, the regulatory hub, 16
and the insurance portal, including a description of: 17
1. The applications filed, abandoned, accepted, and rejected; 18
2. Tests conducted; and 19
3. Innovations made available; 20
(c) A description of the interstate innovation compacts or memorandums of 21
understanding and cooperation agreements requested, entered, or amended; 22
(d) The number and types of orders or other actions taken by the commissioner 23
and any applicable agency under the subtitle; 24
(e) Identification of any statutory barriers for consideration of amendment by 25
the General Assembly: 26
1. Following successful waivers, tests, and issuance of limited and 27 UNOFFICIAL COPY 22 RS BR 1657
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extended no-action letters; and 1
2. Necessary to further the purposes of the subtitle; and 2
(f) Any other information or recommendations deemed relevant by the 3
commissioner and any applicable agency. 4
(3) The commissioner shall also provide the Interim Joint Committee on Banking 5
and Insurance a detailed briefing, upon request, to discuss and explain any 6
report submitted under this section. 7
Section 16. KRS 304.10-030 is amended to read as follows: 8
As used in this subtitle: 9
(1) "Admitted insurer" means an insurer that is licensed or authorized to transact the 10
business of insurance in Kentucky; 11
(2) "Affiliate" means, with respect to an insured, any entity that controls, is controlled 12
by, or is under common control with the insured; 13
(3) "Broker" means a surplus lines broker duly licensed as such under this subtitle; 14
(4) "Domestic surplus lines insurer" means a domestic insurer that meets all of the 15
following requirements: 16
(a) The board of directors of the insurer has adopted a resolution seeking 17
certification as a domestic surplus lines insurer; 18
(b) The commissioner has approved the certification described in paragraph (a) 19
of this subsection; 20
(c) The insurer is already eligible to offer surplus lines insurance in at least 21
one (1) other state; and 22
(d) The insurer is authorized to do business under Subtitle 24 of this chapter; 23
(5) "Exempt commercial purchaser" means any person purchasing commercial 24
insurance that, at the time of placement, meets the following requirements: 25
(a) The person employs or retains a qualified risk manager to negotiate insurance 26
coverage; 27 UNOFFICIAL COPY 22 RS BR 1657
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(b) The person has paid aggregate nationwide commercial property and casualty 1
insurance premium in excess of one hundred thousand dollars ($100,000) in 2
the immediately preceding twelve (12) months; 3
(c) 1. The person meets at least one (1) of the following criteria: 4
a. The person possesses a net worth in excess of twenty million 5
dollars ($20,000,000), adjusted pursuant to subparagraph 2. of this 6
paragraph; 7
b. The person generates annual revenues in excess of fifty million 8
dollars ($50,000,000), as adjusted pursuant to subparagraph 2. of 9
this paragraph; 10
c. The person employs more than five hundred (500) full-time or full-11
time equivalent employees per individual insured or is a member 12
of an affiliated group employing more than one thousand (1,000) 13
employees in the aggregate; 14
d. The person is a not-for-profit organization or public entity 15
generating annual budgeted expenditures of at least thirty million 16
dollars ($30,000,0000), adjusted pursuant to subparagraph 2. of 17
this paragraph; or 18
e. The person is a municipality with a population in excess of fifty 19
thousand (50,000) persons. 20
2. Effective on the fifth January 1 occurring after July 12, 2012, and each 21
fifth January 1 occurring thereafter, the amounts in subparagraph 1.a., b., 22
and d. of this paragraph shall be adjusted to reflect the percentage 23
change for the five (5) year period in the consumer price index for all 24
urban consumers published by the Bureau of Labor Statistics of the 25
Department of Labor; 26
(6)[(5)] To "export" means to place in an unauthorized insurer under this Surplus 27 UNOFFICIAL COPY 22 RS BR 1657
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Lines Law insurance covering a subject of insurance resident, located, or to be 1
performed in Kentucky; 2
(7)[(6)] "Home state" means: 3
(a) 1. The state in which an insured maintains its principal place of business 4
or, in the case of an individual, the individual's principal residence; or 5
2. If one hundred percent (100%) of the insured risk is located out of the 6
state referred to in subparagraph 1. of this paragraph, the state to which 7
the greatest percentage of the insured's taxable premium for that 8
insurance contract is allocated; or 9
(b) If more than one (1) insureds from an affiliated group are named insureds on a 10
single nonadmitted insurance contract, the home state, as determined pursuant 11
to paragraph (a) of this section, of the member of the affiliated group that has 12
the largest percentage of premium attributed to it under the insurance contract; 13
(8)[(7)] "Nonadmitted insurance" means: 14
(a) Any property and casualty insurance permitted to be placed directly or through 15
a surplus lines broker with a nonadmitted insurer or a domestic surplus lines 16
insurer eligible to accept the insurance; and 17
(b) Any health and life insurance providing disability coverage: 18
1. With policy limits in excess of those available from an admitted insurer; 19
2. With participation limits; or 20
3. Insuring occupations for which coverage is not procurable through an 21
admitted insurer; 22
(9)[(8)] "Nonadmitted insurer" means an insurer that is not authorized or admitted to 23
transact the business of insurance in Kentucky; and 24
(10)[(9)] "Surplus lines" means: 25
(a) Nonadmitted insurance sold to, solicited by, or negotiated with an insured 26
whose home state is Kentucky. 27 UNOFFICIAL COPY 22 RS BR 1657
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Section 17. KRS 304.10-040 is amended to read as follows: 1
(1) Surplus Lines may be procured from a nonadmitted insurer or a domestic surplus 2
lines insurer subject to the following conditions: 3
(a) The insurance shall be procured through a licensed surplus lines broker; 4
(b) After a diligent effort, a licensed agent with property and casualty lines of 5
authority, or with health and life lines of authority if procuring disability 6
insurance, has been unable to procure the full amount of insurance required 7
from an insurer that is authorized to transact, and that actually writes, that 8
kind and class of insurance in this state. If the licensed agent is able to procure 9
an amount of insurance less than the full amount, only the excess amount 10
needed to procure the full amount shall be exported; 11
(c) The insurance shall not be exported for the sole purpose of securing either: 12
1. A lower premium rate than would be accepted by an authorized insurer; 13
or 14
2. More advantageous terms of the insurance contract. 15
(2) The requirements of subsection (1) of this section related to a diligent effort shall 16
not be required for coverage procured or placed for an exempt commercial 17
purchaser if: 18
(a) The broker procuring or placing the surplus lines insurance has disclosed to 19
the exempt commercial purchaser that insurance may or may not be available 20
from the admitted market that may provide greater protection with more 21
regulatory oversight; and 22
(b) The exempt commercial purchaser has subsequently requested in writing that 23
the broker procure or place insurance from a nonadmitted insurer or a 24
domestic surplus lines insurer. 25
Section 18. KRS 304.2-120 is amended to read as follows: 26
(1) (a) In general, orders and notices of the commissioner shall be issued in 27 UNOFFICIAL COPY 22 RS BR 1657
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accordance with this chapter. 1
(b) Notices, recommended orders, and final orders issued as a result of an 2
administrative hearing shall be issued in accordance with KRS Chapter 13B. 3
(2) Orders and notices of the commissioner shall be effective only when in writing 4
signed by the commissioner or by the commissioner's authority. 5
(3) Every order of the commissioner shall state its effective date and shall concisely 6
state: 7
(a) Its intent or purpose; 8
(b) The grounds on which it is based; 9
(c) The provisions of this code under which action is taken or proposed to be 10
taken; and 11
(d) All other matters required by law. 12
(4) (a) All persons holding licenses or certificates of authority from the commissioner 13
shall maintain current residence, business, home office, and administrative 14
addresses, as applicable, on file with the commissioner. 15
(b) Licensees shall inform the commissioner, either in writing or electronically, 16
in a format acceptable to the commissioner, of any change in addresses or 17
legal name within thirty (30) days of the change. 18
(c) Except as provided in paragraph (d) of this subsection, as a condition to 19
holding a license or certificate of authority from the commissioner, persons 20
holding licenses or certificate of authority are deemed to have consented to 21
service of notices and orders of the commissioner at their addresses on file 22
with the commissioner and any notice or order of the commissioner mailed or 23
delivered to the address on file with the commissioner constitutes valid 24
service of notice or order. 25
(d) Notices and orders of the commissioner shall, in addition to any service at 26
the physical address, also be sent to any of the certificate holder's or 27 UNOFFICIAL COPY 22 RS BR 1657
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licensee's electronic addresses, including emails, on file with the 1
commissioner. 2
Section 19. KRS 304.1-120 is amended to read as follows: 3
No provision of this code shall apply to: 4
(1) Fraternal benefit societies (as identified in Subtitle 29), except as stated in Subtitle 5
29. 6
(2) Nonprofit hospital, medical-surgical, dental, and health service corporations (as 7
identified in Subtitle 32) except as stated in Subtitle 32. 8
(3) Burial associations (as identified in KRS Chapter 303), except as stated in Subtitle 9
31. 10
(4) Assessment or cooperative insurers (as identified in KRS Chapter 299), except as 11
stated in KRS Chapter 299. 12
(5) Insurance premium finance companies (as identified in Subtitle 30), except as stated 13
in Subtitle 30. 14
(6) Qualified organizations which issue charitable gift annuities within the 15
Commonwealth of Kentucky. For the purposes of this subsection: 16
(a) A "qualified organization" means one which is: 17
1. Exempt from taxation under Section 501(c)(3) of the Internal Revenue 18
Code as a charitable organization, if it files a copy of federal form 990 19
with the Division of Consumer Protection in the Office of the Attorney 20
General; or 21
2. Exempt from taxation under Section 501(c)(3) of the Internal Revenue 22
Code as a religious organization; or 23
3. Exempt as a publicly owned or nonprofit, privately endowed educational 24
institution approved or licensed by the State Board of Education, the 25
Southern Association of Colleges and Schools, or an equivalent public 26
authority of the jurisdiction where the institution is located; and 27 UNOFFICIAL COPY 22 RS BR 1657
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(b) A "charitable gift annuity" means a giving plan or method by which a gift of 1
cash or other property is made to a qualified organization in exchange for its 2
agreement to pay an annuity. 3
(7) A religious organization, as identified in this subsection, or its participants, that: 4
(a) Is a nonprofit religious organization; 5
(b) Is limited to participants who are members of the same denomination or 6
religion; 7
(c) Matches its participants who have financial, physical, or medical needs with 8
participants who choose to assist with those needs; 9
(d) 1. Includes the following notice for delivery to all participants, printed in 10
not less than ten (10) point, bold-faced type on or accompanying all 11
applications, guideline materials, or any similar documents: 12
"NOTICE: UNDER KENTUCKY LAW, THE RELIGIOUS 13
ORGANIZATION FACILITATING THE SHARING OF MEDICAL 14
EXPENSES IS NOT AN INSURANCE COMPANY, AND ITS 15
GUIDELINES, PLAN OF OPERATION, OR ANY OTHER 16
DOCUMENT OF THE RELIGIOUS ORGANIZATION DO NOT 17
CONSTITUTE OR CREATE AN INSURANCE POLICY. 18
PARTICIPATION IN THE RELIGIOUS ORGANIZATION OR A 19
SUBSCRIPTION TO ANY OF ITS DOCUMENTS SHALL NOT BE 20
CONSIDERED INSURANCE. ANY ASSISTANCE YOU RECEIVE 21
WITH YOUR MEDICAL BILLS WILL BE TOTALLY VOLUNTARY. 22
NEITHER THE ORGANIZATION OR ANY PARTICIPANT SHALL 23
BE COMPELLED BY LAW TO CONTRIBUTE TOWARD YOUR 24
MEDICAL BILLS. WHETHER OR NOT YOU RECEIVE ANY 25
PAYMENTS FOR MEDICAL EXPENSES, AND WHETHER OR 26
NOT THIS ORGANIZATION CONTINUE S TO OPERATE, YOU 27 UNOFFICIAL COPY 22 RS BR 1657
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SHALL BE PERSONALLY RESPONSIBLE FOR THE PAYMENT 1
OF YOUR MEDICAL BILLS." 2
2. A participant shall acknowledge receipt of the "Notice" by signing 3
below the "Notice" on the application; 4
(e) Suggests amounts to give that are voluntary among the participants, with no 5
assumption of risk or promise to pay either among the participants or between 6
the participants and the organization. 7
(8) A public or private ambulance service licensed and regulated by the Cabinet for 8
Health and Family Services to the extent that it solicits membership subscriptions, 9
accepts membership applications, charges membership fees, and furnishes prepaid 10
or discounted ambulance services to subscription members and designated members 11
of their households. 12
(9) A direct primary care agreement established under KRS 311.6201, 311.6202, 13
314.198, and 314.199. 14
(10) Transactions and insurers authorized under Subtitle 53, except as stated in 15
Subtitle 53. 16
Section 20. KRS 304.11-030 is amended to read as follows: 17
(1) It shall be unlawful for any company to enter into a contract of insurance as an 18
insurer or to transact insurance business in this state, as set forth in subsection (2) of 19
this section without a certificate of authority from the commissioner, except[; 20
provided, that] this subsection shall not apply to: 21
(a) The lawful transaction of surplus lines insurance; 22
(b) The lawful transaction of reinsurance by insurers; 23
(c) Transactions in this state involving a policy lawfully solicited, written, and 24
delivered outside of this state covering only subjects of insurance not resident, 25
located, or expressly to be performed in this state at the time of issuance, and 26
which transactions are subsequent to the issuance of such policy; 27 UNOFFICIAL COPY 22 RS BR 1657
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(d) Transactions involving contracts of insurance independently procured through 1
negotiations occurring entirely outside of this state which are reported and on 2
which premium tax is paid; 3
(e) Attorneys acting in the ordinary relation of attorney and client in the 4
adjustment of claims or losses; 5
(f) Transactions in this state involving group life and group health or blanket 6
health insurance or group annuities where the master policy of such groups 7
was lawfully issued and delivered in a state in which the company was 8
authorized to do an insurance business; 9
(g) Transactions in this state involving any policy of insurance issued prior to July 10
1, 1968;[ and] 11
(h) Insurance on vessels, craft or hulls, cargoes, marine builder's risk, marine 12
protection and indemnity or other risk, including strikes and war risks 13
commonly insured under ocean or wet marine forms of policy; and 14
(i) Transactions involving insurance contracts placed through the insurance 15
portal, as defined in Section 1 of this Act. 16
(2) Any of the following acts in this state effected by mail or otherwise is defined to be 17
doing an insurance business in this state. The venue of an act committed by mail is 18
at the point where the matter transmitted by mail is delivered and takes effect. 19
Unless otherwise indicated, the term "insurer" as used in this section includes all 20
corporations, associations, partnerships, and individuals, engaged as principals in 21
the business of insurance and also includes interinsurance exchanges and mutual 22
benefit societies: 23
(a) The making of or proposing to make, as an insurer, an insurance contract; 24
(b) The making of or proposing to make, as guarantor or surety, any contract of 25
guaranty or suretyship as a vocation and not merely incidental to any other 26
legitimate business or activity of the guarantor or surety; 27 UNOFFICIAL COPY 22 RS BR 1657
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(c) The taking or receiving of any application for insurance; 1
(d) The receiving or collection of any premiums, commissions, membership fees, 2
assessments, dues or other consideration for any insurance or any part thereof; 3
(e) The issuance or delivery of contracts of insurance to residents of this state or 4
to persons authorized to do business in this state; 5
(f) Directly or indirectly acting as an agent for, or otherwise representing or 6
aiding on behalf of another, any person or insurer in the solicitation, 7
negotiation, procurement or effectuation of insurance or renewals thereof or in 8
the dissemination of information as to coverage or rates, or forwarding of 9
applications, or delivery of policies or contracts, or inspection of risks, or 10
fixing of rates or investigation or adjustment of claims or losses, or in the 11
transaction of matters subsequent to effectuation of the contract and arising 12
out of it, or in any other manner representing or assisting a person or insurer in 13
the transaction of insurance with respect to subjects of insurance resident, 14
located or to be performed in this state. The provisions of this subsection shall 15
not operate to prohibit full-time salaried employees of a corporate insured 16
from acting in the capacity of an insurance manager or buyer in placing 17
insurance in behalf of such employer; 18
(g) The doing of any kind of insurance business specifically recognized as 19
constituting the doing of an insurance business within the meaning of the 20
statutes relating to insurance; 21
(h) The doing or proposing to do any insurance business in substance equivalent 22
to any of the foregoing in a manner designed to evade the provisions of this 23
code; and 24
(i) Any other transactions of business in this state by an insurer. 25
(3) (a) The failure of a company transacting insurance business in Kentucky to obtain 26
a certificate of authority shall not impair the validity of any act or contract of 27 UNOFFICIAL COPY 22 RS BR 1657
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such company and shall not prevent such company from defending any action 1
at law or suit in equity in any court of this state. 2
(b) In event of failure of any such unauthorized insurer to pay any claim or loss 3
within the provisions of such insurance contract, any person who assisted or in 4
any manner aided directly or indirectly in the procurement of such insurance 5
contract shall be liable to the insured for the full amount of the claim or loss in 6
the manner provided by the provisions of such insurance contract. 7
(4) Whenever the commissioner believes, from evidence satisfactory to him or her, that 8
any company is violating or about to violate the provisions of these sections, the 9
commissioner may, through the Attorney General of this state, cause a complaint to 10
be filed in the Circuit Court of Franklin County to enjoin and restrain such company 11
from continuing such violation or engaging therein or doing any act in furtherance 12
thereof. The court shall have jurisdiction of the proceeding and shall have the power 13
to make and enter an order or judgment awarding such preliminary or final 14
injunctive relief as in its judgment is proper. 15
Section 21. KRS 91A.080 is amended to read as follows: 16
(1) The legislative body of each local government which elects to impose and collect 17
license fees or taxes upon insurance companies for the privilege of engaging in the 18
business of insurance may, except as provided in subsection (10) of this section, 19
enact or change its license fee or rate of tax to be effective July 1 of each year on a 20
prospective basis only and shall file with the commissioner of insurance at least one 21
hundred (100) days prior to the effective date, a copy of all ordinances and 22
amendments which impose a license fee or tax. No less than eighty-five (85) days 23
prior to the effective date, the commissioner of insurance shall promptly notify each 24
insurance company engaged in the business of insurance in the Commonwealth of 25
those local governments which have elected to impose the license fees or taxes and 26
the current amount of the license fee or rate of tax. 27 UNOFFICIAL COPY 22 RS BR 1657
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(2) Any license fee or tax imposed by a local government upon an insurance company 1
with respect to life insurance policies may be based upon the first year's premiums, 2
and, if so based, shall be applied to the amount of the premiums actually collected 3
within each calendar quarter upon the lives of persons residing within the corporate 4
limits of the local government. 5
(3) Any license fee or tax imposed by a local government upon any insurance company 6
with respect to any policy which is not a life insurance policy shall be based upon 7
the premiums actually collected by the insurance company within each calendar 8
quarter on risks located within the corporate limits of the local government on those 9
classes of business which the insurance company is authorized to transact, less all 10
premiums returned to policyholders. In determining the amount of license fee or tax 11
to be collected and to be paid to the local government, the insurance company shall 12
use the tax rate effective on the first day of the policy term. When an insurance 13
company collects a premium as a result of a change in the policy during the policy 14
term, the tax rate used shall be the rate in effect on the effective date of the policy 15
change. With respect to premiums returned to policyholders, the license fee or tax 16
shall be returned by the insurance company to the policyholder pro rata on the 17
unexpired amount of the premium at the same rate at which it was collected and 18
shall be taken as a credit by the insurance company on its next quarterly report to 19
the local government. 20
(4) The Department of Insurance shall, by administrative regulation, provide for a 21
reasonable collection fee to be retained by the insurance company or its agent as 22
compensation for collecting the tax, except that the collection fee shall not be more 23
than fifteen percent (15%) of the fee or tax collected and remitted to the local 24
government or two percent (2%) of the premiums subject to the tax, whichever is 25
less. To facilitate computation, collection, and remittance of the fee or tax and 26
collection fee provided in this section, the fees or taxes set out in subsection (1), (2), 27 UNOFFICIAL COPY 22 RS BR 1657
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or (3) of this section, together with the collection fee in this section, may be rounded 1
off to the nearest dollar amount. 2
(5) Pursuant to KRS 304.3-270, if any other state retaliates against any Kentucky 3
domiciliary insurer because of the requirements of this section, the commissioner of 4
insurance shall impose an equal tax upon the premiums written in this state by 5
insurers domiciled in the other state. 6
(6) Accounting and reporting procedures for collection and reporting of the fees or 7
taxes and the collection fee herein provided shall be determined by administrative 8
regulations promulgated by the Department of Insurance. 9
(7) (a) Upon written request of the legislative body of any local government, at the 10
expense of the requesting local government, which shall be paid in advance by 11
the local government to the Department of Insurance, the Department of 12
Insurance shall audit, or cause to be audited by contract with qualified 13
auditors, the books or records of the insurance companies or agents subject to 14
the fee or tax to determine whether the fee or tax is being properly collected 15
and remitted, and the findings of the audit shall be reported to the local 16
government and the insurance company subject to the audit. An insurance 17
company may appeal the findings of the audit conducted under this subsection 18
and any assessment issued pursuant to the audit findings in accordance with 19
the provisions of KRS 91A.0804(5). 20
(b) Willful failure to properly collect and remit the fee or tax imposed by a local 21
government pursuant to the authority granted by this section shall constitute 22
grounds for the revocation of the license issued to an insurance company or 23
agent under the provisions of KRS Chapter 304. 24
(c) If the Department of Insurance finds that an insurance company has willfully 25
engaged in a pattern of business conduct that fails to properly collect and 26
remit the fee or tax imposed by a local government pursuant to the authority 27 UNOFFICIAL COPY 22 RS BR 1657
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granted by this section, the Department of Insurance may assess the 1
responsible insurance company an appropriate penalty fee no greater than ten 2
percent (10%) of the additional license fees or taxes determined to be owed to 3
the local government. The penalty fee shall be paid to the local government 4
owed the license fee or tax less any administrative costs of the Department of 5
Insurance in enforcing this section. Any insurance company or agent held 6
responsible for a penalty fee may request a hearing with the Department of 7
Insurance to be conducted pursuant to KRS 304.2-310 to 304.2-370 regarding 8
the finding of a willful violation and the subsequent penalty fee. 9
(8) The license fees or taxes provided for by subsections (2) and (3) of this section shall 10
be due thirty (30) days after the end of each calendar quarter. Annually, by March 11
31, each insurance company shall furnish each local government to which the tax or 12
fee is remitted with a breakdown of all collections in the preceding calendar year for 13
the following categories of insurance: 14
(a) Casualty; 15
(b) Automobile; 16
(c) Inland marine; 17
(d) Fire and allied perils; 18
(e) Health; and 19
(f) Life. 20
(9) Any license fee or tax not paid on or before the due date shall bear interest at the tax 21
interest rate as defined in KRS 131.010(6) from the date due until paid. Such 22
interest payable to the local government is separate of penalties provided for in 23
subsection (7) of this section. In addition, the local government may assess a ten 24
percent (10%) penalty for a tax or fee not paid within thirty (30) days after the due 25
date. 26
(10) No license fee or tax imposed under this section shall apply to premiums: 27 UNOFFICIAL COPY 22 RS BR 1657
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(a) Received on policies of group health insurance provided for state employees 1
under KRS 18A.225; 2
(b) Received on policies insuring employers against liability for personal injuries 3
to their employees or the death of their employees caused thereby, under the 4
provisions of KRS Chapter 342; 5
(c) Received on health insurance policies issued to individuals; 6
(d) Received on policies issued through Kentucky Access created in Subtitle 17B 7
of KRS Chapter 304; 8
(e) Received on policies for high deductible health plans as defined in 26 U.S.C. 9
sec. 223(c)(2); 10
(f) Received on multistate surplus lines, defined as non-admitted insurance as 11
provided in Title V, Subtitle B, the Non-Admitted and Reinsurance Reform 12
Act of 2010, of the Dodd-Frank Wall Street Reform and Consumer Protection 13
Act, Pub. L. No. 111-203; 14
(g) Paid to insurance companies or surplus lines brokers by nonprofit self-15
insurance groups or self-insurance entities whose membership consists of 16
school districts; [or] 17
(h) Paid to insurance companies or surplus lines brokers by nonprofit self-18
insurance groups or self-insurance entities whose membership consists of 19
cities, counties, charter county governments, urban-county governments, 20
consolidated local governments, unified local governments, school districts, or 21
any other political subdivisions of the Commonwealth; or 22
(i) Received on policies issued by or contractual liability insurance policies 23
issued to: 24
1. A participant, as defined in Section 1 of this Act, under a waiver or a 25
limited no-action letter; or 26
2. An innovative insurer authorized under Section 5 of this Act. 27 UNOFFICIAL COPY 22 RS BR 1657
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(11) No county may impose the tax authorized by this section upon the premiums 1
received on policies issued to public service companies which pay ad valorem taxes. 2
(12) Insurance companies which pay license fees or taxes pursuant to this section shall 3
credit city license fees or taxes against the same license fees or taxes levied by the 4
county, when the license fees or taxes are levied by the county on or after July 13, 5
1990. For purposes of this subsection, a consolidated local government, urban-6
county government, charter county government, or unified local government shall 7
be considered a county. 8
(13) No license fee or tax imposed under this section shall apply to premiums paid to 9
insurers of municipal bonds, leases, or other debt instruments issued by or on behalf 10
of a city, county, charter county government, urban-county government, 11
consolidated local government, special district, nonprofit corporation, or other 12
political subdivision of the Commonwealth. However, this exemption shall not 13
apply if the bonds, leases, or other debt instruments are issued for profit or on behalf 14
of for-profit or private organizations. 15
(14) A county may impose a license fee or tax covering the entire county or may limit 16
the application of the fee or tax to the unincorporated portions of the county. 17
Section 22. KRS 154.32-010 is amended to read as follows: 18
(1) "Activation date" means the date established in the tax incentive agreement that is 19
within two (2) years of final approval; 20
(2) "Affiliate" means the following: 21
(a) Members of a family, including only brothers and sisters of the whole or half 22
blood, spouse, ancestors, and lineal descendants of an individual; 23
(b) An individual, and a corporation more than fifty percent (50%) in value of the 24
outstanding stock of which is owned, directly or indirectly, by or for that 25
individual; 26
(c) An individual, and a limited liability company of which more than fifty 27 UNOFFICIAL COPY 22 RS BR 1657
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percent (50%) of the capital interest or profits are owned or controlled, 1
directly or indirectly, by or for that individual; 2
(d) Two (2) corporations which are members of the same controlled group, which 3
includes and is limited to: 4
1. One (1) or more chains of corporations connected through stock 5
ownership with a common parent corporation if: 6
a. Stock possessing more than fifty percent (50%) of the total 7
combined voting power of all classes of stock entitled to vote or 8
more than fifty percent (50%) of the total value of shares of all 9
classes of stock of each of the corporations, except the common 10
parent corporation, is owned by one (1) or more of the other 11
corporations; and 12
b. The common parent corporation owns stock possessing more than 13
fifty percent (50%) of the total combined voting power of all 14
classes of stock entitled to vote or more than fifty percent (50%) of 15
the total value of shares of all classes of stock of at least one (1) of 16
the other corporations, excluding, in computing the voting power 17
or value, stock owned directly by the other corporations; or 18
2. Two (2) or more corporations if five (5) or fewer persons who are 19
individuals, estates, or trusts own stock possessing more than fifty 20
percent (50%) of the total combined voting power of all classes of stock 21
entitled to vote or more than fifty percent (50%) of the total value of 22
shares of all classes of stock of each corporation, taking into account the 23
stock ownership of each person only to the extent the stock ownership is 24
identical with respect to each corporation; 25
(e) A grantor and a fiduciary of any trust; 26
(f) A fiduciary of a trust and a fiduciary of another trust, if the same person is a 27 UNOFFICIAL COPY 22 RS BR 1657
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grantor of both trusts; 1
(g) A fiduciary of a trust and a beneficiary of that trust; 2
(h) A fiduciary of a trust and a beneficiary of another trust, if the same person is a 3
grantor of both trusts; 4
(i) A fiduciary of a trust and a corporation more than fifty percent (50%) in value 5
of the outstanding stock of which is owned, directly or indirectly, by or for the 6
trust or by or for a person who is a grantor of the trust; 7
(j) A fiduciary of a trust and a limited liability company more than fifty percent 8
(50%) of the capital interest, or the interest in profits, of which is owned 9
directly or indirectly, by or for the trust or by or for a person who is a grantor 10
of the trust; 11
(k) A corporation, a partnership, or a limited partnership if the same persons own: 12
1. More than fifty percent (50%) in value of the outstanding stock of the 13
corporation; and 14
2. More than fifty percent (50%) of the capital interest, or the profits 15
interest, in the partnership or limited partnership; 16
(l) A corporation and a limited liability company if the same persons own: 17
1. More than fifty percent (50%) in value of the outstanding stock of the 18
corporation; and 19
2. More than fifty percent (50%) of the capital interest or the profits in the 20
limited liability company; 21
(m) A partnership or limited partnership and a limited liability company if the 22
same persons own: 23
1. More than fifty percent (50%) of the capital interest or profits in the 24
partnership or limited partnership; and 25
2. More than fifty percent (50%) of the capital interest or the profits in the 26
limited liability company; 27 UNOFFICIAL COPY 22 RS BR 1657
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(n) An S corporation and another S corporation if the same persons own more 1
than fifty percent (50%) in value of the outstanding stock of each corporation; 2
S corporation designation being the same as that designation under the 3
Internal Revenue Code of 1986, as amended; 4
(o) An S corporation and a C corporation, if the same persons own more than fifty 5
percent (50%) in value of the outstanding stock of each corporation; S and C 6
corporation designations being the same as those designations under the 7
Internal Revenue Code of 1986, as amended; or 8
(p) Two (2) or more limited liability companies, if the same persons own more 9
than fifty percent (50%) of the capital interest or are entitled to more than fifty 10
percent (50%) of the capital profits in the limited liability companies; 11
(3) "Agribusiness" means the processing of raw agricultural products, including but not 12
limited to timber and industrial hemp, or the performance of value-added functions 13
with regard to raw agricultural products; 14
(4) "Alternative fuel production" means a Kentucky operation that primarily produces 15
alternative transportation fuels for sale. The alternative fuel production may produce 16
electricity as a by-product if the primary function of the operations remains the 17
production and sale of alternative transportation fuels; 18
(5) "Alternative transportation fuels" has the same meaning as in KRS 152.715; 19
(6) "Approved company" means an eligible company that has received final approval to 20
receive incentives under this subchapter; 21
(7) "Approved costs" means the amount of eligible costs approved by the authority at 22
final approval; 23
(8) "Authority" means the Kentucky Economic Development Finance Authority 24
established by KRS 154.20-010; 25
(9) "Biomass resources" has the same meaning as in KRS 152.715; 26
(10) "Capital lease" means a lease classified as a capital lease by the Statement of 27 UNOFFICIAL COPY 22 RS BR 1657
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Financial Accounting Standards No. 13, Accounting for Leases, issued by the 1
Financial Accounting Standards Board, November 1976, as amended; 2
(11) "Carbon dioxide transmission pipeline" means the in-state portion of a pipeline, 3
including appurtenant facilities, property rights, and easements, that is used 4
exclusively for the purpose of transporting carbon dioxide to the point of sale, 5
storage, or other carbon management applications; 6
(12) "Coal severing and processing" means activities resulting in the eligible company 7
being subject to the tax imposed by KRS Chapter 143; 8
(13) "Commonwealth" means the Commonwealth of Kentucky; 9
(14) "Confirmed approved costs" means: 10
(a) For insurance innovator economic development projects: 11
1. The documented eligible costs incurred on or before the activation 12
date; and 13
2. If property is leased, the estimated rent to be incurred by the approved 14
company throughout the term of the tax incentive agreement; 15
(b) For owned economic development projects, the documented eligible costs 16
incurred on or before the activation date; or 17
(c)[(b)] For leased economic development projects: 18
1. The documented eligible costs incurred on or before the activation date; 19
and 20
2. Estimated rent to be incurred by the approved company throughout the 21
term of the tax incentive agreement. 22
For both owned and leased economic development projects, "confirmed approved 23
costs" may be less than approved costs, but shall not be more than approved costs; 24
(15) "Department" means the Department of Revenue; 25
(16) "Economic development project" means: 26
(a) The acquisition, leasing, or construction of a new facility; 27 UNOFFICIAL COPY 22 RS BR 1657
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(b) The acquisition, leasing, rehabilitation, or expansion of an existing facility; or 1
(c) The installation and equipping of a facility; 2
by an eligible company. "Economic development project" does not include any 3
economic development project that will result in the replacement of facilities 4
existing in the Commonwealth, except as provided in KRS 154.32-060; 5
(17) (a) "Eligible company" means any corporation, limited liability company, 6
partnership, limited partnership, sole proprietorship, business trust, or any 7
other entity with a proposed economic development project that is engaged in 8
or is planning to be engaged in one (1) or more of the following activities 9
within the Commonwealth: 10
1. Manufacturing; 11
2. Agribusiness; 12
3. Nonretail service or technology; 13
4. Headquarters operations, regardless of the underlying business activity 14
of the company; 15
5. Alternative fuel, gasification, energy-efficient alternative fuel, or 16
renewable energy production; 17
6. Carbon dioxide transmission pipeline; 18
7. Coal severing and processing; [or] 19
8. Hospital operations; or 20
9. Insurance innovation. 21
(b) "Eligible company" does not include companies where the primary activity to 22
be conducted within the Commonwealth is forestry, fishing, the provision of 23
utilities, construction, wholesale trade, retail trade, real estate, rental and 24
leasing, educational services, accommodation and food services, or public 25
administration services; 26
(18) "Eligible costs" means: 27 UNOFFICIAL COPY 22 RS BR 1657
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(a) For insurance innovator economic development projects: 1
1. Start-up costs; 2
2. Costs related to making an innovation available through the 3
regulatory sandbox, as defined in Section 1 of this Act, including the 4
costs incurred for all: 5
a. Wages paid related to the economic development project; and 6
b. Facility costs, including owning or leasing space; 7
(b) For owned economic development projects: 8
1. Start-up costs; 9
2. Nonrecurring obligations incurred for labor and nonrecurring payments 10
to contractors, subcontractors, builders, and materialmen in connection 11
with the economic development project; 12
3. The cost of acquiring land or rights in land and any cost incidental 13
thereto, including recording fees; 14
4. The cost of contract bonds and of insurance of all kinds that may be 15
required or necessary for completion of an economic development 16
project which is not paid by a contractor or otherwise provided for; 17
5. All costs of architectural and engineering services, including test 18
borings, surveys, estimated plans and specifications, preliminary 19
investigations, and supervision of construction, as well as for the 20
performance of all the duties required for construction of the economic 21
development project; 22
6. All costs which are required to be paid under the terms of any contract 23
for the economic development project; 24
7. All costs incurred for construction activities, including site tests and 25
inspections; subsurface site work; excavation; removal of structures, 26
roadways, cemeteries, and other surface obstructions; filling, grading, 27 UNOFFICIAL COPY 22 RS BR 1657
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and providing drainage and storm water retention; installation of utilities 1
such as water, sewer, sewage treatment, gas, electric, communications, 2
and similar facilities; off-site construction of utility extensions to the 3
boundaries of the real estate; construction and installation of railroad 4
spurs as needed to connect the economic development project to existing 5
railways; or similar activities as the authority may determine necessary 6
for construction of the economic development project; and 7
8. All other costs of a nature comparable to those described above; and 8
(c)[(b)] For leased economic development projects: 9
1. Start-up costs; 10
2. Building/leasehold improvements; and 11
3. Fifty percent (50%) of the estimated annual rent for each year of the tax 12
incentive agreement. 13
Notwithstanding any other provision of this subsection, for economic development 14
projects that are not in enhanced incentive counties, the cost of equipment eligible 15
for recovery as an eligible cost shall not exceed twenty thousand dollars ($20,000) 16
for each new full-time job created as of the activation date; 17
(19) "Employee benefits" means payments by an approved company for its full-time 18
employees for health insurance, life insurance, dental insurance, vision insurance, 19
defined benefits, 401(k), or similar plans; 20
(20) "Energy-efficient alternative fuel production" means a Kentucky operation that 21
produces for sale energy-efficient alternative fuels; 22
(21) "Energy-efficient alternative fuels" means homogeneous fuels that: 23
(a) Are produced from processes designed to densify feedstock coal, waste coal, 24
or biomass resources; and 25
(b) Have an energy content that is greater than the feedstock coal, waste coal, or 26
biomass resource; 27 UNOFFICIAL COPY 22 RS BR 1657
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(22) "Enhanced incentive counties" means counties certified by the authority pursuant to 1
KRS 154.32-050; 2
(23) "Final approval" means the action taken by the authority authorizing the eligible 3
company to receive incentives under this subchapter; 4
(24) (a) "Full-time job" means a job held by a person who: 5
1. Is required to work a minimum of thirty-five (35) hours per week; and 6
2. a. Is subject to the Kentucky individual income tax imposed by KRS 7
141.020; or 8
b. Works remotely away from the economic development project if 9
the job meets all of the following conditions: 10
i. Is held by a Kentucky resident; 11
ii. Was created as a result of the economic development project; 12
and 13
iii. The payroll of this job is expensed to the economic 14
development project. 15
(b) "Full-time job" does not include a job held by a resident of any state with a 16
reciprocal agreement between the Commonwealth and the other state as 17
described in KRS 141.070; 18
(25) "Gasification process" means a process that converts any carbon-containing material 19
into a synthesis gas composed primarily of carbon monoxide and hydrogen; 20
(26) "Gasification production" means a Kentucky operation that primarily produces for 21
sale: 22
(a) Alternative transportation fuels; 23
(b) Synthetic natural gas; 24
(c) Chemicals; 25
(d) Chemical feedstocks; or 26
(e) Liquid fuels; 27 UNOFFICIAL COPY 22 RS BR 1657
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from coal, waste coal, coal-processing waste, or biomass resources, through a 1
gasification process. The gasification production may produce electricity as a by-2
product if the primary function of the operations remains the production and sale of 3
alternative transportation fuels, synthetic natural gas, chemicals, chemical 4
feedstocks, or liquid fuels; 5
(27) "Headquarters" means the principal office where the principal executives of the 6
entity are located and from which other personnel, branches, affiliates, offices, or 7
entities are controlled; 8
(28) "Hospital" means a facility licensed by the Cabinet for Health and Family Services 9
under KRS Chapter 216B for the operation of a hospital and the basic services 10
provided by a hospital; 11
(29) "Incentives" means the incentives available under this subchapter, as listed in KRS 12
154.32-020(3); 13
(30) "Insurance innovator" means an eligible company that: 14
(a) Is subject to the tax imposed under KRS 136.320, 136.330, 136.340, 15
136.350, 136.370, 136.390, or 304.3-270; 16
(b) Is a participant, as defined in Section 1 of this Act; and 17
(c) Invests or deposits one hundred thousand dollars ($100,000) in a Kentucky 18
domiciled financial institution; 19
(31) "Job target" means the annual average number of new full-time jobs that the 20
approved company commits to create and maintain at the economic development 21
project, which shall not be less than ten (10) new full-time jobs; 22
(32)[(31)] "Kentucky gross receipts" has the same meaning as in KRS 141.0401; 23
(33)[(32)] "Kentucky gross profits" has the same meaning as in KRS 141.0401; 24
(34)[(33)] "Lease agreement" means an agreement between an approved company and an 25
unrelated entity conveying the right to use a facility, the terms of which reflect an 26
arms' length transaction. "Lease agreement" does not include a capital lease; 27 UNOFFICIAL COPY 22 RS BR 1657
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(35)[(34)] "Leased project" means an economic development project site occupied by an 1
approved company pursuant to a lease agreement; 2
(36)[(35)] "Manufacturing" means any activity involving: 3
(a) Processing, assembling, or production of any property, including the 4
processing resulting in a change in the conditions of the property and any 5
activity related to the processing, assembling, or production of property, 6
together with the storage, warehousing, distribution, and related office 7
facilities; or 8
(b) Production of vital medications, personal protective equipment, or equipment 9
necessary to produce personal protective equipment; 10
(37)[(36)] (a) "Nonretail service or technology" means any activity where service or 11
technology is provided predominantly outside the Commonwealth and 12
designed to serve a multistate, national, or international market. 13
(b) "Nonretail service or technology" includes but is not limited to call centers, 14
centralized administrative or processing centers, telephone or Internet sales 15
order or processing centers, distribution or fulfillment centers, data processing 16
centers, research and development facilities, and other similar activities; 17
(38)[(37)] "Owned project" means an economic development project owned in fee 18
simple by the approved company or an affiliate, or possessed by the approved 19
company or an affiliate pursuant to a capital lease; 20
(39)[(38)] "Personal protective equipment" means protective clothing, helmets, gloves, 21
face shields, goggles, face masks, respirators, and other equipment designed to 22
protect the user from injury or the spread of infection or illness; 23
(40)[(39)] "Preliminary approval" means the action taken by the authority preliminarily 24
approving an eligible company for incentives under this subchapter; 25
(41)[(40)] "Renewable energy production" means a Kentucky operation that utilizes 26
wind power, biomass resources, landfill methane gas, hydropower, solar power, or 27 UNOFFICIAL COPY 22 RS BR 1657
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other similar renewable resources to generate electricity for sale to unrelated 1
entities; 2
(42)[(41)] "Rent" means the actual annual rent or fee paid by an approved company 3
under a lease agreement; 4
(43)[(42)] "Start-up costs" means nonrecurring costs incurred to furnish and equip a 5
facility for an economic development project, including costs incurred for: 6
(a) Computers, furnishings, office equipment, manufacturing equipment, and 7
fixtures; 8
(b) The relocation of out-of-state equipment; and 9
(c) Cost of fixed telecommunications equipment; 10
as certified to the authority in accordance with KRS 154.32-030; 11
(44)[(43)] "Synthetic natural gas" means the same thing as in KRS 152.715; 12
(45)[(44)] "Tax incentive agreement" means the agreement entered into pursuant to KRS 13
154.32-040 between the authority and an approved company; 14
(46)[(45)] "Term" means the period of time for which a tax incentive agreement may be 15
in effect, which shall not exceed fifteen (15) years for an economic development 16
project located in an enhanced incentive county, or ten (10) years for an economic 17
development project not located in any other county; 18
(47)[(46)] "Vital medications" means any drug or biologic used to prevent or treat a 19
serious life-threatening disease or medical condition for which there is no other 20
available source with sufficient supply of that drug or biologic or alternative drug or 21
biologic; 22
(48)[(47)] "Wage" means the per hour earnings of a full-time employee, including 23
wages, tips, overtime, bonuses, and commissions, as reflected on the employee's 24
federal form W-2 wage and tax statement, but excludes employee benefits; and 25
(49)[(48)] "Wage target" means the average total hourly compensation amount, including 26
the minimum wage and employee benefits, that the approved company commits to 27 UNOFFICIAL COPY 22 RS BR 1657
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meet for all new full-time jobs created and maintained as a result of the economic 1
development project, which shall not be less than: 2
(a) One hundred twenty-five percent (125%) of the federal minimum wage in 3
enhanced incentive counties; or 4
(b) One hundred fifty percent (150%) of the federal minimum wage in all other 5
counties. 6
Section 23. KRS 154.32-020 is amended to read as follows: 7
(1) The purposes of this subchapter are: 8
(a) To provide incentives for eligible companies and to encourage the location or 9
expansion of manufacturing facilities, agribusiness operations, nonretail 10
service or technology facilities, headquarters operations, alternative fuel 11
production facilities, gasification production facilities, energy-efficient 12
alternative fuel production facilities, renewable energy production facilities, 13
carbon dioxide transmission pipelines, coal severing and processing,[ and] 14
hospital operations, and insurance innovation in the Commonwealth to 15
advance the public purposes of: 16
1. Creation of new jobs that, but for the incentives offered by the authority, 17
would not exist within the Commonwealth; 18
2. Creation of new sources of tax revenues for the support of public 19
services provided by the Commonwealth; 20
3. Improvement in the quality of life for Kentucky citizens through the 21
creation of sustainable jobs with higher salaries;[ and] 22
4. Providing an economic stimulus to bolster in-state production of vital 23
medications and personal protective equipment; and 24
5. Fostering an environment for innovation in the financial and 25
insurance industry within the Commonwealth; and 26
(b) To provide enhanced incentives for companies that locate in enhanced 27 UNOFFICIAL COPY 22 RS BR 1657
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incentive counties in recognition of the depressed economic conditions in 1
those counties and the increased need for the growth and development caused 2
by the depressed economic conditions. 3
(2) To qualify for the incentives provided by subsection (3) of this section, an approved 4
company shall: 5
(a) Incur eligible costs of at least one hundred thousand dollars ($100,000); 6
(b) Create at least ten (10) new full-time jobs and maintain an annual average 7
number of at least ten (10) new full-time jobs; and 8
(c) 1. Pay at least ninety percent (90%) of all new full-time employees whose 9
jobs were created as a result of the economic development project a 10
minimum wage of at least one hundred twenty-five percent (125%) of 11
the federal minimum wage in enhanced incentive counties, and one 12
hundred fifty percent (150%) of the federal minimum wage in other 13
counties throughout the term of the economic development project; and 14
2. Provide employee benefits for all new full-time jobs equal to at least 15
fifteen percent (15%) of the minimum wage requirement established by 16
subparagraph 1. of this paragraph. If the eligible company does not 17
provide employee benefits equal to at least fifteen percent (15%) of the 18
minimum wage requirement established by subparagraph 1. of this 19
paragraph, the eligible company may still qualify for incentives if it 20
provides the full-time employees hired as a result of the economic 21
development project total hourly compensation equal to or greater than 22
one hundred fifteen percent (115%) of the minimum wage requirement 23
established in subparagraph 1. of this paragraph through increased 24
hourly wages combined with employee benefits; or 25
(d) Produce vital medications, personal protective equipment, or equipment 26
necessary to produce personal protective equipment. 27 UNOFFICIAL COPY 22 RS BR 1657
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(3) The incentives available under this subchapter are as follows: 1
(a) Tax credits of up to one hundred percent (100%) of the: 2
1. Kentucky income tax imposed under KRS 141.020 or 141.040 and the 3
limited liability entity tax imposed under KRS 141.0401 on the income, 4
Kentucky gross profits, or Kentucky gross receipts of the approved 5
company generated by or arising from the economic development 6
project, as set forth in KRS 141.415 and 154.32-070; or 7
2. Insurance premiums taxes imposed under KRS 136.320, 136.330, 8
136.340, 136.350, 136.370, 136.390, or 304.3-270; 9
(b) Authorization for the approved company to impose a wage assessment against 10
the gross wages of each new employee subject to the Kentucky income tax as 11
provided in KRS 154.32-090; and 12
(c) Notwithstanding any provision of law to the contrary, for any economic 13
development project with an eligible investment of more than two hundred 14
million dollars ($200,000,000), the authority may authorize approval to the 15
economic development project based upon terms and incentives applicable to 16
economic development project locating in an enhanced incentive county. 17
(4) The General Assembly hereby finds and declares that the authority granted in this 18
subchapter and the purposes accomplished hereby are proper governmental and 19
public purposes for which public moneys may be expended, and that the 20
inducement of the location of economic development projects within the 21
Commonwealth is of paramount importance to the economic well-being of the 22
Commonwealth. 23
Section 24. KRS 154.32-070 is amended to read as follows: 24
(1) For taxable years beginning after December 31, 2009, an approved company may be 25
eligible for a credit of up to one hundred percent (100%) of the incentives provided 26
under subsection (3) of Section 23 of this Act[Kentucky income tax imposed under 27 UNOFFICIAL COPY 22 RS BR 1657
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KRS 141.020 or 141.040, and the limited liability entity tax imposed under KRS 1
141.0401], that would otherwise be owed by the approved company to the 2
Commonwealth[ for the approved company's taxable year, on the income, Kentucky 3
gross profits, or Kentucky gross receipts of the approved company generated by or 4
arising from the economic development project]. 5
(2) The credit allowed the approved company shall be applied against both the income 6
tax imposed by KRS 141.020 or 141.040, and the limited liability entity tax 7
imposed by KRS 141.0401, with credit ordering as provided in KRS 141.0205, for 8
the taxable year for which the tax return of the approved company is filed, or the 9
insurance premiums taxes due, subject to the annual maximum set forth in the tax 10
incentive agreement. Any credit not used in the year in which it was first available 11
may be carried forward to subsequent years, provided that no credit may be carried 12
forward beyond the term of the tax incentive agreement. 13
(3) The approved company shall not be required to pay estimated tax payments under 14
KRS 141.044 on the Kentucky taxable income, Kentucky gross receipts, or 15
Kentucky gross profits generated by or arising from the eligible project. 16
(4) The credit provided by this section shall be determined as provided in KRS 141.415 17
or Section 26 of this Act. 18
(5) The amount of incentives allowed in any year shall not exceed the lesser of the tax 19
liability of the approved company related to the economic development project for 20
that year or the annual maximum approved costs set forth in the tax incentive 21
agreement. The incentives shall be allowed for: 22
(a) Each fiscal year of the approved company during the term of the tax incentive 23
agreement for which a tax return is filed by the approved company; or 24
(b) The annual return required related to insurance premiums taxes. 25
Section 25. KRS 154.32-100 is amended to read as follows: 26
By October 1 of each year, the department shall certify to the authority and the Interim 27 UNOFFICIAL COPY 22 RS BR 1657
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Joint Committee on Appropriations and Revenue, in the form of an annual report, 1
aggregate tax credits claimed on tax returns filed during the fiscal year ending June 30 of 2
that year and aggregate assessments taken during the prior calendar year by approved 3
companies with respect to their economic development projects under this subchapter, 4
and shall certify to the authority and the Interim Joint Committee on Appropriations 5
and Revenue, within ninety (90) days from the date an approved company has filed its 6
state income tax return, when an approved company has taken tax credits or assessments 7
equal to the total incentives available to the approved company. 8
SECTION 26. A NEW SECTION OF KRS CHAPTER 136 IS CREATED TO 9
BE NUMBERED AS KRS 136.401 AND TO READ AS FOLLOWS: 10
(1) As used in this section: 11
(a) "Approved company" has the same meaning as in Section 22 of this Act; 12
(b) "Economic development project" has the same meaning as in Section 22 of 13
this Act; and 14
(c) "Tax credit" means the tax credit allowed in Section 24 of this Act. 15
(2) There is hereby allowed a nonrefundable credit for taxpayers that, as insurance 16
innovators, are approved for the incentives provided in Section 23 of this Act. The 17
credit may be claimed against the tax imposed by: 18
(a) KRS 136.320; 19
(b) KRS 136.330; 20
(c) KRS 136.340; 21
(d) KRS 136.350; 22
(e) KRS 136.370; 23
(f) KRS 136.390; or 24
(g) KRS 304.3-270; 25
with the ordering of the credit as provided in Section 27 of this Act. 26
(3) The credit may not be sold, transferred, or allocated to any other taxpayer. 27 UNOFFICIAL COPY 22 RS BR 1657
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(4) If the amount of the credit allowed for a year under subsection (2) of this section 1
exceeds the tax otherwise due for that year, the excess shall be carried forward to 2
succeeding years until fully used, as provided under Section 24 of this Act. 3
(5) On or before December 1, 2023, and annually thereafter as long as the credit is 4
claimed by a taxpayer, the department shall submit a written report to the Interim 5
Joint Committee on Appropriations and Revenue, providing cumulative 6
information by taxable year: 7
(a) The number of taxpayers claiming a credit under this section, and the total 8
value of credits claimed; 9
(b) The total value of approved costs approved by the Cabinet for Economic 10
Development; 11
(c) The location by county of each approved economic development project 12
claiming a credit under this section; and 13
(d) The number and total value of any tax credits revoked by the Cabinet for 14
Economic Development during the fiscal year, with an explanation of the 15
reason for each revocation. 16
SECTION 27. A NEW SECTION OF KRS CHAPTER 136 IS CREATED TO 17
BE NUMBERED AS KRS 136.405 AND TO READ AS FOLLOWS: 18
(1) If a taxpayer is entitled to more than one (1) of the tax credits permitted against 19
the taxes imposed by KRS 136.320, 136.330 136.340, 136.350, 136.370, 136.390, 20
or 304.3-270, the credits shall be taken in the following order: 21
(a) The investment fund credit permitted by KRS 154.20-258; 22
(b) The New Markets Development Program credit permitted by KRS 141.434; 23
and 24
(c) The insurance innovator credit permitted by Section 23 of this Act. 25
(2) A taxpayer claiming a credit against any of the insurance premiums taxes 26
imposed by KRS 136.320, 136.330, 136.340, 136.350, 136.370, or 136.390 shall 27 UNOFFICIAL COPY 22 RS BR 1657
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not be required to pay additional retaliatory tax imposed by KRS 304.3-270. 1
Section 28. KRS 131.190 is amended to read as follows: 2
(1) No present or former commissioner or employee of the department, present or 3
former member of a county board of assessment appeals, present or former property 4
valuation administrator or employee, present or former secretary or employee of the 5
Finance and Administration Cabinet, former secretary or employee of the Revenue 6
Cabinet, or any other person, shall intentionally and without authorization inspect or 7
divulge any information acquired by him or her of the affairs of any person, or 8
information regarding the tax schedules, returns, or reports required to be filed with 9
the department or other proper officer, or any information produced by a hearing or 10
investigation, insofar as the information may have to do with the affairs of the 11
person's business. 12
(2) The prohibition established by subsection (1) of this section shall not extend to: 13
(a) Information required in prosecutions for making false reports or returns of 14
property for taxation, or any other infraction of the tax laws; 15
(b) Any matter properly entered upon any assessment record, or in any way made 16
a matter of public record; 17
(c) Furnishing any taxpayer or his or her properly authorized agent with 18
information respecting his or her own return; 19
(d) Testimony provided by the commissioner or any employee of the department 20
in any court, or the introduction as evidence of returns or reports filed with the 21
department, in an action for violation of state or federal tax laws or in any 22
action challenging state or federal tax laws; 23
(e) Providing an owner of unmined coal, oil or gas reserves, and other mineral or 24
energy resources assessed under KRS 132.820, or owners of surface land 25
under which the unmined minerals lie, factual information about the owner's 26
property derived from third-party returns filed for that owner's property, under 27 UNOFFICIAL COPY 22 RS BR 1657
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the provisions of KRS 132.820, that is used to determine the owner's 1
assessment. This information shall be provided to the owner on a confidential 2
basis, and the owner shall be subject to the penalties provided in KRS 3
131.990(2). The third-party filer shall be given prior notice of any disclosure 4
of information to the owner that was provided by the third-party filer; 5
(f) Providing to a third-party purchaser pursuant to an order entered in a 6
foreclosure action filed in a court of competent jurisdiction, factual 7
information related to the owner or lessee of coal, oil, gas reserves, or any 8
other mineral resources assessed under KRS 132.820. The department may 9
promulgate an administrative regulation establishing a fee schedule for the 10
provision of the information described in this paragraph. Any fee imposed 11
shall not exceed the greater of the actual cost of providing the information or 12
ten dollars ($10); 13
(g) Providing information to a licensing agency, the Transportation Cabinet, or 14
the Kentucky Supreme Court under KRS 131.1817; 15
(h) Statistics of gasoline and special fuels gallonage reported to the department 16
under KRS 138.210 to 138.448; 17
(i) Providing any utility gross receipts license tax return information that is 18
necessary to administer the provisions of KRS 160.613 to 160.617 to 19
applicable school districts on a confidential basis; 20
(j) Providing documents, data, or other information to a third party pursuant to an 21
order issued by a court of competent jurisdiction; or 22
(k) Providing information to the Legislative Research Commission under: 23
1. KRS 139.519 for purposes of the sales and use tax refund on building 24
materials used for disaster recovery; 25
2. KRS 141.436 for purposes of the energy efficiency products credits; 26
3. KRS 141.437 for purposes of the ENERGY STAR home and the 27 UNOFFICIAL COPY 22 RS BR 1657
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ENERGY STAR manufactured home credits; 1
4. KRS 141.383 for purposes of the film industry incentives; 2
5. KRS 154.26-095 for purposes of the Kentucky industrial revitalization 3
tax credits and the job assessment fees; 4
6. KRS 141.068 for purposes of the Kentucky investment fund; 5
7. KRS 141.396 for purposes of the angel investor tax credit; 6
8. KRS 141.389 for purposes of the distilled spirits credit; 7
9. KRS 141.408 for purposes of the inventory credit; 8
10. KRS 141.390 for purposes of the recycling and composting credit; 9
11. KRS 141.3841 for purposes of the selling farmer tax credit; 10
12. KRS 141.4231 for purposes of the renewable chemical production tax 11
credit; 12
13. KRS 141.524 for purposes of the Education Opportunity Account 13
Program tax credit; 14
14. KRS 141.398 for purposes of the development area tax credit;[ and] 15
15. KRS 139.516 for the purposes of the sales and use tax exemption on the 16
commercial mining of cryptocurrency; and 17
16. Sections 25 and 27 of this Act for purposes of the insurance innovator 18
tax credit. 19
(3) The commissioner shall make available any information for official use only and on 20
a confidential basis to the proper officer, agency, board or commission of this state, 21
any Kentucky county, any Kentucky city, any other state, or the federal government, 22
under reciprocal agreements whereby the department shall receive similar or useful 23
information in return. 24
(4) Access to and inspection of information received from the Internal Revenue Service 25
is for department use only, and is restricted to tax administration purposes. 26
Information received from the Internal Revenue Service shall not be made available 27 UNOFFICIAL COPY 22 RS BR 1657
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to any other agency of state government, or any county, city, or other state, and shall 1
not be inspected intentionally and without authorization by any present secretary or 2
employee of the Finance and Administration Cabinet, commissioner or employee of 3
the department, or any other person. 4
(5) Statistics of crude oil as reported to the department under the crude oil excise tax 5
requirements of KRS Chapter 137 and statistics of natural gas production as 6
reported to the department under the natural resources severance tax requirements 7
of KRS Chapter 143A may be made public by the department by release to the 8
Energy and Environment Cabinet, Department for Natural Resources. 9
(6) Notwithstanding any provision of law to the contrary, beginning with mine-map 10
submissions for the 1989 tax year, the department may make public or divulge only 11
those portions of mine maps submitted by taxpayers to the department pursuant to 12
KRS Chapter 132 for ad valorem tax purposes that depict the boundaries of mined-13
out parcel areas. These electronic maps shall not be relied upon to determine actual 14
boundaries of mined-out parcel areas. Property boundaries contained in mine maps 15
required under KRS Chapters 350 and 352 shall not be construed to constitute land 16
surveying or boundary surveys as defined by KRS 322.010 and any administrative 17
regulations promulgated thereto. 18
Section 29. The following KRS sections are repealed: 19
304.3-700 Definitions for KRS 304.3-700 to 304.3-735. 20
304.3-705 Application for admission to regulatory sandbox -- Disclosure and stability 21
requirements -- Disqualifying factors. 22
304.3-710 Director of insurance innovation -- Review of applications -- Notice of 23
acceptance or rejection -- Hearing. 24
304.3-715 Limited no-action letter -- Safe harbor of limited letter -- Publication of 25
limited letter on department's Web site. 26
304.3-720 One-year period for beta test -- Extension by commissioner -- Terms and 27 UNOFFICIAL COPY 22 RS BR 1657
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conditions -- Early termination -- Cease and desist order -- Appeal. 1
304.3-725 Completion and review of beta test -- Issuance of extended no-action letter or 2
notice declining to issue extended letter -- Safe harbor of extended letter -- Use of 3
innovation and conduct permitted -- Hearing -- Publication of extended letter on 4
department's Web site. 5
304.3-730 Confidentiality of financial information -- Permissible disclosures in 6
extended no-action letter. 7
304.3-735 Annual report. 8
Section 30. Notwithstanding subsection (4)(b) of Section 12 of this Act, initial 9
appointments to the Kentucky Innovation Council established in Section 12 of this Act 10
shall be staggered so that three of the appointments expire at three years after 11
appointment. Thereafter, all appointments to the council shall be for terms of two years. 12
Section 31. Sections 1 to 15 of this Act may be cited as the Insurance and 13
Related Innovation Sandbox Law. 14