Page 1 of 3 LRC 2023-BR1754-HB5
COMMONWEALTH OF KENTUCKY FISCAL NOTE STATEMENT
LEGISLATIVE RESEARCH COMMISSION
2023 REGULAR SESSION
MEASURE
2023 BR NUMBER 1754 HOUSE BILL NUMBER 5
TITLE AN ACT relating to property tax on distilled spirits.
SPONSOR Representative Jason Petrie
FISCAL SUMMARY
STATE FISCAL IMPACT: YES NO UNCERTAIN
OTHER FISCAL STATEMENT(S) THAT MAY APPLY: ACTUARIAL ANALYSIS
LOCAL MANDATE CORRECTIONS IMPACT HEALTH BENEFIT MANDATE
APPROPRIATION UNIT(S) IMPACTED:
FUND(S) IMPACTED: GENERAL ROAD FEDERAL RESTRICTED
FISCAL ESTIMATES 2022-2023 2023-2024 ANNUAL IMPACT AT
FULL IMPLEMENTATION
REVENUES See Chart One
EXPENDITURES Indeterminable
NET EFFECT (Indeterminable)
( ) indicates a decrease/negative
PURPOSE OF MEASURE: Section 1 of the proposal provides an exemption from the state and
local property taxes on distilled spirits inventory, starting with the January 1, 2026, assessment.
Property taxes on distilled spirits are due on September 15
th
following each assessment date.
Therefore, Section 1 does not have a fiscal impact in the current or next biennium.
Section 2 of the proposal sunsets the existing distilled spirits inventory tax credit beginning with
the 2024 tax year. HB 5 would permit the accumulated credits that have not been claimed by the
end of the 2023 tax year to be claimed by the taxpayer in any taxable year starting with the 2024
tax year. The first filing date for the 2024 income tax returns will begin on April 15, 2025, and
will continue thereafter based on whether the taxpayer has a fiscal year accounting period and
whether the income tax return is filed under an extension of time to file that return. Therefore,
Section 2 does not have a fiscal impact in the current biennium.
FISCAL EXPLANATION: There is no fiscal impact in the current biennium. Looking forward
into the next biennium and the future, the following information is presented as an estimate,
however, a specific fiscal impact cannot be determined for the following reasons:
• The Consensus Forecasting Group has not determined the economic conditions that may
impact the Commonwealth during the next biennium;
• Confidential tax data related to specific local jurisdictions is not available to the
Legislative Research Commission staff; and Page 2 of 3 LRC 2023-BR1754-HB5
• There is missing data to make a complete estimate at this time.
The following chart displays the estimated amounts of local tax loss and state tax loss related to
the property tax exemption of distilled spirits in a bonded warehouse.
Estimated Reduction in State and Local Property Tax Receipts Related to Distilled Spirits
Chart One
Tax Year Tax Exemption Local Tax Loss State Tax Loss Total Tax Loss
2026 3% $1,385,151 $97,354 $1,482,504
2027 6% 2,770,301 194,708 2,965,009
2028 9% 4,155,452 292,062 4,447,513
2029 13% 6,002,319 421,867 6,424,186
2030 17% 7,849,186 551,672 8,400,858
2031 21% 9,696,054 681,447 10,337,531
2032 26% 12,004,638 843,733 10,377,531
2033 32% 14,774,939 1,038,441 12,848,371
2034 38% 17,545,240 1,233,149 18,778,389
2035 44% 20,315,541 1,427,856 21,743,398
2036 50% 23,085,843 1,622,564 24,708,407
2037 65% 30,011,595 2,109,333 32,120,929
2038 80% 36,937,348 2,596,103 39,533,451
2039 100% 46,171,685 3,245,128 49,416,813
Estimated Loss from 2026 to 2039 $232,705,293 $16,355,446 $249,060,739
Source: Kentucky Department of Revenue and LRC staff estimated calculations.
The following chart displays the estimated amounts of estimated income tax credit that may be
available beginning in 2024:
Chart Two
Tax Year Expected Local
Taxes
Actual State
Taxes
Credits Taken Difference
2015 $14,242,945 $971,772 N.A.* $15,241,717
2016 16,750,998 1,099,035 1,502,456 16,347,577
2017 18,394,880 1,168,465 2,198,035 17,365,310
2018 21,261,267 1,383,935 4,919,545 17,725,657
2019 23,796,056 1,538,154 727,608 24,606,602
2020 26,731,190 1,753,569 824,899 27,659,860
2021 31,369,816 2,023,703 274,501 33,119,018
2022 37,389,756 2,384,002 N.A.* 39,773,758
Total $189,936,908 $12,322,635 $10,447,044 $191,812,499
Source: Kentucky Department of Revenue.
* No returns claiming a credit were filed for the 2015 tax year. DOR data on the amount of distilled spirits claimed
for the 2022 tax year is not available at this time.
Page 3 of 3 LRC 2023-BR1754-HB5
Support Education Excellence in Kentucky (SEEK) – The legislation would require
additional General Fund contributions to the SEEK program. Pursuant to KRS 160.470(9)(a),
school districts are required to levy a minimum tax of $.30 per $100 of assessed property to
participate in the SEEK program. Since this legislation gradually eliminates the ad valorem tax
on distilled spirits, school districts that tax distilled spirits will contribute less local effort to the
SEEK program than they would if distilled spirits remained taxable property.
This fiscal note does not address any fiscal impact to local school districts.
DATA SOURCE(S): Kentucky Department for Revenue and LRC Staff Economists
PREPARER: Jennifer Hays NOTE NUMBER: 60 REVIEW: JAB DATE: 3/1/2023