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AN ACT relating to tax incentives for first-time home buyers. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. A NEW SECTION OF KRS CHAPTER 141 IS CREATED TO 3
READ AS FOLLOWS: 4
(1) As used in this section: 5
(a) "Eligible costs" means any down payment or closing cost associated with 6
the purchase of a qualified principal residence and does not include any 7
costs incurred prior to the establishment of an eligible savings account; 8
(b) "Eligible savings account" means an account established and designated by 9
a financial institution as having the sole purpose of saving for eligible costs 10
associated with the purchase of a qualified principal residence by a first-11
time home buyer; 12
(c) "Financial institution" means a financial institution as defined in KRS 13
286.11-003 that has a physical location in this state; 14
(d) "First-time home buyer" means an individual who purchases or has the 15
intent to purchase a qualified principal residence in this state and has not 16
had an ownership interest in a principal residence for a minimum of ten 17
(10) years prior to the date in which tax incentives are utilized under this 18
section; and 19
(e) "Qualified principal residence" means a single-family residence within this 20
state and that meets the qualifications for a principal residence for purposes 21
of Section 121 of the Internal Revenue Code. 22
(2) (a) For taxable years beginning on or after January 1, 2025, but before 23
January 1, 2035, a first-time home buyer shall be allowed a deduction in 24
each taxable year for contributions made into an eligible savings account 25
and may exclude any interest earned therefrom. 26
(b) Deductions and exclusions under paragraph (a) of this subsection in any 27 UNOFFICIAL COPY 24 RS BR 1142
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taxable year shall be limited to: 1
1. Five thousand dollars ($5,000) for single individuals or taxpayers 2
filing a separate return; or 3
2. Ten thousand dollars ($10,000) for married individuals filing 4
separately on a combined form or a joint tax return. 5
(3) The total of tax incentives claimed under this section for taxable years beginning 6
on or after January 1, 2025, but before January 1, 2035, shall not exceed: 7
(a) Twenty-five thousand dollars ($25,000) for single account holders filing a 8
single return or separate returns; or 9
(b) Fifty thousand dollars ($50,000) for joint account holders filing separately 10
on a combined form or a joint tax return. 11
(4) (a) The department may request bank statements or other necessary forms of 12
verification to confirm: 13
1. The annual contribution made to an eligible savings account; 14
2. The total interest income earned from an eligible savings account; or 15
3. That funds were withdrawn from an eligible savings account for 16
eligible costs by a first-time home buyer. 17
(b) If a first-time home buyer withdraws and uses funds from an eligible 18
savings account for something other than eligible costs, recapture of the 19
deduction or exclusion shall be claimed as an addition to income on the 20
return for the taxable year in which the funds were withdrawn. 21
(c) Notwithstanding paragraph (b) of this subsection, funds may be withdrawn 22
from an eligible savings account for circumstances that involve the: 23
1. Death or disability of an account holder; 24
2. Exhaustion of an account holder's unemployment compensation as a 25
result of a job loss; 26
3. Disbursement of account assets under a bankruptcy proceeding in 27 UNOFFICIAL COPY 24 RS BR 1142
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accordance with the United States Bankruptcy Code, 11 U.S.C. secs. 1
101 to 110; or 2
4. Transfer or deposit of funds into another eligible savings account 3
within sixty (60) days of the withdrawal. 4
(5) (a) In order for the General Assembly to evaluate the effectiveness of this 5
section, the department shall submit the following information to the 6
Legislative Research Commission and the Interim Joint Committee on 7
Appropriations and Revenue on or before November 1, 2026, and on or 8
before each November 1 thereafter as long as the eligible savings account 9
tax deduction and the exclusion may be claimed on a return: 10
1. The location of the taxpayer, by county, as reflected on the return filed 11
for the taxable year; 12
2. The amount of eligible savings account contribution deductions 13
claimed by the taxpayer for the taxable year; 14
3. The amount of the eligible savings account income exclusions claimed 15
by the taxpayer for the taxable year; 16
4. The total cumulative amount of all eligible savings account 17
contribution deductions claimed for the taxable year; 18
5. The total cumulative amount of all eligible savings account income 19
exclusions claimed for the taxable; and 20
6. Based on ranges of adjusted gross income of no larger than five 21
thousand dollars ($5,000) for the taxable year, the total amount of tax 22
deductions claimed and the total number of returns claiming a tax 23
deduction for each adjusted gross income range; and 24
7. Based on ranges of adjusted gross income of no larger than five 25
thousand dollars ($5,000) for the taxable year, the total amount of 26
exclusions claimed and the total number of returns claiming an 27 UNOFFICIAL COPY 24 RS BR 1142
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exclusion of interest for each adjusted gross income range. 1
(b) The information required to be reported under this section shall not be 2
considered confidential taxpayer information and shall not be subject to 3
KRS Chapter 131 or any other provisions of the Kentucky Revised Statutes 4
prohibiting disclosure or reporting of information. 5
Section 2. KRS 141.019 is amended to read as follows: 6
In the case of taxpayers other than corporations: 7
(1) Adjusted gross income shall be calculated by subtracting from the gross income of 8
those taxpayers the deductions allowed individuals by Section 62 of the Internal 9
Revenue Code and adjusting as follows: 10
(a) Exclude income that is exempt from state taxation by the Kentucky 11
Constitution and the Constitution and statutory laws of the United States; 12
(b) Exclude income from supplemental annuities provided by the Railroad 13
Retirement Act of 1937 as amended and which are subject to federal income 14
tax by Pub. L. No. 89-699; 15
(c) Include interest income derived from obligations of sister states and political 16
subdivisions thereof; 17
(d) Exclude employee pension contributions picked up as provided for in KRS 18
6.505, 16.545, 21.360, 61.523, 61.560, 65.155, 67A.320, 67A.510, 78.610, 19
and 161.540 upon a ruling by the Internal Revenue Service or the federal 20
courts that these contributions shall not be included as gross income until such 21
time as the contributions are distributed or made available to the employee; 22
(e) Exclude Social Security and railroad retirement benefits subject to federal 23
income tax; 24
(f) Exclude any money received because of a settlement or judgment in a lawsuit 25
brought against a manufacturer or distributor of "Agent Orange" for damages 26
resulting from exposure to Agent Orange by a member or veteran of the 27 UNOFFICIAL COPY 24 RS BR 1142
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Armed Forces of the United States or any dependent of such person who 1
served in Vietnam; 2
(g) 1. a. For taxable years beginning after December 31, 2005, but before 3
January 1, 2018, exclude up to forty-one thousand one hundred ten 4
dollars ($41,110) of total distributions from pension plans, annuity 5
contracts, profit-sharing plans, retirement plans, or employee 6
savings plans; and 7
b. For taxable years beginning on or after January 1, 2018, exclude 8
up to thirty-one thousand one hundred ten dollars ($31,110) of 9
total distributions from pension plans, annuity contracts, profit-10
sharing plans, retirement plans, or employee savings plans. 11
2. As used in this paragraph: 12
a. "Annuity contract" has the same meaning as set forth in Section 13
1035 of the Internal Revenue Code; 14
b. "Distributions" includes but is not limited to any lump-sum 15
distribution from pension or profit-sharing plans qualifying for the 16
income tax averaging provisions of Section 402 of the Internal 17
Revenue Code; any distribution from an individual retirement 18
account as defined in Section 408 of the Internal Revenue Code; 19
and any disability pension distribution; and 20
c. "Pension plans, profit-sharing plans, retirement plans, or employee 21
savings plans" means any trust or other entity created or organized 22
under a written retirement plan and forming part of a stock bonus, 23
pension, or profit-sharing plan of a public or private employer for 24
the exclusive benefit of employees or their beneficiaries and 25
includes plans qualified or unqualified under Section 401 of the 26
Internal Revenue Code and individual retirement accounts as 27 UNOFFICIAL COPY 24 RS BR 1142
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defined in Section 408 of the Internal Revenue Code; 1
(h) 1. a. Exclude the portion of the distributive share of a shareholder's net 2
income from an S corporation subject to the franchise tax imposed 3
under KRS 136.505 or the capital stock tax imposed under KRS 4
136.300; and 5
b. Exclude the portion of the distributive share of a shareholder's net 6
income from an S corporation related to a qualified subchapter S 7
subsidiary subject to the franchise tax imposed under KRS 8
136.505 or the capital stock tax imposed under KRS 136.300. 9
2. The shareholder's basis of stock held in an S corporation where the S 10
corporation or its qualified subchapter S subsidiary is subject to the 11
franchise tax imposed under KRS 136.505 or the capital stock tax 12
imposed under KRS 136.300 shall be the same as the basis for federal 13
income tax purposes; 14
(i) Exclude income received for services performed as a precinct worker for 15
election training or for working at election booths in state, county, and local 16
primaries or regular or special elections; 17
(j) Exclude any capital gains income attributable to property taken by eminent 18
domain; 19
(k) 1. Exclude all income from all sources for members of the Armed Forces 20
who are on active duty and who are killed in the line of duty, for the 21
year during which the death occurred and the year prior to the year 22
during which the death occurred. 23
2. For the purposes of this paragraph, "all income from all sources" shall 24
include all federal and state death benefits payable to the estate or any 25
beneficiaries; 26
(l) Exclude all military pay received by members of the Armed Forces while on 27 UNOFFICIAL COPY 24 RS BR 1142
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active duty; 1
(m) 1. Include the amount deducted for depreciation under 26 U.S.C. sec. 167 2
or 168; and 3
2. Exclude the amounts allowed by KRS 141.0101 for depreciation; 4
(n) Include the amount deducted under 26 U.S.C. sec. 199A; 5
(o) Ignore any change in the cost basis of the surviving spouse's share of property 6
owned by a Kentucky community property trust occurring for federal income 7
tax purposes as a result of the death of the predeceasing spouse; 8
(p) Allow the same treatment allowed under Pub. L. No. 116-260, secs. 276 and 9
278, related to the tax treatment of forgiven covered loans, deductions 10
attributable to those loans, and tax attributes associated with those loans for 11
taxable years ending on or after March 27, 2020, but before January 1, 2022;[ 12
and] 13
(q) For taxable years beginning on or after January 1, 2020, but before March 11, 14
2023, allow the same treatment of restaurant revitalization grants in 15
accordance with Pub. L. No. 117-2, sec. 9673 and 15 U.S.C. sec. 9009c, 16
related to the tax treatment of the grants, deductions attributable to those 17
grants, and tax attributes associated with those grants;[ and] 18
(r) For taxable years beginning on or after January 1, 2025, but before 19
January 1, 2035, exclude amounts contributed to an eligible savings 20
account for use by a first-time home buyer in accordance with Section 1 of 21
this Act; and 22
(s) For taxable years beginning on or after January 1, 2025, but before 23
January 1, 2035, exclude interest income received from an eligible savings 24
account for use by a first-time home buyer in accordance with Section 1 of 25
this Act; and 26
(2) Net income shall be calculated by subtracting from adjusted gross income all the 27 UNOFFICIAL COPY 24 RS BR 1142
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deductions allowed individuals by Chapter 1 of the Internal Revenue Code, as 1
modified by KRS 141.0101, except: 2
(a) Any deduction allowed by 26 U.S.C. sec. 164 for taxes; 3
(b) Any deduction allowed by 26 U.S.C. sec. 165 for losses, except wagering 4
losses allowed under Section 165(d) of the Internal Revenue Code; 5
(c) Any deduction allowed by 26 U.S.C. sec. 213 for medical care expenses; 6
(d) Any deduction allowed by 26 U.S.C. sec. 217 for moving expenses; 7
(e) Any deduction allowed by 26 U.S.C. sec. 67 for any other miscellaneous 8
deduction; 9
(f) Any deduction allowed by the Internal Revenue Code for amounts allowable 10
under KRS 140.090(1)(h) in calculating the value of the distributive shares of 11
the estate of a decedent, unless there is filed with the income return a 12
statement that the deduction has not been claimed under KRS 140.090(1)(h); 13
(g) Any deduction allowed by 26 U.S.C. sec. 151 for personal exemptions and 14
any other deductions in lieu thereof; 15
(h) Any deduction allowed for amounts paid to any club, organization, or 16
establishment which has been determined by the courts or an agency 17
established by the General Assembly and charged with enforcing the civil 18
rights laws of the Commonwealth, not to afford full and equal membership 19
and full and equal enjoyment of its goods, services, facilities, privileges, 20
advantages, or accommodations to any person because of race, color, religion, 21
national origin, or sex, except nothing shall be construed to deny a deduction 22
for amounts paid to any religious or denominational club, group, or 23
establishment or any organization operated solely for charitable or educational 24
purposes which restricts membership to persons of the same religion or 25
denomination in order to promote the religious principles for which it is 26
established and maintained; and 27 UNOFFICIAL COPY 24 RS BR 1142
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(i) A taxpayer may elect to claim the standard deduction allowed by KRS 1
141.081 instead of itemized deductions allowed pursuant to 26 U.S.C. sec. 63 2
and as modified by this section. 3
Section 3. KRS 131.190 is amended to read as follows: 4
(1) No present or former commissioner or employee of the department, present or 5
former member of a county board of assessment appeals, present or former property 6
valuation administrator or employee, present or former secretary or employee of the 7
Finance and Administration Cabinet, former secretary or employee of the Revenue 8
Cabinet, or any other person, shall intentionally and without authorization inspect 9
or divulge any information acquired by him or her of the affairs of any person, or 10
information regarding the tax schedules, returns, or reports required to be filed with 11
the department or other proper officer, or any information produced by a hearing or 12
investigation, insofar as the information may have to do with the affairs of the 13
person's business. 14
(2) The prohibition established by subsection (1) of this section shall not extend to: 15
(a) Information required in prosecutions for making false reports or returns of 16
property for taxation, or any other infraction of the tax laws; 17
(b) Any matter properly entered upon any assessment record, or in any way made 18
a matter of public record; 19
(c) Furnishing any taxpayer or his or her properly authorized agent with 20
information respecting his or her own return; 21
(d) Testimony provided by the commissioner or any employee of the department 22
in any court, or the introduction as evidence of returns or reports filed with the 23
department, in an action for violation of state or federal tax laws or in any 24
action challenging state or federal tax laws; 25
(e) Providing an owner of unmined coal, oil or gas reserves, and other mineral or 26
energy resources assessed under KRS 132.820, or owners of surface land 27 UNOFFICIAL COPY 24 RS BR 1142
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under which the unmined minerals lie, factual information about the owner's 1
property derived from third-party returns filed for that owner's property, under 2
the provisions of KRS 132.820, that is used to determine the owner's 3
assessment. This information shall be provided to the owner on a confidential 4
basis, and the owner shall be subject to the penalties provided in KRS 5
131.990(2). The third-party filer shall be given prior notice of any disclosure 6
of information to the owner that was provided by the third-party filer; 7
(f) Providing to a third-party purchaser pursuant to an order entered in a 8
foreclosure action filed in a court of competent jurisdiction, factual 9
information related to the owner or lessee of coal, oil, gas reserves, or any 10
other mineral resources assessed under KRS 132.820. The department may 11
promulgate an administrative regulation establishing a fee schedule for the 12
provision of the information described in this paragraph. Any fee imposed 13
shall not exceed the greater of the actual cost of providing the information or 14
ten dollars ($10); 15
(g) Providing information to a licensing agency, the Transportation Cabinet, or 16
the Kentucky Supreme Court under KRS 131.1817; 17
(h) Statistics of gasoline and special fuels gallonage reported to the department 18
under KRS 138.210 to 138.448; 19
(i) Providing any utility gross receipts license tax return information that is 20
necessary to administer the provisions of KRS 160.613 to 160.617 to 21
applicable school districts on a confidential basis; 22
(j) Providing documents, data, or other information to a third party pursuant to an 23
order issued by a court of competent jurisdiction; or 24
(k) Providing information to the Legislative Research Commission under: 25
1. KRS 139.519 for purposes of the sales and use tax refund on building 26
materials used for disaster recovery; 27 UNOFFICIAL COPY 24 RS BR 1142
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2. KRS 141.436 for purposes of the energy efficiency products credits; 1
3. KRS 141.437 for purposes of the ENERGY STAR home and the 2
ENERGY STAR manufactured home credits; 3
4. KRS 141.383 for purposes of the film industry incentives; 4
5. KRS 154.26-095 for purposes of the Kentucky industrial revitalization 5
tax credits and the job assessment fees; 6
6. KRS 141.068 for purposes of the Kentucky investment fund; 7
7. KRS 141.396 for purposes of the angel investor tax credit; 8
8. KRS 141.389 for purposes of the distilled spirits credit; 9
9. KRS 141.408 for purposes of the inventory credit; 10
10. KRS 141.390 for purposes of the recycling and composting credit; 11
11. KRS 141.3841 for purposes of the selling farmer tax credit; 12
12. KRS 141.4231 for purposes of the renewable chemical production tax 13
credit; 14
13. KRS 141.524 for purposes of the Education Opportunity Account 15
Program tax credit; 16
14. KRS 141.398 for purposes of the development area tax credit; 17
15. KRS 139.516 for the purposes of the sales and use tax exemption on the 18
commercial mining of cryptocurrency;[ and] 19
16. KRS 141.419 for purposes of the decontamination tax credit; and 20
17. Section 1 of this Act for the purposes of the deduction for 21
contributions made to an eligible savings account and the exclusion of 22
interest earned therefrom. 23
(3) The commissioner shall make available any information for official use only and on 24
a confidential basis to the proper officer, agency, board or commission of this state, 25
any Kentucky county, any Kentucky city, any other state, or the federal 26
government, under reciprocal agreements whereby the department shall receive 27 UNOFFICIAL COPY 24 RS BR 1142
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similar or useful information in return. 1
(4) Access to and inspection of information received from the Internal Revenue Service 2
is for department use only, and is restricted to tax administration purposes. 3
Information received from the Internal Revenue Service shall not be made available 4
to any other agency of state government, or any county, city, or other state, and 5
shall not be inspected intentionally and without authorization by any present 6
secretary or employee of the Finance and Administration Cabinet, commissioner or 7
employee of the department, or any other person. 8
(5) Statistics of crude oil as reported to the department under the crude oil excise tax 9
requirements of KRS Chapter 137 and statistics of natural gas production as 10
reported to the department under the natural resources severance tax requirements 11
of KRS Chapter 143A may be made public by the department by release to the 12
Energy and Environment Cabinet, Department for Natural Resources. 13
(6) Notwithstanding any provision of law to the contrary, beginning with mine-map 14
submissions for the 1989 tax year, the department may make public or divulge only 15
those portions of mine maps submitted by taxpayers to the department pursuant to 16
KRS Chapter 132 for ad valorem tax purposes that depict the boundaries of mined-17
out parcel areas. These electronic maps shall not be relied upon to determine actual 18
boundaries of mined-out parcel areas. Property boundaries contained in mine maps 19
required under KRS Chapters 350 and 352 shall not be construed to constitute land 20
surveying or boundary surveys as defined by KRS 322.010 and any administrative 21
regulations promulgated thereto. 22