Kentucky General Assembly Concludes

Last week, the 2025 30-day Regular Session of the Kentucky General Assembly concluded. Lawmakers returned on March 27 and 28 for two final days to strategically override any Gubernatorial vetoes and pass outstanding legislation. During the Session, 148 bills and 14 resolutions were passed into law from over 1,000 filed proposals. Of these, 110 were signed by the Governor, 27 were enacted over the Governor’s veto, and 10 became law without the Governor’s signature. A total of 932 bills failed to pass one or both Chambers or become law, while two bills were enacted with line-item vetoes from the Governor.

During the “short session,” legislative leaders approached policy changes and budget amendments with caution due to uncertainty surrounding federal impacts on the Commonwealth. The General Assembly advanced key business priorities, including reducing state income tax rates, streamlining regulations, and addressing some housing affordability solutions. Additionally, legislators allocated budget surplus funds to support disaster relief efforts. Below are key bills monitored by Commerce Lexington that became law, significantly impacting the Greater Lexington business community.

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Budget & Tax Policy:
The top priority for the General Assembly is continuing reforms to Kentucky’s tax policies.  House Bill (HB) 1 reduces Kentucky’s individual income tax rate from 4.0% to 3.5% effective January 1, 2026.  HB 775 amended various Kentucky Revised Statutes (KRS) to address tax increment financing, distilled spirits and cannabis infused beverages taxation, and the individual income tax rate reduction conditions. The bill authorizes state individual income tax rate reductions by tenths of a percentage point starting January 1, 2028. This amendment enables the General Assembly to continue lowering the rate, though in smaller steps, to meet statutory triggers related to revenues and budget surplus. HB 775 also provides specific sales tax incentives directed to economic development projects and entertainment attractions that will help the Greater Lexington region. HB 1 was signed into law by the Governor and HB 775 was allowed to become law without his signature.  

Economic Development:
In addition to specific provisions included in HB 775, the General Assembly passed broader economic development legislation. Senate Bill (SB) 1 creates the Kentucky Film Office within the Cabinet for Economic Development and the Kentucky Film Leadership Council to promote film industry activities. SB 28 establishes a new agricultural economic development program within the Kentucky Department of Agriculture and creates the agricultural economic development board and grant funds to support business development. SB 1 was signed into law by the Governor and SB 28 became law after a veto override by the General Assembly.

Regulation:
Commerce Lexington also joined with other business organizations to support efforts to streamline government regulations to be no more stringent than federal policies with environmental protection (SB 89), air pollution (HB 137), and occupational, safety and health policies (HB 398). SB 89 and HB 398 were passed by the General Assembly with veto overrides, while HB 137 was allowed to become law without the Governor's signature.

Other issues addressed include adoption of a state frameworks for regulation of NIL agreements for student-athletes (SB 3), artificial intelligence utilized by state agencies (SB 4), cannabis-infused beverages (SB 202), ready to drink alcohol (HB 618), as well as additional changes to Kentucky’s Horse Racing and Gaming Commission regulations (HB 566).

Another priority issue this session for legislative leaders is increasing legislative oversight and reforms to Kentucky’s Medicaid program (SB 25, HB 695). The Governor line-item vetoed SB 25 and the General Assembly partially overrode specific line-item vetoes on the final two days. 

Housing Affordability:
Another top priority for Commerce Lexington this session is advocacy for housing affordability solutions. Some policy steps were taken this session. SB 25 allows the use of industrial revenue bonds for multi-family housing developments, HB 160 decreases regulatory and zoning barriers for the construction of manufactured homes, and HB 321 mandates planning commissioners and their staff complete training focused on the impact of planning and zoning on housing supply and accessibility. Commerce Lexington fully expects housing policy to be a priority issue for the 2026 budget session, including advocacy for infrastructure funding to support housing developments across the state, housing development districts, and other tax credits or incentives to support affordable housing.

Source: Legislative Research Commission