AN ACT relating to a tax credit for alternative jet fuel.
HB296 creates a new nonrefundable Kentucky income tax credit for alternative jet fuel, available to both producers and consumers of qualifying fuel. The bill defines alternative jet fuel in detail, generally requiring that it be produced in the United States, usable in existing aircraft and fuel infrastructure, and meet specified lifecycle greenhouse gas reduction standards. The credit would apply to taxable years beginning on or after January 1, 2026, and before January 1, 2031, at a rate of $1.50 per gallon, or $2 per gallon for fuel produced in Kentucky.
The bill limits the credit to one claim per gallon by either the producer or the consumer, caps the credit at $4 million per taxpayer per year, and sets an annual statewide cap of $20 million. If requests exceed the statewide cap, the Department of Revenue must prorate the credits among eligible taxpayers. The bill also requires an application and certification process, annual reporting to the General Assembly, and disclosure of certain taxpayer information for legislative review. In addition, it amends Kentucky’s credit-priority statute so the alternative jet fuel credit is placed in the ordering of nonrefundable tax credits against individual, corporate, and limited liability entity taxes.
The bill’s impact on state law is to add a new economic development and clean-energy incentive to Chapter 141 of the Kentucky Revised Statutes and to modify the credit-ordering rules in KRS 141.0205. It also expands the list of tax-credit information that the Department of Revenue may share with the Legislative Research Commission by adding the new credit to the confidentiality exceptions in KRS 131.190. The practical effect would be to subsidize production, blending, and consumption of qualifying aviation fuel while creating administrative duties for the Department of Revenue to certify claims, enforce caps, and report usage.
Because there are no committee transcripts or recorded votes in the provided material, there is no documented floor or committee sentiment to summarize. Based on the bill text alone, the measure appears designed to encourage a lower-carbon aviation fuel market and support in-state production, suggesting a pro-business and pro-environment policy rationale. The bill also includes explicit safeguards such as caps, nonrefundable treatment, and reporting requirements, which may reflect an effort to limit fiscal exposure and allow legislative oversight.
The main points of potential contention are likely to be fiscal cost, the use of tax incentives to support a specific industry, and the environmental eligibility standards used to define qualifying fuel. The bill’s annual $20 million cap and per-taxpayer limit may be viewed as necessary controls by supporters, while critics may question whether the credit will meaningfully reduce emissions or simply subsidize fuel producers and airlines. Another possible issue is the bill’s requirement that certain taxpayer information be made available for legislative evaluation, which narrows confidentiality protections and could raise privacy or administrative concerns for affected taxpayers.
HB296 would create a new nonrefundable alternative jet fuel tax credit in KRS Chapter 141 and add it to Kentucky’s credit-priority rules under KRS 141.0205. It would also amend KRS 131.190 to allow disclosure of related taxpayer information to the Legislative Research Commission for oversight purposes. The bill affects alternative jet fuel producers, blenders, feedstock growers, and consumers, while imposing application, certification, and reporting requirements on the Department of Revenue.
No committee discussion or vote history was provided, so there is no recorded legislative sentiment to report. From the bill’s structure, the measure appears generally supportive of alternative aviation fuel development, with a policy emphasis on economic development, in-state production, and emissions reduction. The inclusion of caps, proration, and reporting suggests an attempt to balance incentive support with fiscal caution and legislative oversight.
Likely areas of contention include the cost of the credit to the state treasury, whether the incentive will produce measurable environmental benefits, and whether the credit should favor in-state production with a higher rate. Supporters would likely emphasize aviation decarbonization, domestic fuel production, and economic development, while skeptics may focus on subsidy effectiveness, administrative complexity, and the privacy implications of expanded reporting and disclosure. The bill’s eligibility rules and lifecycle emissions thresholds could also prompt debate over which fuels qualify and how compliance is measured.