AN ACT relating to the employer student loan repayment credit.
Summary
HB361 creates a new Kentucky income tax credit for employers that make student loan repayment payments on behalf of qualifying employees. The credit is available for taxable years beginning on or after January 1, 2025, and before January 1, 2029, and equals 50% of the amount the employer pays toward the outstanding principal balance of an eligible student loan. The credit is nonrefundable, nontransferable, and cannot be carried forward.
To qualify, an employee must live and work in Kentucky, have earned their first bachelor’s degree within the prior five years, work at least 35 hours per week, and not be an owner or family member of an owner of the employer. The employer must be a Kentucky taxpayer subject to corporate or limited liability entity taxes. Employers claiming the credit must document employee and loan information on their returns, and the Department of Revenue must report annual usage data to the Interim Joint Committee on Appropriations and Revenue beginning in 2026.
Impact
The bill adds a new tax incentive to KRS Chapter 141 and also amends the state’s credit-ordering statute so the employer student loan repayment credit is placed among Kentucky’s nonrefundable business incentive credits. It further amends KRS 131.190 to allow the Department of Revenue to share confidential tax information with the Legislative Research Commission for administration and oversight of the new credit. The practical effect is to reduce state tax liability for eligible employers that subsidize recent graduates’ student debt, while creating reporting requirements for state oversight and evaluation.
Sentiment
No committee transcripts or recorded votes were provided, so there is no direct evidence of debate, support, or opposition in the available record. Based on the bill’s structure, it appears designed as a pro-workforce, pro-retention incentive aimed at encouraging employers to help attract and keep recent graduates in Kentucky. The inclusion of a sunset-like eligibility window and reporting requirements suggests an interest in testing the credit’s effectiveness before deciding whether to continue it.
Contention
The main policy questions likely concern the cost of the credit to state revenues, whether the benefit will meaningfully improve recruitment and retention of young graduates, and whether the eligibility rules are narrow enough to target the intended workforce without excluding many employers or employees. Because the credit is nonrefundable and nontransferable, smaller employers or those with limited tax liability may be less able to use it fully, which could also be a point of concern. The confidentiality amendment is administrative rather than controversial on its face, but it expands the list of tax programs for which revenue information may be shared with legislative staff.