AN ACT relating to the New Markets Development Program tax credit.
Summary
HB372 revises Kentucky’s New Markets Development Program tax credit statutes. The bill keeps the core structure of the program, under which qualified community development entities apply to the Department of Revenue to have equity investments or long-term debt securities certified as qualified equity investments eligible for tax credits. It preserves the application process, certification order, recapture rules, and the refundable performance fee system, while updating the program’s operating requirements and administrative details.
The bill maintains the 39% tax credit for qualified equity investments and allows credits to be carried forward, but it increases the annual statewide cap on credits from $10 million to $20 million. It also preserves the rule that credits cannot be sold or transferred, while allowing pass-through entities to allocate credits among owners. The bill continues to require that investments be made in qualified low-income community businesses in Kentucky and that entities meet investment thresholds within specified timeframes or face recapture and forfeiture consequences.
Impact
HB372 would amend KRS 141.433 and 141.434, directly affecting Kentucky’s New Markets Development Program tax credit administration and fiscal limits. The most significant legal change is the increase in the annual cap on credits from $10 million to $20 million, which would allow the Department of Revenue to certify a larger volume of qualifying investments each fiscal year. The bill also preserves and reinforces compliance mechanisms, including application fees, performance fees, recapture authority, and the new markets performance guarantee account, which together govern how community development entities access and retain the credit.
Sentiment
No committee transcripts or recorded votes were provided, so there is no direct evidence of debate, support, or opposition in the available materials. Based on the bill text alone, the measure appears to be a technical and program-expansion update rather than a controversial policy overhaul. Its structure suggests a generally pro-development and pro-investment intent, aimed at expanding the availability of tax credit authority for community development projects.
Contention
The main likely point of contention is fiscal: raising the annual credit cap from $10 million to $20 million increases the state’s exposure to forgone revenue, which may concern budget-focused lawmakers. Another possible issue is whether the program’s compliance and recapture safeguards are sufficient to justify the larger cap, especially given the refundable performance fee and the requirement that investments be deployed in low-income communities within strict deadlines. Supporters would likely emphasize economic development, community investment, and access to capital in distressed areas, while skeptics may question whether the expanded credit limit produces enough measurable public benefit.