AN ACT relating to a tax credit for alternative jet fuel.
HB 545 creates a new Kentucky income tax credit for the production and supply chain of alternative jet fuel. The bill defines “alternative jet fuel,” “agriculturally based alternative jet fuel,” “eligible feedstock,” “feedstock provider,” and “synthetic blending component,” and limits the credit to fuel that meets specified ASTM standards and achieves at least a 50% lifecycle greenhouse gas emissions reduction compared with petroleum-based jet fuel. The credit would apply to eligible taxpayers located in Kentucky, including alternative jet fuel producers and feedstock providers.
The bill sets credit rates for taxable years beginning on or after January 1, 2029, and before January 1, 2035: $0.50 per gallon for feedstock providers, $1.50 per gallon for alternative jet fuel producers, $2.00 per gallon for producers of agriculturally based alternative jet fuel, and $2.50 per gallon for agriculturally based alternative jet fuel made with Kentucky-produced eligible feedstock. The credit is nonrefundable and nontransferable, cannot be carried forward, is capped at $2 million per taxpayer for certain feedstock/provider credits, may stack in limited circumstances up to $3 per gallon per entity, and is subject to a $20 million annual statewide cap with pro rata apportionment if claims exceed that limit.
HB 545 also requires the Department of Revenue, in coordination with the Kentucky Department of Agriculture and the Energy and Environment Cabinet, to adopt emergency and ordinary regulations to implement and verify the credit, and to report to the Interim Joint Committee on Appropriations and Revenue before the credit can be approved. Taxpayers must apply annually, and the department must certify qualifying volumes and credit amounts. The bill further requires annual reporting to the General Assembly on claims, gallons, county distribution, and income ranges, and it makes that information nonconfidential for reporting purposes.
The bill amends Kentucky’s credit-ordering statute so the new alternative jet fuel producer credit is placed in the existing sequence of nonrefundable business and corporate credits. It also amends Kentucky’s tax confidentiality statute to allow disclosure of information to the Legislative Research Commission for administration and oversight of the new credit. In practical terms, the bill would create a new incentive structure for aviation fuel production and related agricultural feedstock supply chains while adding administrative and reporting obligations to state tax agencies.
No committee transcript or vote record was provided, so the overall sentiment cannot be measured from recorded debate. Based on the bill text alone, the measure appears designed to support economic development, agriculture, and lower-carbon aviation fuel production, with built-in fiscal limits and oversight. The main points of potential contention are the cost of the credit to the state treasury, whether the incentive will meaningfully attract in-state production, the complexity of verification and reporting, and the environmental and feedstock eligibility standards that determine who can qualify.
HB 545 would add a new nonrefundable, nontransferable income tax credit to KRS Chapter 141 for alternative jet fuel producers and feedstock providers, and it would amend KRS 141.0205 to place that credit in the statutory ordering of business tax credits. It would also amend KRS 131.190 to permit disclosure of otherwise confidential tax information to the Legislative Research Commission for oversight of the new credit. The bill creates new administrative duties for the Department of Revenue, the Kentucky Department of Agriculture, and the Energy and Environment Cabinet, including rulemaking, certification, annual reporting, and verification of fuel and taxpayer eligibility. The credit would affect Kentucky-based fuel producers, agricultural feedstock suppliers, and related businesses beginning with taxable years in 2029, subject to annual and statewide caps.
Because no committee discussion or vote history was provided, there is no recorded floor or committee sentiment to summarize. From the structure of the bill, the measure appears generally pro-industry and pro-agriculture, with an emphasis on economic development, aviation fuel innovation, and greenhouse gas reduction. The bill also includes multiple safeguards—caps, certification, reporting, and delayed effective use dates—suggesting an effort to balance incentive support with fiscal oversight.
The likely areas of contention are the size and duration of the tax expenditure, the $20 million annual statewide cap, and whether the credit will produce measurable economic or environmental benefits. Another possible point of debate is the complexity of the eligibility rules, including ASTM fuel standards, lifecycle emissions testing, and feedstock verification, which may be seen as necessary guardrails by supporters but burdensome by critics. The requirement to disclose taxpayer-related credit data for legislative reporting may also raise privacy or administrative concerns, although the bill expressly removes confidentiality protections for that reporting.