AN ACT relating to an exemption from sales and use tax for religious institutions.

UNOFFICIAL COPY 26 RS BR 1135
Page 1 of 4
XXXX 12/18/2025 3:11 PM Jacketed
AN ACT relating to an exemption from sales and use tax for religious institutions. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 139.495 is amended to read as follows: 3
(1) As used in this section: 4
(a) "Educational or charitable institution" means [The taxes imposed by this 5
chapter shall apply to]: 6
1.[(a)] A resident[,] nonprofit educational or[,] charitable[, or religious] 7
institution that has [institutions which have] qualified for exemption 8
from income taxation under Section 501(c)(3) of the Inter nal Revenue 9
Code; or[and] 10
2.[(b)] Any resident, single member limited liability company that is: 11
a.[1.] Wholly owned and controlled by a resident or nonresident, 12
nonprofit educational or[,] charitable[, or religious] institution 13
that[which] has qualified for exemption from income taxation 14
under Section 501(c)(3) of the Internal Revenue Code; and 15
b.[2.] Disregarded as an entity separate from the resident or nonresident, 16
nonprofit educational or[,] charitable[, or religious] institution for 17
federal income tax purposes pursuant to 26 C.F.R. sec. 301.7701 -18
2; and 19
(b) "Religious institution" means: 20
1. A resident no nprofit religious institution that has qualified for 21
exemption from income taxation under Section 501(c)(3) of the 22
Internal Revenue Code; or 23
2. Any resident, single member limited liability company that is: 24
a. Wholly owned and controlled by a resident or n onresident, 25
nonprofit religious institution that has qualified for exemption 26
from income taxation under Section 501(c)(3) of the Internal 27
UNOFFICIAL COPY 26 RS BR 1135
Page 2 of 4
XXXX 12/18/2025 3:11 PM Jacketed
Revenue Code; and 1
b. Disregarded as an entity separate from the resident or 2
nonresident, nonprofit religious instituti on for federal income 3
tax purposes pursuant to 26 C.F.R. sec. 301.7701-2. 4
[as provided in this section.] 5
(2) (a) For educational or charitable institutions, except as provided in paragraph 6
(b) of this subsection, the taxes imposed by this chapter do [Tax do es] not 7
apply to any of the following: 8
1. Purchases[Sales] of tangible personal property, digital property, or 9
services made by [to] these institutions [ or limited liability companies 10
described in subsection (1) of this section] , provided the tangible 11
personal property, digital property, or service is to be used solely in this 12
state within the educational or[,] charitable[, or religious] function; 13
2. Sales of food to students in school cafeterias or lunchrooms; 14
3. Sales by school bookstores of textbooks, wor kbooks, and other course 15
materials; 16
4. Sales by nonprofit, school sponsored clubs and organizations, provided 17
the[such] sales do not include tickets for athletic events; 18
5. Sales of admissions, including the sales of admissions to a golf course 19
when the admission is the result of a fundraising event, by [ nonprofit] 20
educational or[,] charitable[, or religious] institutions[ described in 21
subsection (1) of this section] . All oth er sales of admissions to a golf 22
course by these institutions are not exempt from tax under this section; 23
or 24
6. a. Fundraising event sales made by [nonprofit ] educational or[,] 25
charitable[, or religious] institutions[ and limited liability 26
companies described in subsection (1) of this section]. 27
UNOFFICIAL COPY 26 RS BR 1135
Page 3 of 4
XXXX 12/18/2025 3:11 PM Jacketed
b. As used in [For the purposes of] this subparagraph, "fundraising 1
event sales" does not include sales related to the operation of a 2
retail business, including but not limited to thrift stores, 3
bookstores, surplus pr operty auctions, recycle and reuse stores, or 4
any ongoing operations in competition with for-profit retailers. 5
(b) The exemptions provided in subparagraphs 5. and 6. of paragraph (a) of this 6
subsection shall not apply to sales generated by or arising at a tourism 7
development project approved under KRS 148.851 to 148.860. 8
(3) (a) An educational or charitable [An] institution shall be entitled to a refund 9
equal to twenty-five percent (25%) of the tax collected on its sale of donated 10
goods if the refund is used exclusively as reimbursement for capital 11
construction costs of additional retail locations in this state, provided the 12
institution: 13
1.[(a)] Routinely sells donated items; 14
2.[(b)] Provides job training and employment to individuals with 15
workplace disadvantages and disabilities; 16
3.[(c)] Spends at least seventy -five percent (75%) of its annual revenue 17
on job training, job placement, or other related community services; 18
4.[(d)] Submits a refund application to the department within sixty (60) 19
days after the new retail location opens for business; and 20
5.[(e)] Provides records of capital construction costs for the new retail 21
location and any other information the department deems necessary to 22
process the refund. 23
The maximum refund allowed for any location shall n ot exceed one million 24
dollars ($1,000,000). 25
(b) As used in this subsection, "capital construction cost": 26
1. Means the cost of construction of any new facilities or the purchase and 27
UNOFFICIAL COPY 26 RS BR 1135
Page 4 of 4
XXXX 12/18/2025 3:11 PM Jacketed
renovation of any existing facilities; and[, but] 1
2. Does not include the cost of real property other than real property 2
designated as a brownfield site as defined in KRS 65.680(4). 3
(4) Notwithstanding any other provision of law to the contrary, refunds under 4
subsection (3) of this section shall be made directly to the institution. Interest shall 5
not be allowed or paid on the refund. The department may examine any refund 6
within four (4 ) years from the date the refund application is received. Any 7
overpayment shall be subject to the interest provisions of KRS 131.183 and the 8
penalty provisions of KRS 131.180. 9
(5) All other sales made by [nonprofit ] educational or[,] charitable[, or religi ous] 10
institutions[ or limited liability companies described in subsection (1) of this 11
section] are taxable and the tax may be passed on to the purchaser as provided in 12
KRS 139.210. 13
(6) For religious institutions, the taxes imposed by this chapter do not ap ply to any of 14
the following: 15
(a) Sales of tangible personal property, digital property, or services made by a 16
religious institution; or 17
(b) Purchases of tangible personal property, digital property, or services made 18
by a religious institution, provided the tangible personal property, digital 19
property, or service is to be used solely in this state within the religious 20
function. 21