AN ACT relating to a tax credit for alternative jet fuel.

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AN ACT relating to a tax credit for alternative jet fuel. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
SECTION 1. A NEW SECTION OF KRS CHAPTER 141 IS CREATED TO 3
READ AS FOLLOWS: 4
(1) As used in this section: 5
(a) "Agriculturally based alternative jet fuel" means an alternative jet fuel 6
produced from agricultural biomass, including c rops and agricultural 7
byproducts derived from agricultural or livestock production, such as corn, 8
soybeans, wheat, canola, animal fats, and biomass residues from trees, 9
wood, and grasses; 10
(b) "Alternative jet fuel" means a liquid fuel that can be used in a n aircraft 11
without the need to modify the aircraft engines or existing fuel distribution 12
infrastructure, and that: 13
1. Consists of synthesized hydrocarbons and meets the requirements of: 14
a. The American Society for Testing and Materials International 15
Standard D7566; or 16
b. The American Society for Testing and Materials International 17
standard D1655; 18
2. Is derived from eligible feedstocks; 19
3. Is not derived from palm fatty acid distillates; and 20
4. Achieves at least a fifty percent (50%) lifecycle greenhouse gas 21
emissions reduction in comparison with petroleum -based jet fuel, as 22
determined by a test that shows the fuel production pathway achieves 23
at least a fifty percent (50%) reduction of the ag gregate attributional 24
care lifecycle by measuring either: 25
a. Emissions under the lifecycle methodology for alternative jet 26
fuels adopted by the International Civil Aviation Organization 27
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with the agreement of the United States; or 1
b. Greenhouse gas emission s values utilizing the most recent 2
version of Argonne National Laboratory's GREET model; 3
(c) "Alternative jet fuel producer" means an entity in this state that: 4
1. Produces alternative jet fuel; or 5
2. Blends SBC with conventional aviation gasoline or jet fuel; 6
(d) "Eligible feedstock" means any feedstock that qualifies as an eligible 7
feedstock for purposes of Section 45Z of the Internal Revenue Code; 8
(e) "Eligible taxpayer" means an alternative jet fuel producer or feedstock 9
provider that is located in the Commonwealth; 10
(f) "Feedstock provider" means an entity that manufactures an eligible 11
feedstock, including SBC, used in the process of making alternative jet fuel; 12
and 13
(g) "Synthetic blending component" or "SBC" means synthesized 14
hydrocarbons that meet the requirements in any one (1) of the annexes of 15
the American Society for Testing and Materials International standard 16
D7566, which may then be used as a component in the manufacture of 17
alternative jet fuel. 18
(2) (a) There shall be allowed a nonrefundable, nontransferable alternative jet fuel 19
credit allowed against the taxes imposed in KRS 141.020 or 141.040 and 20
141.0401 for alternative jet fuel producers in an amount certified by the 21
department under this section, with the ordering of the credits as provided 22
in Section 2 of this Act. 23
(b) For taxable years beginning on or after January 1, 2029, but before 24
January 1, 2035, an eligible taxpayer may claim a credit at a rate of: 25
1. Fifty cents ($0.50) per gallon to a feedstock provider supplying either 26
eligible feedstocks or SBC to an alternative jet fuel producer; 27
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2. One dollar and fifty cents ($1.50) per gallon to an alternative jet fuel 1
producer that processes eligible feedstocks or blends SBC with 2
conventional jet fuel to produce alternative jet fuel; 3
3. Two doll ars ($2) per gallon to an alternative jet fuel producer that 4
processes eligible feedstocks or blends SBC with conventional jet fuel 5
to produce agriculturally based alternative jet fuel; or 6
4. Two dollars and fifty cents ($2.50) per gallon to an alternative jet fuel 7
producer that processes eligible feedstocks or blends SBC with 8
conventional jet fuel to produce an agriculturally based alternative jet 9
fuel using an eligible feedstock that was produced in the 10
Commonwealth. 11
(3) (a) The credit allowed in subsecti on (2) of this section shall not be carried 12
forward to other taxable years. 13
(b) The total credit allowed in subsection (2)(b)1. and 2. of this section shall not 14
exceed two million dollars ($2,000,000) per eligible taxpayer per taxable 15
year. 16
(c) The credits allowed in subsection (2) of this section may stack if the 17
alternative jet fuel producer is the same as the feedstock provider and shall 18
not exceed three dollars ($3) per gallon per entity. 19
(d) The aggregate total credit certified in a calendar year shall not exceed 20
twenty million dollars ($20,000,000). If the aggregate total of credits 21
certified exceeds twenty million dollars ($20,000,000), the department shall 22
apportion credits pro rata among eligible taxpayers up to the twenty million 23
dollar ($20,000,000) limit. 24
(4) The department, in conjunction with the Kentucky Department of Agriculture 25
and the Energy and Environment Cabinet, shall promulgate emergency and 26
ordinary administrative regulations in accordance with KRS Chapter 13A to 27
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adopt: 1
(a) Forms and procedures necessary for implementation, calculation, 2
reporting, and certification of the credit no later than October 1, 2028; 3
(b) Verification standards and processes to ensure the fuel meets the 4
requirements to be alternative jet fuel or agric ulturally based alternative jet 5
fuel; and 6
(c) Verification standards and processes to ensure each alternative jet fuel 7
producer and feedstock provider meets the criteria established in subsection 8
(1)(c) and (f) of this section. 9
(5) The department, Kentucky Department of Agriculture, and Energy and 10
Environment Cabinet shall report to the Interim Joint Committee on 11
Appropriations and Revenue when administrative regulations have been 12
promulgated under subsection (4) of this section, and the credit provided in this 13
section shall not be approved prior to the report. 14
(6) (a) An eligible taxpayer seeking approval for the credit under this section shall: 15
1. Submit an application to the department, on a form as prescribed by 16
the department, by January 15, 2030, follo wing the close of the 17
calendar year, and each January 15 thereafter as long as the credit is 18
available; and 19
2. Provide the: 20
a. Taxpayer's identification number; and 21
b. Description and amount or volume of alternative jet fuel, eligible 22
feedstock, or SBC: 23
i. Produced, including anticipated production amounts, for 24
the calendar year; or 25
ii. Blended, including anticipated production amounts, for the 26
calendar year. 27
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(b) The department shall: 1
1. Review all applications submitted by eligible taxpayers by February 2
15, 2030, and each February 15 thereafter as long as the credit is 3
available; 4
2. Determine the qualifying volumes of alternative jet fuel, eligible 5
feedstock, or SBC per eligible taxpayer; and 6
3. Issue a certification by March 1, 2030, and each March 1 thereafter as 7
long as the credit is available, of the credit amount approved for each 8
eligible taxpayer. 9
(7) (a) In order for the General Assembly to evaluate the alternative jet fuel 10
producer credit, by November 1, 2030, and each November 1 thereafter, as 11
long as the tax credit is claimed on any tax return filed, the department 12
shall report the following to the Legislative Research Commission for 13
referral to the Interim Joint Committee on Appropriations and Revenue and 14
the Department of Agriculture: 15
1. The number of tax returns, by the tax type of return filed, claiming the 16
credit for each taxable year; 17
2. The total amount of credit claimed on returns filed for each taxable 18
year; 19
3. The total number of gallons claimed per return filed of: 20
a. Eligible feedstock or SBC provided; 21
b. Eligible feedstock processed or SBC blended with conventional 22
jet fuel to produce alternative jet fuel; 23
c. Agriculturally based alternative jet fuel produced; and 24
d. Agriculturally based alternative jet fuel produced using an 25
eligible feedstock that was produced in the Commonwealth; 26
4. The cumulative number of credits claimed by county, as identified by 27
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the mailing address on the return filed for each taxable year; and 1
5. a. In the case of taxpayers other than corporations, based on 2
ranges of adjusted gross income of no larger than five thousand 3
dollars ($5,000), the total amount of credits claimed for each 4
adjusted gross income range for each taxable year. 5
b. In the case of corporations, based on ranges of net income of no 6
larger than fifty thousand dollars ($50,000), the total amount of 7
credit claimed for each net income range for each taxable year. 8
(b) The information required to be reported under this subsection shall not be 9
considered confidential taxpayer information and shall not be subject to 10
KRS Chapter 131 or any other provisions of the Kentucky Revised Statutes 11
prohibiting disclosure or reporting information. 12
Section 2. KRS 141.0205 is amended to read as follows: 13
If a taxpayer is entitled to more than one (1) of the tax credits allowed against the tax 14
imposed by KRS 141.020, 141.040, and 141.0401, the priority of application and use of 15
the credits shall be determined as follows: 16
(1) The nonrefundable business incentive credits against the tax imposed by KRS 17
141.020 shall be taken in the following order: 18
(a) The limited liability entity tax credit permitted by KRS 141.0401; 19
(b) The economic development credits computed under KRS 141.347, 141.381, 20
141.384, 141.3841, 141.400, 141.403, 141.407, 141.415, 154.12 -207, and 21
154.12-2088; 22
(c) The qualified farming operation credit permitted by KRS 141.412; 23
(d) The certified rehabilitation credit permitted by KRS 171.397(1)(a); 24
(e) The health insurance credit permitted by KRS 141.062; 25
(f) The tax paid to other states credit permitted by KRS 141.070; 26
(g) The credit for hiring the unemployed permitted by KRS 141.065; 27
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(h) The recycling or composting equipment credit permitted by KRS 141.390; 1
(i) The [tax ]credit for cash contributions in investment funds permitted by KRS 2
154.20-263 in effect prior to July 15, 2002, and the credit permitted by KRS 3
154.20-258; 4
(j) The research facilities credit permitted by KRS 141.395; 5
(k) The employer High School Equival ency Diploma program incentive credit 6
permitted under KRS 151B.402; 7
(l) The voluntary environmental remediation credit permitted by KRS 141.418; 8
(m) The biodiesel and renewable diesel credit permitted by KRS 141.423; 9
(n) The clean coal incentive credit permitted by KRS 141.428; 10
(o) The ethanol credit permitted by KRS 141.4242; 11
(p) The cellulosic ethanol credit permitted by KRS 141.4244; 12
(q) The energy efficiency credits permitted by KRS 141.436; 13
(r) The railroad maintenance and improvement credit permitted by KRS 141.385; 14
(s) The Endow Kentucky credit permitted by KRS 141.438; 15
(t) The New Markets Development Program credit permitted by KRS 141.434; 16
(u) The distilled spirits credit permitted by KRS 141.389; 17
(v) The angel investor credit permitted by KRS 141.396; 18
(w) The film industry credit permitted by KRS 141.383 for applications approved 19
on or after April 27, 2018, but before January 1, 2022; 20
(x) The inventory credit permitted by KRS 141.408; 21
(y) The renewable chemical production credit permitted by KRS 141.4231;[ and] 22
(z) The qualified broadband investment [tax ]credit permitted by KRS 141.391; 23
and 24
(aa) The alternative jet fuel producer credit permitted by Section 1 of this Act; 25
(2) After the application of the nonrefundable credits in subsection (1) of this section, 26
the nonrefundable personal tax credits against the tax imposed by KRS 141.020 27
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shall be taken in the following order: 1
(a) The individual credits permitted by KRS 141.020(3); 2
(b) The credit permitted by KRS 141.066; 3
(c) The tuition credit permitted by KRS 141.069; 4
(d) The household and dependent care credit permitted by KRS 141.067; 5
(e) The income gap credit permitted by KRS 141.066; and 6
(f) The Education Opportunity Account Program [tax ]credit permitted by KRS 7
141.522; 8
(3) After the application of the nonrefundable credits provided for in subsection (2) of 9
this section, the refundable credits against the tax imposed by KRS 141.020 shall be 10
taken in the following order: 11
(a) The individual withholding tax credit permitted by KRS 141.350; 12
(b) The individual estimated tax payment credit permitted by KRS 141.305; 13
(c) The certified rehabilitation credit permitted by KRS 171.3961, 171.3963, and 14
171.397(1)(b); 15
(d) The film industry [tax ] credit permitted by KRS 141.383 for applications 16
approved prior to April 27, 2018, or on or after January 1, 2022; 17
(e) The development area [tax ]credit permitted by KRS 141.398; 18
(f) The decontamination [tax ]credit permitted by KRS 141.419; and 19
(g) The pass-through entity tax credit permitted by KRS 141.209; 20
(4) The nonrefundable credit permitted by KRS 141.0401 shall be applied against the 21
tax imposed by KRS 141.040; 22
(5) The following nonrefundable credits shall be ap plied against the sum of the tax 23
imposed by KRS 141.040 after subtracting the credit provided for in subsection (4) 24
of this section, and the tax imposed by KRS 141.0401 in the following order: 25
(a) The economic development credits computed under KRS 141.347 , 141.381, 26
141.384, 141.3841, 141.400, 141.403, 141.407, 141.415, 154.12 -207, and 27
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154.12-2088; 1
(b) The qualified farming operation credit permitted by KRS 141.412; 2
(c) The certified rehabilitation credit permitted by KRS 171.397(1)(a); 3
(d) The health insurance credit permitted by KRS 141.062; 4
(e) The unemployment credit permitted by KRS 141.065; 5
(f) The recycling or composting equipment credit permitted by KRS 141.390; 6
(g) The coal conversion credit permitted by KRS 141.041; 7
(h) The enterprise zone credit permitted by KRS 154.45 -090, for taxable periods 8
ending prior to January 1, 2008; 9
(i) The [tax ]credit for cash contributions to investment funds permitted by KRS 10
154.20-263 in effect prior to July 15, 2002, and the credit permitted by KRS 11
154.20-258; 12
(j) The research facilities credit permitted by KRS 141.395; 13
(k) The employer High School Equivalency Diploma program incentive credit 14
permitted by KRS 151B.402; 15
(l) The voluntary environmental remediation credit permitted by KRS 141.418; 16
(m) The biodiesel and renewable diesel credit permitted by KRS 141.423; 17
(n) The clean coal incentive credit permitted by KRS 141.428; 18
(o) The ethanol credit permitted by KRS 141.4242; 19
(p) The cellulosic ethanol credit permitted by KRS 141.4244; 20
(q) The energy efficiency credits permitted by KRS 141.436; 21
(r) The ENERGY STAR home or ENERGY STAR manufactured home credit 22
permitted by KRS 141.437; 23
(s) The railroad maintenance and improvement credit permitted by KRS 141.385; 24
(t) The railroad expansion credit permitted by KRS 141.386; 25
(u) The Endow Kentucky credit permitted by KRS 141.438; 26
(v) The New Markets Development Program credit permitted by KRS 141.434; 27
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(w) The distilled spirits credit permitted by KRS 141.389; 1
(x) The film industry credit permitted by KRS 141.38 3 for applications approved 2
on or after April 27, 2018, but before January 1, 2022; 3
(y) The inventory credit permitted by KRS 141.408; 4
(z) The renewable chemical production [tax ]credit permitted by KRS 141.4231; 5
(aa) The Education Opportunity Account Prog ram [tax ]credit permitted by KRS 6
141.522;[ and] 7
(ab) The qualified broadband investment [tax ]credit permitted by KRS 141.391; 8
and 9
(ac) The alternative jet fuel producer credit permitted by Section 1 of this Act; 10
and 11
(6) After the application of the nonre fundable credits in subsection (5) of this section, 12
the refundable credits shall be taken in the following order: 13
(a) The corporation estimated tax payment credit permitted by KRS 141.044; 14
(b) The certified rehabilitation credit permitted by KRS 171.3961, 171.3963, and 15
171.397(1)(b); 16
(c) The film industry [tax ] credit permitted by KRS 141.383 for applications 17
approved prior to April 27, 2018, or on or after January 1, 2022; 18
(d) The decontamination [tax ]credit permitted by KRS 141.419; and 19
(e) The pass-through entity tax credit permitted by KRS 141.209. 20
Section 3. KRS 131.190 is amended to read as follows: 21
(1) No present or former commissioner or employee of th e department, present or 22
former member of a county board of assessment appeals, present or former property 23
valuation administrator or employee, present or former secretary or employee of the 24
Finance and Administration Cabinet, former secretary or employee of the Revenue 25
Cabinet, or any other person, shall intentionally and without authorization inspect 26
or divulge any information acquired by him or her of the affairs of any person, or 27
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information regarding the tax schedules, returns, or reports required to b e filed with 1
the department or other proper officer, or any information produced by a hearing or 2
investigation, insofar as the information may have to do with the affairs of the 3
person's business. 4
(2) The prohibition established by subsection (1) of this section shall not extend to: 5
(a) Information required in prosecutions for making false reports or returns of 6
property for taxation, or any other infraction of the tax laws; 7
(b) Any matter properly entered upon any assessment record, or in any way made 8
a matter of public record; 9
(c) Furnishing any taxpayer or his or her properly authorized agent with 10
information respecting his or her own return; 11
(d) Testimony provided by the commissioner or any employee of the department 12
in any court, or the introduction as evidence of returns or reports filed with the 13
department, in an action for violation of state or federal tax laws or in any 14
action challenging state or federal tax laws; 15
(e) Providing an owner of unmined coal, oil or gas reserves, and other mineral or 16
energy resources assessed under KRS 132.820, or owners of surface land 17
under which the unmined minerals lie, factual information about the owner's 18
property derived from third-party returns filed for that owner's property, under 19
the provisions of KRS 132.820, th at is used to determine the owner's 20
assessment. This information shall be provided to the owner on a confidential 21
basis, and the owner shall be subject to the penalties provided in KRS 22
131.990(2). The third -party filer shall be given prior notice of any di sclosure 23
of information to the owner that was provided by the third-party filer; 24
(f) Providing to a third -party purchaser pursuant to an order entered in a 25
foreclosure action filed in a court of competent jurisdiction, factual 26
information related to the ow ner or lessee of coal, oil, gas reserves, or any 27
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other mineral resources assessed under KRS 132.820. The department may 1
promulgate an administrative regulation establishing a fee schedule for the 2
provision of the information described in this paragraph. An y fee imposed 3
shall not exceed the greater of the actual cost of providing the information or 4
ten dollars ($10); 5
(g) Providing information to a licensing agency, the Transportation Cabinet, or 6
the Kentucky Supreme Court under KRS 131.1817; 7
(h) Statistics o f gasoline and special fuels gallonage reported to the department 8
under KRS 138.210 to 138.448; 9
(i) Providing any utility gross receipts license tax return information that is 10
necessary to administer the provisions of KRS 160.613 to 160.617 to 11
applicable school districts on a confidential basis; 12
(j) Providing documents, data, or other information to a third party pursuant to an 13
order issued by a court of competent jurisdiction; 14
(k) Publishing administrative writings on its official website in accordance wit h 15
KRS 131.020(1)(b); or 16
(l) Providing information to the Legislative Research Commission under: 17
1. KRS 139.519 for purposes of the sales and use tax refund on building 18
materials used for disaster recovery; 19
2. KRS 141.436 for purposes of the energy efficiency products credits; 20
3. KRS 141.437 for purposes of the ENERGY STAR home and the 21
ENERGY STAR manufactured home credits; 22
4. KRS 141.383 for purposes of the film industry incentives; 23
5. KRS 154.26-095 for purposes of the Kentucky industrial revitalization 24
credit and the job assessment fees; 25
6. KRS 141.068 for purposes of the Kentucky investment fund; 26
7. KRS 141.396 for purposes of the angel investor credit; 27
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8. KRS 141.389 for purposes of the distilled spirits credit; 1
9. KRS 141.408 for purposes of the inventory credit; 2
10. KRS 141.390 for purposes of the recycling and composting credits; 3
11. KRS 141.3841 for purposes of the selling farmer credit; 4
12. KRS 141.423 1 for purposes of the renewable chemical production 5
credit; 6
13. KRS 141.524 for purposes of the Education Opportunity Account 7
Program credit; 8
14. KRS 141.398 for purposes of the development area credit; 9
15. KRS 139.516 for purposes of the sales and use tax exemptions for the 10
commercial mining of cryptocurrency; 11
16. KRS 141.419 for purposes of the decontamination credit; 12
17. KRS 141.391 for purposes of the qualified broadband investment credit; 13
18. KRS 139.499 for purposes of the sales and use tax exemptions for a 14
qualified data center project;[ and] 15
19. KRS 139.5325 for purposes of the sales and use tax incentive for a 16
qualifying attraction; and 17
20. Section 1 of this Act for the purposes of the alternative jet fuel 18
producer credit. 19
(3) The commissioner shall make available any information for official use only and on 20
a confidential basis to the proper officer, agency, board or commission of this state, 21
any Kentucky county, any Kentucky city, any other state, or the federal 22
government, under reciprocal agreeme nts whereby the department shall receive 23
similar or useful information in return. 24
(4) Access to and inspection of information received from the Internal Revenue Service 25
is for department use only, and is restricted to tax administration purposes. 26
Information received from the Internal Revenue Service shall not be made available 27
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to any other agency of state government, or any county, city, or other state, and 1
shall not be inspected intentionally and without authorization by any present 2
secretary or employee of the Finance and Administration Cabinet, commissioner or 3
employee of the department, or any other person. 4
(5) Statistics of crude oil as reported to the department under the crude oil excise tax 5
requirements of KRS Chapter 137 and statistics of natural g as production as 6
reported to the department under the natural resources severance tax requirements 7
of KRS Chapter 143A may be made public by the department by release to the 8
Energy and Environment Cabinet, Department for Natural Resources. 9
(6) Notwithstanding any provision of law to the contrary, beginning with mine -map 10
submissions for the 1989 tax year, the department may make public or divulge only 11
those portions of mine maps submitted by taxpayers to the department pursuant to 12
KRS Chapter 132 for ad valo rem tax purposes that depict the boundaries of mined -13
out parcel areas. These electronic maps shall not be relied upon to determine actual 14
boundaries of mined-out parcel areas. Property boundaries contained in mine maps 15
required under KRS Chapters 350 and 3 52 shall not be construed to constitute land 16
surveying or boundary surveys as defined by KRS 322.010 and any administrative 17
regulations promulgated thereto. 18