The Kentucky CPA Journal

Advocacy

2025 legislative session wrap up and what is next

Issue 2
July 30, 2025

End of an era

On Friday, March 28, the Kentucky General Assembly adjourned sine die from the 2025 legislative session. With the final stroke of the gavel, we marked not only the end of the legislative session, but also the last time the Kentucky General Assembly will meet in those chambers, at least for the next few years. While the massive marble and granite structure has dominated the landscape of Frankfort for more than a century, the Capitol closed this summer for extensive renovations, with lawmakers meeting in a temporary structure next door until the work is completed.

Priority legislation

As this was a short session, the two-year budget was not on the agenda. However, many important pieces of legislation covered priority issues such as Tax Policy, Education, and Business.

During this 30-day Session, KyCPA’s advocacy team met directly with key policymakers and collaborated with business stakeholders to ensure your interests were represented in Frankfort. With over 1,000 bills reviewed, monitored, and directly impacted this Session, this article will review the Society and business community’s priority issues during the 2025 Legislative Session.

The session opened with the passing of House Bill (HB)1, further lowering the state’s personal income tax rate from 4 percent to 3.5 percent. This marks a continuing drive to lower the personal income tax rate as started in 2018. Further adjustments were made to the lowering of the tax rate in HB775, which allows for a smaller incremental reduction of the rate as low as .1 percent, if certain triggers are met, including the General Fund and the Budget Reserve Trust Fund being sufficiently funded.

The aptly numbered HB15 lowered the minimum age for applying for a motor vehicle instruction permit from 16 to 15 years old. The permit must be held for a minimum of 180 days; the driver must complete 60 hours of practice driving (including 10 hours at night) and must be 16 years old before obtaining a full license. While the bill does lower the age of potential drivers on the road, the increased instruction period as well as the earlier access to education and employment opportunities in the more rural areas of our state, made this bill appealing to most.

Senate Bill (SB)4 Established a framework for the responsible use of A.I. in state government and elections. The bill requires the disclosure of any state agencies’ use of A.I., ensures the implementation of risk assessments, and requires the approval of the Commonwealth Office of Technology (COT).  SB4 also mandates the creation of an A.I. oversight committee to develop standards for A.I. use in state government and introduces measures to address A.I.-generated misinformation in campaigns and elections.

SB9 introduced significant changes to maternity and sick leave for school district employees.  The bill requires all school districts to provide at least 30 days maternity leave annually by 2030. The bill also requires the Teacher’s Retirement System (TRS) to report sick leave liabilities in its annual accrual valuations and subjects school district sick leave policies to audits. 

While state and national CPA Associations are working to get accounting into the STEM program, we have so far fallen short, though efforts continue to ramp up as bills were introduced at the federal level recently, and the AICPA Spring Council in D.C. has made it one of the main talking points. Closer to home, Kentucky passed HB342, a bill concerning financial fiteracy. The bill requires that high school students earn one credit in a financial literacy course during their Junior or Senior year in order to graduate.  The course must include topics such as budgeting, risk (insurance), taxes, saving/investing, and instruction on how to properly review documents before signing them. There will be many hurdles to overcome before the bill is properly executed, including training teachers, and providing the necessary materials. However, the bill passed both chambers without issue.

We were also successful in our efforts to pass two bills brought forward by our own state Board of Accountancy. HB261 provides retired CPAs with greater flexibility to offer certain uncompensated services to the public (after obtaining a CPE waiver based on retirement). HB262 Provides greater flexibility for small firms regarding their names after the death or retirement of an owner. Both bills were sponsored by Representative Deanna Frazier Gordon, and passed unanimously out of the house and Senate. We thank Rep. Gordon and the Board of Accountancy for their efforts.

HB775 was an ‘aircraft carrier’ of a bill that ended up housing all kinds of language pertaining to a wide range of topics including the incremental adjustment to tax rate reductions, but most relevant to our members would be that we used HB775 as a vehicle to secure Kentucky’s conformity to IRC through December 31, 2025. This extends the streak of years that we have been able to consistently secure conformity, though it is always tricky to do on a non-budget year, so we are thankful to assembly leadership for their help on this.

Interim goals

As we go into the interim period before the start of the 2026 Budget session, we have several issues that we hope to break ground on or continue to dig into after they were brought up during the 2025 session. Primarily, the Kentucky Tax Tribunal, which was proposed in HB650, the Modernization of Local Tax Collection (HB253), and a cleanup of KRS language pertaining to tax filing extension due to disaster declarations.

The Kentucky Tax Tribunal, which would take the place of the Kentucky Tax Court of Appeals, is a newly proposed method of resolving tax related disputes. The Tribunal format has been deployed in several other states and has been well received and found to be an effective way of streamlining tax dispute resolution.  The Tribunal offers a single panel of judges as opposed to the current format which may cause taxpayers to face multiple layers of review including administrative agencies, circuit courts, and appellate courts, all of which can be very time consuming and costly.  We hope to weigh in with the bill’s sponsors to advocate that the panel of judges includes a designated seat for a licensed CPA, as it currently only requires attorneys with a background in taxation.

Local tax collection has long been an issue for Kentucky, a state with well over 100 counties and localities that all require individual tax filings for businesses operating within those jurisdictions, regardless of the extent. The administrative burden on businesses as well as tax preparers has been a hot topic for years, and we hope to collaborate with the necessary stakeholders and reach a commonsense resolution that meets the needs of all parties involved. HB253 aimed to accomplish this during the 2025 session but fell short. However, the bill did make a splash during the session. We aim to carry the momentum, and advocate for a more streamlined and efficient approach to collecting local taxes.

Finally, despite the best efforts of not only our own in-house expertise, but also the active partnership with the Kentucky Department of Revenue and the IRS, the rollout of the Disaster Relief Tax Extension for the February 14 floods was at times ambiguous, and at others outright contradictory. We spent an amazing amount of time on the phone with membership and leadership alike trying to confirm if the extension was awarded to the whole state or just those areas affected by the flood; and what did “affected” mean in this context anyway? At the end of the day, each professional had to make their own decision on what the multiple press releases from the various regulatory authorities meant, and what was the best course of action for their clients. It cannot go unmentioned that despite the tax extension awarded by the IRS, according to Kentucky Stature, the Department of Revenue is unable to wave interest under any circumstances. Kentucky filers were awarded an extension, though in a way, it was an extension in name only, as a late fee as high as 11 percent against unpaid state tax liabilities awaited them should they choose to utilize it. While securing an interest waiver for future Disaster Declaration Tax Extensions would be a heavy lift, we will strive to clear up the language in the code to provide better guidance in the future.

National industry news

On the national level, the accounting profession is facing several changes. The AICPA and NASBA released their most recent exposure draft on the UAA seeking comment on the proposed third licensure pathway; a bachelor’s degree with 2 years of experience plus passing the exam. Every state is assessing for themselves how the new pathway will affect mobility and reciprocity, and drafting legislation accordingly. Fortunately, so far, every piece of legislation that has been proposed or passed has included this additional pathway. With the closing of the comment window, the various regulatory bodies will be meeting to discuss the submissions, though they expect to require minimal changes, if any, to the current pathway proposals. Our own Board of Accountancy will be meeting to discuss the new UAA updates, and we look forward to working with them to draft Kentucky’s pathway legislation, and secure mobility and reciprocity for our members, as well as those out of state practitioners looking to do business in the Commonwealth.

As mentioned briefly before, KyCPA as well as our counterparts around the country are sparing no effort to have accounting education classified as part of a well-rounded STEM curriculum. Recently H.R.3541 was introduced to the U.S. House and S.1705 was introduced to the U.S. Senate to accomplish just that. In addition to the classification, the bills authorize the use of federal Student Support and Academic Enrichment (SSAE) grants to develop and strengthen accounting programs in elementary and secondary schools, with a focus on increasing access for students from underrepresented groups. The legislation emphasizes early exposure to accounting as a career path, aiming to diversify and strengthen the future accounting workforce. We believe that recognizing accounting as a STEM field reflects its integration with technology skills and its critical role in today’s data driven economy, and we look forward to working with our sister associations around the country to advocate for the passing of these pieces of legislation. Both bills were referred to their respective committees for consideration.

KyCPA-PAC

We rely on several tools to help us be effective as a professional trade association, facilitating our advocacy for our members. Promoting streamlined, common-sense policies and legislation, while defending the profession and your clients against policies, legislation or regulations that could negatively impact not only the profession, or their client’s business operations, but also their ethical responsibilities. Our biggest strength and resource are most certainly our membership. The collective expertise of not just our Committees and Boards, but also the key contacts around the state, whose targeted advocacy can sway a vote at a crucial moment, are paramount to our success.

However, it is also vital for our viability as an association, that we have a well-funded PAC. We use these funds to bolster the campaigns of legislators whom we hope will hold the line in Frankfort, at a time when a single vote can drastically change the landscape of the accounting profession for the better, or worse. We ask that you help us in our efforts in Frankfort and beyond by contributing to the KyCPA-PAC and provide us the dry powder we need to wage the battles that must be fought. Click here to make a contribute to the KyCPA-PAC. 

Conclusion

Leveraging the expertise of the CPA profession provides KyCPA the credibility to advise policymakers on tax, client advisory, licensing, and business policy issues. Your involvement is critical to providing key advice and protecting the profession. The Society will proactively offer its professional, expert, and practitioner guidance to the General Assembly and Governor’s Administration for the implementation of clear administrative guidance regarding law changes passed during the 2025 Legislative Session.  

Be sure to stay up to date on what's happening in Frankfort and Washington by reading the Society’s Legislative Updates and joining the discussions on Member Meetup.

If you have any questions, comments or feedback, please feel free to reach out to the Society’s Government Affairs Director, Cash Cassady, at ccassady@kycpa.org