Committee advances broad development and tax package including TIF changes, tax treatment for cannabis-infused beverages, and income-tax increment options

House Bill 775, a multi-part tax and development measure, was reported out of the House Appropriations and Revenue Committee on Tuesday as amended by PHS 2 and a subsequent committee amendment. The substitute grew substantially during committee consideration and the final committee tally was 16 yes, 3 no and 1 pass.

Representative Jason Nemes (spelled in amendment materials as Nemes) sponsored the bill. He provided a section-by-section estimated impact memorandum to summarize the changes. Key provisions in the committee substitute include:

- Tax increment financing (TIF): Clarifies definitions and allows smaller development areas to be created within existing development areas in cities of the first class (the chair referenced the Yum TIF in Louisville as a potential use).

- Administrative changes: Requires certain brewers to file and pay electronically beginning July 1, 2026 (a process change with no fiscal impact listed for the current period).

- Distilled spirits and property tax clarifications: Changes how property-tax-related reductions for distilled spirits are calculated (assessed-value basis rather than tax-rate reference points); described as a clarification rather than a new tax.

- Individual income tax reduction mechanism: Modifies the existing framework so that, if certified by the Office of State Budget Director, smaller incremental reductions (for example 0.1, 0.2, 0.3, 0.5, etc., subject to statutory conditions) could be certified and the General Assembly could act on those increments in future years. Sponsor materials stress that additional legislative or certification steps would be required before any reduction takes effect.

- Metropolitan College incentive: Extends the existing program for another period (no current-year fiscal impact recorded in the memorandum).

- Tourism and entertainment incentives: Establishes sales-tax mechanisms to incentivize large multi-day events and certain tourism development projects; the estimated cost cited in committee materials was approximately $3,000,000 annually for the entertainment-event sales-tax incentive once in full operation.

- Cannabis-infused beverages (hemp-derived): Imposes excise taxes at levels similar to distilled spirits at wholesale points while preserving retail sales-tax treatment; committee discussion noted a tentative fiscal estimate of roughly $930,000 in revenue in a future fiscal year (2526 in the estimate memorandum). Committee members were explicit that HB 775 addresses taxation only and that separate legislation (referred to in discussion as Senate Bill 202) deals with whether particular products are lawful and how they are licensed.

Committee debate focused on the broad scope of the substitute and the late arrival of a large substitute (one member said the bill went from “maybe 4 pages to a hundred and 7” and that members had limited time to digest it). Some members requested additional review of industry impacts and fiscal implications before floor consideration. Representative Fugate asked whether “cannabis drink” products are derived from marijuana; the sponsor clarified the tax provisions in HB 775 apply to hemp-derived products and that separate bills address broader legalization and licensing questions.

Final committee action: PHS 2 (and a committee amendment) was adopted; the bill was reported with a roll-call of 16 yes, 3 no and 1 pass and a title amendment was adopted. Chair Petrie said he expected further debate in the full process and indicated it was possible the bill would change in later stages.