Kentucky law lets a qualifying data center buy its servers, cooling systems, backup generators and software without paying state sales and use tax. In early November 2026, the state Cabinet for Economic Development published new conditions a project must meet before the state approves that exemption. Kentucky Lantern The approving body is the Kentucky Economic Development Finance Authority, which I will call KEDFA. It is the state board that votes each month on business incentives.
What the law gives and what it leaves to KEDFA
HB 775, passed in 2025, set the investment a project must make within five years of KEDFA’s first approval. A project in a county of 100,000 people or more must invest $450 million. A county between 50,000 and 100,000 needs $100 million, and a county of 50,000 or fewer needs $25 million. Kentucky Legislature The exemption can last up to 50 years at $450 million or more and up to 25 years below that. A project that takes any other state incentive under the same chapter of Kentucky law cannot qualify.
The Department of Revenue says the new county thresholds took effect June 27, 2025. Department of Revenue
| What the law sets | Before HB 775 | After HB 775 |
|---|---|---|
| Where a project may locate | Louisville and Jefferson County only | Any Kentucky county |
| County of 100,000 or more | $450 million, Louisville only | $450 million |
| County of 50,000 to 100,000 | Not eligible | $100 million |
| County of 50,000 or fewer | Not eligible | $25 million |
| Company that only builds site infrastructure | $150 million, Louisville only | $150 million anywhere |
The law leaves the approval details to KEDFA. It lets KEDFA set review standards and ask for any other information it wants, including the company’s creditworthiness and the likelihood the project succeeds. Kentucky Legislature
What an applicant must file before the vote
A complete application is due at least 30 days before a KEDFA meeting, with a $1,000 fee. The mayor and the county judge executive must each send a letter endorsing the project, with the minutes or resolution that authorized it. Cabinet process requirements Carroll County shows how that letter can decide a project. On October 27, the county’s governing body let a motion to support one developer’s state application die for lack of a second. A day later it voted 4 to 0 to reaffirm support for a different project. Madison Courier
The applicant must also state what taxes it would owe with no incentives at all. It must say whether it will seek other state or local breaks. An independent economic impact study must show the jobs, wages and taxes the project creates, and the taxes lost if every requested incentive is granted.
Every utility must send a letter signed by its chief executive. The letter confirms the utility can serve the project and says whether serving it will raise rates for existing customers. The applicant must also file an energy plan with the state Energy and Environment Cabinet, as the governor’s executive order of August 6, 2026 requires. Cabinet for Economic Development
What happens after KEDFA says yes
KEDFA’s first approval is now conditional and gives the company 180 days to finish the rest. In June, the cabinet’s chart gave nine months for a shorter list of follow up items. Cabinet incentive chart The resolution also warns that a change in the law could end the benefit.
Within those 180 days the company must sign a community benefits agreement. This is a contract with the county or city, approved by its governing body, that lists payments, infrastructure duties and a plan to tear down or reuse the building if it closes. The company must also show its utility has filed a tariff case with the Public Service Commission. A tariff is the price schedule and service terms the commission approves for a class of customer. Cabinet process requirements
Then KEDFA signs a memorandum of agreement, the contract that sets the investment, the term and the penalties for default. The state will not issue the exemption certificate until the commission issues a final order on that tariff. The company pays a $70,000 administrative fee, or $25,000 if it only builds site infrastructure. Cabinet process requirements
Can KEDFA shorten the exemption?
The law sets 50 years and 25 years as the longest terms an agreement may run, so a shorter term is allowed. Kentucky Legislature The new documents leave room to cut the size and length of the break when a project brings few jobs or already gets local tax relief. A cabinet spokesman said the length must match what the company commits to the community. Kentucky Lantern
The minimum investment amounts and the exclusions stay where the legislature put them. The director of a state policy group said the cabinet can only negotiate terms and that larger changes need the General Assembly. Kentucky Lantern As of August, the state had not awarded the exemption to any project. Lexington Herald Leader