April 20, 2026
By Cash Cassady
The 2026 session of the Kentucky General Assembly proved to be a consequential one for the accounting profession, marked by meaningful progress on licensure modernization, thoughtful changes to municipal financial reporting, and continued evolution of the Commonwealth’s tax code. For CPAs across Kentucky, the outcomes of this session will have both immediate and long-term implications for practice, compliance, and the future pipeline of the profession.
One of the most significant achievements of the session was the passage of HB 45, legislation modernizing Kentucky’s CPA licensure framework. As firms across the state continue to face pipeline challenges, HB 45 introduces additional pathways to licensure while maintaining the core pillars of the profession: education, examination, and experience. Importantly, the legislation preserves the integrity of the CPA credential and ensures continued mobility with other states, an essential component in today’s increasingly interconnected professional environment. This reform reflects a broader national conversation around licensure and positions Kentucky as a competitive state for attracting and retaining accounting talent. The successful passage of HB 45 was the result of strong collaboration between lawmakers, regulators, and the CPA community, underscoring the value of sustained advocacy and member engagement.
Another key legislative win came with the passage of SB 192, addressing municipal financial reporting requirements. This legislation introduces a more flexible framework for smaller local governments by allowing, under certain thresholds, the use of agreed-upon procedures engagements performed by a CPA in place of a full audit. The change reflects a pragmatic approach to balancing accountability with resource constraints, particularly for smaller jurisdictions. For practitioners, SB 192 creates clarity around engagement standards while reinforcing the critical role CPAs play in supporting transparency and fiscal oversight at the local level. It also opens the door for more tailored service offerings that align with the needs and capacities of municipal clients.
Tax policy was another central focus of the session, particularly through the passage of HB 757 and HB 869, which together addressed a range of revenue and conformity issues. A key area of engagement for the CPA community was Kentucky’s approach to Internal Revenue Code (IRC) conformity, an issue with significant implications for tax compliance, planning, and administrative complexity. Through coordinated advocacy alongside the Kentucky Chamber of Commerce and national stakeholders, including the Council On State Taxation (COST), the profession helped secure partial IRC conformity. This included updating Kentucky’s conformity date to December 31, 2025, as well as addressing the treatment of Section 174 research and experimental expenditures by reverting to its end-of-year 2024 treatment.
The treatment of Section 174 has been a major concern for practitioners and taxpayers alike. At the federal level, the move toward mandatory capitalization and amortization of research and development expenditures under the OBBBA was a business-friendly policy which aimed to afford growth opportunities to American industry. Kentucky’s decision not to fully conform to this federal treatment, by reverting to its end-of-year 2024 approach, creates a divergence that practitioners must continue to navigate.
As a result, this issue will likely remain a focus of future advocacy efforts, with continued emphasis on achieving greater alignment between federal and state tax treatment to reduce unnecessary compliance burdens.
The biennial budget adopted during the 2026 session reflects a Commonwealth that continues to operate from a position of fiscal strength, while also signaling a transition to a more measured and sustainable growth environment. For CPAs, the budget offers important context for understanding the broader economic and policy landscape in which clients and organizations will operate over the next two years.
At a high level, the scale of the budget underscores the size and complexity of Kentucky’s financial commitments. Total annual spending across all funds, combining the General Fund, federal funds, and restricted accounts, falls in the range of approximately $30 to $32 billion. Within that, the General Fund, which is most directly influenced by state tax policy, accounts for roughly $15 to $16 billion per year. These figures reflect several years of strong revenue performance, driven in part by economic recovery and growth following the pandemic period.
Perhaps the most notable indicator of Kentucky’s fiscal health is the condition of the Budget Reserve Trust Fund, commonly referred to as the Rainy-Day Fund. Entering this biennium, reserves remain at or near historic highs, exceeding $3 billion. This level of savings provides a meaningful buffer against potential economic downturns and gives policymakers greater flexibility to manage future uncertainty without resorting to abrupt spending cuts or tax increases.
That said, revenue expectations are beginning to normalize. Forecasts presented to lawmakers during the session point toward moderate, steady growth rather than the elevated revenue surges seen in recent years. For practitioners, this marks an important shift. A more stable revenue environment places greater emphasis on forecasting accuracy, long-term planning, and disciplined policy decisions, particularly as the state continues to evaluate tax reform measures.
On the spending side, the budget reflects a continued focus on core priorities while avoiding significant structural expansions. Education remains the largest area of investment, with sustained funding for K-12 through the SEEK formula as well as support for postsecondary institutions. Workforce development also features prominently, with targeted investments aimed at strengthening Kentucky’s talent pipeline—an area of particular relevance given the challenges facing the accounting profession and other skilled industries.
In addition, the budget includes ongoing commitments to infrastructure and capital needs, as well as continued adherence to actuarially required contributions for the state’s public pension systems. These decisions reflect a broader emphasis on long-term fiscal responsibility rather than short-term expansion.
Importantly, the budget does not exist in isolation. It is closely tied to the tax policy changes debated and enacted during the session, particularly through HB 757 and HB 869. Lawmakers continue to balance efforts to enhance Kentucky’s tax competitiveness, especially through reductions in the individual income tax rate, with the need to maintain stable and sufficient revenue streams. For CPAs, this interplay between budget and tax policy reinforces the importance of staying attuned to both sides of the fiscal equation.
From a practical standpoint, the state’s current financial position provides a degree of predictability that is beneficial for planning and advisory work. Strong reserves and stable revenues reduce the likelihood of sudden policy shifts, while ongoing tax changes ensure that the need for careful interpretation and client guidance remains high.
In many ways, the 2026 session represents a meaningful step forward for the CPA profession in Kentucky. With the successful passage of licensure modernization, thoughtful updates to municipal reporting, and progress on tax conformity, the General Assembly has addressed key issues while laying the groundwork for future improvements. As implementation begins and the policy landscape continues to evolve, CPAs will remain central to helping businesses, governments, and individuals navigate an environment defined by steady change, increasing complexity, and continued opportunity.
If you have any questions, comments or feedback, please feel free to reach out to the Kentucky Society of CPAs Government Affairs Director, Cash Cassady, at ccassady@kycpa.org.
Thank you to everyone who joined KyCPA for CPA Day at the Capitol 2026 in Frankfort on February 11!
It was an incredible day connecting with policymakers, advocating for the CPA profession and sharing valuable insights on key issues impacting tax, licensing and client advisory services. We’re grateful to our members who showed up, made their voices heard and helped strengthen the future of the profession. Your engagement makes a difference.
