What Does It Do?

The Modernization of Local Tax Collection legislation introduces a streamlined approach to managing local payroll and net profits taxes across all jurisdictions through a single online portal. This system aims to simplify the process of tax payment for businesses by consolidating transactions and reducing administrative burdens. It is designed to enhance compliance, which is expected to generate increased revenue for local governments. Importantly, funds collected through the system must be deposited into local government accounts within one day, ensuring timely disbursement.

The State Treasurer is tasked with overseeing the system, leveraging existing expertise in remittances and fund transfers. A steering committee, composed of stakeholders, will be established to design the system in preparation for development by third-party programmers. Although businesses are not mandated to use the new system, local jurisdictions are required to adopt it.

The system is designed to reduce paperwork and administrative expenses for small businesses across Kentucky. It includes reporting mechanisms for auditing and compliance while respecting home rule, allowing local governments to retain control over tax rates and policies. Notably, the system does not impose costs on local jurisdictions, as the expenses are covered by businesses using the portal.

The legislation also safeguards local funds from being held by the state and ensures the system does not discourage economic development. Instead, it aims to foster a more business-friendly environment by eliminating barriers to compliance. The development timeline prioritizes thorough planning and implementation, with the system projected to go live by January 1, 2027, following a detailed design, build-out, and testing phase.