Last-Minute Tax Breaks Allow Racetracks to Keep Sales Taxes

Update: Key parts of the bill highlighted in this analysis were changed in subsequent legislation explained here.

As has become routine in recent budget cycles, the General Assembly added lucrative tax breaks for already well-subsidized industries in the final hours of the legislative session after meaningful public scrutiny was no longer possible.

Under new legislation, Kentucky’s horse industry would receive millions of dollars in sales tax subsidies for races run in Louisville and Lexington. This giveaway to one of Kentucky’s most powerful industries was passed alongside a new two-year state budget that makes painful cuts to agencies serving our least powerful neighbors, including foster children and hungry seniors.

The rich get richer under HB 757

House Bill (HB) 757, the revenue bill tied to the state budget, was not passed by the Senate until late on what was supposed to be the final day before the veto recess. Lawmakers then extended the session past midnight and moved the bill into a free conference committee, a process that allows sweeping changes with virtually no transparency. At that stage, lawmakers can insert entirely new provisions without committee review or substantive floor debate, leaving members with a simple up-or-down vote on the final product.

Two costly tax breaks were added during that opaque process.¹

The first provision appears tailored to benefit a specific development project in Louisville, continuing a troubling pattern of last-minute, project-specific giveaways to favored developers.

The second provision is far broader and far more expensive. It allows entities hosting certain “professional sporting events” that are “qualifying attractions” held at qualifying venues in Louisville or Lexington to keep 100% of the state sales taxes collected during those events. This includes but is not limited to taxes collected on admissions, food and beverage concessions, souvenirs, parking, merchandise, and other hospitality services.

Unlike prior, more limited incentives — such as those used to attract the Breeders’ Cup — these new provisions do not require the event to be new or incremental. Instead, the provisions apply to ongoing activities that already occur regularly in Kentucky and would continue to do so without any incentive.

While some temporary events may choose to locate in Kentucky because of these subsidies, the primary beneficiaries are clear: Churchill Downs and Keeneland.

Based on requirements to qualify for the subsidy, both Churchill Downs and Keeneland will be able to apply for and receive 100% of the sales tax collected on behalf of the Commonwealth during every single day of their regular race meets because, as defined in the bill:

• Racetracks qualify as eligible venues;
• Horse racing is a “professional sporting event”, which is defined as “an organized, competitive event, governed by rules and a sporting body, where participants compete for compensation beyond actual expenses”; and
• Regular race meets meet the requirements to be a “qualifying attraction” which are professional sporting events that are:
  • Held at a venue over a duration of at least three consecutive days; hosted by a sponsoring entity which is defined as a “person hosting a qualifying attraction pursuant to an agreement with a facility operator (there is no requirement that the sponsoring entity and the facility operator be separate entities); and
  • Open to the public upon the purchase of tickets, with attendance totaling at least 100,000 admissions over the duration of each series of events (note that “series of events” is not defined but the practical interpretation as used in the statute is that the attendance would be over the entire race meet).²

As a result, both Churchill Downs and Keeneland can claim 100% of the sales tax collected during every day of their race meets — not only for special events, but for their core, ongoing business operations.

Although the bill limits each entity to one incentive request per year, that request can cover multiple qualifying attractions. The Department of Revenue can begin approving applications on July 1, 2026, and the program will run for up to 10 years.

Other existing events, such as equine competitions at the Kentucky Horse Park and the World’s Championship Horse Show held during the Kentucky State Fair, may also qualify. But again, these are not new activities; they are longstanding events that already take place.

An already heavily subsidized industry gets more

These new incentives come on top of substantial, longstanding public financial support for the horse industry and associated gambling operations:

• Kentucky imposes an exceptionally low effective tax rate on slot machines operated by the horse industry compared to other states. After accounting for the portion of tax revenue collected that is returned to the horse industry through various support funds, the effective rate is about 7.3%, compared to 33% to 55% in other states with slots.
• Churchill Downs, a publicly traded company, which is worth about $10 billion and generated almost $3 billion in revenue for its shareholders in 2025, has avoided paying property taxes on the track property and over 70 other parcels it owns surrounding the track since 2002. This is because Churchill Downs was granted an economic development incentive known as an industrial revenue bond (IRB) — a deal that was recently extended by 30 additional years by the Louisville Metro Council. Under the IRB deal, the track “transfers” the included properties to Louisville Metro, which isn’t subject to property tax, and then Louisville Metro “leases” the property back to Churchill Downs. A consequence of this sweetheart deal for Churchill Downs is that others in Jefferson County must make up for the lost revenue by paying higher taxes. Churchill Downs does pay some money to Jefferson County Public Schools (JCPS) through a payment in lieu of taxes (PILOT) program, but this too has been the subject of controversy due past failures of the Jefferson County PVA to reassess properties owned by Churchill Downs, resulting in inappropriately low payments to JCPS — a situation that has been remedied in recent years.
• Churchill Downs has also received state tax incentives through Tax Increment Financing program of up to $25 million; and
• Keeneland was approved for up to $23 million in Tourism Development Act Incentives in 2023.³

The tradeoff: tax breaks v. essential services

These new giveaways are being enacted while the General Assembly is making real and painful budget cuts. As state revenues have been reduced through successive cuts to the income tax rate, reliance has necessarily shifted to other sources, particularly the sales tax, which has become more important. But the ability to rely on sales tax revenues is compromised when lawmakers give money generated through sales taxes away, as they are doing with these last-minute changes.

The judicial branch has warned that layoffs may be necessary due to cuts to its base funding. Most executive branch agencies — including the Department for Community Based Services — are facing a 4% base cut in the first year of the biennium, followed by a 3% base cut in the second year for a total 7% cut. In some cases, the lack of essential funding is already visible: foster children are sleeping in state office buildings because the state lacks sufficient funding to adequately support foster placements.

These tax breaks cannot credibly be described as economic development. They do not require new investment, new events or new economic activity. Instead, they divert public revenue to subsidize business activities that are already occurring—and that are already heavily supported by Kentucky public dollars.

At a moment when core public services are being reduced, Kentucky is choosing to expand subsidies for one of its most well-supported industries.