LEXINGTON, Ky. — Kentucky lawmakers approved substantial sales tax subsidies for the state's horse racing industry in the final hours of the legislative session, allowing Churchill Downs and Keeneland to retain 100% of state sales taxes collected during race meets, according to analysis by the Kentucky Center for Economic Policy.

The tax breaks were inserted into House Bill 757 during a late-night conference committee process that bypassed typical transparency requirements. The provisions, added after meaningful public scrutiny was no longer possible, allow qualifying racetracks in Louisville and Lexington to keep sales taxes on admissions, food and beverage, merchandise, parking and other hospitality services for their regular race meets.

Unlike previous, more limited incentives tied to new events, the new provisions apply to ongoing activities that already occur regularly in Kentucky and would continue without any incentive, the policy center noted. Both Churchill Downs and Keeneland meet the bill's definition of qualifying venues hosting professional sporting events with sufficient attendance.

The subsidies come as the state's horse racing industry already receives substantial public financial support. Kentucky imposes exceptionally low effective tax rates on slot machines operated by the industry compared to other states — about 7.3% after accounting for funds returned to the horse industry, versus 33% to 55% elsewhere. Churchill Downs, a publicly traded company worth approximately $10 billion, has avoided property taxes since 2002 through an industrial revenue bond arrangement recently extended 30 additional years by Louisville Metro Council. Keeneland received up to $23 million in Tourism Development Act incentives in 2023.

The tax giveaways come as state agencies face significant budget cuts. The Department for Community Based Services and most executive branch agencies are experiencing a 4% base cut in the first year of the biennium followed by a 3% cut in the second year. The judicial branch has warned that layoffs may be necessary due to reduced funding. Foster children are reportedly sleeping in state office buildings due to insufficient funding, the Kentucky Center for Economic Policy reported.

The Department of Revenue will begin approving applications for the new sales tax subsidy program July 1, 2026, with the program running for up to 10 years.