Kentucky Governor Signs Law Updating Incentive Programs

Kentucky Governor Andy Beshear recently signed House Bill 869 into law, which will overhaul the state’s incentive programs to better support rural and lower-income counties. The bill was passed in the final hours of the 2026 legislative session.

Along with establishing a tiered system that incentivizes businesses to expand into lower-income counties, the law increases funding eligibility for infrastructure improvements and workforce development programs that will make it even easier for businesses to choose rural counties.

“Companies aren’t just looking for tax breaks. They want a well-rounded community with shovel-ready sites, a skilled workforce, and reliable local partners,” says Colby Kirk, President and CEO of One East Kentucky. “This bill gives rural communities a better opportunity to win in each of these areas and makes them more attractive for investment on a national (and international) scale.”  

One East Kentucky and its partners were part of the incentive reform discussions from the beginning, and they have stood by legislators as they worked through the bill until it was passed and signed into law. These programs can benefit all nine counties that comprise One East Kentucky and countless other rural communities across the state. 

The Law Establishes High-Need Heritage Counties

Before this bill was signed into law, Kentucky had a system for economic development incentives for enhanced and non-enhanced counties. With this model, enhanced counties qualified for additional support and incentives. However, 90 counties in Kentucky qualified for enhanced status, comprising 75% of the state. This meant that many rural and lower-performing counties were still left behind.

This law establishes a system to better identify counties that need investment and development. Newly designated “Heritage Counties” will have the greatest need for incentives to attract companies and will qualify for grants that support infrastructure and workforce development. The state will identify Heritage Counties based on metrics of population density and change in population.

“Our goal is to use these incentives and programs to turn the tide of our local economies, and we hopefully won’t be considered Heritage Counties forever,” says Kirk.

When companies moving to Kentucky choose Heritage Counties, they bring jobs, increase residents' recreational spending, and contribute to the local tax base. Even a single manufacturer moving to one of these counties can have a big impact on the economy. 

The Program Protects Funding Following Income Tax Cuts

Now is a particularly important time to protect incentive programs that attract businesses to Kentucky. On January 1, 2026, the state lowered its income tax rate from 4% to 3.5%. This was an additional decrease from 5% in 2023. While residents might enjoy the tax break, the reduced taxes have a direct impact on companies that receive incentives for operating in enhanced counties.  

Manufacturers who invest in Kentucky can receive incentives based on the income tax paid by employees. When income tax rates drop, the overall value of this incentive drops. Companies that were planning to receive a certain amount over a set period (especially as they created more jobs) would see their benefits diminish as income tax rates were lowered.

House Bill 869 grandfathered in projects that were already approved for incentives before February 2023. The companies that chose Kentucky or are in the process of moving here will still receive the incentives at the levels the state agreed to.  

For example, Dajcor Aluminum expanded into Perry County in 2019 and has since expanded into a 100-employee operation. This company will receive its promised financial incentives for choosing Eastern Kentucky. 

One East Kentucky Worked Closely With State Legislators 

The team at One East Kentucky and its partners across the state made this new law possible. Kirk had met with legislators throughout 2025 and attended committee meetings to highlight the importance of a clearer incentive tier system, one that would incentivize development in regions that need jobs and industry the most.  

Nearly 85% of coal jobs were lost in the state over the past 30 years, many of them in Eastern Kentucky. While the coal industry still has a valuable presence in the area, there is a need for new businesses and industries to move here. This new framework and grant programs will help rural communities, like Eastern Kentucky, work toward a brighter future while helping companies choose an affordable, desirable place to do business.  

“Nothing like this has ever been passed in my tenure in economic development,” says Kirk. “This law will help create jobs in the region and add value to communities in Eastern Kentucky. And I especially want to thank Sen. Phillip Wheeler of Pike County, who represents a large portion of the One East Kentucky region. His chairmanship of the Senate’s Economic Development Committee and his involvement in the passage of this bill are what have made these meaningful changes possible.”

Kirk says that he feels like the state legislators heard him and listened to the needs of the nine counties comprising the One East Kentucky region. This bill can help shape their future. 

Learn More About Development in Eastern Kentucky

Eastern Kentucky is actively taking steps to bring new businesses, top talent, and opportunities to the region. Learn how Johnson County is developing build-ready sites and spec buildings for investors. Read about Martin County and its efforts to create a tourist economy that attracts residents. This law is a fantastic step toward growth, but each community in the region is already working toward prosperity.

Contact Kirk and his team at One East Kentucky to learn more about this region. Your future belongs in Eastern Kentucky, and his team can help you find the right place to do business.