Kentucky Local Government Premium Tax (KY LGPT): Health Insurance Summary for 2026–2027

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Kentucky Department of Insurance Bulletin 2026-02 updates the schedules, forms, and procedures governing the Kentucky Local Government Premium Tax, commonly known as KY LGPT, for premiums collected from July 1, 2026, through June 30, 2027. Health insurers, other authorized insurance companies, and surplus lines brokers must update their systems to apply the new local tax rates and jurisdiction information by July 1, 2026. Read Bulletin 2026-02.

Health Insurance Exemptions from KY LGPT

Several important health-related premiums and insurers are exempt from the Kentucky Local Government Premium Tax. The bulletin identifies exemptions for:

• Health insurance policies issued to individuals;
• Group health insurance provided to Kentucky state employees under KRS 18A.225;
• High-deductible health plans meeting the definition in 26 U.S.C. § 223(c)(2);
• Workers’ compensation insurance; and
• Policies issued by entities authorized to operate in Kentucky only as health maintenance organizations under KRS 304.38-060.

These exemptions do not mean that every health-related premium is automatically exempt. For example, a group health plan that does not fall within a statutory or local exemption may remain subject to KY LGPT. Insurers should review the applicable local government’s tax code and ordinance because some jurisdictions provide additional exemptions or exclude health insurance from their local tax.

Determining the Correct Taxing Jurisdiction

When a health insurance premium is taxable, KY LGPT is determined using the physical location of the insured risk—not merely the policyholder’s mailing address or ZIP code. Insurers must establish the actual address, city, and county associated with the risk.

A ZIP code alone must not be used to assign Kentucky Local Government Premium Tax because postal boundaries do not necessarily match city or county taxing boundaries. Insurers and surplus lines brokers that issued or renewed more than 2,000 Kentucky policies during the preceding calendar year must use a Verified Risk Location system or program.

The applicable rate is generally the KY LGPT rate in effect on the first day of the policy term. If additional premium is collected because of a change during the policy term, the rate effective on the date of that change applies. Local tax rates, exemptions, minimum taxes, and tax-code rules can vary by jurisdiction and line of insurance.

Policyholder Disclosures and Collection Fees

If an insurer passes the Kentucky Local Government Premium Tax on to a health policyholder, it must disclose:

• The amount of KY LGPT charged for the policy term;
• The name of each local taxing jurisdiction receiving the tax; and
• Whether the amount includes a collection fee.

The disclosure generally belongs on the policy, declarations pages, initial billing instrument, renewal certificate, or endorsement billing document, depending on the transaction. If tax is owed to multiple jurisdictions, each jurisdiction must be identified separately.

An insurer or agent may retain a reasonable collection fee, limited to the lesser of 15% of the KY LGPT collected and remitted or 2% of the taxable premium. When tax and the associated fee are refunded or credited, the policyholder must receive the applicable refund, including the collection-fee portion, on a proportional basis.

Health Insurer Filing Responsibilities

Quarterly KY LGPT payments and returns are due to each applicable local government 30 days after the end of the calendar quarter. Insurers should use Form LGT-141 or a substantially similar form. Quarterly returns are not sent to the Department of Insurance, but they must be retained for at least five years.

The annual reconciliation is due March 31. Health insurers must:

• File Form LGT-140 electronically with the Department through the eService Portal;
• Send a paper Form LGT-140 to each applicable local government;
• Pay the $5 Department filing fee; and
• Submit a no-tax-due reconciliation when no taxable KY LGPT premiums were collected.

For 2026, unpaid or underpaid Kentucky Local Government Premium Tax accrues interest at 9%. A local government may impose an additional 10% penalty if the amount remains unpaid 30 days after its due date.

Health insurers should review the 2026–2027 tax schedule, tax-code descriptions, and payee listing before applying KY LGPT. Questions may be directed to the Kentucky Department of Insurance Local Government Premium Tax Unit at DOI.MunicipalTaxes@ky.gov or 502-564-1649.

This summary is for general informational purposes. Insurers should consult Bulletin 2026-02, applicable statutes and regulations, and each local government’s ordinance when determining health insurance KY LGPT liability.