What You’ll Learn
If you’re a nonprofit in Kentucky, or you’re a nonprofit considering fundraising or other activities in Kentucky, you must understand the requirements that Kentucky has established for nonprofits operating in the state.
How can you become familiar with these laws? Where should you start?
Start here. This state profile includes the basic requirements nonprofits must consider. Reading the profile and implementing appropriate compliance measures will help you prepare your organization for success in Kentucky.
Getting to Know the State Nonprofit Corporation Law
*Important primarily for nonprofits incorporated in Kentucky
Emma Woodhouse, handsome, clever, and rich, with a comfortable home and happy disposition, seemed to unite some of the best blessings of existence; and had lived nearly twenty-one years in the world with very little to distress or vex her. She was the youngest of the two daughters of a most affectionate, indulgent father; and had, in consequence of her sister’s marriage, been mistress of his house from a very early period. Her mother had died too long ago for her to have more than an indistinct remembrance of her caresses; and her place had been supplied by an excellent woman as governess, who had fallen little short of a mother in affection.
- Emma, Jane Austen
When reading a novel, we get to know a fictional character by the author’s description. The author tells us about the character’s appearance, purpose, actions, mannerisms, and values.
Nonprofit corporations are something like fictional characters.
We learn how a nonprofit will look and act and make decisions not by reading a novel, but by reading the state law (called the nonprofit corporation act) and the rules the nonprofit makes for itself (called the bylaws and articles of incorporation). The law and the organization’s own rules tell us the organization’s name, purpose, way of acting, and method of making decisions.
To get to know your own nonprofit, be sure to review the sections below.
State Nonprofit Corporation Law
For Religious Nonprofits
Nonprofit Religious Corporation Act: Kentucky’s nonprofit corporation law mentions the option for nonprofit corporations to incorporate for religious purposes. However, the law lacks both: (a) specific provisions to protect the right of nonprofits incorporated for religious purposes to self-government in internal affairs and (b) an option to incorporate expressly as a nonprofit religious corporation. See Ky. Rev. Stat. Ann. § 273; Confused about what it means to be a religious nonprofit corporation? See our whitepaper “Why a Religious Corporation?”
Reliance on Religious Guidance in Governance: Kentucky law permits a director, in the fulfillment of the director’s fiduciary duties, to rely on the opinion of individuals who can reasonably be assumed to have expertise on a certain matter, but does not expressly allow a director to rely on guidance from religious figures within his or her faith tradition. Ky. Rev. Stat. Ann. § 273.215
Understanding Religious Liberty in this State
*Important for all nonprofits doing business in Kentucky, whether incorporated in Kentucky or elsewhere
The religious education and formation of students is the very reason for the existence of most private religious schools, and therefore the selection and supervision of the teachers upon whom the schools rely to do this work lie at the core of their mission. Judicial review of the way in which religious schools discharge those responsibilities would undermine the independence of religious institutions in a way that the First Amendment does not tolerate.
- Our Lady of Guadalupe School v. Morrisey-Berru, 140 S. Ct. 2049 (2020).
Sometimes, the state or local government (like the city or county) makes laws that could conflict with your organization’s free exercise of religion or its sincerely-held religious beliefs.
For example, a law might require employers not to make faith-based distinctions between job candidates. If your organization’s mission is to pass on the teachings of your faith, you will need to make faith-based distinctions in evaluating candidates because their faith commitments will impact their abilities to partner in your mission and witness the faith to your program participants.
So what do you need to do? Be aware of the laws listed below. If any of the laws impact your organization—for example, if you are an employer or a facility open to the public—learn more about how you can protect yourself by reviewing Napa Legal’s religious liberty resources. Talk to an attorney if you have specific concerns.
Religious Liberty Protections
State Religious Freedom Restoration Act: Kentucky has enacted a RFRA that protects the religious free exercise of all individuals and entities by requiring government burdens on religious exercise to satisfy strict scrutiny. These protections originate in a statute rather than the state constitution. Ky. Rev. Stat. Ann. § 446.350; Not sure what a “religious freedom restoration act” is? Click here to learn the fundamentals.
State Constitutional Protection of Free Exercise: The Kentucky Constitution follows in lockstep with the federal constitution’s protections, meeting but not exceeding the required minimum protections of the First Amendment. Ky. Const. § 5
State Blaine Amendment: The Kentucky Constitution contains a Blaine Amendment that could prevent the participation of faith-based schools in generally available public benefit programs on the same terms as similarly situated secular schools. This is not as broad as a general Blaine Amendment, which prohibits all aid to faith-based institutions, but is still detrimental to the work of faith-based institutions. Current U.S. Supreme Court precedent has rendered this language ineffective, but it could become effective in the future if Court precedent changes. See Ky. Const. § 189; Not sure what a Blaine Amendment is? Review the basics here.
Other Relevant State Laws and Regulations
Religious Freedom and Public Accommodation Law: Kentucky’s nondiscrimination laws generally restrict religious freedom for religious organizations that offer public programming and facilities but provide accommodations or exemptions for the vast majority of religious organizations. Ky. Rev. Stat. Ann. § 344.120; Ky. Rev. Stat. Ann. § 344.130; Not sure what a public accommodation law is or what it means for your organization’s religious liberty? Learn the basics in this article which discusses the issue in the context of the case Fulton v. City of Philadelphia.
Protections for Religious Exercise in State of Emergency: Kentucky law provides that religious worship can only be prohibited or restricted by an emergency order that: (a) applies equally to all “essential” secular entities in the jurisdiction, (b) serves a compelling governmental interest, and (c) is narrowly tailored. Ky. Rev. Stat. Ann. § 39A.100
Key Employment Laws and Regulations
In addition to tracking the protected classes under the federal anti-discrimination employment law, Title VII of the Civil Rights Act of 1964, Kentucky employment law prohibits employers from discriminating on the basis of age. An employer is any person who has more than eight employees for twenty or more weeks each year. Religious employers are not prohibited from considering religious qualifications for roles in which religion is a bona fide occupational qualification. Local governments may also have employment-related regulations. An attorney can help you understand what requirements apply to your organization.
Religious Freedom for Faith-Based Employers: Ky. Rev. Stat. Ann. § 344.040; Ky. Rev. Stat. Ann. § 344.090; Need to review the basics on religious freedom and employment matters? Walk through a self-audit of best practices here.
Religious Freedom for Employees: Not Present
Conducting Activities or Programs in this State
Understanding the Business Registration Requirement
*Important primarily for nonprofits doing business in Kentucky but incorporated elsewhere
If you are fundraising or conducting activities in this state, you must consider whether you need to register as a foreign nonprofit corporation. State law requires entities that are conducting a “trade, occupation, and profession” in Kentucky to register. An attorney can help you decide whether you need to register based on the type and volume of activities you have in this state.
Fundraising and Charitable Registration in This State
How to Know (And What to D0) If You're Fundraising In This State
*Important for both Kentucky and Foreign Nonprofits
Not sure what “charitable registration” is? Need to review the basics? Read this article for a refresher.
This state generally requires organizations to register prior to soliciting donations. However, the registration requirement has an exemption for religious organizations soliciting contributions for religious purposes. For eligible organizations, the exemption is automatic. Organizations with “hybrid” purposes, such as religious and educational missions or religious and charitable missions, should consult with an attorney to confirm whether registration is necessary in their specific circumstances.
This state has a broad definition of what constitutes solicitation and does not specify what minimum activity level triggers registration requirements.
Be aware that if your organization engages a professional fundraiser to solicit, additional regulations will apply.
For more information, see the Kentucky Attorney General’s charity resource page.
If You're Fundraising In Multiple States, Make Sure You Understand the URS
This state requires organizations to register using the Unified Registration Statement, which is a standardized charitable registration accepted in many states.
Evaluate Whether You'll Need a Registered Agent
Kentucky does not require a registered agent for purposes of charitable registration, but does require organizations doing business in the state to designate a registered agent for purposes of foreign business registration. More information about this is included below. See Ky. Rev. Stat. Ann. §§ 14.4-010; 273.182; 273.3641.
Follow the Rules About Communicating with the Public
This state does not require organizations to post specific language when conducting charitable solicitations unless the organization is working with a professional fundraiser.
Charitable Registration Statute
Get Acquainted with State and Local Taxes and Exemptions
State and Local Taxes
*Important for all nonprofits doing business in Kentucky, whether incorporated in Kentucky or elsewhere
In this state, organizations that have received federal income tax exemption under IRC § 501(c)(3) can apply to receive exemption from state income tax. The applicable form is available at the Commonwealth of Kentucky Department of Revenue webpage. Kentucky’s general exemption for 501(c)(3) and other religious nonprofit organizations appears to exempt even unrelated business income for eligible entities. See Ky. Rev. Stat. Ann. § 141.040.
It is also important to consider whether your organization might be eligible for sales and use tax or property tax exemptions. Under the Kentucky Constitution, real and personal property owned by religious institutions is exempt from property tax. To receive the property tax exemption, eligible organization must apply for exemption using forms provided by the Kentucky Department of Revenue.
In this state, religious organizations may apply to receive an exemption from sales and use taxes both for eligible sales by the organization and eligible purchases by the organization. More information about the sales and use tax exemptions and applications is available on the Kentucky Department of Revenue website. An accountant or attorney can provide answers to specific questions regarding your organization’s eligibility for exemption.
Corporate Income Tax Statute
Kentucky imposes a corporate income tax and offers an automatic exemption only to a subset of organizations with federal 501(c)(3) exempt status. Ky. Rev. Stat. Ann. § 141.040
Corporate Franchise Tax Statute
This state does not have a corporate franchise tax.
What You Need to Know About Sales Tax
Sales and Use Tax: Kentucky imposes a sales and use tax on religious organizations’ sales and only provides limited exemptions for certain items. Kentucky imposes a sales and use tax on religious organizations’ purchases but generally provides a broad and comprehensive, entity-based tax exemption for 501(c)(3) religious organizations’ purchases upon application. Ky. Rev. Stat. Ann. § 139.495
State Tax Treatment of Unrelated Business Income: General exemption appears to exempt even unrelated business income for eligible entities. See Ky. Rev. Stat. Ann. § 141.040.
Property Tax: Kentucky imposes property tax but, upon application, generally provides an exemption to religious organizations for property used for religious and/or charitable purposes. Ky. Const. § 170
State-Specific Special Requirements
A volunteer attorney in Kentucky
This resource contains general educational information related to legal concepts, but this information does not constitute legal advice. Anyone seeking legal advice is strongly encouraged to consult with a licensed attorney regarding any of the matters discussed herein. Although licensed attorneys work with Napa Legal, Napa Legal is not a law firm and does not undertake legal representation on behalf of any clients. Further, no licensed attorney working with or on behalf of Napa Legal agrees to undertake legal representation on behalf of any client unless the terms of such representation are set forth in a separate, written representation agreement.
Become a member or sign in to access the full Multi-State Matrix and Napa Legal's entire library of resources.
Create an All Access Account to view every state plus additional content from our expansive Nonprofit Library.
**Please note that the following state profiles are forthcoming and will be published soon:Hawaii and Washington