KRS ch. 141 | Kentucky Revised Statutes, Chapter 141 — Income Taxes

Title XI — Revenue and Taxation

Includes enactments through the 2026 Regular Session.

The KRS database was last updated on 2026-08-31.

Title XI Revenue and Taxation

Chapter 141 Income Taxes

141.010 Definitions for chapter for taxable years beginning on or after January 1, 2018.

As used in this chapter, for taxable years beginning on or after January 1, 2018:

(1) "Adjusted gross income," in the case of taxpayers other than corporations, means the amount calculated in KRS 141.019;

(2) "Captive real estate investment trust" means a real estate investment trust as defined in Section 856 of the Internal Revenue Code that meets the following requirements:

(a) 1. The shares or other ownership interests of the real estate investment trust are not regularly traded on an established securities market; or

The real estate investment trust does not have enough shareholders or owners to be required to register with the Securities and Exchange Commission;

(b) 1. The maximum amount of stock or other ownership interest that is owned or constructively owned by a corporation equals or exceeds:

a. Twenty-five percent (25%), if the corporation does not occupy property owned, constructively owned, or controlled by the real estate investment trust; or

b. Ten percent (10%), if the corporation occupies property owned, constructively owned, or controlled by the real estate investment trust. The total ownership interest of a corporation shall be determined by aggregating all interests owned or constructively owned by a corporation; and

For the purposes of this paragraph:

a. "Corporation" means a corporation taxable under KRS 141.040, and includes an affiliated group as defined in KRS 141.200, that is required to file a consolidated return pursuant to KRS 141.200; and

b. "Owned or constructively owned" means owning shares or having an ownership interest in the real estate investment trust, or owning an interest in an entity that owns shares or has an ownership interest in the real estate investment trust. Constructive ownership shall be determined by looking across multiple layers of a multilayer pass-through structure; and

(3) "Commissioner" means the commissioner of the department;

(4) "Corporation" has the same meaning as in Section 7701(a)(3) of the Internal Revenue Code;

(5) "Critical infrastructure" means property and equipment owned or used by communications networks, electric generation, transmission or distribution systems, gas distribution systems, or water or wastewater pipelines that service multiple customers or citizens, including but not limited to real and personal property such as buildings, offices, lines, poles, pipes, structures, or equipment;

(6) "Declared state disaster or emergency" means a disaster or emergency event for which:

(a) The Governor has declared a state of emergency pursuant to KRS 39A.100; or

(b) A presidential declaration of a federal major disaster or emergency has been issued;

(7) "Department" means the Department of Revenue;

(8) "Dependent" means those persons defined as dependents in the Internal Revenue Code;

(9) "Disaster or emergency-related work" means repairing, renovating, installing, building, or rendering services that are essential to the restoration of critical infrastructure that has been damaged, impaired, or destroyed by a declared state disaster or emergency;

(10) "Disaster response business" means any entity:

(a) That has no presence in the state and conducts no business in the state, except for disaster or emergency-related work during a disaster response period;

(b) Whose services are requested by a registered business or by a state or local government for purposes of performing disaster or emergency-related work in the state during a disaster response period; and

(c) That has no registrations, tax filings, or nexus in this state other than disaster or emergency-related work during the calendar year immediately preceding the declared state disaster or emergency;

(11) "Disaster response employee" means an employee who does not work or reside in the state, except for disaster or emergency-related work during the disaster response period;

(12) "Disaster response period" means a period that begins ten (10) days prior to the first day of the Governor's declaration under KRS 39A.100, or the President's declaration of a federal major disaster or emergency, whichever occurs first, and that extends thirty (30) calendar days after the declared state disaster or emergency;

(13) "Doing business in this state" includes but is not limited to:

(a) Being organized under the laws of this state;

(b) Having a commercial domicile in this state;

(d) Having one (1) or more individuals performing services in this state;

(e) Maintaining an interest in a pass-through entity doing business in this state;

(f) Deriving income from or attributable to sources within this state, including deriving income directly or indirectly from a trust doing business in this state, or deriving income directly or indirectly from a single-member limited liability company that is doing business in this state and is disregarded as an entity separate from its single member for federal income tax purposes; or

(g) Directing activities at Kentucky customers for the purpose of selling them goods or services. Nothing in this subsection shall be interpreted in a manner that goes beyond the limitations imposed and protections provided by the United States Constitution or Pub. L. No. 86-272;

(14) "Employee" has the same meaning as in Section 3401(c) of the Internal Revenue Code;

(15) "Employer" has the same meaning as in Section 3401(d) of the Internal Revenue Code;

(16) "Fiduciary" has the same meaning as in Section 7701(a)(6) of the Internal Revenue Code;

(17) "Financial institution" means:

(a) A national bank organized as a body corporate and existing or in the process of organizing as a national bank association pursuant to the provisions of the National Bank Act, 12 U.S.C. secs. 21 et seq., in effect on December 31, 1997, exclusive of any amendments made subsequent to that date;

(b) Any bank or trust company incorporated or organized under the laws of any state, except a banker's bank organized under KRS 286.3-135;

(c) Any corporation organized under the provisions of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any corporation organized after December 31, 1997, that meets the requirements of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997; or

(d) Any agency or branch of a foreign depository as defined in 12 U.S.C. sec. 3101, in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any agency or branch of a foreign depository established after December 31, 1997, that meets the requirements of 12 U.S.C.

sec. 3101 in effect on December 31, 1997;

(18) "Fiscal year" has the same meaning as in Section 7701(a)(24) of the Internal Revenue Code;

(19) "Gross income":

(a) In the case of taxpayers other than corporations, has the same meaning as in Section 61 of the Internal Revenue Code; and

(b) In the case of corporations, means the amount calculated in KRS 141.039;

(20) "Individual" means a natural person;

(21) "Internal Revenue Code" means for taxable years beginning on or after January 1, 2026, the Internal Revenue Code in effect on December 31, 2025, exclusive of any amendments made subsequent to that date, other than amendments that extend provisions in effect on December 31, 2024, that would otherwise terminate;

(22) "Limited liability pass-through entity" means any pass-through entity that affords any of its partners, members, shareholders, or owners, through function of the laws of this state or laws recognized by this state, protection from general liability for actions of the entity;

(23) "Modified gross income" means the greater of:

(a) Adjusted gross income as defined in 26 U.S.C. sec. 62, including any amendments in effect on December 31 of the taxable year, and adjusted as follows:

Include interest income derived from obligations of sister states and political subdivisions thereof; and
Include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or

(b) Adjusted gross income as defined in subsection (1) of this section and adjusted to include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2);

(24) "Net income":

(a) In the case of taxpayers other than corporations, means the amount calculated in KRS 141.019; and

(b) In the case of corporations, means the amount calculated in KRS 141.039;

(25) "Nonresident" means any individual not a resident of this state;

(26) "Number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under KRS 141.325, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero;

(27) "Part-year resident" means any individual that has established or abandoned Kentucky residency during the calendar year;

(28) "Pass-through entity" means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity recognized by the laws of this state that is not taxed for federal purposes at the entity level, but instead passes to each partner, member, shareholder, or owner their proportionate share of income, deductions, gains, losses, credits, and any other similar attributes;

(29) "Payroll period" has the same meaning as in Section 3401(b) of the Internal Revenue Code;

(30) "Person" has the same meaning as in Section 7701(a)(1) of the Internal Revenue Code;

(31) "Registered business" means a business entity that owns or otherwise possesses critical infrastructure and that is registered to do business in the state prior to the declared state disaster or emergency;

(32) "Resident" means an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in the aggregate more than one hundred eighty-three (183) days of the taxable year in this state;

(33) "S corporation" has the same meaning as in Section 1361(a) of the Internal Revenue Code;

(34) "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States;

(35) "Taxable net income":

(a) In the case of corporations that are taxable in this state, means "net income" as defined in subsection (24) of this section;

(b) In the case of corporations that are taxable in this state and taxable in another state, means "net income" as defined in subsection (24) of this section and as allocated and apportioned under KRS 141.120;

(c) For homeowners' associations as defined in Section 528(c) of the Internal Revenue Code, means "taxable income" as defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the provisions of subsection (21) of this section, the Internal Revenue Code sections referred to in this paragraph shall be those code sections in effect for the applicable tax year; and

(d) For a corporation that meets the requirements established under Section 856 of the Internal Revenue Code to be a real estate investment trust, means "real estate investment trust taxable income" as defined in Section 857(b)(2) of the Internal Revenue Code, except that a captive real estate investment trust shall not be allowed any deduction for dividends paid;

(36) "Taxable year" means the calendar year or fiscal year ending during such calendar year, upon the basis of which net income is computed, and in the case of a return made for a fractional part of a year under the provisions of this chapter or under administrative regulations prescribed by the commissioner, "taxable year" means the period for which the return is made; and

(37) "Wages" has the same meaning as in Section 3401(a) of the Internal Revenue Code and includes other income subject to withholding as provided in Section 3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 6, effective July 15, 2026. -- Amended 2025 Ky. Acts ch. 98, sec. 30, effective June 27, 2025. -- Amended 2024 Ky. Acts ch. 166, sec. 14, effective July 15, 2024. -- Amended 2023 Ky. Acts ch. 92, sec. 17, effective March 24, 2023. -- Amended 2022 Ky. Acts ch. 212, sec. 42, effective July 14, 2022. -- Amended 2021 Ky. Acts ch. 31, sec. 1, effective June 29, 2021. -- Amended 2019 Ky. Acts ch. 151, sec. 35, effective June 27, 2019. -- Repealed and reenacted 2018 Ky. Acts ch. 171, sec. 53, effective April 14, 2018; and ch. 207, sec. 53, effective April 27, 2018. -- Amended 2016 Ky. Acts ch. 113, sec. 2, effective July 15, 2016; and ch. 138, sec. 3, effective April 27, 2016. -- Amended 2014 Ky. Acts ch. 102, sec. 2, effective July 15, 2014. -- Amended 2011 Ky. Acts ch. 54, sec. 1, effective March 16, 2011. -- Amended 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 3, effective June 4, 2010. -- Repealed and reenacted 2010 Ky. Acts ch. 51, sec. 42, effective July 15, 2010. -- Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 105, effective June 26, 2009. -- Amended 2007 Ky. Acts ch. 52, sec. 2, effective June 26, 2007; and ch. 137, sec. 42, effective June 26, 2007. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 1, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 149, sec. 202, effective July 12, 2006; ch. 251, sec. 13, effective July 12, 2006; and ch. 252, Pt. XXVIII, sec. 16, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 471, effective June 20, 2005; ch. 168, sec. 3, effective March 18, 2005; and ch. 173, Part XVIII, sec. 1, effective March 20, 2005. -- Amended 2004 Ky. Acts ch. 135, sec. 1, effective July 13, 2004. -- Amended 2002 Ky. Acts ch. 206, sec. 1, effective July 15, 2002; and ch. 367, sec. 1, effective July 15, 2002. -- Amended 2001 Ky. Acts ch. 67, sec. 1, effective March 15, 2001. -- Amended 2000 Ky. Acts ch. 337, sec. 1, effective July 14, 2000; and ch. 533, sec. 1, effective April 26, 2000. -- Amended 1998 Ky. Acts ch. 1, sec. 1, effective February 6, 1998; ch. 365, sec. 1, effective July 15, 1998; ch. 402, sec. 3, effective April 7, 1998; ch. 496, sec. 63, effective April 10, 1998; ch. 509, sec. 8, effective July 15, 1998; ch. 550, sec. 1, effective July 15, 1998; and ch. 586, sec. 8, effective July 15, 1998. -- Amended 1996 Ky. Acts ch. 69, sec. 1, effective July 15, 1996. -- Amended 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 1, effective April 28, 1995. -- Amended 1994 Ky. Acts ch. 45, sec. 1, effective July 15, 1994. -- Amended 1992 Ky. Acts ch. 165, sec. 1, effective July 14, 1992. -- Amended 1990 Ky. Acts ch. 163, sec. 8, effective July 13, 1990; ch. 242, sec. 2, effective July 13, 1990; ch. 303, sec. 1, effective July 1, 1990; and ch. 476, Pt. VII D, sec. 630, effective April 11, 1990. -- Amended 1988 Ky. Acts ch. 174, sec. 1, effective July 15, 1988. -- Amended 1986 Ky. Acts ch. 459, sec. 3, effective July 15, 1986. -- Amended 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. V, sec. 14, effective July 29, 1985. -- Amended 1984 Ky. Acts ch. 378, sec. 1, effective July 1, 1984. -- Amended 1982 Ky. Acts ch. 105, sec. 1, effective March 24, 1982; and ch. 166, sec. 15, effective July 15, 1982. -- Amended 1980 Ky. Acts ch. 176, sec. 1, effective July 15, 1980. -- Amended 1978 Ky. Acts ch. 233, sec. 10, effective June 17, 1978. -- Amended 1976 Ky. Acts ch. 155, sec. 7. -- Amended 1974 Ky. Acts ch. 163, sec. 2. -- Amended 1972 Ky. Acts ch. 62, Pt. III, sec. 1. -- Amended 1970 Ky. Acts ch. 216, sec. 3. -- Amended 1968 Ky. Acts ch. 40, Part II, sec. 1. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 1. -- Amended 1962 Ky. Acts ch. 124, sec. 1. -- Amended 1960 Ky. Acts ch. 5, Art. III, sec. 1. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 1. -- Amended 1954 Ky. Acts ch. 79, sec. 1. -- Amended 1952 Ky. Acts ch. 194, secs. 1 and 2. -- Amended 1948 Ky. Acts ch. 93, sec. 1. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-1, 4281b-2, 4281b-5.

Legislative Research Commission Note (7/14/2022). This statute was amended during the 2022 Regular Session by House Bill 8, a bill which was subsequently amended by 2022 House Bill 659 prior to the section’s effective date. The modifications specified in House Bill 659 have been incorporated in codification.

Legislative Research Commission Note (6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 35 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (4/27/2018). This statute was repealed and reenacted by 2018 Ky. Acts ch. 171, sec. 53 and ch. 207, sec. 53, which are nearly identical and have been codified together.

Legislative Research Commission Note (4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

Legislative Research Commission Note (7/15/2014). 2014 Ky. Acts ch. 102, sec. 40 provides that the amendments to this statute made in 2014 Ky. Acts ch. 102, sec. 2, shall apply to tax years beginning on or after January 1, 2014.

Legislative Research Commission Note (3/16/2011). 2011 Ky. Acts ch. 54, sec. 2, provides that the amendments to KRS 141.010 in 2011 Ky. Acts ch. 54, sec. 1, "apply for taxable years beginning on or after January 1, 2011."

Legislative Research Commission Note (6/26/2007). 2007 Ky. Acts ch. 52, sec. 3, provides that the amendments to KRS 141.010 in 2007 Ky. Acts ch. 52, sec. 2, "shall apply to tax years beginning on or after January 1, 2007."

Legislative Research Commission Note (6/28/2006). 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 73, provides that "unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007."

Legislative Research Commission Note (6/28/2006). Under the authority of KRS 7.136, a manifest clerical or typographical error has been corrected. In the first sentence of 2006 (1st Extra. Sess.) Ky. Acts ch 2, sec. 11, the citation to KRS 141.010(24)(b) to (h) has been changed to KRS 141.010(24)(b)2. to 8. to conform to other amendments citing this statute elsewhere in the Act.

Legislative Research Commission Note (4/25/2006). 2006 Ky. Acts ch. 252, Pt. XXVIII, sec. 18 provides that "The amendment in Section 16 of this Part is applicable for tax years beginning after December 31, 2001."

Legislative Research Commission Note (3/20/2005). 2005 Ky. Acts ch. 173, Part XVIII, sec. 2, provides that changes made to subsection (11)(a) of this section are effective for taxable years beginning after December 1, 2004.

Legislative Research Commission Note (7/13/2004). The amendments made to subsections (10)(r) and (12)(l) of this statute in 2004 Ky. Acts ch. 135, sec. 1, "shall apply for taxable years beginning after December 31, 2003." 2004 Ky. Acts ch. 135, sec. 4.

Legislative Research Commission Note (7/15/2002). The change of dates in subsection (3) of this statute from December 31, 1999, to December 31, 2001, applies to "taxable years beginning after December 31, 2001." 2002 Ky. Acts. ch. 367, sec. 4.

Legislative Research Commission Note (7/15/2002). The amendments made to subsections (10)(k), (11), and (13) of this statute in 2002 Ky. Acts ch. 206, sec. 1, "shall apply for taxable years beginning after December 31, 2001." 2002 Ky. Acts ch. 206, sec. 2.

Legislative Research Commission Note (7/14/2000). The change of dates in subsection (3) of this statute from December 1, 1997, to December 31, 1999, applies to "taxable years beginning after December 31, 1999." 2000 Ky. Acts ch. 337, sec. 4.

Legislative Research Commission Note (4/26/2000). The exclusions set forth in subsection (10)(p) and (q) and subsection (12)(i) to (k) of this statute took effect April 26, 2000, and "retroactively apply to tax years beginning after December 31, 1998. 2000 Ky. Acts. ch. 533, secs. 4 and 5.

Legislative Research Commission Note (4/28/95). The exclusion set forth in subsection (10)(i) of this statute applies "to income received after December 31, 1994," pursuant to 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 11.

141.0101 Depreciation methods and transitional rules.

(1) (a) The provisions of subsections (2) to (11) of this section shall apply to taxable years beginning before January 1, 1994.

(b) The provisions of subsections (12) to (15) of this section shall apply to taxable years beginning after December 31, 1993.

(2) For property placed in service prior to January 1, 1990, in lieu of the depreciation and expense deductions allowed under Internal Revenue Code Sections 168 and 179, a deduction for a reasonable allowance for depreciation, exhaustion, wear and tear, and obsolescence of property used in a trade or business shall be allowed and computed as set out in subsections (3) to (11) of this section. For property placed in service after December 31, 1989, the depreciation and expense deductions allowed under Sections 168 and 179 of the Internal Revenue Code shall be allowed.

(3) Effective August 1, 1985, "reasonable allowance" as used in subsection (2) of this section shall mean depreciation computed in accordance with Section 167 of the Internal Revenue Code and related regulations in effect on December 31, 1980, for all property placed in service on or after January 1, 1981, except as provided in subsections (6) to (8) of this section.

(4) Depreciation of property placed in service prior to January 1, 1981, shall be computed under Section 167 of the Internal Revenue Code, and the method elected thereunder at the time the property was first placed in service or as changed with the approval of the Commissioner of Internal Revenue Service or as required by changes in federal regulations.

(5) Taxpayers other than corporations shall be allowed to deduct as depreciation on recovery property placed in service before August 1, 1985, an amount calculated under Section 168 of the Internal Revenue Code subject to the provisions of subsections (6) and (8) of this section. Corporations with a taxable year beginning on or after July 1, 1984, and before August 1, 1985, shall calculate a deduction for depreciation on recovery property placed in service prior to August 1, 1985, using either of the following alternative methods:

(a) Dividing the total of the deductions allowed under Internal Revenue Code Section 168 by one and four tenths (1.4); and

(b) Calculating the deduction that would be allowed or allowable under the provisions of Section 167 of the Internal Revenue Code.

(6) Recovery property placed in service on or after January 1, 1981, and before August 1, 1985, and subject to transition under subsection (8) of this section, shall be subject to depreciation under Section 167 of the Internal Revenue Code, restricted to the straight line method therein provided over the remaining useful life of such assets.

(7) Depreciation of property placed in service on or after August 1, 1985, shall be computed under Section 167 of the Internal Revenue Code.

(8) Transition from Section 168 of the Internal Revenue Code, Accelerated Cost Recovery System (ACRS) depreciation, to the depreciation allowed or allowable under this section shall be reported in the first taxable year beginning on or after August 1, 1985. To implement the transition, the following adjustments shall be made:

(a) Taxpayers other than corporations shall use the adjusted Kentucky basis for property placed in service on or after January 1, 1981. "Adjusted Kentucky basis" means the basis used for determining depreciation under Section 168 of the Internal Revenue Code less the allowed or allowable depreciation and adjustment for election to expense an asset (Section 179 of the Internal Revenue Code);

(b) Corporations shall adjust the federal unadjusted basis by increasing such basis by the ACRS depreciation not allowed as a deduction in determining Kentucky net income for tax years beginning after June 30, 1984, less allowed or allowable ACRS depreciation for federal income tax purposes. Corporations will not be permitted to adjust the basis by the ACRS depreciation not allowed for Kentucky income tax purposes in tax years beginning on or before June 30, 1984.

(9) A taxpayer may elect to treat the cost of property placed in service on or before July 31, 1985, as an expense as provided in Section 179 of the Internal Revenue Code in effect on December 31, 1981, except that the aggregate cost which may be expensed for corporations shall not exceed five thousand dollars ($5,000). A taxpayer may elect to treat the cost of property placed in service on or after August 1, 1985, as an expense as provided in Section 179 of the Internal Revenue Code in effect on December 31, 1980. Computations, limitations, definitions, exceptions, and other provisions of Section 179 of the Internal Revenue Code and related regulations shall be construed to govern the computation of the allowable deduction.

(10) Upon the sale, exchange, or disposition of any depreciable property placed in service on or after January 1, 1981, capital gains or losses and the amount of ordinary income determined under the provisions of the Internal Revenue Code shall be computed for Kentucky income tax purposes as follows:

(a) Compute the Kentucky unadjusted basis which is the cost of the asset reduced by any basis adjustment made by the taxpayer under Section 48(q)(1) of the Internal Revenue Code and any expense allowed and utilized under Section 179 of the Internal Revenue Code (First Year Expense) in determining Kentucky net income in prior years, and

(b) Compute the adjusted basis by subtracting the depreciation allowed or allowable for Kentucky income tax purposes from the unadjusted basis, except corporations will not be permitted to adjust the basis of assets by the ACRS depreciation not allowed for Kentucky income tax purposes in the tax years beginning on or before June 30, 1984, and

(c) Compute the gain or loss by subtracting the adjusted basis from the value received from the disposition of the depreciable property, and

(d) Compute the recapture of depreciation required under Sections 1245 through 1256 of the Internal Revenue Code and related regulations, and

(e) Unless otherwise provided in this subsection the provisions of the Internal Revenue Code and related regulations governing the determination of capital gains or losses shall apply for Kentucky income tax purposes.

(11) Unless otherwise provided by this chapter, the basis of property placed in service prior to January 1, 1990, for purposes of Kentucky income tax shall be the basis, adjusted or unadjusted, required to be used under Section 167 of the Internal Revenue Code in effect on December 31, 1980.

(12) As used in this subsection to subsection (14) of this section:

(a) "Transition property" means any property placed in service before the first day of the first taxable year beginning after December 31, 1993, and owned by the taxpayer on the first day of the first taxable year beginning after December 31, 1993.

(b) "Adjusted Kentucky basis" means the amount computed in accordance with the provisions of paragraph (b) of subsection (10) of this section for transition property.

(c) "Adjusted federal basis" means the original cost, or, in the case of Section 338 property, the adjusted grossed-up basis of transition property less:

Any basis adjustments required by the Internal Revenue Code for credits; and
The total accumulated depreciation and election to expense deductions allowed or allowable for federal income tax purposes.

(d) "Section 338 property" means property to which an adjusted grossed-up basis has been allocated pursuant to a valid election made by a purchasing corporation under the provisions of Section 338 of the Internal Revenue Code.

(e) "Transition amount" means the net difference between the adjusted Kentucky basis and the adjusted federal basis of all transition property determined as of the first day of the first taxable year beginning after December 31, 1993.

(13) For taxable years beginning after December 31, 1993, the amounts of depreciation and election to expense deductions, allowed or allowable, the basis of assets, adjusted or unadjusted, and the gain or loss from the sale or other disposition of assets shall be the same for Kentucky income tax purposes as determined under Chapter 1 of the Internal Revenue Code.

(14) For taxable years beginning after December 31, 1993, the transition amount computed in accordance with the provisions of paragraph (e) of subsection (12) of this section shall be reported by the taxpayer as follows:

(a) In the first taxable year beginning after December 31, 1993, and the eleven

(11) succeeding taxable years, the taxpayer shall include in gross income one- twelfth (1/12) of the transition amount if:

The adjusted federal basis of transition property exceeds the adjusted Kentucky basis of transition property;
The transition amount exceeds five million dollars ($5,000,000);
The transition amount includes property for which an election was made under Section 338 of the Internal Revenue Code; and
The taxpayer elects the provisions of this paragraph with the filing of an amended income tax return for the first taxable year beginning after December 31, 1993.

(b) In the first taxable year beginning after December 31, 1993 and the three (3) succeeding taxable years, if the transition amount exceeds one hundred thousand dollars ($100,000), or if the transition amount does not exceed one hundred thousand dollars ($100,000) and the taxpayer elects the provision of this paragraph with the filing of the income tax return for the first taxable year beginning after December 31, 1993, the taxpayer shall:

Deduct from gross income twenty-five percent (25%) of the transition amount if the adjusted Kentucky basis of transition property exceeds the adjusted federal basis of transition property; or
Add to gross income twenty-five percent (25%) of the transition amount if the adjusted federal basis of transition property exceeds the adjusted Kentucky basis of transition property.

(c) In the first taxable year beginning after December 31, 1993, if the transition amount does not exceed one hundred thousand dollars ($100,000) and the taxpayer does not elect the provisions of paragraph (b) of this subsection, the taxpayer shall:

Deduct from gross income the total transition amount if the adjusted Kentucky basis of transition property exceeds the adjusted federal basis of transition property; or
Add to gross income the total transition amount if the adjusted federal basis of transition property exceeds the adjusted Kentucky basis of transition property.

(15) For taxable years beginning before January 1, 2028, notwithstanding any other provision of this section to the contrary, any qualified farming operation, as defined in KRS 141.410, shall be allowed to compute the depreciation deduction for new buildings and equipment purchased to enable participation in a networking project, as defined in KRS 141.410, on an accelerated basis at two (2) times the rate that would otherwise be permitted under the provisions of this section. The accumulated depreciation allowed under this subsection shall not exceed the taxpayer's basis in such property.

(16) (a) For property placed in service after September 10, 2001, only the depreciation deduction allowed under Section 168 of the Internal Revenue Code in effect on December 31, 2001, exclusive of any amendments made subsequent to that date, shall be allowed.

(b) For property placed in service after September 10, 2001, but prior to January 1, 2020, only the expense deduction allowed under Section 179 of the Internal Revenue Code in effect on December 31, 2001, exclusive of any amendments made subsequent to that date, shall be allowed.

(c) For property placed in service on or after January 1, 2020, only the expense deduction allowed under Section 179 of the Internal Revenue Code in effect on December 31, 2003, exclusive of any amendments made subsequent to that date, shall be allowed, except that the phase-out provisions of Section 179 of the Internal Revenue Code, limiting the qualifying investment in property, shall not apply.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 55, effective July 15, 2026. -- Amended 2020 Ky. Acts ch. 91, sec. 28, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 36, effective June 27, 2019. -- Amended 2014 Ky. Acts ch. 102, sec. 3, effective July 15, 2014. -- Amended 1996 Ky. Acts ch. 232, sec. 1, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 45, sec. 2, effective July 15, 1994; ch. 56, sec. 1, effective July 15, 1994; and ch. 390, sec. 15, effective July 15, 1994. -- Amended 1990 Ky. Acts ch. 476, Pt. VII D, sec. 631, effective April 11, 1990. -- Created 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. V, sec. 16, effective July 29, 1985.

Legislative Research Commission Note (6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 36 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (7/15/2014). 2014 Ky. Acts ch. 102, sec. 40 provides that the amendments to this statute made in 2014 Ky. Acts ch. 102, sec. 3, shall apply to tax years beginning on or after January 1, 2014.

Legislative Research Commission Note. 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. V, sec. 17, directs that the provisions of this section shall apply to taxable years ending after 7/31/85, unless otherwise provided.

141.0105 Repealed, 2006.

[Repealed]

141.011 Casualty losses -- Net operating losses.

(1) Notwithstanding any other provision of this chapter, the net operating loss carryback-carryforward deduction, including casualty loss, allowed under Section 172 of the Internal Revenue Code shall apply only to such losses incurred in taxable years beginning after December 31, 1979, and no such loss shall be carried back to taxable years beginning before January 1, 1980. Any casualty loss carryforward authorized by this section as it existed before January 1, 1980, may be carried forward as an itemized deduction until it has been fully deducted.

(2) The net operating loss carryback deduction shall not be allowed for losses incurred for taxable years beginning on or after January 1, 2005.

(3) For taxable years when the tax due under KRS 141.040 is based on the alternative minimum calculation provided in KRS 141.040, any net operating loss carryforward deduction that is utilized for the taxable year shall be the amount of taxable net income before the net operating loss deduction, that exceeds the taxable net income equivalent. For purposes of this subsection, "taxable net income equivalent" means the amount of taxable net income that would generate an income tax equal to the alternative minimum calculation liability computed under KRS 141.040.

(4) For taxable years beginning on or after January 1, 2005, and before December 31, 2006, the net operating loss carryforward deduction of a corporation shall be reduced by the amount of distributive share income, loss, and deduction distributed to an individual or general partnership as defined in KRS 141.206.

(5) For taxable years beginning on or after January 1, 2005, but prior to January 1, 2019, the portion of a net operating loss that is not used to offset the income of an affiliate according to the limits in KRS 141.200(11) shall be available for carryforward, subject to the limitations contained in this section.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 207, sec. 123, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 12, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 2, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 168, sec. 4, effective March 18, 2005. -- Amended 1980 Ky. Acts ch. 176, sec. 2, effective July 15, 1980. -- Created 1978 Ky. Acts ch. 50, secs. 1, 4, effective June 17, 1978.

Legislative Research Commission Note (6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 73, provides that "unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007."

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.012 Repealed, 2006.

[Repealed]

141.013 Repealed, 1974.

[Repealed]

141.014 Disposition of receipts under chapter.

Receipts derived from taxes assessed and collected under the provisions of this chapter shall be appropriated for general fund purposes.

Effective: June 14, 1962

History: Created 1962 Ky. Acts ch. 124, sec. 9, effective June 14, 1962.

141.015 Repealed, 1954.

[Repealed]

141.016 Reporting federal adjusted gross income attributed to husband and wife -- Allocation of income and business deductions between husband and wife.

(1) If the federal adjusted gross income of husband or wife is entered on a separate federal return, their Kentucky adjusted gross incomes may be entered on their separate Kentucky tax returns or their joint Kentucky tax return as they so elect.

(2) If the federal adjusted gross income of husband and wife is entered on a joint federal return, or if neither files a federal return:

(a) Their adjusted gross income shall be entered on their joint Kentucky tax return; or

(b) Separate adjusted gross incomes may be entered on their separate Kentucky tax returns if they so elect.

(3) Where husband and wife have not separately reported and claimed items of income and adjustments of income for federal income tax purposes, and have not elected to file a joint Kentucky income tax return, such items allowable for Kentucky income tax purposes shall be allocated and adjusted as follows:

(a) Income shall be allocated to the spouse who earned the income or with respect to whose property the income is attributable;

(b) Allowable deductions with respect to trade, business, or production of income shall be allocated to the spouse to whom attributable.

Effective: April 11, 1990

History: Created 1990 Ky. Acts ch. 476, Pt. VII D, sec. 639, effective April 11, 1990.

141.017 Deductions allowed by this chapter limited to amounts directly or indirectly subject to taxation under this chapter -- No item to be deducted more than once.

(1) (a) All deductions allowed by this chapter shall be limited to amounts directly or indirectly allocable to income subject to taxation under the provisions of this chapter.

(b) Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under this chapter shall not be allowed.

(c) This subsection does not apply to deductions allowed under Pub. L. No. 116- 260, secs. 276 and 278, related to the tax treatment of forgiven covered loans and deductions attributable to those loans for taxable years ending on or after March 27, 2020, but before taxable years beginning January 1, 2022.

(d) This subsection shall not apply to deductions allowed under Pub. L. No. 117- 2, sec. 9673, relating to amounts allocable to income from grants to restaurants and other food service eligible entities under the restaurant revitalization grants program for taxable years beginning on or after January 1, 2020, but before March 11, 2023.

(2) Nothing in this chapter shall be construed to permit the same item to be deducted more than once.

Effective: March 24, 2023

History: Amended 2023 Ky. Acts ch. 92, sec. 18, effective March 24, 2023. -- Amended 2021 Ky. Acts ch. 22, sec. 1, effective March 15, 2021. -- Created 2018 Ky. Acts ch. 171, sec. 54, effective April 14, 2018; and ch. 207, sec. 54, effective April 27, 2018.

Legislative Research Commission Note (4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the provisions created for this statute in that Act apply to taxable years beginning on or after January 1, 2018.

141.018 Department's authority to interpret and carry out provisions of certain income tax changes made by the 2005 Regular Session and 2006 First Extraordinary Session of the General Assembly -- Authority to promulgate administrative regulations to explain or implement changes.

Consistent with the provisions of 2005 Ky. Acts ch. 168 and the provisions of 2006 (1st Extra. Sess.) Ky. Acts ch. 2, the Department of Revenue shall have the authority to interpret and carry out the provisions and intent of amendments made by the 2005 Regular Session of the General Assembly and the 2006 First Extraordinary Session of the General Assembly relative to the imposition of the tax assessed under this chapter on individuals, entities taxable as individuals, entities taxable under KRS 141.040 and 141.0401, the passed-through income of entities taxable under KRS 141.040 and 141.0401, entities considered not taxable or exempt from tax, any other entity or taxable unit, and any related item of income, deduction, or credit, and shall promulgate administrative regulations necessary to explain or implement this section.

Effective: June 28, 2006

History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 70, effective June 28, 2006. -- Created 2005 Ky. Acts ch. 168, sec. 152, effective March 18, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.019 Calculation of adjusted gross income and net income for taxpayers other than corporations.

In the case of taxpayers other than corporations:

(1) Adjusted gross income shall be calculated by subtracting from the gross income of those taxpayers the deductions allowed individuals by Section 62 of the Internal Revenue Code and adjusting as follows:

(a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States;

(b) Exclude income from supplemental annuities provided by the Railroad Retirement Act of 1937 as amended and which are subject to federal income tax by Pub. L. No. 89-699;

(d) Exclude employee pension contributions picked up as provided for in KRS 6.505, 16.545, 21.360, 61.523, 61.560, 65.155, 67A.320, 67A.510, 78.610, and 161.540 upon a ruling by the Internal Revenue Service or the federal courts that these contributions shall not be included as gross income until such time as the contributions are distributed or made available to the employee;

(e) Exclude Social Security and railroad retirement benefits subject to federal income tax;

(f) Exclude any money received because of a settlement or judgment in a lawsuit brought against a manufacturer or distributor of "Agent Orange" for damages resulting from exposure to Agent Orange by a member or veteran of the Armed Forces of the United States or any dependent of such person who served in Vietnam;

(g) 1. a. For taxable years beginning after December 31, 2005, but before January 1, 2018, exclude up to forty-one thousand one hundred ten dollars ($41,110) of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans; and

b. For taxable years beginning on or after January 1, 2018, exclude up to thirty-one thousand one hundred ten dollars ($31,110) of total distributions from pension plans, annuity contracts, profit- sharing plans, retirement plans, or employee savings plans.

As used in this paragraph:

a. "Annuity contract" has the same meaning as set forth in Section 1035 of the Internal Revenue Code;

b. "Distributions" includes but is not limited to any lump-sum distribution from pension or profit-sharing plans qualifying for the income tax averaging provisions of Section 402 of the Internal Revenue Code; any distribution from an individual retirement account as defined in Section 408 of the Internal Revenue Code; and any disability pension distribution; and

c. "Pension plans, profit-sharing plans, retirement plans, or employee savings plans" means any trust or other entity created or organized under a written retirement plan and forming part of a stock bonus, pension, or profit-sharing plan of a public or private employer for the exclusive benefit of employees or their beneficiaries and includes plans qualified or unqualified under Section 401 of the Internal Revenue Code and individual retirement accounts as defined in Section 408 of the Internal Revenue Code;

(h) 1. a. Exclude the portion of the distributive share of a shareholder's net income from an S corporation subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300; and

b. Exclude the portion of the distributive share of a shareholder's net income from an S corporation related to a qualified subchapter S subsidiary subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300.

The shareholder's basis of stock held in an S corporation where the S corporation or its qualified subchapter S subsidiary is subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 shall be the same as the basis for federal income tax purposes;

(i) Exclude income received for services performed as a precinct worker for election training or for working at election booths in state, county, and local primaries or regular or special elections;

(j) Exclude any capital gains income attributable to property taken by eminent domain;

(k) 1. Exclude all income from all sources for members of the Armed Forces who are on active duty and who are killed in the line of duty, for the year during which the death occurred and the year prior to the year during which the death occurred.

For the purposes of this paragraph, "all income from all sources" shall include all federal and state death benefits payable to the estate or any beneficiaries;

(l) Exclude all military pay received by members of the Armed Forces while on active duty;

(m) 1. Include the amount deducted for depreciation under 26 U.S.C. sec. 167 or 168; and

Exclude the amounts allowed by KRS 141.0101 for depreciation;

(n) Include the amount deducted under 26 U.S.C. sec. 199A;

(o) Ignore any change in the cost basis of the surviving spouse's share of property owned by a Kentucky community property trust occurring for federal income tax purposes as a result of the death of the predeceasing spouse;

(p) Allow the same treatment allowed under Pub. L. No. 116-260, secs. 276 and 278, related to the tax treatment of forgiven covered loans, deductions attributable to those loans, and tax attributes associated with those loans for taxable years ending on or after March 27, 2020, but before January 1, 2022;

(q) For taxable years beginning on or after January 1, 2020, but before March 11, 2023, allow the same treatment of restaurant revitalization grants in accordance with Pub. L. No. 117-2, sec. 9673 and 15 U.S.C. sec. 9009c, related to the tax treatment of the grants, deductions attributable to those grants, and tax attributes associated with those grants;

(r) For taxable years beginning on or after January 1, 2026:

Include the amount deducted for domestic research or experimental expenditures under 26 U.S.C. sec. 174A; and
Allow a subtraction equal to the amortization of domestic research or experimental expenditures computed in accordance with 26 U.S.C. sec. 174, as that section existed on December 31, 2024;

(s) Include the amount deducted for any qualified film or television production, any qualified live theatrical production, and any qualified sound recording production under 26 U.S.C. sec. 181; and

(t) Include interest deducted under 26 U.S.C. sec. 139L for amounts paid to a qualified lender on any qualified real estate loan; and

(2) Net income shall be calculated by subtracting from adjusted gross income all the deductions allowed individuals by Chapter 1 of the Internal Revenue Code, as modified by KRS 141.0101, except:

(a) Any deduction allowed by 26 U.S.C. sec. 164 for taxes;

(b) Any deduction allowed by 26 U.S.C. sec. 165 for losses, except wagering losses allowed under Section 165(d) of the Internal Revenue Code;

(d) Any deduction allowed by 26 U.S.C. sec. 217 for moving expenses;

(e) Any deduction allowed by 26 U.S.C. sec. 67 for any other miscellaneous deduction;

(f) Any deduction allowed by the Internal Revenue Code for amounts allowable under KRS 140.090(1)(h) in calculating the value of the distributive shares of the estate of a decedent, unless there is filed with the income return a statement that the deduction has not been claimed under KRS 140.090(1)(h);

(g) Any deduction allowed by 26 U.S.C. sec. 151 for personal exemptions and any other deductions in lieu thereof;

(h) Any deduction allowed for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained;

(i) A taxpayer may elect to claim the standard deduction allowed by KRS 141.081 instead of itemized deductions allowed pursuant to 26 U.S.C. sec. 63 and as modified by this section;

(j) For taxable years beginning on or after January 1, 2026, any deduction allowed by 26 U.S.C. sec. 163(h)(3) as qualified residence interest shall be limited to the amount of interest paid or accrued during the taxable year on the acquisition and home equity indebtedness of the principal residence of the taxpayer and shall not be claimed for more than one (1) qualified residence;

(k) Any deduction allowed by 26 U.S.C. sec. 224 for qualified tips;

(l) Any deduction allowed by 26 U.S.C. sec. 225 for qualified overtime compensation; and

(m) Any deduction allowed by 26 U.S.C. sec. 163(h)(4) for qualified passenger vehicle loan interest.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 7, effective July 15, 2026; and ch. 198, sec. 48, effective July 15, 2026. -- Amended 2023 Ky. Acts ch. 92, sec. 19, effective March 24, 2023. -- Amended 2021 Ky. Acts ch. 22, sec. 2, effective March 15, 2021. -- Amended 2020 Ky. Acts ch. 25, sec. 5, effective July 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 37, effective June 27, 2019. -- Created 2018 Ky. Acts ch. 171, sec. 55, effective April 14, 2018; and ch. 207, sec. 55, effective April 27, 2018.

Legislative Research Commission Note (7/15/2026). This statute was amended by 2026 RS HB 757 (2026 Ky. Acts ch. 161, sec. 7), which was subsequently amended by 2026 RS HB 869 (2026 Ky. Acts ch. 198, sec. 48), and the amendments have been codified together.

141.020 Levy of income tax on individuals -- Rate of normal tax -- Reduction -- Tax credits -- Income of nonresidents subject to tax -- Election to pay tax imposed by KRS 141.023.

(1) An annual tax shall be paid for each taxable year by every resident individual of this state upon his or her entire net income as defined in this chapter. The tax shall be determined by applying the rates in subsection (2) of this section to net income and subtracting allowable tax credits provided in subsection (3) of this section.

(2) (a) As used in this subsection:

"Balance in the BRTF at the end of a fiscal year" means the budget reserve trust fund account established in KRS 48.705 and includes the following amounts and actions resulting from the final close of the fiscal year:

a. The amount of moneys in the fund at the end of a fiscal year;

b. All close-out actions related to a budget reduction plan under KRS 48.130 or as modified in a branch budget bill; and

c. All close-out actions related to the surplus expenditure plan under KRS 48.140 or as modified in a branch budget bill;

"GF appropriations" means the authorization by the General Assembly to expend GF moneys, excluding:

a. Continuing appropriations;

b. Any appropriation to the budget reserve trust fund;

c. Any lump-sum appropriation to a state-administered retirement system, as defined in KRS 7A.210, that is in excess of the appropriations specifically budgeted to meet the recurring statutorily required contributions or recurring actuarially determined contributions for a state-administered retirement system under KRS 21.525, 61.565, 61.702, 78.635, 78.5536, or 161.550, as applicable; and

d. Any appropriation from the budget reserve trust fund account established in KRS 48.705 that is:

i. Solely supported by moneys from the budget reserve trust fund account; and

ii. Specifically identified in the appropriation language as not being a GF appropriation for the purposes of this section;

"GF moneys" means receipts deposited in the general fund defined in KRS 48.010, excluding tobacco moneys deposited in the fund established in KRS 248.654;
"IIT equivalent" means the amount of reduction in GF moneys resulting from a one (1) percentage point reduction to the individual income tax rate and shall be calculated by dividing the actual individual income tax receipts for the fiscal year under consideration by:

a. The sum of:

i. The individual income tax rate, expressed as a percentage, for the first six (6) months of the fiscal year; and

ii. The individual income tax rate, expressed as a percentage, for the second six (6) months of the fiscal year; and

b. Dividing the sum determined in subdivision a. of this subparagraph by two (2); and

For analysis through fiscal year 2024-2025 and for reporting through September 5, 2025:

a. "Reduction conditions" means:

i. The balance in the BRTF at the end of a fiscal year shall be equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

ii. GF moneys at the end of a fiscal year shall be equal to or greater than GF appropriations for that fiscal year plus the IIT equivalent for that fiscal year; and

b. "Tax rate reduction" means the current tax rate minus five-tenths of one percent (0.5%).

(b) 1. For the analysis for fiscal year 2025-2026 and fiscal year 2026-2027, and for reporting on or before September 5, 2026, and September 5, 2027, "tax rate reduction conditions" means the greatest reduction achieved under subparagraphs 2. and 3. of this paragraph.

a. The balance in the BRTF at the end of a fiscal year is equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

b. GF moneys at the end of a fiscal year are equal to or greater than GF appropriations for that fiscal year plus an amount that falls within a range of greater than fifty percent (50%) but less than one hundred percent (100%) of the IIT equivalent for that fiscal year; then the tax rate reduction may be the current tax rate minus twenty-five one-hundredths of one percent (0.25%).

a. The balance in the BRTF at the end of a fiscal year is equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

b. GF moneys at the end of a fiscal year are equal to or greater than GF appropriations for that fiscal year plus the IIT equivalent for that fiscal year; then the tax rate reduction may be the current tax rate minus five-tenths of one percent (0.5%).

(c) 1. For the analysis for fiscal year 2027-2028 and each fiscal year thereafter and for reporting on or before September 5, 2028, and each September 5 thereafter, "tax rate reduction conditions" means the greatest reduction achieved under subparagraphs 2. to 6. of this paragraph.

a. The balance in the BRTF at the end of a fiscal year is equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

b. GF moneys at the end of a fiscal year are equal to or greater than GF appropriations for that fiscal year plus an amount that falls within a range of equal to or greater than twenty percent (20%) but not greater than thirty-nine percent (39%) of the IIT equivalent for that fiscal year; then the tax rate reduction may be the current tax rate minus one-tenth of one percent (0.1%).

a. The balance in the BRTF at the end of a fiscal year is equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

b. GF moneys at the end of a fiscal year are equal to or greater than GF appropriations for that fiscal year plus an amount that falls within a range of equal to or greater than forty percent (40%) but not greater than fifty-nine percent (59%) of the IIT equivalent for that fiscal year; then the tax rate reduction may be the current tax rate minus two-tenths of one percent (0.2%).

a. The balance in the BRTF at the end of a fiscal year is equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

b. GF moneys at the end of a fiscal year are equal to or greater than GF appropriations for that fiscal year plus an amount that falls within a range of equal to or greater than sixty percent (60%) but not greater than seventy-nine percent (79%) of the IIT equivalent for that fiscal year; then the tax rate reduction may be the current tax rate minus three-tenths of one percent (0.3%).

a. The balance in the BRTF at the end of a fiscal year is equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

b. GF moneys at the end of a fiscal year are equal to or greater than GF appropriations for that fiscal year plus an amount that falls within a range of equal to or greater than eighty percent (80%) but not greater than ninety-nine percent (99%) of the IIT equivalent for that fiscal year; then the tax rate reduction may be the current tax rate minus four-tenths of one percent (0.4%).

a. The balance in the BRTF at the end of a fiscal year is equal to or greater than ten percent (10%) of the GF moneys for that fiscal year; and

(d) For taxable years beginning on or after January 1, 2023, but prior to January 1, 2024, the tax shall be four and one-half percent (4.5%) of net income.

(e) For taxable years beginning on or after January 1, 2024, but before January 1, 2026, the tax shall be four percent (4%) of net income.

(f) For taxable years beginning on or after January 1, 2026, the tax shall be three and one-half percent (3.5%) of net income.

(g) 1. For taxable years beginning on or after January 1, 2027, the income tax rate may be reduced according to the annual process established in:

a. Subparagraph 2. or 3. of this paragraph; and

b. Subparagraph 4. of this paragraph.

a. The Office of State Budget Director shall review the reduction conditions for the fiscal year 2024-2025 no later than September 1, 2025.

b. After reviewing the reduction conditions under subdivision a. of this subparagraph, the Office of State Budget Director shall, no later than September 5, 2025, report to the Interim Joint Committee on Appropriations and Revenue:

i. Whether the reduction conditions for the fiscal year 2024- 2025 have been met; and

ii. The amounts associated with each item within the reduction conditions used for making that determination.

c. i. If the reduction conditions have been met for fiscal year 2024-2025, the General Assembly may take action to reduce the rate in paragraph (f) of this subsection for the taxable year beginning January 1, 2027.

ii. If the reduction conditions have not been met for fiscal year 2024-2025 or the General Assembly does not take action to reduce the rate in paragraph (f) of this subsection, the department shall maintain the rate in paragraph (f) of this subsection for the taxable year beginning January 1, 2027.

a. The Office of State Budget Director shall review the tax rate reduction conditions for the fiscal year 2025-2026 no later than September 1, 2026.

b. After reviewing the tax rate reduction conditions under subdivision a. of this subparagraph, the Office of State Budget Director shall, no later than September 5, 2026, report to the Interim Joint Committee on Appropriations and Revenue:

i. Whether the tax rate reduction conditions for the fiscal year 2025-2026 have been met; and

ii. The amounts associated with each item within the tax rate reduction conditions used for making that determination.

c. i. If the tax rate reduction conditions have been met for fiscal year 2025-2026, the General Assembly may take action to reduce the rate in paragraph (f) of this subsection for the taxable year beginning January 1, 2028.

ii. If the tax rate reduction conditions have not been met for fiscal year 2025-2026 or the General Assembly does not take action to reduce the rate in paragraph (f) of this subsection, the department shall maintain the rate in paragraph (f) of this subsection for the taxable year beginning January 1, 2028.

a. The Office of State Budget Director shall implement an annual process to review and report future reduction conditions or tax rate reduction conditions at the same time and in the same manner for each fiscal year subsequent to the fiscal year 2024-2025 and each taxable year subsequent to the taxable year beginning January 1, 2027.

b. The department shall not implement an income tax rate reduction without an action by the General Assembly.

c. The annual process shall continue until the income tax rate is zero.

(h) For taxable years beginning on or after January 1, 2018, but before January 1, 2023, the tax shall be five percent (5%) of net income.

(i) For taxable years beginning after December 31, 2004, and before January 1, 2018, the tax shall be determined by applying the following rates to net income:

Two percent (2%) of the amount of net income up to three thousand dollars ($3,000);
Three percent (3%) of the amount of net income over three thousand dollars ($3,000) and up to four thousand dollars ($4,000);
Four percent (4%) of the amount of net income over four thousand dollars ($4,000) and up to five thousand dollars ($5,000);
Five percent (5%) of the amount of net income over five thousand dollars ($5,000) and up to eight thousand dollars ($8,000);
Five and eight-tenths percent (5.8%) of the amount of net income over eight thousand dollars ($8,000) and up to seventy-five thousand dollars ($75,000); and
Six percent (6%) of the amount of net income over seventy-five thousand dollars ($75,000).

(3) (a) The following tax credits, when applicable, shall be deducted from the result obtained under subsection (2) of this section to arrive at the annual tax:

a. For taxable years beginning before January 1, 2014, twenty dollars ($20) for an unmarried individual; and

b. For taxable years beginning on or after January 1, 2014, and before January 1, 2018, ten dollars ($10) for an unmarried individual;

a. For taxable years beginning before January 1, 2014, twenty dollars ($20) for a married individual filing a separate return and an additional twenty dollars ($20) for the spouse of taxpayer if a separate return is made by the taxpayer and if the spouse, for the calendar year in which the taxable year of the taxpayer begins, had no Kentucky gross income and is not the dependent of another taxpayer; or forty dollars ($40) for married persons filing a joint return, provided neither spouse is the dependent of another taxpayer. The determination of marital status for the purpose of this section shall be made in the manner prescribed in Section 153 of the Internal Revenue Code; and

b. For taxable years beginning on or after January 1, 2014, and before January 1, 2018, ten dollars ($10) for a married individual filing a separate return and an additional ten dollars ($10) for the spouse of a taxpayer if a separate return is made by the taxpayer and if the spouse, for the calendar year in which the taxable year of the taxpayer begins, had no Kentucky gross income and is not the dependent of another taxpayer; or twenty dollars ($20) for married persons filing a joint return, provided neither spouse is the dependent of another taxpayer. The determination of marital status for the purpose of this section shall be made in the manner prescribed in Section 153 of the Internal Revenue Code;

a. For taxable years beginning before January 1, 2014, twenty dollars ($20) credit for each dependent. No credit shall be allowed for any dependent who has made a joint return with his or her spouse; and

b. For taxable years beginning on or after January 1, 2014, and before January 1, 2018, ten dollars ($10) credit for each dependent. No credit shall be allowed for any dependent who has made a joint return with his or her spouse;

An additional forty dollars ($40) credit if the taxpayer has attained the age of sixty-five (65) before the close of the taxable year;
An additional forty dollars ($40) credit for taxpayer's spouse if a separate return is made by the taxpayer and if the taxpayer's spouse has attained the age of sixty-five (65) before the close of the taxable year, and, for the calendar year in which the taxable year of the taxpayer begins, has no Kentucky gross income and is not the dependent of another taxpayer;
An additional forty dollars ($40) credit if the taxpayer is blind at the close of the taxable year;
An additional forty dollars ($40) credit for taxpayer's spouse if a separate return is made by the taxpayer and if the taxpayer's spouse is blind, and, for the calendar year in which the taxable year of the taxpayer begins, has no Kentucky gross income and is not the dependent of another taxpayer; and
An additional twenty dollars ($20) credit shall be allowed if the taxpayer is a member of the Kentucky National Guard at the close of the taxable year.

(b) In the case of nonresidents, the tax credits allowable under this subsection shall be the portion of the credits that are represented by the ratio of the taxpayer's Kentucky adjusted gross income as determined by KRS 141.019 to the taxpayer's adjusted gross income as defined in Section 62 of the Internal Revenue Code. However, in the case of a married nonresident taxpayer with income from Kentucky sources, whose spouse has no income from Kentucky sources, the taxpayer shall determine allowable tax credit(s) by either:

The method contained above applied to the taxpayer's tax credit(s), excluding credits for a spouse and dependents; or
Prorating the taxpayer's tax credit(s) plus the tax credits for the taxpayer's spouse and dependents by the ratio of the taxpayer's Kentucky adjusted gross income as determined by KRS 141.019 to the total joint federal adjusted gross income of the taxpayer and the taxpayer's spouse.

(c) In the case of a part-year resident, the tax credits allowable under this subsection shall be the portion of the credits represented by the ratio of the taxpayer's Kentucky adjusted gross income as determined by KRS 141.019 to the taxpayer's adjusted gross income as defined in Section 62 of the Internal Revenue Code.

(4) An annual tax shall be paid for each taxable year as specified in this section upon the entire net income except as herein provided, from all tangible property located in this state, from all intangible property that has acquired a business situs in this state, and from business, trade, profession, occupation, or other activities carried on in this state, by natural persons not residents of this state. A nonresident individual shall be taxable only upon the amount of income received by the individual from labor performed, business done, or from other activities in this state, from tangible property located in this state, and from intangible property which has acquired a business situs in this state; provided, however, that the situs of intangible personal property shall be at the residence of the real or beneficial owner and not at the residence of a trustee having custody or possession thereof. For taxable years beginning on or after January 1, 2021, but before January 1, 2027, the tax imposed by this section shall not apply to a disaster response employee or to a disaster response business. The remainder of the income received by the nonresident shall be deemed nontaxable by this state.

(5) Subject to the provisions of KRS 141.081, any individual may elect to pay the annual tax imposed by KRS 141.023 in lieu of the tax levied under this section.

(6) A part-year resident is subject to taxation, as prescribed in subsection (1) of this section, during that portion of the taxable year that the individual is a resident and, as prescribed in subsection (4) of this section, during that portion of the taxable year when the individual is a nonresident.

Effective: June 27, 2025

History: Amended 2025 Ky. Acts ch. 1, sec. 1, effective June 27, 2025; and ch. 98, sec. 9, effective June 27, 2025. -- Amended 2024 Ky. Acts ch. 166, sec. 15, effective April 10, 2024. -- Amended 2023 Ky. Acts ch. 3, sec. 1, effective June 29, 2023; and ch. 92, sec. 21, effective March 24, 2023. -- Amended 2022 Ky. Acts ch. 212, sec. 1, effective July 14, 2022. -- Amended 2021 Ky. Acts ch. 31, sec. 2, effective June 29, 2021. -- Amended 2018 Ky. Acts ch. 171, sec. 57, effective April 14, 2018; and ch. 207, sec. 57, effective April 27, 2018. -- Amended 2013 Ky. Acts ch. 119, sec. 16, effective June 25, 2013. -- Amended 2005 Ky. Acts ch. 168, sec. 5, effective March 18, 2005. -- Amended 1990 Ky. Acts ch. 476, Pt. VII D, sec. 632, effective April 11, 1990. -- Amended 1976 Ky. Acts ch. 77, Pt. I, sec. 1. -- Amended 1974 Ky. Acts ch. 362, sec. 1. -- Amended 1972 Ky. Acts ch. 84, Pt. II, sec. 2. -- Amended 1970 Ky. Acts ch. 216, sec. 5. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 3. -- Amended 1964 Ky. Acts ch. 76, sec. 1. -- Amended 1962 Ky. Acts ch. 124, sec. 2. -- Amended 1960 Ky. Acts ch. 5, Art. III, sec. 2. -- Amended 1958 Ky. Acts ch. 3, sec. 1. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 2. -- Amended 1954 Ky. Acts ch. 79, sec. 2. -- Amended 1952 Ky. Acts ch. 124, sec. 1. -- Amended 1948 Ky. Acts ch. 93, sec. 2. -- Amended 1946 Ky. Acts ch. 234, sec. 6. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-14.

Legislative Research Commission Note (6/27/2025). This statute was amended by 2025 Ky. Acts chs. 1 and 98, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the amendments made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.0201 Artistic charitable contributions deduction for individuals.

(1) Notwithstanding any statutory provisions to the contrary, a deduction shall be allowed individuals against adjusted gross income in arriving at net income for "qualified artistic charitable contributions" in an amount equal to the fair market value of the property contributed as determined at the time of such contribution.

(2) For purposes of this chapter, "qualified artistic charitable contribution" shall mean a charitable contribution of any literary, musical, artistic or scholarly composition, any letter or memorandum, or similar property, but only if:

(a) Such property was created by the personal efforts of the taxpayer no less than one (1) year prior to such contribution;

(b) The taxpayer has received a written appraisal of the fair market value of such property by a person qualified to make such an appraisal (other than the taxpayer, donee, or any related person within the meaning of Section 168(e)(4)(D) of the Internal Revenue Code), and the appraisal is made within one (1) year of the date of such contribution;

(c) The taxpayer attaches to his income tax return for the taxable year in which such contribution was made a copy of such appraisal;

(d) The donee is an organization described in Section 170(b)(1)(A) of the Internal Revenue Code;

(e) The use of such property by the donee is related to the purpose or function constituting the basis for the donee's exemption under Section 501 of the Internal Revenue Code, or in the case of a governmental unit, to a public purpose; and

(f) The taxpayer receives from the donee a written statement representing that the donee's use of the property will be in accordance with paragraph (e) of this subsection.

(3) The aggregate amount of qualified artistic charitable contributions allowable to any taxpayer as a deduction under this section for any taxable year shall not exceed the artistic adjusted gross income of the taxpayer for such taxable year. For purposes of this subsection, the term "artistic adjusted gross income" means that portion of the adjusted gross income of the taxpayer for the taxable year attributable to:

(a) Income with respect to property described in subsection (2) of this section that is created by the taxpayer; and

(b) Income from teaching, lecturing, performing or similar activity with respect to such property or to similar property created by individuals other than the taxpayer.

(4) The provisions of this section shall not apply in the case of any charitable contribution of any letter, memorandum, or similar property which was written, prepared or produced by or for an individual while such individual was an officer or employee of the United States or any state, or political subdivision thereof, if the writing, preparation, or production of such property was related to, or arose out of the performance of such individual's duties as such an officer or employee.

(5) The provisions of this section shall be effective for tax years beginning on or after January 1, 1987.

Effective: July 15, 1986

History: Created 1986 Ky. Acts ch. 247, sec. 1, effective July 15, 1986.

141.0202 Repealed, 2018.

[Repealed]

141.0205 Priority of application and use of tax credits.

If a taxpayer is entitled to more than one (1) of the tax credits allowed against the tax imposed by KRS 141.020, 141.040, and 141.0401, the priority of application and use of the credits shall be determined as follows:

(1) The nonrefundable business incentive credits against the tax imposed by KRS 141.020 shall be taken in the following order:

(a) The limited liability entity tax credit permitted by KRS 141.0401;

(b) The economic development credits computed under KRS 141.347, 141.381, 141.384, 141.3841, 141.400, 141.403, 141.407, 141.415, 154.12-207, and 154.12-2088;

(d) The certified rehabilitation credit permitted by KRS 171.397(1)(a) and 171.398;

(e) The health insurance credit permitted by KRS 141.062;

(f) The tax paid to other states credit permitted by KRS 141.070;

(g) The credit for hiring the unemployed permitted by KRS 141.065;

(h) The recycling or composting equipment credit permitted by KRS 141.390;

(i) The credit for cash contributions in investment funds permitted by KRS 154.20-263 in effect prior to July 15, 2002, and the credit permitted by KRS 154.20-258;

(j) The research facilities credit permitted by KRS 141.395;

(k) The employer High School Equivalency Diploma program incentive credit permitted under KRS 151B.402;

(l) The voluntary environmental remediation credit permitted by KRS 141.418;

(m) The biodiesel and renewable diesel credit permitted by KRS 141.423;

(n) The clean coal incentive credit permitted by KRS 141.428;

(o) The ethanol credit permitted by KRS 141.4242;

(p) The cellulosic ethanol credit permitted by KRS 141.4244;

(q) The energy efficiency credits permitted by KRS 141.436;

(r) The railroad maintenance and improvement credit permitted by KRS 141.385;

(s) The Endow Kentucky credit permitted by KRS 141.438;

(t) The New Markets Development Program credit permitted by KRS 141.434;

(u) The distilled spirits credit permitted by KRS 141.389;

(v) The angel investor credit permitted by KRS 141.396;

(w) The film industry credit permitted by KRS 141.383 for applications approved on or after April 27, 2018, but before January 1, 2022;

(x) The inventory credit permitted by KRS 141.408;

(y) The renewable chemical production credit permitted by KRS 141.4231;

(z) The qualified broadband investment credit permitted by KRS 141.391; and

(aa) The alternative jet fuel producer credit permitted by KRS 141.417;

(2) After the application of the nonrefundable credits in subsection (1) of this section, the nonrefundable personal tax credits against the tax imposed by KRS 141.020 shall be taken in the following order:

(a) The individual credits permitted by KRS 141.020(3);

(b) The credit permitted by KRS 141.066;

(d) The household and dependent care credit permitted by KRS 141.067;

(e) The income gap credit permitted by KRS 141.066; and

(f) The Education Opportunity Account Program credit permitted by KRS 141.522;

(3) After the application of the nonrefundable credits provided for in subsection (2) of this section, the refundable credits against the tax imposed by KRS 141.020 shall be taken in the following order:

(a) The individual withholding tax credit permitted by KRS 141.350;

(b) The individual estimated tax payment credit permitted by KRS 141.305;

(d) The film industry credit permitted by KRS 141.383 for applications approved prior to April 27, 2018, or on or after January 1, 2022;

(e) The development area credit permitted by KRS 141.398;

(f) The decontamination credit permitted by KRS 141.419;

(g) The pass-through entity tax credit permitted by KRS 141.209;

(h) The economic development credit permitted by KRS 141.399; and

(i) The certified mixed-use development credit permitted by KRS 141.3821;

(4) The nonrefundable credit permitted by KRS 141.0401 shall be applied against the tax imposed by KRS 141.040;

(5) The following nonrefundable credits shall be applied against the sum of the tax imposed by KRS 141.040 after subtracting the credit provided for in subsection (4) of this section, and the tax imposed by KRS 141.0401 in the following order:

(a) The economic development credits computed under KRS 141.347, 141.381, 141.384, 141.3841, 141.400, 141.403, 141.407, 141.415, 154.12-207, and 154.12-2088;

(b) The qualified farming operation credit permitted by KRS 141.412;

(d) The health insurance credit permitted by KRS 141.062;

(e) The unemployment credit permitted by KRS 141.065;

(f) The recycling or composting equipment credit permitted by KRS 141.390;

(g) The coal conversion credit permitted by KRS 141.041;

(h) The enterprise zone credit permitted by KRS 154.45-090, for taxable periods ending prior to January 1, 2008;

(i) The credit for cash contributions to investment funds permitted by KRS 154.20-263 in effect prior to July 15, 2002, and the credit permitted by KRS 154.20-258;

(j) The research facilities credit permitted by KRS 141.395;

(k) The employer High School Equivalency Diploma program incentive credit permitted by KRS 151B.402;

(l) The voluntary environmental remediation credit permitted by KRS 141.418;

(m) The biodiesel and renewable diesel credit permitted by KRS 141.423;

(n) The clean coal incentive credit permitted by KRS 141.428;

(o) The ethanol credit permitted by KRS 141.4242;

(p) The cellulosic ethanol credit permitted by KRS 141.4244;

(q) The energy efficiency credits permitted by KRS 141.436;

(r) The ENERGY STAR home or ENERGY STAR manufactured home credit permitted by KRS 141.437;

(s) The railroad maintenance and improvement credit permitted by KRS 141.385;

(t) The railroad expansion credit permitted by KRS 141.386;

(u) The Endow Kentucky credit permitted by KRS 141.438;

(v) The New Markets Development Program credit permitted by KRS 141.434;

(w) The distilled spirits credit permitted by KRS 141.389;

(x) The film industry credit permitted by KRS 141.383 for applications approved on or after April 27, 2018, but before January 1, 2022;

(y) The inventory credit permitted by KRS 141.408;

(z) The renewable chemical production credit permitted by KRS 141.4231;

(aa) The Education Opportunity Account Program credit permitted by KRS 141.522;

(ab) The qualified broadband investment credit permitted by KRS 141.391; and

(ac) The alternative jet fuel producer credit permitted by KRS 141.417; and

(6) After the application of the nonrefundable credits in subsection (5) of this section, the refundable credits shall be taken in the following order:

(a) The corporation estimated tax payment credit permitted by KRS 141.044;

(b) The certified rehabilitation credit permitted by KRS 171.3961, 171.3963, 171.397(1)(b), and 171.398;

(c) The film industry credit permitted by KRS 141.383 for applications approved prior to April 27, 2018, or on or after January 1, 2022;

(d) The decontamination credit permitted by KRS 141.419;

(e) The pass-through entity tax credit permitted by KRS 141.209;

(f) The economic development credit permitted by KRS 141.399; and

(g) The certified mixed-use development credit permitted by KRS 141.3821.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 43, effective July 15, 2026; and ch. 198, sec. 2, effective April 27, 2026. -- Amended 2024 Ky. Acts ch. 166, sec. 12, effective July 15, 2024. -- Amended 2023 Ky. Acts ch. 75, sec. 37, effective June 29, 2023; ch. 92, sec. 22, effective March 24, 2023; and ch. 148, sec. 6, effective March 31, 2023. -- Amended 2022 Ky. Acts ch. 212, sec. 54, effective July 14, 2022. -- Amended 2021 Ky. Acts ch. 156, sec. 31, effective June 29, 2021; ch. 167, sec. 20, effective June 29, 2021; and ch. 203, sec. 9, effective June 29, 2021. -- Amended 2020 Ky. Acts ch. 91, sec. 20, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 146, sec. 9, effective June 27, 2019; and ch. 151, sec. 79, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 171, sec. 105, effective April 14, 2018; ch. 199, sec. 5, effective July 14, 2018; and ch. 207, sec. 105, effective April 27, 2018. -- Amended 2017 Ky. Acts ch. 63, sec. 10, effective June 29, 2017. -- Amended 2014 Ky. Acts ch. 102, sec. 17, effective July 15, 2014. -- Amended 2013 Ky. Acts ch. 59, sec. 46, effective June 25, 2013; and ch. 131, sec. 33, effective June 25, 2013. -- Amended 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 15, effective June 4, 2010. -- Repealed and reenacted 2010 Ky. Acts ch. 5, sec. 14, effective February 25, 2010 -- Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 30, effective June 26, 2009. -- Amended 2008 Ky. Acts ch. 139, sec. 14, effective July 15, 2008. -- Amended 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 27, effective August 30, 2007. -- Amended 2007 Ky. Acts ch. 91, sec. 7, effective March 23, 2007. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 2, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 6, sec. 13, effective March 4, 2006. -- Amended 2005 Ky. Acts ch. 168, sec. 6, effective March 18, 2005. -- Amended 2002 Ky. Acts ch. 230, sec. 7, effective July 15, 2002. -- Amended 2000 Ky. Acts ch. 320, sec. 2, effective July 14, 2000. -- Amended 1998 Ky. Acts ch. 414, sec. 20, effective July 15, 1998; and ch. 499, sec. 6, effective July 15, 1998. -- Created 1994 Ky. Acts ch. 57, sec. 1, effective July 15, 1994.

Legislative Research Commission Note (7/15/2026). This statute was amended by 2026 Ky. Acts chs. 161 and 198, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (6/29/2023). This statute was amended by 2023 Ky. Acts chs. 75, 92, and 148. Where these Acts are not in conflict, they have been codified together. Where a conflict exists, Acts ch. 148, which was last enacted by the General Assembly, prevails under KRS 446.250.

Legislative Research Commission Note (3/6/2006). 2006 Ky. Acts ch. 6, sec. 30, provides that this section applies retroactively for taxable years beginning on or after January 1, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (7/15/1994). This statute applies "to taxable years beginning after December 31, 1993." 1994 Ky. Acts ch. 57, sec. 4.

141.021 Federal and local government annuities excluded from gross income -- Taxability after December 31, 1997.

Notwithstanding the provisions of KRS 141.010, federal retirement annuities, and local government retirement annuities paid pursuant to KRS 67A.320, 67A.340, 67A.360 to 67A.690, 79.080, 90.400, 90.410, 95.290, 95.520 to 95.620, 95.621 to 95.629, 95.767 to 95.784, 95.851 to 95.884, or 96.180, shall be excluded from gross income. Except federal retirement annuities and local government retirement annuities accrued or accruing on or after January 1, 1998, shall be subject to the tax imposed by KRS 141.020, to the extent provided in KRS 141.019 and 141.0215.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 38, effective June 27, 2019. -- Amended 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 9, effective April 28, 1995. -- Amended 1990 Ky. Acts ch. 305, sec. 1, effective July 13, 1990. -- Amended 1978 Ky. Acts ch. 343, sec. 1, effective June 17, 1978. -- Amended 1976 Ky. Acts ch. 121, sec. 1. -- Amended 1974 Ky. Acts ch. 314, sec. 2. -- Created 1972 Ky. Acts ch. 119, sec. 1.

Legislative Research Commission Note (6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 38 of that Act apply to taxable years beginning on or after January 1, 2019.

141.0215 Inclusion in gross income of government retirement payments after December 31, 1997 -- Computation.

(1) Notwithstanding the provisions of KRS 141.010(1), for tax years commencing on or after January 1, 1998, the amount of all previously untaxed distributions from a retirement plan paid pursuant to KRS Chapters 6, 16, 21, 61, 67A, 78, 90, 95, 96, 161, and 164, and the amount of all previously untaxed distributions paid from a retirement plan by the federal government, which are excluded from gross income pursuant to KRS 141.021, shall be included in gross income as follows:

(a) Multiply the total annual government retirement payments by a fraction whose numerator is the number of full or partial years of service performed for the governmental unit making the retirement payments after January 1, 1998, and whose denominator is the total number of full or partial years of service performed for the governmental unit making retirement payments, including purchased service credit. Purchased service credits shall be included in the numerator of the fraction only if the services for which credits are being purchased were provided after January 1, 1998.

(b) The resulting number shall be the amount included in gross income.

(2) Any taxpayer receiving government retirement payments from more than one (1) governmental unit shall separately determine the payment amount attributable to each unit to be included in gross income, using the formula set forth in subsection

(1) of this section.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 39, effective June 27, 2019. -- Created 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 2, effective April 28, 1995.

Legislative Research Commission Note (6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 39 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (6/27/2019). Although 2019 Ky. Acts ch. 151, sec. 39, contained a citation to "141.010(12)" in subsection (1) of this statute, it is clear from the context and from the history of KRS 141.010 that "141.010(1)" was intended, and this manifest clerical or typographical error was corrected in codification under the authority of KRS 7.136.

141.022 Repealed, 1962.

[Repealed]

141.023 Optional tax tables.

To facilitate tax computation and tax return preparation, the Department of Revenue may develop optional tax tables and specify the classes of taxpayers eligible to utilize the tables in the preparation of their returns.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 472, effective June 20, 2005. -- Amended 1990 Ky. Acts ch. 476, Pt. VII D, sec. 633, effective April 11, 1990. -- Created 1976 Ky. Acts ch. 77, Pt. I, sec. 2.

141.025 Repealed, 1976.

[Repealed]

141.030 Levy of income tax on estates, trusts and fiduciaries -- Liability of fiduciaries.

(1) The tax imposed by KRS 141.020 upon individuals shall apply to estates and trusts and to all fiduciaries. This tax shall be paid annually upon the net income of estates and of any property held in trust at the rates specified in KRS 141.020.

(2) The fiduciary shall be responsible for making the return of income for the person for whom he acts, whether the income is taxable to the fiduciary or to the beneficiaries of the income.

History: Amended 1954 Ky. Acts ch. 79, sec. 4, effective June 17, 1954. -- Amended 1950 Ky. Acts ch. 172, sec. 1. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-29.

141.039 Calculation of gross income and net income for corporations.

In the case of corporations:

(1) Gross income shall be calculated by adjusting federal gross income as defined in Section 61 of the Internal Revenue Code as follows:

(a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States;

(b) Exclude all dividend income;

(d) Exclude fifty percent (50%) of gross income derived from any disposal of coal covered by Section 631(c) of the Internal Revenue Code if the corporation does not claim any deduction for percentage depletion, or for expenditures attributable to the making and administering of the contract under which such disposition occurs or to the preservation of the economic interests retained under such contract;

(e) Include the amount calculated under KRS 141.205;

(f) Ignore the provisions of Section 281 of the Internal Revenue Code in computing gross income;

(g) Include the amount of deprecation deduction calculated under 26 U.S.C. sec. 167 or 168;

(h) Allow the same treatment allowed under Pub. L. No. 116-260, secs. 276 and 278, related to the tax treatment of forgiven covered loans, deductions attributable to those loans, and tax attributes associated with those loans for taxable years ending on or after March 27, 2020, but before January 1, 2022;

(i) For taxable years beginning on or after January 1, 2020, but before March 11, 2023, allow the same treatment of restaurant revitalization grants in accordance with Pub. L. No. 117-2, sec. 9673 and 15 U.S.C. sec. 9009c, related to the tax treatment of the grants, deductions attributable to those grants, and tax attributes associated with those grants;

(j) For taxable years beginning on or after January 1, 2026:

Include the amount deducted for domestic research or experimental expenditures under 26 U.S.C. sec. 174A; and
Allow a subtraction equal to the amortization of domestic research or experimental expenditures computed in accordance with 26 U.S.C. sec. 174, as that section existed on December 31, 2024;

(k) Include the amount deducted for any qualified film or television production, any qualified live theatrical production, and any qualified sound recording production under 26 U.S.C. sec. 181;

(l) Include interest deducted under 26 U.S.C. sec. 139L for amounts paid to a qualified lender on any qualified real estate loan; and

(m) For purposes of determining the limitation on business interest under 26 U.S.C. sec. 163(j), the provisions of that section in effect on December 31, 2024, exclusive of any amendments made subsequent to that date, shall be used; and

(2) Net income shall be calculated by subtracting from gross income:

(a) The deduction for depreciation allowed by KRS 141.0101;

(b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families;

(c) All the deductions from gross income allowed corporations by Chapter 1 of the Internal Revenue Code, as modified by KRS 141.0101, except:

Any deduction for a state tax which is computed, in whole or in part, by reference to gross or net income and which is paid or accrued to any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or to any foreign country or political subdivision thereof;
The deductions contained in Sections 243, 245, and 247 of the Internal Revenue Code;
The provisions of Section 281 of the Internal Revenue Code shall be ignored in computing net income;
Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under the provisions of this chapter, except for deductions allowed under Pub. L. No. 116-260, secs. 276 and 278, related to the tax treatment of forgiven covered loans and deductions attributable to those loans for taxable years ending on or after March 27, 2020, but before January 1, 2022; and deductions allowed under Pub. L. No. 117-2, sec. 9673 and 15 U.S.C. sec. 9009c, related to the tax treatment of restaurant revitalization grants and deductions attributable to those grants for taxable years beginning on or after January 1, 2020, but before March 11, 2023. Nothing in this chapter shall be construed to permit the same item to be deducted more than once;
Any deduction for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained;
Any deduction prohibited by KRS 141.205; and
Any dividends-paid deduction of any captive real estate investment trust; and

(d) 1. A deferred tax deduction in an amount computed in accordance with this paragraph.

For purposes of this paragraph:

a. "Net deferred tax asset" means that deferred tax assets exceed the deferred tax liabilities of the combined group, as computed in accordance with accounting principles generally accepted in the United States of America; and

b. "Net deferred tax liability" means deferred tax liabilities that exceed the deferred tax assets of a combined group as defined in KRS 141.202, as computed in accordance with accounting principles generally accepted in the United States of America.

Only publicly traded companies, including affiliated corporations participating in the filing of a publicly traded company's financial statements prepared in accordance with accounting principles generally accepted in the United States of America, as of January 1, 2019, shall be eligible for this deduction.
If the provisions of KRS 141.202 result in an aggregate increase to the member's net deferred tax liability, an aggregate decrease to the member's net deferred tax asset, or an aggregate change from a net deferred tax asset to a net deferred tax liability, the combined group shall be entitled to a deduction, as determined in this paragraph.
For ten (10) years beginning with the combined group's first taxable year beginning on or after January 1, 2028, a combined group shall be entitled to a deduction from the combined group's entire net income equal to one-tenth (1/10) of the amount necessary to offset the increase in the net deferred tax liability, decrease in the net deferred tax asset, or aggregate change from a net deferred tax asset to a net deferred tax liability. The increase in the net deferred tax liability, decrease in the net deferred tax asset, or the aggregate change from a net deferred tax asset to a net deferred tax liability shall be computed based on the change that would result from the imposition of the combined reporting requirement under KRS 141.202, but for the deduction provided under this paragraph as of June 27, 2019.
The deferred tax impact determined in subparagraph 5. of this paragraph shall be converted to the annual deferred tax deduction amount, as follows:

a. The deferred tax impact determined in subparagraph 5. of this paragraph shall be divided by the tax rate determined under KRS 141.040;

b. The resulting amount shall be further divided by the apportionment factor determined by KRS 141.120 or 141.121 that was used by the combined group in the calculation of the deferred tax assets and deferred tax liabilities as described in subparagraph

of this paragraph; and

c. The resulting amount represents the total net deferred tax deduction available over the ten (10) year period as described in subparagraph 5. of this paragraph.

The deduction calculated under this paragraph shall not be adjusted as a result of any events happening subsequent to the calculation, including but not limited to any disposition or abandonment of assets. The deduction shall be calculated without regard to the federal tax effect and shall not alter the tax basis of any asset. If the deduction under this section is greater than the combined group's entire Kentucky net income, any excess deduction shall be carried forward and applied as a deduction to the combined group's entire net income in future taxable years until fully utilized.
Any combined group intending to claim a deduction under this paragraph shall file a statement with the department on or before July 1, 2019. The statement shall specify the total amount of the deduction which the combined group claims on the form, including calculations and other information supporting the total amounts of the deduction as required by the department. No deduction shall be allowed under this paragraph for any taxable year, except to the extent claimed on the timely filed statement in accordance with this paragraph.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 8, effective July 15, 2026; and ch. 198, sec. 49, effective July 15, 2026. -- Amended 2024 Ky. Acts ch. 166, sec. 16, effective July 15, 2024. -- Amended 2023 Ky. Acts ch. 92, sec. 20, effective March 24, 2023. -- Amended 2021 Ky. Acts ch. 22, sec. 3, effective March 15, 2021. -- Amended 2020 Ky. Acts ch. 91, sec. 7, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 196, sec. 4, effective June 27, 2019. -- Created 2018 Ky. Acts ch. 171, sec. 56, effective April 14, 2018; and ch. 207, sec. 56, effective April 27, 2018.

Legislative Research Commission Note (7/15/2026). This statute was amended by 2026 RS HB 757 (2026 Ky. Acts ch. 161, sec. 8), which was subsequently amended by 2026 RS HB 869 (2026 Ky. Acts ch. 198, sec. 49), and the amendments have been codified together.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 7 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (6/27/2019). Under the authority of KRS 7.136(1), the Reviser of Statutes has rearranged the subdivisions in subsection (2)(d)2. of this statute to place the definitions in alphabetical order. No words in the definitions were changed in this process.

141.040 Corporation income tax -- Exemptions -- Rate.

(1) Every corporation doing business in this state, except those corporations listed in paragraphs (a) and (b) of this subsection, shall pay for each taxable year a tax to be computed by the taxpayer on taxable net income at the rates specified in this section:

(a) For taxable years beginning prior to January 1, 2021:

Financial institutions, as defined in KRS 136.500, except bankers banks organized under KRS 286.3-135;
Savings and loan associations organized under the laws of this state and under the laws of the United States and making loans to members only;
Banks for cooperatives;
Production credit associations;
Insurance companies, including farmers' or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit; and
Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:

a. The property consists of the final printed product, or copy from which the printed product is produced; and

b. The corporation has no individuals receiving compensation in this state as provided in KRS 141.120(8)(b); and

(b) For taxable years beginning on or after January 1, 2021:

Insurance companies, including farmers' or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit;
Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:

a. The property consists of the final printed product, or copy from which the printed product is produced; and

b. The corporation has no individuals receiving compensation in this state as provided in KRS 141.120(8)(b); and

For taxable years beginning before January 1, 2027, a disaster response business.

(2) For taxable years beginning on or after January 1, 2018, the rate of five percent (5%) of taxable net income shall apply.

(3) For taxable years beginning on or after January 1, 2007, and before January 1, 2018, the following rates shall apply:

(a) Four percent (4%) of the first fifty thousand dollars ($50,000) of taxable net income;

(b) Five percent (5%) of taxable net income over fifty thousand dollars ($50,000) up to one hundred thousand dollars ($100,000); and

(4) (a) An S corporation shall pay income tax on the same items of income and in the same manner as required for federal purposes, except to the extent required by differences between this chapter and the federal income tax law and regulations.

(b) 1. If the S corporation is required under Section 1363(d) of the Internal Revenue Code to submit installments of tax on the recapture of LIFO benefits, installments to pay the Kentucky tax due shall be paid on or before the due date of the S corporation's return, as extended, if applicable.

Notwithstanding KRS 141.170(3), no interest shall be assessed on the installment payment for the period of extension.

(c) If the S corporation is required under Section 1374 or 1375 of the Internal Revenue Code to pay tax on built-in gains or on passive investment income, the amount of tax imposed by this subsection shall be computed by applying the highest rate of tax for the taxable year.

Effective: July 15, 2024

History: Amended 2024 Ky. Acts ch. 166, sec. 36, effective July 15, 2024. -- Amended 2021 Ky. Acts ch. 31, sec. 3, effective June 29, 2021. -- Amended 2019 Ky. Acts ch. 196, sec. 12, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 171, sec. 58, effective April 14, 2018; and ch. 207, sec. 58, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 3, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 251, secs. 46 and 47, effective April 25, 2006; and ch. 252, Pt. XIII, sec. 1, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 168, sec. 7, effective March 18, 2005. -- Amended 1996 Ky. Acts ch. 254, sec. 32, effective July 15, 1996. -- Amended 1990 Ky. Acts ch. 262, sec. 6, effective July 13, 1990; and ch. 476, Pt. VII C, sec. 629, effective April 11, 1990. -- Amended 1988 Ky. Acts ch. 111, sec. 1, effective July 15, 1988; and ch. 332, sec. 1, effective July 15, 1988. -- Amended 1986 Ky. Acts ch. 459, sec. 4, effective July 15, 1986. -- Amended 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. III, sec. 18, effective July 29, 1985. -- Amended 1980 Ky. Acts ch. 176, sec. 3, effective July 15, 1980. -- Amended 1976 Ky. Acts ch. 155, sec. 8. -- Amended 1972 Ky. Acts ch. 62, Part III. sec. 2; and ch. 121, sec. 4. -- Amended 1970 Ky. Acts ch. 14, sec. 5. -- Amended 1966 Ky. Acts ch. 176, Part 1, sec. 4; and ch. 255, sec. 137. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 4. -- Amended 1954 Ky. Acts ch. 79, sec. 5. -- Amended 1952 Ky. Acts ch. 124, sec. 2. -- Amended 1948 Ky. Acts ch. 93, sec. 3. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-14, 4281b-14a.

Legislative Research Commission Note (6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 40 (HB 354) and ch. 196, sec. 12 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 40, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 40, was not codified.

Legislative Research Commission Note (7/12/2006). 2006 Ky. Acts ch. 247 instructs the Reviser of Statutes to adjust KRS references throughout the statutes to conform with the 2006 renumbering of the Financial Services Code, KRS Chapter 286. Such an adjustment has been made in this statute.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.0401 Limited liability entity tax -- Exemptions -- Rate.

(1) As used in this section:

(a) "Kentucky gross receipts" means an amount equal to the computation of the numerator of the apportionment fraction under KRS 141.120, any administrative regulations related to the computation of the sales factor, and KRS 141.121 and includes the proportionate share of Kentucky gross receipts of all wholly or partially owned limited liability pass-through entities, including all layers of a multi-layered pass-through structure;

(b) "Gross receipts from all sources" means an amount equal to the computation of the denominator of the apportionment fraction under KRS 141.120, any administrative regulations related to the computation of the sales factor, and KRS 141.121 and includes the proportionate share of gross receipts from all sources of all wholly or partially owned limited liability pass-through entities, including all layers of a multi-layered pass-through structure;

(d) "Cost of goods sold" means:

Amounts that are:

a. Allowable as cost of goods sold pursuant to the Internal Revenue Code and any guidelines issued by the Internal Revenue Service relating to cost of goods sold, unless modified by this paragraph; and

b. Incurred in acquiring or producing the tangible product generating the Kentucky gross receipts.

For manufacturing, producing, reselling, retailing, or wholesaling activities, cost of goods sold shall only include costs directly incurred in acquiring or producing the tangible product. In determining cost of goods sold:

a. Labor costs shall be limited to direct labor costs as defined in paragraph (f) of this subsection;

b. Bulk delivery costs as defined in paragraph (g) of this subsection may be included; and

c. Costs allowable under Section 263A of the Internal Revenue Code may be included only to the extent the costs are incurred in acquiring or producing the tangible product generating the Kentucky gross receipts. Notwithstanding the foregoing, indirect labor costs allowable under Section 263A shall not be included;

For any activity other than manufacturing, producing, reselling, retailing, or wholesaling, no costs shall be included in cost of goods sold. As used in this paragraph, "guidelines issued by the Internal Revenue Service" includes regulations, private letter rulings, or any other guidance issued by the Internal Revenue Service that may be relied upon by taxpayers under reliance standards established by the Internal Revenue Service;

(e) 1. "Kentucky gross profits" means Kentucky gross receipts reduced by returns and allowances attributable to Kentucky gross receipts, less the cost of goods sold attributable to Kentucky gross receipts. If the amount of returns and allowances attributable to Kentucky gross receipts and the cost of goods sold attributable to Kentucky gross receipts is zero, then "Kentucky gross profits" means Kentucky gross receipts; and

"Gross profits from all sources" means gross receipts from all sources reduced by returns and allowances attributable to gross receipts from all sources, less the cost of goods sold attributable to gross receipts from all sources. If the amount of returns and allowances attributable to gross receipts from all sources and the cost of goods sold attributable to gross receipts from all sources is zero, then gross profits from all sources means gross receipts from all sources;

(f) "Direct labor" means labor that is incorporated into the tangible product sold or is an integral part of the manufacturing process;

(g) "Bulk delivery costs" means the cost of delivering the product to the consumer if:

The tangible product is delivered in bulk and requires specialized equipment that generally precludes commercial shipping; and
The tangible product is taxable under KRS 138.220;

(h) "Manufacturing" and "producing" means:

Manufacturing, producing, constructing, or assembling components to produce a significantly different or enhanced end tangible product;
Mining or severing natural resources from the earth; or
Growing or raising agricultural or horticultural products or animals;

(i) "Real property" means land and anything growing on, attached to, or erected on it, excluding anything that may be severed without injury to the land;

(j) "Reselling," "retailing," and "wholesaling" mean the sale of a tangible product;

(k) "Tangible personal property" means property, other than real property, that has physical form and characteristics; and

(l) "Tangible product" means real property and tangible personal property;

(2) (a) For taxable years beginning on or after January 1, 2007, an annual limited liability entity tax shall be paid by every corporation and every limited liability pass-through entity doing business in Kentucky on all Kentucky gross receipts or Kentucky gross profits except as provided in this subsection. A small business exclusion from this tax shall be provided based on the reduction contained in this subsection. The tax shall be the greater of the amount computed under paragraph (b) of this subsection or one hundred seventy-five dollars ($175), regardless of the application of any tax credits provided under this chapter or any other provisions of the Kentucky Revised Statutes for which the business entity may qualify.

(b) The limited liability entity tax shall be the lesser of subparagraph 1. or 2. of this paragraph:

a. If the corporation's or limited liability pass-through entity's gross receipts from all sources are three million dollars ($3,000,000) or less, the limited liability entity tax shall be one hundred seventy- five dollars ($175);

b. If the corporation's or limited liability pass-through entity's gross receipts from all sources are greater than three million dollars ($3,000,000) but less than six million dollars ($6,000,000), the limited liability entity tax shall be nine and one-half cents ($0.095) per one hundred dollars ($100) of the corporation's or limited liability pass-through entity's Kentucky gross receipts reduced by an amount equal to two thousand eight hundred fifty dollars ($2,850) multiplied by a fraction, the numerator of which is six million dollars ($6,000,000) less the amount of the corporation's or limited liability pass-through entity's Kentucky gross receipts for the taxable year, and the denominator of which is three million dollars ($3,000,000), but in no case shall the result be less than one hundred seventy-five dollars ($175);

c. If the corporation's or limited liability pass-through entity's gross receipts from all sources are equal to or greater than six million dollars ($6,000,000), the limited liability entity tax shall be nine and one-half cents ($0.095) per one hundred dollars ($100) of the corporation's or limited liability pass-through entity's Kentucky gross receipts.

a. If the corporation's or limited liability pass-through entity's gross profits from all sources are three million dollars ($3,000,000) or less, the limited liability entity tax shall be one hundred seventy- five dollars ($175);

b. If the corporation's or limited liability pass-through entity's gross profits from all sources are at least three million dollars ($3,000,000) but less than six million dollars ($6,000,000), the limited liability entity tax shall be seventy-five cents ($0.75) per one hundred dollars ($100) of the corporation's or limited liability pass-through entity's Kentucky gross profits, reduced by an amount equal to twenty-two thousand five hundred dollars ($22,500) multiplied by a fraction, the numerator of which is six million dollars ($6,000,000) less the amount of the corporation's or limited liability pass-through entity's Kentucky gross profits, and the denominator of which is three million dollars ($3,000,000), but in no case shall the result be less than one hundred seventy-five dollars ($175);

c. If the corporation's or limited liability pass-through entity's gross profits from all sources are equal to or greater than six million dollars ($6,000,000), the limited liability entity tax shall be seventy-five cents ($0.75) per one hundred dollars ($100) of all of the corporation's or limited liability pass-through entity's Kentucky gross profits. In determining eligibility for the reductions contained in this paragraph, a member of an affiliated group shall consider the total gross receipts and the total gross profits from all sources of the entire affiliated group, including eliminating entries for transactions among the group.

(c) A credit shall be allowed against the tax imposed under paragraph (a) of this subsection for the current year to a corporation or limited liability pass- through entity that owns an interest in a limited liability pass-through entity. The credit shall be the proportionate share of tax calculated under this subsection by the lower-level pass-through entity, as determined after the amount of tax calculated by the pass-through entity has been reduced by the minimum tax of one hundred seventy-five dollars ($175). The credit shall apply across multiple layers of a multi-layered pass-through entity structure. The credit at each layer shall include the credit from each lower layer, after reduction for the minimum tax of one hundred seventy-five dollars ($175) at each layer.

(d) The department may promulgate administrative regulations to establish a method for calculating the cost of goods sold attributable to Kentucky.

(3) A nonrefundable credit based on the tax calculated under subsection (2) of this section shall be allowed against the tax imposed by KRS 141.020 or 141.040. The credit amount shall be determined as follows:

(a) The credit allowed a corporation subject to the tax imposed by KRS 141.040 shall be equal to the amount of tax calculated under subsection (2) of this section for the current year after subtraction of any credits identified in KRS 141.0205, reduced by the minimum tax of one hundred seventy-five dollars ($175), plus any credit determined in paragraph (b) of this subsection for tax paid by wholly or partially owned limited liability pass-through entities. The amount of credit allowed to a corporation based on the amount of tax paid under subsection (2) of this section for the current year shall be applied to the income tax due from the corporation's activities in this state. Any remaining credit from the corporation shall be disallowed.

(b) The credit allowed members, shareholders, or partners of a limited liability pass-through entity shall be the members', shareholders', or partners' proportionate share of the tax calculated under subsection (2) of this section for the current year after subtraction of any credits identified in KRS 141.0205, as determined after the amount of tax paid has been reduced by the minimum tax of one hundred seventy-five dollars ($175). The credit allowed to members, shareholders, or partners of a limited liability pass-through entity shall be applied to income tax assessed on income from the limited liability pass-through entity. Any remaining credit from the limited liability pass- through entity shall be disallowed.

(4) Each taxpayer subject to the tax imposed in this section shall file a return, on forms prepared by the department, on or before the fifteenth day of the fourth month following the close of the taxpayer's taxable year. Any tax remaining due after making the payments required in KRS 141.044 shall be paid by the original due date of the return.

(5) The department shall prescribe forms and promulgate administrative regulations as needed to administer the provisions of this section.

(6) The tax imposed by subsection (2) of this section shall not apply to:

(a) For taxable years beginning prior to January 1, 2021:

Financial institutions, as defined in KRS 136.500, except banker's banks organized under KRS 287.135 or 286.3-135;
Savings and loan associations organized under the laws of this state and under the laws of the United States and making loans to members only;
Banks for cooperatives;
Production credit associations;
Insurance companies, including farmers' or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit;
Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:

a. The property consists of the final printed product, or copy from which the printed product is produced; and

b. The corporation has no individuals receiving compensation in this state as provided in KRS 141.901;

Public service corporations subject to tax under KRS 136.120;
Open-end registered investment companies organized under the laws of this state and registered under the Investment Company Act of 1940;
Any property or facility which has been certified as a fluidized bed energy production facility;
An alcohol production facility as defined in KRS 247.910;
Real estate investment trusts as defined in Section 856 of the Internal Revenue Code;
Regulated investment companies as defined in Section 851 of the Internal Revenue Code;
Real estate mortgage investment conduits as defined in Section 860D of the Internal Revenue Code;
Personal service corporations as defined in Section 269A(b)(1) of the Internal Revenue Code;
Cooperatives described in Sections 521 and 1381 of the Internal Revenue Code, including farmers' agricultural and other cooperatives organized or recognized under KRS Chapter 272, advertising cooperatives, purchasing cooperatives, homeowners associations including those described in Section 528 of the Internal Revenue Code, political organizations as defined in Section 527 of the Internal Revenue Code, and rural electric and rural telephone cooperatives; or
Publicly traded partnerships as defined by Section 7704(b) of the Internal Revenue Code that are treated as partnerships for federal tax purposes under Section 7704(c) of the Internal Revenue Code, or their publicly traded partnership affiliates. "Publicly traded partnership affiliates" shall include any limited liability company or limited partnership for which at least eighty percent (80%) of the limited liability company member interests or limited partner interests are owned directly or indirectly by the publicly traded partnership; and

(b) For taxable years beginning on or after January 1, 2021:

Insurance companies, including farmers' or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit;
Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:

a. The property consists of the final printed product, or copy from which the printed product is produced; and

b. The corporation has no individuals receiving compensation in this state as provided in KRS 141.901;

Public service corporations subject to tax under KRS 136.120;
Open-end registered investment companies organized under the laws of this state and registered under the Investment Company Act of 1940;
An alcohol production facility as defined in KRS 247.910;
Real estate investment trusts as defined in Section 856 of the Internal Revenue Code;
Regulated investment companies as defined in Section 851 of the Internal Revenue Code;
Real estate mortgage investment conduits as defined in Section 860D of the Internal Revenue Code;
Personal service corporations as defined in Section 269A(b)(1) of the Internal Revenue Code;
Cooperatives described in Sections 521 and 1381 of the Internal Revenue Code, including farmers' agricultural and other cooperatives organized or recognized under KRS Chapter 272, advertising cooperatives, purchasing cooperatives, homeowners associations including those described in Section 528 of the Internal Revenue Code, political organizations as defined in Section 527 of the Internal Revenue Code, and rural electric and rural telephone cooperatives; or
Publicly traded partnerships as defined by Section 7704(b) of the Internal Revenue Code that are treated as partnerships for federal tax purposes under Section 7704(c) of the Internal Revenue Code, or their publicly traded partnership affiliates. "Publicly traded partnership affiliates" shall include any limited liability company or limited partnership for which at least eighty percent (80%) of the limited liability company member interests or limited partner interests are owned directly or indirectly by the publicly traded partnership.

(7) (a) As used in this subsection, "qualified exempt organization" means an entity listed in subsection (6)(a) and (b) of this section and shall not include any entity whose exempt status has been disallowed by the Internal Revenue Service.

(b) Notwithstanding any other provisions of this section, any limited liability pass-through entity that is owned in whole or in part by a qualified exempt organization shall, in calculating its Kentucky gross receipts or Kentucky gross profits, exclude the proportionate share of its Kentucky gross receipts or Kentucky gross profits attributable to the ownership interest of the qualified exempt organization.

(c) Any limited liability pass-through entity that reduces Kentucky gross receipts or Kentucky gross profits in accordance with paragraph (b) of this subsection shall disregard the ownership interest of the qualified exempt organization in determining the amount of credit available under subsection (3) of this section.

(d) The Department of Revenue may promulgate an administrative regulation to further define "qualified exempt organization" to include an entity for which exemption is constitutionally or legally required, or to exclude any entity created primarily for tax avoidance purposes with no legitimate business purpose.

(8) The credit permitted by subsection (3) of this section shall flow through multiple layers of limited liability pass-through entities and shall be claimed by the taxpayer who ultimately pays the tax on the income of the limited liability pass-through entity.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 51, effective July 15, 2026. -- Amended 2020 Ky. Acts ch. 91, sec. 8, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 196, sec. 13, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 171, sec. 77, effective April 14, 2018; and ch. 207, sec. 77, effective April 27, 2018. -- Amended 2008 Ky. Acts ch. 18, sec. 1, effective July 15, 2008. -- Created 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 4, effective June 28, 2006.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 8 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 41 (HB 354) and ch. 196, sec. 13 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 41, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 41, was not codified.

Legislative Research Commission Note (7/15/2008). 2008 Ky. Acts ch. 18, sec. 4 provides that the amendments made to this section by that Act "shall apply to taxable periods beginning after December 31, 2007."

141.0405 Repealed, 2018.

[Repealed]

141.0406 Repealed, 2018.

[Repealed]

141.041 Tax credit for corporations for installing, modifying or utilizing coal for manufacturing or heating.

(1) There shall be allowed a credit against the tax imposed on any corporation subject to taxation under KRS 141.040 and 141.0401, and which, on or after January 1, 1984, installs, modifies, and utilizes facilities located in Kentucky for generating steam or hot water for space-heating or materials processing or for providing direct heat for industrial processes in the following ways:

(a) Replacement of an existing heat-generating facility not capable of using coal as a fuel with one in which coal can be used;

(b) Erection of a heat-generating facility additional to any existing heat-generating facility or facilities and capable of using coal as a fuel;

(c) Refurbishment for coal utilization of heat-generating facilities which were at one time capable of using coal but which had been altered to allow use of other fuels;

(d) Alteration of an existing heat-generating facility not capable of utilizing coal in such ways as to allow the use of coal;

(e) Substitution of coal for other fuels in any heat-generating facility which on January 1, 1984, was in existence and capable of utilizing coal and other fuels. Substitution means the increased heat input in BTU from coal matched by equal decreases of heat input in equivalent measures to BTU from other fuels, based upon relative fuel usage in the calendar year preceding the year in which the substitution occurred.

(2) The amount of the allowable credit shall be equal to four and one-half percent (4.5%) of the purchase price of the coal subject to taxation under KRS Chapter 143 consumed or substituted in each eligible heating facility as described in subsection

(1) of this section, minus any transporting cost included in the purchase price.

(3) The credit shall be allowed for ten (10) years consecutive from the date of the initial installation, modification, or utilization of any heat-generating facility installed or modified on and after January 1, 1984, as defined in subsection (1)(a), (b), (c), and

(d) of this section or ten (10) years consecutive from the filing of a fuel-switching credit claim in subsection (1)(e) of this section.

(4) The credit allowable under this section shall be applied against both the taxpayer's income tax liability and the taxpayer's tax liability under the limited liability entity tax imposed by KRS 141.0401, with the ordering of the credits as provided in KRS 141.0205, and no part of the credit shall be applicable to the tax imposed by KRS 141.040 or 141.0401 for any other taxable year.

(5) A corporation claiming the credit under this section must submit proof of the installation, modification, utilization or substitution as required by regulations issued by the Department of Revenue prior to the claiming of such credit.

Effective: June 28, 2006

History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 15, effective June 28, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 474, effective June 20, 2005. -- Amended 1994 Ky. Acts ch. 57, sec. 2, effective July 15, 1994. -- Created 1984 Ky. Acts ch. 411, sec. 1, effective July 13, 1984.

Legislative Research Commission Note (7/15/94). The changes to this statute from 1994 Ky. Acts ch. 57 apply "to taxable years beginning after December 31, 1993." 1994 Ky. Acts ch. 57, sec. 4.

141.042 Repealed, 2019.

[Repealed]

141.044 Payment of estimated tax by corporations and pass-through entities -- Refund of taxes -- Administrative regulations.

(1) For taxable years beginning on or after January 1, 2019, every corporation and limited liability pass-through entity subject to taxation under KRS 141.040 and 141.0401 shall make estimated tax payments if the taxes imposed by KRS 141.040 and 141.0401 for the taxable year can reasonably be expected to exceed five thousand dollars ($5,000).

(2) Estimated tax payments for the taxes imposed under KRS 141.040 and 141.0401 shall be made at the same time and calculated in the same manner as estimated tax payments for federal income tax purposes under 26 U.S.C. sec. 6655, except:

(a) The estimated liabilities for the taxes imposed under KRS 141.040 and 141.0401 shall be used to make the estimated payments;

(b) Any provisions in 26 U.S.C. sec. 6655 that apply for federal tax purposes but do not apply to the taxes imposed under KRS 141.040 and 141.0401;

(d) The tax interest rate identified under KRS 131.183 shall be used to determine the underpayment rate instead of the rate under 26 U.S.C. sec. 6621;

(e) Any waiver of penalties shall be performed as provided in KRS 131.175; and

(f) 1. A refund of taxes collected under this section shall include interest at the tax interest rate as defined in KRS 131.010.

Interest shall not begin to accrue until ninety (90) days after the latest of:

a. The due date of the return;

b. The date the return was filed;

c. The date the tax was paid;

d. The last day prescribed by law for filing the return; or

e. The date an amended return claiming a refund is filed.

A refund shall not be made of any estimated tax paid unless:

a. i. An application is made by the taxpayer or officer authorized to make the request on a form prescribed by the department; and

ii. It is determined that the estimated tax was paid to the department in error; or

b. A return is filed as required by this chapter.

(3) The department may promulgate administrative regulations in accordance with KRS Chapter 13A to implement this section.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 3, effective July 15, 2026. -- Amended 2020 Ky. Acts ch. 91, sec. 9, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 42, effective June 27, 2019. -- Repealed and reenacted 2009 Ky. Acts ch. 86, sec. 8, effective March 24, 2009. -- Amended 2008 Ky. Acts ch. 132, sec. 9, effective April 24, 2008. -- Amended 1982 Ky. Acts ch. 452, sec. 24, effective July 1, 1982. -- Amended 1976 Ky. Acts ch. 155, sec. 9. -- Amended 1966 Ky. Acts ch. 24, Part II, sec. 2; and ch. 176, Part II, sec. 2. -- Created 1960 Ky. Acts ch. 186, Art. III, sec. 3.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 9 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (3/24/2009). 2009 Ky. Acts ch. 86, sec. 15, provides that "the provisions of Sections 7 to 10 of this Act shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act and shall apply to all claims for those taxable years pending in any judicial or administrative forum."

Legislative Research Commission Note (3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that "The intent of the General Assembly in repealing and reenacting KRS 136.392, 138.195, 141.160, 160.6156, 160.6157, 160.6158, 131.183, 141.044, 141.235, 134.580, 393.060, and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008."

Legislative Research Commission Note (3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides "To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood."

Legislative Research Commission Note (4/24/2008). 2008 Ky. Acts ch. 132, sec. 15 provides that the amendments made to this statute by that Act "shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act (April 24, 2008) and shall apply to all claims for those taxable years pending in any judicial or administrative forum."

141.046 Repealed, 1970.

[Repealed]

141.050 Federal interpretations applicable, when -- Taxpayer record -- Subpoenas -- Forms -- Regulations.

(1) Except to the extent required by differences between this chapter and its application and the federal income tax law and its application, the administrative and judicial interpretations of the federal income tax law, computations of gross income and deductions therefrom, accounting methods, and accounting procedures, for purposes of this chapter shall be as nearly as practicable identical with those required for federal income tax purposes. Changes to federal income tax law made after the Internal Revenue Code reference date contained in KRS 141.010 shall not apply for purposes of this chapter unless adopted by the General Assembly.

(2) Every person subject to the provisions of this chapter shall keep records, render under oath statements, make returns, and comply with the rules and administrative regulations as the department from time to time may promulgate. Whenever the department judges it necessary, it may require a person, by notice served upon him or her, to make a return, render under oath statements, or keep records, as the department deems sufficient to show whether or not the person is liable for tax, and the extent of the liability.

(3) The commissioner or his or her authorized agent or representative, for the purpose of ascertaining the correctness of any return or for the purposes of making an estimate of the taxable income of any taxpayers, may require the attendance of the taxpayer or of any other person having knowledge in the premises.

(4) The department shall promulgate rules and regulations necessary to effectively carry out the provisions of this chapter.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 76, effective April 14, 2018; and ch. 207, sec. 76, effective April 27, 2018. -- Amended 2016 Ky. Acts ch. 82, sec. 33, effective July 15, 2016. -- Amended 2005 Ky. Acts ch. 85, sec. 476, effective June 20, 2005. -- Amended 2002 Ky. Acts ch. 234, sec. 2, effective July 15, 2002; and ch. 316, sec. 4, effective July 15, 2002. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 5. -- Amended 1954 Ky. Acts ch. 79, sec. 6. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-23.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

141.055 Repealed, 1954.

[Repealed]

141.060 Repealed, 1956.

[Repealed]

141.062 Premiums paid for health insurance to be treated as income tax credit.

(1) The amount of premiums paid for health insurance shall be treated as an income tax credit for state income tax purposes, and as a credit against the limited liability entity tax imposed by KRS 141.0401, with the ordering of the credits as provided in KRS 141.0205, as follows:

(a) Twenty percent (20%) of the first year premium;

(b) Fifteen percent (15%) of the second year premium;

(d) Five percent (5%) of the fourth year premium.

(2) No employer or employee shall be eligible for the income tax credits enumerated in this section unless:

(a) Premiums are paid into the trust prior to July 1, 1992;

(b) Fifty (50) or fewer employees are employed;

(c) No health insurance benefits have been provided by the employer during the three (3) years preceding the date premiums are initially paid to the trust;

(d) Employers maintain participation in the trust for all full-time and part-time employees for a period of four (4) continuous years; and

(e) Employers pay at least fifty percent (50%) of the premium.

Effective: June 28, 2006

History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 16, effective June 28, 2006. -- Created 1990 Ky. Acts ch. 482, sec. 21, effective July 13, 1990.

141.063 Skills training investment credits allowed by KRS 154.12-204 to 154.12-208 -- Application to income tax obligations -- Annual report.

(1) As used in this section, unless the context requires otherwise:

(a) "Approved company" has the same meaning as in KRS 154.12-204;

(b) "Corporation" has the same meaning as in KRS 154.12-204;

(d) "Qualified company" has the same meaning as in KRS 154.12-204;

(e) "Skills training investment credit" has the same meaning as in KRS 154.12- 204; and

(f) "Skills upgrade training" has the same meaning as in KRS 154.12-204.

(2) For taxable years beginning on or after July 1, 2022, the corporation shall not accept applications for the skills training investment credits allowed by KRS 154.12-204 to 154.12-208.

(3) The amount of skills training investment credit awarded by the corporation under KRS 154.12-204 to 154.12-208 shall be credited on the tax return of the approved company in the year the corporation's closeout of approved training costs were incurred. The skills training investment credits allowed shall only be used by the approved company that has been awarded the credits in accordance with KRS 154.12-204 to 154.12-208. The skills training investment credits shall be applied to the income tax imposed by KRS 141.020 or 141.040. The credit may also be applied to the limited liability entity tax imposed by KRS 141.0401, with the order of the credits as provided in KRS 141.0205. These credits shall be in addition to all other tax credits granted under the laws of the Commonwealth.

(4) The skills training investment credit may be carried forward for three (3) successive fiscal years by the approved company if the amount allowable as credits exceeds the income tax liability of the approved company in the tax year during which the final closeout of the approved training costs were incurred. Any excess credits shall not be refundable or carried forward beyond the third fiscal year.

(5) A qualified company shall not be entitled to receive the grant-in-aid under KRS 154.12-207 or skills training investment credits if the qualified company requires the employee to reimburse the employer or otherwise pay for any costs or expenses incurred in connection with the occupational upgrade training or skills upgrade training.

(6) To the extent that any expenditures of a qualified company constitute approved costs and are the basis for the skills upgrade or occupational upgrade training under KRS 154.12-207, these expenditures shall only be eligible as the basis for either grants-in-aid or skills training investment credits.

(7) By October 1 of each year, the Department of Revenue shall certify to the corporation the amount of any skills training investment credits taken pursuant to KRS 154.12-207 on tax returns filed during the fiscal year ending June 30 of that year.

(8) The Department of Revenue may promulgate administrative regulations in accordance with KRS Chapter 13A to adopt forms and procedures for the reporting of the credit authorized in KRS 154.12-204 to 154.12-208.

(9) (a) In order for the General Assembly to evaluate the fulfillment of the purposes of this section, the department shall submit the following information, related to each taxable year that a grant-in-aid under KRS 154.12-207 or skills training investment credit is claimed on any income tax return filed:

The cumulative amount of tax credits by taxable year claimed by entity type, including:

a. Person;

b. Corporation;

c. Limited liability company;

d. Partnership;

e. Limited partnership;

f. Sole proprietorship;

g. Holding company;

h. Joint stock company;

i. Professional services corporation; or

j. Any other legal entity through which business is conducted;

The number of returns filed claiming a tax credit for each taxable year by entity type;
In the case of a taxpayer other than a corporation, based on the mailing address of the return, the total amount of credits claimed by county;
In the case of a taxpayer other than a corporation, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000), the total amount of credit claimed for each adjusted gross income range by taxable year; and
In the case of a corporation, based on ranges of net income no larger than fifty thousand dollars ($50,000), the total amount of credit claimed for each net income range.

(b) The report required by paragraph (a) of this subsection shall be submitted to the Interim Joint Committee on Appropriations and Revenue beginning no later than November 1, 2018, and no later than each November 1 thereafter, as long as the skills training investment credit is claimed on any return processed by the department.

Effective: July 14, 2018

History: Created 2018 Ky. Acts ch. 199, sec. 4, effective July 14, 2018.

141.065 Tax credit for hiring person classified as unemployed -- Annual report.

(1) For the purposes of this section, "code" or "Internal Revenue Code" means the Internal Revenue Code in effect as of December 31, 1981.

(2) For taxable years beginning before January 1, 2028, there shall be allowed as a credit for any taxpayer against the tax imposed by KRS 141.020 or 141.040 and 141.0401 for any taxable year, with the ordering of the credits as provided in KRS 141.0205, an amount equal to one hundred dollars ($100) for each person hired by the taxpayer, if that person has been classified as unemployed by the Office of Unemployment Insurance in the Education and Labor Cabinet and has been so classified for at least sixty (60) days prior to his employment by the taxpayer, and if further that person has remained in the employ of the taxpayer for at least one hundred eighty (180) consecutive days during the taxable year in which the taxpayer claims the credit.

(3) No credit shall be allowed to any taxpayer for any person hired under any of the following circumstances:

(a) A person for whom the taxpayer receives federally funded payments for on- the-job training;

(b) For any person who bears any of the relationships to the taxpayer described in paragraphs (1) through (8) of Section 152(a) of the Internal Revenue Code, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than fifty percent (50%) in value of the outstanding stock of the corporation as determined with the application of Section 267(c) of the code;

(c) If the taxpayer is an estate or trust, to any person who is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in paragraphs (1) through (8) of Section 152(a) of the code to a grantor, beneficiary, or fiduciary of the estate or trust; or

(d) To any person who is a dependent of the taxpayer as described in code Section 152(a)(9), or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or fiduciary of the estate or trust.

(4) For purposes of this section, all employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by a single employer. In no instance shall the credit, if any, allowable by subsection (2) of this section for any employee qualified thereunder be claimed more than once for any taxable year by such a controlled group of corporations. For purposes of this subsection, the term "controlled group of corporations" has the meaning given to that term by code Section 1563(a), except that "more than fifty percent (50%)" shall be substituted for "at least eighty percent (80%)" each place it appears in code Section 1563(a)(1), and the determination shall be made without regard to subsections (a)(4) and (e)(3)(c) of code Section 1563.

(5) For purposes of this section, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and in no instance shall the credit, if any, allowable by subsection

(2) of this section for any employee qualified thereunder be claimed more than once for any taxable year.

(6) No credit shall be allowed under subsection (2) of this section to any organization which is exempt from income tax by this chapter.

(7) In the case of a pass-through entity, the amount of the credit determined under this section for any taxable year shall be applied at the entity level against the limited liability entity tax imposed by KRS 141.0401 and shall also be apportioned pro rata among the members, partners, or shareholders of the limited liability entity on the last day of the taxable year, and any person to whom an amount is so apportioned shall be allowed, subject to code Section 53, a credit under subsection (2) of this section for that amount.

(8) In the case of an estate or trust, the amount of the credit determined under this section for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of income of the estate or trust allocable to each, and any beneficiary to whom any amount has been apportioned under this subsection shall be allowed, subject to code Section 53, a credit under subsection (2) of this section for that amount.

(9) In no event shall the credit allowed, pursuant to this section, for any taxable year exceed the tax liability of the taxpayer for the taxable year.

(10) (a) By November 1, 2026, and each November 1 thereafter as long as credit is claimed under this section, the department shall report to the Legislative Research Commission for referral to the Interim Joint Committee on Appropriations and Revenue:

The total number of returns claiming the credit for the taxable year;
The total amount of credit claimed for the taxable year;
By county, the total number of unemployed persons hired for which credit is claimed for the taxable year;
By taxpayer:

a. The name and location of the taxpayer claiming the credit as listed on the tax return;

b. The total number of tax credits claimed for the taxable year;

c. The total amount of credit claimed for the taxable year; and

d. The total number of unemployed persons hired in which credit is claimed for the taxable year; and

a. In the case of taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of credit claimed and the total number of returns claiming this credit for each adjusted gross income range.

b. In the case of corporations, based on ranges of net income of no larger than fifty thousand dollars ($50,000) for the taxable year, the total amount of credit claimed and the total number of returns claiming this credit for each net income range.

(b) The Office of Unemployment Insurance shall assist by providing the department with the information necessary to help fulfill the requirements under this subsection.

(c) The information required to be reported under this subsection shall not be considered confidential taxpayer information and shall not be subject to KRS Chapter 131 or any other provisions of the Kentucky Revised Statutes prohibiting disclosure or reporting of information.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 53, effective July 15, 2026. -- Amended 2022 Ky. Acts ch. 236, sec. 25, effective July 1, 2022. -- Amended 2019 Ky. Acts ch. 146, sec. 10, effective June 27, 2019. -- Amended 2009 Ky. Acts ch. 11, sec. 11, effective June 25, 2009. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 17, effective June 28, 2006. -- Amended 2005 Ky. Acts ch. 99, sec. 117, effective June 20, 2005. -- Amended 2000 Ky. Acts ch. 14, sec. 9, effective July 14, 2000. -- Amended 1998 Ky. Acts ch. 426, sec. 100, effective July 15, 1998. -- Amended 1984 Ky. Acts ch. 111, secs. 79 and 177, effective July 13, 1984. -- Created 1982 Ky. Acts ch. 431, sec. 1, effective July 15, 1982.

141.066 Definitions -- Nonrefundable low income, family size, and income gap tax credits.

(1) As used in this section:

(a) "Federal poverty level" means the Health and Human Services poverty guidelines updated periodically in the Federal Register by the United States Department of Health and Human Services under the authority of 42 U.S.C.

sec. 9902(2) and available on June 30 of the taxable year;

(b) "Qualifying dependent" means a qualifying child as defined in the Internal Revenue Code, Section 152(c), and includes a child who lives in the household but cannot be claimed as a dependent if the provisions of Internal Revenue Code Section 152(e)(2) and 152(e)(4) apply;

(c) "Qualifying individual" means an individual whose filing status is single or married filing separately if during the taxable year the individual's spouse is not a member of the household;

(d) "Qualifying married couple" means a husband and wife living together who file a joint return or separately on a combined return. "Marital status" shall have the same meaning as defined in Section 7703 of the Internal Revenue Code; and

(e) "Threshold amount" means:

For a qualifying individual with no qualifying dependent children, the federal poverty level established for a family unit size of one (1):
For a qualifying individual with one (1) qualifying dependent child or a qualifying married couple with no qualifying dependent children, the federal poverty level established for a family unit size of two (2);
For a qualifying individual with two (2) qualifying dependent children or a qualifying married couple with one (1) qualifying dependent child, the federal poverty level established for a family unit size of three (3);
For a qualifying individual with (3) or more qualifying dependent children or a qualifying married couple with two (2) or more qualifying dependent children, the federal poverty level established for a family unit size of four (4).

(2) (a) For taxable years beginning before January 1, 2005, a resident individual whose adjusted gross income does not exceed the amounts set out in paragraph (c) of this subsection shall be eligible for a nonrefundable "low income" tax credit. The credit shall be applied against the taxpayer's tax liability calculated under KRS 141.020, and shall be taken in the order established by KRS 141.0205.

(b) For a husband and wife filing jointly, the "low income" tax credit shall be computed on the basis of their joint adjusted gross income and shall be applied against their joint tax liability. For a husband and wife living together, whether filing separate returns or filing separately on a combined return, the "low income" credit shall be computed on the basis of their combined adjusted gross income, except that a separately computed gross income of less than zero shall be treated as zero, and shall be applied against their combined tax liability.

(c) The "low income" tax credit shall be computed as follows: PERCENT OF TAX AMOUNT OF ADJUSTED LIABILITY ALLOWED AS GROSS INCOME LOW INCOME TAX CREDIT not over $5,000 100% over $ 5,000 but not over $10,000 50% over $10,000 but not over $15,000 25% over $15,000 but not over $20,000 15% over $20,000 but not over $25,000 5% over $25,000 -0-

(3) (a) For taxable years beginning after December 31, 2004, qualifying taxpayers whose modified gross income is below one hundred thirty-three percent (133%) of the threshold amount shall be entitled to a nonrefundable family size tax credit. The family size tax credit shall be applied against the taxpayer's tax liability calculated under KRS 141.020. The family size tax credit shall not reduce the taxpayer's tax liability below zero.

(b) For qualifying taxpayers whose modified gross income is equal to or below one hundred percent (100%) of the threshold amount, the family size tax credit shall be equal to the taxpayer's tax liability.

(c) For qualifying taxpayers whose modified gross income exceeds the threshold amount but is below one hundred thirty-three percent (133%) of the threshold amount, the family size tax credit shall be equal to the amount of the taxpayer's individual income tax liability multiplied by a percentage as follows:

If modified gross income is above one hundred percent (100%) but less than or equal to one hundred four percent (104%) of the threshold amount, the credit percentage shall be ninety percent (90%);
If modified gross income is above one hundred four percent (104%) but less than or equal to one hundred eight percent (108%) of the threshold amount, the credit percentage shall be eighty percent (80%);
If modified gross income is above one hundred eight percent (108%) but less than or equal to one hundred twelve percent (112%) of the threshold amount, the credit percentage shall be seventy percent (70%);
If modified gross income is above one hundred twelve percent (112%) but less than or equal to one hundred sixteen percent (116%) of the threshold amount, the credit percentage shall be sixty percent (60%);
If modified gross income is above one hundred sixteen percent (116%) but less than or equal to one hundred twenty percent (120%) of the threshold amount, the credit percentage shall be fifty percent (50%);
If modified gross income is above one hundred twenty percent (120%) but less than or equal to one hundred twenty-four percent (124%) of the threshold amount, the credit percentage shall be forty percent (40%);
If modified gross income is above one hundred twenty-four percent (124%) but less than or equal to one hundred twenty-seven percent (127%) of the threshold amount, the credit percentage shall be thirty percent (30%);
If modified gross income is above one hundred twenty-seven percent (127%) but less than or equal to one hundred thirty percent (130%) of the threshold amount, the credit percentage shall be twenty percent (20%);
If modified gross income is above one hundred thirty percent (130%) but less than or equal to one hundred thirty-three percent (133%) of the threshold amount, the credit percentage shall be ten percent (10%);
If modified gross income is above one hundred thirty-three percent (133%) of the threshold amount, the credit percentage shall be zero.

(d) For taxable years beginning on or after January 1, 2019, but before January 1, 2021, in addition to the credit calculated under paragraphs (a), (b), and (c) of this subsection, the income gap credit shall be allowed:

If modified gross income is above one hundred percent (100%) but less than or equal to one hundred four percent (104%) of the threshold amount, the credit shall be in an amount equal to:

a. Eleven dollars ($11) for a family size of one (1);

b. Seven dollars ($7) for a family size of two (2); and

c. Three dollars ($3) for a family size of three (3);

If modified gross income is above one hundred four percent (104%) but less than or equal to one hundred eight percent (108%) of the threshold amount, the credit shall be in an amount equal to:

a. Twenty dollars ($20) for a family size of one (1);

b. Thirteen dollars ($13) for a family size of two (2); and

c. Six dollars ($6) for a family size of three (3);

If modified gross income is above one hundred eight percent (108%) but less than or equal to one hundred twelve percent (112%) of the threshold amount, the credit shall be in an amount equal to:

a. Twenty-nine dollars ($29) for a family size of one (1);

b. Eighteen dollars ($18) for a family size of two (2); and

c. Six dollars ($6) for a family size of three (3);

If modified gross income is above one hundred twelve percent (112%) but less than or equal to one hundred sixteen percent (116%) of the threshold amount, the credit shall be in an amount equal to:

a. Thirty-seven dollars ($37) for a family size of one (1);

b. Twenty-two dollars ($22) for a family size of two (2); and

c. Six dollars ($6) for a family size of three (3);

If modified gross income is above one hundred sixteen percent (116%) but less than or equal to one hundred twenty percent (120%) of the threshold amount, the credit shall be in an amount equal to:

a. Forty-five dollars ($45) for a family size of one (1);

b. Twenty-four dollars ($24) for a family size of two (2); and

c. Four dollars ($4) for a family size of three (3);

If modified gross income is above one hundred twenty percent (120%) but less than or equal to one hundred twenty-four percent (124%) of the threshold amount, the credit shall be in an amount equal to:

a. Fifty-one dollars ($51) for a family size of one (1); and

b. Twenty-six dollars ($26) for a family size of two (2);

If modified gross income is above one hundred twenty-four percent (124%) but less than or equal to one hundred twenty-seven percent (127%) of the threshold amount, the credit shall be in an amount equal to:

a. Fifty-eight dollars ($58) for a family size of one (1); and

b. Twenty-seven dollars ($27) for a family size of two (2);

If modified gross income is above one hundred twenty-seven percent (127%) but less than or equal to one hundred thirty percent (130%) of the threshold amount, the credit shall be in an amount equal to:

a. Sixty-four dollars ($64) for a family size of one (1); and

b. Twenty-eight dollars ($28) for a family size of two (2); and

If modified gross income is above one hundred thirty percent (130%) but less than or equal to one hundred thirty-three percent (133%) of the threshold amount, the credit shall be in an amount equal to:

a. Sixty-nine dollars ($69) for a family size of one (1); and

b. Twenty-eight dollars ($28) for a family size of two (2).

(4) For a qualifying married couple filing jointly, the family size tax credit shall be computed on the basis of their joint modified gross income and shall be applied against their joint tax liability. For a qualifying married couple living together, whether filing separate returns or filing separately on a combined return, the family size tax credit shall be computed on the basis of their combined modified gross income, except that a separately computed modified gross income of less than zero shall be treated as zero, and shall be applied against their combined tax liability.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 43, effective June 27, 2019. -- Amended 2005 Ky. Acts ch. 168, sec. 9, effective March 18, 2005. -- Amended 1994 Ky. Acts ch. 57, sec. 3, effective July 15, 1994. â€“ Amended 1992 Ky. Acts ch. 52, sec. 1, effective July 14, 1992; and ch. 105, sec. 72, effective July 14, 1992. -- Created 1990 Ky. Acts ch. 476, Pt. VII D, sec. 638, effective April 11, 1990.

Legislative Research Commission Note (6/27/2019). Section 88 of 2019 Ky. Acts 151 reads as follows: "It is the intent of the General Assembly to study the long-term impact of the income tax on certain family-size households and to extend the provisions of Section 43 of this Act [this statute] or find a permanent alternative to those provisions."

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (7/15/1994). The changes to this statute from 1994 Ky. Acts ch. 57 apply "to taxable years beginning after December 31, 1993." 1994 Ky. Acts ch. 57, sec. 4.

141.067 Household and dependent care service credit.

A resident individual may deduct from the tax computed under the provisions of KRS 141.020 a credit for household and dependent care services necessary for gainful employment. The credit shall be twenty percent (20%) of the federal credit allowed under Section 21 of the Internal Revenue Code.

Effective: April 11, 1990

History: Created 1990 Ky. Acts ch. 476, Pt. VII D, sec. 637, effective April 11, 1990.

141.068 Definitions -- Determination of tax credits under KRS 154.20-258.

(1) As used in this section, unless the context requires otherwise:

(a) "Authority" means the Kentucky Economic Development Finance Authority as created pursuant to KRS 154.20-010;

(b) "Investor" has the same meaning as set forth in KRS 154.20-254;

(d) "Investment fund manager" has the same meaning as set forth in KRS 154.20- 254; and

(e) "Tax credit" means the credits provided for in KRS 154.20-258.

(2) (a) An investor which is an individual or a corporation shall be entitled to the credit certified by the authority under KRS 154.20-258 against the tax due computed as provided by KRS 141.020 or 141.040, respectively, and against the tax imposed by KRS 141.0401, with the ordering of credits as provided in KRS 141.0205.

(b) The amount of the certified tax credit that may be claimed in any tax year of the investor shall be determined in accordance with the provisions of KRS 154.20-258.

(3) (a) In the case of an investor that is a pass-through entity not subject to the tax imposed by KRS 141.040, the amount of the tax credit certified by the authority under KRS 154.20-258 shall be taken by the pass-through entity against the limited liability entity tax imposed by KRS 141.0401, and shall also be apportioned among the partners, members, or shareholders at the same ratio as the partners', members', or shareholders' distributive shares of income are determined for the tax year during which the amount of the credit is certified by the authority.

(b) The amount of the tax credit apportioned to each partner, member, or shareholder that may be claimed in any tax year of the partner, member, or shareholder shall be determined in accordance with the provisions of KRS 154.20-258.

(4) (a) In the case of an investor that is a trust not subject to the tax imposed by KRS 141.040, the amount of the tax credit certified by the authority under KRS 154.20-258 shall be apportioned to the trust and the beneficiaries on the basis of the income of the trust allocable to each for the tax year during which the tax credit is certified by the authority.

(b) The amount of tax credit apportioned to each trust or beneficiary that may be claimed in any tax year of the trust or beneficiary shall be determined in accordance with the provisions of KRS 154.20-258.

(5) The Department of Revenue shall promulgate administrative regulations under KRS Chapter 13A to adopt procedures for the administration of the credits authorized by KRS 154.20-258.

(6) In order for the General Assembly to evaluate the fulfillment of the purposes stated in KRS 154.20-250, the department shall work jointly with the Cabinet for Economic Development to provide a report detailing each investment fund agreement entered into by the cabinet. The report shall be submitted to the Interim Joint Committee on Appropriations and Revenue on or before May 1, 2019, and contain the following information:

(a) The date the agreement was entered into by the cabinet with the investment fund manager;

(b) The name of the investment fund manager and the name of the investment fund;

(d) The total number of investment funds, the number of investors for each fund, the amount of committed cash contributions to each investment fund, and the total qualified investments made by each investment fund, including initial and subsequent investments, for each small business;

(e) A list detailing each investor within each investment fund, the amount of investment made by each investor, and the amount of tax credit awarded each investor;

(f) Whether the authority has suspended the availability of any credits, terminated any agreements, or pursued any other remedy because the investment fund manager failed to comply with the agreement;

(g) By taxable year, the amount of tax credit claimed by each investor by type of tax, including income tax, any taxes imposed on financial institutions, or insurance taxes;

(h) The number of small businesses that are active, inactive, or closed that have received investments from an investment fund;

(i) The number and location of each new small business established or expanded;

(j) The number and location of each new job created;

(k) The number of new products and technologies created; and

(l) The total amount of tax credit awarded for each fiscal year.

(7) If either the department or the Cabinet for Economic Development does not currently have the data to fulfill the reporting requirement of subsection (6) of this section, the department and the cabinet shall work jointly to obtain the data in an expedient manner to provide the report on or before the May 1, 2019, report date.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 96, effective April 14, 2018; and ch. 207, sec. 96, effective April 27, 2018. -- Amended 2016 Ky. Acts ch. 82, sec. 34, effective July 15, 2016. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 18, effective June 28, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 477, effective June 20, 2005; and ch. 168, sec. 10, effective March 18, 2005. -- Amended 2002 Ky. Acts ch. 230, sec. 6, effective July 15, 2002. -- Created 1998 Ky. Acts ch. 414, sec. 16, effective July 15, 1998.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.069 Credit allowed for tuition at eligible educational institution.

(1) As used in this section, "eligible Kentucky education institution" means an institution as defined by Section 25A of the Internal Revenue Code that is located within the Commonwealth of Kentucky.

(2) For taxable years beginning after December 31, 2004, an individual may deduct from the tax computed under KRS 141.020 a nonrefundable credit for qualified tuition and related expenses required for enrollment or attendance of the taxpayer, taxpayer's spouse or any dependent at an eligible Kentucky educational institution. The credit shall be twenty-five percent (25%) of the federal credit allowable under Section 25A of the Internal Revenue Code.

(3) The credit allowed in subsection (2) of this section shall not be allowed for expenses for graduate level course study.

(4) If the taxpayer is a married individual within the meaning of Section 7703 of the Internal Revenue Code, the credit shall apply only if the taxpayer and the taxpayer's spouse file a joint return or file separately on a combined form. The credit shall not be allowed if the taxpayer and the taxpayer's spouse file separate returns.

(5) Any unused credit may be carried forward five (5) years.

Effective: March 18, 2005

History: Created 2005 Ky. Acts ch. 168, sec. 8, effective March 18, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.070 Credits allowed individuals for tax paid to other states.

(1) Whenever an individual who is a resident of this state has become liable for income tax to another state upon all or any part of the individual's net income for the taxable year, derived from sources without this state and subject to taxation under this chapter, the amount of income tax payable under this chapter shall be credited on the return with the income tax paid to the other state, upon producing to the proper assessing officer satisfactory evidence of the fact of the payment, except that application of any credits shall not operate to reduce the tax payable under this chapter to an amount less than would have been payable were the income from the other state ignored.

(2) An individual who is not a resident of this state shall not be liable for any income tax under KRS 141.020(4) if the laws of the state of which the individual was a resident at the time the income was earned in this state contained a reciprocal provision under which nonresidents were exempted from gross or net income taxes to the other state, if the state of residence of the nonresident individual allowed a similar exemption to resident individuals of this state. The exemption authorized by this subsection shall in no manner preclude the department from requiring any information reports under KRS 141.150(2).

(3) As used in this section, "state" means a state of the United States, the District of Columbia, the commonwealth of Puerto Rico, or any territory or possession of the United States.

(4) Any resident entity owner of an electing entity, as those terms are defined in KRS 141.209, doing business in another state in which the tax is assessed and paid at the entity level shall be allowed a credit in accordance with subsection (1) of this section. The credit shall be based on the entity owner's distributive share of the electing entity's items of income, loss, deduction, and credit.

Effective: March 31, 2023

History: Amended 2023 Ky. Acts ch. 92, sec. 23, effective March 24, 2023; and ch. 148, sec. 7, effective March 31, 2023. -- Amended 2018 Ky. Acts ch. 207, sec. 118, effective April 27, 2018. -- Amended 2005 Ky. Acts ch. 85, sec. 478, effective June 20, 2005. -- Amended 1974 Ky. Acts ch. 163, sec. 3. -- Amended 1966 Ky. Acts ch. 255, sec. 138. -- Amended 1960 Ky. Acts ch. 5, Art. III, sec. 4. -- Amended 1958 Ky. Acts ch. 3, sec. 2. -- Created 1952 Ky. Acts ch. 194, sec. 3. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-15, 4281b-16.

Legislative Research Commission Note (3/31/2023). This statute was amended by 2023 Ky. Acts chs. 92 and 148. Where these Acts are not in conflict, they have been codified together. Where a conflict exists, Acts ch. 148, which was last enacted by the General Assembly, prevails under KRS 446.250.

141.071 Definition -- Right to designate portion of tax to political party.

(1) The term "political party" shall, for the purposes of this section and KRS 141.072 and 141.073, mean those parties who met the requirements of KRS 118.015 on January 1 of the taxable year.

(2) Every individual whose income tax liability for the taxable year is as great or greater than amounts permitted to be designated under this section, may designate that the tax paid or portion thereof be paid, as provided under this section and KRS 141.072, to a political party. Amounts of individual tax liability permitted to be so designated are as follows: for the 1982 taxable year, one dollar and fifty cents ($1.50); for the 1983 taxable year, one dollar and seventy-five cents ($1.75); and for the 1984 taxable year and for every year thereafter, two dollars ($2). In the case of a joint return, each spouse shall, for the purposes of this section, be considered to have an equal tax liability and may each designate amounts as provided in this section, provided that the joint tax liability is at least as great as amounts jointly so designated. Such designation shall not increase or decrease the income tax liability of any taxpayer nor shall it reduce the overpayment of any taxpayer.

Effective: January 1, 1983

History: Amended 1982 Ky. Acts ch. 167, sec. 1, effective January 1, 1983. -- Created 1976 Ky. Acts ch. 264, secs. 1 and 2.

141.072 Designation of party -- Certification and remittance to state and county party organizations.

The designation for a political party shall appear on the face of the individual income tax return. Fifty cents ($0.50) of any designation pursuant to KRS 141.071 shall be reserved for remittance to the appropriate official of the local governing authority of the designated political party within the taxpayer's resident county. The remainder of the designation shall be reserved for remittance to the appropriate official of the state governing authority of the designated political party. The commissioner of the Department of Revenue shall annually certify by December 1 all such designated amounts to be paid by the State Treasurer, and the Treasurer shall annually remit by the following January 1 such funds to the appropriate official of the state and local governing authorities of the designated political party.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 479, effective June 20, 2005. -- Amended 1982 Ky. Acts ch. 167, sec. 2, effective January 1, 1983. -- Created 1976 Ky. Acts ch. 264, sec. 3.

141.073 Rules and regulations.

The Department of Revenue shall promulgate such rules and regulations as may be necessary to effectively administer the provisions of KRS 141.071 and 141.072.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 480, effective June 20, 2005. -- Created 1976 Ky. Acts ch. 264, sec. 4.

141.075 Repealed, 1954.

[Repealed]

141.080 Repealed, 1954.

[Repealed]

141.081 Optional standard deduction for individuals -- Exception.

(1) An individual, at his election, may deduct from his adjusted gross income a standard deduction of:

(a) Six hundred and fifty dollars ($650) for taxable years beginning before December 31, 1996;

(b) Nine hundred dollars ($900) for taxable years beginning after December 31, 1996, but before December 31, 1997;

(c) One thousand two hundred dollars ($1,200) for taxable years beginning after December 31, 1997, but before December 31, 1998;

(d) One thousand five hundred dollars ($1,500) for taxable years beginning after December 31, 1998, but before December 31, 1999;

(e) One thousand seven hundred dollars ($1,700) for taxable years beginning after December 31, 1999, but before December 31, 2000; and

(f) The amount calculated under subsection (2) of this section for taxable years beginning after December 31, 2000.

(2) (a) For taxable years beginning after December 31, 2000, and each taxable year thereafter, the standard deduction for the current taxable year shall be equal to the standard deduction for the prior taxable year multiplied by the greater of:

The average of the monthly CPI-U figures for the twelve (12) consecutive months ending in and including the July six (6) months prior to the January beginning the current tax year, divided by the average of the monthly CPI-U figures for the twelve (12) months ending in and including the July eighteen (18) months prior to the January beginning the current tax year; or
One (1).

(b) As used in this subsection, a tax year shall be the twelve (12) month period beginning in January and ending in December.

(c) As used in this subsection, "CPI-U" means the nonseasonally adjusted United States city average of the Consumer Price Index for all urban consumers for all items, as released by the federal Bureau of Labor Statistics.

(3) The standard deduction provided for in this section shall be in lieu of all deductions and shall not be allowed in the case of a taxable year of less than twelve (12) months on account of a change in the accounting period or in the case of a fiduciary.

(4) In the case of a husband and wife living together, the standard deduction provided for in this section shall not be allowed to either if the net income of one (1) of the spouses is determined without regard to the standard deduction. The determination of marital status shall be made in the manner prescribed in Section 153 of the Internal Revenue Code.

Effective: July 15, 1996

History: Amended 1996 Ky. Acts ch. 265, sec. 1, effective July 15, 1996. -- Amended 1976 Ky. Acts ch. 77, Pt. 1, sec. 3. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 5, effective April 23, 1956. -- Amended 1954 Ky. Acts ch. 79, sec. 8. -- Created 1946 Ky. Acts ch. 234, sec. 7.

141.082 Repealed, 1976.

[Repealed]

141.083 Repealed, 1954.

[Repealed]

141.084 Repealed, 1954.

[Repealed]

141.085 Repealed, 1954.

[Repealed]

141.090 Repealed, 1954.

[Repealed]

141.095 Repealed, 1954.

[Repealed]

141.096 Repealed, 1954.

[Repealed]

141.100 Repealed, 1954.

[Repealed]

141.110 Repealed, 1954.

[Repealed]

141.120 Division of income of interstate business for tax purposes -- Apportionment.

This section applies to taxable years beginning on or after January 1, 2018.

(1) As used in this section:

(a) "Apportionable income" means:

All income that is apportionable under the Constitution of the United States and is not allocated under this section, including:

a. Income arising from transactions and activity in the regular course of the taxpayer's trade or business; and

b. Income arising from tangible and intangible property if the acquisition, management, employment, development, or disposition of the property is or was related to the operation of the taxpayer's trade or business; and

Any income that would be allocable to this state under the Constitution of the United States, but that is apportioned rather than allocated pursuant to this section;

(b) "Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed;

(c) "Financial organization" means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, cooperative bank, small loan company, sales finance company, investment company, or any similar type of entity;

(d) "Non-apportionable income" means all income other than apportionable income;

(e) "Receipts" means all gross receipts of the taxpayer that are not allocated under this section, and that are received from transactions and activity in the regular course of the taxpayer's trade or business, except that receipts of a taxpayer from:

Hedging transactions; and
The maturity, redemption, sale, exchange, loan, or other disposition of cash or securities; shall be excluded; and

(f) "This state" means the Commonwealth of Kentucky.

(2) Any taxpayer having income from business activity which is taxable both within and without this state, other than activity as a provider as defined in KRS 136.602, a financial organization, or a public service company, shall allocate and apportion net income as provided in this section.

(3) For purposes of allocation and apportionment of income under this section, a taxpayer is taxable in another state if:

(a) In that state the taxpayer is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax; or

(b) That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not do so.

(4) Rents and royalties from real or tangible personal property, capital gains, interest, or patent or copyright royalties, to the extent that they constitute nonapportionable income, shall be allocated as provided in subsections (5) to (8) of this section.

(5) (a) Net rents and royalties from real property located in this state are allocable to this state.

(b) Net rents and royalties from tangible personal property are allocable to this state:

If and to the extent that the property is utilized in this state; or
In their entirety if the taxpayer's commercial domicile is in this state and the taxpayer is not organized under the laws of or taxable in the state in which the property is utilized.

(c) The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction the numerator of which is the number of days of physical location of the property in this state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during all rental or royalty periods is unknown or unascertainable by the taxpayer, tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.

(6) (a) Capital gains and losses from sales of real property located in this state are allocable to this state.

(b) Capital gains and losses from sales of tangible personal property are allocable to this state if:

The property had a situs in this state at the time of the sale; or
The taxpayer's commercial domicile is in this state and the taxpayer is not taxable in the state in which the property had a situs.

(c) Capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer's commercial domicile is in this state.

(7) Interest is allocable to this state if the taxpayer's commercial domicile is in this state.

(8) (a) Patent and copyright royalties are allocable to this state:

If and to the extent that the patent or copyright is utilized by the payer in this state; or
If and to the extent that the patent or copyright is utilized by the payer in a state in which the taxpayer is not taxable and the taxpayer's commercial domicile is in this state.

(b) A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state or to the extent that a patented product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the patent is utilized in the state in which the taxpayer's commercial domicile is located.

(9) All apportionable income shall be apportioned to this state by multiplying the income by a fraction the numerator of which is the total receipts of the taxpayer in this state during the taxable year and the denominator of which is the total receipts of the taxpayer everywhere during the taxable year.

(10) Receipts from the sale of tangible personal property are in this state if:

(a) The property is delivered or shipped to a purchaser, other than the United States government, within this state regardless of the f.o.b. point or other conditions of the sale; or

(b) The property is shipped from an office, store, warehouse, factory, or other place of storage in this state and the purchaser is the United States government.

(11) (a) Receipts, other than receipts described in subsection (10) of this section, are in this state if the taxpayer's market for the sales is in this state. The taxpayer's market for sales is in this state:

In the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this state;
In the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this state;
In the case of sale of a service, if and to the extent the service is delivered to a location in this state; and
In the case of intangible property:

a. That is rented, leased, or licensed, if and to the extent the property is used in this state, provided that intangible property utilized in marketing a good or service to a consumer is used in this state if that good or service is purchased by a consumer who is in this state; and

b. That is sold, if and to the extent the property is used in this state, provided that:

i. A contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is used in this state if the geographic area includes all or part of this state;

ii. Receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of the intangible property under subdivision a. of this subparagraph; and

iii. All other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the receipts factor.

(b) If the state or states of assignment under paragraph (a) of this subsection cannot be determined, the state or states of assignment shall be reasonably approximated.

(c) If the taxpayer is not taxable in a state to which a receipt is assigned under paragraph (a) or (b) of this subsection, or if the state of assignment cannot be determined under paragraph (a) of this subsection or reasonably approximated under paragraph (b) of this subsection, the receipt shall be excluded from the denominator of the receipts factor.

(d) The department may promulgate administrative regulations necessary to carry out the purposes of this section.

(12) (a) If the allocation and apportionment provisions of this section do not fairly represent the extent of the taxpayer's business activity in this state, the taxpayer may petition for or the department may require, in respect to all or any part of the taxpayer's business activity, if reasonable:

Separate accounting;
The inclusion of one (1) or more additional factors which will fairly represent the taxpayer's business activity in this state; or
The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income.

(b) 1. If the allocation and apportionment provisions of this section do not fairly represent the extent of business activity in this state of taxpayers engaged in a particular industry or in a particular transaction or activity, the department may, in addition to the authority provided in paragraph

(a) of this subsection, promulgate administrative regulations for determining alternative allocation and apportionment methods for those taxpayers.

An administrative regulation promulgated pursuant to this paragraph shall be applied uniformly, except that with respect to any taxpayer to whom the administrative regulation applies, the taxpayer may petition for or the department may require adjustment according to paragraph (a) of this subsection.

(c) 1. The party petitioning for or the department requiring the use of any method to effectuate an equitable allocation and apportionment of the taxpayer's income pursuant to paragraph (a) of the subsection shall prove by clear and convincing evidence:

a. That the allocation and apportionment provisions of this section do not fairly represent the extent of the taxpayer's business activity in this state; and

b. That the alternative to the provisions is reasonable.

The same burden of proof shall apply whether the taxpayer is petitioning for, or the department is requiring, the use of any reasonable method to effectuate an equitable allocation and apportionment of the taxpayer's income. Notwithstanding the previous sentence, if the department can show that in any two (2) of the prior five (5) taxable years, the taxpayer had used an allocation or apportionment method at variance with its allocation or apportionment method or methods used for the other taxable years, then the department shall not bear the burden of proof in imposing a different method provided by paragraph (a) of this subsection.

(d) If the department requires any method to effectuate an equitable allocation and apportionment of the taxpayer's income, the department cannot impose any civil or criminal penalty with reference to the tax due that is attributable to the taxpayer's reasonable reliance solely on the allocation and apportionment provisions of this subsection.

(e) A taxpayer that has received written permission from the department to use a reasonable method to effectuate an equitable allocation and apportionment of the taxpayer's income shall not have that permission revoked with respect to transactions and activities that have already occurred unless there has been a material change in, or a material misrepresentation of, the facts provided by the taxpayer upon which the department reasonably relied.

Effective: April 27, 2018

History: Repealed and reenacted 2018 Ky. Acts ch. 171, sec. 60, effective April 14, 2018; and ch. 207, sec. 60, effective April 27, 2018. -- Amended 2008 Ky. Acts ch. 18, sec. 2, effective July 15, 2008. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 6, effective June 28, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 481, effective June 20, 2005; and ch. 168, sec. 11, effective March 18, 2005. -- Amended 2000 Ky. Acts ch. 543, sec. 2, effective July 1, 2000. -- Amended 1996 Ky. Acts ch. 239, sec. 1, effective July 15, 1996. -- Amended 1992 Ky. Acts ch. 165, sec. 2, effective July 14, 1992. -- Amended 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. VII, sec. 19, effective July 29, 1985. -- Amended 1984 Ky. Acts ch. 264, sec. 6, effective July 13, 1984. -- Amended 1976 Ky. Acts ch. 155, sec. 10. -- Amended 1974 Ky. Acts ch. 137, sec. 4; and ch. 163, sec. 4. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 6. -- Amended 1962 Ky. Acts ch. 124, sec. 3. -- Amended 1954 Ky. Acts ch. 79, sec. 10. - - Amended 1950 Ky. Acts ch. 73, sec. 1. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-32.

Legislative Research Commission Note (4/27/2018). This statute was repealed and reenacted by 2018 Ky. Acts ch. 171, sec. 60 and ch. 207, sec. 60, which are nearly identical and have been codified together.

Legislative Research Commission Note (6/28/2006). 2005 Ky. Acts ch. 85, sec. 701, instructs the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in the Act, as it confirms the reorganization of the Finance and Administration Cabinet. Such a correction has been made in this section.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.121 Special rules for apportioning business income -- Management of a treasury function -- Passenger airlines -- Qualified air freight forwarders -- Administrative regulations regarding sourcing of receipts.

(1) As used in this section:

(a) "Affiliated airline" means an airline:

For which a qualified air freight forwarder facilitates air transportation; and
That is in the same affiliated group as a qualified air freight forwarder;

(b) "Affiliated group" has the same meaning as in KRS 141.201;

(c) "Kentucky revenue passenger miles" means the total revenue passenger miles within the borders of Kentucky for all flight stages that either originate or terminate in this state;

(d) "Passenger airline" means a person or corporation engaged primarily in the carriage by aircraft of passengers in interstate commerce;

(e) "Provider" means any corporation engaged in the business of providing:

Communications service as defined in KRS 136.602;
Cable service as defined in KRS 136.602; or
Internet access as defined in 47 U.S.C. sec. 151;

(f) "Qualified air freight forwarder" means a person that:

Is engaged primarily in the facilitation of the transportation of property by air;
Does not itself operate aircraft; and
Is in the same affiliated group as an affiliated airline; and

(g) "Revenue passenger miles" means miles calculated in accordance with 14 C.F.R. Part 241.

(2) (a) For purposes of apportioning business income to this state for taxable years beginning prior to January 1, 2018:

Passenger airlines shall determine the property, payroll, and sales factors as follows:

a. Except as modified by this subdivision, the property factor shall be determined as provided in KRS 141.901. Aircraft operated by a passenger airline shall be included in both the numerator and denominator of the property factor. Aircraft shall be included in the numerator of the property factor by determining the product of:

i. The total average value of the aircraft operated by the passenger airline; and

ii. A fraction, the numerator of which is the Kentucky revenue passenger miles of the passenger airline for the taxable year and the denominator of which is the total revenue passenger miles of the passenger airline for the taxable year;

b. Except as modified by this subdivision, the payroll factor shall be determined as provided in KRS 141.901. Compensation paid during the tax period by a passenger airline to flight personnel shall be included in the numerator of the payroll factor by determining the product of:

i. The total amount paid during the taxable year to flight personnel; and

c. Except as modified by this subdivision, the sales factor shall be determined as provided in KRS 141.901. Transportation revenues shall be included in the numerator of the sales factor by determining the product of:

i. The total transportation revenues of the passenger airline for the taxable year; and

ii. A fraction, the numerator of which is the Kentucky revenue passenger miles for the taxable year and the denominator of which is the total revenue passenger miles for the taxable year; and

Qualified air freight forwarders shall determine the property, payroll, and sales factors as follows:

a. The property factor shall be determined as provided in KRS 141.901;

b. The payroll factor shall be determined as provided in KRS 141.901; and

c. Except as modified by this subparagraph, the sales factor shall be determined as provided in KRS 141.901. Freight forwarding revenues shall be included in the numerator of the sales factor by determining the product of:

i. The total freight forwarding revenues of the qualified air freight forwarder for the taxable year; and

ii. A fraction, the numerator of which is miles operated in Kentucky by the affiliated airline and the denominator of which is the total miles operated by the affiliated airline.

(b) For purposes of apportioning income to this state for taxable years beginning on or after January 1, 2018, except as modified by this paragraph, the apportionment fraction shall be determined as provided in KRS 141.120, except that:

Transportation revenues shall be determined to be in this state by multiplying the total transportation revenues by a fraction, the numerator of which is the Kentucky revenue passenger miles for the taxable year and the denominator of which is the total revenue passenger miles for the taxable year; and
Freight forwarding revenues shall be determined to be in this state by multiplying the total freight forwarding revenues by a fraction, the numerator of which is miles operated in Kentucky by the affiliated airline and the denominator of which is the total miles operated by the affiliated airline.

(3) For purposes of apportioning income to this state for taxable years beginning on or after January 1, 2018, the apportionment fraction for a provider shall continue to be calculated using a three (3) factor formula as provided in KRS 141.901.

(4) (a) A corporation may elect the allocation and apportionment methods for the corporation's apportionable income provided for in paragraphs (b) and (c) of this subsection. The election, if made, shall be irrevocable for a period of five

(5) years.

(b) All business income derived directly or indirectly from the sale of management, distribution, or administration services to or on behalf of regulated investment companies, as defined under the Internal Revenue Code of 1986, as amended, including trustees, and sponsors or participants of employee benefit plans which have accounts in a regulated investment company, shall be apportioned to this state only to the extent that shareholders of the investment company are domiciled in this state as follows:

Total apportionable income shall be multiplied by a fraction, the numerator of which shall be Kentucky receipts from the services for the tax period and the denominator of which shall be the total receipts everywhere from the services for the tax period;
For purposes of subparagraph 1. of this paragraph, Kentucky receipts shall be determined by multiplying total receipts for the taxable year from each separate investment company for which the services are performed by a fraction. The numerator of the fraction shall be the average of the number of shares owned by the investment company's shareholders domiciled in this state at the beginning of and at the end of the investment company's taxable year, and the denominator of the fraction shall be the average of the number of the shares owned by the investment company shareholders everywhere at the beginning of and at the end of the investment company's taxable year; and
Nonapportionable income shall be allocated to this state as provided in KRS 141.120.

(c) All apportionable income derived directly or indirectly from the sale of securities brokerage services by a business which operates within the boundaries of any area of the Commonwealth, which on June 30, 1992, was designated as a Kentucky Enterprise Zone, as described in KRS 154.655(2) before that statute was renumbered in 1992, shall be apportioned to this state only to the extent that customers of the securities brokerage firm are domiciled in this state. The portion of business income apportioned to Kentucky shall be determined by multiplying the total business income from the sale of these services by a fraction determined in the following manner:

The numerator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by customers domiciled in Kentucky for the brokerage firm's taxable year;
The denominator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by all of the brokerage firm's customers for that year; and
Nonapportionable income shall be allocated to this state as provided in KRS 141.120.

(5) Public service companies and financial organizations required by KRS 141.010 to allocate and apportion net income shall allocate and apportion that income as follows:

(a) Nonapportionable income shall be allocated to this state as provided in KRS 141.120;

(b) Apportionable income shall be apportioned to this state as provided by KRS 141.120. Receipts shall be determined as provided by administrative regulations promulgated by the department; and

(c) An affiliated group required to file a consolidated return under KRS 141.201 that includes a public service company, a provider of communications services or multichannel video programming services as defined in KRS 136.602, or a financial organization shall determine the amount of receipts as provided by administrative regulations promulgated by the department.

(6) A corporation:

(a) That owns an interest in a limited liability pass-through entity; or

(b) That owns an interest in a general partnership; shall include the proportionate share of receipts of the limited liability pass-through entity or general partnership when apportioning income. The phrases "an interest in a limited liability pass-through entity" and "an interest in a general partnership" shall extend to each level of multiple-tiered pass-through entities.

(7) The department shall promulgate administrative regulations to detail the sourcing of the following receipts related to financial institutions:

(a) Receipts from the lease of real property;

(b) Receipts from the lease of tangible personal property;

(d) Interest, fees, and penalties imposed in connection with loans not secured by real property;

(e) Net gains from the sale of loans;

(f) Receipts from fees, interest, and penalties charged to card holders;

(g) Net gains from the sale of credit card receivables;

(h) Card issuer's reimbursement fees;

(i) Receipts from merchant discount;

(j) Receipts from ATM fees;

(k) Receipts from loan servicing fees;

(l) Receipts from other services;

(m) Receipts from the financial institution's investment assets and activity and trading assets and activity; and

(n) All other receipts.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 10, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 44, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 171, sec. 78, effective April 14, 2018; and ch. 207, sec. 78, effective April 27, 2018. -- Amended 2012 Ky. Acts ch. 101, sec. 2, effective April 11, 2012. -- Created 2008 Ky. Acts ch. 18, sec. 3, effective July 15, 2008.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 10 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (4/11/2012). 2012 Ky. Acts ch. 101, sec. 3, provides that this statute, as amended by 2012 Ky. Acts ch. 101, sec. 2, "applies to taxable years beginning on or after January 1, 2010."

Legislative Research Commission Note (7/15/2008). 2008 Ky. Acts ch. 18, sec. 4 provides that this section "shall apply to taxable periods beginning after December 31, 2007."

141.124 Repealed, 1966.

[Repealed]

141.125 Repealed, 1954.

[Repealed]

141.130 Liability for tax on discontinuation of business.

If any corporation or pass-through entity dissolves or withdraws from this state during any taxable year, or if any corporation in any manner surrenders or loses its charter during any taxable year, the dissolution, withdrawal, or loss or surrender of charter shall not defeat the filing of returns and the assessment and collection of income taxes for the period of that taxable year during which the corporation or pass-through entity had an income in this state.

Effective: June 28, 2006

History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 19, effective June 28, 2006. -- Amended 2005 Ky. Acts ch. 168, sec. 12, effective March 18, 2005. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-35.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.140 Accounting period for computation of income.

(1) If the taxpayer makes, or is required to make, a federal income tax return, the taxpayer's income shall be computed for the purposes of this chapter on the basis of the same calendar or fiscal year required by the federal government, and the taxpayer shall employ the same methods of accounting required for federal income tax purposes.

(2) If a return is made by an individual for a period of less than one (1) year, the net income, computed on the basis of the period for which a separate return is made, shall be placed on an annual basis by multiplying the amount thereof by the number of days in the year and dividing by the number of days included in the period for which the separate return is made. The tax payable shall be such part of the tax computed on the annual basis as the number of days in the period is of the number of days in the year.

(3) If a return is made by a corporation for a period of less than one (1) year, the taxable net income, computed on the basis of the period for which a return is made, shall be placed on an annual basis by multiplying the amount thereof by the number of days in the year and dividing by the number of days included in the period for which the return is made. The tax payable shall be such part of the tax computed on the annual basis as the number of days in the period is of the number of days in the year.

Effective: March 18, 2005

History: Amended 2005 Ky. Acts ch. 168, sec. 13, effective March 18, 2005. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 7, effective April 23, 1956. -- Amended 1954 Ky. Acts ch. 79, sec. 11. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-8.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.150 Reports of income payments to others.

(1) Every corporation subject to the jurisdiction of this state, unless excused by the department, shall render a correct report of its payments of dividends to residents of this state, stating the name and address of each shareholder, the number of shares owned by him, and the amount of dividends paid to him.

(2) Every person subject to the jurisdiction of this state, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries and employers, making payment to another person, domiciled in this state, of interest, rent, premiums, annuities, compensations, remunerations, emoluments or other fixed or determinable gains, profits and income not subject to withholding provisions contained in KRS 141.310 of six hundred dollars ($600) or more in any taxable year, shall render a true and accurate report to the department of the payments made. Every person subject to the jurisdiction of this state, in whatever capacity acting, making payment of wages to another person domiciled in this state, shall render a true and accurate report to the department of the payments made. In the case of such payments made by the state and its political subdivisions, the officers or employees having information as to such payments designated by the department by the regulations hereinafter provided for shall make such reports. The reports shall be made under the regulations and in the form and manner and to the extent prescribed by the department, and shall set forth the amount of the gains, wages, profits and income, and the name and address of the recipient of the payments. The department may also require any person to make information reports respecting nonresidents it believes to be subject to income tax.

(3) The reports contemplated by this section may be required, regardless of amounts, in the case of payments of dividends or interest upon bonds, mortgages, deeds of trust or other similar obligations of corporations. When necessary to make effective the provisions of this section, the name and address of the recipient of the income shall be furnished upon demand of the person paying the income. The provisions of this section shall not apply to the payment of interest on obligations of the United States or of this state, or the political subdivisions thereof.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 482, effective June 20, 2005. -- Amended 1986 Ky. Acts ch. 496, sec. 22, effective August 1, 1986. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 8, effective April 23, 1956. -- Amended 1954 Ky. Acts ch. 79, sec. 12. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-9.

Legislative Research Commission Note. A technical correction has been made in this section by the Reviser of Statutes pursuant to KRS 7.136.

141.160 When returns for income tax are due -- Forms -- Copy of federal return may be required -- Returns for cooperatives.

(1) All returns of income for the preceding taxable year shall be made by April 15 in each year, except returns made on the basis of a fiscal year, which shall be made by the fifteenth day of the fourth month following the close of the fiscal year. Blank forms for returns of income shall be supplied by the department.

(2) Whenever, in the opinion of the department, it is necessary to examine the federal income tax return or a copy thereof of any taxpayer in order to audit his return, the department may compel the taxpayer to produce for inspection a copy of his federal return and all statements and schedules in support thereof. The department may also require copies of reports of adjustments made by the federal government.

(3) Notwithstanding subsection (1) of this section, all returns of income for the preceding taxable year made by cooperatives as described in Sections 521 and 1381 of the Internal Revenue Code or by KRS Chapter 272 shall be made by September 15 in each year, except returns made on the basis of a fiscal year, which shall be made by the fifteenth day of the ninth month following the close of the fiscal year.

Effective: March 24, 2009

History: Repealed and reenacted 2009 Ky. Acts ch. 86, sec. 3, effective March 24, 2009. -- Amended 2008 Ky. Acts ch. 132, sec. 3, effective April 24, 2008. -- Amended 2005 Ky. Acts ch. 85, sec. 483, effective June 20, 2005. -- Amended 1954 Ky. Acts ch. 79, sec. 13, effective June 17, 1954. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-10, 4281b-22, 4281b-24.

141.170 Extension of time for filing returns.

(1) The department may grant any taxpayer other than a corporation a reasonable extension of time for filing an income tax return whenever good cause exists, and shall keep a record of every extension. Except in the case of an individual who is abroad, no extension shall be granted for more than six (6) months. In the case of an individual who is abroad, the extension shall not be granted for more than one (1) year.

(2) A corporation may be granted an extension of not more than seven (7) months for filing its income tax return, provided the corporation, on or before the date prescribed for payment of the tax, requests the extension and pays the amount properly estimated as its tax.

(3) If the time for filing a return is extended, the taxpayer shall pay, as part of the tax, an amount equal to the tax interest rate as defined in KRS 131.010(6) on the tax shown due on the return, but not previously paid, from the time the tax was due until the return is actually filed with the department.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 45, effective June 27, 2019. -- Amended 2005 Ky. Acts ch. 85, sec. 484, effective June 20, 2005. -- Amended 1996 Ky. Acts ch. 344, sec. 3, effective July 15, 1996. -- Amended 1990 Ky. Acts ch. 29, sec. 1, effective July 1, 1990. -- Amended 1986 Ky. Acts ch. 459, sec. 5, effective July 15, 1986. -- Amended 1982 Ky. Acts ch. 387, sec. 8, effective July 15, 1982. -- Amended 1972 Ky. Acts ch. 84, Pt. II, sec. 4. -- Amended 1950 Ky. Acts ch. 189, sec. 1. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-21, 4281b-25.

Legislative Research Commission Note (7/13/90). The amendment to this section made by HB 255, 1990 Ky. Acts ch. 29, was made effective for taxable years beginning on or after July 1, 1990.

141.175 Extension for members of Armed Forces serving in combat zones.

(1) As used in this section and KRS 141.019 and 141.900:

(a) "Active duty" means the day the person assembles at his or her armory or other designated place until the day he or she returns there and has been properly relieved, including:

Fractional parts of a day which count as a full day; and
All days of active duty for training and inactive duty training; and

(b) "Armed Forces" means the military forces of the United States and the Commonwealth, including the:

Army;
Navy;
Air Force;
Marine Corps;
Coast Guard;
Any Reserve branch of the Army, Navy, Air Force, Marine Corps, or Coast Guard; and
National Guard.

(2) (a) Members of the Armed Forces called to active duty who are required by law to file an income tax return and pay income taxes to the state of Kentucky shall be allowed an extension to file the return and pay the taxes, which would otherwise become due during the period of service, if the member serves in an area designated as a combat zone by presidential proclamation.

(b) The extension referred to in paragraph (a) of this subsection shall expire twelve (12) months after the service.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 46, effective June 27, 2019. -- Created 2002 Ky. Acts ch. 109, sec. 2, effective July 15, 2002.

Legislative Research Commission Note (6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 46 of that Act apply to taxable years beginning on or after January 1, 2019.

141.180 Individuals required to make return -- Verification.

(1) For taxable years beginning before January 1, 2005:

(a) Every individual, except as otherwise provided in this subsection, having for the taxable year an adjusted gross income which exceeds five thousand dollars ($5,000), if single, or if married and not living with husband or wife and every married individual living with husband or wife whose adjusted gross income combined with the adjusted gross income of his or her spouse exceeds five thousand dollars ($5,000) shall make to the department a return stating specifically the items which he claims as deductions and tax credits allowed by this chapter.

(b) Any individual who is blind or who has attained the age of sixty-five (65) before the close of the taxable year shall be required to make a return only if the taxpayer has for the taxable year an adjusted gross income which exceeds five thousand dollars ($5,000). Every married individual living with husband or wife shall, if both spouses have attained the age of sixty-five (65), be required to make a return if the combined adjusted gross income of both spouses exceeds five thousand four hundred dollars ($5,400). If the individual is unable to make his or her own return, the return shall be made by a duly authorized agent.

(c) Any individual, who is both sixty-five (65) or over and blind before the close of the taxable year, shall make a return if the taxpayer has for the taxable year an adjusted gross income which exceeds five thousand dollars ($5,000).

(d) Notwithstanding any other provision of this subsection, an individual, having for the taxable year gross income from self-employment of five thousand dollars ($5,000) or more, shall make a return.

(e) Any nonresident individual with gross income from Kentucky sources and a total gross income of five thousand dollars ($5,000) or over shall make a return.

(2) For taxable years beginning after December 31, 2004:

(a) Except as otherwise provided in this subsection, every individual having for the taxable year a modified gross income exceeding the threshold amount determined under KRS 141.066, and every married couple living together with a combined modified gross income exceeding the threshold amount determined under KRS 141.066, shall file a return with the department stating specifically the items claimed as deductions and tax credits allowed by this chapter. If the individual is unable to file a return, the return shall be made by a duly authorized agent.

(b) Notwithstanding any other provision of this subsection, an individual having, for the taxable year, gross income from self-employment exceeding the threshold amount determined under KRS 141.066 shall file a return.

(c) Any nonresident individual with gross income from Kentucky sources and a total gross income exceeding the threshold amount determined under KRS 141.066 shall file a return.

(3) A husband and wife not living together shall make separate returns. A husband and wife living together may make a joint return, or may make separate returns. However, if separate returns are made, neither spouse shall report income nor claim deductions properly attributable to the other.

(4) Notwithstanding any other provisions of KRS Chapters 131 and 141, a husband or a wife who is jointly and severally liable for taxes levied under KRS 141.020, applicable penalties, and interest shall be relieved of liability for tax, interest, penalties, and other amounts if:

(a) The spouse has been relieved of liability for federal income tax, interest, penalties, and other amounts for the same taxable year by the Internal Revenue Service under Section 6015 of the Internal Revenue Code, to be effective as of the date that the Internal Revenue Service approved the relief; or

(b) It is shown that the spouse would have qualified for relief under the provisions of Section 6015 of the Internal Revenue Code for the same taxable year if there had been a federal income tax liability, to be effective as of the date that the department approved the relief.

(5) Notwithstanding KRS 134.580, any relief granted pursuant to paragraphs (a) and (b) of subsection (4) of this section shall not result in a tax overpayment to the spouse requesting relief for payments made before the relief was approved.

(6) Each individual return shall be verified by a declaration that it is made under the penalties of perjury.

Effective: June 24, 2015

History: Amended 2015 Ky. Acts ch. 67, sec. 12, effective June 24, 2015. -- Amended 2005 Ky. Acts ch. 85, sec. 485, effective June 20, 2005; and ch. 168, sec. 14, effective March 18, 2005. -- Amended 2000 Ky. Acts ch. 337, sec. 2, effective July 14, 2000. -- Amended 1994 Ky. Acts ch. 12, sec. 1, effective July 15, 1994. -- Amended 1990 Ky. Acts ch. 476, Pt. VII D, sec. 634, effective April 11, 1990. -- Amended 1978 Ky. Acts ch. 233, sec. 11, effective June 17, 1978. -- Amended 1976 Ky. Acts ch. 77, Pt. I, sec. 4. -- Amended 1960 Ky. Acts ch. 5, Art. III, sec. 5, effective February 5, 1960. -- Amended 1958 Ky. Acts ch. 3, sec. 3. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 9. -- Amended 1952 Ky. Acts ch. 124, sec. 4. -- Amended 1946 Ky. Acts ch. 234, sec. 5. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-13, 4281b-17.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

Legislative Research Commission Note (7/14/2000). The change in the Internal Revenue Code cites in subsection (7)(a) and (b) from Section 6013e to Section 6015 "apply to taxable years beginning after December 31, 1999."

141.190 Returns of fiduciaries.

(1) Every fiduciary, except a receiver appointed by authority of law in possession of part only of the property of an individual, shall make under oath a return for any of the following individuals, estates, or trusts for which he acts, setting forth therein such information as may be prescribed by the department:

(a) Every individual having an adjusted gross income for the taxable year which exceeds five thousand dollars ($5,000);

(b) Every estate the gross income of which for the taxable year is twelve hundred dollars ($1,200) or over;

(2) Any fiduciary required to make a return under this chapter shall be subject to all the provisions of this chapter that apply to individuals.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 486, effective June 20, 2005. -- Amended 1990 Ky. Acts ch. 476, Pt. VII D, sec. 635, effective April 11, 1990. -- Amended 1976 Ky. Acts ch. 77, Pt. I, sec. 5. -- Amended 1960 Ky. Acts ch. 5, Art. III, sec. 6. - - Amended 1958 Ky. Acts ch. 3, sec. 4. -- Amended 1954 Ky. Acts ch. 79, sec. 14. -- Amended 1952 Ky. Acts ch. 194, sec. 9. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-30.

141.200 Corporation returns -- Requirement of affiliated groups to file consolidated returns.

(1) Subsections (2) to (7) of this section shall apply for taxable periods ending before January 1, 2005, and election periods beginning prior to January 1, 2005.

(2) As used in subsections (2) to (7) of this section, unless the context requires otherwise:

(a) "Affiliated group" means affiliated group as defined in Section 1504(a) of the Internal Revenue Code and related regulations;

(b) "Consolidated return" means a Kentucky corporation income tax return filed by members of an affiliated group in accordance with this section. The determinations and computations required by this chapter shall be made in accordance with the provisions of Section 1502 of the Internal Revenue Code and related regulations, except as required by differences between this chapter and the Internal Revenue Code. Corporations exempt from taxation under KRS 141.040 shall not be included in the return;

(c) "Separate return" means a Kentucky corporation income tax return in which only the transactions and activities of a single corporation are considered in making all determinations and computations necessary to calculate taxable net income, tax due, and credits allowed in accordance with the provisions of this chapter;

(d) "Corporation" means "corporation" as defined in Section 7701(a)(3) of the Internal Revenue Code; and

(e) "Election period" means the ninety-six (96) month period provided for in subsection (4)(d) of this section.

(3) Every corporation doing business in this state, except those exempt from taxation under KRS 141.040, shall, for each taxable year, file a separate return unless the corporation was, for any part of the taxable year, a member of an affiliated group electing to file a consolidated return in accordance with subsection (4) of this section.

(4) (a) An affiliated group, whether or not filing a federal consolidated return, may elect to file a consolidated return which includes all members of the affiliated group.

(b) An affiliated group electing to file a consolidated return under paragraph (a) of this subsection shall be treated for all purposes as a single corporation under the provisions of this chapter. All transactions between corporations included in the consolidated return shall be eliminated in computing net income and in determining the property, payroll, and sales factors in accordance with KRS 141.901. The gross receipts received by a public service company that is a member of an affiliated group shall be excluded from the calculation of the alternative minimum calculation under the provisions of KRS 141.040. For purposes of this paragraph, "public service company" has the same meaning as provided in KRS 136.120.

(c) Any election made in accordance with paragraph (a) of this subsection shall be made on a form prescribed by the department and shall be submitted to the department on or before the due date of the return including extensions for the first taxable year for which the election is made.

(d) Notwithstanding subsections (9) to (15) of this section, any election to file a consolidated return pursuant to paragraph (a) of this subsection shall be binding on both the department and the affiliated group for a period beginning with the first month of the first taxable year for which the election is made and ending with the conclusion of the taxable year in which the ninety-sixth consecutive calendar month expires.

(e) For each taxable year for which an affiliated group has made an election in accordance with paragraph (a) of this subsection, the consolidated return shall include all corporations which are members of the affiliated group.

(5) Each corporation included as part of an affiliated group filing a consolidated return shall be jointly and severally liable for the income tax liability computed on the consolidated return, except that any corporation which was not a member of the affiliated group for the entire taxable year shall be jointly and severally liable only for that portion of the Kentucky consolidated income tax liability attributable to that portion of the year that the corporation was a member of the affiliated group.

(6) Every corporation return or report required by this chapter shall be executed by one

(1) of the following officers of the corporation: the president, vice president, secretary, treasurer, assistant secretary, assistant treasurer, or chief accounting officer. The Department of Revenue may require a further or supplemental report of further information and data necessary for computation of the tax.

(7) In the case of a corporation doing business in this state that carries on transactions with stockholders or with other corporations related by stock ownership, by interlocking directorates, or by some other method, the department shall require information necessary to make possible accurate assessment of the income derived by the corporation from sources within this state. To make possible such assessment, the department may require the corporation to file supplementary returns showing information respecting the business of any or all individuals and corporations related by one (1) or more of these methods to the corporation. The department may require the return to show in detail the record of transactions between the corporation and any or all other related corporations or individuals.

(8) Subsections (9) to (14) of this section shall apply for taxable years beginning on or after January 1, 2005, but prior to January 1, 2019.

(9) As used in subsections (9) to (14) of this section:

(a) 1. For taxable years beginning after December 31, 2004, and before January 1, 2007, "affiliated group" means one (1) or more chains of includible corporations connected through stock ownership, membership interest, or partnership interest with a common parent corporation which is an includible corporation if:

a. The common parent owns directly an ownership interest meeting the requirements of subparagraph 2. of this paragraph in at least one (1) other includible corporation; and

b. An ownership interest meeting the requirements of subparagraph

of this paragraph in each of the includible corporations, excluding the common parent, is owned directly by one (1) or more of the other corporations.
The ownership interest of any corporation meets the requirements of this paragraph if the ownership interest encompasses at least eighty percent (80%) of the voting power of all classes of ownership interests and has a value equal to at least eighty percent (80%) of the total value of all ownership interests;

(b) 1. For taxable years beginning after December 31, 2006, but prior to January 1, 2019, "affiliated group" means one (1) or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation if:

a. The common parent owns directly stock meeting the requirements of subparagraph 2. of this paragraph in at least one (1) other includible corporation; and

b. Stock meeting the requirements of subparagraph 2. of this paragraph in each of the includible corporations, excluding the common parent, is owned directly by one (1) or more of the other corporations.

The stock of any corporation meets the requirements of this paragraph if the stock encompasses at least eighty percent (80%) of the voting power of all classes of stock and has a value equal to at least eighty percent (80%) of the total value of all stock;

(c) "Common parent corporation" means the member of an affiliated group that meets the ownership requirement of paragraph (a)1. or (b)1. of this subsection;

(d) "Foreign corporation" means a corporation that is organized under the laws of a country other than the United States and is related to a member of an affiliated group through stock ownership;

(e) "Includible corporation" means any corporation that is doing business in this state except:

Corporations exempt from corporation income tax under KRS 141.040;
Foreign corporations;
Corporations with respect to which an election under Section 936 of the Internal Revenue Code is in effect for the taxable year;
Real estate investment trusts as defined in Section 856 of the Internal Revenue Code;
Regulated investment companies as defined in Section 851 of the Internal Revenue Code;
A domestic international sales company as defined in Section 992(a)(1) of the Internal Revenue Code;
Any corporation that realizes a net operating loss whose apportionment fraction under KRS 141.120 is de minimis;
Any corporation for which the apportionment fraction under KRS 141.120 is zero; and
For taxable years beginning prior to January 1, 2006, and taxable years beginning on or after January 1, 2007, an S corporation as defined in Section 1361(a) of the Internal Revenue Code;

(f) "Ownership interest" means stock, a membership interest in a limited liability company, or a partnership interest in a limited partnership or limited liability partnership;

(g) "Consolidated return" means a Kentucky corporation income tax return filed by members of an affiliated group in accordance with this section. The determinations and computations required by this chapter shall be made in accordance with the provisions of the Internal Revenue Code and related regulations, except as required by differences between this chapter and the Internal Revenue Code;

(h) "Separate return" means a Kentucky corporation income tax return in which only the transactions and activities of a single corporation are considered in making all determinations and computations necessary to calculate taxable net income, tax due, and credits allowed in accordance with the provisions of this chapter; and

(i) "Stock" means stock in a corporation, or a membership interest in a limited liability company that has elected to be treated as a corporation for federal tax purposes.

(10) Every corporation doing business in this state except those exempt from taxation under KRS 141.040 shall, for each taxable year, file a separate return unless the corporation was, for any part of the taxable year:

(a) An includible corporation in an affiliated group;

(b) A common parent corporation doing business in this state;

(d) A qualified real estate investment trust subsidiary that is included in the return filed by the real estate investment trust parent; or

(e) A disregarded entity that is included in the return filed by its parent entity.

(11) (a) An affiliated group, whether or not filing a federal consolidated return, shall file a consolidated return which includes all includible corporations.

(b) An affiliated group required to file a consolidated return under this subsection shall be treated for all purposes as a single corporation under the provisions of this chapter. All transactions between corporations included in the consolidated return shall be eliminated in computing net income and in determining the property, payroll, and sales factors in accordance with KRS 141.901 or the apportionment fraction in accordance with KRS 141.120.

(c) For taxable years beginning on or after January 1, 2005, and before January 1, 2019, includible corporations that have incurred a net operating loss shall not deduct an amount that exceeds, in the aggregate, fifty percent (50%) of the income realized by the remaining includible corporations that did not realize a net operating loss. The portion of any net operating loss limited by the application of this subsection shall be available for carryforward in accordance with KRS 141.011. The department shall promulgate administrative regulations to establish the manner and extent to which net operating losses attributable to tax periods ending prior to January 1, 2005, may offset income of affiliated groups.

(d) The gross receipts received by a public service company that is a member of an affiliated group shall be excluded from the calculation of the alternative minimum calculation under KRS 141.040. For purposes of this paragraph, "public service company" has the same meaning as provided in KRS 136.120.

(12) Each includible corporation included as part of an affiliated group filing a consolidated return shall be jointly and severally liable for the income tax liability computed on the consolidated return, except that any includible corporation which was not a member of the affiliated group for the entire taxable year shall be jointly and severally liable only for that portion of the Kentucky consolidated income tax liability attributable to that portion of the year that the corporation was a member of the affiliated group.

(13) Every corporation return or report required by this chapter shall be executed by one

(1) of the following officers or management of the corporation: the president, vice president, secretary, treasurer, assistant secretary, assistant treasurer, chief accounting officer, manager, member, or partner. The department may require a further or supplemental report of further information and data necessary for computation of the tax.

(14) In the case of a corporation doing business in this state that carries on transactions with stockholders, members or partners, or with other corporations related by ownership, by interlocking directorates, or by some other method, the department shall require that information necessary to make possible an accurate assessment of the income derived by the corporation from sources within this state be provided. To make possible this assessment, the department may require the corporation to file supplementary returns showing information respecting the business of any or all individuals and corporations related by one (1) or more of these methods to the corporation. The department may require the return to show in detail the record of transactions between the corporation and any or all other related corporations or individuals.

(15) This section shall not be construed to limit or otherwise impair the department's authority under KRS 141.205.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 79, effective April 14, 2018; and ch. 207, sec. 79, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 7, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 3, effective April 25, 2006; and ch. 6, sec. 15, effective March 6, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 487, effective June 20, 2005; and ch. 168, sec. 15, effective March 18, 2005. -- Amended 2000 Ky. Acts ch. 543, sec. 1, effective July 1, 2000. -- Amended 1996 Ky. Acts ch. 239, sec. 2, effective July 15, 1996. -- Amended 1986 Ky. Acts ch. 496, sec. 23, effective August 1, 1986. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 7. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281a-18, 4281a-19, 4281a-20.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (3/6/2006). 2006 Ky. Acts ch. 6, sec. 31, provides that this section is effective for taxable years beginning on or after January 1, 2006.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.201 Corporation returns -- Election of affiliated groups to file consolidated returns -- Taxable years beginning on or after January 1, 2019.

(1) This section shall apply to taxable years beginning on or after January 1, 2019.

(2) As used in this section:

(a) "Affiliated group" means affiliated group as defined in Section 1504(a) of the Internal Revenue Code and related regulations;

(b) "Consolidated return" means a Kentucky corporation income tax return filed by members of an affiliated group in accordance with this section;

(d) "Corporation" means "corporation" as defined in Section 7701(a)(3) of the Internal Revenue Code; and

(e) "Election period" means the forty-eight (48) month period provided for in subsection (4)(d) of this section.

(3) Every corporation doing business in this state, except those corporations listed as exempt from taxation under KRS 141.040(1)(a) and (b), shall, for each taxable year:

(a) 1. File a combined report, if the corporation is a member of unitary business group as provided in KRS 141.202; or

Make an election to file a consolidated return with all members of the affiliated group as provided in this section; or

(b) File a separate return, if paragraph (a) of this subsection does not apply.

(4) (a) An affiliated group, whether or not filing a federal consolidated return, may elect to file a consolidated return which includes all members of the affiliated group.

(b) 1. An affiliated group electing to file a consolidated return under paragraph

(a) of this subsection shall be treated for all purposes as a single corporation under this chapter.

The determinations and computations required by this chapter shall be made in accordance with Section 1502 of the Internal Revenue Code and related regulations, except as required by differences between this chapter and the Internal Revenue Code.
Corporations listed as exempt from taxation under KRS 141.040(1)(a) and (b) shall not be included in the return.
All transactions between corporations included in the consolidated return shall be eliminated in computing net income as provided in KRS 141.039(2), and determining the apportionment fraction in accordance with KRS 141.120.

(c) Any election made in accordance with paragraph (a) of this subsection shall be made on a form prescribed by the department and shall be submitted to the department on or before the due date of the return, including extensions, for the first taxable year for which the election is made.

(d) Any election to file a consolidated return pursuant to paragraph (a) of this subsection shall be binding on both the department and the affiliated group for a period beginning with the first month of the first taxable year for which the election is made and ending with the conclusion of the taxable year in which the forty-eighth consecutive calendar month expires.

(e) For each taxable year for which an affiliated group has made an election provided in paragraph (a) of this subsection, the consolidated return shall include all corporations which are members of the affiliated group.

(6) Every corporation return or report required by this chapter shall be executed by one

(1) of the following officers of the corporation: the president, vice president, secretary, treasurer, assistant secretary, assistant treasurer, or chief accounting officer. The department may require a further or supplemental report of further information and data necessary for computation of the tax.

(7) In the case of a corporation doing business in this state that carries on transactions with stockholders or with other corporations related by stock ownership, by interlocking directorates, or by some other method, the department shall require information necessary to make possible accurate assessment of the income derived by the corporation from sources within this state. To make possible this assessment, the department may require the corporation to file supplementary returns showing information respecting the business of any or all individuals and corporations related by one (1) or more of these methods to the corporation. The department may require the return to show in detail the record of transactions between the corporation and any or all other related corporations or individuals.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 11, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 47, effective June 27, 2019. -- Created 2018 Ky. Acts ch. 207, sec. 119, effective April 27, 2018.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 11 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 47 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 154, the provisions created for this statute in that Act apply to taxable years beginning on or after January 1, 2019.

141.202 Requirement of taxpayer engaged in a unitary business with one or more other corporations to file a combined report -- Administrative regulations -- Taxable years beginning on or after January 1, 2019.

(1) This section shall apply to taxable years beginning on or after January 1, 2019.

(2) As used in this section:

(a) "Combined group" means the group of all corporations whose income and apportionment factors are required to be taken into account as provided in subsection (3) of this section in determining the taxpayer's share of the net income or loss apportionable to this state. A combined group shall include only corporations, the voting stock of which is more than fifty percent (50%) owned, directly or indirectly, by a common owner or owners;

(b) "Corporation" has the same meaning as in KRS 141.010, including an organization of any kind treated as a corporation for tax purposes under KRS 141.040, wherever located, which if it were doing business in this state would be a taxpayer, and the business conducted by a pass-through entity which is directly or indirectly held by a corporation shall be considered the business of the corporation to the extent of the corporation's distributive share of the pass- through entity income, inclusive of guaranteed payments;

(c) "Doing business in a tax haven" means being engaged in activity sufficient for that tax haven jurisdiction to impose a tax under United States constitutional standards;

(d) 1. "Tax haven" means a jurisdiction that, during the taxable year has no or nominal effective tax on the relevant income and:

a. Has laws or practices that prevent effective exchange of information for tax purposes with other governments on taxpayers benefitting from the tax regime;

b. Has a tax regime which lacks transparency. A tax regime lacks transparency if the details of legislative, legal, or administrative provisions are not open and apparent or are not consistently applied among similarly situated taxpayers, or if the information needed by tax authorities to determine a taxpayer's correct tax liability, such as accounting records and underlying documentation, is not adequately available;

c. Facilitates the establishment of foreign-owned entities without the need for a local substantive presence or prohibits these entities from having any commercial impact on the local economy;

d. Explicitly or implicitly excludes the jurisdiction's resident taxpayers from taking advantage of the tax regime's benefits or prohibits enterprises that benefit from the regime from operating in the jurisdiction's domestic market; or

e. Has created a tax regime which is favorable for tax avoidance, based upon an overall assessment of relevant factors, including whether the jurisdiction has a significant untaxed offshore financial or other services sector relative to its overall economy.

"Tax haven" does not include a jurisdiction that has entered into a comprehensive income tax treaty with the United States, which the Secretary of the Treasury has determined is satisfactory for purposes of Section 1(h)(11)(C)(i)(II) of the Internal Revenue Code;

(e) "Taxpayer" means any corporation subject to the tax imposed under this chapter;

(f) "Unitary business" means a single economic enterprise that is made up either of separate parts of a single corporation or of a commonly controlled group of corporations that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. For purposes of this section, the term "unitary business" shall be broadly construed, to the extent permitted by the United States Constitution; and

(g) "United States" means the fifty (50) states of the United States, the District of Columbia, and United States' territories and possessions.

(3) (a) Except as provided in KRS 141.201, a taxpayer engaged in a unitary business with one (1) or more other corporations shall file a combined report which includes the income, determined under subsection (5) of this section, and the apportionment fraction, determined under KRS 141.120 and paragraph (d) of this subsection, of all corporations that are members of the unitary business, and any other information as required by the department. The combined report shall be filed on a waters-edge basis under subsection (8) of this section.

(b) The department may, by administrative regulation, require that the combined report include the income and associated apportionment factors of any corporations that are not included as provided by paragraph (a) of this subsection, but that are members of a unitary business, in order to reflect proper apportionment of income of the entire unitary businesses. Authority to require combination by administrative regulation under this paragraph includes authority to require combination of corporations that are not, or would not be combined, if the corporation were doing business in this state.

(c) In addition, if the department determines that the reported income or loss of a taxpayer engaged in a unitary business with any corporation not included as provided by paragraph (a) of this subsection represents an avoidance or evasion of tax by the taxpayer, the department may, on a case-by-case basis, require all or any part of the income and associated apportionment factors of the corporation be included in the taxpayer's combined report.

(d) With respect to the inclusion of associated apportionment factors as provided in paragraph (a) of this subsection, the department may require the inclusion of any one (1) or more additional factors which will fairly represent the taxpayer's business activity in this state, or the employment of any other method to effectuate a proper reflection of the total amount of income subject to apportionment and an equitable allocation and apportionment of the taxpayer's income.

(e) A unitary business shall consider the combined gross receipts and combined income from all sources of all members under subsection (8) of this section, including eliminating entries for transactions among the members under subsection (8)(e) of this section.

(f) Notwithstanding paragraphs (a) to (e) of this subsection, a consolidated return may be filed as provided in KRS 141.201 if the taxpayer makes an election according to KRS 141.201.

(4) The use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Each taxpayer member is responsible for tax based on its taxable income or loss apportioned or allocated to this state, which shall include, in addition to the other types of income, the taxpayer member's share of apportionable income of the combined group, where apportionable income of the combined group is calculated as a summation of the individual net incomes of all members of the combined group. A member's net income is determined by removing all but apportionable income, expense, and loss from that member's total income as provided in subsection (5) of this section.

(5) (a) Each taxpayer member is responsible for tax based on its taxable income or loss apportioned or allocated to this state, which shall include:

Its share of any income apportionable to this state of each of the combined groups of which it is a member, determined under subsection

(6) of this section;

Its share of any income apportionable to this state of a distinct business activity conducted within and without the state wholly by the taxpayer member, determined under KRS 141.120;
Its income from a business conducted wholly by the taxpayer member entirely within the state;
Its income sourced to this state from the sale or exchange of capital or assets, and from involuntary conversions, as determined under subsection (8)(g) of this section;
Its nonapportionable income or loss allocable to this state, determined under KRS 141.120;
Its income or loss allocated or apportioned in an earlier year, required to be taken into account as state source income during the income year, other than a net operating loss; and
Its net operating loss carryover.

(b) No tax credit or post-apportionment deduction earned by one (1) member of the group, but not fully used by or allowed to that member, may be used in whole or in part by another member of the group or applied in whole or in part against the total income of the combined group, except as provided in paragraph (c) of this subsection.

(c) If the taxable income computed pursuant to KRS 141.039 results in a net loss for a taxpayer member of the combined group, that taxpayer member has a Kentucky net operating loss, subject to the net operating loss limitations and carry forward provisions of KRS 141.011. No prior year net operating loss carryforward shall be available to entities that were not doing business in this state in the year in which the loss was incurred. A Kentucky net operating loss carryover incurred by a taxpayer member of a combined group shall be deducted from income or loss apportioned to this state pursuant to this section as follows:

For taxable years beginning on or after the first day of the initial taxable year for which a combined unitary tax return is required under this section, if the computation of a combined group's Kentucky net income before apportionment to this state results in a net operating loss, a taxpayer member of the group may carry over its share of the net operating loss as apportioned to this state, as calculated under this section and in accordance with KRS 141.120 or 141.121, and it shall be deductible from a taxpayer member's apportioned net income derived from the unitary business in a future tax year to the extent that the carryover and deduction is otherwise consistent with KRS 141.011;
Where a taxpayer member of a combined group has a Kentucky net operating loss carryover derived from a loss incurred by a combined group in a tax year beginning on or after the first day of the initial tax year for which a combined unitary tax return is required under this section, then the taxpayer member may share the net operating loss carryover with other taxpayer members of the combined group if the other taxpayer members were members of the combined group in the tax year that the loss was incurred. Any amount of net operating loss carryover that is deducted by another taxpayer member of the combined group shall reduce the amount of net operating loss carryover that may be carried over by the taxpayer member that originally incurred the loss;
Where a taxpayer member of a combined group has a net operating loss carryover derived from a loss incurred in a tax year prior to the initial tax year for which a combined unitary tax return is required under this section, the carryover shall remain available to be deducted by that taxpayer member and any other taxpayer members of the combined group, but in no case shall the deduction reduce any taxpayer member's Kentucky apportioned taxable income by more than fifty percent (50%) in any taxable year, other than the taxpayer member that originally incurred the net operating loss, in which case no limitation is provided except as provided by Section 172 of the Internal Revenue Code. Any net operating loss carryover that is not utilized in a particular taxable year shall be carried over by the taxpayer member that generated the loss and utilized in the future consistent with the limitations of this subparagraph; or
Where a taxpayer member of a combined group has a net operating loss carryover derived from a loss incurred in a tax year during which the taxpayer member was not a taxpayer member of the combined group, the carryover shall remain available to be deducted by that taxpayer member or other taxpayer members, but in no case shall the deduction reduce any taxpayer member's Kentucky apportioned taxable income by more than fifty percent (50%) in any taxable year, other than the taxpayer member that originally incurred the net operating loss, in which case no limitation is provided except as provided by Section 172 of the Internal Revenue Code. Any net operating loss carryover that is not utilized in a particular taxable year, shall be carried over by the taxpayer member that generated the loss and utilized in the future consistent with the limitations of this subparagraph.

(6) The taxpayer's share of the business income apportionable to this state of each combined group of which it is a member shall be the product of:

(a) The apportionable income of the combined group, determined under subsection (7) of this section; and

(b) The taxpayer member's apportionment fraction, determined under KRS 141.120, including in the sales factor numerator the taxpayer's sales associated with the combined group's unitary business in this state, and including in the denominator the sales of all members of the combined group, including the taxpayer, which sales are associated with the combined group's unitary business wherever located. The sales of a pass-through entity shall be included in the determination of the partner's apportionment percentage in proportion to a ratio, the numerator of which is the amount of the partner's distributive share of the pass-through entity's unitary income included in the income of the combined group as provided in subsection (8) of this section and the denominator of which is the amount of pass-through entity's total unitary income.

(7) The apportionable income of a combined group is determined as follows:

(a) The total income of the combined group is the sum of the income of each member of the combined group determined under federal income tax laws, as adjusted for state purposes, as if the member were not consolidated for federal purposes; and

(b) From the total income of the combined group determined under subsection (8) of this section, subtract any income and add any expense or loss, other than the apportionable income, expense, or loss of the combined group.

(8) To determine the total income of the combined group, taxpayer members shall take into account all or a portion of the income and apportionment factor of only the following members otherwise included in the combined group as provided in subsection (3) of this section:

(a) The entire income and apportionment percentage of any member, incorporated in the United States or formed under the laws of any state, the District of Columbia, or any territory or possession of the United States, that earns less than eighty percent (80%) of its income from sources outside of the United States, the District of Columbia, or any territory or possession of the United States;

(b) Any member that earns more than twenty percent (20%) of its income, directly or indirectly, from intangible property or service related activities that are deductible against the apportionable income of other members of the combined group, to the extent of that income and the apportionment factor related to that income. If a non-United States corporation is includible as a member in the combined group, to the extent that the non-United States corporation's income is excluded from United States taxation pursuant to the provisions of a comprehensive income tax treaty, the income or loss is not includible in the combined group's net income or loss. The member's expenses or apportionment factors attributable to income that is excluded from United States taxation pursuant to the provisions of a comprehensive income tax treaty are not to be included in the combined report;

(c) The entire income and apportionment factor of any member that is doing business in a tax haven. If the member's business activity within a tax haven is entirely outside the scope of the laws, provisions, and practices that cause the jurisdiction to meet the definition established in subsection (2)(d) of this section, the activity of the member shall be treated as not having been conducted in a tax haven;

(d) If a unitary business includes income from a pass-through entity, the income to be included in the total income of the combined group shall be the member of the combined group's direct and indirect distributive share of the pass- through entity's unitary income;

(e) Income from an intercompany transaction between members of the same combined group shall be deferred in a manner similar to 26 C.F.R. 1.1502-13. Upon the occurrence of any of the following events, deferred income resulting from an intercompany transaction between members of a combined group shall be restored to the income of the seller, and shall be apportionable income earned immediately before the event:

The object of a deferred intercompany transaction is:

a. Resold by the buyer to an entity that is not a member of the combined group;

b. Resold by the buyer to an entity that is a member of the combined group for use outside the unitary business in which the buyer and seller are engaged; or

c. Converted by the buyer to a use outside the unitary business in which the buyer and seller are engaged; or

The buyer and seller are no longer members of the same combined group, regardless of whether the members remain unitary;

(f) A charitable expense incurred by a member of a combined group shall, to the extent allowable as a deduction provided by Section 170 of the Internal Revenue Code, be subtracted first from the apportionable income of the combined group, subject to the income limitations of that section applied to the entire apportionable income of the group, and any remaining amount shall then be treated as a nonapportionable expense allocable to the member that incurred the expense, subject to the income limitations of that section applied to the nonapportionable income of that specific member. Any charitable deduction disallowed under this paragraph, but allowed as a carryover deduction in a subsequent year, shall be treated as originally incurred in the subsequent year by the same member, and this paragraph shall apply in the subsequent year in determining the allowable deduction in that year;

(g) Gain or loss from the sale or exchange of capital assets, property described by Section 1231(a)(3) of the Internal Revenue Code, and property subject to an involuntary conversion shall be removed from the total separate net income of each member of a combined group and shall be apportioned and allocated as follows:

For each class of gain or loss, including short-term capital, long-term capital, Internal Revenue Code Section 1231, and involuntary conversions, all members' gain and loss for the class shall be combined, without netting between the classes, and each class of net gain or loss separately apportioned to each member using the member's apportionment percentage determined under subsection (6) of this section;
Each taxpayer member shall then net its apportioned business gain or loss for all classes, including any apportioned gain and loss from other combined groups, against the taxpayer member's nonapportionable gain and loss for all classes allocated to this state, using the rules of Sections 1231 and 1222 of the Internal Revenue Code, without regard to any of the taxpayer member's gains or losses from the sale or exchange of capital assets, Internal Revenue Code Section 1231 property, and involuntary conversions which are nonapportionable items allocated to another state;
Any resulting state source income or loss, if the loss is not subject to the limitations of Section 1211 of the Internal Revenue Code, of a taxpayer member produced by the application of subparagraphs 1. and 2. of this paragraph shall then be applied to all other state source income or loss of that member; and
Any resulting state source loss of a member that is subject to the limitations of Section 1211 of the Internal Revenue Code shall be carried forward by that member, and shall be treated as state source short-term capital loss incurred by that member for the year for which the carryover applies; and

(h) Any expense of one (1) member of the unitary group which is directly or indirectly attributable to the nonapportionable or exempt income of another member of the unitary group shall be allocated to that other member as corresponding nonapportionable or exempt expense, as appropriate.

(9) (a) As a filing convenience, and without changing the respective liability of the group members, members of a combined reporting group shall annually designate one (1) taxpayer member of the combined group to file a single return in the form and manner prescribed by the department, in lieu of filing their own respective returns.

(b) The taxpayer member designated to file the single return shall consent to act as surety with respect to the tax liability of all other taxpayers properly included in the combined report, and shall agree to act as agent on behalf of those taxpayers for the taxable year for matters relating to the combined report. If for any reason the surety is unwilling or unable to perform its responsibilities, tax liability may be assessed against the taxpayer members.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 12, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 196, sec. 5, effective June 27, 2019. -- Created 2018 Ky. Acts ch. 207, sec. 120, effective April 27, 2018.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 12 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 48 (HB 354) and ch. 196, sec. 5 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 48, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 48, was not codified.

141.205 Disallowance of certain deductions for affiliated entities or related parties.

(1) As used in this section:

(a) "Intangible property" means franchises, patents, patent applications, trade names, trademarks, service marks, copyrights, trade secrets, and similar types of intangible assets;

(b) "Intangible expenses" includes the following only to the extent that the amounts are allowed as deductions or costs in determining taxable net income before the application of any net operating loss deduction provided under Chapter 1 of the Internal Revenue Code:

Expenses, losses, and costs for, related to, or in connection directly or indirectly with the direct or indirect acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of intangible property;
Losses related to, or incurred in connection directly or indirectly with, factoring transactions or discounting transactions;
Royalty, patent, technical, and copyright fees;
Licensing fees; and
Other similar expenses and costs;

(c) "Intangible interest expense" means only those amounts which are directly or indirectly allowed as deductions under Section 163 of the Internal Revenue Code for purposes of determining taxable income under that code, to the extent that the amounts are directly or indirectly for, related to, or connected to the direct or indirect acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of intangible property;

(d) "Management fees" includes but is not limited to expenses and costs paid for services pertaining to accounts receivable and payable, employee benefit plans, insurance, legal, payroll, data processing, purchasing, tax, financial and securities, accounting, reporting and compliance services or similar services, only to the extent that the amounts are allowed as a deduction or cost in determining taxable net income before application of the net operating loss deduction for the taxable year provided under Chapter 1 of the Internal Revenue Code;

(e) "Affiliated group" has the same meaning as in KRS 141.201;

(f) "Foreign corporation" means a corporation that is organized under the laws of a country other than the United States and that would be a related member if it were a domestic corporation;

(g) "Related member" means a person that, with respect to the entity during all or any portion of the taxable year, is:

A person or entity that has, directly or indirectly, at least fifty percent (50%) of the equity ownership interest in the taxpayer, as determined under Section 318 of the Internal Revenue Code;
A component member as defined in Section 1563(b) of the Internal Revenue Code;
A person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code; or
A person that, notwithstanding its form of organization, bears the same relationship to the taxpayer as a person described in subparagraphs 1. to
of this paragraph;

(h) "Recipient" means a related member or foreign corporation to whom the item of income that corresponds to the intangible interest expense, the intangible expense, or the management fees, is paid;

(i) "Unrelated party" means a person that has no direct, indirect, beneficial or constructive ownership interest in the recipient; and in which the recipient has no direct, indirect, beneficial or constructive ownership interest;

(j) "Disclosure" means that the entity shall provide the following information to the Department of Revenue with its tax return regarding a related party transaction:

The name of the recipient;
The state or country of domicile of the recipient;
The amount paid to the recipient; and
A description of the nature of the payment made to the recipient;

(k) "Other related party transaction" means a transaction which:

Is undertaken by an entity which was not required to file a consolidated return under KRS 141.201;
Is undertaken by an entity, directly or indirectly, with one (1) or more of its stockholders, members, partners, or affiliated entities; and
Is not within the scope of subsections (2) and (3) of this section;

(l) "Related party costs" means intangible expense, intangible interest expense, management fees and any costs or expenses associated with other related party transactions; and

(m) "Entity" means any taxpayer other than a natural person.

(2) An entity subject to the tax imposed by this chapter shall not be allowed to deduct an intangible expense, an intangible interest expense, or a management fee directly or indirectly paid, accrued or incurred to, or in connection directly or indirectly with one (1) or more direct or indirect transactions with one (1) or more related members or with a foreign corporation as defined in subsection (1) of this section, or with an entity that would be included in the affiliated group based upon ownership interest if it were organized as a corporation.

(3) The disallowance of deductions provided by subsection (2) of this section shall not apply if:

(a) The entity and the recipient are both included in the same consolidated Kentucky corporation income tax return for the relevant taxable year; or

(b) The entity makes a disclosure, and establishes by a preponderance of the evidence that:

The payment made to the recipient was subject to, in its state or country of commercial domicile, a net income tax, or a franchise tax measured by, in whole or in part, net income. If the recipient is a foreign corporation, the foreign nation shall have in force a comprehensive income tax treaty with the United States; and
The recipient is engaged in substantial business activities separate and apart from the acquisition, use, licensing, management, ownership, sale, exchange, or any other disposition of intangible property, or in the financing of related members, as evidenced by the maintenance of permanent office space and full-time employees dedicated to the maintenance and protection of intangible property; and
The transaction giving rise to the intangible interest expense, intangible expense, or management fees between the entity and the recipient was made at a commercially reasonable rate and at terms comparable to an arm's-length transaction; or

(c) The entity makes a disclosure, and establishes by preponderance of the evidence that the recipient regularly engages in transactions with one (1) or more unrelated parties on terms identical to that of the subject transaction; or

(d) The entity and the Department of Revenue agree in writing to the application or use of an alternative method of apportionment under KRS 141.120.

(4) An entity subject to the tax imposed by this chapter may deduct expenses or costs associated with an other related party transaction only in an amount equal to the amount which would have resulted if the other related party transaction had been carried out at arm's length. In any dispute between the department and the entity with respect to the amount which would have resulted if the transaction had been carried out at arm's length, the entity shall bear the burden of establishing the amount by a preponderance of the evidence.

(5) Nothing in this section shall be deemed to prohibit an entity from deducting a related party cost in an amount permitted by this section, provided that the entity has incurred related party costs equal to or greater than the amounts permitted by this section.

(6) If it is determined by the department that the amount of a deduction claimed by an entity with respect to a related party cost is greater than the amount permitted by this section, the net income of the entity shall be adjusted to reflect the amount of the related party cost permitted by this section.

(7) For tax periods ending before January 1, 2005, in the case of entities not required to file a consolidated or combined return under subsection (1) of this section that carried on transactions with stockholders or affiliated entities directly or indirectly, the department shall adjust the net income of such entities to an amount that would result if such transactions were carried on at arm's length.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 13, effective April 15, 2020. -- Amended 2018 Ky. Acts ch. 171, sec. 80, effective April 14, 2018; and ch. 207, sec. 80, effective April 27, 2018. -- Amended 2013 Ky. Acts ch. 119, sec. 17, effective June 25, 2013. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 8, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 6, sec. 16, effective March 6, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 488, effective June 20, 2005; and ch. 168, sec. 16, effective March 18, 2005. -- Amended 1976 Ky. Acts ch. 155, sec. 11. -- Amended 1974 Ky. Acts ch. 163, sec. 5. -- Amended 1972 Ky. Acts ch. 62, Pt. III, sec. 3. -- Amended 1970 Ky. Acts ch. 216, sec. 6. -- Amended 1968 Ky. Acts ch. 40, Part II, sec. 2. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 8. -- Amended 1962 Ky. Acts ch. 124, sec. 4. -- Amended 1960 Ky. Acts ch. 186, Art. III, sec. 1. -- Created 1954 Ky. Acts ch. 79, sec. 15.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 13 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (6/25/2013). 2013 Ky. Acts ch. 119, sec. 25, provides that the amendments to this statute in 2013 Ky. Acts ch. 119, sec. 17, apply to taxable years beginning on or after January 1, 2014.

Legislative Research Commission Note (6/25/2013). A reference to "subsections (2) to (5)" in subsection (1)(k)3. of this statute has been changed in codification to "subsections (2) and (3)" under KRS 7.136(1)(e) and (h). In 2013 Ky. Acts ch. 119, sec. 17, subsections (4) and (5) were stricken from this statute and subsequent subsections renumbered, but the internal reference in the existing language was overlooked.

Legislative Research Commission Note (3/6/2006). 2006 Ky. Acts ch. 6, sec. 30, provides that this section applies retroactively for taxable years beginning on or after January 1, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.206 Filing of returns by pass-through entities -- Withholding requirements on owners of pass-through entities -- Appointment issues for pass-through entities.

(1) Every pass-through entity doing business in this state shall, on or before the fifteenth day of the fourth month following the close of its annual accounting period, file a copy of its federal tax return with the form prescribed and furnished by the department.

(2) (a) Pass-through entities shall calculate net income in the same manner as in the case of an individual under KRS 141.019 and the adjustment required under Sections 703(a) and 1363(b) of the Internal Revenue Code.

(b) Computation of net income under this section and the computation of the partner's, member's, or shareholder's distributive share shall be computed as nearly as practicable identical with those required for federal income tax purposes except to the extent required by differences between this chapter and the federal income tax law and regulations.

(3) Individuals, estates, trusts, or corporations doing business in this state as a partner, member, or shareholder in a pass-through entity shall be liable for income tax only in their individual, fiduciary, or corporate capacities, and no income tax shall be assessed against the net income of any pass-through entity, except as required:

(a) For S corporations under KRS 141.040;

(b) For a partnership level audit under KRS 141.211; and

(4) (a) Every pass-through entity required to file a return under subsection (1) of this section, except publicly traded partnerships as described in KRS 141.0401(6)(a)18. and (b)13., shall withhold Kentucky income tax on the distributive share, whether distributed or undistributed, of each nonresident individual partner, member, or shareholder.

(b) Withholding shall be at the maximum rate provided in KRS 141.020.

(5) (a) Every pass-through entity required to withhold Kentucky income tax as provided by subsection (4) of this section shall pay estimated tax for the taxable year, if for a nonresident individual partner, member, or shareholder, the estimated tax liability can reasonably be expected to exceed five hundred dollars ($500).

(b) The payment of estimated tax shall contain the information and shall be filed as provided in KRS 141.207.

(6) (a) If a pass-through entity demonstrates to the department that a partner, member, or shareholder has filed an appropriate tax return for the prior year with the department, then the pass-through entity shall not be required to withhold on that partner, member, or shareholder for the current year unless the exemption from withholding has been revoked pursuant to paragraph (b) of this subsection.

(b) 1. An exemption from withholding shall be considered revoked if the partner, member, or shareholder does not file and pay all taxes due in a timely manner.

An exemption so revoked shall be reinstated only with permission of the department.
If a partner, member, or shareholder who has been exempted from withholding does not file a return or pay the tax due, the department may require the pass-through entity to pay to the department the amount that should have been withheld, up to the amount of the partner's, member's, or shareholder's ownership interest in the entity.
The pass-through entity shall be entitled to recover a payment made pursuant to this paragraph from the partner, member, or shareholder on whose behalf the payment was made.

(7) In determining the tax under this chapter, a resident individual, estate, or trust that is a partner, member, or shareholder in a pass-through entity shall take into account the partner's, member's, or shareholder's total distributive share of the pass-through entity's items of income, loss, deduction, and credit.

(8) In determining the tax under this chapter, a nonresident individual, estate, or trust that is a partner, member, or shareholder in a pass-through entity required to file a return under subsection (1) of this section shall take into account:

(a) 1. If the pass-through entity is doing business only in this state, the partner's, member's, or shareholder's total distributive share of the pass- through entity's items of income, loss, and deduction; or

If the pass-through entity is doing business both within and without this state, the partner's, member's, or shareholder's distributive share of the pass-through entity's items of income, loss, and deduction multiplied by the apportionment fraction of the pass-through entity as prescribed in subsection (11) of this section; and

(b) The partner's, member's, or shareholder's total distributive share of credits of the pass-through entity.

(9) A corporation that is subject to tax under KRS 141.040 and is a partner or member in a pass-through entity shall take into account the corporation's distributive share of the pass-through entity's items of income, loss, and deduction and:

(a) 1. For taxable years beginning on or after January 1, 2007, but prior to January 1, 2018, shall include the proportionate share of the sales, property, and payroll of the limited liability pass-through entity or general partnership in computing its own apportionment factor; and

For taxable years beginning on or after January 1, 2018, shall include the proportionate share of the sales of the limited liability pass-through entity or general partnership in computing its own apportionment factor; and

(b) Credits from the partnership.

(10) (a) If a pass-through entity is doing business both within and without this state, the pass-through entity shall compute and furnish to each partner, member, or shareholder the numerator and denominator of each factor of the apportionment fraction determined in accordance with subsection (11) of this section.

(b) For purposes of determining an apportionment fraction under paragraph (a) of this subsection, if the pass-through entity is:

Doing business both within and without this state; and
A partner or member in another pass-through entity; then the pass-through entity shall be deemed to own the pro rata share of the property owned or leased by the other pass-through entity, and shall also include its pro rata share of the other pass-through entity's payroll and sales.

(c) The phrases "a partner or member in another pass-through entity" and "doing business both within and without this state" shall extend to each level of multiple-tiered pass-through entities.

(d) The attribution to the pass-through entity of the pro rata share of property, payroll and sales from its role as a partner or member in another pass-through entity will also apply when determining the pass-through entity's ultimate apportionment factor for property, payroll and sales as required under subsection (11) of this section.

(11) (a) For taxable years beginning prior to January 1, 2018, a pass-through entity doing business within and without the state shall compute an apportionment fraction, the numerator of which is the property factor, representing twenty- five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, with each factor determined in the same manner as provided in KRS 141.901, and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2).

(b) For taxable years beginning on or after January 1, 2018, a pass-through entity doing business within and without the state shall compute an apportionment fraction as provided in KRS 141.120.

(12) Resident individuals, estates, or trusts that are partners in a partnership, members of a limited liability company electing partnership tax treatment for federal income tax purposes, owners of single member limited liability companies, or shareholders in an S corporation which does not do business in this state are subject to tax under KRS 141.020 on federal net income, gain, deduction, or loss passed through the partnership, limited liability company, or S corporation.

(13) An S corporation election made in accordance with Section 1362 of the Internal Revenue Code for federal tax purposes is a binding election for Kentucky tax purposes.

(14) (a) Nonresident individuals shall not be taxable on investment income distributed by a qualified investment partnership. For purposes of this subsection, a "qualified investment partnership" means a pass-through entity that, during the taxable year, holds only investments that produce income that would not be taxable to a nonresident individual if held or owned individually.

(b) A qualified investment partnership shall be subject to all other provisions relating to a pass-through entity under this section and shall not be subject to the tax imposed under KRS 141.040 or 141.0401.

(15) (a) A pass-through entity shall deliver to the department a return upon a form prescribed by the department showing the total amounts paid or credited to its nonresident individual partners, members, or shareholders, the amount paid in accordance with this subsection, and any other information the department may require.

(b) A pass-through entity shall furnish to its nonresident partner, member, or shareholder annually, but not later than the fifteenth day of the fourth month after the end of its taxable year, a record of the amount of tax paid on behalf of the partner, member, or shareholder on a form prescribed by the department.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 52, effective July 15, 2026. -- Amended 2023 Ky. Acts ch. 92, sec. 24, effective March 24, 2023; and ch. 148, sec. 8, effective March 31, 2023. -- Amended 2021 Ky. Acts ch. 156, sec. 9, effective June 29, 2021. -- Amended 2020 Ky. Acts ch. 91, sec. 14, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 49, effective June 27, 2019; and ch. 196, sec. 15, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 171, sec. 81, effective April 14, 2018; and ch. 207, sec. 81, effective April 27, 2018. -- Amended 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 4, effective June 4, 2010. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 9, effective June 28, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 489, effective June 20, 2005; and ch. 168, sec. 17, effective March 18, 2005. -- Amended 2002 Ky. Acts ch. 230, sec. 8, effective July 15, 2002. -- Amended 1988 Ky. Acts ch. 332, sec. 2. -- Created 1954 Ky. Acts ch. 79, sec. 17, effective June 17, 1954.

Legislative Research Commission Note (6/29/2021). This statute was amended in Section 9 of 2021 Ky. Acts ch. 156. Section 38 of that Act provides that Section 9 applies to taxable years beginning on or after January 1, 2022.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 14 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (6/27/2019). Although 2019 Ky. Acts ch. 151, sec. 49, contained a citation to "subsection (6)(a)18. of this section" in subsection (4)(a) of this statute, it is clear from the context that "subsection (6)(a)18. of Section 41 of this Act" (codified as KRS 141.0401) was intended, and this manifest clerical or typographical error was corrected in codification under the authority of KRS 7.136.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.207 Calculation of estimated tax required by KRS 141.206 for nonresident individuals -- Payment of estimated tax.

(1) For a nonresident individual partner, member, or shareholder, the payment of estimated tax required by KRS 141.206 shall be calculated under KRS 141.020 and 141.305 for the taxable year.

(2) The payment of estimated tax shall be made in installments by the pass-through entity in the same manner and at the same times as provided by KRS 141.305, for a nonresident individual partner, member, or shareholder.

(3) A pass-through entity required to make a payment of estimated tax shall be subject to the penalty provisions for any underpayment of estimated tax.

Effective: June 29, 2021

History: Amended 2021 Ky. Acts ch. 156, sec. 10, effective June 29, 2021. -- Amended 2019 Ky. Acts ch. 151, sec. 50, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 171, sec. 82, effective April 14, 2018; and ch. 207, sec. 82, effective April 27, 2018. -- Created 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 5, effective June 4, 2010.

Legislative Research Commission Note (6/29/2021). This statute was amended in 2021 Ky. Acts ch. 156. Section 38 of that Act provides that Section 10 applies to taxable years beginning on or after January 1, 2022.

141.208 Treatment of limited liability companies.

(1) For the purposes of this section, "limited liability company" shall mean any company subject to the provisions of KRS Chapter 275.

(2) For taxable years beginning after December 31, 2004, and before January 1, 2007, a limited liability company shall file a Kentucky corporate income tax return and determine its Kentucky income tax liability as provided in KRS 141.040 regardless of the tax treatment elected for federal income tax purposes. For all other taxable years, a limited liability company shall be treated for Kentucky income tax purposes in the same manner as its tax treatment elected for federal income tax purposes. All other income tax issues not expressly addressed by the provisions of this chapter shall be treated in the same manner as the issues are treated for federal income tax purposes.

Effective: June 28, 2006

History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 10, effective June 28, 2006. -- Amended 2005 Ky. Acts ch. 168, sec. 19, effective March 18, 2005. -- Amended 1998 Ky. Acts ch. 341, sec. 1, effective July 15, 1998. -- Created 1994 Ky. Acts ch. 389, sec. 109, effective July 15, 1994.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.209 Annual election to have tax under KRS 141.120 imposed on pass-through

entity -- Refundable tax credit -- Report to owner -- Administrative regulations.

(1) For purposes of this section:

(a) "Authorized person" means any individual with the authority from the electing entity to bind the electing entity or sign returns on its behalf;

(b) "Direct owner" means a partner, member, or shareholder that holds an interest directly in a pass-through entity;

(d) "Entity owner" means the direct or indirect owners of an electing entity receiving a proportionate share of the entity's income;

(e) "Indirect owner" means a partner, member, or shareholder in a pass-through entity that holds an interest indirectly, or through another indirect partner, member, or shareholder in a pass-through entity; and

(f) "Owner" means a direct or indirect partner, member, or shareholder of an electing entity and includes a beneficiary of an estate or trust.

(2) (a) For taxable years beginning on or after January 1, 2022, an authorized person may elect annually, on behalf of the electing entity, to have the tax under KRS 141.020 imposed upon the electing entity and based upon the ordinary income and the separately stated items of income calculated under KRS 141.206.

(b) 1. All calculations for the return shall continue to be made as provided under KRS 141.206.

The election shall be made on a form prescribed by the department.

(c) For taxable years beginning on or after January 1, 2023, the election may be made at any time during the taxable year or after the end of the taxable year, but not later than the:

Fifteenth day of the fourth month after the close of the taxable year; or
Fifteenth day of the tenth month after the close of the taxable year, if the return is filed under KRS 141.170.

(d) For taxable years beginning on or after January 1, 2022, but before January 1, 2023:

The election may be made after March 31, 2023, but shall be made before August 31, 2024;
As a result of the electing entity making the election as described in subparagraph 1. of this paragraph:

a. No late payment, late filing, or other similar penalty under KRS 131.180 shall be imposed on an electing entity; and

b. No interest under KRS 131.183 shall apply to the tax paid by the electing entity.

(e) 1. For taxable years beginning on or after January 1, 2022, but before January 1, 2024, an electing entity is not required to make estimated income tax payments and no estimated tax penalty shall be assessed under KRS 141.985.

For taxable years beginning on or after January 1, 2024, an electing entity shall be:

a. Required to make estimated income tax payments if the provisions of KRS 141.305 are met; and

b. Subject to the estimated tax penalty under KRS 141.985 if the estimated income tax payments are not properly made.

(f) The election, once made for a taxable year, is irrevocable and binding upon all entity owners.

(3) For taxable years beginning on or after January 1, 2022, there shall be allowed a refundable pass-through entity tax credit which shall be:

(a) Equal to one hundred percent (100%) of the entity owner's proportionate share of the tax paid by the pass-through entity for the taxable year;

(b) Claimed against the tax imposed under KRS 141.020 on a return filed by the entity owner, with the ordering of credits as provided in KRS 141.0205; and

(4) An electing entity shall report to each direct owner of the entity the direct owner's proportionate share of the tax paid for the taxable year for purposes of the pass- through entity tax credit created in subsection (3) of this section.

(5) The department shall prescribe forms and may promulgate administrative regulations as needed to administer this section.

Effective: March 31, 2023

History: Created 2023 Ky. Acts ch. 148, sec. 9, effective March 31, 2023.

Legislative Research Commission Note (3/31/2023). 2023 Ky. Acts ch. 148, sec. 9, which created this statute, contained an erroneous reference in subsection (3)(b) to "the ordering of credits as provided in Section 9 of this Act," although Section 6 (KRS 141.0205) is the only section in that Act that sets forth the ordering of tax credits. The Reviser of Statutes has corrected this manifest clerical or typographical error during codification under the authority of KRS 7.136(1).

141.210 Auditing of returns -- Assessment of additional tax.

(1) As soon as practicable after each return is received, the department shall examine and audit it.

(2) (a) 1. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the additional tax shall be assessed and a notice of assessment mailed to the taxpayer by the department within four (4) years from the date the return was filed, except as otherwise provided in this subsection.

In the case of a failure to file a return or of a fraudulent return the additional tax may be assessed at any time.
In the case of a return where a taxpayer other than a corporation understates his net income or omits an amount properly includable in net income or both which understatement or omission or both is in excess of twenty-five percent (25%) of the amount of net income stated in the return the additional tax may be assessed at any time within six (6) years after the return was filed.
In the case of a return where a corporation understates its taxable net income or omits an amount properly includable in taxable net income or both, which understatement or omission or both is in excess of twenty- five percent (25%) of the amount of taxable net income stated in the return, the additional tax may be assessed at any time within six (6) years after the return was filed.
In the case of an assessment of additional tax relating directly to adjustments resulting from a final federal adjustment, as defined in KRS 141.211, the additional tax may be assessed before the expiration of the times provided in KRS 141.211.
In the case of the assessment of additional tax resulting from a decrease of a net operating loss deduction or a capital loss deduction, resulting from the carryback of a loss which occurs in a taxable year beginning after December 31, 1993, the additional tax may be assessed at any time before the expiration of the times provided for in this subsection for assessing additional tax for the taxable year which resulted in the net operating loss or capital loss carryback.

(b) The times provided in this subsection may be extended by agreement between the taxpayer and the department.

(c) For the purposes of this subsection, a return filed before the last day prescribed by law for filing the return shall be considered as filed on the last day.

(d) Any extension granted for filing the return shall also be considered as extending the last day prescribed by law for filing the return.

(3) If any additional tax is assessed on account of any income which has been returned for taxation by any other taxpayer, the department, with the consent of the other taxpayer, his personal representatives, or heirs, shall reduce the amount of the additional tax assessed for each year by the amount of the income tax paid for that year by the other taxpayer on account of the income in question.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 58, effective April 15, 2020. -- Amended 2018 Ky. Acts ch. 171, sec. 114, effective April 14, 2018; and ch. 207, sec. 114, effective April 27, 2018. -- Amended 2005 Ky. Acts ch. 85, sec. 490, effective June 20, 2005. -- Amended 1994 Ky. Acts ch. 106, sec. 2, effective July 15, 1994. -- Amended 1974 Ky. Acts ch. 163, sec. 6. -- Amended 1970 Ky. Acts ch. 216, sec. 7. - - Amended 1966 Ky. Acts ch. 176, Part I, sec. 9. -- Amended 1956 (4th Extra, Sess.) Ky. Acts ch. 4, sec. 10. -- Amended 1954 Ky. Acts ch. 79, sec. 16. -- Amended 1952 Ky. Acts ch. 194, sec. 10. -- Amended 1948 Ky. Acts ch. 93, sec. 7. -- Repealed in part 1944 Ky. Acts ch. 173, sec. 9. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281-12, 4281b-26.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which are in conflict. Under KRS 446.250, Acts ch. 207, which was last enacted by the General Assembly, prevails.

141.211 Audits performed and additional tax assessed at the partnership level.

(1) As used in this section:

(a) "Administrative adjustment request" means an administrative adjustment request filed by a partnership under Section 6227 of the Internal Revenue Code;

(b) "Audited partnership" means a partnership subject to a partnership level audit resulting in a federal adjustment;

(d) "Direct partner" means a partner that holds an interest directly in a partnership or pass-through entity;

(e) "Exempt partner" means a partner that is exempt from taxation under KRS 141.040 (a) or (b);

(f) 1. "Federal adjustment" means a change to an item or amount determined under the Internal Revenue Code that is used by a taxpayer to compute income tax owed to the Commonwealth, whether that change results from action by the:

a. Internal Revenue Service, including a partnership level audit; or

b. Filing of an amended federal return, federal refund claim, or an administrative adjustment request by the taxpayer.

A federal adjustment is positive to the extent that it increases net income or taxable net income and is negative to the extent that it decreases net income or taxable net income;

(g) "Federal adjustments report" includes methods or forms required by the department for use by a taxpayer to report final federal adjustments, including an amended income tax return, information return, or a uniform multistate report;

(h) "Federal partnership representative" means the person:

The partnership designates for the taxable year as the partnership’s representative; or
The Internal Revenue Service has appointed to act as the federal partnership representative, under Section 6223(a) of the Internal Revenue Code;

(i) "Final determination date" means the following:

a. Except as provided in subparagraphs 2. and 3. of this paragraph, if the federal adjustment arises from any action by the Internal Revenue Service, the final determination date is the first day on which no federal adjustments arising from that action remain to be finally determined, whether by Internal Revenue Service decision with respect to which all rights of appeal have been waived or exhausted, by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted.

b. For agreements required to be signed by the Internal Revenue Service and the taxpayer, the final determination date is the date upon which the last party signed the agreement;

For federal adjustments arising from any action by the Internal Revenue Service, if the taxpayer filed as a member of a consolidated return under KRS 141.201 or a combined report under KRS 141.202, the final determination date means the first day on which no related federal adjustments arising from that action remain to be finally determined, as described in subparagraph 1. of this paragraph, for the entire group; and
If the federal adjustment results from filing an amended federal return, a federal refund claim, or an administrative adjustment request, or if it is a federal adjustment reported on an amended federal return or other similar report filed under Section 6225(c) of the Internal Revenue Code, the final determination date means the day on which the amended return, refund claim, administrative adjustment request, or other similar report was filed;

(j) "Final federal adjustment" means a federal adjustment after the final determination date for that federal adjustment has passed;

(k) "Indirect partner" means a partner in a partnership or pass-through entity and that partnership or pass-through entity holds an interest directly, or through another indirect partner, in a partnership or pass-through entity;

(l) "Nonresident partner" means an individual, trust, or estate partner that is not a resident partner;

(m) "Partner" means a person that holds an interest directly or indirectly in a partnership or other pass-through entity;

(n) "Partnership" means an entity subject to the provisions of Subchapter K of Chapter 1 of the Internal Revenue Code;

(o) "Partnership level audit" means an examination by the Internal Revenue Service at the partnership level under Subchapter C of Chapter 63 of the Internal Revenue Code, as enacted by Pub. L. No. 114-74, which results in a federal adjustment;

(p) "Pass-through entity" means an entity, other than a partnership, that is not subject to tax under KRS 141.040;

(q) 1. "Reallocation adjustment" means a federal adjustment resulting from a partnership level audit or an administrative adjustment request that changes the shares of one (1) or more items of partnership income, gain, loss, expense, or credit allocated to direct partners.

A positive reallocation adjustment means the portion of a reallocation adjustment that would increase federal income for one (1) or more direct partners.
A negative reallocation adjustment means the portion of a reallocation adjustment that would decrease federal income for one (1) or more direct partners;

(r) "Resident partner" means an individual, trust, or estate partner that is a resident for the relevant taxable year;

(s) "Reviewed year" means the taxable year of a partnership that is subject to a partnership level audit from which federal adjustments arise;

(t) "Taxpayer" has the same meaning as in KRS 131.010 and includes:

a. A partnership subject to a partnership level audit; or

b. A partnership that has made an administrative adjustment request; and

A tiered partner of the partnership described in subparagraph 1. of this paragraph; and

(u) "Tiered partner" means any partner that is a partnership or pass-through entity.

(2) Except in the case of final federal adjustments that are required to be reported by a partnership and its partners under subsection (3) of this section, and final federal adjustments required to be reported for federal purposes under Section 6225(a)(2) of the Internal Revenue Code, a taxpayer shall report and pay any income tax due with respect to final federal adjustments arising from any action:

(a) By the Internal Revenue Service; or

(b) Reported by the taxpayer on a timely filed amended federal income tax return, including a return or other similar report filed under Section 6225(c)(2) of the Internal Revenue Code, or federal claim for refund; by filing a federal adjustments report with the department for the reviewed year and, if applicable, paying the additional tax owed by the taxpayer no later than one hundred eighty (180) days after the final determination date.

(3) (a) Except for adjustments required to be reported for federal purposes under Section 6225(a)(2) of the Internal Revenue Code, and the distributive share of adjustments that have been reported as required under subsection (2) of this section, partnerships and partners shall report final federal adjustments arising from a partnership level audit or an administrative adjustment request and make payments as under this subsection.

(b) 1. With respect to an action required or allowed to be taken by a partnership under this subsection and a proceeding under KRS 131.110 with respect to that action, the state partnership representative for the reviewed year shall have the sole authority to act on behalf of the partnership, and the partnership’s direct partners and indirect partners shall be bound by those actions.

The state partnership representative for the reviewed year is the partnership’s federal partnership representative unless the partnership designates in writing another person as its state partnership representative.
The department may establish reasonable qualifications and procedures for designating a person, other than the federal partnership representative, to be the state partnership representative.

(c) Final federal adjustments subject to the requirements of this subsection, except for those subject to a properly made election under subsection (4) of this section, shall be reported as follows:

No later than ninety (90) days after the final determination date, the partnership shall:

a. File with the department a completed federal adjustments report, including all information required by the department;

b. Notify each of its direct partners of their distributive share of the final federal adjustments, including all information required by the department; and

c. File an amended composite return for direct partners or an amended withholding return for direct partners as required under KRS 141.206 and pay the additional amount of tax that would have been due had the final federal adjustments been reported properly as required; and

No later than one hundred eighty (180) days after the final determination date, each direct partner that is taxed under KRS 141.020 or 141.040 shall:

a. File a federal adjustments report reporting their distributive share of the adjustments reported to them under subparagraph 1.b. of this paragraph; and

b. Pay any additional amount of tax due as if final federal adjustments had been properly reported, plus any penalty due under KRS 131.180 and interest due under KRS 131.183 and minus any credit for related amounts paid or withheld and remitted on behalf of the direct partner under subparagraph 1.c. of this paragraph.

(4) An audited partnership making an election under this subsection shall:

(a) No later than ninety (90) days after the final determination date, file a completed federal adjustments report, including all information required by the department, and notify the department that it is making the election under this subsection; and

(b) No later than one hundred eighty (180) days after the final determination date, pay an amount, determined as follows, in lieu of taxes owed by its direct and indirect partners:

Exclude from final federal adjustments the distributive share of these adjustments reported to a direct exempt partner not subject to tax under KRS 141.040(1)(a) or (b);
For the total distributive shares of the remaining final federal adjustments reported to direct corporate partners subject to tax under KRS 141.040, apportion and allocate the adjustments under KRS 141.206 and multiply the resulting amount by the highest tax rate for the taxable year under KRS 141.040;
For the total distributive shares of the remaining final federal adjustments reported to nonresident direct partners subject to tax under KRS 141.020, determine the amount of the adjustments under KRS 141.206 based on what would be subject to tax as Kentucky-sourced income for a nonresident partner, and multiply the resulting amount by the highest tax rate for the taxable year under KRS 141.020;
For the total distributive shares of the remaining final federal adjustments reported to tiered partners, determine the amount of the adjustments which is of a type that it would be subject to tax under KRS 141.206, less any amount that the audited partnership can determine to the department's satisfaction that is not subject to tax, and multiply that amount by the highest tax rate under KRS 141.020 or 141.040;
For the total distributive shares of the remaining final federal adjustments reported to resident direct partners subject to tax under KRS 141.020, multiply that amount by the highest tax rate under KRS 141.020; and
Add the amounts determined in subparagraphs 2. to 5. of this paragraph, and remit the amount along with penalty due under KRS 131.180 and interest due under KRS 131.183.

(5) The election under subsection (4) of this section shall not apply to:

(a) The distributive share of final audit adjustments that under KRS 141.202 that are included in the unitary business income of any direct or indirect corporate partner, provided that the audited partnership can reasonably determine this;

(b) Any final federal adjustments resulting from an administrative adjustment request; or

(6) (a) The direct and indirect partners of an audited partnership that are tiered partners and all of the partners of those tiered partners that are subject to tax under KRS 141.020 and 141.040 are subject to the reporting and payment requirements of subsection (3) of this section and the tiered partners are entitled to make the elections provided in subsection (4) of this section.

(b) The tiered partners or their partners shall make the required reports and payments no later than ninety (90) days after the time for filing and furnishing statements to tiered partners and the partners under Section 6226 of the Internal Revenue Code and the regulations thereunder.

The reports and payments required by tiered partners and their partners;
Making the elections under this section;
The procedures related to the modified reporting and payment method under subsection (7) of this section; or
A de minimis amount upon which a taxpayer shall not be required to comply with this section.

(7) (a) Under procedures promulgated under KRS Chapter 13A by the department, an audited partnership or a tiered partner may enter into an agreement with the department to utilize an alternative reporting and payment method, including applicable time requirements for any other provision of this section, if the audited partnership or tiered partner demonstrates that the requested method will reasonably provide for the reporting and payment of taxes, penalties, and interest due under the provisions of this section.

(b) Application for approval of an alternative reporting and payment method shall be made by the audited partnership or tiered partner within the times established under subsection (4) or (6) of this section, as appropriate.

(8) (a) The election made under subsection (4) or (7) of this section is irrevocable, unless the department, in its discretion, determines otherwise.

(b) If properly reported and paid by the audited partnership or tiered partner, the amount determined under subsection (4) or (6) of this section shall be treated as paid in lieu of taxes owed by its direct and indirect partners, to the extent applicable, on the same final federal adjustments.

(c) The direct partners or indirect partners may not take any deduction or credit for this amount or claim a refund of the amount in this state.

(d) Nothing in this subsection shall preclude a direct resident partner from claiming a credit against taxes paid to this state under KRS Chapter 141, any amounts paid by the audited partnership or tiered partner on the resident partner's behalf to another state or local tax jurisdiction under KRS 141.070.

(9) Nothing in this section prevents the department from assessing a direct partner or an indirect partner for taxes they owe, using the best information available, in the event that a partnership or tiered partner fails to timely make any report or payment required by this section for any reason.

(10) The department shall assess additional tax, interest, and penalties resulting from any final federal adjustments arising from an audit by the Internal Revenue Service including a partnership level audit, reported by the taxpayer on an amended federal income tax return, or as part of an administrative adjustment request by the following dates:

(a) If a taxpayer files with the department a federal adjustments report or an amended Kentucky tax return as required within the periods under this section, the department may assess any amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from those federal adjustments if the department issues a notice of the assessment to the taxpayer no later than the expiration of the one (1) year period following the date of filing with the department of the federal adjustments report; or

(b) If the taxpayer fails to file the federal adjustments report within the periods specified in subsection (2) or (3) of this section, as appropriate, or the federal adjustments report filed by the taxpayer omits final federal adjustments or understates the correct amount of tax owed, the department may assess any amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from the final federal adjustments, and absent fraud, if the department issues a notice of the assessment to the taxpayer no later than the expiration of the six

(6) year period following the final determination date.

(11) (a) A taxpayer may make estimated payments to the department, following the applicable process under KRS 141.207, of the tax expected to result from a pending Internal Revenue Service audit, prior to the due date of the federal adjustments report, without having to file the report with the department.

(b) The estimated tax payments shall be credited against any tax liability ultimately found to be due and will limit the accrual of further statutory interest on that amount.

(c) If the estimated tax payments exceed the final tax liability and statutory interest ultimately determined to be due, the taxpayer is entitled to a refund or credit for the excess, provided the taxpayer filed a federal adjustments report or claim for refund or credit of tax under this section no later than one (1) year following the final determination date.

(12) (a) Except for final federal adjustments required to be reported for federal purposes under Section 6225(a)(2) of this Internal Revenue Code, a taxpayer may file a claim for refund or credit of tax arising from federal adjustments made by the Internal Revenue Service on or before the later of:

The expiration of the last day for filing a claim for refund or credit under KRS 134.580; or
One (1) year from the date a federal adjustments report under subsection

(2) or (3) of this section, as applicable, was due to the department.

(b) The federal adjustments report shall serve as the means for the taxpayer to report additional tax due, report a claim for refund or credit of tax, and make other adjustments, including any net operating loss, resulting from adjustments to the taxpayer's federal taxable income.

(13) (a) Unless otherwise agreed in writing by the taxpayer and the department, any adjustments by the department or by the taxpayer made after the expiration of the time allowed under KRS 141.210 is limited to changes to the taxpayer's tax liability arising from federal adjustments.

(b) The time periods provided for in this section may be extended, upon written agreement between the taxpayer and the department, based on the complexity of the federal adjustment or the number of direct partners or tiered partners.

(c) The time period shall be automatically extended, upon written notice to the department, by sixty (60) days for an audited partnership or tiered partner which has ten thousand (10,000) or more direct partners.

(d) Any extension granted under this subsection for filing the federal adjustments report extends the last day prescribed by law for assessing any additional tax arising from the adjustments to federal taxable income and the period for filing a claim for refund or credit of taxes.

Effective: April 15, 2020

History: Created 2020 Ky. Acts ch. 91, sec. 57, effective April 15, 2020.

141.215 Deferred filing of returns and payment of taxes.

Members of the Army, Navy, Marines, Air Force, or Public Health Service of the United States government who serve in an area designated as a combat zone by presidential proclamation who are required by law to file an income tax return and pay income taxes to the State of Kentucky shall not be required to file the return and pay the taxes, which would otherwise become due during the period of service, until twelve (12) months after the service.

Effective: July 15, 2002

History: Amended 2002 Ky. Acts ch. 109, sec. 1, effective July 15, 2002. -- Amended 1991 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 1, effective February 15, 1991. -- Amended 1976 Ky. Acts ch. 155, sec. 12. -- Amended 1974 Ky. Acts ch. 163, sec. 7. -- Created 1952 Ky. Acts ch. 194, sec. 12, effective June 19, 1952.

141.220 Payment of tax -- When due.

The full amount of the unpaid tax payable by any taxpayer, as appears from the face of the return, shall be paid to the department at the time prescribed for filing the income tax return, determined without regard to any extension of time for filing the return.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 491, effective June 20, 2005. -- Amended 1996 Ky. Acts ch. 344, sec. 4, effective July 15, 1996. -- Amended 1954 Ky. Acts ch. 79, sec. 18, effective June 19, 1954. -- Amended 1952 Ky. Acts ch. 194, sec. 11. -- Amended 1950 Ky. Acts ch. 189, sec. 2. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-28, 4281b-33, 4281b-34.

141.225 Repealed, 1950.

[Repealed]

141.230 Repealed, 1954.

[Repealed]

141.235 Action interfering with collection or payment prohibited -- Limitation on refund of taxes.

(1) No suit shall be maintained in any court to restrain or delay the collection or payment of the tax levied by this chapter.

(2) Any tax collected pursuant to the provisions of this chapter may be refunded or credited in accordance with the provisions of KRS 134.580, except that:

(a) In any case where the assessment period contained in KRS 141.210 has been extended by an agreement between the taxpayer and the department, the limitation contained in this subsection shall be extended accordingly.

(b) If the claim for refund or credit relates directly to adjustments resulting from a federal audit, the taxpayer shall file a claim for refund or credit within the time provided in KRS 141.211.

(c) If the claim for refund or credit relates to an overpayment attributable to a net operating loss carryback or capital loss carryback, resulting from a loss which occurs in a taxable year beginning after December 31, 1993, the claim for refund or credit shall be filed within the times prescribed in this subsection for the taxable year of the net operating loss or capital loss which results in the carryback. For the purposes of this subsection and subsection (3) of this section, a return filed before the last day prescribed by law for filing the return shall be considered as filed on the last day.

(3) Overpayments as defined in KRS 134.580 of taxes collected pursuant to KRS 141.305, 141.310, or 141.315 shall be refunded or credited with interest at the tax interest rate as defined in KRS 131.010(6). Effective for refunds issued after April 24, 2008, the interest shall not begin to accrue until ninety (90) days after the latest of:

(a) The due date of the return;

(b) The date the return was filed;

(d) The last day prescribed by law for filing the return; or

(e) The date an amended return claiming a refund is filed.

(4) Exclusive authority to refund or credit overpayments of taxes collected pursuant to this chapter is vested in the commissioner or his authorized agent. Amounts directed to be refunded shall be paid out of the general fund.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 59, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 51, effective June 27, 2019. -- Repealed and reenacted 2009 Ky. Acts ch. 86, sec. 9, effective March 24, 2009. -- Amended 2008 Ky. Acts ch. 132, sec. 10, effective April 24, 2008. -- Amended 2005 Ky. Acts ch. 85, sec. 492, effective June 20, 2005. -- Amended 1996 Ky. Acts ch. 344, sec. 6, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 106, sec. 3, effective July 15, 1994. -- Amended 1982 Ky. Acts ch. 452, sec. 25, effective July 1, 1982. --Amended 1976 Ky. Acts ch. 155, sec. 13. -- Amended 1972 Ky. Acts ch. 203, sec. 18. -- Amended 1970 Ky. Acts ch. 216, sec. 8. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 10. -- Amended 1962 Ky. Acts ch. 124, sec. 5. -- Amended 1954 Ky. Acts ch. 79, sec. 19. - - Created 1948 Ky. Acts ch. 93, sec. 10.

141.240 Repealed, 1954.

[Repealed]

141.250 Repealed, 1952.

[Repealed]

141.260 Repealed, 1952.

[Repealed]

141.270 Repealed, 1952.

[Repealed]

141.300 Repealed, 2019.

[Repealed]

141.305 Estimated income tax payments -- Administrative regulations.

(1) For taxable years beginning on or after January 1, 2019, every individual shall make estimated income tax payments if his or her:

(a) Gross income from sources other than wages upon which Kentucky income tax will be withheld can reasonably be expected to exceed five thousand dollars ($5,000) for the taxable year; or

(b) Adjusted gross income can reasonably be expected to be an amount not less than the amount for which a return is required under KRS 141.180.

(2) No estimated tax shall be required if the estimated tax liability can reasonably be expected to be five hundred dollars ($500) or less.

(3) Estimated tax payment for the tax imposed under KRS 141.020 shall be made at the same time and calculated in the same manner as an estimated tax payment for federal income tax purposes under 26 U.S.C. sec. 6654, except:

(a) The estimated tax liability for the tax imposed under KRS 141.020 shall be used to make the estimated payment;

(b) Any provisions in 26 U.S.C. sec. 6654 that apply for federal tax purposes but do not apply to the taxes imposed under KRS 141.020 shall not be included;

(d) The tax interest rate identified under KRS 131.183 shall be used to determine the underpayment rate instead of the rate under 26 U.S.C. sec. 6621; and

(e) Any waiver of penalties shall be performed as provided in KRS 131.175.

(4) The department may promulgate administrative regulations to implement this section.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 52, effective June 27, 2019. -- Amended 2005 Ky. Acts ch. 85, sec. 494, effective June 20, 2005. -- Amended 1992 Ky. Acts ch. 403, sec. 18, effective July 14, 1992. -- Amended 1990 Ky. Acts ch. 29, sec. 3, effective July 1, 1990. -- Amended 1978 Ky. Acts ch. 233, sec. 12, effective June 17, 1978. -- Amended 1976 Ky. Acts ch. 155, sec. 15. -- Amended 1972 Ky. Acts ch. 84, Pt. II, sec. 5. -- Created 1954 Ky. Acts ch. 79, sec. 21, effective June 17, 1954.

Legislative Research Commission Note (7/13/90). The amendment to this section made by House Bill 255, 1990 Ky. Acts ch. 29, was made effective for taxable years beginning on or after July 1, 1990.

141.310 Withholding of tax from wages paid by employer.

(1) Every employer making payment of wages on or after January 1, 1971, shall deduct and withhold upon the wages a tax determined under KRS 141.315 or by the tables authorized by KRS 141.370.

(2) If wages are paid with respect to a period which is not a payroll period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days, including Sundays and holidays, equal to the number of days in the period with respect to which the wages are paid.

(3) If wages are paid by an employer without regard to any payroll period or other period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days equal to the number of days, including Sundays and holidays, which have elapsed since the date of the last payment of wages by the employer during the calendar year, or the date of commencement of employment with the employer during the year, or January 1 of the year, whichever is the later.

(4) In determining the amount to be deducted and withheld under this section, the wages may, at the election of the employer, be computed to the nearest dollar.

(5) The tables mentioned in subsection (1) of this section shall consider the standard deduction.

(6) The department may permit the use of accounting machines to calculate the proper amount to be deducted from wages when the calculation produces substantially the same result as set forth in the tables authorized by KRS 141.370. Prior approval of the calculation shall be secured from the department at least thirty (30) days before the first payroll period for which it is to be used.

(7) The department may, by administrative regulations, authorize employers:

(a) To estimate the wages which will be paid to any employee in any quarter of the calendar year;

(b) To determine the amount to be deducted and withheld upon each payment of wages to the employee during the quarter as if the appropriate average of the wages estimated constituted the actual wages paid; and

(c) To deduct and withhold upon any payment of wages to the employee during the quarter the amount necessary to adjust the amount actually deducted and withheld upon the wages of the employee during the quarter to the amount that would be required to be deducted and withheld during the quarter if the payroll period of the employee was quarterly.

(8) The department may provide by regulation, under the conditions and to the extent it deems proper, for withholding in addition to that otherwise required under this section and KRS 141.315 in cases in which the employer and the employee agree to the additional withholding. The additional withholding shall for all purposes be considered tax required to be deducted and withheld under this chapter.

(9) Effective January 1, 1992, any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the job assessment fee provided in KRS 154.24-110 may offset a portion of the fee against the Kentucky income tax required to be withheld from the employee under this section. The amount of the offset shall be four-fifths (4/5) of the amount of the assessment fee withheld from the employee or the Commonwealth's contribution of KRS 154.24-110(3) applies. If the provisions in KRS 154.24-150(3) or (4) apply, the offset, the offset shall be one hundred percent (100%) of the assessment.

(10) Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees an assessment provided in KRS 154.22-070 or KRS 154.28-110 may offset the fee against the Kentucky income tax required to be withheld from the employee under this section.

(11) Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the job assessment fee provided in KRS 154.26-100 may offset a portion of the fee against the Kentucky income tax required to be withheld from the employee under this section. The amount of the offset shall be four-fifths (4/5) of the amount of the assessment fee withheld from the employee, or if the agreement under KRS 154.26-090(1)(f)2. is consummated, the offset shall be one hundred percent (100%) of the assessment fee.

(12) Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the wage assessment fee provided in KRS 154.25-040 may offset a portion of the fee against the Kentucky income tax required to be withheld from the employee under this section. The amount of the offset shall be equal to the amount of the Kentucky income tax credit authorized for the assessed employee who is entitled to receive a simultaneous adjustment resulting from an approved jobs retention project as provided in KRS 154.25-040.

(13) Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the job development assessment fee provided in KRS 154.32-090 may offset the state portion of the assessment against the Kentucky income tax required to be withheld from the employee under this section.

(14) Any employer required by this section to withhold Kentucky income tax may be required to post a bond with the department. The bond shall be a corporate surety bond or cash. The amount of the bond shall be determined by the department, but shall not exceed fifty thousand dollars ($50,000).

(15) Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees an assessment provided in KRS 154.27-080 may offset the assessment against the Kentucky income tax required to be withheld from the employee under this section.

(16) The Commonwealth may bring an action for a restraining order or a temporary or permanent injunction to restrain or enjoin the operation of an employer's business until the bond is posted or the tax required to be withheld is paid or both. The action may be brought in the Franklin Circuit Court or in the Circuit Court having jurisdiction of the defendant.

(17) An approved company and any associated loan-out entity under Subchapter 61 of KRS Chapter 154 required to withhold Kentucky income tax from employees on all qualified payroll expenditures shall withhold at the maximum rate provided in KRS 141.020, and remit and certify the withheld amount to the department.

Effective: June 29, 2023

History: Amended 2023 Ky. Acts ch. 75, sec. 3, effective June 29, 2023. -- Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 52, effective June 26, 2009. -- Amended 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 13, effective August 30, 2007. -- Amended 2005 Ky. Acts ch. 85, sec. 495, effective June 20, 2005; and ch. 168, sec. 21, effective March 18, 2005. -- Amended 2004 Ky. Acts ch. 18, sec. 5, effective July 13, 2004; and ch. 105, sec. 21, effective July 13, 2004. -- Amended 2002 Ky. Acts ch. 338, sec. 42, effective July 15, 2002. -- Amended 2001 Ky. Acts ch. 133, sec. 8, effective June 21, 2001. -- Amended 2000 Ky. Acts ch. 300, sec. 2, effective July 14, 2000; and ch. 528, sec. 18, effective July 14, 2000. -- Amended 1996 Ky. Acts ch. 194, sec. 4, effective July 15, 1996. -- Amended 1992 Ky. Acts ch. 358, sec. 16, effective July 14, 1992; ch. 359, sec. 12, effective July 14,1992; and ch. 360, sec. 14, effective July 14, 1992. -- Amended 1978 Ky. Acts ch. 233, sec. 13, effective June 17, 1978. -- Amended 1972 Ky. Acts ch. 84, Pt. II, sec. 6. -- Amended 1970 Ky. Acts ch. 216, sec. 9. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 12, effective April 23, 1956. -- Created 1954 Ky. Acts ch. 79, sec. 22.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (7/14/2000). This section was amended by 2000 Ky. Acts chs. 300 and 528. Where these Acts are not in conflict, they have been codified together. Where a conflict exists, Acts ch. 528, which was last enacted by the General Assembly, prevails under KRS 446.250.

Legislative Research Commission Note (7/15/96). Under KRS 7.136(1)(h), KRS 154.26-090(1)(d)2.b. has been substituted in subsection (11) of this statute for a reference to KRS 156.24-090(1)(d)2.b. that appears in 1996 Ky. Acts ch. 194, sec. 4. Materials in the bill folder for Senate Bill 219 (which became 1996 Ky. Acts ch. 194) and the minutes of the Senate committee to which this bill was referred show that the former reference was intended to have been incorporated into that committee's committee substitute. The citation given in the Acts text does not exist, and it is clear that the erroneous citation resulted from a typographical error in preparing the committee substitute.

141.315 Department to promulgate regulations governing certain types of wage payments.

If payment of wages is made to an employee by an employer:

(1) With respect to a payroll period or other period, any part of which is included in a payroll period or other period with respect to which wages are also paid to such employee by such employer, or

(2) Without regard to any payroll period or other period, but on or prior to the expiration of a payroll period or other period with respect to which wages are also paid to such employee by such employer; or

(3) With respect to a period beginning in one (1) and ending in another calendar year; or

(4) Through an agent, fiduciary, or other person who also has the control, receipt, custody, or disposal of, or pays, the wages payable by another employer to such employee, the manner of withholding and the amount to be deducted and withheld under KRS 141.310 shall be determined in accordance with regulations promulgated by the department under which the withholding exemption allowed to the employee in any calendar year shall approximate the withholding exemption allowable with respect to an annual payroll period.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 496, effective June 20, 2005. -- Created 1954 Ky. Acts ch. 79, sec. 23, effective June 17, 1954.

141.320 Remuneration paid by an employer deemed wages.

If the remuneration paid by an employer to an employee for services performed during one-half (1/2) or more of any payroll period of not more than thirty-one (31) consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half (1/2) of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages.

Effective: June 17, 1954

History: Created 1954 Ky. Acts ch. 79, sec. 24, effective June 17, 1954.

141.325 Withholding exemptions -- Certificates.

(1) An employee receiving wages shall on any day be entitled to the following withholding exemptions:

(a) For taxable years beginning prior to January 1, 2018:

One (1) exemption for himself;
One (1) exemption for each dependent for whom he would be entitled to a tax credit under the provisions of KRS 141.020;
If the employee is married, the exemption to which his spouse is entitled, or would be entitled if such spouse were an employee, under subparagraph 1. of this paragraph, but only if such spouse does not have in effect a withholding exemption certificate claiming such exemption; and

(b) Such other withholding exemptions as the department may prescribe by regulation.

(2) Every employee shall, before the date of commencement of employment, furnish his or her employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he or she claims, which in no event shall exceed the number to which he is entitled.

(3) Withholding exemption certificates shall take effect as of the beginning of the first payroll period ending, or the first payment of wages made without regard to a payroll period, on or after the date on which such certificate is so furnished.

(4) A withholding exemption certificate which takes effect under this section shall continue in effect with respect to the employer until another such certificate takes effect under this section. If a withholding exemption certificate is furnished to take the place of an existing certificate, the employer, at his option, may continue the old certificate in force with respect to all wages paid on or before the first status determination date, January 1 or July 1, which occurs at least thirty (30) days after the date on which such new certificate is furnished.

(5) If, on any day during the calendar year, the number of withholding exemptions to which the employee may reasonably be expected to be entitled at the beginning of his next taxable year is different from the number to which the employee is entitled on such day, the employee shall in such cases and at such time as the department may prescribe, furnish the employer with a withholding exemption certificate relating to the number of exemptions which he claims with respect to such next taxable year, which shall in no event exceed the number to which he may reasonably be expected to be so entitled. Exemption certificates issued pursuant to this subsection shall not take effect with respect to any payment of wages made in the calendar year in which the certificate is furnished.

(6) If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is less than the number of withholding exemptions claimed by the employee on the withholding exemption certificate then in effect with respect to him, the employee shall, within ten (10) days thereafter, furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day. If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is greater than the number of withholding exemptions claimed, the employee may furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day.

(7) Withholding exemption certificates shall be in the form and contain the information required by the department.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 83, effective April 14, 2018; and ch. 207, sec. 83, effective April 27, 2018. -- Amended 2013 Ky. Acts ch. 119, sec. 23, effective June 25, 2013. -- Amended 2005 Ky. Acts ch. 85, sec. 497, effective June 20, 2005. -- Amended 1978 Ky. Acts ch. 233, sec. 14, effective June 17, 1978. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 13, effective April 23, 1956. -- Created 1954 Ky. Acts ch. 79, sec. 25.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

141.330 Employers to file quarterly returns and make payments -- Liability -- Actions -- Lien on property of employer.

(1) Every employer required to deduct and withhold tax under KRS 141.310 and 141.315 shall, for the quarterly period beginning on the first day of January of each year, and for each quarterly period thereafter, on or before the last day of the month following the close of each quarterly period make a return and report to the department the tax required to be withheld under KRS 141.310 and 141.315, unless the employer is permitted or required to report monthly or annually. Such employer shall, on or before the last day of the month following the close of each quarterly period, pay over to the department the tax required to be withheld under KRS 141.310 and 141.315; Provided, however, That the department may, by regulations, require employers to remit the tax withheld under KRS 141.310 and 141.315 within a reasonable time after the payroll period or other period. A return shall be filed by every employer making payment of wages even though no tax has been withheld.

(2) If the department, in any case, has reason to believe that the collection of the tax provided for in subsection (1) of this section is in jeopardy, it may require the employer to make such return and pay such tax at any time.

(3) Every employer, who fails to withhold or pay to the department any sums required by this chapter to be withheld and paid, shall be personally and individually liable therefor to the Commonwealth; and any sum or sums withheld in accordance with the provisions of KRS 141.310 and 141.315 shall be deemed to be held in trust for the Commonwealth.

(4) The Commonwealth shall have a lien upon all the property of any employer who fails to withhold or pay over to the department sums required to be withheld under KRS 141.310 and 141.315. If the employer withholds but fails to pay the amounts withheld to the department, the lien shall accrue as of the date the amounts withheld were required to be paid to the department. If the employer fails to withhold, the lien shall accrue at the time the liability of the employer becomes fixed.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 498, effective June 20, 2005. -- Amended 1970 Ky. Acts ch. 216, sec. 11. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 11. -- Amended 1962 Ky. Acts ch. 124, sec. 6. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 14. -- Created 1954 Ky. Acts ch. 79, sec. 26.

Legislative Research Commission Note. This section as amended by Acts 1970, ch. 216 applies to taxable years beginning on or after January 1, 1971.

141.335 Annual withholding statement to be furnished employee.

(1) Every person required to deduct and withhold from an employee a tax under KRS 141.310 or 141.315, or who would have been required to deduct and withhold a tax under KRS 141.310 or 141.315 if the employee had claimed no more than one (1) withholding exemption, shall furnish to each such employee in respect of the remuneration paid by such person to such employee during the calendar year, on or before January 31 of the succeeding year, or, if his employment is terminated before the close of such calendar year, on the day on which the last payment of remuneration is made, a written statement showing the following:

(a) the name of such person;

(b) the name of the employee and his social security account number;

(d) the total amount deducted and withheld as tax under KRS 141.310 and 141.315.

(2) The statement required to be furnished by this section in respect of any wages shall be furnished at such other times, shall contain such other information, and shall be in such form as the department may by regulations prescribe. A duplicate of such statement if made and filed in accordance with regulations prescribed by the department shall constitute the return required to be made in respect of such wages under KRS 141.150.

(3) The department may promulgate regulations providing for reasonable extensions of time, not in excess of thirty (30) days, to employers required to furnish statements under this section.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 499, effective June 20, 2005. -- Created 1954 Ky. Acts ch. 79, sec. 27, effective June 17, 1954.

141.340 Liability of employer for tax payment -- Corporate officers, managers of limited liability companies, and partners of registered limited liability partnerships personally liable.

(1) An employer shall be liable for the payment of the tax required to be deducted and withheld under KRS 141.310 and 141.315, and shall not be liable to any person for the amount of any such payment.

(2) The president, vice president, secretary, treasurer or any other person holding an equivalent corporate office of any corporation subject to KRS 141.310 or 141.315 shall be personally and individually liable, both jointly and severally, for any tax required to be withheld under this chapter from wages paid to one (1) or more employees of any such corporation, and neither the corporate dissolution or withdrawal of the corporation from the state nor the cessation of holding any such corporate office shall discharge the foregoing liability of any such person; provided that the personal and individual liability shall apply to each or every person holding such corporate office at the time such tax becomes or became obligated. No person shall be personally and individually liable under this subsection who had no authority to collect, truthfully account for, or pay over any tax imposed by this chapter at the time that taxes imposed by this chapter become or became due. "Taxes" as used in this section shall include interest accrued at the rate provided by KRS 131.138, all applicable penalties and fees imposed under KRS 131.180, 131.410 to 131.445, and 131.990.

(3) Notwithstanding any other provisions of this chapter, KRS 275.150, 362.1-306(3) or predecessor law, or 362.2-404(3) to the contrary, the managers of a limited liability company, the partners of a limited liability partnership, or the general partners of a limited liability limited partnership or any other person holding any equivalent office of a limited liability company, limited liability partnership, or limited liability limited partnership subject to KRS 141.310 or 141.315 shall be personally and individually liable, both jointly and severally, for any tax required to be withheld under this chapter from wages paid to one (1) or more employees of any such limited liability company, limited liability partnership, or limited liability limited partnership. Dissolution, withdrawal of the limited liability company, limited liability partnership, or limited liability limited partnership from the state, or the cessation of holding any office shall not discharge the liability of any person. The personal and individual liability shall apply to each and every manager of a limited liability company, partner in a limited liability partnership, and general partner of a limited liability limited partnership at the time the taxes become or became due. No person shall be personally and individually liable under this subsection who had no authority to collect, truthfully account for, or pay over any tax imposed by this chapter at the time that the taxes imposed by this chapter become or became due. "Taxes" as used in this section shall include interest accrued at the rate provided by KRS 131.183, all applicable penalties imposed under this chapter, and all applicable penalties and fees imposed under KRS 131.180, 131.410 to 131.445, and 131.990.

Effective: July 12, 2006

History: Amended 2006 Ky. Acts ch. 149, sec. 203, effective July 12, 2006. -- Amended 2002 Ky. Acts ch. 366, sec. 17, effective January 1, 2003. -- Amended 1978 Ky. Acts ch. 233, sec. 15, effective June 17, 1978. -- Created 1954 Ky. Acts ch. 79, sec. 28, effective June 17, 1954.

Legislative Research Commission Note (1/1/2003). The amendments to subsection (3) of this statute made in 2002 Ky. Acts ch. 366, sec. 17, "apply retroactively to July 15, 1994." 2002 Ky. Acts ch. 366, sec. 19.

141.345 Refund or credit in case of overpayment.

(1) Where there has been an overpayment of tax under KRS 141.310 or 141.315, refund or credit shall be made to the employer only to the extent that the amount of such overpayment was not deducted and withheld under KRS 141.310 or 141.315 by the employer.

(2) Unless written application for refund or credit is received by the department from the employer within four (4) years from the date the overpayment was made, no refund or credit shall be allowed.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 500, effective June 20, 2005. -- Amended 1966 Ky. Acts ch. 176, Part 1, sec. 12. -- Created 1954 Ky. Acts ch. 79, sec. 29.

141.347 Computation of income tax credit.

(1) As used in this section, unless the context requires otherwise:

(a) "Approved company" shall have the same meaning as set forth in KRS 154.22-010;

(b) "Economic development project" shall have the same meaning as set forth in KRS 154.22-010;

(d) "Kentucky gross receipts" means Kentucky gross receipts as defined in KRS 141.0401; and

(e) "Kentucky gross profits" means Kentucky gross profits as defined in KRS 141.0401.

(2) An approved company shall determine the tax credit as provided in this section.

(3) An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:

(a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project;

Compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project;

Using the method chosen under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(c) The tax credit shall be the amount by which the net tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.22-050.

(4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to tax under KRS 141.040 or a trust not subject to tax under KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020.

(b) The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.

(d) If the tax computed in this section exceeds the credit, the excess shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 or 141.0401 for filing the returns.

(e) Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.

(5) Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner's, member's, shareholder's, or beneficiary's distributive share of net income or credit of a pass- through entity or trust.

(6) If the economic development project is a totally separate facility:

(a) Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility; and

(b) Kentucky gross receipts or Kentucky gross profits attributable to the project for the purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.

(7) If the economic development project is an expansion to a previously existing facility:

(a) Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility, and the net income attributable to the economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic development project by a formula approved by the Department of Revenue; and

(b) Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the economic development project for the purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic development project by a formula approved by the Department of Revenue.

(8) If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the economic development project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the economic development project using an alternative method approved by the Department of Revenue.

(9) The Department of Revenue may issue administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.22-020 to 154.22-070 and the allowable income tax credit which an approved company may retain under KRS 154.22-020 to 154.22-070.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 84, effective April 14, 2018; and ch. 207, sec. 84, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 20, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 4, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 501, effective June 20, 2005; and ch. 168, sec. 20, effective March 18, 2005. -- Amended 1996 Ky. Acts ch. 194, sec. 5, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 390, sec. 36, effective July 15, 1994. -- Amended 1992 Ky. Acts ch. 105, sec. 55, effective July 14, 1992; and ch. 360, sec. 13, effective July 14, 1992. -- Created 1988 Ky. Acts ch. 392, sec. 21, effective April 8, 1988.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (7/14/92). This section was amended by 1992 Ky. Acts ch. 105, sec. 55, and ch. 360, sec. 13. The changes made by ch. 105 are purely technical in nature to make internal references conform to renumbering effectuated by other sections of that Act, while the changes made by ch. 360 are substantive in nature. Notwithstanding ch. 105, sec. 79, the changes of ch. 360 prevail. Cf. KRS 7.123.

141.350 Credit of amount withheld against tax imposed by KRS 141.020 for same taxable year.

The amount deducted and withheld as tax under KRS 141.310 and 141.315 during any calendar year upon the wages of any individual and the amount of credit described in KRS 154.22-070(2), 154.24-110, 154.24-150(3) and (4), 154.25-040, 154.26-100(2), 154.27-080, 154.28-110, or 154.32-090 shall be allowed as a credit to the recipient of the income against the tax imposed by KRS 141.020, for taxable years beginning in the calendar year. If more than one (1) taxable year begins in the calendar year, the amount shall be allowed as a credit against the tax for the last taxable year so beginning.

Effective: June 29, 2023

History: Amended 2023 Ky. Acts ch. 75, sec. 4, effective June 29, 2023. -- Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 53, effective June 26, 2009. -- Amended 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 14, effective August 30, 2007. -- Amended 2000 Ky. Acts ch. 300, sec. 3, effective July 14, 2000; and ch. 528, sec. 19, effective July 14, 2000. -- Amended 1996 Ky. Acts ch. 194, sec. 6, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 450, sec. 35, effective July 15, 1994. – Amended 1992 Ky. Acts ch. 105, sec. 71, effective July 14, 1992; ch. 358, sec. 18, effective July 14, 1992; and ch. 359, sec. 14, effective July 14, 1992. -- Amended 1988 Ky. Acts ch. 392, sec. 22, effective April 8, 1988. -- Amended 1978 Ky. Acts ch. 384, sec. 27, effective June 17, 1978. -- Created 1954 Ky. Acts ch. 79, sec. 30, effective June 17, 1954.

141.355 Crediting of overpayment and refund of balance -- Withholding in excess of tax imposed by KRS 141.020, when considered overpayment.

(1) Where there has been an overpayment of any tax imposed under KRS 141.020, 141.310, or 141.315, the amount of such overpayment shall be credited against any income tax or installment thereof then due from the taxpayer, and any balance shall be refunded in the manner provided in KRS 141.235.

(2) Where the amount of the tax withheld at the source under KRS 141.310 or 141.315 exceeds the taxes imposed by KRS 141.020 against which the tax so withheld may be credited under KRS 141.350, the amount of such excess shall be considered an overpayment.

Effective: June 17, 1954

History: Created 1954 Ky. Acts ch. 79, sec. 31, effective June 17, 1954.

141.360 Repealed, 1970.

[Repealed]

141.370 Tables for determining tax to be withheld.

The tax levied under KRS 141.020 and required to be withheld under KRS 141.310, unless determined by KRS 141.315, shall be withheld in accordance with the tables provided by the department. The department shall annually publish withholding tables for use in determining the amount of tax to be withheld under KRS 141.310 and 141.315. The tables shall reflect the tax computed under KRS 141.020 for the midpoint of each income range using the standard deduction allowed under KRS 141.081. The withholding tables shall be available in an on-line format.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 502, effective June 20, 2005; and ch. 168, sec. 22, effective March 18, 2005. -- Created 1970 Ky. Acts ch. 216, sec. 10.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (3/18/2005). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note. This section as enacted by Acts 1970, ch. 216 applies to taxable years beginning on or after January 1, 1971.

141.375 Repealed, 2005.

[Repealed]

141.380 Repealed, 2005.

[Repealed]

141.381 Nonrefundable tax credit for entities participating in the Metropolitan College.

(1) As used in this section:

(a) "Corporation" means the Bluegrass State Skills Corporation established by KRS 154.12-205;

(b) "Educational institution" means a regionally accredited college, university, or technical school;

(c) "Metropolitan College" means a nonprofit consortium that includes educational institutions located within the Commonwealth and the qualified taxpayer as members. The purpose of Metropolitan College shall be to provide postsecondary educational opportunities to employees of the qualified taxpayer as part of a combined work and postsecondary education program;

(d) "Other educational expenses" means the same kinds of educational expenses that were permitted under the Metropolitan College Consortium Agreement approved November 5, 2005; and

(e) "Qualified taxpayer" means any taxpayer who, on June 26, 2009, is a party to the Metropolitan College Consortium Agreement approved November 5, 2005.

(2) To be eligible for the tax credit provided by this section, a qualified taxpayer shall be a partner in Metropolitan College.

(3) A qualified taxpayer shall be allowed a nonrefundable credit against the tax imposed by KRS 141.020 or 141.040, and KRS 141.0401, for each taxable year beginning on or after July 1, 2010, in the amount of fifty percent (50%) of the actual costs incurred by the qualified taxpayer for:

(a) Tuition paid to an educational institution for a student participating in the Metropolitan College; and

(b) Other educational expenses paid on behalf of a student participating in the Metropolitan College; on behalf of employees of the qualified corporation, for up to two thousand eight hundred (2,800) employees each year.

(4) To claim the credit each year, the qualified taxpayer shall, on an annual basis, submit to the corporation information listing each employee of the qualified taxpayer for whom tuition or other educational expenses were paid, the amount paid on behalf of each employee, and the amount of credit the qualified company is eligible to claim. The corporation shall review the information provided by the qualified company, and shall notify the department and the qualified company of the amount of credit the qualified company is eligible to claim.

(5) The credit allowed by this section for any taxable year shall not exceed the tax liability of the taxpayer for the taxable year. Any credit not used may be carried forward to subsequent years.

(6) The qualified company shall provide to the corporation and the department any information and documentation requested for the purpose of monitoring the credit established by this section.

(7) The approved company shall maintain records and submit information as required by the corporation and the department. The corporation may share information provided by the approved company with the department for the purpose of monitoring the credit established by this section.

(8) The corporation may, through the promulgation of administrative regulations in accordance with KRS Chapter 13A, establish additional standards or requirements for the administration of this section.

(9) The credit established by this section shall expire on April 15, 2037, unless extended by the General Assembly.

Effective: June 27, 2025

History: Amended 2025 Ky. Acts ch. 98, sec. 10, effective June 27, 2025. -- Amended 2015 Ky. Acts ch. 30, sec. 2, effective July 1, 2015. -- Amended 2012 Ky. Acts ch. 157, sec. 1, effective July 12, 2012. -- Created 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 19, effective June 26, 2009.

141.382 Refundable or transferable tax credit for qualified rehabilitation expenses for certified historic structure.

(1) As used in this section:

(a) "Certified historic structure" means the same as defined in KRS 171.396;

(b) "Qualified rehabilitation expense" means the same as defined in KRS 171.396; and

(2) A refundable or transferable credit in the amount determined in KRS 171.397 and 171.398 shall be allowed against the taxes imposed by KRS 136.505 or 141.020 or 141.040 and 141.0401, with the ordering of credits provided in KRS 141.0205, for qualified rehabilitation expenses incurred by the taxpayer and used for substantial rehabilitation to a certified historic structure.

Effective: April 14, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 60, effective April 14, 2026. -- Created 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 32, effective June 26, 2009.

141.3821 Tax credit for certified mixed-use rehabilitation expenses -- Administrative regulations -- Report. (Effective July 1, 2027)

(1) As used in this section:

(a) "Approved taxpayer" means any person or entity:

Subject to the taxes imposed in KRS 141.020 or 141.040 and 141.0401; and
That is the recipient of a certified rehabilitation credit or transferred credit as determined by the authority in accordance with KRS 154.20- 195;

(b) "Authority" has the same meaning as in KRS 154.20-195;

(d) "Eligible rehabilitation expenses" has the same meaning as in KRS 154.20- 195.

(2) (a) For taxable years beginning on or after January 1, 2028, but before January 1, 2032, there shall be allowed a refundable, transferable certified rehabilitation credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401, with the ordering of the credit as provided in KRS 141.0205.

(b) In the case of a pass-through entity not subject to the tax imposed by KRS 141.040, the credit shall be taken against the tax imposed by KRS 141.0401 and shall be claimed by the partners, members, or shareholders in accordance with their proportionate share of income.

Be equal to the amount determined and approved by the authority in accordance with KRS 154.20-195; and
Not exceed twenty-five million dollars ($25,000,000).

(3) A taxpayer receiving the credit may elect to transfer the credit to another taxpayer or insurer as provided by KRS 154.20-195(7)(b).

(4) The department may promulgate administrative regulations in accordance with KRS Chapter 13A to establish policies and procedures to implement this section.

(5) (a) By November 1 of each year in which a certified mixed-use rehabilitation credit is claimed, the department, working with the authority, shall report to the Legislative Research Commission for referral to the Interim Joint Committee on Appropriations and Revenue, the following:

The location of each certified mixed-use rehabilitation project;
The total amount of credit claimed by project location for the taxable year;
The total amount of credit claimed by each approved taxpayer; and
The total amount of all credit claimed by all taxpayers for the taxable year.

(b) The information required to be reported under this section shall not be considered confidential taxpayer information and shall not be subject to KRS Chapter 131 or any other provisions of the Kentucky Revised Statutes prohibiting disclosure or reporting of information.

Effective: July 1, 2027

History: Created 2026 Ky. Acts ch. 198, sec. 31, effective July 1, 2027.

141.383 Refundable tax credit for motion picture or entertainment production expenses -- Limitations -- Qualifications -- Reporting.

(1) As used in this section:

(a) "Above-the-line production crew" has the same meaning as in KRS 154.61- 010;

(b) "Approved company" has the same meaning as in KRS 154.61-010;

(d) "Continuous film production" has the same meaning as in KRS 154.61-010;

(e) "Council" means the Kentucky Film Leadership Council created in KRS 154.12-282;

(f) "Loan-out entity" has the same meaning as in KRS 154.61-010;

(g) "Office" means the Kentucky Film Office created in KRS 154.12-280;

(h) "Qualifying expenditure" has the same meaning as in KRS 154.61-010;

(i) "Qualifying payroll expenditure" has the same meaning as in KRS 154.61- 010;

(j) "Secretary" has the same meaning as in KRS 154.61-010; and

(k) "Tax incentive agreement" has the same meaning as in KRS 154.61-010.

(2) (a) There is hereby created a tax credit against the tax imposed under KRS 141.020 or 141.040 and 141.0401, with the ordering of credits as provided in KRS 141.0205.

(b) The incentive available under paragraph (a) of this section is:

A refundable credit for applications approved prior to April 27, 2018;
A nonrefundable and nontransferable credit for applications approved on or after April 27, 2018, but before January 1, 2022; and
A refundable credit for applications approved on or after January 1, 2022, if the provisions of paragraph (c) of this subsection are met.

a. Seventy-five million dollars ($75,000,000) for the calendar year 2022 and each calendar year thereafter;

b. Beginning with calendar year 2024, the amount in subdivision a. of this subparagraph shall be allocated accordingly:

i. Twenty-five million dollars ($25,000,000) shall be allocated for all approved companies with a continuous film production; and

ii. On the first day of April 2025, and on April 1 of each calendar year thereafter, any unused balance allocated under subpart i. of this subdivision for continuous film productions shall be made available for all approved companies with a motion picture or entertainment production; and

c. i. Beginning with calendar year 2026, any unallocated balance of the amount allocated in subdivision a. of this subparagraph for the previous calendar year shall carry forward into the subsequent calendar year to be made available for approved companies with high-impact motion pictures, continuous film productions, or entertainment productions.

ii. For purposes of this subdivision and KRS 154.61-020 the determination of a high-impact motion picture or entertainment production shall be based upon criteria established in administrative regulations promulgated under KRS 154.61-020(4)(c).

To qualify for the refundable credit, all applicants shall:

a. Begin filming or production in Kentucky within one hundred eighty (180) days of approval by the office; and

b. Complete filming or production in Kentucky within two (2) years of their production start date.

(3) An approved company may receive a refundable tax credit if:

(a) The department has received notification from the office that the approved company has satisfied all requirements of KRS 154.61-020 and 154.61-030; and

(b) The approved company has provided a detailed cost report and sufficient documentation to the office, which has been forwarded by the office to the department, that:

The purchases of qualifying expenditures were made after the execution of the tax incentive agreement; and
The approved company or loan-out entity has withheld income tax as required by KRS 141.310 on all qualified payroll expenditures, and remitted and certified the withheld amount to the department.

(4) Interest shall not be allowed or paid on any refundable credits provided under this section.

(5) The department may promulgate administrative regulations under KRS Chapter 13A to administer this section.

(6) On or before September 1, 2010, and on or before each September 1 thereafter, for the immediately preceding fiscal year, the department shall report to the office and the Interim Joint Committee on Appropriations and Revenue the names of the approved companies and the amounts of refundable income tax credit claimed.

(7) No later than September 1, 2021, and by November 1 every four (4) years thereafter, the department and the Cabinet for Economic Development shall cooperatively provide historical data related to the tax credit allowed in this section and KRS 154.61-020 and 154.61-030, including data items beginning with tax credits claimed for taxable years beginning on or after January 1, 2018:

(a) The name of the taxpayer claiming the tax credit;

(b) The date that the application was approved and the date the filming or production was completed;

(d) The total amount of the tax credit, including any amount denied, any amount applied against a tax liability, any amount refunded, and any amount remaining that may be claimed on a return filed in the future;

(e) Whether the taxpayer is a Kentucky-based company as defined in KRS 154.61-010;

(f) Whether the taxpayer films or produces a:

Feature-length film, television program, industrial film, video game, music video, or commercial;
National touring production of a Broadway show; or
Documentary;

(g) Whether the filming or production was performed:

Entirely in a heritage county; or
In whole or in part in any Kentucky county other than in a heritage county;

(h) The amount of qualifying expenditures incurred by the taxpayer;

(i) The amount of qualifying payroll expenditures paid to:

Resident below-the-line crew; and
Nonresident below-the-line production crew; including the number of crew members in each category;

(j) The amount of qualifying payroll expenditures paid to:

Resident above-the-line crew; and
Nonresident above-the-line crew; including the number of crew members in each category; and

(k) A brief description of the type of motion picture or entertainment production project.

(8) The information required to be reported under this section shall not be considered confidential taxpayer information and shall not be subject to KRS Chapter 131 or any other provisions of the Kentucky Revised Statutes prohibiting disclosure or reporting of information.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 194, sec. 1, effective July 15, 2026; and ch. 198, sec. 21, effective April 27, 2026. -- Amended 2025 Ky. Acts ch. 91, sec. 4, effective July 1, 2025; and ch. 162, sec 11, effective April 10, 2025. -- Amended 2023 Ky. Acts ch. 75, sec. 5, effective June 29, 2023. -- Amended 2021 Ky. Acts ch. 156, sec. 16, effective June 29, 2021. -- Amended 2020 Ky. Acts ch. 91, sec. 15, effective April 15, 2020. -- Amended 2018 Ky. Acts ch. 171, sec. 85, effective April 14, 2018; and ch. 207, sec. 85, effective April 27, 2018. -- Amended 2014 Ky. Acts ch. 102, sec. 13, effective July 15, 2014. -- Created 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 47, effective June 26, 2009.

Legislative Research Commission Note (7/15/2026). This statute was amended by 2026 Ky. Acts chs. 194 and 198, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 15 of that Act apply to taxable years beginning on or after January 1, 2019.

141.384 Nonrefundable tax credit for small businesses.

(1) As used in this section, "small business" has the same meaning as in KRS 154.60- 010.

(2) (a) For taxable years beginning after December 31, 2010, a small business may be eligible for a nonrefundable credit of up to one hundred percent (100%) of the Kentucky income tax imposed under KRS 141.020 or 141.040, and the limited liability entity tax imposed under KRS 141.0401.

(b) A small business that is subject to the tax imposed by KRS 141.020 or 141.040 and that has tax credits approved under Subchapter 60 of KRS Chapter 154 shall apply the credits against the income tax imposed by KRS 141.020 or 141.040 and against the limited liability entity tax imposed by KRS 141.0401, with the ordering of credits as provided in KRS 141.0205.

(c) A small business that is a pass-through entity not subject to the tax imposed by KRS 141.040 and that has tax credits approved under Subchapter 60 of KRS Chapter 154 shall apply the credits against the limited liability entity tax imposed by KRS 141.0401, and shall also distribute the amount of the approved tax credits to each partner, member, or shareholder based on the partner's, member's, or shareholder's distributive share of income as determined for the year during which the tax credits are approved, with the ordering of credits as provided in KRS 141.0205.

Effective: July 15, 2014

History: Amended 2014 Ky. Acts ch. 128, sec. 4, effective July 15, 2014. -- Amended 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 13, effective June 4, 2010. -- Created 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 68, effective June 26, 2009.

141.3841 Selling farmer tax credit -- Report.

(1) The selling farmer tax credit permitted by KRS 154.60-040:

(a) Shall be nonrefundable and nontransferable; and

(b) May be claimed against the taxes imposed in KRS 141.020 or 141.040 and 141.0401, with the ordering of the credit as provided in KRS 141.0205.

(2) (a) The maximum amount of credit that may be claimed by a seller in each taxable year is limited to:

No more than the total amount of credit approved by the Kentucky Economic Development Finance Authority;
Twenty-five thousand dollars ($25,000) cap for each taxable year of the seller when agricultural assets are sold to an actively engaged farmer who does not meet the definition of a beginning farmer;
Fifty thousand dollars ($50,000) cap for each taxable year of the seller when agricultural assets are sold to a beginning farmer;
One hundred thousand dollars ($100,000) lifetime cap for each seller selling to an actively engaged farmer; and
Two hundred thousand dollars ($200,000) lifetime cap for each seller selling to a beginning farmer.

(b) The credit shall be first claimed on the tax return for the taxable year during which the credit was approved.

(c) Any unused credit in a taxable year may be carried forward for up to five (5) taxable years and, if not utilized within the five (5) year period, shall be lost.

(3) In order for the General Assembly to evaluate the fulfillment of the purpose stated in KRS 154.60-040, the department shall provide the following information, on a cumulative basis, for each seller, for each taxable year:

(a) The location, by county, of the agricultural assets sold to an actively engaged farmer or a beginning farmer and approved for a tax credit under KRS 154.60- 040;

(b) The total amount of tax credit approved by the Kentucky Economic Development Finance Authority for each seller;

(d) 1. In the case of all taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of tax credits claimed and the number of returns claiming a tax credit for each adjusted gross income range; and

In the case of all corporations, based on ranges of net income no larger than fifty thousand dollars ($50,000) for the taxable year, the total amount of tax credit claimed and the number of returns claiming a tax credit for each net income range.

(4) The report required by subsection (3) of this section shall be submitted to the Interim Joint Committee on Appropriations and Revenue beginning no later than November 1, 2021, and no later than each November 1 thereafter, as long as the credit is claimed on any return processed by the department.

Effective: June 27, 2025

History: Amended 2025 Ky. Acts ch. 98, sec. 29, effective June 27, 2025. -- Created 2020 Ky. Acts ch. 91, sec. 19, effective April 15, 2020.

141.385 Nonrefundable tax credit for railroad improvement.

(1) As used in this section:

(a) "Class II railroad" means a railroad company classified as a Class II carrier by the federal Surface Transportation Board;

(b) "Class III railroad" means a railroad company classified as a Class III carrier by the federal Surface Transportation Board;

(c) "Qualified expenditures" means expenditures, whether or not otherwise chargeable to a capital account, that are made to maintain or improve railroads located in Kentucky, including roadbeds, bridges, and related structures, that are owned or leased as of January 1, 2008, by a Class II or Class III railroad; and

(d) "Eligible taxpayer" means:

The owner of any Class II railroad or Class III railroad located in Kentucky; or
Any person who transports property using the rail facilities of a Class II railroad or Class III railroad located in Kentucky or furnishes railroad- related property or services to a Class II railroad or Class III railroad located in Kentucky, but only with respect to miles of railroad track assigned to the person by a Class II railroad or Class III railroad for purposes of subsection (3) of this section.

(2) For taxable years beginning after December 31, 2009, an eligible taxpayer shall be entitled to a nonrefundable credit against the taxes imposed by KRS 141.020 or 141.040, and 141.0401 with the ordering of credits as directed in KRS 141.0205, in an amount equal to fifty percent (50%) of the qualified expenditures paid or incurred by the taxpayer during the taxable year.

(3) The credit allowed under subsection (2) of this section shall not exceed the product of:

(a) Three thousand five hundred dollars ($3,500) multiplied by:

(b) The sum of:

The number of miles of railroad track in Kentucky owned or leased by the eligible taxpayer as of the close of the taxable year; and
The number of miles of railroad track in Kentucky assigned for purposes of this section to the eligible taxpayer by a Class II railroad or Class III railroad which owns or leases the railroad track as of the close of the taxable year.

(4) A mile of railroad track may be taken into account by a qualified taxpayer other than the owner only if the mile of railroad track is assigned to the person by the owner for purposes of this section. Any mile that is so assigned shall not be taken into account by the owner for purposes of this section.

(5) With respect to any assignment of a mile of railroad track under subsection (4) of this section:

(a) The assignment may be made only once per taxable year of the Class II railroad or Class III railroad and shall be treated as made as of the close of the taxable year;

(b) The mile shall not be taken into account under this section by the railroad for such taxable year; and

(c) The assignment shall be taken into account for the taxable year of the assignee, which includes the date that the assignment is treated as effective.

(6) If a credit is taken as provided for in subsection (2) of this section, the basis of the track shall be reduced by the amount of credit taken.

Effective: June 26, 2009

History: Created 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 69, effective June 26, 2009.

141.386 Nonrefundable tax credit for railroad expansion or upgrade to accommodate transportation of fossil energy resources or biomass resources.

(1) As used in this section:

(a) "Fossil energy resources" means reserves of coal, oil shale, and natural gas; and

(b) "Biomass resources" means agricultural materials that may be used for production of transportation fuels such as biodiesel or ethanol or that may themselves be used as a fuel, alone or in combination with a fossil fuel, for generation of electricity.

(2) For taxable years beginning after December 31, 2009:

(a) A corporation that owns fossil energy resources subject to tax under KRS 143.020 or 143A.020 or biomass resources and transports these resources using rail facilities; or

(b) A railway company subject to tax under KRS 136.120 that serves a corporation that owns fossil energy resources subject to tax under KRS 143.020 or 143A.020 or biomass resources; shall be entitled to a nonrefundable tax credit against the taxes imposed under KRS 141.040 and 141.0401, with the ordering of credits as directed by KRS 141.0205, in an amount certified by the department pursuant to subsection (4) of this section.

(3) (a) The credit shall be equal to twenty-five percent (25%) of the expenditures paid or incurred by the corporation or railway company to expand or upgrade railroad track, including roadbeds, bridges, and related track structures, to accommodate the transport of fossil energy resources or biomass resources.

(b) The credit amount approved for a calendar year for all taxpayers under this section shall be limited to one million dollars ($1,000,000).

(c) If the total amount of approved credit exceeds one million dollars ($1,000,000), the department shall determine the amount of credit each corporation and railway company receives by multiplying one million dollars ($1,000,000) by a fraction, the numerator of which is the amount of approved credit for a corporation or railway company and the denominator of which is the total approved credit for all corporations and railway companies.

(4) Each corporation or railway company eligible for the credit provided under this section shall file a railroad expansion tax credit claim on forms prescribed by the department by the fifteenth day of the first month following the close of the preceding calendar year. The department shall determine the amount of the approved credit and issue a credit certificate to the corporation or railway company by the fifteenth day of the third month following the close of the calendar year.

Effective: June 26, 2009

History: Created 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 70, effective June 26, 2009.

141.387 No carry forward permitted for tax credits provided by KRS 141.385 and 141.386 -- Claims for credits.

(1) The tax credits established by KRS 141.385 and 141.386 shall not be carried forward to a return for any other period.

(2) If an expenditure by a taxpayer qualifies for credits under more than one (1) of the provisions of KRS 141.385 and 141.386, the taxpayer may claim credit under one

(1) section only.

Effective: June 26, 2009

History: Created 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 71, effective June 26, 2009.

141.388 Repealed, 2018.

[Repealed]

141.389 Nonrefundable and nontransferable distilled spirits ad valorem tax credit -

Election to waive credits -- Credit to be used only for capital improvement at licensed distiller's premises -- Refundable credit for taxpayer investing and creating jobs in area of low and moderate income -- Administrative regulations -- Annual report.

(1) (a) There shall be allowed a nonrefundable and nontransferable credit to each taxpayer paying the distilled spirits ad valorem tax as follows:

For taxable years beginning on or after January 1, 2015, and before December 31, 2015, the credit shall be equal to twenty percent (20%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis;
For taxable years beginning on or after January 1, 2016, and before December 31, 2016, the credit shall be equal to forty percent (40%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis;
For taxable years beginning on or after January 1, 2017, and before December 31, 2017, the credit shall be equal to sixty percent (60%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis;
For taxable years beginning on or after January 1, 2018, and before December 31, 2018, the credit shall be equal to eighty percent (80%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis; and
For taxable years beginning on or after January 1, 2019, but prior to January 1, 2024, the credit shall be equal to one hundred percent (100%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis.

(b) The credit shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of the credits as provided in KRS 141.0205.

(2) (a) For purposes of this section:

"Accumulated amount" means the tax credits that have been accumulated by a taxpayer under subsection (4)(a) of this section;
"Base reduction percentage" means the percentage by which the taxpayer's total number of barrels of distilled spirits stored or aging in this state as of January 1 of a taxable year does not equal or exceed the taxpayer's total number of barrels of distilled spirits stored or aging in this state as of January 1, 2025;
"Business-wide reduction" has the same meaning as in KRS 138.208;
"Extraordinary event" has the same meaning as in KRS 138.208; and
"LMI" means a low and moderate income population where the county median family income or county median household income is less than eighty percent (80%) of the state median family income or state median household income, respectively, as determined by using the most recent five (5) year American Community Survey published by the United States Census Bureau. For purposes of this section, once a county has been identified as an LMI population, the county shall remain an LMI population without regard to future determinations using the United States Census Bureau data.

(b) A taxpayer may make an election regarding the distilled spirits tax credit related to taxable years beginning on or after January 1, 2024, but prior to January 1, 2040. The election shall be to:

a. Waive any accumulated amount of tax credits; and

b. Be allowed a nonrefundable and nontransferable tax credit up to twenty-five thousand (25,000) barrels of distilled spirits in a bonded warehouse or premises for each taxable year. The tax credit shall be equal to one hundred percent (100%) of the tax assessed under KRS 132.160 and paid by the taxpayer under KRS 132.180 on a timely basis on those barrels; or

a. Waive all future tax credits allowed under this section; and

b. Be allowed a refundable tax credit on multiple taxes as described in subsection (7) of this section.

(c) Any election made under this subsection shall be made on a form prescribed by the department and shall be submitted to the department on or before the due date of the tax return, including an extension of time to file a return under KRS 141.170, for the taxpayer's first taxable year beginning on or after January 1, 2024.

(d) Any election made under this subsection shall be binding on both the department and the taxpayer and shall be irrevocable.

(3) The amount of distilled spirits credit allowed under subsection (1) of this section shall be used only for capital improvements at the premises of the distiller licensed pursuant to KRS Chapter 243. As used in this subsection, "capital improvement" means any costs associated with:

(a) Construction, replacement, or remodeling of warehouses or facilities;

(b) Purchases of barrels and pallets used for the storage and aging of distilled spirits in maturing warehouses;

(c) Acquisition, construction, or installation of equipment for the use in the manufacture, bottling, or shipment of distilled spirits;

(d) Addition or replacement of access roads or parking facilities; and

(e) Construction, replacement, or remodeling of facilities to market or promote tourism, including but not limited to a visitor's center.

(4) The distilled spirits credit allowed under subsection (1) of this section:

(a) May be accumulated for multiple taxable years;

(b) Shall be claimed on the return of the taxpayer filed for the taxable year during which the credits were used pursuant to subsection (3) of this section; and

Any delinquent tax paid to the Commonwealth; or
Any interest, fees, or penalty paid to the Commonwealth.

(5) (a) Before the distilled spirits credit allowed under subsection (1) of this section shall be claimed on any return, the capital improvements required by subsection (3) of this section shall be completed and specifically associated with the credit allowed on the return.

(b) The amount of distilled spirits credit allowed shall be recaptured if the capital improvement associated with the credit is sold or otherwise disposed of prior to the exhaustion of the useful life of the asset for Kentucky depreciation purposes.

(c) If the allowed credit is associated with multiple capital improvements, and not all capital improvements are sold or otherwise disposed of, the distilled spirits credit shall be prorated based on the cost of the capital improvement sold over the total cost of all improvements associated with the credit.

(6) If the taxpayer is a pass-through entity, the taxpayer may apply the credits allowed in subsection (1) or (2) of this section against the limited liability entity tax imposed by KRS 141.0401, and shall pass the credits through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.

(7) (a) For taxable years beginning on or after January 1, 2026, a taxpayer making an election under subsection (2)(b)2. of this section is entitled to a refundable tax credit if the taxpayer:

Makes a capital investment of at least twenty million dollars ($20,000,000) within an LMI; and
Creates ten (10) or more new jobs within an LMI.

(b) Upon certification to the department that the capital investment has been made and the jobs have been created within an LMI, the department shall:

Award a refundable credit that is:

a. Equal to no more than fifty percent (50%) of the accumulated amount;

b. Based on the sales and use tax paid on the purchase of tangible personal property used in the capital investment within the LMI and the withholding of tax from wages paid by the taxpayer as an employer under KRS 141.310 from employees hired to fill the jobs created within the LMI; and

c. Refunded over a period, the earlier of which is:

a. Fifteen (15) years; or

b. Until the amount determined in subdivision a. of this subparagraph has been utilized through the sales and use tax and withholding tax remitted; and

Reduce the taxpayer's accumulated amount by the amount refunded.

(c) 1. Any portion of the fifty percent (50%) of the accumulated amount remaining on or after March 1, 2039, shall lapse.

No later than June 15, 2039, the department shall report to the Interim Joint Committee on Appropriations and Revenue the total of the lapsing accumulated amounts and the number of taxpayers related to the lapsing accumulated total.

(d) 1. To qualify for the portion of the refundable credit for sales and use tax paid under paragraph (b) of this subsection, the taxpayer shall:

a. Collect from the purchasers of tangible personal property used in the construction, replacement, or remodeling of warehouses or facilities all documentation relating to the payment of sales or use tax;

b. Document sales and use tax paid directly by the taxpayer; and

c. File an application for refund of the sales or use tax paid as reflected in the documentation collected.

To qualify for the portion of the refundable credit for tax withheld from employees, the taxpayer shall document the amount withheld and file an application for a refund as prescribed by the department.

(e) Requests for a refund shall be filed annually and shall cover purchases made or the amount withheld from employees during the immediately preceding

year. Requests for a refund shall be filed in the manner directed by the department.

(f) Interest shall not be allowed or paid on any refund made under this section.

(g) To fulfill the requirements for a sales and use tax refund, the taxpayer shall execute information-sharing agreements prescribed by the department with contractors, vendors, and other related parties to verify construction material costs.

(8) (a) Notwithstanding subsection (7) of this section, for taxable years beginning on or after January 1, 2026, the taxpayer's accumulated amount shall be reduced by the taxpayer's base reduction percentage, including a recapture of any credits which have previously been refunded.

(b) If a business-wide reduction or extraordinary event occurs, any taxpayer may apply to the secretary of the Finance and Administration Cabinet for a waiver of the reduction in the accumulated amount.

(9) The department may promulgate an administrative regulation pursuant to KRS Chapter 13A to implement the allowable credits under this section, require the filing of forms designed by the department, and require specific information for the evaluation of the credits taken by any taxpayer.

(10) No later than September 1, 2016, and annually thereafter, the department shall report to the Interim Joint Committee on Appropriations and Revenue:

(a) The name of each taxpayer taking the credits permitted by subsection (1) or

(2) of this section;

(b) The amount of credits taken by that taxpayer;

(d) Whether the credits offset tax liability or were refunded to the taxpayer;

(e) The type of tax that was refunded to the taxpayer; and

(f) The amount of tax refunded for each type of tax.

Effective: March 31, 2023

History: Amended 2023 Ky. Acts ch. 148, sec. 3, effective March 31, 2023. -- Amended 2018 Ky. Acts ch. 171, sec. 103, effective April 14, 2018; and ch. 207, sec. 103, effective April 27, 2018. -- Created 2014 Ky. Acts ch. 102, sec. 16, effective July 15, 2014.

141.390 Tax credit for recycling or composting equipment -- Report.

(1) As used in this section:

(a) "Postconsumer waste" means any product generated by a business or consumer which has served its intended end use, and which has been separated from solid waste for the purposes of collection, recycling, composting, and disposition and which does not include secondary waste material or demolition waste;

(b) "Recycling equipment" means any machinery or apparatus used exclusively to process postconsumer waste material and manufacturing machinery used exclusively to produce finished products composed of substantial postconsumer waste materials;

(c) "Composting equipment" means equipment used in a process by which biological decomposition of organic solid waste is carried out under controlled aerobic conditions, and which stabilizes the organic fraction into a material which can easily and safely be stored, handled, and used in an environmentally acceptable manner;

(d) "Recapture period" means:

For qualified equipment with a useful life of five (5) or more years, the period from the date the equipment is purchased to five (5) full years from that date; or
For qualified equipment with a useful life of less than five (5) years, the period from the date the equipment is purchased to three (3) full years from that date;

(e) "Useful life" means the period determined under Section 168 of the Internal Revenue Code; and

(f) "Major recycling project" means a project location where the taxpayer:

Invests more than ten million dollars ($10,000,000) in recycling or composting equipment to be used exclusively in this state;
Has at least four hundred (400) full-time employees with an average hourly wage of more than three hundred percent (300%) of the federal minimum wage; and
Has plant and equipment with a total cost of more than five hundred million dollars ($500,000,000).

(2) (a) 1. A taxpayer that purchases recycling or composting equipment to be used exclusively within this state for recycling or composting postconsumer waste materials shall be entitled to a credit against the:

a. Income taxes under KRS 141.020 or 141.040; and

b. Limited liability entity tax under KRS 141.0401; with the ordering of the credits under KRS 141.0205.

The total tax credit shall be an amount equal to fifty percent (50%) of the installed cost of the recycling or composting equipment.
The amount of credit claimed in the taxable year during which the recycling equipment is purchased shall not exceed:

a. Ten percent (10%) of the amount of the total credit allowable; or

b. Twenty-five percent (25%) of the total of each tax liability which would be otherwise due for that taxable year.

The amount of credit claimed in a taxable year subsequent to the taxable year during which the recycling equipment is purchased shall not exceed twenty-five percent (25%) of the total of each tax liability, which would be otherwise due for that taxable year.

(b) 1. For taxable years beginning after December 31, 2019, a taxpayer that has a major recycling project containing recycling or composting equipment to be used exclusively within this state for recycling or composting postconsumer waste material shall be entitled to a credit against the:

a. Income taxes under KRS 141.020 or 141.040; and

b. Limited liability entity tax under KRS 141.0401; with the ordering of the credits under KRS 141.0205.

The total tax credit shall be an amount equal to twenty-five percent (25%) of the installed cost of the recycling or composting equipment.
The credit described in this paragraph shall be limited to a period of thirty (30) years commencing with the approval of the recycling credit application.
The amount of credit claimed in the taxable year during which the recycling equipment is purchased shall not exceed seventy-five percent (75%) of the total of each tax liability which would be otherwise due for that taxable year.
The amount of credit claimed in a taxable year subsequent to the taxable year during which the recycling equipment is purchased shall not exceed seventy-five percent (75%) of the total of each tax liability, which would be otherwise due for that taxable year.

(c) A taxpayer with one (1) or more major recycling projects shall be entitled to a total credit including the amount computed in paragraph (a) of this subsection plus the amount of credit computed in paragraph (b) of this subsection, except that the total amount of credits under paragraphs (a) and (b) of this subsection claimed in a taxable year shall not exceed seventy-five percent (75%) of the total of each tax liability which would be otherwise due for that taxable year.

(d) A taxpayer shall not be permitted to utilize a credit computed under paragraph

(a) of this subsection and a credit computed under paragraph (b) of this subsection on the same recycling or composting equipment.

(3) (a) 1. Except as provided in subparagraph 2. of this paragraph, application for a tax credit shall be made to the department on or before the first day of the seventh month following the close of the taxable year in which the recycling or composting equipment is purchased or placed in service.

For taxable years beginning on or after January 1, 2020, but before January 1, 2024, application for a tax credit related to a major recycling project may be made to the department on or before the first day of the seventh month following either:

a. The close of the taxable year in which the recycling or composting equipment is purchased or placed in service; or

b. The close of the taxable year immediately following the taxable year in which the recycling or composting equipment is purchased or placed in service.

(b) The application shall include a description of each item of recycling equipment purchased, the date of purchase and the installed cost of the recycling equipment, a statement of where the recycling equipment is to be used, and any other information as the department may require to fulfill the reporting requirements under subsection (8) of this section.

(c) The department shall review all applications received to determine whether expenditures for which credits are required meet the requirements of this section and shall advise the taxpayer of the amount of credit for which the taxpayer is eligible under this section.

(4) (a) Except as provided in subsection (6) of this section, if a taxpayer that receives a tax credit under this section sells, transfers, or otherwise disposes of the qualifying recycling or composting equipment before the end of the recapture period, the tax credit shall be redetermined under subsection (5) of this section.

(b) If the total credit taken in prior taxable years exceeds the redetermined credit, the difference shall be added to the taxpayer's tax liability under this chapter for the taxable year in which the sale, transfer, or disposition occurs.

(c) If the redetermined credit exceeds the total credit already taken in prior taxable years, the taxpayer shall be entitled to use the difference to reduce the taxpayer's tax liability under this chapter for the taxable year in which the sale, transfer, or disposition occurs.

(5) The total tax credit allowable under subsection (2) of this section for equipment that is sold, transferred, or otherwise disposed of before the end of the recapture period shall be adjusted as follows:

(a) For equipment with a useful life of five (5) or more years that is sold, transferred, or otherwise disposed of:

One (1) year or less after the purchase, no credit shall be allowed.
Between one (1) year and two (2) years after the purchase, twenty percent (20%) of the total allowable credit shall be allowed.
Between two (2) and three (3) years after the purchase, forty percent (40%) of the total allowable credit shall be allowed.
Between three (3) and four (4) years after the purchase, sixty percent (60%) of the total allowable credit shall be allowed.
Between four (4) and five (5) years after the purchase, eighty percent (80%) of the total allowable credit shall be allowed.

(b) For equipment with a useful life of less than five (5) years that is sold, transferred, or otherwise disposed of:

One (1) year or less after the purchase, no credit shall be allowed.
Between one (1) year and two (2) years after the purchase, thirty-three percent (33%) of the total allowable credit shall be allowed.
Between two (2) and three (3) years after the purchase, sixty-seven percent (67%) of the total allowable credit shall be allowed.

(6) Subsections (4) and (5) of this section shall not apply to transfers due to death, or transfers due merely to a change in business ownership or organization as long as the equipment continues to be used exclusively in recycling or composting, or transactions to which Section 381(a) of the Internal Revenue Code applies.

(7) The department may promulgate administrative regulations to carry out the provisions of this section.

(8) (a) The purpose of expanding the tax credit for a major recycling project is to encourage more recycling and composting by businesses within the Commonwealth.

(b) In order for the General Assembly to evaluate the fulfillment of the purpose stated in paragraph (a) of this subsection, the department shall provide the following information on a cumulative basis for each taxable year to provide a historical impact of the tax credit to the Commonwealth:

A narrative for each major recycling project approved for a tax credit, describing:

a. The taxpayer claiming the tax credit;

b. The industry sector within which the taxpayer operates in this state, including the NAICS code for the taxpayer; and

c. The type of recycling or composting equipment purchased by the taxpayer;

The location, by county, of the major recycling project;
The installed cost of the recycling or composting equipment;
The total amount of tax credit approved for the major recycling project;
The amount of tax credit allowed for the major recycling project for each taxable year; and
a. In the case of all taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of tax credits claimed and the number of returns claiming a tax credit for each adjusted gross income range; and

b. In the case of all corporations, based on ranges of net income no larger than fifty thousand dollars ($50,000) for the taxable year, the total amount of tax credit claimed and the number of returns claiming a tax credit for each net income range.

(c) The report required by paragraph (b) of this subsection shall be submitted to the Interim Joint Committee on Appropriations and Revenue beginning no later than November 1, 2021, and no later than each November 1 thereafter, as long as the credit is claimed on any return processed by the department.

Effective: June 29, 2021

History: Amended 2021 Ky. Acts ch. 156, sec. 12, effective June 29, 2021. -- Amended 2019 Ky. Acts ch. 151, sec. 53, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 171, sec. 86, effective April 14, 2018; and ch. 207, sec. 86, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 21, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 5, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 504, effective June 20, 2005; and ch. 168, sec. 23, effective March 18, 2005. -- Created 1991 (1st Extra. Sess.) Acts ch. 12, sec. 63, effective February 26, 1991.

Legislative Research Commission Note (6/27/2019). Section 84 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 53 of that Act apply to taxable years beginning on or after January 1, 2021.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.391 Nonrefundable tax credit for expansion of broadband services.

(1) As used in this section:

(a) "Eligible equipment or services" means the equipment used in the expansion of broadband services in Kentucky and includes:

Wires, cables, fiber, conduits, antennas, poles, switches, routers, amplifiers, rectifiers, repeaters, receivers, multiplexers, transmitters, circuit cards, insulating and protective materials and cases, power equipment, backup power equipment, diagnostic equipment, storage devices, and modems;
General central office or headend equipment, including:

a. Channel cards;

b. Frames; and

c. Cabinets;

Equipment used in successor technologies, including items used to monitor, test, maintain, enable, or facilitate:

a. Eligible equipment or services;

b. Machinery;

c. Software;

d. Ancillary components;

e. Appurtenances; and

f. Accessories; and

Any other infrastructure that is used in whole or in part to provide or expand broadband communications services; and

(b) "Qualified broadband investment":

Means the purchase or lease of any eligible equipment or services by any provider that Kentucky sales and use tax has been paid under KRS Chapter 139; and
Does not include the purchase or lease of personal consumer electronics, including:

a. Smartphones;

b. Computers;

c. Tablets;

d. Consumer-grade modems; and

e. Routers.

(2) For taxable years beginning on or after January 1, 2025, but before January 1, 2029, there is hereby created a qualified broadband investment tax credit to provide for the expansion of broadband services in this state.

(3) (a) The credit in subsection (2) of this section shall be nonrefundable, nontransferable, and allowed against the tax imposed under KRS 141.020 or 141.040 and 141.0401 with the ordering of the credit as provided in KRS 141.0205.

(b) The tax credit shall be equal to the amount of sales tax actually paid on the qualified broadband investment:

Reduced by the amount of seller reimbursement allowed under KRS 139.570; and
Limited to:

a. Fifty percent (50%) of the amount determined under subparagraph

of this paragraph for a taxpayer; and

b. A total of five million dollars ($5,000,000) for all tax credits in each taxable year in which the credit is available.

(4) (a) Beginning with calendar year 2025, any taxpayer who intends to take the credit for a qualified broadband investment tax credit shall:

Submit an application for approval to the department on a form prescribed by the department prior to December 31, 2025, and each December 31 thereafter as long as the credit is available; and
Provide:

a. The taxpayer's identification number;

b. The amount of sales and use tax that the taxpayer remitted or intends to remit for the qualified broadband investment; and

c. A statement of how approval of this tax credit will result in greater investment in this state by:

i. Expansion of broadband services;

ii. An upgrade to existing broadband infrastructure; or

iii. An increase of access to broadband for the residents in this state.

(b) The department shall:

Review all submitted applications no later than January 15, 2026, and each January 15 thereafter as long as the credit is available; and
By February 1 following the end of the calendar year, provide a letter to the taxpayer indicating approval and amount of tax credit to be awarded.

(5) A taxpayer approved for credit under subsection (4) of this section shall submit with their return, verification of the sales and use tax remitted on the qualified broadband investment, which may include:

(a) Receipt of eligible equipment or services purchased; or

(b) Lease agreement for eligible equipment or services.

(6) If the total amount of credits granted approval under subsection (4) of this section exceeds five million dollars ($5,000,000), each taxpayer shall receive no more than its applicable pro rata share of the five million dollar ($5,000,000) limit.

(7) (a) In order for the General Assembly to evaluate the effectiveness of the qualified broadband investment tax credit, the department shall submit the following information to the Legislative Research Commission for referral to the Interim Joint Committee on Appropriations and Revenue on or before November 1, 2026, and on or before each November 1 thereafter as long as the credit may be claimed on a return:

The location of the taxpayer, by county, as reflected on the return filed for the taxable year;
The amount of qualified broadband investment tax credit claimed by the taxpayer for the taxable year;
The total cumulative amount of all qualified broadband investment tax credits claimed for the taxable year; and
a. In the case of all taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of qualified broadband investment tax credit claimed and the total number of returns claiming this tax credit for each income range; and

Effective: July 15, 2024

History: Created 2024 Ky. Acts ch. 166, sec. 11, effective July 15, 2024.

141.392 Repealed, 2018.

[Repealed]

141.395 Tax credit for construction of research facilities.

(1) As used in this section:

(a) "Construction of research facilities" means constructing, remodeling, and equipping facilities in this state or expanding existing facilities in this state for qualified research and includes only tangible, depreciable property, and does not include any amounts paid or incurred for replacement property; and

(b) "Qualified research" means qualified research as defined in Section 41 of the Internal Revenue Code.

(2) A nonrefundable credit in the amount determined in subsection (3) of this section is permitted against the tax assessed by both KRS 141.020 or 141.040 and 141.0401, with the ordering of credits as provided in KRS 141.0205, for the construction of research facilities. Any unused credit may be carried forward ten (10) years.

(3) The credit allowed in subsection (2) of this section shall equal five percent (5%) of the qualified costs of construction of research facilities.

Effective: June 28, 2006

History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 22, effective June 28, 2006. -- Created 2002 Ky. Acts ch. 230, sec. 5, effective July 15, 2002.

141.396 Nonrefundable angel investor tax credit against individual income tax -- Carry forward -- Transfer of credit -- Recapture of credit -- Data reporting requirements.

(1) As used in this section:

(a) "Authority" has the same meaning as in KRS 154.20-230;

(b) "Qualified investor" has the same meaning as in KRS 154.20-230;

(d) "Taxpayer" means an individual subject to the tax imposed by KRS 141.020, who has either:

Received a credit from the authority pursuant to KRS 154.20-236; or
Received a credit through a valid transfer allowed under this section from a qualified investor that was originally awarded the credit.

(2) For taxable years beginning on or after January 1, 2015, there is hereby created the angel investor tax credit. The credit shall be nonrefundable, and shall apply against the tax imposed by KRS 141.020. The ordering of the credit shall be as provided in KRS 141.0205.

(3) A qualified investor may seek a credit by applying to the authority pursuant to KRS 154.20-236.

(4) The maximum amount of credit that may be claimed by a taxpayer in any taxable year shall not exceed fifty percent (50%) of the total amount of credit awarded or transferred to the taxpayer.

(5) Any amount of credit that a taxpayer is unable to utilize during a taxable year may be carried forward for use in a succeeding taxable year for a period not to exceed fifteen (15) years. Any amount of credit not used within fifteen (15) years shall be

lost. No amount of credit may be carried back by any taxpayer.

(6) The credit shall not apply to any liability a taxpayer may have for interest, penalties, past due taxes, or any other additions to the taxpayer's tax liability. The holder of the credit shall assume any and all liabilities and responsibilities of the credit.

(7) A credit may be transferred by a qualified investor to any individual taxpayer. A qualified investor making a transfer shall give written notice to the department and shall provide any other information required by the department, in the manner prescribed by the department. Any transferred credit shall be subject to the original timeframes and requirements established by this section and KRS 154.20-230 to 154.20-240 as if held by the qualified investor.

(8) To receive the credit, a taxpayer shall claim the credit on his or her return in the manner prescribed by the department.

(9) The department shall recapture any portion, or the full amount, of a credit upon notification from the authority that a recapture is required pursuant to KRS 154.20- 240.

(10) In order for the General Assembly to evaluate the fulfillment of the purposes stated in KRS 154.20-232, the department and the Cabinet for Economic Development shall work jointly to submit the following information to the Interim Joint Committee on Appropriations and Revenue on or before May 1, 2019, and each May 1 thereafter, related to each taxable year that an angel investor credit is claimed on a return:

(a) The number of qualified small businesses certified by the authority;

(b) The demographics of each qualified small business, including:

The net worth of the qualified small business;
The qualified activity the qualified small business is actively and principally engaged in within the Commonwealth;
The number of employees of the qualified small business;
The location of the assets, operations, and employees of the qualified small business; and
The aggregate amount of qualified investments received by the qualified small business;

(c) A list detailing each qualified investor certified by the authority, the amount of investment made by each qualified investor, the date each qualified investment is made by the qualified investor, and the amount of tax credit awarded each investor;

(d) By taxable year, the amount of tax credit claimed by each investor and the amount of credit available to be claimed in future taxable years;

(e) The number of qualified small businesses that are active, inactive, or closed that have received qualified investments;

(f) The number of qualified small businesses that have established a location in the Commonwealth and the number that have expanded operations, the number and location of each new job created, a description of each development of new products and technologies in the Commonwealth, and the field of operation for that growth, including knowledge-based, high-tech, or research and development; and

(g) The total amount of tax credit awarded for each fiscal year.

(11) If either the department or the Cabinet for Economic Development does not currently have the data to fulfill the reporting requirement of subsection (10) of this section, the department and the cabinet shall work jointly to obtain the data in an expedient manner to provide the report on or before the May 1, 2019, report date.

Effective: June 29, 2021

History: Amended 2021 Ky. Acts ch. 185, sec. 140, effective June 29, 2021. -- Amended 2018 Ky. Acts ch. 171, sec. 98, effective April 14, 2018; and ch. 207, sec. 97, effective April 27, 2018. -- Created 2014 Ky. Acts ch. 102, sec. 28, effective July 15, 2014.

141.398 Development area tax credit -- Annual report.

(1) As used in this section:

(a) "Development area" has the same meaning as in KRS 65.501;

(b) "Owner" means:

The individual who owned the residential property on January 1, 2021; or
Upon the death of the individual under subparagraph 1. of this paragraph, a beneficiary who:

a. Is a lineal descendant of the individual, but also including a spouse, child, legally adopted child, grandchild, brother, sister, parent, or grandparent; and

b. Inherits the residential property of the individual;

(c) "Property tax" means the total ad valorem tax paid to the Commonwealth, a consolidated local government, and all taxing districts on the residential property; and

(d) "Residential property" means:

The principal residence of the owner;
Located in a development area; and
Owned as of January 1, 2021.

(2) There is hereby created the development area tax credit allowable against the tax imposed under KRS 141.020, with the ordering of credits under KRS 141.0205.

(3) (a) The tax credit permitted by subsection (2) of this section shall be a refundable, nontransferable tax credit to the owner of residential property in the development area.

(b) The credit shall be equal to the amount in which the property tax timely paid on the residential property in a taxable year exceeds the amount of property tax assessed on that residential property on January 1, 2021.

(4) The tax credit shall end the earlier of the taxable year in which:

(a) The residential property is sold by the owner; or

(b) The period allowed for incremental revenues under KRS 65.504 ends.

(5) (a) In order for the General Assembly to evaluate the development area tax credit, the department shall provide the following information on a cumulative basis for each taxable year to provide a historical impact of the tax credit to the Commonwealth:

The total amount of tax credit claimed for each taxable year by all owners;
The total amount of tax credit for each taxable year which is used to offset tax liability of owners and the total amount that is refunded to owners;
The physical address of the residential property which created the tax credit;
The amount of the tax credit claimed for the taxable year for each physical address;
The amount of the tax credit used to offset tax liability and the amount refunded to the owner at that physical address; and
Based on ranges of net income no larger than five thousand dollars ($5,000), the total amount of tax credit claimed and the number of returns claiming a tax credit for each adjusted gross income range.

(b) The report required by paragraph (a) of this subsection shall be submitted to the Interim Joint Committee on Appropriations and Revenue beginning no later than November 1, 2023, and no later than each November 1 thereafter, as long as the credit is claimed on any return processed by the department.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 203, sec. 8, effective June 29, 2021.

141.399 Economic development tax credit -- Duties of department -- Administrative regulations.

(1) As used in this section:

(a) "Approved company" has the same meaning as in KRS 154.32-010;

(b) "Authority" has the same meaning as in KRS 154.32-010; and

(c) "Credit" means the economic development credit provided to an approved company by the authority in accordance with KRS 154.32-070.

(2) (a) For taxable years beginning on or after January 1, 2026, there shall be allowed an economic development credit to an approved company. The credit shall be refundable, nontransferable, and allowed against the tax imposed under KRS 141.020 or 141.040 and 141.0401, with the ordering of the credit as provided in KRS 141.0205.

(c) The amount of the credit that may be claimed in a taxable year by the approved company shall be equal to the amount determined in accordance with KRS 154.32-070, as applicable, except the total amount of credits claimed by all approved companies under KRS 154.32-070 shall not exceed four million dollars ($4,000,000) per taxable year, of which no more than one million dollars ($1,000,000) shall be allowed for wages paid to full-time employees in counties other than heritage counties.

(3) (a) The department shall:

Promulgate administrative regulations in accordance with KRS Chapter 13A to administer the credit;
Work with the authority to determine the approved amount of credit or apportionable share of credit available to be claimed in any taxable year on a return as filed by an approved company or each partner, member, or shareholder of an approved company; and
Report the following to the authority on the credits claimed under this section:

a. The total amount of credit awarded for each taxable year, by county;

b. Each taxpayer claiming a credit; and

c. The total amount of wages paid to a full-time employee by an approved company and included in its credit computation.

(b) The information required to be reported under this subsection shall not be considered confidential taxpayer information and shall not be subject to KRS Chapter 131 or any other provisions of the Kentucky Revised Statutes prohibiting disclosure or reporting of information.

Effective: April 27, 2026

History: Created 2026 Ky. Acts ch. 198, sec. 1, effective April 27, 2026.

141.400 Tax credit for company approved for economic development project under KRS 154.28-010 to 154.28-100.

(1) As used in this section, unless the context requires otherwise:

(a) "Approved company" shall have the same meaning as set forth in KRS 154.28-010;

(b) "Economic development project" shall have the same meaning as set forth in KRS 154.28-010;

(d) "Kentucky gross receipts" means Kentucky gross receipts as defined in KRS 141.0401; and

(e) "Kentucky gross profits" means Kentucky gross profits as defined in KRS 141.0401.

(2) An approved company shall determine the income tax credit as provided in this section.

(a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project;

Compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

Using the same method used under subparagraph 2. of paragraph (a) of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross receipts or Kentucky gross profits from the economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to tax under KRS 141.040, or a trust not subject to tax under KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020.

(d) If the tax computed in this section exceeds the credit, the excess shall be paid by the pass-through entity or trust at the times provided by KRS 141.0401 or 141.160 for filing the returns.

(6) If the economic development project is a totally separate facility:

(b) Kentucky gross receipts or Kentucky gross profits attributable to the project for purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.

(7) If the economic development project is an expansion to a previously existing facility:

(a) Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic development project by a formula approved by the Department of Revenue; and

(9) The Department of Revenue may issue administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.22-020 to 154.22-070 and KRS 154.28-010 to 154.28-090 and this section and the allowable tax credit which an approved company may retain under KRS 154.22- 020 to 154.22-070 and KRS 154.28-010 to 154.28-090 and this section.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 87, effective April 14, 2018; and ch. 207, sec. 87, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 23, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 6, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 505, effective June 20, 2005; and ch. 168, sec. 24, effective March 18, 2005. -- Amended 1996 Ky. Acts ch. 194, sec. 7, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 390, sec. 37, effective July 15, 1994. -- Created 1992 Ky. Acts ch. 363, sec. 11, effective July 14, 1992.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.401 Repealed, 2023.

[Repealed]

141.402 Taxing provisions governing approved companies under Subchapter 25 of KRS Chapter 154.

(1) As used in this section, unless the context requires otherwise:

(a) "Approved company" shall have the same meaning as set forth in KRS 154.25-010;

(b) "Jobs retention project" shall have the same meaning as set forth in KRS 154.25-010;

(d) "Kentucky gross profits" means Kentucky gross profits as defined in KRS 141.0401; and

(e) "Tax credit" means the tax credit allowed in KRS 154.25-030.

(2) An approved company shall determine the income tax credit as provided in this section.

(a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, including income from the jobs retention project;

Compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the jobs retention project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, excluding net income attributable to the jobs retention project;

Using the same method used under subparagraph 2. of paragraph (a) of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the jobs retention project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to a jobs retention project at the rates provided in KRS 141.020(2).

(d) If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.

(6) (a) Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and

(7) If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the jobs retention project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the jobs retention project using an alternative method approved by the Department of Revenue.

(8) The Department of Revenue may promulgate administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of this section and KRS 154.25-010 to 154.25-050 and the allowable income tax credit which an approved company may retain under this section and KRS 154.25-010 to 154.25-050.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 54, effective June 27, 2019. -- Created 2007 Ky. Acts ch. 91, sec. 6, effective March 23, 2007.

Legislative Research Commission Note (3/23/2007). In subsection (8) of Ky. Acts ch. 91, sec. 6, it appears from context and on advice of the drafter that two references to "this Act" should have been to "this section and Sections 1 to 5 of this Act." The Reviser of Statutes has made these changes pursuant to KRS 7.136.

141.403 Tax credit for company approved on or before June 30, 2021, under KRS 154.26-010 to 154.26-100 -- Administrative regulations.

(1) If an eligible company has not yet received preliminary approval on or before June 30, 2021, the eligible company shall not receive final approval by the authority to become an approved company and receive tax credits under Subchapter 26 of KRS Chapter 154. Approved companies and outstanding eligible companies with preliminary approval granted on or before June 30, 2021, shall continue to be governed by Subchapter 26 of KRS Chapter 154 and this section.

(2) As used in this section, unless the context requires otherwise:

(a) "Approved company" has the same meaning as in KRS 154.26-010;

(b) "Economic revitalization project" has the same meaning as in KRS 154.26- 010;

(d) "Final approval" has the same meaning as in KRS 154.26-010;

(e) "Kentucky gross receipts" has the same meaning as in KRS 141.0401; and

(f) "Kentucky gross profits" has the same meaning as in KRS 141.0401

(g) "Preliminary approval" has the same meaning as in KRS 154.26-010; and

(h) "Tax credit" means the tax credit allowed in KRS 154.26-090.

(3) An approved company shall determine the income tax credit as provided in this section.

(4) An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:

(a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic revitalization project;

Compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the economic revitalization project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic revitalization project;

Using the same method used under subparagraph 2. of paragraph (a) of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the economic revitalization project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(5) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed KRS 141.040 shall be subject to income tax on the net income attributable to an economic revitalization project at the rates provided in KRS 141.020.

(b) The amount of the tax credit shall be determined as provided in subsection (4) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.

(d) If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.

(6) Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (5) of this section shall be excluded in determining each partner's, member's, shareholder's, or beneficiary's distributive share of net income or credit of a pass- through entity or trust.

(7) If the economic revitalization project is a totally separate facility:

(a) Net income attributable to the project for the purposes of subsections (4), (5), and (6) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and

(b) Kentucky gross receipts or Kentucky gross profits attributable to the project for purposes of subsection (4) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.

(8) If the economic revitalization project is an expansion to a previously existing facility:

(a) Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the economic revitalization project for the purposes of subsections (4), (5), and (6) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic revitalization project by a formula approved by the department; and

(4) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic revitalization project pursuant to a formula approved by the department.

(9) If an approved company can show to the satisfaction of the department that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the economic revitalization project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the economic revitalization project using an alternative method approved by the department.

(10) The department may issue administrative regulations and require the filing of forms designed by the department to reflect the intent of KRS 154.26-010 to 154.26-100 and the allowable income tax credit which an approved company may retain under KRS 154.26-010 to 154.26-100.

Effective: June 29, 2021

History: Amended 2021 Ky. Acts ch. 185, sec. 101, effective June 29, 2021. -- Amended 2018 Ky. Acts ch. 171, sec. 89, effective April 14, 2018; and ch. 207, sec. 89, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 25, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 8, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 507, effective June 20, 2005; and ch. 168, sec. 26, effective March 18, 2005. -- Amended 1996 Ky. Acts ch. 194, sec. 8, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 390, sec. 38, effective July 15, 1994. -- Created 1992 Ky. Acts ch. 359, sec. 13, effective July 14, 1992.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.405 Tax credit for company approved for occupational or skills upgrade training program under KRS 154.12-2084 to 154.12-2089 -- Administrative regulations.

(1) As used in this section, unless the context requires otherwise:

(a) "Approved company" has the same meaning as set forth in KRS 154.12-2084;

(b) "Skills training investment credit" has the same meaning as set forth in KRS 154.12-2084;

(d) "Kentucky gross profits" means Kentucky gross profits as defined in KRS 141.0401.

(2) An approved company shall determine the tax credit as provided in this section.

(3) (a) An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:

Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income;
Compute the limited liability entity tax imposed under KRS 141.0401 on Kentucky gross profits or Kentucky gross receipts; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this subsection;

(b) The amount of the skills training investment credit that the Bluegrass State Skills Corporation has given final approval for under KRS 154.12-2088(6) shall be applied against the net tax computed under paragraph (a)3. of this subsection; and

(c) The skills training investment credit payment shall not exceed the amount of the final approval awarded by the Bluegrass State Skills Corporation under KRS 154.12-2088(6).

(4) (a) In the case of an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040, the amount of the tax credit awarded by the Bluegrass State Skills Corporation in KRS 154.12-2088(6) shall be taken against the tax imposed by KRS 141.0401 by the approved company, and shall also be apportioned among the partners, members, or shareholders thereof at the same ratio as the partners', members', or shareholders' distributive shares of income are determined for the tax year during which the final authorization resolution is adopted by the Bluegrass State Skills Corporation in KRS 154.12-2088(6).

(5) (a) In the case of an approved company that is a trust not subject to the tax imposed by KRS 141.040, the amount of the tax credit awarded by the Bluegrass State Skills Corporation in KRS 154.12-2088(6) shall be apportioned to the trust and the beneficiaries on the basis of the income of the trust allocable to each for the tax year during which the final authorizing resolution is adopted by the Bluegrass State Skills Corporation in KRS 154.12-2088(6).

(6) The Department of Revenue may promulgate administrative regulations in accordance with KRS Chapter 13A adopting forms and procedures for the reporting of the credit allowed in KRS 154.12-2084 to 154.12-2089.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 90, effective April 14, 2018; and ch. 207, sec. 90, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 26, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 9, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 508, effective June 20, 2005; and ch. 168, sec. 27, effective March 18, 2005. -- Amended 2000 Ky. Acts ch. 300, sec. 4, effective July 14, 2000. -- Created 1998 Ky. Acts ch. 499, sec. 5, effective July 15, 1998.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.407 Determination of allowable income tax credit approved company may retain.

(1) As used in this section, unless the context requires otherwise:

(a) "Approved company" shall have the same meaning as set forth in KRS 154.24-010;

(b) "Economic development project" shall have the same meaning as economic development project as set forth in KRS 154.24-010;

(d) "Kentucky gross receipts" means Kentucky gross receipts as defined in KRS 141.0401; and

(e) "Kentucky gross profits" means Kentucky gross profits as defined in KRS 141.0401.

(2) An approved company shall determine the tax credit as provided in this section.

(a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project;

Compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or a trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020.

(b) The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.

(d) If the tax computed herein exceeds the credit, the excess shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.

(6) If the economic development project is a totally separate facility:

(a) Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and

(7) If the economic development project is an expansion to a previously existing facility:

(a) Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic development project by a formula approved by the Department of Revenue; and

(9) The Department of Revenue may promulgate administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.24-010 to 154.24-150 and the allowable income tax credit which an approved company may retain under KRS 154.24-010 to 154.24-150.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 91, effective April 14, 2018; and ch. 207, sec. 91, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 27, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 10, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 509, effective June 20, 2005; and ch. 168, sec. 28, effective March 18, 2005. -- Amended 1996 Ky. Acts ch. 194, sec. 9, effective July 15, 1996. -- Amended 1994 Ky. Acts ch. 390, sec. 39, effective July 15, 1994. -- Created 1992 Ky. Acts ch. 358, sec. 17, effective July 14, 1992.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.408 Inventory tax credit -- Applies on or after January 1, 2018 -- Pass-through entities, allowable credit -- Annual report.

(1) There shall be allowed a nonrefundable and nontransferable credit against the tax imposed by KRS 141.020 or 141.040 and 141.0401, with the ordering of the credits as provided in KRS 141.0205, for any taxpayer that, on or after January 1, 2018, timely pays an ad valorem tax to the Commonwealth or any political subdivision thereof for property described in KRS 132.020(1)(e) or 132.099.

(2) The credit allowed under subsection (1) of this section shall be in an amount equal to:

(a) Twenty-five percent (25%) of the ad valorem taxes timely paid for taxable years beginning on or after January 1, 2018, and before January 1, 2019;

(b) Fifty percent (50%) of the ad valorem taxes timely paid for taxable years beginning on or after January 1, 2019, and before January 1, 2020;

(c) Seventy-five percent (75%) of the ad valorem taxes timely paid for taxable years beginning on or after January 1, 2020, and before January 1, 2021; and

(d) One hundred percent (100%) of the ad valorem taxes timely paid, for taxable years beginning on or after January 1, 2021.

(3) If the taxpayer is a pass-through entity, the taxpayer may apply the credit against the limited liability entity tax imposed by KRS 141.0401, and shall pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.

(4) No later than October 1, 2019, and annually thereafter, the department shall report to the Interim Joint Committee on Appropriations and Revenue:

(a) The name of each taxpayer taking the credit permitted by subsection (1) of this section;

(b) The location of the property upon which the credit was allowed; and

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 55, effective June 27, 2019. -- Created 2018 Ky. Acts ch. 171, sec. 115, effective April 14, 2018; and ch. 207, sec. 115, effective April 27, 2018.

Legislative Research Commission Note (4/27/2018). This statute was created by 2018 Ky. Acts ch. 171, sec. 115 and ch. 207, sec. 115, which are nearly identical and have been codified together.

141.410 Definitions for KRS 141.410 to 141.414.

As used in KRS 141.410 to 141.414, unless the context requires otherwise:

(1) "Approved costs" means the costs incurred during the taxable year by a qualified farming operation for training and improving the skills of managers and employees involved in a networking project.

(2) "Business network" means a formalized, collaborative mechanism organized by and operating among three (3) or more qualified farming operations, industrial entities, business enterprises, or private sector firms for the purposes of, but not limited to: pooling expertise; improving responses to changing technology or markets; lowering the risks to individual entities of accelerated modernization; encouraging new technology investments, new market development, and employee skills improvement; and developing a system of collective intelligence among participating entities.

(3) "Food producing facilities" means establishments that manufacture or process foods and beverages for human consumption, and which are included under the three (3) digit NAICS code three hundred eleven (311).

(4) "Networking project" means a project by which farmers and other entities involved in the production of food join together to form a network approved by the Cabinet for Economic Development for the purpose of producing or expanding the production of crops or livestock necessary for the establishment or expansion of secondary food-producing facilities in Kentucky.

(5) "Qualified farming operation" means an individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, or institution, engaged in farming in Kentucky that provides raw materials for food- producing facilities in Kentucky, and that purchases new buildings or equipment, or that incurs training expenses, to support its participation in a networking project.

(6) "NAICS code" means the classification system grouping business operations or enterprises as published in the North American Industry Classification System United States Manual published by Convergence Working Group and the United States Office of Management and Budget, 2002 edition.

(7) "Kentucky gross receipts" means Kentucky gross receipts as defined in KRS 141.0401.

(8) "Kentucky gross profits" means Kentucky gross profits as defined in KRS 141.0401.

Effective: June 28, 2006

History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 28, effective June 28, 2006. -- Amended 2006 Ky. Acts ch 252, Pt. XIII, sec. 11, effective April 25, 2006. - Amended 2005 Ky. Acts ch. 168, sec. 29, effective March 18, 2005. -- Created 1994 Ky. Acts ch. 390, sec. 16, effective July 15, 1994.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.412 Tax credit for qualified farming operation -- Annual report.

(1) For taxable years beginning before January 1, 2028, a qualified farming operation shall be entitled to a nonrefundable credit against the Kentucky income tax liability established pursuant to the provisions of this chapter on any income of the qualified farming operation generated by or arising out of the qualified farming operation's participation in a networking project, and against the limited liability entity tax imposed by KRS 141.0401 on any Kentucky gross profits or Kentucky gross receipts of the qualified farming operation generated by or arising out of the qualified farming operation's participation in a networking project. The credits shall be applied as provided in KRS 141.0205. The annual credit shall be available for the first five (5) years that the farming operation is involved in the networking project. The annual credit shall be equal to the approved costs incurred by the qualified farming operation during the tax year and shall not exceed the income, Kentucky gross profits or Kentucky gross receipts, as the case may be, of the qualified farming operation generated by or arising out of the qualified farming operation's participation in a networking project.

(2) Any credit not used in the tax year in which it first becomes available may be carried forward to the next succeeding five (5) tax years until the credit has been fully used. The aggregate credit used in any tax year shall not exceed the income, Kentucky gross profits or Kentucky gross receipts, as the case may be, of the qualified farming operation generated by or arising out of the qualified farming operation's participation in a networking project in that tax year.

(3) (a) By November 1, 2026, and each November 1 thereafter as long as a qualified farming operation credit is claimed under this section, the department shall report to the Legislative Research Commission for referral to the Interim Joint Committee on Appropriations and Revenue:

The total number of returns claiming the credit for the taxable year;
The total amount of credit claimed for the taxable year;
By taxpayer:

a. The name and location of the taxpayer claiming the credit as listed on the tax return;

b. The total number of tax credits claimed for the taxable year;

c. The total amount of credit claimed for the taxable year;

d. The name and location, by county, of the networking project;

e. Type of food or product produced; and

f. Type of raw materials provided for food-producing facilities in this state; and

a. In the case of taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of credit claimed and the total number of returns claiming this credit for each adjusted gross income range.

(b) The Cabinet for Economic Development shall assist by providing the department with information on the approved farming operations or networking projects to help fulfill the requirements under this subsection.

Effective: July 15, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 54, effective July 15, 2026. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 29, effective June 28, 2006. -- Created 1994 Ky. Acts ch. 390, sec. 17, effective July 15, 1994.

141.414 Computation of tax and credit.

(1) A qualified farming operation which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:

(a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the qualified farming operation's participation in a networking project.

Compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the qualified farming operation's participation in a networking project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph;

(b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 applies on net income or taxable net income, excluding net income attributable to the qualified farming operation's participation in a networking project;

Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the qualified farming operation's participation in a networking project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph; and

(c) Be entitled to a tax credit in the amount by which the tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection. The credit shall not exceed the farming operation's approved costs, as defined in KRS 141.410.

(2) Notwithstanding any other provisions of this chapter, a qualified farming operation which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to its participation in a networking project at the rates provided in KRS 141.020, and the amount of the tax credit shall be the same as the amount of the tax computed in this subsection. The credit shall not exceed the farming operation's approved costs, as defined in KRS 141.410. If the tax computed in this subsection exceeds the tax credit, the difference shall be paid by the pass- through entity or trust at the times provided by KRS 141.160 for filing the returns.

(3) Notwithstanding any other provisions of this chapter, the net income subject to tax and the tax credit determined under subsection (2) of this section shall be excluded in determining each partner's, member's, shareholder's, or beneficiary's distributive share of net income or credit of a pass-through entity or trust.

(4) If the networking entity is a separate facility:

(a) Net income attributable to the project for the purposes of subsections (1), (2), and (3) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the project and overhead expenses apportioned to the facility; and

(b) Kentucky gross receipts or Kentucky gross profits attributable to the project for the purposes of subsection (1) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.

(5) If the networking project is an expansion to a previously existing farming operation:

(a) Net income attributable to the entire operation shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the farming operation's participation in the networking project and overhead expenses apportioned to the networking project, and the net income attributable to the networking project for the purposes of subsections (1), (2), and (3) of this section shall be determined by apportioning the separate accounting net income of the entire networking project to the networking project by a formula approved by the Department of Revenue; and

(b) Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the economic development project for the purposes of subsection (1) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic development project by a formula approved by the Department of Revenue.

(6) If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved farming operation are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the networking project, the approved farming operation shall determine net income, Kentucky gross receipts, or Kentucky gross profits from its participation in the networking project using an alternative method approved by the Department of Revenue.

(7) The Department of Revenue may promulgate administrative regulations pursuant to KRS Chapter 13A and require the filing of forms designed by the Department of Revenue necessary to effectuate KRS 141.0101 and KRS 141.410 to 141.414 and the allowable income tax credit which an approved farming operation may retain under the provisions of KRS 141.412 and this section.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 92, effective April 14, 2018; and ch. 207, sec. 92, effective April 27, 2018. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 30, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 12, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 510, effective June 20, 2005; and ch. 168, sec. 30, effective March 18, 2005. -- Created 1994 Ky. Acts ch. 390, sec. 18, effective July 15, 1994.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.415 Computation of income tax and credit for approved company.

(1) As used in this section, unless the context requires otherwise:

(a) "Approved company" means the same as defined in KRS 154.32-010 or 154.34-010;

(b) "Economic development project" means the same as defined in KRS 154.32- 010;

(d) "Tax credit" means the tax credit allowed in KRS 154.34-120 or the credit allowed in KRS 154.32-070, as the case may be;

(e) "Kentucky gross receipts" means the same as defined in KRS 141.0401; and

(f) "Kentucky gross profits" means the same as defined in KRS 141.0401.

(2) An approved company shall determine the income tax credit as provided in this section.

(a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from a reinvestment project or economic development project;

Compute the limited liability entity tax imposed under KRS 141.0401 including Kentucky gross profits or Kentucky gross receipts from the reinvestment project or economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to a reinvestment project or economic development project;

Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the reinvestment project or economic development project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(c) The tax credit shall be the amount by which the tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.32-070 or 154.34-120, as the case may be.

(4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to a reinvestment project or economic development project at the rates provided in KRS 141.020.

(c) The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.32-070 or 154.34-120, as the case may be.

(d) If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.

(6) If the reinvestment project or economic development project is a totally separate facility:

(a) Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and

(7) If the reinvestment project or economic development project is an expansion to a previously existing facility:

(a) Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the reinvestment project or economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the reinvestment project or economic development project by a formula approved by the department; and

(b) Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the reinvestment project or economic development project for the purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the reinvestment project or economic development project by a formula approved by the department.

(8) If an approved company can show to the satisfaction of the department that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the reinvestment project or economic development project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the reinvestment project or economic development project using an alternative method approved by the department.

(9) The department may promulgate administrative regulations and require the filing of forms designed by the department to reflect the intent of KRS 154.34-010 to 154.34-100 and Subchapter 32 of KRS Chapter 154, and the allowable income tax credit which an approved company may retain under KRS 154.34-010 to 154.34- 100 or Subchapter 32 of KRS Chapter 154.

Effective: April 27, 2018

History: Amended 2018 Ky. Acts ch. 171, sec. 93, effective April 14, 2018; and ch. 207, sec. 93, effective April 27, 2018. -- Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 31, effective June 26, 2009. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 31, effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 13, effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 511, effective June 20, 2005; and ch. 168, sec. 31, effective March 18, 2005. -- Created 2003 Ky. Acts ch. 148, sec. 11, effective June 24, 2003.

Legislative Research Commission Note (4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.416 Repealed, 2009

[Repealed]

141.417 Alternative jet fuel tax credit -- Definitions for section -- Rates -- Limits -- Administrative regulations -- Reports -- Application and certification.

(1) As used in this section:

(a) "Agriculturally based alternative jet fuel" means an alternative jet fuel produced from agricultural biomass, including crops and agricultural byproducts derived from agricultural or livestock production, such as corn, soybeans, wheat, canola, animal fats, and biomass residues from trees, wood, and grasses;

(b) "Alternative jet fuel" means a liquid fuel that can be used in an aircraft without the need to modify the aircraft engines or existing fuel distribution infrastructure, and that:

Consists of synthesized hydrocarbons and meets the requirements of:

a. The American Society for Testing and Materials International Standard D7566; or

b. The American Society for Testing and Materials International Standard D1655;

Is derived from eligible feedstocks;
Is not derived from palm fatty acid distillates; and
Achieves at least a fifty percent (50%) lifecycle greenhouse gas emissions reduction in comparison with petroleum-based jet fuel, as determined by a test that shows the fuel production pathway achieves at least a fifty percent (50%) reduction of the aggregate attributional care lifecycle by measuring either:

a. Emissions under the lifecycle methodology for alternative jet fuels adopted by the International Civil Aviation Organization with the agreement of the United States; or

b. Greenhouse gas emissions values utilizing the most recent version of Argonne National Laboratory's GREET model;

Produces alternative jet fuel; or
Blends SBC with conventional aviation gasoline or jet fuel;

(d) "Eligible feedstock" means any feedstock that qualifies as an eligible feedstock for purposes of Section 45Z of the Internal Revenue Code;

(e) "Eligible taxpayer" means an alternative jet fuel producer or feedstock provider that is located in the Commonwealth;

(f) "Feedstock provider" means an entity that manufactures an eligible feedstock, including SBC, used in the process of making alternative jet fuel; and

(g) "Synthetic blending component" or "SBC" means synthesized hydrocarbons that meet the requirements in any one (1) of the annexes of the American Society for Testing and Materials International Standard D7566, which may then be used as a component in the manufacture of alternative jet fuel.

(2) (a) There shall be allowed a nonrefundable, nontransferable alternative jet fuel credit allowed against the taxes imposed in KRS 141.020 or 141.040 and 141.0401 for alternative jet fuel producers in an amount certified by the department under this section, with the ordering of the credits as provided in KRS 141.0205.

(b) For taxable years beginning on or after January 1, 2029, but before January 1, 2035, an eligible taxpayer may claim a credit at a rate of:

Fifty cents ($0.50) per gallon to a feedstock provider supplying either eligible feedstocks or SBC to an alternative jet fuel producer;
One dollar and fifty cents ($1.50) per gallon to an alternative jet fuel producer that processes eligible feedstocks or blends SBC with conventional jet fuel to produce alternative jet fuel;
Two dollars ($2) per gallon to an alternative jet fuel producer that processes eligible feedstocks or blends SBC with conventional jet fuel to produce agriculturally based alternative jet fuel; or
Two dollars and fifty cents ($2.50) per gallon to an alternative jet fuel producer that processes eligible feedstocks or blends SBC with conventional jet fuel to produce an agriculturally based alternative jet fuel using an eligible feedstock that was produced in the Commonwealth.

(3) (a) The credit allowed in subsection (2) of this section shall not be carried forward to other taxable years.

(b) The total credit allowed in subsection (2)(b)1. and 2. of this section shall not exceed two million dollars ($2,000,000) per eligible taxpayer per taxable year.

(c) The credits allowed in subsection (2) of this section may stack if the alternative jet fuel producer is the same as the feedstock provider and shall not exceed three dollars ($3) per gallon per entity.

(d) The aggregate total credit certified in a calendar year shall not exceed twenty million dollars ($20,000,000). If the aggregate total of credits certified exceeds twenty million dollars ($20,000,000), the department shall apportion credits pro rata among eligible taxpayers up to the twenty million dollar ($20,000,000) limit.

(4) The department, in conjunction with the Kentucky Department of Agriculture and the Energy and Environment Cabinet, shall promulgate emergency and ordinary administrative regulations in accordance with KRS Chapter 13A to adopt:

(a) Forms and procedures necessary for implementation, calculation, reporting, and certification of the credit no later than October 1, 2028;

(b) Verification standards and processes to ensure the fuel meets the requirements to be alternative jet fuel or agriculturally based alternative jet fuel; and

(c) Verification standards and processes to ensure each alternative jet fuel producer and feedstock provider meets the criteria established in subsection (1)(c) and (f) of this section.

(5) The department, Kentucky Department of Agriculture, and Energy and Environment Cabinet shall report to the Interim Joint Committee on Appropriations and Revenue when administrative regulations have been promulgated under subsection (4) of this section, and the credit provided in this section shall not be approved prior to the report.

(6) (a) An eligible taxpayer seeking approval for the credit under this section shall:

Submit an application to the department, on a form as prescribed by the department, by January 15, 2030, following the close of the calendar year, and each January 15 thereafter as long as the credit is available; and
Provide the:

a. Taxpayer's identification number; and

b. Description and amount or volume of alternative jet fuel, eligible feedstock, or SBC:

i. Produced, including anticipated production amounts, for the calendar year; or

ii. Blended, including anticipated production amounts, for the calendar year.

(b) The department shall:

Review all applications submitted by eligible taxpayers by February 15, 2030, and each February 15 thereafter as long as the credit is available;
Determine the qualifying volumes of alternative jet fuel, eligible feedstock, or SBC per eligible taxpayer; and
Issue a certification by March 1, 2030, and each March 1 thereafter as long as the credit is available, of the credit amount approved for each eligible taxpayer.

(7) (a) In order for the General Assembly to evaluate the alternative jet fuel producer credit, by November 1, 2030, and each November 1 thereafter, as long as the tax credit is claimed on any tax return filed, the department shall report the following to the Legislative Research Commission for referral to the Interim Joint Committee on Appropriations and Revenue and the Department of Agriculture:

The number of tax returns, by the tax type of return filed, claiming the credit for each taxable year;
The total amount of credit claimed on returns filed for each taxable year;
The total number of gallons claimed per return filed of:

a. Eligible feedstock or SBC provided;

b. Eligible feedstock processed or SBC blended with conventional jet fuel to produce alternative jet fuel;

c. Agriculturally based alternative jet fuel produced; and

d. Agriculturally based alternative jet fuel produced using an eligible feedstock that was produced in the Commonwealth;

The cumulative number of credits claimed by county, as identified by the mailing address on the return filed for each taxable year; and
a. In the case of taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000), the total amount of credits claimed for each adjusted gross income range for each taxable year.

b. In the case of corporations, based on ranges of net income of no larger than fifty thousand dollars ($50,000), the total amount of credit claimed for each net income range for each taxable year.

Effective: April 27, 2026

History: Created 2026 Ky. Acts ch. 198, sec. 42, effective April 27, 2026.

141.418 Nonrefundable credit for voluntary environmental remediation.

(1) As used in this section:

(a) "Hazardous substances" shall have the meaning provided in KRS 224.1-400;

(b) "Pollutant or contaminant" shall have the meaning provided in KRS 224.1- 400;

(d) "Release" shall have the meaning as provided in either or both KRS 224.1-400 and 224.60-115;

(e) "Qualifying voluntary environmental remediation property" means real property subject to the provisions of KRS 224.1-400, 224.1-405, or 224.60- 135 where the Energy and Environment Cabinet has made a determination that:

All releases of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property occurred prior to the property owner's acquisition of the property;
The property owner made all appropriate inquiry into previous ownership and uses of the property in accordance with generally accepted practices;
The property owner or a responsible party has provided all legally required notices with respect to hazardous substances, pollutants, contaminants, petroleum, or petroleum products found at the property;
The property owner is in compliance with all land use restrictions and does not impede the effectiveness or integrity of any institutional control;
The property owner complied with any information request or administrative subpoena under KRS Chapter 224; and
The property owner is not affiliated with any person who is potentially liable for the release of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property pursuant to KRS 224.1-400, 224.1-405, or 224.60-135, through:

a. Direct or indirect familial relationship;

b. Any contractual, corporate, or financial relationship, excluding relationships created by instruments conveying or financing title or by contracts for sale of goods or services; or

c. Reorganization of a business entity that was potentially liable;

(f) "Expenditures" means payment for work to characterize the extent of contamination and to remediate the contamination at a qualifying voluntary environmental remediation property; and

(g) "Taxpayer" means an individual subject to tax under KRS 141.020 or a corporation subject to tax under KRS 141.040.

(2) (a) There shall be allowed a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 for taxable years beginning after December 31, 2004, and against the tax imposed by KRS 141.0401 for taxable years beginning after December 31, 2006, for taxpayer expenditures made at a qualifying voluntary environmental remediation property in order to correct the effect of a release of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property pursuant to KRS 224.1-400, 224.1-405, or 224.60-135, consistent with a corrective action plan approved by the Energy and Environment Cabinet pursuant to KRS 224.1-400, 224.1- 405, or 224.60-135, and provided the cleanup was not financed through a public grant program or the petroleum storage tank environmental assurance fund.

(b) The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of the credits as provided in KRS 141.0205.

(3) The maximum total credit for each taxpayer shall not exceed one hundred fifty thousand dollars ($150,000). For purposes of this section, an affiliated group of taxpayers required to file a consolidated return under KRS 141.200 shall be treated as one (1) taxpayer.

(4) A taxpayer claiming a credit under this section shall submit receipts to the Energy and Environment Cabinet in proof of the expenditures claimed. The Energy and Environment Cabinet shall verify the receipts. After the receipts are verified, the Finance and Administration Cabinet shall notify the taxpayer of eligibility for the credit.

(5) The credit may be first claimed on the income tax return of the taxpayer filed in the taxable year during which the credit was certified. The amount of the allowable credit for any taxable year shall be twenty-five percent (25%) of the maximum credit approved. The credit may be carried forward for ten (10) successive taxable years.

(6) If the taxpayer is a pass-through entity, the taxpayer shall apply the credit against the limited liability entity tax imposed by KRS 141.0401, and shall also pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.

Effective: July 15, 2010

History: Amended 2010 Ky. Acts ch. 24, sec. 112, effective July 15, 2010. -- Amended 2007 Ky. Acts ch. 100, sec. 4, effective June 26, 2007. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 32, effective June 28, 2006. -- Created 2005 Ky. Acts ch. 168, sec. 140, effective March 18, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.419 Definitions for section -- Refundable credit for qualifying expenditures at qualifying decontamination property -- Administrative regulations -- Reporting.

(1) As used in this section:

(a) "Assignee" means the taxpayer to whom the credit allowed under this section is transferred;

(b) "Exempt entity" means any tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, any political subdivision of the Commonwealth, any state or local agency, board, or commission, or any quasi-governmental entity;

(d) "Qualifying decontamination property" has the same meaning as in KRS 224.1-420; and

(e) "Taxpayer" means any:

Entity that is subject to the taxes imposed by KRS 141.020 or KRS 141.040 and 141.0401; or
Exempt entity and may include any individual, corporation, limited liability company, business development corporation, partnership, limited partnership, sole proprietorship, association, joint stock company, receivership, trust, professional service organization, or other legal entity through which business is conducted that claims the credit or transfers the credit under this section.

(2) For taxable years beginning on or after January 1, 2022, but before January 1, 2032, a taxpayer making a qualifying expenditure at a qualifying decontamination property shall be allowed a refundable credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401, with the ordering of credits as provided in KRS 141.0205.

(3) The department may promulgate administrative regulations in accordance with the provisions of KRS Chapter 13A to establish policies and procedures to implement the provisions of this section.

(4) Any taxpayer approved for credit under this section shall not also claim or apply for credit related to the remediation or decontamination of the same qualifying property under KRS 141.418.

(5) The taxpayer receiving the credits may assign, sell, or transfer, in whole or in part, the tax credit to any other taxpayer. Within thirty (30) days of credit transfer, the assignor shall provide written notice to the department of its intent to transfer or sell the tax credit along with supporting documentation prescribed by the department which shall include but not be limited to:

(a) Date on which the transfer is effective;

(b) Assignee's name, taxpayer identification number, address, and bank routing and transfer number; and

(6) (a) The purpose of this credit is to encourage investment in and decontamination or remediation of qualifying decontamination property. In order for the General Assembly to evaluate the fulfillment of the purpose stated in this section, the department shall provide the following information on a cumulative basis for each taxable year to provide a historical impact of the tax credit to the Commonwealth:

The number of tax returns, by the tax type of return filed, claiming the credit for each taxable year;
The total amount of credit claimed on returns filed for each taxable year;
The cumulative number of projects by county, as identified by the county in which the qualifying decontamination project is located, for each taxable year;
The cumulative total of credits claimed by county, as identified by the county in which the qualifying decontamination project is located for each taxable year;
a. In the case of taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000), the total amount of credits claimed for each adjusted gross income range for each taxable year; and

b. In the case of corporations, based on ranges of net income of no larger than fifty thousand dollars ($50,000), the total amount of credits claimed for each net income range for each taxable year; and

Any other taxpayer information necessary for the General Assembly to evaluate this credit.

(b) The report required by paragraph (a) of this subsection shall be submitted to the Interim Joint Committee on Appropriations and Revenue no later than November 1, 2024, and annually thereafter as long as the decontamination tax credit is claimed on any tax return filed.

Effective: July 14, 2022

History: Created 2022 Ky. Acts ch. 212, sec. 52, effective July 14, 2022.

141.420 Repealed, 2018.

[Repealed]

141.421 Tax incentives for alternative fuel, gasification, and renewable energy facilities.

(1) As used in this section:

(a) "Approved company" has the same meaning as in KRS 154.27-010;

(b) "Eligible project" has the same meaning as in KRS 154.27-010;

(d) "Kentucky gross profits" has the same meaning as in KRS 141.0401; and

(e) "Tax credit" means the tax credit allowed in KRS 154.27-080.

(2) An approved company shall compute the income tax credit as provided in this section.

Compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the eligible project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the eligible project; and
Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.

(4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to an eligible project at the rates provided in KRS 141.020(2).

(b) The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.

(d) If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.

(5) Notwithstanding any other provisions of this chapter, the net income subject to tax, tax credit, and estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner's, member's, shareholder's, or beneficiary's distributive share of net income or credit of a pass-through entity or trust.

(6) (a) Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility; and

(7) If an approved company can show to the satisfaction of the department that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the eligible project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the eligible project using an alternative method approved by the department.

(8) The department may promulgate administrative regulations and require the filing of forms designed by the department to reflect the intent of this section and KRS 154.27-080 and the allowable income tax credit which an approved company may retain under this section and KRS 154.27-080.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 56, effective June 27, 2019. -- Created 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 12, effective August 30, 2007.

Alternative Fuel Producer Tax Credits Alternative Fuel Producer Tax Credits

141.422 Definitions for KRS 141.422 to 141.425.

As used in KRS 141.422 to 141.425:

(1) "Annual biodiesel and renewable diesel tax credit cap" means:

(a) For calendar years beginning prior to January 1, 2008, one million five hundred thousand dollars ($1,500,000);

(b) For the calendar year beginning on January 1, 2008, five million dollars ($5,000,000);

(c) For calendar years beginning on or after January 1, 2009, but before January 1, 2021, ten million dollars ($10,000,000);

(2) "Annual biodiesel, renewable diesel, and renewable chemical production tax credit cap" means, for calendar years beginning on or after January 1, 2021, ten million dollars ($10,000,000);

(3) "Annual cellulosic ethanol tax credit cap" means five million dollars ($5,000,000), unless the annual cellulosic ethanol tax credit cap is modified pursuant to KRS 141.4248, in which case the cap established by KRS 141.4248 shall be the annual cellulosic ethanol tax credit cap for that year. Any adjustments to the annual cellulosic ethanol tax credit cap made pursuant to KRS 141.4248 shall be made on an annual basis and shall not carry forward to subsequent years;

(4) "Annual ethanol tax credit cap" means five million dollars ($5,000,000), unless the annual credit cap is modified pursuant to KRS 141.4248, in which case the cap established by KRS 141.4248 shall be the annual ethanol tax credit cap for that

year. Any adjustments to the annual ethanol tax credit cap made pursuant to KRS 141.4248 shall be made on an annual basis and shall not carry forward to subsequent years;

(5) "Biodiesel" means a renewable, biodegradeable, mono alkyl ester combustible liquid that is derived from agriculture crops, agriculture plant oils, agriculture residues, animal fats, or waste products that meets current American Society for Testing and Materials specification D6751 for biodiesel fuel (B100) blend stock distillate fuels;

(6) "Biodiesel producer" means an entity that manufactures biodiesel at a location in this Commonwealth;

(7) "Cellulosic ethanol" means ethyl alcohol for use as motor fuel that meets the current American Society for Testing and Materials specification D4806 for ethanol that is produced from cellulosic biomass materials of any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, including:

(a) Plant wastes from industrial processes such as sawdust and paper pulp;

(b) Energy crops grown specifically for fuel production such as switchgrass; or

(8) "Cellulosic ethanol producer" means an entity that uses cellulosic biomass materials to manufacture cellulosic ethanol at a location in this Commonwealth;

(9) "Blended biodiesel" means a blend of biodiesel with petroleum diesel so that the percentage of biodiesel in the blend is at least two percent (2%) (B2 or greater);

(10) "Ethanol" means ethyl alcohol produced from corn, soybeans, or wheat for use as a motor fuel that meets the current American Society for Testing and Materials specification D4806 for ethanol;

(11) "Ethanol-based tax credits" means the cellulosic ethanol tax credit provided for in KRS 141.4244 and the ethanol tax credit provided for in KRS 141.4242;

(12) "Ethanol producer" means an entity that uses corn, soybeans, or wheat to manufacture ethanol at a location in this Commonwealth;

(13) "Renewable diesel" means a renewable, biodegradeable, non-ester combustible liquid that:

(a) Is derived from biomass resources as defined in KRS 152.715; and

(b) Meets the current American Society for Testing and Materials Specification D396 for fuel oils intended for use in various types of fuel-oil-burning equipment; D975 for diesel fuel oils suitable for various types of diesel fuel engines; or D1655 for aviation turbine fuels; and

(14) "Renewable diesel producer" means an entity that manufactures renewable diesel at a location in this Commonwealth.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 26, effective April 15, 2020. -- Amended 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 20, effective August 30, 2007. -- Created 2005 Ky. Acts ch. 168, sec. 136, effective March 18, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.423 Nonrefundable credit for biodiesel producer, biodiesel blender, or renewable diesel producer.

(1) (a) A biodiesel producer, biodiesel blender, or renewable diesel producer shall be entitled to a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and KRS 141.0401 in an amount certified by the department under subsection (4) of this section.

(b) The credit rate shall be:

One dollar ($1) per biodiesel gallon produced by a biodiesel producer;
One dollar ($1) per gallon of biodiesel used in the blending process by a biodiesel blender; and
One dollar ($1) per gallon of renewable diesel produced by a renewable diesel producer; unless the total amount of approved credit for all biodiesel producers, biodiesel blenders, and renewable diesel producers exceeds the annual biodiesel and renewable diesel tax credit cap for calendar years beginning prior to January 1, 2021, or the annual biodiesel, renewable diesel, and renewable chemical production tax credit cap for calendar years beginning on or after January 1, 2021.

(c) For calendar years beginning prior to January 1, 2021, if the total amount of approved credit for all biodiesel producers, biodiesel blenders, and renewable diesel producers exceeds the annual biodiesel and renewable diesel tax credit cap, the department shall determine the amount of credit each biodiesel producer, biodiesel blender, and renewable diesel producer receives by multiplying the annual biodiesel and renewable diesel tax credit cap by a fraction, the numerator of which is the amount of approved credit for the biodiesel producer, biodiesel blender, and renewable diesel producer and the denominator of which is the total approved credit for all biodiesel producers, biodiesel blenders, and renewable diesel producers.

(d) For calendar years beginning on or after January 1, 2021, if the total amount of approved credit for all biodiesel producers, biodiesel blenders, renewable diesel producers, and renewable chemical producers exceeds the annual biodiesel, renewable diesel, and renewable chemical production tax credit cap, the department shall determine the amount of credit each biodiesel producer, biodiesel blender, renewable diesel producer, and renewable chemical producer receives by multiplying the annual biodiesel, renewable diesel, and renewable chemical production tax credit cap by a fraction, the numerator of which is the amount of approved credit for the each producer and the denominator of which is the total approved credit for all producers.

(e) The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of credits as provided in KRS 141.0205.

(2) Re-blending of blended biodiesel shall not qualify for the credit provided under this section.

(3) The credit allowed in subsection (1) of this section shall not be carried forward to a return for any other period.

(4) (a) Each biodiesel producer, biodiesel blender, and renewable diesel producer eligible for the credit provided under subsection (1) of this section shall file a tax credit claim for biodiesel gallons produced or blended in this state or for renewable diesel produced in this state on forms prescribed by the department by the fifteenth day of the first month following the close of the preceding calendar year.

(b) The department shall determine the amount of the approved credit based on the amount of biodiesel produced, biodiesel blended, renewable diesel produced, or renewable chemical produced in this state during the preceding calendar year and issue a credit certificate to the biodiesel producer, biodiesel blender, renewable diesel producer, or renewable chemical producer by the fifteenth day of the fourth month following the close of the calendar year.

(5) In the case of a biodiesel producer, biodiesel blender, renewable diesel producer, or renewable chemical producer that has a fiscal year end for purposes of computing the tax imposed by KRS 141.020, 141.040, and 141.0401, the amount of approved credit shall be claimed on the return filed for the first fiscal year ending after the close of the preceding calendar year.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 27, effective April 15, 2020. -- Amended 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 21, effective August 30, 2007. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 33, effective June 28, 2006. -- Created 2005 Ky. Acts ch. 168, sec. 137, effective March 18, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.4231 Renewable chemical production tax credit.

(1) (a) An eligible business that:

Has entered into an agreement under KRS 246.700(3);
Receives certification from the Department of Agriculture of the preliminary tax credit under KRS 246.700(6); and
Receives authorization from the department regarding the amount of tax credit that is allowed; may claim the renewable chemical production tax credit in an amount equal to the amount authorized by the department as provided in KRS 141.423.

(b) For taxable years beginning on or after January 1, 2021, the renewable chemical production tax credit shall be nonrefundable, nontransferable, and allowed against taxes imposed by KRS 141.020 or 141.040 and 141.0401, with the ordering of the credits as provided in KRS 141.0205.

(c) 1. Any amount of credit that a taxpayer is unable to utilize during a taxable year may be carried forward for use in a succeeding taxable year for a period not to exceed three (3) taxable years.

Any amount of credit not used within the three (3) taxable years shall be lost.
No amount of credit may be carried back to a prior taxable year by any taxpayer.

(2) If the eligible business is a pass-through entity, the eligible business may apply the credit against the limited liability entity tax imposed by KRS 141.0401, and shall pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.

(3) If the Department of Agriculture rescinds any tax credit under KRS 246.700(9), the repayment of any tax credit by the taxpayer shall be:

(a) Considered a tax payment due and payable to the Kentucky State Treasurer; and

(b) Collected by the department in the same manner as failure to pay the tax shown due or required to be shown due with the filing of that return.

(4) (a) In order for the General Assembly to evaluate the Renewable Chemical Tax Credit Program, the department, in cooperation with the Department of Agriculture, shall submit to the Interim Joint Committee on Appropriations and Revenue a cumulative report describing the activities of the program by taxable year.

(b) The report shall include:

The aggregate number of pounds, by each type of renewable chemicals produced in this state, for all successful tax credit applicants under the program;
The aggregate gross receipts from sales, by each type of renewable chemicals produced in this state, for all successful tax credit applicants under the program;
The number of employees located in this state of all successful tax credit applicants during the calendar year immediately preceding the calendar year for which the successful applicants first applied for a tax credit under the program;
The number of employees located in this state of all successful tax credit applicants during each calendar year that the tax credit is claimed;
The number of tax credit certificates and aggregate amount of tax credits awarded under the program for each calendar year; and
For each eligible business issued a renewable chemical production tax credit during each taxable year:

a. The county within which the eligible business is producing the renewable chemical;

b. The amount of the tax credit claimed by the eligible business;

c. The manner in which the eligible business first qualified as an eligible business, whether by organizing, expanding, or locating in this state;

d. The amount of renewable chemical production tax credit claimed during each taxable year; and

e. Any repayment of incentives by the business, if the business does not meet the requirements of the agreement.

Effective: April 15, 2020

History: Created 2020 Ky. Acts ch. 91, sec. 25, effective April 15, 2020.

141.424 Biodiesel credit distribution for pass-through entities.

(1) In the case of a biodiesel producer, biodiesel blender, or renewable diesel producer which is a pass-through entity not subject to tax under KRS 141.040, the amount of approved credit shall be applied against the tax imposed by KRS 141.0401 at the entity level, and shall also be distributed to each partner, member, shareholder, or beneficiary based on the partner's, member's, shareholder's, or beneficiary's distributive share of the income of the pass-through entity. Each biodiesel producer, biodiesel blender, or renewable diesel producer shall notify the department electronically of all partners, members, shareholders, or beneficiaries who may claim any amount of the approved credit. Failure to provide information to the department in a manner prescribed by administrative regulation may constitute the forfeiture of available credits to all partners, members, shareholders, or beneficiaries in the pass-through entity.

(2) An agricultural cooperative association organized under KRS Chapter 272 or 272A may elect to apportion pro rata any amount of the approved credit among the members of the association and, if a limited cooperative association, among patron members only, on the basis of the quantity or value of business done with or for such members for the taxable year. The agricultural cooperative association shall notify the department electronically of all members who may claim any amount of the approved credit if the election is made.

Effective: July 12, 2012

History: Amended 2012 Ky. Acts ch. 160, sec. 134, effective July 12, 2012. -- Amended 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 22, effective August 30, 2007. - - Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 34, effective June 28, 2006. -- Created 2005 Ky. Acts ch. 168, sec. 138, effective March 18, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.4242 Nonrefundable credit for producers of ethanol.

(1) (a) For taxable years beginning after December 31, 2007, an ethanol producer shall be eligible for a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401 in an amount certified by the department under subsection (3) of this section. The credit rate shall be one dollar ($1) per ethanol gallon produced, unless the total amount of approved credit for all ethanol producers exceeds the annual ethanol tax credit cap. If the total amount of approved credit for all ethanol producers exceeds the annual ethanol tax credit cap, the department shall determine the amount of credit each ethanol producer receives by multiplying the annual ethanol tax credit cap by a fraction, the numerator of which is the amount of approved credit for the ethanol producer and the denominator of which is the total approved credit for all ethanol producers.

(2) The credit provided under subsection (1) of this section shall not be carried forward to a return for any other period.

(3) Each ethanol producer eligible for the credit provided under subsection (1) of this section shall file an ethanol tax credit claim for ethanol gallons produced in this state on forms prescribed by the department by January 15 following the close of the preceding calendar year. The department shall determine the amount of the approved credit based on the amount of ethanol produced in this state during the preceding calendar year and shall issue a credit certificate to the ethanol producer by April 15 following the close of the preceding calendar year.

(4) In the case of an ethanol producer that has a fiscal year end for purposes of computing the tax imposed by KRS 141.020, 141.040, and 141.0401, the amount of approved credit provided under subsection (1) of this section shall be claimed on the return filed for the first fiscal year ending after the close of the preceding calendar year.

Effective: August 30, 2007

History: Created 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 24, effective August 30, 2007.

141.4244 Nonrefundable credit for producers of cellulosic ethanol.

(1) (a) For taxable years beginning after December 31, 2007, a cellulosic ethanol producer shall be eligible for a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401 in an amount certified by the department under subsection (3) of this section. The credit rate shall be one dollar ($1) per cellulosic ethanol gallon produced, unless the total amount of approved credit for all cellulosic ethanol producers exceeds the annual cellulosic ethanol tax credit cap. If the total amount of approved credit for all cellulosic ethanol producers exceeds the annual cellulosic ethanol tax credit cap, the department shall determine the amount of credit each cellulosic ethanol producer receives by multiplying the annual cellulosic ethanol tax credit cap by a fraction, the numerator of which is the amount of approved credit for the cellulosic ethanol producer and the denominator of which is the total approved credit for all cellulosic ethanol producers.

(2) The credit provided under subsection (1) of this section shall not be carried forward to a return for any other period.

(3) Each cellulosic ethanol producer eligible for the credit provided under subsection

(1) of this section shall file a cellulosic ethanol tax credit claim for cellulosic ethanol gallons produced in this state on forms prescribed by the department by January 15 following the close of the preceding calendar year. The department shall determine the amount of the approved credit based on the amount of cellulosic ethanol produced in this state during the preceding calendar year and shall issue a credit certificate to the cellulosic ethanol producer by April 15 following the close of the preceding calendar year.

(4) In the case of a cellulosic ethanol producer that has a fiscal year end for purposes of computing the tax imposed by KRS 141.020, 141.040, and 141.0401, the amount of approved credit provided under subsection (1) of this section shall be claimed on the return filed for the first fiscal year ending after the close of the preceding calendar year.

Effective: August 30, 2007

History: Created 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 23, effective August 30, 2007.

141.4246 Ethanol or cellulosic ethanol credit distribution for pass-through entities.

(1) An ethanol producer or a cellulosic ethanol producer that is a pass-through entity not subject to tax under KRS 141.040 shall apply the amount of approved credit against the tax imposed by KRS 141.0401 at the entity level, and shall also distribute the amount of the approved credit to each partner, member, shareholder, or beneficiary based on the partner's, member's, shareholder's, or beneficiary's distributive share of the income of the pass-through entity.

(2) Each ethanol producer or cellulosic ethanol producer shall notify the department electronically of all partners, members, shareholders, or beneficiaries who may claim any amount of the approved credit. Failure to provide information to the department in a manner prescribed by administrative regulation may result in the forfeiture of available credits to all partners, members, shareholders, or beneficiaries in the pass-through entity.

(3) An agricultural cooperative association organized under KRS Chapter 272 or 272A may elect to apportion pro rata any amount of the approved credit among the members of the association and, if a limited cooperative association, among patron members only, on the basis of the quantity or value of business done with or for such members for the taxable year. The agricultural cooperative association shall notify the department electronically of all members who may claim any amount of the approved credit if the election is made.

(4) Failure to provide information to the department in a manner prescribed by administrative regulation may result in the forfeiture of available credits to all partners, members, shareholders, or beneficiaries in the pass-through entity or agricultural cooperative association.

Effective: July 12, 2012

History: Amended 2012 Ky. Acts ch. 160, sec. 135, effective July 12, 2012. -- Created 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 25, effective August 30, 2007.

141.4248 Transfer of unused ethanol or cellulosic ethanol tax credit caps established by KRS 141.4242 and 141.4244.

(1) (a) If, in any calendar year, all approved applications for credit filed pursuant to KRS 141.4242 and 141.4244 do not completely use the annual cellulosic ethanol tax credit cap established by KRS 141.4244 or annual ethanol tax credit cap established by KRS 141.4242, as the case may be; and

(b) The other ethanol-based tax credit program has total approved applications for credit that exceed the annual cap established for that program; then the unused cap may be transferred to the other ethanol-based tax credit program.

(2) The amount of credit cap transferred from one (1) program to the other shall not exceed the amount necessary for all approved applicants to receive the one dollar ($1) per gallon credit provided for in KRS 141.4242 or 141.4244, as the case may be.

(3) Any unused cap remaining for any calendar year after both programs have been fully funded shall not be available to be used in any other year.

Effective: August 30, 2007

History: Created 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 26, effective August 30, 2007.

141.425 Authorization for administrative regulations to administer biodiesel credit.

The department may promulgate administrative regulations necessary to administer KRS 141.422 to 141.424.

Effective: March 18, 2005

History: Created 2005 Ky. Acts ch. 168, sec. 139, effective March 18, 2005.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.428 Kentucky Clean Coal Incentive Act -- Definitions -- Tax credit -- Administrative regulations.

(1) As used in this section:

(a) "Clean coal facility" means an electric generation facility beginning commercial operation on or after January 1, 2005, at a cost greater than one hundred fifty million dollars ($150,000,000) that is located in the Commonwealth of Kentucky and is certified by the Energy and Environment Cabinet as reducing emissions of pollutants released during generation of electricity through the use of clean coal equipment and technologies;

(b) "Clean coal equipment" means equipment purchased and installed for commercial use in a clean coal facility to aid in reducing the level of pollutants released during the generation of electricity from eligible coal;

(c) "Clean coal technologies" means technologies incorporated for use within a clean coal facility to lower emissions of pollutants released during the generation of electricity from eligible coal;

(d) "Eligible coal" means coal that is subject to the tax imposed under KRS 143.020;

(e) "Ton" means a unit of weight equivalent to two thousand (2,000) pounds; and

(f) "Taxpayer" means taxpayer as defined in KRS 131.010(4).

(2) Effective for tax years ending on or after December 31, 2006, a nonrefundable, nontransferable credit shall be allowed for:

(a) Any electric power company subject to tax under KRS 136.120 and certified as a clean coal facility or any taxpayer that owns or operates a clean coal facility and purchases eligible coal that is used by the taxpayer in a certified clean coal facility; or

(b) A parent company of an entity identified in paragraph (a) of this subsection if the subsidiary is wholly owned.

(3) (a) The credit may be taken against the taxes imposed by:

KRS 136.120; or
KRS 141.020 or 141.040, and 141.0401.

(b) The credit shall not be carried forward and must be used on the tax return filed for the period during which the eligible coal was purchased. The Energy and Environment Cabinet must approve and certify use of the clean coal equipment and technologies within a clean coal facility before any taxpayer may claim the credit.

(c) The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of credits as provided in KRS 141.0205.

(4) The amount of the allowable credit shall be two dollars ($2) per ton of eligible coal purchased that is used to generate electric power at a certified clean coal facility.

(5) Each taxpayer eligible for the credit provided under subsection (2) of this section shall file a clean coal incentive credit claim on forms prescribed by the department. At the time of filing for the credit, the taxpayer shall submit an electronic report verifying the tons of coal subject to the tax imposed by KRS 143.020 purchased for each year in which the credit is claimed. The department shall determine the amount of the approved credit and issue a credit certificate to the taxpayer.

(6) Corporations and pass-through entities subject to the tax imposed under KRS 141.040 or 141.0401 shall be eligible to apply, subject to the conditions imposed under this section, the approved credit against its liability for the taxes, in consecutive order as follows:

(a) The credit shall first be applied against both the tax imposed by KRS 141.0401 and the tax imposed by KRS 141.020 or 141.040, with the ordering of credits as provided in KRS 141.0205;

(b) The credit shall then be applied to the tax imposed by KRS 136.120. The credit shall meet the entirety of the taxpayer's liability under the first tax listed in consecutive order before applying any remaining credit to the next tax listed. The taxpayer's total liability under each preceding tax must be fully met before the remaining credit can be applied to the subsequent tax listed in consecutive order.

(7) If the taxpayer is a pass-through entity not subject to tax under KRS 141.040, the amount of approved credit shall be applied against the tax imposed by KRS 141.0401 at the entity level, and shall also be distributed to each partner, member, or shareholder based on the partner's, member's, or shareholder's distributive share of the income of the pass-through entity. The credit shall be claimed in the same manner as specified in subsection (6) of this section. Each pass-through entity shall notify the department electronically of all partners, members, or shareholders who may claim any amount of the approved credit. Failure to provide information to the department in a manner prescribed by regulation may constitute the forfeiture of available credits to all partners, members, or shareholders associated with the pass- through entity.

(8) The taxpayer shall maintain all records associated with the credit for a period of five

(5) years. Acceptable verification of eligible coal purchased shall include invoices that indicate the tons of eligible coal purchased from a Kentucky supplier of coal and proof of remittance for that purchase.

(9) The department shall develop the forms required under this section, specifying the procedure for claiming the credit, and applying the credit against the taxpayer's liability in the order provided under subsections (6) and (7) of this section.

(10) The Office of Energy Policy within the Energy and Environment Cabinet and the department shall promulgate administrative regulations necessary to administer this section.

(11) This section shall be known as the Kentucky Clean Coal Incentive Act.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 57, effective June 27, 2019. -- Amended 2018 Ky. Acts ch. 29, sec. 6, effective July 14, 2018. -- Amended 2010 Ky. Acts ch. 24, sec. 113, effective July 15, 2010. -- Amended 2007 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 28, effective August 30, 2007. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 35, effective June 28, 2006. -- Created 2005 Ky. Acts ch. 168, sec. 142, effective March 18, 2005.

Legislative Research Commission Note (4/27/2018). KRS 136.070 was repealed in 2018 Ky. Acts chs. 171 and 207, but a conforming amendment was not made to this statute to address the reference it contains to KRS 136.070. The Reviser of Statutes has determined that making such a conforming change during the 2018 codification exceeds the permissible correction of manifest clerical or typographical errors under KRS 7.136(1)(h). Therefore, the reference to KRS 136.070 remains unchanged and would have to be changed pursuant to future legislative action.

Legislative Research Commission Note (4/27/2018). KRS 141.0405 was repealed in 2018 Ky. Acts chs. 171 and 207, but a conforming amendment was not made to this statute to address the reference it contains to KRS 141.0405. The Reviser of Statutes has determined that making such a conforming change during the 2018 codification exceeds the permissible correction of manifest clerical or typographical errors under KRS 7.136(1)(h). Therefore, the reference to KRS 141.0405 remains unchanged and would have to be changed pursuant to future legislative action.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.430 Repealed, 2018.

[Repealed]

New Markets Development Program Tax Credit New Markets Development Program Tax Credit

141.432 Definitions for KRS 141.432 to 141.434.

As used in KRS 141.432 to 141.434, unless the context requires otherwise:

(1) "Applicable percentage" means zero percent (0%) for each of the first two (2) credit allowance dates, seven percent (7%) for the third credit allowance date, and eight percent (8%) for the next four (4) credit allowance dates;

(2) "Credit allowance date" means, with respect to any qualified equity investment:

(a) The date on which the investment is initially made; and

(b) Each of the six (6) anniversary dates of that date thereafter;

(3) "Long-term debt security" means any debt instrument issued by a qualified community development entity, at par value or a premium, with an original maturity date of at least seven (7) years from the date of its issuance, with no acceleration of repayment, amortization, or prepayment features prior to its original maturity date. The qualified community development entity that issues the debt instrument may not make cash interest payments on the debt instrument during the period commencing with its issuance and ending on its final credit allowance date in excess of the cumulative operating income, as defined in the regulations promulgated under 26 U.S.C. sec. 45D, of the qualified community development entity for that same period, which shall be calculated prior to giving effect to the expense of the cash interest payments. The foregoing shall in no way limit the holder's ability to accelerate payments on the debt instrument in situations where the qualified community development entity has defaulted on covenants designed to ensure compliance with KRS 141.432 to 141.434 or 26 U.S.C. sec. 45D;

(4) "Purchase price" means the amount paid to a qualified community development entity that issues a qualified equity investment for the qualified equity investment;

(5) "Qualified active low-income community business" has the same meaning given that term in 26 U.S.C. sec. 45D. A business shall be considered a qualified active low-income community business for the duration of the qualified community development entity's investment in, or loan to, the business if the entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low-income community business throughout the entire period of the investment or loan. The term excludes any business that derives or projects to derive fifteen percent (15%) or more of its annual revenue from the rental or sale of real estate. This exclusion does not apply to a business that is controlled by, or under common control with, another business if the second business:

(a) Does not derive or project to derive fifteen percent (15%) or more of its annual revenue from the rental or sale of real estate; and

(b) Is the primary tenant of the real estate leased from the first business;

(6) "Qualified community development entity" has the same meaning given that term in 26 U.S.C. sec. 45D; provided that the entity has entered into, or is controlled by an entity that has entered into, an allocation agreement with the Community Development Financial Institutions Fund of the United States Treasury Department with respect to credits authorized by 26 U.S.C. sec. 45D, which includes the Commonwealth of Kentucky within the service area set forth in such allocation agreement;

(7) "Qualified equity investment" means any equity investment in, or long-term debt security issued by, a qualified community development entity that:

(a) Is acquired after June 4, 2010, at its original issuance solely in exchange for cash;

(b) 1. In the case of a qualified equity investment issued prior to January 1, 2014, has at least eighty-five percent (85%) of its cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth by the second anniversary of the initial credit allowance date; and

In the case of a qualified equity investment issued on or after January 1, 2014, has at least one hundred percent (100%) of its cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth by the first anniversary of the initial credit allowance date; and

(c) Is designated by the issuer as a qualified equity investment under this subsection and is certified by the department as not exceeding the limitation contained in KRS 141.434. This term shall include any qualified equity investment that does not meet the provisions of paragraph (a) of this subsection if the investment was a qualified equity investment in the hands of a prior holder. The qualified community development entity shall keep sufficiently detailed books and records with respect to the investments made with the proceeds of the qualified equity investments to allow the direct tracing of the proceeds into qualified low-income community investments in qualified active low-income community businesses in the Commonwealth;

(8) "Qualified low-income community investment" means any capital or equity investment in, or loan to, any qualified active low-income community business made after June 4, 2010. With respect to any one (1) qualified active low-income community business, the maximum amount of qualified low-income community investments that may be made in the business, on a collective basis with all of its affiliates, with the proceeds of qualified equity investments that have been certified under KRS 141.433 shall be ten million dollars ($10,000,000) whether made by one

(1) or several qualified community development entities;

(9) "Tax credit" means a nonrefundable credit against the taxes imposed by KRS 141.020, 141.040, 141.0401, 136.320, 136.330, 136.340, 136.350, 136.370, 136.390, or 304.3-270. For the credit against the taxes imposed by KRS 141.020, 141.040, or 141.0401, the ordering of the credits shall be as provided in KRS 141.0205. An insurance company claiming a tax credit against the insurance premium tax is not required to pay additional retaliatory tax levied pursuant to KRS 304.3-270; and

(10) "Taxpayer" means any individual or entity subject to the tax imposed by KRS 141.020, 141.040, 141.0401, 136.320, 136.330, 136.340, 136.350, 136.370, 136.390, or 304.3-270.

Effective: July 15, 2014

History: Amended 2014 Ky. Acts ch. 102, sec. 29, effective July 15, 2014. -- Created 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 16, effective June 4, 2010.

141.433 Application for New Markets Development Program tax credit.

(1) A qualified community development entity that seeks to have an equity investment or long-term debt security certified as a qualified equity investment and eligible for the tax credit permitted by KRS 141.434 shall apply to the department. The qualified community development entity shall submit an application on a form that the department provides that shall include but not be limited to:

(a) The name, address, tax identification number, and evidence of the certification of the entity as a qualified community development entity;

(b) A copy of an allocation agreement executed by the entity or its controlling entity and the Community Development Financial Institutions Fund, which includes the Commonwealth of Kentucky in its service area;

(c) A certificate executed by an executive officer of the entity attesting that the allocation agreement remains in effect and has not been revoked or canceled by the Community Development Financial Institutions Fund;

(d) A description of the proposed amount, structure, and purchaser of the equity investment or long-term debt security;

(e) The name and tax identification number of any person or entity eligible to utilize tax credits as a result of the issuance of the qualified equity investment;

(f) Information regarding the proposed use of proceeds from the issuance of the qualified equity investment;

(g) A nonrefundable application fee in an amount set by the department. This fee shall be paid to the department and shall be required of each application submitted; and

(h) In the case of applications submitted on or after January 1, 2014, the refundable performance fee required by subsection (8) of this section.

(2) The department shall review applications in the order in which they are received. Within thirty (30) days after receipt of a completed application containing the information necessary for the department to certify a potential qualified equity investment, including the payment of the application fee, the department shall approve or deny the application. If the department intends to deny the application, it shall inform the qualified community development entity, by written notice sent via certified mail and any other such means deemed feasible by the department, of the grounds for the denial. Upon receipt of the notice of intended denial by the qualified community development entity:

(a) If the qualified community development entity provides any additional information required by the department or otherwise completes its application within fifteen (15) days, the application shall be considered completed as of the original date of submission, however the department shall have an additional thirty (30) days to either approve or deny the application as completed; or

(b) If the qualified community development entity fails to provide the information or complete its application within the fifteen (15) day period, the application shall be deemed denied and must be resubmitted in full with a new submission date.

(3) If the application is deemed complete, the department shall certify the proposed equity investment or long-term debt security as a qualified equity investment and eligible for tax credits under KRS 141.432 to 141.434, subject to the annual cap limitations contained in KRS 141.434. The department shall provide written notice sent via certified mail and any other means deemed feasible by the department, of the certification to the qualified community development entity. The notice shall include the names of those taxpayers who are eligible to claim the credits and their respective credit amounts. If the names of the persons or entities that are eligible to claim the credits change due to a transfer of a qualified equity investment or a change in an allocation pursuant to KRS 141.434, the qualified community development entity shall notify the department of such change.

(4) Within ninety (90) days after receipt of the notice of certification, the qualified community development entity shall issue the qualified equity investment and receive cash in the amount of the certified purchase price. The qualified community development entity shall provide the department with evidence of the receipt of the cash investment within ten (10) business days after receipt. If the qualified community development entity does not receive the cash investment and issue the qualified equity investment within ninety (90) days following receipt of the certification notice, the certification shall lapse, and the entity may not issue the qualified equity investment without reapplying to the department for certification. A certification that lapses shall revert back to the department and may be reissued only in accordance with the application process outlined in this section.

(5) The department shall certify qualified equity investments in the order applications are received by the department. Applications received on the same day shall be deemed to have been received simultaneously. For applications received on the same day and deemed complete, the department shall certify, consistent with remaining tax credit capacity, qualified equity investments in proportionate percentages based upon the ratio of the amount of qualified equity investment requested in an application to the total amount of qualified equity investments requested in all applications received on the same day. If a pending request cannot be fully certified because of the limitations contained in KRS 141.434, the department shall certify the portion that may be certified unless the qualified community development entity elects to withdraw its request rather than receive partial credit.

(6) (a) The department may recapture any portion of a tax credit allowed under this section if:

Any amount of federal tax credit that might be available with respect to the qualified equity investment that generated the tax credit under this section is recaptured under 26 U.S.C. sec. 45D. In such case, the department's recapture shall be proportionate to the federal recapture with respect to the qualified equity investment;
The qualified community development entity redeems or makes a principal repayment with respect to the qualified equity investment that generated the tax credit prior to the final credit allowance date of the qualified equity investment. In such case, the department's recapture shall be proportionate to the amount of the redemption or repayment with respect to the qualified equity investment; or
The qualified community development entity fails to invest:

a. In the case of a qualified equity investment issued prior to January 1, 2014, at least eighty-five percent (85%) of the purchase price of the qualified equity investment in qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth within twenty-four (24) months of the issuance of the qualified equity investment and maintain this level of investment in qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth until the last credit allowance date for the qualified equity investment; and

b. In the case of a qualified equity investment issued on or after January 1, 2014, at least one hundred percent (100%) of the purchase price of the qualified equity investment in qualified low- income community investments in qualified active low-income community businesses located in the Commonwealth within twelve (12) months of the issuance of the qualified equity investment and maintain this level of investment in qualified low- income community investments in qualified active low-income community businesses located in the Commonwealth until the last credit allowance date for the qualified equity investment. In this case, the department's recapture shall be proportionate to the amount of the redemption or repayment with respect to the qualified equity investment. For purposes of calculating the amount of qualified low-income community investments held by a qualified community development entity, an investment shall be considered held by the qualified community development entity even if the investment has been sold or repaid; provided that the qualified community development entity reinvests an amount equal to the capital returned to or recovered from the original investment, exclusive of any profits realized, in another qualified active low-income community business in this state within twelve (12) months of the receipt of the capital. A qualified community development entity shall not be required to reinvest capital returned from qualified low-income community investments after the sixth anniversary of the issuance of the qualified equity investment, the proceeds of which were used to make the qualified low-income community investment, and the qualified low-income community investment shall be considered held by the issuer through the qualified equity investment's final credit allowance date.

(b) The department shall provide written notice sent via certified mail or other means deemed feasible by the department, to the qualified community development entity of any proposed recapture of tax credits pursuant to this subsection. The entity shall have ninety (90) days to cure any deficiency indicated in the department's original recapture notice and avoid such recapture. If the entity fails or is unable to cure the deficiency within the ninety (90) day period, the department shall provide the entity and the taxpayer from whom the credit is to be recaptured with a final order of recapture. Any tax credit for which a final recapture order has been issued shall be recaptured by the department from the taxpayer who claimed the tax credit on a tax return.

(7) The department shall through administrative regulations promulgated in accordance with KRS Chapter 13A provide rules to implement the provisions of KRS 141.432 to 141.434, and to administer the allocation of tax credits issued for qualified equity investments.

(8) (a) On or after January 1, 2014, a qualified community development entity that seeks to have an equity investment or long-term debt security certified as a qualified equity investment and eligible for the tax credit permitted by KRS 141.434 shall, as part of the application, pay a refundable performance fee in an amount equal to one-half of one percent (0.5%) of the amount of the equity investment or long-term debt security requested to be certified as a qualified equity investment, not to exceed five hundred thousand dollars ($500,000).

(b) This fee shall be in the nature of a security deposit to ensure compliance on the part of a qualified community development entity. The fee shall be paid to the department and deposited in the New Markets performance guarantee account established by this subsection, and retained there as private funds until compliance with the provisions of this subsection has been established or as otherwise provided by this subsection.

In the case of any application that is ultimately denied pursuant to subsection (2) of this section, the department shall refund the full amount of the fee submitted with the denied application;
In the case of any qualified equity investment that is certified in an amount that is less than the amount requested, due to the limitations contained in KRS 141.434 and pursuant to subsection (5) of this section, the department shall refund a portion of the fee so that only an amount equal to one-half of one percent (0.5%) of the actual certified amount, not to exceed five hundred thousand dollars ($500,000), is retained; and
In the case of any qualified equity investment that is certified as eligible for tax credits, the qualified community development entity may request a refund of the fee no sooner than thirty (30) days after having met all the requirements of this subsection. The refund request shall be made in writing to the department. The department shall review the refund request within thirty (30) days, and shall either comply with the request and issue the refund of the fee, without interest, if the qualified community development entity has met all the requirements of this subsection, or give written notice to the qualified community development entity that it is noncompliant and subject to possible forfeiture of the fee as provided in this subsection.

(d) The qualified community development entity shall forfeit the fee to the Commonwealth as follows:

The entire amount of the fee shall be forfeited if the qualified community development entity and its subsidiary qualified community development entities fail to issue the total amount of qualified equity investment certified by the department and receive cash in exchange therefor within ninety (90) days after receipt of the notice of certification; and
A portion of the fee shall be forfeited if the qualified community development entity, or any subsidiary qualified community development entity, that issues a qualified equity investment certified by the department fails to meet the percentage investment requirement under subsection (6) of this section by the first credit allowance date of the qualified equity investment. The forfeiture shall be proportionate to the amount of the qualified equity investment that is not invested as required by subsection (6) of this section. Forfeiture of the fee under this subparagraph shall be subject to the ninety (90) day cure period allowed under subsection (6) of this section.

(e) The amount of the fee that is forfeited pursuant to this subsection shall be transferred from the New Markets performance guarantee account and deposited into the general fund.

(f) 1. The New Markets performance guarantee account is hereby established as a fiduciary fund within the State Treasury, to be administered by the department solely for the purposes set out in this subsection.

Notwithstanding KRS 45.229, moneys in the account shall not lapse but shall be retained in the account at all times except as provided by this subsection.

Effective: July 15, 2014

History: Amended 2014 Ky. Acts ch. 102, sec. 30, effective July 15, 2014. -- Created 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 17, effective June 4, 2010.

141.434 New Markets Development Program tax credit.

(1) There is hereby created a Kentucky New Markets Development Program tax credit.

(2) A person or entity that makes a qualified equity investment earns a vested right to the tax credit created by subsection (1) of this section. The amount of the credit shall be equal to thirty-nine percent (39%) of the purchase price of the qualified equity investment made by the person or entity claiming the credit. The tax credit may be utilized as follows:

(a) The holder of the qualified equity investment on a particular credit allowance date of the qualified equity investment, whether it be the original purchaser or subsequent holder of the qualified equity investment, may utilize a portion of the tax credit against its tax liability for the taxable year that includes the credit allowance date equal to the applicable percentage for the credit allowance date multiplied by the purchase price paid for the qualified equity investment;

(b) Any tax credit that a taxpayer may not utilize during a particular year may be carried forward for use in any subsequent tax year; and

(c) An insurance company claiming a tax credit against the insurance premium tax is not required to pay additional retaliatory tax levied pursuant to KRS 304.3-270.

(3) No tax credit claimed under this section may be sold or transferred. Tax credits that a partnership, limited liability company, S corporation, or other pass-through entity claims may be allocated to the partners, members, or shareholders of the entity for their direct use in accordance with the provisions of any agreement among the partners, members, or shareholders.

(4) The total amount of tax credits that may be awarded by the department pursuant to KRS 141.432 to 141.434 shall be limited to ten million dollars ($10,000,000) in each fiscal year. Once the department has certified a cumulative amount of qualified equity investments that can result in the utilization of this total amount of tax credits in a fiscal year, the department may not certify any more qualified equity investments. This limitation on qualified equity investments shall be based on scheduled utilization of tax credits without regard to the potential for taxpayers to carry forward tax credits to subsequent tax years.

Effective: July 15, 2014

History: Amended 2014 Ky. Acts ch. 102, sec. 31, effective July 15, 2014. -- Created 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 18, effective June 4, 2010.

Energy Efficiency Products and Homes Tax Credit Energy Efficiency Products and Homes Tax Credit

141.435 Definitions for KRS 141.435 to 141.437.

As used in KRS 141.435 to 141.437:

(1) "Active solar space-heating system" means a system that:

(a) Consists of solar energy collectors that collect and absorb solar radiation combined with electric fans or pumps to transfer and distribute that solar heat;

(b) May include an energy storage space-heating system to provide heat when the sun is not shining; and

(2) "Certified installer" means an installer who has satisfied the professional certification standards established by the North American Board of Certified Energy Practitioners (NABCEP) and who has been certified as a NABCEP Certified Solar PV Installer or a NABCEP Certified Solar Thermal Installer;

(3) "Combined active solar space-heating and water-heating system" means a system that meets the requirements of both an active solar space-heating system and a solar water-heating system and is installed by a certified installer;

(4) "Commonwealth" means the Commonwealth of Kentucky;

(5) "Dwelling unit" includes a manufactured home as defined in KRS 100.348;

(6) "Energy-efficient interior lighting system" means an interior lighting system that meets the maximum reduction in lighting power density requirements for the federal energy efficient commercial building deduction under 26 U.S.C. sec. 179D, as in effect December 31, 2007;

(7) "Energy-efficient heating, cooling, ventilation, or hot water system" means a heating, cooling, ventilation, or hot water system that meets the requirements for the federal energy-efficient commercial building deduction under 26 U.S.C. sec. 179D, as in effect December 31, 2007;

(8) "Energy-efficient windows and storm doors" means windows and storm doors that are:

(a) ENERGY STAR-labeled; and

(b) Certified by the National Fenestration Rating Council as meeting the North- Central U.S. climate zone performance standards for U-factor (nonsolar heat conductance), solar heat gain coefficient, air leakage, visible-light transmittance, and condensation resistance;

(9) "ENERGY STAR" shall have the same meaning as in KRS 56.770;

(10) "Installed cost" means the following, less any discounts, rebates, sales tax, installation-assistance credits, name-referral allowances, or other similar reductions:

(a) The purchase cost of equipment, components, and associated design; and

(b) Labor costs properly allocable to the on-site preparation, assembly, and original installation of the property, including piping or wiring to interconnect such property to the dwelling unit or commercial property;

(11) "Passive solar space-heating system" means a system that:

(a) Takes advantage of the warmth of the sun through the use of design features such as large south-facing windows and materials in the floors or walls that absorb warmth during the day and release that warmth at night;

(b) Includes one (1) or more of the following designs:

Direct gain which stores and slowly releases heat energy collected from the sun shining directly into the building and warming materials such as tile or concrete;
Indirect gain which uses materials that are located between the sun and the living space such as a wall to hold, store, and release heat; or
Isolated gain which collects warmer air from an area that is remote from the living space, such as a sunroom attached to a house, and the warmer air flows naturally to the rest of the house; and

(c) Meets the guidelines and technical requirements for passive solar design established by administrative regulation pursuant to KRS 141.436(7);

(12) "Qualified energy property" means the following property that meets the performance, quality, and certification standards of and that would have been eligible for the federal tax credit for residential energy property expenditures under 26 U.S.C. sec. 25C, as it existed on December 31, 2007:

(a) An electric heat pump water heater;

(b) An electric heat pump;

(d) An open loop geothermal heat pump;

(e) A direct expansion (DX) geothermal heat pump;

(f) A central air conditioner;

(g) A natural gas, propane, or oil furnace or hot water heater;

(h) A hot water boiler including outdoor wood-fired boiler units; or

(i) An advanced main air circulating fan;

(13) "Solar photovoltaic system" means a system for electricity generation that:

(a) Includes solar photovoltaic panels, structural attachments, electrical wiring, inverters for converting direct current output to alternating current, and appropriate controls and safety measures for output monitoring;

(b) Meets the requirements of Article 690 of the National Electrical Code;

(d) Is installed by a certified installer;

(14) "Solar water-heating system" means a system that:

(a) Uses solar-thermal energy to heat water;

(b) 1. Is an indirect pressurized glycol system that uses propylene glycol; or

Is an indirect drainback system that uses distilled water or propylene glycol;

Certified by the Solar Rating and Certification Corporation; and
Covered by a manufacturer's warranty of not less than five (5) years;

(d) Is installed by a certified installer; and

(e) Is warranted by the certified installer for a period of not less than two (2) years;

(15) "Upgraded insulation" means insulation with the following R-value ratings:

(a) Attic insulation rated R-38 or higher;

(b) Exterior wall, crawl space, and basement exterior wall insulation rated R-13 or higher; and

(16) "Wind turbine" or "wind machine" means a turbine or machine used for generating electricity that:

(a) Is certified as meeting the United States Wind Industry Consensus Standards developed by the American Wind Energy Association in partnership with the United States Department of Energy;

(b) Is covered by a manufacturer's warranty of not less than five (5) years;

(c) Is in compliance with all relevant building codes, height restriction variances, other special code requirements, and zoning ordinances;

(d) Has been installed in accordance with all building codes and all permits were received prior to the start of construction and installation;

(e) Is in compliance with all applicable Federal Aviation Administration regulations;

(f) Meets all requirements of Article 705 of the National Electrical Code for electrical components and installations; and

(g) Is rated and listed by Underwriters Laboratories.

Effective: February 25, 2010

History: Repealed and reenacted 2010 Ky. Acts ch. 5, sec. 11, effective February 25, 2010. -- Created 2008 Ky. Acts ch. 139, sec. 11, effective July 15, 2008.

Legislative Research Commission Note (2/25/2010). 2010 Ky. Acts ch. 5, sec. 28, provides that the repeal and reenactment of this section in that Act "shall apply retroactively to July 15, 2008."

Legislative Research Commission Note (7/15/2008). 2008 Ky. Acts ch. 139, sec. 26, provides that this section "shall apply to taxable periods beginning after December 31, 2008."

141.436 Tax credit for installation of energy efficiency products for residential and commercial property -- Administrative regulations -- Reports.

(1) (a) For taxable periods beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040, and KRS 141.0401, with the ordering of credits as provided in KRS 141.0205. The credit shall apply if one

(1) or more of the items listed in paragraph (b) of this subsection is installed during the taxable year in a dwelling unit located in the Commonwealth that is owned by the taxpayer and used by the taxpayer as:

The taxpayer's principal place of residence; or
A single-family or multifamily residential rental unit.

(b) The tax credit shall equal thirty percent (30%) of the installed costs of:

Upgraded insulation, not to exceed one hundred dollars ($100);
Energy-efficient windows and storm doors, not to exceed two hundred fifty dollars ($250); or
Qualified energy property, not to exceed two hundred fifty dollars ($250).

(2) (a) For taxable years beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040, and KRS 141.0401, with the ordering of credits as provided in KRS 141.0205, if one (1) or more of the items listed in paragraph (b) of this subsection is installed during the taxable year on a dwelling unit located in the Commonwealth, or on property located in the Commonwealth that is owned and used by the taxpayer as commercial property.

(b) The tax credit shall equal:

Thirty percent (30%) of the installed costs of:

a. An active solar space-heating system;

b. A passive solar space-heating system;

c. A combined active solar space-heating and water-heating system;

d. A solar water-heating system; and

e. A wind turbine or wind machine; or

Three dollars ($3) per watt direct current (DC) of rated capacity of a solar photovoltaic system.

Five hundred dollars ($500) per taxpayer if installed on a dwelling unit located in the Commonwealth that is owned by the taxpayer and used by the taxpayer as:

a. The taxpayer's principal place of residence; or

b. A single-family residential rental unit; or

One thousand dollars ($1,000) per taxpayer if installed on property located in the Commonwealth that is owned and used by the taxpayer as:

a. A multifamily residential rental unit; or

b. Commercial property;

(3) (a) For taxable years beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040, and KRS 141.0401, with the ordering of credits as provided in KRS 141.0205, if one (1) or more of the following is installed during the taxable year on property located in the Commonwealth that is owned and used by the taxpayer as commercial property:

An energy-efficient interior lighting system; and
An energy-efficient heating, cooling, ventilation, or hot water system.

(b) The tax credit shall equal thirty percent (30%) of the installed costs of:

An energy-efficient interior lighting system, not to exceed five hundred dollars ($500) per taxpayer; and
An energy-efficient heating, cooling, ventilation, or hot water system, not to exceed five hundred dollars ($500) per taxpayer.

(c) In no case shall the total tax credits provided in this subsection exceed one thousand dollars ($1,000) per taxpayer.

(d) For purposes of the tax credit provided by this subsection, "commercial property" shall not include single-family or multifamily residential units.

(4) The tax credits provided under this section shall apply in the tax year in which the installation is completed. If the credit cannot be taken in full in the year in which the installation is completed, the tax credit may be carried forward one (1) year.

(5) The department may request copies of invoices, purchase receipts, installation contracts, proof of installer's NABCEP certification, and any other information that the department determines necessary to verify credits taken.

(6) If the taxpayer has taken the ENERGY STAR home or the ENERGY STAR manufactured home tax credit provided under KRS 141.437, the tax credits provided under this section shall not apply.

(7) The department shall establish, by administrative regulation, the guidelines and technical requirements for items that are eligible for the tax credits provided under subsection (2) of this section, including but not limited to requirements for capacity, siting, plumbing, collector mountings, and pressurization. The department shall enlist the assistance, cooperation, and recommendations of the Office of Energy Policy and the Kentucky Pollution Prevention Center at the University of Louisville in determining those guidelines and technical requirements and may enlist their assistance in evaluating the eligibility of credits taken under this section.

(8) On or before December 1, 2010, and on or before every December 1 thereafter, the department shall report to the Legislative Research Commission the total number and gross amount of each type of tax credit claimed on returns processed during the fiscal year ending prior to the December reporting date.

Effective: July 14, 2018

History: Amended 2018 Ky. Acts ch. 29, sec. 7, effective July 14, 2018. -- Repealed and reenacted 2010 Ky. Acts ch. 5, sec. 12, effective February 25, 2010; and amended ch. 24, sec. 114, effective July 15, 2010. -- Created 2008 Ky. Acts ch. 139, sec. 12, effective July 15, 2008.

Legislative Research Commission Note (2/25/2010). 2010 Ky. Acts ch. 5, sec. 28, provides that the repeal and reenactment of this section in that Act "shall apply retroactively to July 15, 2008."

Legislative Research Commission Note (7/15/2008). 2008 Ky. Acts ch. 139, sec. 26, provides that this section "shall apply to taxable periods beginning after December 31, 2008."

141.437 Tax credit for construction of ENERGY STAR home or sale of ENERGY STAR manufactured home -- Required verification -- Reports.

(1) As used in this section:

(a) "ENERGY STAR home" means any single-family residence that qualifies for and receives the ENERGY STAR label under the ENERGY STAR Program administered by the United States Environmental Protection Agency; and

(b) "ENERGY STAR manufactured home" means a manufactured home as defined in KRS 100.348 that meets the ENERGY STAR label under the ENERGY STAR Program administered by the United States Environmental Protection Agency.

(2) For taxable years beginning after December 31, 2008, and before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed by KRS 141.040, and KRS 141.0401, with the ordering of credits as provided in KRS 141.0205 if a taxpayer:

(a) Builds a new ENERGY STAR home located in the Commonwealth for use as a principal place of residence; or

(b) Sells a new ENERGY STAR manufactured home to a buyer who uses that home as a principal place of residence in the Commonwealth.

(3) The tax credit shall equal:

(a) Eight hundred dollars ($800) if the taxpayer builds an ENERGY STAR home; or

(b) Four hundred dollars ($400) if the taxpayer sells an ENERGY STAR manufactured home.

(4) The tax credit provided under this section shall apply in the tax year in which the taxpayer completes construction of the ENERGY STAR home or sells the ENERGY STAR manufactured home.

(5) The tax credit provided in this section shall not apply if:

(a) The tax credit has been previously taken by another taxpayer on the same ENERGY STAR home or ENERGY STAR manufactured home; or

(b) The taxpayer has taken the energy efficiency tax credits provided in KRS 141.436.

(6) The department may request verification of the ENERGY STAR label placed on the home, documentation that the buyer is using the home as a principal place of residence, and any other information that the department determines is necessary to verify the tax credits taken.

(7) On or before December 1, 2010, and on or before every December 1 thereafter, the department shall report to the Legislative Research Commission the total number and gross amount of each type of credit claimed on returns processed during the fiscal year ending prior to the December reporting period.

Effective: February 25, 2010

History: Repealed and reenacted 2010 Ky. Acts ch. 5, sec. 13, effective February 25, 2010. -- Created 2008 Ky. Acts ch. 139, sec. 13, effective July 15, 2008.

Legislative Research Commission Note (2/25/2010). 2010 Ky. Acts ch. 5, sec. 28, provides that the repeal and reenactment of this section in that Act "shall apply retroactively to July 15, 2008."

Legislative Research Commission Note (7/15/2008). 2008 Ky. Acts ch. 139, sec. 26, provides that this section "shall apply to taxable periods beginning after December 31, 2008."

141.438 Endow Kentucky tax credit.

(1) For taxable years beginning on or after January 1, 2011, there is hereby established the Endow Kentucky tax credit.

(2) A taxpayer providing an endowment gift to a permanent endowment fund of a qualified community foundation, or county-specific component fund, or affiliate community foundation, which has been certified under KRS 147A.325, and meeting the requirements of subsection (7) of this section, may claim a credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401. The ordering of the credit shall be as provided in KRS 141.0205.

(3) The credit shall be equal to twenty percent (20%) of the value of the endowment gift provided by the taxpayer, not to exceed ten thousand dollars ($10,000).

(4) The credit shall be nonrefundable, but any amount of credit that a taxpayer is not able to utilize during a particular taxable year may be carried forward for use in a subsequent taxable year, for a period not to exceed five (5) years.

(5) No tax credit claimed under this section may be sold or transferred. If the taxpayer is a pass-through entity not subject to tax under KRS 141.040, the amount of approved credit shall be applied against the tax imposed by KRS 141.0401 at the entity level, and shall also be distributed to each partner, member, or shareholder based on the partner's, member's, or shareholder's distributive share of the income of the pass-through entity.

(6) The total amount of tax credit that may be awarded under this section shall be limited to:

(a) Five hundred thousand dollars ($500,000) in each fiscal year beginning on or before July 1, 2015;

(b) One million dollars ($1,000,000) in each fiscal year beginning on or after July 1, 2016, and prior to July 1, 2026; and

(7) A taxpayer pursuing a tax credit under this section shall:

(a) File an application for preliminary authorization of the tax credit with the department;

(b) After receiving preliminary authorization from the department, provide an endowment gift to a qualified community foundation, county-specific component fund, or affiliate community foundation which has been certified under KRS 147A.325 within thirty (30) days of the date of the notice of authorization for the tax credit from the department; and

(8) (a) The department shall:

Create the application required to be filed by the taxpayer seeking preliminary approval for the tax credit; and
Publish on its website the amount of total credit allocated to date, the date the last processed application for preliminary approval was received, and the remaining credit available.

(b) 1. Upon receipt of an application for preliminary approval submitted under subsection (7) of this section, the department shall review the application and, if approved, the department shall issue a notice of preliminary approval to the requesting taxpayer.

The notice of preliminary approval shall include the amount of credit, shall notify the taxpayer that the proposed gift must be made within thirty (30) days of the date reflected on the notice of authorization, and that the taxpayer must notify the department that the gift has been made, in the form and format determined by the department, within ten (10) days of making the gift.
Upon preliminary approval of an application for credit, the department shall reduce the outstanding available credit cap amount to reflect the preliminary approved credit.

(c) Upon timely receipt of notification from a taxpayer preliminarily approved for a credit that the investment has been timely made, the department shall verify the information provided and, if the information is accurate, the department shall issue a final tax credit letter to the taxpayer.

(d) If a taxpayer fails to make the required investment or provide proof of the investment to the department within the time frames established by this subsection and subsection (7) of this section, the department shall void the preliminary approval and shall restore the allocated amounts to the tax credit cap.

Effective: April 14, 2026

History: Amended 2026 Ky. Acts ch. 161, sec. 119, effective April 14, 2026. -- Amended 2014 Ky. Acts ch. 138, sec. 7, effective July 15, 2014. -- Created 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 14, effective June 4, 2010.

Refund Designations Refund Designations

141.440 Designation of income tax refund to child victims' trust fund.

(1) Effective for the tax year beginning January 1, 1984, and until the State Treasurer certifies that the assets in the child victims' trust fund exceed twenty million dollars ($20,000,000), any individual, or individuals in the case of joint return, who is entitled to a tax refund sufficient to make a designation under this section may designate that two dollars ($2) or four dollars ($4) or any amount of the refund be credited to the child victims' trust fund.

(2) The tax designation authorized in this section shall be clearly and unambiguously printed on the first page of the state individual income tax return.

(3) The proceeds derived from the tax designation shall be credited to the child victims' trust fund to be allocated and distributed as provided in KRS 15.900 to 15.940.

Effective: July 15, 1986

History: Amended 1986 Ky. Acts ch. 439, sec. 3, effective July 15, 1986. -- Created 1984 Ky. Acts ch. 382, sec. 14, effective July 13, 1984.

141.441 Designation of income tax refund to local history trust fund.

(1) Effective for taxable years beginning January 1, 2015, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the local history trust fund created under KRS 171.325 may designate an amount, not to exceed the amount of the refund, to be paid to the trust

fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The instructions accompanying the individual income tax return shall include a description of the local history trust fund and the purposes for which the funds from the income tax checkoff may be used.

(3) The commissioner shall, by July 1, 2016, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the local history trust fund created by KRS 171.325.

Effective: July 15, 2014

History: Created 2014 Ky. Acts ch. 102, sec. 15, effective July 15, 2014.

141.442 Repealed, 2005.

[Repealed]

141.4425 Designation of income tax refund to Kentucky YMCA Youth Association.

(1) Effective for taxable years beginning on or after January 1, 2019, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the Kentucky YMCA Youth Assembly program may designate an amount, not to exceed the amount of the refund, to be paid to the Kentucky YMCA Youth Association. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.

(3) The instructions accompanying the individual income tax return shall include a description of the Kentucky YMCA Youth Assembly and the purposes for which the funds from the income tax checkoff may be used.

(4) The department shall, by July 1, 2020, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the Kentucky YMCA Youth Association.

(5) The funds transferred to the Kentucky YMCA Youth Association under subsection

(4) of this section shall be used exclusively in support of the Kentucky YMCA Youth Assembly program.

Effective: June 27, 2019

History: Created 2019 Ky. Acts ch. 196, sec. 3, effective June 27, 2019.

141.443 Designation of income tax refund to Special Olympics Kentucky.

(1) Effective for taxable years beginning January 1, 2016, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to Special Olympics Kentucky may designate an amount, not to exceed the amount of the refund, to be paid to Special Olympics Kentucky. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax return.

(3) The instructions accompanying the individual income tax return shall include a description of Special Olympics Kentucky, and the purposes for which the funds from the income tax refund designation may be used.

(4) The commissioner shall, by December 1, 2017, and by December 1 of each year thereafter, transfer the funds designated by taxpayers under this section to Special Olympics Kentucky.

Effective: June 24, 2015

History: Created 2015 Ky. Acts ch. 96, sec. 1, effective June 24, 2015.

141.444 Designation of income tax refund to veterans' program trust fund.

A taxpayer required to file a return pursuant to KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the veterans' program trust fund established by KRS 40.460(2)(b), may designate an amount, not to exceed the amount of the refund, to be paid to the veterans' program trust fund. The designation shall not increase or decrease the amount of the income tax liability of a taxpayer, but it shall reduce the income tax refund of the taxpayer by the amount designated.

Effective: July 14, 1992

History: Created 1992 Ky. Acts ch. 58, sec. 1, July 14, 1992.

141.445 Designation of income tax refund to pediatric cancer research trust fund.

(1) Effective for taxable years beginning on or after January 1, 2016, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the pediatric cancer research trust fund created under KRS 211.595 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.

(3) The instructions accompanying the individual income tax return shall include a description of the pediatric cancer research trust fund and the purposes for which the funds from the income tax checkoff may be used.

(4) The commissioner of the department shall, by July 1, 2017, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the pediatric cancer research trust fund created by KRS 211.595.

Effective: June 24, 2015

History: Created 2015 Ky. Acts ch. 96, sec. 2, effective June 24, 2015; and ch. 108, sec. 1, effective June 24, 2015.

Legislative Research Commission Note (6/24[/2015). This statute was created with identical text in 2015 Ky. Acts chs. 96 and 108, which were companion bills. These Acts have been codified together.

141.446 Designation of income tax refund to breast cancer research and education trust fund.

(1) Effective for taxable years beginning January 1, 2005, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the breast cancer research and education trust fund created under KRS 211.580 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.

(3) The instructions accompanying the individual income tax return shall include a description of the breast cancer research and education trust fund and the purposes for which the funds from the income tax checkoff may be used.

(4) The commissioner of the Department of Revenue shall, by July 1, 2006, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the breast cancer research and education trust fund created by KRS 211.580.

Effective: June 20, 2005

History: Created 2005 Ky. Acts ch. 27, sec. 1, effective June 20, 2005.

141.447 Designation of income tax refund to rape crisis center trust fund.

(1) Effective for taxable years beginning on or after January 1, 2016, any taxpayer required to file a return under KRS 141.180, who is entitled to an income tax refund and who desires to contribute to the rape crisis center trust fund created by KRS 211.603, may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form. The instructions accompanying the individual income tax return shall include a description of the rape crisis center trust fund and the purposes for which the funds may be used.

(3) The department shall, by July 1, 2017, and annually thereafter, transfer the funds designated by taxpayers under this section to the rape crisis center trust fund created by KRS 211.603.

Effective: June 24, 2015

History: Created 2015 Ky. Acts ch. 108, sec. 5, effective June 24, 2015.

141.448 Designation of income tax refund to farms to food banks trust fund.

(1) Effective for taxable years beginning on or after January 1, 2013, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the farms to food banks trust fund created under KRS 247.985 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.

(3) The instructions accompanying the individual income tax return shall include a description of the farms to food banks trust fund and the purposes for which the funds from the income tax checkoff may be used.

(4) The commissioner of the Department of Revenue shall, by July 1, 2014, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the farms to food banks trust fund created by KRS 247.985.

Effective: July 12, 2012

History: Created 2012 Ky. Acts ch. 159, sec. 1, effective July 12, 2012.

Legislative Research Commission Note (7/12/2012). 2005 Ky. Acts ch. 85, sec. 701, instructs the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in the Act, as it confirms the reorganization of the Finance and Administration Cabinet. A reference to the "secretary of the Revenue Cabinet" that appeared in 2012 Ky. Acts ch. 159, sec. 1, has been changed during codification to read, "commissioner of the Department of Revenue."

141.449 Designation of income tax refund to Kentucky CASA network fund.

(1) Effective for taxable years beginning on or after January 1, 2019, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the Kentucky CASA network fund created by KRS 620.512 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.

(2) The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.

(3) The instructions accompanying the individual income tax return shall include a description of the Kentucky CASA network fund and the purposes for which the funds from the income tax checkoff may be used.

(4) The department shall, by July 1, 2020, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the Kentucky CASA network fund created by KRS 620.512.

Effective: July 14, 2018

History: Created 2018 Ky. Acts ch. 62, sec. 1, effective July 14, 2018.

Nongame Species and Habitat Acquisition Programs Nongame Species and Habitat Acquisition Programs

141.450 Public policy.

The General Assembly declares that it is the public policy of the Commonwealth of Kentucky to set aside and preserve, for the benefit of present and future generations, certain areas of unusual natural significance as laboratories for scientific research, as reservoirs of natural materials not all of the uses of which are now known, as habitats for plant and animal species and biotic communities, as living museums of the native landscape where people may observe nature's web of life and our natural heritage, as places of historic and natural interest and scenic beauty, and as reminders of the vital human dependence upon fresh air, clean water, and unspoiled natural areas. KRS 141.455 to 141.475 are enacted to provide a means by which the protection of nongame species and the acquisition of land or interests in land and the protection, maintenance, and use of the land, may be financed in part through a voluntary check-off designation on state income tax return forms.

Effective: July 15, 1980

History: Created 1980 Ky. Acts ch. 121, sec. 1, effective July 15, 1980.

141.455 Designation of income tax refund to nongame species protection and natural areas acquisition programs.

Each taxpayer required to file a return pursuant to KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the nongame species protection and natural areas acquisition programs of the Commonwealth may designate as provided in this section an amount, not to exceed the amount of the refund, to be paid to such programs. In the case of a joint return, each spouse may also designate that a portion of the refund shall be paid to said programs. Such designation shall not increase or decrease the income tax liability of any taxpayer, but it shall reduce the income tax refund of such taxpayer or spouse by the amount or amounts designated.

Effective: July 15, 1994

History: Amended 1994 Ky. Acts ch. 72, sec. 1, effective July 15, 1994. -- Created 1980 Ky. Acts ch. 121, sec. 2, effective July 15, 1980.

141.460 Space on form for designation.

(1) The Department of Revenue shall print on the face of the Kentucky individual income tax form a space for a taxpayer to designate that a contribution be made to the Kentucky Nature and Wildlife Fund from that taxpayer's income tax refund. The space for designating the contribution shall be in substantially the following form: KENTUCKY NATURE AND WILDLIFE FUND. I wish to contribute $2----- $5----- $10----- $----- of my TAX REFUND TO THE KENTUCKY NATURE AND WILDLIFE FUND.

(2) The Department of Revenue shall print in the instructions accompanying the individual income tax form a description of the purposes for which the Kentucky Nature and Wildlife Fund was established and the use of moneys from the income tax check-off.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 514, effective June 20, 2005. -- Amended 1994 Ky. Acts ch. 72, sec. 2, effective July 15, 1994. -- Created 1980 Ky. Acts ch. 121, sec. 3, effective July 15, 1980.

141.465 Apportionment of funds -- Funds to be placed in interest-bearing account.

The commissioner of the Department of Revenue shall transfer fifty percent (50%) of the funds designated in KRS 141.460 to the nongame fish and wildlife fund created by KRS 150.165 and fifty percent (50%) to the Kentucky nature preserves fund created by KRS 146.520 and shall reduce the amount of the income tax refund by the amount designated. Moneys in each fund shall be placed in an interest-bearing account.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 515, effective June 20, 2005. -- Amended 1994 Ky. Acts ch. 72, sec. 3, effective July 15, 1994. -- Created 1980 Ky. Acts ch. 121, sec. 4, effective July 15, 1980.

141.470 Use of funds apportioned to the nature preserves fund.

The Office of Kentucky Nature Preserves shall maintain a separate account showing all remittances to, and disbursements from, the Kentucky nature preserves fund made from contributions under KRS 141.455. Contributions remitted to the Kentucky nature preserves fund under KRS 141.465 shall be disbursed by the Office of Kentucky Nature Preserves for the acquisition of land or interests in land as provided in KRS 146.465 and for the protection, maintenance, and use of the land, and for no other purpose.

Effective: July 14, 2018

History: Amended 2018 Ky. Acts ch. 29, sec. 8, effective July 14, 2018. -- Created 1980 Ky. Acts ch. 121, sec. 6, effective July 15, 1980.

141.475 Rules and regulations.

The Department of Revenue shall promulgate such rules and regulations as may be necessary to effectively administer the provisions of KRS 141.455 to 141.470.

Effective: June 20, 2005

History: Amended 2005 Ky. Acts ch. 85, sec. 516, effective June 20, 2005. -- Created 1980 Ky. Acts ch. 121, sec. 7, effective July 15, 1980.

141.480 Designation provisions void, when.

In the event of the enactment by the General Assembly of an act authorizing the collection of the state individual income tax, levied under KRS Chapter 141, by the federal government, the provisions of KRS 141.450 to 141.475 shall be void and shall stand repealed if the provisions of such act prevent such collection.

Effective: July 15, 1980

History: Created 1980 Ky. Acts ch. 121, sec. 8, effective July 15, 1980.

Education Opportunity Account Program Education Opportunity Account Program

141.500 Education Opportunity Account Program. (See LRC Note below)

There is hereby established the Education Opportunity Account Program, also known as the EOA program. The purpose of the EOA program is to give more flexibility and choices in education to Kentucky residents and to address disparities in educational options available to students.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 5, effective June 29, 2021.

Legislative Research Commission Note (12/15/2022). On December 15, 2022, the Kentucky Supreme Court ruled that the Education Opportunity Account Act, KRS 141.500 to 141.528, as enacted in 2021 HB 563 (2021 Ky. Acts ch. 167), "violates the proscription in Section 184 of the Kentucky Constitution on the raising or collecting of 'sum[s]' for 'education other than in common schools'." Commonwealth ex rel. Cameron v. Johnson, et al., 2021-SC-0518-TG.

141.502 Definitions for KRS 141.500 to 141.528 (See LRC Note below)

As used in KRS 141.500 to 141.528:

(1) "Account-granting organization" or "AGO" means a nonprofit organization that complies with the requirements of KRS 141.500 to 141.528 and:

(a) Receives contributions, allocates funds, and administers EOAs; or

(b) Is an intermediary organization;

(2) "Contribution" means a donation in the form of cash or marketable securities that is eligible for the tax credit permitted by KRS 141.522;

(3) "Curriculum" means a complete course of study for a particular content area or grade level;

(4) "Education opportunity account" or "EOA" means the account to which funds are allocated by an AGO to the parent of an EOA student in order to pay for expenses to educate the EOA student pursuant to the requirements of KRS 141.500 to 141.528;

(5) "Education service provider" means a person or organization that receives payments from an EOA to provide educational materials and services to EOA students;

(6) "Eligible student" means a resident of Kentucky who:

(a) Is a member of a household with an annual household income at the time of initially applying for an EOA from an AGO under this section of not more than one hundred seventy-five percent (175%) of the amount of household income necessary to establish eligibility for reduced-price meals based on size of household as determined annually by the United States Department of Agriculture applicable to the Commonwealth, pursuant to 42 U.S.C. secs. 1751 to 1789;

(b) Has previously received an EOA from an AGO under this section; or

(7) "Eligible taxpayer" means an individual or business, including but not limited to a corporation, S corporation, partnership, limited liability company, or sole proprietorship subject to tax imposed under KRS 141.020, 141.040, or 141.0401;

(8) "EOA student" means an eligible student who is participating in the EOA program;

(9) "Income" has the same meaning as in the United States Department of Agriculture, Food and Nutrition Service, Child Nutrition Programs, Income Eligibility Guidelines, Federal Register Vol. 83, No. 89, published May 8, 2018, and as updated annually as authorized by 42 U.S.C. sec. 1758(b)(1)(A);

(10) "Intermediary organization" means a nonprofit organization that complies with the requirements of KRS 141.500 to 141.528 and receives contributions to fund AGOs; and

(11) "Parent" means a biological or adoptive parent, legal guardian, custodian, or other person with legal authority to act on behalf of an EOA student.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 6, effective June 29, 2021.

141.504 Uniform process for education opportunity account allocation -- Qualifying expenses -- Provision for eligible student in county with population of 90,000 or more -- Duration of education opportunity account -- Prioritization of funding -- Restrictions. (See LRC Note below)

(1) Each AGO shall create a uniform process for determining the amount allocated to each eligible student’s EOA with the following limitations:

(a) For eligible students that intend to use the funds in the EOA to pay tuition at a nonpublic school or tuition as described in KRS 158.120(2), the EOA funds shall not exceed the lesser of:

Their parents' demonstrated financial need as determined by an independent financial analysis performed by an organization that is:

a. Experienced in evaluating a student's need for financial aid; and

b. Included on the department's list of approved organizations as required by KRS 141.514(2)(a); or

The actual amount of tuition and required fees charged by the school to students who do not receive assistance under this program;

(b) For all other eligible students, the EOA funds shall not exceed the lesser of:

The expected cost of educational services to be provided during the succeeding school year; or
The Commonwealth’s guaranteed SEEK base amount for the immediately preceding school year reduced by the percentage equal to one-fourth (1/4) of the percentage by which the applicant’s household income exceeds the applicable federal reduced lunch household income threshold; and

(c) For students in the foster care system, the AGO shall assume that the student’s parents have no income or ability to pay for educational services for the purposes of prioritizing the students and determining the amount of assistance provided under this program.

(2) (a) The funds in an EOA shall not be used for athletics or any associated fees and shall only be used to pay for the tuition and fee expenses permitted by paragraph (b) of this subsection and the following qualifying expenses if covered by the AGO and incurred for the purpose of educating an EOA student:

Tuition or fees to attend a prekindergarten to grade twelve (12) public school;
Tuition or fees for online learning programs;
Tutoring services provided by an individual or a tutoring facility;
Services contracted for and provided by a public school, including but not limited to individual classes and extracurricular activities and programs;
Textbooks, curriculum, or other instructional materials, including but not limited to any supplemental materials or associated online instruction required by either a curriculum or an education service provider;
Computer hardware or other technological devices that are primarily used to help meet an EOA student’s educational needs;
Educational software and applications;
School uniforms;
Fees for nationally standardized assessments, advanced placement examinations, examinations related to college or university admission, and tuition or fees for preparatory courses for these;
Tuition or fees for summer education programs and specialized after- school education programs, excluding after-school childcare;
Tuition, fees, instructional materials, and examination fees at a career or technical school;
Educational services and therapies, including but not limited to occupational, behavioral, physical, speech-language, and audiology therapies provided by a licensed professional;
Tuition and fees at an institution of higher education for dual credit courses; and
Fees for transportation paid to a fee-for-service transportation provider for the student to travel to and from an education service provider.

(b) In addition to the variety of education-related expenses for public and nonpublic schools in the Commonwealth as provided by paragraph (a) of this subsection, EOA students that are residents of counties with a population of ninety thousand (90,000) or more, as determined by the 2010 decennial report of the United States Census Bureau, shall be permitted to use funds received through the EOA program for tuition and fees to attend nonpublic schools, because students in these counties have access to substantial existing nonpublic school infrastructure and there is capacity in these counties to either grow existing tuition assistance programs or form new nonprofits from existing networks that can provide tuition assistance to students over the course of the pilot program. Pursuant to KRS 141.524, the General Assembly shall assess whether the purposes of the EOA program are being fulfilled.

(3) EOA funds shall not be refunded, rebated, or shared with a parent or EOA student in any manner. Any refund or rebate for materials or services purchased with EOA funds shall be credited directly to the student’s EOA.

(4) Parents may make payments for the costs of educational materials and services not covered by the funds in their student’s EOA, but personal deposits into an EOA shall not be permitted.

(5) Funds allocated to an EOA shall not constitute taxable income to the parent or the EOA student.

(6) (a) An EOA shall remain in force, unless the EOA is closed because of a substantial misuse of funds, and any unused funds shall roll over from quarter to quarter and from year to year until:

The parent withdraws the EOA student from the EOA program;
The EOA student receives a high school diploma or equivalency certificate; or
The end of the school year in which the student reaches twenty-one (21) years of age; whichever occurs first.

(b) When an EOA is closed, any unused funds shall revert to the AGO that granted the EOA and be allocated by that AGO to fund other EOAs. If the AGO that granted the EOA is no longer operating, the funds shall be transferred to another AGO operating in good standing with the Commonwealth.

(7) An AGO shall first prioritize funding EOAs for students, their siblings, and foster children living in the same household who received an EOA in the previous academic year and then to first-time applicants in accordance with subsection (8) of this section.

(8) For first-time applicants, an AGO shall prioritize awarding EOAs to the applicants as follows:

(a) A majority of funds available for first-time applicants shall be reserved for students whose household income does not exceed that necessary to establish eligibility for reduced-price meals based on size of household as determined annually by the United States Department of Agriculture applicable to the Commonwealth, pursuant to 42 U.S.C. secs. 1751 to 1789. Within in this group of applicants, the funds shall be further prioritized to fund EOAs in the order of the applicants with the most demonstrated financial need; and

(b) The remaining unfunded first-time applicants shall be selected for funding based on a random lottery until all remaining funds are allocated to EOAs.

(9) An AGO may define and limit the services that the EOA funds may cover.

(10) An AGO shall not accept a contribution from an eligible taxpayer if the eligible taxpayer designates that the contribution shall be used to award an EOA to a particular student.

(11) Dependents of the AGO’s board of directors, its staff, and its donors are ineligible to receive an EOA.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 7, effective June 29, 2021.

141.506 Application to establish an education opportunity account for eligible students -- Renewal -- Process to cease funding student account. (See LRC Note below)

(1) To establish an EOA for an eligible student, the parent shall submit an application to an AGO.

(2) The AGO shall approve an application for an EOA if:

(a) An AGO verifies that the student on whose behalf the parent is applying is an eligible student;

(b) Funds are available for the EOA; and

To use the funds in the EOA only for the covered qualifying expenses;
Not to establish any other EOA for the eligible student with any other AGO;
To comply with the rules and requirements of the EOA program; and
Not to use EOA funds to cover the cost of educational materials or services if they are currently receiving the same types of materials or services through the school district in which the student is enrolled.

(3) The AGO shall annually renew a student’s EOA if funds are available unless the student’s family income has increased above two hundred fifty percent (250%) of the amount of household income necessary to establish eligibility for reduced-price meals based on size of household as determined annually by the United States Department of Agriculture applicable to the Commonwealth, pursuant to 42 U.S.C.

secs. 1751 to 1789.

(4) In the event that an eligible student becomes ineligible for reasons other than fraud or misuse of funds, the AGO may cease funding for the student’s EOA provided that:

(a) The AGO immediately suspends payment of additional funds into the student’s EOA. For EOAs that have been open for at least one (1) full school year, the EOA shall remain open and active for the parent to make qualifying expenditures to educate the student from funds remaining in the EOA. When no funds remain in the student’s EOA, the AGO may close the EOA;

(b) If a parent reapplies to the AGO and signs a new written agreement, payments into the student’s existing EOA may resume if the EOA is still open and active. A new EOA may be established if the student’s EOA was closed; and

(c) An AGO shall adopt policies to provide the least disruptive process possible for EOA students desiring to leave the EOA program.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 8, effective June 29, 2021.

141.508 Application for tax credit -- Preliminary approval subject to annual tax

credit cap -- Taxpayer notification -- Taxpayer contribution – Account- granting organization certification of contribution. (See LRC Note below)

(1) Prior to making a contribution to an AGO, the taxpayer or an AGO acting on behalf of the taxpayer shall apply to the department for preapproval of the tax credit permitted by KRS 141.522 in a manner prescribed by the department. Each application shall be submitted separately and shall provide the total amount of proposed contributions and the year or years in which the contributions will be made, whether the proposed contributions will be in the form of cash or marketable securities, and the name of the AGO to which the contributions will be made.

(2) Subject to the annual tax credit cap established by KRS 141.522, the department shall preliminarily approve the amount of tax credit within ten (10) business days of receipt of the application and shall notify the taxpayer and the AGO. The notification shall include the amount of the tax credit preliminarily approved, the name of the AGO to which contributions may be made, and any other information the department deems necessary.

(3) If a taxpayer applies or the AGO applies on behalf of the taxpayer for preapproval when no amount of tax credit remains for allocation, but a portion of the total amount of tax credit available is pending verification, the department shall notify the taxpayer and the AGO that the application is being held in abeyance and will be funded on a first-come, first-served basis or will be denied if all preapproved contributions are timely made.

(4) (a) The taxpayer shall make the preapproved contribution to the AGO no later than the earlier of:

Fifteen (15) business days following the date of the department's preapproval notice, excluding weekends and holidays; or
June 30 of the fiscal year of the preapproval.

(b) If the preapproved contribution is in the form of marketable securities, the AGO shall monetize the securities within five (5) business days of receipt, excluding weekends and holidays, and notify the department within ten (10) business days of the monetization of the securities. If the monetized value of the marketable securities is less than the amount of the proposed contribution reflected on the application, the taxpayer shall supplement the contribution with additional cash to equal the amount of contribution reflected on the application. The taxpayer shall not receive preapproval for a tax credit in excess of the amount of proposed contribution reflected on the application form.

(5) (a) The AGO shall certify to the department the name of the taxpayer, amount of the contribution made, and the date on which the contribution was made within ten (10) days of when the contribution has been made.

(b) Upon receipt of certification that the contribution has been made or the expiration of the ten (10) day period without certification, whichever occurs first, the department shall modify the amount of credit pending certification, the amount of credit allocated to taxpayers, and the remaining credit available for allocation, as applicable.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 9, effective June 29, 2021.

141.510 Certification and renewal of certification of an account-granting organization -- Application -- Required information -- Department certification. (See LRC Note below)

(1) An organization that seeks to become an AGO shall apply for initial certification or renewal of certification from the department.

(2) An application for initial certification as an AGO shall include:

(a) A copy of the AGO’s incorporation documents;

(b) A copy of the AGO’s Internal Revenue Service determination letter as a Section 501(c)(3) not-for-profit organization;

(d) A description of the application process the AGO will use for parents and eligible students;

(e) A description of the methodology the AGO will use to establish, fund, and manage EOAs;

(f) A description of the process the AGO will use to approve education service providers;

(g) A description of how the AGO will inform parents of approved education service providers; and

(h) A description of the AGO’s procedures for crediting refunds from an education service provider back to a student’s EOA.

(3) An application for renewal of certification as an AGO shall include:

(a) The AGO’s completed Internal Revenue Service Form 990, submitted no later than November 30 of the year before the academic year that the AGO intends to fund EOAs;

(b) A copy of any audit that may be required by the department; and

a. The number of applications the AGO received during the previous academic year, by county and by grade level;

b. The name and address of all students that received EOA funds from the AGO during the previous academic year;

c. When the AGO is an intermediary organization, the name and address of all AGOs that received funds from the intermediary organization during the last fiscal year;

d. The total number of EOAs the AGO maintains;

e. The amount of funds the AGO: i.. Received to fund EOAs during the last fiscal year;

ii. Distributed into EOAs during the last fiscal year;

iii. Has remaining after the distribution into EOAs and any obligations to fund EOAs in the future;

iv. Spent on administrative expenses and an accounting thereof during the last fiscal year; and

v. Spent on fees to private financial management firms or other organizations to maintain records and process transactions of the EOAs;

f. When the AGO is an intermediary organization, the amount of funds the intermediary organization:

i. Received to distribute to AGOs during the last fiscal year;

ii. Distributed to each AGO during the last fiscal year;

iii. Has remaining after the distribution into AGOs and any obligations to distribute to AGOs in the future;

iv. Spent on administrative expenses and an accounting thereof during the last fiscal year; and

v. Spent on fees to private financial management firms or other organizations to maintain records and process transactions;

g. A list of the AGO’s approved education service providers; and

h. A description of how the AGO has complied with the operational requirements and responsibilities of KRS 141.500 to 141.528.

The annual report shall also:

a. Comply with uniform financial accounting standards;

b. Be attested to by an independent certified public accountant in accordance with procedures promulgated by the department; and

c. Be free of material misstatements or exceptions.

(4) The department shall only certify an AGO or renew an AGO’s certification if the organization meets the requirements established by KRS 141.500 to 141.528. The department shall issue initial certifications within sixty (60) days of receiving the application and renew certifications within thirty (30) days of receiving the application.

(5) Upon application for renewal, an AGO shall demonstrate that:

(a) It is an intermediary organization that collects contributions exclusively for the use by AGOs; or

(b) It includes two (2) or more education service providers in its EOA program and has awarded at least fifty (50) EOAs aggregating a minimum of two hundred thousand dollars ($200,000) in the previous year and is expected to award at least fifty (50) EOAs aggregating a minimum of two hundred thousand dollars ($200,000) in the succeeding year.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 10, effective June 29, 2021.

141.512 Minimal allocation of contributions required to education opportunity accounts by account-granting organization -- Standard application process for establishment of student eligibility for an account -- Transfer of funds from one account–granting organization to another -- Donations. (See LRC Note below)

(1) An AGO shall ensure that at least ninety percent (90%) of the total annual contributions received are allocated to EOAs no later than the last day of the AGO's immediately succeeding calendar year or fiscal year, as applicable, unless the current year's total annual contributions received by the AGO exceed an amount equal to the average of the total annual contributions received in the immediately preceding three (3) years by more than fifteen percent (15%), in which case the excess amount may be carried forward and expended for EOAs in three (3) equal installments over the immediately succeeding three (3) years.

(2) An AGO shall maintain separate accounts for EOA funds and operating funds.

(3) Any interest that accrues from contributions that are eligible for the tax credit permitted by KRS 141.522 shall be allocated by the AGO to fund EOAs.

(4) An AGO shall create a standard application process for parents to establish their student’s eligibility for an EOA. An AGO shall ensure that the application is readily available to interested families and may be submitted through various sources, including the Internet.

(5) An AGO shall provide parents with a written explanation of the allowable uses of EOA funds, the responsibilities of parents, and the duties of the AGO and the role of any private financial management firms or other organizations that the AGO may contract with to process EOA transactions or maintain records for other aspects of the EOA program.

(6) (a) An AGO may transfer funds to another AGO if additional funds are required to meet EOA demands at the receiving AGO or if the transferring AGO determines it cannot continue to operate due to any reason.

(b) If funds are transferred for the purpose of meeting EOA demands, no more than a combined aggregate of ten percent (10%) of the AGOs' total annual contributions received may be retained by the AGOs for administrative expenses.

(d) All transferred amounts received by an AGO shall be separately disclosed in the receiving AGO’s annual report for certification renewal pursuant to KRS 141.510.

(e) An AGO that receives a transfer of funds from an AGO that has determined it will not continue to operate shall agree to fund the EOAs established by the transferring AGO to the extent funds are available. The receiving AGO shall also prioritize the funding of transferred EOAs before funding new EOA applicants.

(7) An AGO may accept donations that are not eligible for the tax credit permitted by KRS 141.522, gifts, and grants to cover administrative costs, to inform the public about the EOA program, to fund additional EOAs or to offer assistance outside of the EOA program. Donations that are not eligible for the tax credit permitted by KRS 141.522 shall not be subject to KRS 141.500 to 141.528.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 11, effective June 29, 2021.

141.514 Administration of education opportunity account tax credit and cap -- Required annual publications on department Web site. (See LRC Note below)

(1) To administer the tax credit and the total annual tax credit cap established in KRS 141.522, the department shall:

(a) Create the tax credit application form, the forms to be used by the department to notify the taxpayer and the AGO of preapproval or denial of the credit, and the educational materials to be distributed by the AGO;

(b) Create a Web site listing the amount of the total credit pending verification, the amount of the total credit allocated to date, and the remaining credit available to taxpayers making contributions to AGOs;

(c) Notify the taxpayer and the AGO of the amount of credit allocated to the taxpayer upon certification that the contribution has been made by the issuance of a tax credit allocation letter, which the taxpayer shall submit with the taxpayer's return when claiming the credit; and

(d) Collect necessary data to provide the report required by subsection (3) of this section.

(2) On or before January 1 of each year, the department shall publish on its Web site:

(a) A list of organizations that have been approved by the department to perform independent financial analyses of parents' demonstrated financial needs; and

(b) A list of AGOs.

If an AGO fails to meet the requirements of this section, the department shall not include the organization on the list of AGOs the following calendar year.
Only contributions to AGOs on the list maintained by the department for each calendar year shall be recognized for tax credits awarded under KRS 141.522.

(3) The department shall produce and publish on its Web site an annual report that aggregates the data obtained from the annual reports submitted by AGOs for the renewal of their certification pursuant to KRS 141.510. The department's report shall not include any identifying information of EOA students or AGOs that would violate the confidentiality requirements in KRS 131.190(1).

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 12, effective June 29, 2021.

141.516 Audit of account-granting organization by department -- Notice of violation -- Revocation of certificate. (See LRC Note below)

(1) The department may conduct an audit of an AGO or contract for the auditing of an AGO.

(2) (a) In the event that the department determines that there has been a violation of KRS 141.500 to 141.528 by an AGO, the department shall send written notice to the AGO.

(b) The AGO that receives written notice of a violation will have sixty (60) days from receipt of notice to correct the violation identified by the department.

(c) If the AGO fails or refuses to comply after sixty (60) days, the department may revoke the AGO’s certification to participate in the EOA program.

(3) An AGO whose certificate has been revoked under this section:

(a) May appeal the revocation of its certification to the Board of Tax Appeals pursuant to KRS 49.220;

(b) Shall continue administering EOAs that were donated prior to the date of notice stated on the revocation;

(c) Shall not accept any further contributions for the purpose of funding EOAs on or after the date of notice stated on the revocation; and

(d) Shall refund any contributions that were received for the purpose of funding EOAs on or after the date of notice stated on the revocation.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 13, effective June 29, 2021.

Legislative Research Commission Note (9/17/2021). 2021 Ky. Acts ch. 185 reorganized part of the Public Protection Cabinet to abolish the Kentucky Claims Commission, establish the Office of Claims and Appeals, and attach the Board of Claims, Board of Tax Appeals, and Crime Victims Compensation Board to the office. A reference to the Kentucky Claims Commission in this statute should have been changed to Board of Tax Appeals in codification to conform, but was inadvertently omitted. The Reviser of Statutes has made the conforming correction under the authority of KRS 7.136(2).

141.518 Account-granting organization system of payment to education service providers -- Payments to an education opportunity account -- Approval of education service providers. (See LRC Note below)

(1) (a) Each AGO shall implement a commercially viable, cost-effective, and parent- friendly system for payment of services from EOAs to education service providers.

(b) The AGO shall not adopt a system that relies exclusively on requiring parents to be reimbursed for out-of-pocket expenses, but shall provide maximum flexibility to parents by facilitating direct payments to education service providers or requests for preapproval of and reimbursements for qualifying expenses.

(2) An AGO may contract with private financial management firms or other organizations to maintain records and process transactions of the EOAs.

(3) If funding is available, an AGO shall continue making payments into an EOA until:

(a) The parent does not renew the EOA;

(b) The AGO determines that the EOA student’s family income has increased above two hundred fifty percent (250%) of the amount of household income necessary to establish eligibility for reduced-price meals based on size of household as determined annually by the United States Department of Agriculture applicable to the Commonwealth, pursuant to 42 U.S.C. secs. 1751 to 1789;

(d) The EOA student receives a high school diploma or equivalency certificate.

(4) Each AGO shall establish a process for approving education service providers.

(5) An AGO may approve education service providers on their own initiative, at the request of parents, or upon request from prospective education service providers.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 14, effective June 29, 2021.

141.520 Effect of Education Opportunity Account Program on education service provider -- Authority of government entities. (See LRC Note below)

(1) Nothing in KRS 141.500 to 141.528 shall be deemed to limit the independence or autonomy of an education service provider or to make the actions of an education service provider the actions of the state government.

(2) Nothing in KRS 141.500 to 141.528 shall be construed to expand the regulatory authority of the state, its officers, or any county school district to impose any additional regulation of education service providers beyond those necessary to enforce the requirements of the EOA program.

(3) An education service provider that accepts payment from an EOA pursuant to KRS 141.500 to 141.528 is not an agent of the state or federal government.

(4) An education service provider shall not be required to alter its creed, practices, admissions policy, or curriculum in order to accept payments from an EOA.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 15, effective June 29, 2021.

141.522 Education Opportunity Account Program tax credit -- Cap on credit -- Prioritization. (See LRC Note below)

(1) (a) Effective for taxable years beginning on or after January 1, 2021, but before January 1, 2026, a nonrefundable, nontransferable tax credit shall be permitted against the tax imposed by KRS 141.020 or 141.040 and 141.0401, with the ordering of credit as provided in KRS 141.0205 as applicable, for contributions made during a taxable year to one (1) or more AGOs in accordance with the EOA program. To qualify for this credit, a taxpayer filing as an individual shall elect to claim a federal and Kentucky contribution deduction associated with the contributions made to an AGO that does not exceed an amount equal to the total contribution for the taxable year less the amount of credit allowed by this section for the taxable year.

(b) If the taxpayer is a pass-through entity, the taxpayer shall apply the credit against the limited liability entity tax imposed by KRS 141.0401, and shall also pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.

(2) The aggregate value of the total annual tax credit cap awarded shall not exceed twenty-five million dollars ($25,000,000).

(3) The credit amount awarded per taxpayer per taxable year shall be no more than the lesser of:

(a) Ninety-five percent (95%) of the total contributions made to an AGO, except as provided in subsection (4) of this section; or

(b) One million dollars ($1,000,000).

(4) (a) The taxpayer may elect to pledge a contribution for multiple taxable years, not to exceed a total of four (4) taxable years.

(b) If the multi-year pledge is made by the taxpayer and the amount of the contributions for each of the multiple taxable years is equal to or more than the amount of contributions made to the AGO in the taxable year within which the pledge is made, the amount of allowable credit shall be increased by two (2) percentage points to ninety-seven percent (97%) in the taxable year within which the pledge is made and for each pledged year.

(c) If the taxpayer does not remit the pledged amount of contributions during any taxable year for which a multi-year pledge is made, the taxpayer shall repay the portion of the credit resulting from the increase allowed by this subsection.

(5) Any tax credit awarded under this section that is not used by the taxpayer in the current taxable year may be carried forward for up to five (5) succeeding taxable years until the tax credit has been utilized.

(6) Tax credits under this section shall be awarded on a first-come, first-served basis each fiscal year within the limitations set forth in this section. The date and time stamp from each application for preapproval shall establish the order in which the application was received. For contributions pledged for multiple tax years, the contribution shall be considered the first in line for the years subsequent to the initial year of the pledge.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 16, effective June 29, 2021.

141.524 Report by department on Education Opportunity Account Program. (See LRC Note below)

The department shall provide the following information to the Interim Joint Committee on Appropriations and Revenue no later than November 1, 2022, and no later than November 1 of each year thereafter as long as the tax credit permitted by KRS 141.522 is taken:

(1) All information contained in each annual report filed by an AGO as required by KRS 141.510 and the administrative regulations promulgated thereunder, with each eligible student's identifying information removed and replaced with an assigned unique identification number;

(2) The number and total amount of EOAs awarded by AGOs to EOA students reported by household income range intervals of five thousand dollars ($5,000);

(3) The number and total amount of EOAs awarded by AGOs to EOA students:

(a) Who are currently in the Commonwealth's foster care program;

(b) Who have previously received an EOA under this section; and

(4) Any other information that may be necessary to assist the members of the General Assembly in determining that the purposes of this tax credit are being fulfilled.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 17, effective June 29, 2021.

141.526 Standing for parents of eligible students. (See LRC Note below)

If any part of KRS 141.500 to 141.528 is challenged in state court as violating either the state or federal constitutions, parents of students who would meet the criteria for being eligible students as defined by KRS 141.502 shall be permitted to intervene as of right in such lawsuit for the purposes of defending the EOA program’s constitutionality.

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 18, effective June 29, 2021.

141.528 Short title for KRS 141.500 to 141.528. (See LRC Note below)

KRS 141.500 to 141.528 may be cited as the "Education Opportunity Account Act" or "EOA Act."

Effective: June 29, 2021

History: Created 2021 Ky. Acts ch. 167, sec. 19, effective June 29, 2021.

Definitions Applicable to Taxable Years Prior to January 1, 2018 Definitions Applicable to Taxable Years Prior to January 1, 2018

141.900 Definitions for KRS Chapter 141 -- Taxable years beginning prior to January 1, 2018.

The definitions in this section are the same as the definitions appearing in KRS 141.010 prior to its repeal and reenactment in Section 53 of 2018 Ky. Acts chs. 171 and 207. For taxable years beginning prior to January 1, 2018, as used in this chapter, unless the context requires otherwise:

(1) "Commissioner" means the commissioner of the department;

(2) "Department" means the Department of Revenue;

(3) "Internal Revenue Code" means the Internal Revenue Code in effect on December 31, 2015, exclusive of any amendments made subsequent to that date, other than amendments that extend provisions in effect on December 31, 2015, that would otherwise terminate, and as modified by KRS 141.0101;

(4) "Dependent" means those persons defined as dependents in the Internal Revenue Code;

(5) "Fiduciary" means "fiduciary" as defined in Section 7701(a)(6) of the Internal Revenue Code;

(6) "Fiscal year" means "fiscal year" as defined in Section 7701(a)(24) of the Internal Revenue Code;

(7) "Individual" means a natural person;

(8) "Modified gross income" means the greater of:

(a) Adjusted gross income as defined in Section 62 of the Internal Revenue Code of 1986, including any subsequent amendments in effect on December 31 of the taxable year, and adjusted as follows:

Include interest income derived from obligations of sister states and political subdivisions thereof; and
Include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or

(b) Adjusted gross income as defined in subsection (10) of this section and adjusted to include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2);

(9) "Gross income," in the case of taxpayers other than corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code;

(10) "Adjusted gross income," in the case of taxpayers other than corporations, means gross income as defined in subsection (9) of this section minus the deductions allowed individuals by Section 62 of the Internal Revenue Code and as modified by KRS 141.0101 and adjusted as follows, except that deductions shall be limited to amounts allocable to income subject to taxation under the provisions of this chapter, and except that nothing in this chapter shall be construed to permit the same item to be deducted more than once:

(a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States and Kentucky;

(b) Exclude income from supplemental annuities provided by the Railroad Retirement Act of 1937 as amended and which are subject to federal income tax by Public Law 89-699;

(e) Exclude Social Security and railroad retirement benefits subject to federal income tax;

(f) Include, for taxable years ending before January 1, 1991, all overpayments of federal income tax refunded or credited for taxable years;

(g) Deduct, for taxable years ending before January 1, 1991, federal income tax paid for taxable years ending before January 1, 1990;

(h) Exclude any money received because of a settlement or judgment in a lawsuit brought against a manufacturer or distributor of "Agent Orange" for damages resulting from exposure to Agent Orange by a member or veteran of the Armed Forces of the United States or any dependent of such person who served in Vietnam;

(i) 1. For taxable years ending prior to December 31, 2005, exclude the applicable amount of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans. The "applicable amount" shall be:

a. Twenty-five percent (25%), but not more than six thousand two hundred fifty dollars ($6,250), for taxable years beginning after December 31, 1994, and before January 1, 1996;

b. Fifty percent (50%), but not more than twelve thousand five hundred dollars ($12,500), for taxable years beginning after December 31, 1995, and before January 1, 1997;

c. Seventy-five percent (75%), but not more than eighteen thousand seven hundred fifty dollars ($18,750), for taxable years beginning after December 31, 1996, and before January 1, 1998; and

d. One hundred percent (100%), but not more than thirty-five thousand dollars ($35,000), for taxable years beginning after December 31, 1997.

For taxable years beginning after December 31, 2005, exclude up to forty-one thousand one hundred ten dollars ($41,110) of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans.
As used in this paragraph:

a. "Distributions" includes but is not limited to any lump-sum distribution from pension or profit-sharing plans qualifying for the income tax averaging provisions of Section 402 of the Internal Revenue Code; any distribution from an individual retirement account as defined in Section 408 of the Internal Revenue Code; and any disability pension distribution;

b. "Annuity contract" has the same meaning as set forth in Section 1035 of the Internal Revenue Code; and

(j) 1. a. Exclude the portion of the distributive share of a shareholder's net income from an S corporation subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300; and

The shareholder's basis of stock held in a S corporation where the S corporation or its qualified subchapter S subsidiary is subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 shall be the same as the basis for federal income tax purposes;

(k) Exclude, to the extent not already excluded from gross income, any amounts paid for health insurance, or the value of any voucher or similar instrument used to provide health insurance, which constitutes medical care coverage for the taxpayer, the taxpayer's spouse, and dependents, or for any person authorized to be provided excludable coverage by the taxpayer pursuant to the federal Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111- 148, or the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, during the taxable year. Any amounts paid by the taxpayer for health insurance that are excluded pursuant to this paragraph shall not be allowed as a deduction in computing the taxpayer's net income under subsection (11) of this section;

(l) Exclude income received for services performed as a precinct worker for election training or for working at election booths in state, county, and local primary, regular, or special elections;

(m) Exclude any amount paid during the taxable year for insurance for long-term care as defined in KRS 304.14-600;

(n) Exclude any capital gains income attributable to property taken by eminent domain;

(o) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the Master Settlement Agreement, signed on November 22, 1998;

(p) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco farmers and quota owners for anticipated financial losses caused by the national tobacco settlement;

(q) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a reduction in the quantity of tobacco quota allotted;

(r) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in;

(s) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner;

(t) Exclude all income from all sources for active duty and reserve members and officers of the Armed Forces of the United States or National Guard who are killed in the line of duty, for the year during which the death occurred and the year prior to the year during which the death occurred. For the purposes of this paragraph, "all income from all sources" shall include all federal and state death benefits payable to the estate or any beneficiaries; and

(u) For taxable years beginning on or after January 1, 2010, exclude all military pay received by active duty members of the Armed Forces of the United States, members of reserve components of the Armed Forces of the United States, and members of the National Guard, including compensation for state active duty as described in KRS 38.205;

(11) "Net income," in the case of taxpayers other than corporations, means adjusted gross income as defined in subsection (10) of this section, minus:

(a) The deduction allowed by KRS 141.0202 as it existed prior to January 1, 2018;

(b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families;

(c) For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years beginning before 2010; and

(d) 1. All the deductions allowed individuals by Chapter 1 of the Internal Revenue Code as modified by KRS 141.0101 except:

a. Any deduction allowed by the Internal Revenue Code for state or foreign taxes measured by gross or net income, including state and local general sales taxes allowed in lieu of state and local income taxes under the provisions of Section 164(b)(5) of the Internal Revenue Code;

b. Any deduction allowed by the Internal Revenue Code for amounts allowable under KRS 140.090(1)(h) in calculating the value of the distributive shares of the estate of a decedent, unless there is filed with the income return a statement that such deduction has not been claimed under KRS 140.090(1)(h);

c. The deduction for personal exemptions allowed under Section 151 of the Internal Revenue Code and any other deductions in lieu thereof;

d. For taxable years beginning on or after January 1, 2010, the domestic production activities deduction allowed under Section 199 of the Internal Revenue Code;

e. Any deduction for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained;

f. Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under this chapter;

g. The itemized deduction limitation established in 26 U.S.C. sec. 68 shall be determined using the applicable amount from 26 U.S.C.

sec. 68 as it existed on December 31, 2006; and

h. A taxpayer may elect to claim the standard deduction allowed by KRS 141.081 instead of itemized deductions allowed pursuant to 26 U.S.C. sec. 63 and as modified by this section; and

Nothing in this chapter shall be construed to permit the same item to be deducted more than once;

(12) "Gross income," in the case of corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code and as modified by KRS 141.0101 and adjusted as follows:

(a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States;

(b) Exclude all dividend income received after December 31, 1969;

(e) Include the amount calculated under KRS 141.205;

(f) Ignore the provisions of Section 281 of the Internal Revenue Code in computing gross income;

(g) Exclude income from "safe harbor leases" (Section 168(f)(8) of the Internal Revenue Code);

(h) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the Master Settlement Agreement, signed on November 22, 1998;

(i) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco farmers and quota owners for anticipated financial losses caused by the national tobacco settlement;

(j) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a reduction in the quantity of tobacco quota allotted;

(k) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in;

(l) For taxable years beginning after December 31, 2004, and before January 1, 2007, exclude the distributive share income or loss received from a corporation defined in subsection (24)(b) of this section whose income has been subject to the tax imposed by KRS 141.040. The exclusion provided in this paragraph shall also apply to a taxable year that begins prior to January 1, 2005, if the tax imposed by KRS 141.040 is paid on the distributive share income by a corporation defined in subparagraphs 2. to 8. of subsection (24)(b) of this section with a return filed for a period of less than twelve (12) months that begins on or after January 1, 2005, and ends on or before December 31, 2005. This paragraph shall not be used to delay payment of the tax imposed by KRS 141.040; and

(m) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner;

(13) "Net income," in the case of corporations, means "gross income" as defined in subsection (12) of this section minus:

(a) The deduction allowed by KRS 141.0202 as it existed prior to January 1, 2018;

(b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families;

(d) All the deductions from gross income allowed corporations by Chapter 1 of the Internal Revenue Code and as modified by KRS 141.0101, except:

Any deduction for a state tax which is computed, in whole or in part, by reference to gross or net income and which is paid or accrued to any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or to any foreign country or political subdivision thereof;
The deductions contained in Sections 243, 245, and 247 of the Internal Revenue Code;
The provisions of Section 281 of the Internal Revenue Code shall be ignored in computing net income;
Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under the provisions of this chapter, and nothing in this chapter shall be construed to permit the same item to be deducted more than once;
Exclude expenses related to "safe harbor leases" (Section 168(f)(8) of the Internal Revenue Code);
Any deduction for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained;
Any deduction prohibited by KRS 141.205;
Any dividends-paid deduction of any captive real estate investment trust; and
For taxable years beginning on or after January 1, 2010, the domestic production activities deduction allowed under Section 199 of the Internal Revenue Code;

(14) (a) "Taxable net income," in the case of corporations that are taxable in this state, means "net income" as defined in subsection (13) of this section;

(b) "Taxable net income," in the case of corporations that are taxable in this state and taxable in another state, means "net income" as defined in subsection (13) of this section and as allocated and apportioned under KRS 141.901. A corporation is taxable in another state if, in any state other than Kentucky, the corporation is required to file a return for or pay a net income tax, franchise tax measured by net income, franchise tax for the privilege of doing business, or corporate stock tax;

(c) "Taxable net income," in the case of homeowners' associations as defined in Section 528(c) of the Internal Revenue Code, means "taxable income" as defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the provisions of subsection (3) of this section, the Internal Revenue Code sections referred to in this paragraph shall be those code sections in effect for the applicable tax year; and

(d) "Taxable net income," in the case of a corporation that meets the requirements established under Section 856 of the Internal Revenue Code to be a real estate investment trust, means "real estate investment trust taxable income" as defined in Section 857(b)(2) of the Internal Revenue Code, except that a captive real estate investment trust shall not be allowed any deduction for dividends paid;

(15) "Person" means "person" as defined in Section 7701(a)(1) of the Internal Revenue Code;

(16) "Taxable year" means the calendar year or fiscal year ending during such calendar year, upon the basis of which net income is computed, and in the case of a return made for a fractional part of a year under the provisions of this chapter or under regulations prescribed by the commissioner, "taxable year" means the period for which the return is made;

(17) "Resident" means an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in the aggregate more than one hundred eighty-three (183) days of the taxable year in this state;

(18) "Nonresident" means any individual not a resident of this state;

(19) "Employer" means "employer" as defined in Section 3401(d) of the Internal Revenue Code;

(20) "Employee" means "employee" as defined in Section 3401(c) of the Internal Revenue Code;

(21) "Number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under KRS 141.325, except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero (0);

(22) "Wages" means "wages" as defined in Section 3401(a) of the Internal Revenue Code and includes other income subject to withholding as provided in Section 3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code;

(23) "Payroll period" means "payroll period" as defined in Section 3401(b) of the Internal Revenue Code;

(24) (a) For taxable years beginning before January 1, 2005, and after December 31, 2006, "corporation" means "corporation" as defined in Section 7701(a)(3) of the Internal Revenue Code; and

(b) For taxable years beginning after December 31, 2004, and before January 1, 2007, "corporations" means:

"Corporations" as defined in Section 7701(a)(3) of the Internal Revenue Code;
S corporations as defined in Section 1361(a) of the Internal Revenue Code;
A foreign limited liability company as defined in KRS 275.015;
A limited liability company as defined in KRS 275.015;
A professional limited liability company as defined in KRS 275.015;
A foreign limited partnership as defined in KRS 362.2-102(9);
A limited partnership as defined in KRS 362.2-102(14);
A limited liability partnership as defined in KRS 362.155(7) or in 362.1- 101(7) or (8);
A real estate investment trust as defined in Section 856 of the Internal Revenue Code;
A regulated investment company as defined in Section 851 of the Internal Revenue Code;
A real estate mortgage investment conduit as defined in Section 860D of the Internal Revenue Code;
A financial asset securitization investment trust as defined in Section 860L of the Internal Revenue Code; and
Other similar entities created with limited liability for their partners, members, or shareholders. For purposes of this paragraph, "corporation" shall not include any publicly traded partnership as defined by Section 7704(b) of the Internal Revenue Code that is treated as a partnership for federal tax purposes under Section 7704(c) of the Internal Revenue Code or its publicly traded partnership affiliates. As used in this paragraph, "publicly traded partnership affiliates" shall include any limited liability company or limited partnership for which at least eighty percent (80%) of the limited liability company member interests or limited partner interests are owned directly or indirectly by the publicly traded partnership;

(25) "Doing business in this state" includes but is not limited to:

(a) Being organized under the laws of this state;

(b) Having a commercial domicile in this state;

(d) Having one (1) or more individuals performing services in this state;

(e) Maintaining an interest in a pass-through entity doing business in this state;

(26) "Pass-through entity" means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity recognized by the laws of this state that is not taxed for federal purposes at the entity level, but instead passes to each partner, member, shareholder, or owner their proportionate share of income, deductions, gains, losses, credits, and any other similar attributes;

(27) "S corporation" means "S corporation" as defined in Section 1361(a) of the Internal Revenue Code;

(28) "Limited liability pass-through entity" means any pass-through entity that affords any of its partners, members, shareholders, or owners, through function of the laws of this state or laws recognized by this state, protection from general liability for actions of the entity; and

(29) "Captive real estate investment trust" means a real estate investment trust as defined in Section 856 of the Internal Revenue Code that meets the following requirements:

(a) 1. The shares or other ownership interests of the real estate investment trust are not regularly traded on an established securities market; or

The real estate investment trust does not have enough shareholders or owners to be required to register with the Securities and Exchange Commission; and

(b) 1. The maximum amount of stock or other ownership interest that is owned or constructively owned by a corporation equals or exceeds:

a. Twenty-five percent (25%), if the corporation does not occupy property owned, constructively owned, or controlled by the real estate investment trust; or

For the purposes of this paragraph:

a. "Corporation" means a corporation taxable under KRS 141.040, and includes an affiliated group as defined in KRS 141.200, that is required to file a consolidated return pursuant to the provisions of KRS 141.200; and

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 16, effective April 15, 2020. -- Created 2018 Ky. Acts ch. 171, sec. 52, effective April 14, 2018; and ch. 207, sec. 52, effective April 27, 2018.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 16 of that Act apply to taxable years beginning on or after January 1, 2019.

Legislative Research Commission Note (4/27/2018). KRS 141.0202 was repealed in 2018 Ky. Acts chs. 171 and 207, but a conforming amendment was not made to this statute to address the reference it contains to KRS 141.0202. The Reviser of Statutes has determined that making such a conforming change during the 2018 codification exceeds the permissible correction of manifest clerical or typographical errors under KRS 7.136(1)(h). Therefore, the reference to KRS 141.0202 remains unchanged and would have to be changed pursuant to future legislative action.

Allocation and Apportionment of Net Income for Corporations and Providers Allocation and Apportionment of Net Income for Corporations and Providers

141.901 Division of income of interstate business for tax purposes -- Apportionment.

The provisions of this section are the same as appeared in KRS 141.120 prior to its repeal and reenactment in Section 60 of 2018 Ky. Acts chs. 171 and 207. This section applies to all corporations for taxable years beginning prior to January 1, 2018, and to a provider, as defined in KRS 141.121, for taxable years beginning on or after January 1, 2018.

(1) As used in this section, unless the context requires otherwise:

(a) "Business income" means income arising from transactions and activity in the regular course of a trade or business of the corporation and includes income from tangible and intangible property if the acquisition, management, or disposition of the property constitutes integral parts of the corporation's regular trade or business operations;

(b) "Commercial domicile" means the principal place from which the trade or business of the corporation is managed;

(c) "Compensation" means wages, salaries, commissions, and any other form of remuneration paid or payable to employees for personal services;

(d) "Financial organization" means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank, investment company, or any type of insurance company;

(e) "Nonbusiness income" means all income other than business income;

(f) "Public service company" means any business entity subject to taxation under KRS 136.120;

(g) "Sales" means all gross receipts of the corporation not allocated under subsections (3) to (7) of this section, except as provided by KRS 141.121; and

(h) "State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.

(2) Any corporation which is required by KRS 141.900 to allocate and apportion its net income shall allocate and apportion its net income as provided in this section.

(3) Rents and royalties from real property, intangible or tangible personal property, capital gains and losses, interest, or patent or copyright royalties, to the extent that they constitute nonbusiness income, shall be allocated as provided in subsections

(4) to (7) of this section.

(4) (a) Net rents and royalties from real property located in this state are allocable to this state.

(b) Net rents and royalties from tangible personal property are allocable to this state if and to the extent that the property is utilized in this state; or in their entirety if the corporation's commercial domicile is in this state and the corporation is not organized under the laws of or taxable in the state in which the property is utilized.

(c) The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the corporation, the tangible personalty is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.

(d) Net rents and royalties from intangible personal property located in this state are allocable to this state. For purposes of this section, royalties from property leased in Kentucky shall be considered as royalties from intangible personal property.

(5) (a) Capital gains and losses from sales or other dispositions of real property located in this state are allocable to this state.

(b) Capital gains and losses from sales or other dispositions of tangible personal property are allocable to this state if the property had a situs in this state at the time of the sale, or the corporation's commercial domicile is in this state and the corporation is not taxable in the state in which the property had a situs.

(c) Capital gains and losses from sales or other dispositions of intangible personal property are allocable to this state if the corporation's commercial domicile is in this state.

(6) Interest is allocable to this state if the corporation's commercial domicile is in this state.

(7) (a) Patent and copyright royalties are allocable to this state if and to the extent that the patent or copyright is utilized by the payer in this state; or if and to the extent that the patent or copyright is utilized by the payer in a state in which the corporation is not taxable and the corporation's commercial domicile is in this state.

(c) A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the corporation's commercial domicile is located.

(8) (a) Except as provided in subsection (9) of this section, all business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor, representing twenty-five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2).

(b) 1. The property factor is a fraction, the numerator of which is the average value of the corporation's real and tangible personal property owned or rented and used in this state during the tax period and the denominator of which is the average value of all the corporation's real and tangible personal property owned or rented and used during the tax period; provided, however, that property which has been certified as a pollution control facility as defined in KRS 224.1-300 shall be excluded from the property factor.

Property owned is valued at its original cost. If the original cost of any property is not determinable or is nominal or zero (0) the property shall be valued by the department pursuant to administrative regulations promulgated by the department. Property rented is valued at eight (8) times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the corporation less any annual rental rate received by the corporation from subrentals, provided that the rental and subrentals are reasonable. If the department determines that the annual rental or subrental rate is unreasonable, or if a nominal or zero (0) rate is charged, the department may determine and apply the rental rate as will reasonably reflect the value of the property rented by the corporation.
The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the department may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the property.

(c) The payroll factor is a fraction, the numerator of which is the total amount paid or payable in this state during the tax period by the corporation for compensation, and the denominator of which is the total compensation paid or payable by the corporation everywhere during the tax period. Compensation is paid or payable in this state if:

The individual's service is performed entirely within the state;
The individual's service is performed both within and without the state, but the service performed without the state is incidental to the individual's service within the state; or
Some of the service is performed in the state and the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the state, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this state.

(d) 1. The sales factor is a fraction, the numerator of which is the total sales of the corporation in this state during the tax period, and the denominator of which is the total sales of the corporation everywhere during the tax period.

Sales of tangible personal property are in this state if:

a. The property is delivered or shipped to a purchaser, other than the United States government, or to the designee of the purchaser within this state regardless of the f.o.b. point or other conditions of the sale; or

b. The property is shipped from an office, store, warehouse, factory, or other place of storage in this state and the purchaser is the United States government.

Sales, other than sales of tangible personal property, are in this state if the income-producing activity is performed in this state; or the income- producing activity is performed both in and outside this state and a greater proportion of the income-producing activity is performed in this state than in any other state, based on costs of performance.

(9) (a) If the allocation and apportionment provisions of this section do not fairly represent the extent of the corporation's business activity in this state, the corporation may petition for or the department may require, in respect to all or any part of the corporation's business activity, if reasonable:

Separate accounting;
The exclusion of any one (1) or more of the factors;
The inclusion of one (1) or more additional factors which will fairly represent the corporation's business activity in this state; or
The employment of any other method to effectuate an equitable allocation and apportionment of income.

(b) A corporation may elect the allocation and apportionment methods for the corporation's business income provided for in subparagraphs 1. and 2. of this paragraph. The election, if made, shall be irrevocable for a period of five years.

All business income derived directly or indirectly from the sale of management, distribution, or administration services to or on behalf of regulated investment companies, as defined under the Internal Revenue Code of 1986, as amended, including trustees, and sponsors or participants of employee benefit plans which have accounts in a regulated investment company, shall be apportioned to this state only to the extent that shareholders of the investment company are domiciled in this state as follows:

a. Total business income shall be multiplied by a fraction, the numerator of which shall be Kentucky receipts from the services for the tax period and the denominator of which shall be the total receipts everywhere from the services for the tax period;

b. For purposes of subdivision a. of this subparagraph, Kentucky receipts shall be determined by multiplying total receipts for the tax period from each separate investment company for which the services are performed by a fraction. The numerator of the fraction shall be the average of the number of shares owned by the investment company's shareholders domiciled in this state at the beginning of and at the end of the investment company's taxable year, and the denominator of the fraction shall be the average of the number of the shares owned by the investment company shareholders everywhere at the beginning of and at the end of the investment company's taxable year; and

c. Nonbusiness income shall be allocated to this state as provided in subsections (4) to (7) of this section.

All business income derived directly or indirectly from the sale of securities brokerage services by a business which operates within the boundaries of any area of the Commonwealth, which on June 30, 1992, was designated as a Kentucky Enterprise Zone, as described in KRS 154.655(2) before that statute was renumbered in 1992, shall be apportioned to this state only to the extent that customers of the securities brokerage firm are domiciled in this state. The portion of business income apportioned to Kentucky shall be determined by multiplying the total business income from the sale of these services by a fraction determined in the following manner:

a. The numerator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by customers domiciled in Kentucky for the brokerage firm's taxable year;

b. The denominator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by all of the brokerage firm's customers for that year; and

c. Nonbusiness income shall be allocated to this state as provided in subsections (4) to (7) of this section.

(10) Public service companies and financial organizations required by KRS 141.900 to allocate and apportion net income shall allocate and apportion such income as follows:

(a) Nonbusiness income shall be allocated to this state as provided in subsections

(4) to (7) of this section;

(b) Business income shall be apportioned to this state by multiplying the business income by a fraction, the numerator of which is the property factor, representing twenty-five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2). The payroll factor shall be determined as provided in subsection (8)(c) of this section. The property factor and sales factor shall be determined as provided by administrative regulations promulgated by the department.

(c) An affiliated group electing to file a consolidated return under KRS 141.200(4) or required to file a consolidated return under KRS 141.200(11) that includes a public service company, a provider of communications services or multichannel video programming services as defined in KRS 136.602, or a financial organization shall determine the amount of payroll to be included in the apportionment factor as provided in subsection (8)(c) of this section. The amount of property and sales of the public service company, provider of communications services or multichannel video programming services as defined in KRS 136.602, or financial organization to be included in the apportionment factors of the affiliated group shall be determined in accordance with administrative regulations promulgated by the department under paragraph (b) of this subsection.

(11) For taxable years beginning on or after January 1, 2007, a corporation that:

(a) Owns an interest in a limited liability pass-through entity; or

(b) Owns an interest in a general partnership organized or formed as a general partnership after January 1, 2006; shall include the proportionate share of sales, property, and payroll of the limited liability pass-through entity or general partnership when apportioning income, and shall include the proportionate share of sales in calculating the tax due pursuant to KRS 141.0401. The phrases "an interest in a limited liability pass-through entity" and "an interest in a general partnership organized or formed as a general partnership after January 1, 2006," shall extend to each level of multiple-tiered pass-through entities.

Effective: April 27, 2018

History: Created 2018 Ky. Acts ch. 171, sec. 59, effective April 14, 2018; and ch. 207, sec. 59, effective April 27, 2018.

Legislative Research Commission Note (4/27/2018). This statute was created by 2018 Ky. Acts ch. 171, sec. 59 and ch. 207, sec. 59, which are nearly identical and have been codified together.

Interest and Penalties Interest and Penalties

141.985 Interest on tax not paid by date due -- Addition to tax provided in KRS 141.305 and 141.044 to be considered a penalty.

(1) Except for the addition to tax required when an underpayment of estimated tax occurs under KRS 141.044 and 141.305, any tax imposed by this chapter, whether assessed by the department, or the taxpayer, or any installment or portion of the tax is not paid on or before the date prescribed for its payment, there shall be collected, as a part of the tax, interest upon the unpaid amount at the tax interest rate as defined in KRS 131.010(6) from the date prescribed for its payment until payment is actually made to the department.

(2) Interest shall be assessed, collected, and paid in the same manner as if it were a deficiency.

(3) For purposes of this section, any addition to tax provided in KRS 141.044 and 141.305 shall be considered a penalty.

Effective: April 15, 2020

History: Amended 2020 Ky. Acts ch. 91, sec. 17, effective April 15, 2020. -- Amended 2019 Ky. Acts ch. 151, sec. 58, effective June 27, 2019. -- Amended 2005 Ky. Acts ch. 85, sec. 517, effective June 20, 2005. -- Amended 1982 Ky. Acts ch. 452, sec. 26, effective July 1, 1982. -- Created 1978 Ky. Acts ch. 233, sec. 17, effective June 17, 1978.

Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 17 of that Act apply to taxable years beginning on or after January 1, 2019.

141.990 Penalties.

(1) Any individual, fiduciary, corporation, employer, or other person who violates any of the provisions of this chapter shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180.

(2) Every tax imposed by this chapter, and all increases, interest, and penalties thereon, shall become, from the time it is due and payable, a personal debt to the state from the taxpayer or other person liable therefor.

(3) In addition to the penalties herein prescribed, any taxpayer or employer, who willfully fails to make a return or willfully makes a false return, or who willfully fails to pay taxes owing or collected, with intent to evade payment of the tax or amount collected, or any part thereof, shall be guilty of a Class D felony.

(4) Any person who willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under this chapter of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not the falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document, shall be guilty of a Class D felony.

(5) A return for the purpose of this section shall mean and include any return, declaration, or form prescribed by the department and required to be filed with the department by the provisions of this chapter, or by the rules and regulations of the department or by written request for information to the taxpayer by the department.

Effective: June 27, 2019

History: Amended 2019 Ky. Acts ch. 151, sec. 59, effective June 27, 2019. -- Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 71, effective June 28, 2006. -- Amended 2006 Ky. Acts. ch. 6, sec. 18, effective March 6, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 518, effective June 20, 2005; and ch. 168, sec. 32, effective March 18, 2005. -- Amended 1992 Ky. Acts ch. 338, sec. 27, effective July 14, 1992; ch. 403, sec. 19, effective July 14, 1992; and ch. 463, sec. 17, effective July 14, 1992. -- Amended 1990 Ky. Acts ch. 29, sec. 2, effective July 1, 1990. -- Amended 1978 Ky. Acts ch. 233, sec. 16, effective June 17, 1978. -- Amended 1976 Ky. Acts ch. 155, sec. 16. -- Amended 1972 Ky. Acts ch. 84, Pt. II, sec. 7. -- Amended 1970 Ky. Acts ch. 216, sec. 12. -- Amended 1966 Ky. Acts ch. 176, Part I, sec. 13. -- Amended 1962 Ky. Acts ch. 124, sec. 7. -- Amended 1960 Ky. Acts ch. 5, Art. III, sec. 9. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, sec. 16. -- Amended 1950 Ky. Acts ch. 189, secs. 3 and 4, effective March 25, 1950. -- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. sec. 4281b-21.

Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Legislative Research Commission Note (7/13/90). The amendment to this section made by HB 255, 1990 Ky. Acts ch. 29, was made effective for taxable years beginning on or after July 1, 1990.