KRS § 141.200 — KY Code / Title XI / Chapter 141 / Section 141.200
141.200 Corporation returns -- Requirement of affiliated groups to file consolidated returns
Status: in_force

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

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.

2. 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.

2. 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:

1. Corporations exempt from corporation income tax under KRS 141.040;

2. Foreign corporations;

3. Corporations with respect to which an election under Section 936 of the

Internal Revenue Code is in effect for the taxable year;

4. Real estate investment trusts as defined in Section 856 of the Internal

Revenue Code;

5. Regulated investment companies as defined in Section 851 of the

Internal Revenue Code;

6. A domestic international sales company as defined in Section 992(a)(1)

of the Internal Revenue Code;

7. Any corporation that realizes a net operating loss whose apportionment

fraction under KRS 141.120 is de minimis;

8. Any corporation for which the apportionment fraction under KRS

141.120 is zero; and

9. 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;

(c) A qualified subchapter S Subsidiary that is included in the return filed by the

Subchapter S parent corporation;

(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.