KRS § 141.407 — KY Code / Title XI / Chapter 141 / Section 141.407
141.407 Determination of allowable income tax credit approved company may retain
Status: in_force

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;

(c) "Tax credit" means the tax credit allowed in KRS 154.24-020 to 154.24-150;

(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;

2. 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

3. 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;

2. 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

3. 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 154.24-020 to 154.24-150.

(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.

(c) The tax credit or estimated payment shall not exceed the limits set forth in

KRS 154.24-020 to 154.24-150.

(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.

(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 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 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 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

(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 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.