Kentucky Administrative Regulations › Title 103 - FINANCE AND ADMINISTRATION CABINET - DEPARTMENT OF REVENUE › Chapter 16 - Income Tax; Corporations › Section 103 KAR 16:270 - Apportionment; receipts factor

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO:
				KRS
				141.010,
				141.040,
				141.0401,
				141.120,
				141.121,
				141.205,
				141.206,
				141.901
NECESSITY, FUNCTION, AND CONFORMITY:
				KRS
				131.130(1) authorizes the
				Department of Revenue to promulgate administrative regulations to administer
				and enforce Kentucky's tax laws.
				KRS
				141.120(9) requires that all
				apportionable income of multi-state corporations be apportioned to Kentucky by
				multiplying the income by a fraction.
				KRS
				141.120(11)(d) authorizes
				the department to promulgate administrative regulations providing how to
				determine the receipts factor used in the multi-state apportionable income
				apportionment formula.
				KRS
				141.120(12)(b) authorizes
				the department to promulgate administrative regulations for determining
				alternative allocation and apportionment methods for taxpayers engaged in
				particular industries.
				KRS
				141.121 requires the department to promulgate
				administrative regulations for sourcing receipts of public service corporations
				and financial organizations, and to detail the sourcing of receipts related to
				financial institutions. This administrative regulation provides guidance for
				determining the receipts factor of a multi-state corporation.
Section 1. Definitions.
(1) "Advertising services" means an agreement
			 to include the broadcast customer's advertising content in the broadcaster's
			 film programming.
(2) "Affiliated
			 airline" is defined by
			 KRS
			 141.121(1)(a).
(3) "Apportionable income" is defined by
			 KRS
			 141.120(1)(a).
(4) "Barrel mile" means the transportation of
			 one (1) barrel of liquid or gas one (1) mile.
(5) "Billing address" means the location
			 indicated in the books and records of the taxpayer as the primary mailing
			 address relating to a customer's account that at the time of the transaction is
			 kept in good faith in the normal course of business, and not for tax avoidance
			 purposes.
(6) "Borrower or credit
			 card holder located in this state" means:
(a)
			 A borrower, other than a credit card holder, that is engaged in a trade or
			 business which maintains its commercial domicile in this state; or
(b) A borrower that is not engaged in a trade
			 or business or a credit card holder whose billing address is in this
			 state.
(7) "Broadcast
			 customer" means a person, corporation, partnership, limited liability company,
			 or other entity, such as an advertiser or a platform distribution company, that
			 has a direct connection or contractual relationship with the broadcaster under
			 which revenue is derived by a broadcaster.
(8) "Broadcaster" means a taxpayer that is a
			 television broadcast network, a cable program network, or a television
			 distribution company. The term "broadcaster" does not include a platform
			 distribution company.
(9) "Business
			 customer" means a customer that is a business operating in any form, including
			 a sole proprietorship. Sales to a non-profit organization, to a trust, to the
			 U.S. Government, to a foreign, state, or local government, or to an agency or
			 instrumentality of that government are treated as sales to a business customer
			 and are assigned consistent with the rules for those sales.
(10) "Card issuer's reimbursement fee" means
			 the fee a taxpayer receives from a merchant's bank because one (1) of the
			 persons to whom the taxpayer has issued a credit, debit, or similar type of
			 card has charged merchandise or services to the card.
(11) "Code" means the Internal Revenue Code
			 as defined by
			 KRS
			 141.010(21).
(12) "Commercial domicile" is defined by
			 KRS
			 141.120(1)(b).
(13) "Credit card" means a card, or other
			 means of providing information, that entitles the holder to charge the cost of
			 purchases, or a cash advance, against a line of credit.
(14) "Debit card" means a card, or other
			 means of providing information, that enables the holder to charge the cost of
			 purchases, or a cash withdrawal, against the holder's bank account or a
			 remaining balance on the card.
(15)
			 "Delivered to a location" means to the location of the taxpayer's market for
			 the service, which may not be the location of the taxpayer's employees or
			 property.
(16) "Film programming"
			 means one (1) or more performances, events, or productions (or segments of
			 performances, events, or productions) intended to be distributed for visual and
			 auditory perception, including items such as news, entertainment, sporting
			 events, plays, stories, or other literary, commercial, educational, or artistic
			 works.
(17) "Financial institution"
			 is defined by
			 KRS
			 141.010(17).
(18) "Financial organization" is defined by
			 KRS
			 141.120(1)(c), and includes:
(a) Any corporation or other business entity
			 registered under state law as a bank holding company or registered under the
			 12
			 U.S.C. 1841, et. seq., Federal Bank Holding
			 Company Act of 1956, as amended; or
(b) Registered as a savings and loan holding
			 company under the
			 12
			 U.S.C. 1701 to
			 1750, Federal
			 National Housing Act, as amended; and
(c) Any entity more than fifty (50) percent
			 owned, directly or indirectly, by these holding companies.
(19) "Individual customer" means a customer
			 that is not a business customer.
(20) "In-person services" means services that
			 are physically provided in person by the taxpayer, if the customer or
			 customer's real or tangible property upon which the services are performed is
			 in the same location as the service provider when the services are performed.
			 In-person services includes situations when a third-party contractor provides
			 the services on behalf of the taxpayer.
(21) "Intangible property" means property
			 that is not physical or whose representation by physical means is merely
			 incidental. Examples of intangible property include:
(a) Agreements not to compete;
(b) Brand names;
(c) Computer software;
(d) Contract rights, including broadcasting
			 rights;
(e) Copyrights;
(f) Designs;
(g) Formulae;
(h) Goodwill and going concern
			 value;
(i) Ideas;
(j) Information;
(k) Know-how;
(l) Licenses;
(m) Literary, musical, or artistic
			 composition;
(n) Methods;
(o) Patents;
(p) Procedures;
(q) Processes;
(r) Programs;
(s) Securities;
(t) Systems;
(u) Technical data;
(v) Trade dress;
(w) Trademarks;
(x) Trade names; and
(y) Trade secrets.
(22) "Internal Revenue Code" is defined by
			 KRS
			 141.010(21).
(23) "Kentucky revenue passenger miles" is
			 defined by
			 KRS
			 141.121(1)(c).
(24) "Loan" means any extension of credit
			 resulting from direct negotiations between the taxpayer and its customer, or
			 the purchase, in whole or in part, of this extension of credit from another.
			 Loans include participations, syndications, and leases treated as loans for
			 federal income tax purposes. Loans do not include:
(a) Assets held in a trading
			 account;
(b) Cash items in the
			 process of collection;
(c) Credit
			 card receivables, including purchased credit card relationships;
(d) Federal funds sold;
(e) Futures or forwards contracts;
(f) Non-interest bearing balances due from
			 depository institutions;
(g)
			 Notional principal contracts such as swaps;
(h) Options;
(i) Securities, interests in a REMIC, or
			 other mortgage-backed or asset-backed security;
(j) Securities purchased under agreements to
			 resell; and
(k) Other similar
			 items.
(25) "Loan secured
			 by real property" means that fifty (50) percent or more of the aggregate value
			 of the collateral used to secure a loan or other obligation, when valued at
			 fair market value as of the time the original loan or obligation was incurred,
			 was real property.
(26) "Merchant
			 discount" means the fee (or negotiated discount) charged to a merchant by the
			 taxpayer for the privilege of participating in a program when a credit, debit,
			 or similar type of card is accepted in payment for merchandise or services sold
			 to the card holder, net of any cardholder charge-back and unreduced by any
			 interchange transaction or issuer reimbursement fee paid to another for charges
			 or purchases made its cardholder.
(27) "Miles operated" means the movement of a
			 barge, tug, or other watercraft one (1) mile.
(28) "Non-apportionable income" is defined by
			 KRS
			 141.120(1)(d).
(29) "Participation" means an extension of
			 credit in which an undivided ownership interest is held on a pro rata basis in
			 a single loan or pool of loans and related collateral. In a loan participation,
			 the credit originator initially makes the loan and then subsequently resells
			 all or a portion of it to other lenders. The participation may or may not be
			 known to the borrower.
(30)
			 "Passenger airline" is defined by
			 KRS
			 141.121(1)(d).
(31) "Place of order" means the physical
			 location from which a customer places an order for a sale other than a sale of
			 tangible personal property from a taxpayer, resulting in a contract with the
			 taxpayer.
(32) "Platform
			 distribution company" means a cable service provider, a direct broadcast
			 satellite system, an Internet content distributor, or any distributor that
			 directly charges viewers for access to any film programming.
(33) "Population" means the most recent
			 population data maintained by the U.S. Census Bureau for the year in question
			 as of the close of the taxable period.
(34) "Provider" is defined by
			 KRS
			 141.121(1)(e).
(35) "Public service company" is defined by
			 KRS
			 141.0401(6)(a)9.
(36) "Qualified air freight forwarder" is
			 defined by
			 KRS
			 141.121(1)(f).
(37) "Receipts" is defined by
			 KRS
			 141.120(1)(e).
(38) "Regular place of business" means an
			 office at which the taxpayer carries on its business in a regular and
			 systematic manner and which is continuously maintained, occupied, and used by
			 employees of the taxpayer.
(39)
			 "Related member" is defined by
			 KRS
			 141.205(1)(g).
(40) "Revenue car mile" means the movement of
			 a loaded railroad car one (1) mile.
(41) "Revenue passenger miles" is defined by
			 KRS
			 141.121(1)(g).
(42) "State" is defined by
			 KRS
			 141.010(34).
(43) "State where a contract of sale is
			 principally managed by the customer" means the primary location at which an
			 employee or other representative of a customer serves as the primary contact
			 person for the taxpayer with respect to the day-to-day execution and
			 performance of a contract entered into by the taxpayer with the
			 customer.
(44) "Syndication" means
			 an extension of credit in which two (2) or more persons fund and each person is
			 at risk only up to a specified percentage of the total extension of credit or
			 up to a specified dollar amount.