Court Opinion

ID: 9662141
Source: CourtListenerOpinion
Date Created: 2023-08-23 23:00:20.401784+00
Date Added: 2024-06-11T18:14:37.132401
License: Public Domain

LAMBERT, Justice,
dissenting.
There is no statutory provision in this state by which multiple corporate entities are allowed to file a combined income tax return. The plain language of KRS 141.200(1) requires that
Every corporation doing business in this state, except those exempt from taxation under KRS 141.040, shall make a return stating specifically the items of income and the items claimed as deductions allowed by this chapter. Corporations that are affiliated must each make a separate return.
KRS 141.200(1) (emphasis added).
Income tax reporting requirements arise only from statutory enactment. Multi-state *794corporations doing business in Kentucky must use the apportionment method of KRS 141.120to determine the portion of them business income derived from operations in Kentucky. However, application of KRS 141.120does not allow the filing of a combined return even if corporate operations are integrated or related. In no way does KRS 141.120determine corporate reporting methods. Rather, that determination is governed by KRS 141.200. Only one exception is made to this individual filing requirement, and it is by statute. KRS 141.205 permits the Revenue Cabinet to require a consolidated or combined return for corporations engaged in intercorporate transactions that reduce net income.
Armco Inc. v. Revenue Cabinet, Ky., 748 S.W.2d 372 (1988), and Department of Revenue v. Early & Daniel Co., Ky., 628 S.W.2d 630 (1982) are easily distinguishable from this case. In those cases, this Court held that the Revenue Cabinet properly exercised its statutory power to require the combination of income in narrow instances.1 It should not matter that the Revenue Cabinet, until 1988, interpreted the statute to allow combined income tax reporting for other corporations.
The clear language of the statute evidences an intent to require individual reporting for those corporations who choose to do business in Kentucky through an intricate structure of interlocking corporations.
Because no statutory provision would allow the combination of returns for the multiple corporations of GTE, I respectfully dissent.

. In those cases, this Court sanctioned a combined return for a corporation and its subsidiary where the subsidiary was merely a domestic international sales corporation (DISC). A DISC is a creature of the federal Internal Revenue Code which allows for tax incentives to DISCs engaged in qualifying export sales. In Early & Daniel and Armco, the DISC was clearly a sham corporation set up to receive the benefits available under the Internal Revenue Code.