KRS 140.063 — Exemption of annuities or other payments under employees' trusts -- Retirement annuities -- Individual retirement bonds, accounts, and annuities

(1) There shall be excluded from taxation under KRS Chapter 140, to the extent
attributable to employer's contributions, the value of an annuity or other payment
receivable by any beneficiary (other than the executor or equivalent) under:
(a) An employee's trust (or under a contract purchased by an employee's trust)
forming a part of a pension, stock bonus, o r profit-sharing plan which, at the
time of the decedent's separation from employment (whether by death or
otherwise), or at the time of termination of the plan if earlier, met the
requirements of Section 401(a) of the Internal Revenue Code; or
(b) A retir ement annuity contract purchased by an employer (and not by an
employee's trust) pursuant to a plan which, at the time of decedent's separation
from employment (by death or otherwise), or at the time of termination of the
plan if earlier, was a plan descri bed in Section 403(a) of the Internal Revenue
Code; or
(c) A retirement annuity contract purchased for an employee by an employer
which is an organization referred to in Section 170(b)(1)(A)(ii) or (vi) of the
Internal Revenue Code, or which is a religious organization (other than a
trust), and which is exempt from tax under Section 501(a) of the Internal
Revenue Code; or
(d) Chapter 73 of Title 10 of the United States Code.
(2) If amounts payable after the death of the decedent under a plan described in
paragraph (a) or (b) of subsection (1) of this section, under a contract described in
paragraph (c) of subsection (1) of this section, or under Chapter 73 of Title 10 of the
United States Code are attributable to any extent to payments or contributions made
by the decedent, no exclusion shall be allowed for that part of the value of such
amounts in the proportion that the total payments or contributions made by the
decedent bears to the total payments or contributions made. For purposes of this
subsection, contributions or payments made by the decedent's employer or former
employer under a trust or plan described in paragraph (a) or (b) of subsection (1) of
this section shall not be considered to be contributed by the decedent, and
contributions or payments ma de by the decedent's employer or former employer
toward the purchase of an annuity contract described in paragraph (c) of subsection
(1) of this section shall, to the extent excludable from gross income under Section
403(b) of the Internal Revenue Code, no t be considered to be contributed by the
decedent. This subsection shall apply to all decedents dying after December 31,
1953. For purposes of this subsection, contributions or payments on behalf of the
decedent while he was an employee within the meaning of Section 401(c)(1) of the
Internal Revenue Code made under a trust or plan described in paragraph (a) or (b)
of subsection (1) of this section shall, to the extent allowable as a deduction under
Section 404 of the Internal Revenue Code, be considered to be made by a person
other than the decedent and, to the extent not so allowable shall be considered to be
contributions or payments made by the decedent. For purposes of this subsection,
amounts payable under Chapter 73 of Title 10 of the United States Cod e are
attributable to payments or contributions made by the decedent only to the extent of
amounts deposited by him pursuant to Section 1438 or 1452(d) of such Title 10.
This subsection shall apply to all decedents dying after January 1, 1972.
(3) There sh all be excluded from taxation under KRS Chapter 140 the value of an
annuity receivable by any beneficiary (other than the executor) under:
(a) An individual retirement account described in Section 408(a) of the Internal
Revenue Code.
(b) An individual reti rement annuity described in Section 408(b) of the Internal
Revenue Code.
(c) A retirement bond described in Section 409(a) of the Internal Revenue Code.
(4) If any payment to an account described in paragraph (a) of subsection (3) of this
section or for an annuity described in paragraph (b) of subsection (3) of this section
or a bond described in paragraph (c) of subsection (3) of this section was not
allowable as a deduction under Section 219 or 220 of the Internal Revenue Code
and was not a rollover contr ibution described in Section 402(a)(5), 403(a)(4),
Section 403(b)(8) (but only to the extent such contribution is attributable to a
distribution from a contract described in subsection 408(c)(3)), 408(d)(3), or
409(b)(3)(C) of the Internal Revenue Code, th e preceding sentence shall not apply
to that portion of the value of the amount receivable under such account, annuity, or
bond (as the case may be) which bears the same ratio to the total value of the
amount so receivable as the total amount which was pai d to or for such account,
annuity, or bond and which was not allowable as a deduction under Section 219 or
220 of the Internal Revenue Code and was not such a rollover contribution bears to
the total amount paid to or for such account, annuity, or bond. Fo r purposes of this
subsection, the term "annuity" means an annuity contract or other arrangement
providing for a series of substantially equal periodic payments to be made to a
beneficiary (other than the executor) for his life or over a period extending f or at
least thirty-six (36) months after the date of the decedent's death.
(5) Except to the extent required by differences between KRS Chapter 140 and its
application and the federal estate tax law and its application, the relevant Internal
Revenue Code r egulations and the relevant administrative and judicial
interpretations of the federal estate tax law shall be as nearly as practicable adopted
and followed in the application of this section.
(6) For the purposes of this section the term "Internal Revenue Code" shall mean the
Internal Revenue Code as amended through December 31, 1980.