KRS 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" m eans 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 Inter nal 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 fil e 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 exclud ed 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 taxa ble 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 b y 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 conn ected 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 require ments 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 mem ber 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 mem ber 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 lim ited 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. T he
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 cor porations 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 ad ministrative
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 includib le 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.