KRS 141.347 — Computation of income tax credit

(1) As used in this section, unless the context requires otherwise:
(a) "Approved company" shall have the same meaning as set forth in KRS
154.22-010;
(b) "Economic development project" shall have the same meaning as set forth in
KRS 154.22-010;
(c) "Tax credi t" means the "tax credit" allowed in KRS 154.22 -010 to 154.22 -
070;
(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 l imited 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, s ubtract 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 method chosen under paragraph (a)2. of this subs ection,
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 154.22-050.
(4) (a) Notwithstanding any other provisions of this chapter, an approved company
which is a pass-through entity not subject to tax under KRS 141.040 or a trust
not subject to tax under 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,
members, shareholders, or beneficiaries of the pass-through entity or trust, and
shall be paid on behalf of the partners, members, sharehol ders, or
beneficiaries.
(c) The tax credit or estimated payment shall not exceed the limits set forth in
KRS 154.22-050.
(d) If the tax computed in this section exceeds the credit, the excess shall be paid
by the pass -through entity or trust at the times p rovided by KRS 141.160 or
141.0401 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 inco me 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 thi s chapter 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 attr ibutable to the entire facility shall be determined under the
separate accounting method reflecting only the gross income, deductions,
expenses, gains, and losses allowed under this chapter directly attributable to
the facility, and the net income attribut able 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 approv ed 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 di rectly
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 Kentu cky 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 develo pment 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 Rev enue may issue administrative regulations and require the
filing of forms designed by the Department of Revenue to reflect the intent of KRS
154.22-020 to 154.22 -070 and the allowable income tax credit which an approved
company may retain under KRS 154.22-020 to 154.22-070.