KRS 141.390 — Tax credit for recycling or composting equipment -- Report

(1) As used in this section:
(a) "Postconsumer waste" means any product generated by a business or
consumer which has served its intended end use, and which has been
separated from solid waste for the purposes of collection, recycling,
composting, and disposit ion and which does not include secondary waste
material or demolition waste;
(b) "Recycling equipment" means any machinery or apparatus used exclusively to
process postconsumer waste material and manufacturing machinery used
exclusively to produce finished products composed of substantial
postconsumer waste materials;
(c) "Composting equipment" means equipment used in a process by which
biological decomposition of organic solid waste is carried out under controlled
aerobic conditions, and which stabilizes t he organic fraction into a material
which can easily and safely be stored, handled, and used in an
environmentally acceptable manner;
(d) "Recapture period" means:
1. For qualified equipment with a useful life of five (5) or more years, the
period from the date the equipment is purchased to five (5) full years
from that date; or
2. For qualified equipment with a useful life of less than five (5) years, the
period from the date the equipment is purchased to three (3) full years
from that date;
(e) "Useful life" means the period determined under Section 168 of the Internal
Revenue Code; and
(f) "Major recycling project" means a project location where the taxpayer:
1. Invests more than ten million dollars ($10,000,000) in recycling or
composting equipment to be used exclusively in this state;
2. Has at least four hundred (400) full -time employees with an average
hourly wage of more than three hundred percent (300%) of the federal
minimum wage; and
3. Has plant and equipment with a total cost of more than five hu ndred
million dollars ($500,000,000).
(2) (a) 1. A taxpayer that purchases recycling or composting equipment to be used
exclusively within this state for recycling or composting postconsumer
waste materials shall be entitled to a credit against the:
a. Income taxes under KRS 141.020 or 141.040; and
b. Limited liability entity tax under KRS 141.0401;
with the ordering of the credits under KRS 141.0205.
2. The total tax credit shall be an amount equal to fifty percent (50%) of
the installed cost of the recycling or composting equipment.
3. The amount of credit claimed in the taxable year during which the
recycling equipment is purchased shall not exceed:
a. Ten percent (10%) of the amount of the total credit allowable; or
b. Twenty-five percent (25%) of th e total of each tax liability which
would be otherwise due for that taxable year.
4. The amount of credit claimed in a taxable year subsequent to the taxable
year during which the recycling equipment is purchased shall not exceed
twenty-five percent (25%) of the total of each tax liability, which would
be otherwise due for that taxable year.
(b) 1. For taxable years beginning after December 31, 2019, a taxpayer that has
a major recycling project containing recycling or composting equipment
to be used exclus ively within this state for recycling or composting
postconsumer waste material shall be entitled to a credit against the:
a. Income taxes under KRS 141.020 or 141.040; and
b. Limited liability entity tax under KRS 141.0401;
with the ordering of the credits under KRS 141.0205.
2. The total tax credit shall be an amount equal to twenty -five percent
(25%) of the installed cost of the recycling or composting equipment.
3. The credit described in this paragraph shall be limited to a period of
thirty (30) years commencing with the approval of the recycling credit
application.
4. The amount of credit claimed in the taxable year during which the
recycling equipment is purchased shall not exceed seventy -five percent
(75%) of the total of each tax liability which wo uld be otherwise due for
that taxable year.
5. The amount of credit claimed in a taxable year subsequent to the taxable
year during which the recycling equipment is purchased shall not exceed
seventy-five percent (75%) of the total of each tax liability, which would
be otherwise due for that taxable year.
(c) A taxpayer with one (1) or more major recycling projects shall be entitled to a
total credit including the amount computed in paragraph (a) of this subsection
plus the amount of credit computed in paragraph (b) of this subsection, except
that the total amount of credits under paragraphs (a) and (b) of this subsection
claimed in a taxable year shall not exceed seventy -five percent (75%) of the
total of each tax liability which would be otherwise due for that taxable year.
(d) A taxpayer shall not be permitted to utilize a credit computed under paragraph
(a) of this subsection and a credit computed under paragraph (b) of this
subsection on the same recycling or composting equipment.
(3) (a) 1. Except as provided in subparagraph 2. of this paragraph, application for
a tax credit shall be made to the department on or before the first day of
the seventh month following the close of the taxable year in which the
recycling or composting equipment is purchased or placed in service.
2. For taxable years beginning on or after January 1, 2020, but before
January 1, 2024, application for a tax credit related to a major recycling
project may be made to the department on or before the first day of the
seventh month following either:
a. The close of the taxable year in which the recycling or composting
equipment is purchased or placed in service; or
b. The close of the taxable year immediately following the taxable
year in which the recycling or composting equipment is pu rchased
or placed in service.
(b) The application shall include a description of each item of recycling
equipment purchased, the date of purchase and the installed cost of the
recycling equipment, a statement of where the recycling equipment is to be
used, and any other information as the department may require to fulfill the
reporting requirements under subsection (8) of this section.
(c) The department shall review all applications received to determine whether
expenditures for which credits are required meet the requirements of this
section and shall advise the taxpayer of the amount of credit for which the
taxpayer is eligible under this section.
(4) (a) Except as provided in subsection (6) of this section, if a taxpayer that receives
a tax credit under this section sells, transfers, or otherwise disposes of the
qualifying recycling or composting equipment before the end of the recapture
period, the tax credit shall be redetermined under subsection (5) of this
section.
(b) If the total credit taken in prior taxable years exceeds the redetermined credit,
the difference shall be added to the taxpayer's tax liability under this chapter
for the taxable year in which the sale, transfer, or disposition occurs.
(c) If the redetermined credit exceeds the total credit already taken in prior
taxable years, the taxpayer shall be entitled to use the difference to reduce the
taxpayer's tax liability under this chapter for the taxable year in which the sale,
transfer, or disposition occurs.
(5) The total tax credit allowable under subsection (2) of this section for equipment that
is sold, transferred, or otherwise disposed of before the end of the recaptu re period
shall be adjusted as follows:
(a) For equipment with a useful life of five (5) or more years that is sold,
transferred, or otherwise disposed of:
1. One (1) year or less after the purchase, no credit shall be allowed.
2. Between one (1) year and two (2) years after the purchase, twenty
percent (20%) of the total allowable credit shall be allowed.
3. Between two (2) and three (3) years after the purchase, forty percent
(40%) of the total allowable credit shall be allowed.
4. Between three (3) and f our (4) years after the purchase, sixty percent
(60%) of the total allowable credit shall be allowed.
5. Between four (4) and five (5) years after the purchase, eighty percent
(80%) of the total allowable credit shall be allowed.
(b) For equipment with a u seful life of less than five (5) years that is sold,
transferred, or otherwise disposed of:
1. One (1) year or less after the purchase, no credit shall be allowed.
2. Between one (1) year and two (2) years after the purchase, thirty -three
percent (33%) of the total allowable credit shall be allowed.
3. Between two (2) and three (3) years after the purchase, sixty -seven
percent (67%) of the total allowable credit shall be allowed.
(6) Subsections (4) and (5) of this section shall not apply to transfers due t o death, or
transfers due merely to a change in business ownership or organization as long as
the equipment continues to be used exclusively in recycling or composting, or
transactions to which Section 381(a) of the Internal Revenue Code applies.
(7) The d epartment may promulgate administrative regulations to carry out the
provisions of this section.
(8) (a) The purpose of expanding the tax credit for a major recycling project is to
encourage more recycling and composting by businesses within the
Commonwealth.
(b) In order for the General Assembly to evaluate the fulfillment of the purpose
stated in paragraph (a) of this subsection, the department shall provide the
following information on a cumulative basis for each taxable year to provide a
historical impact of the tax credit to the Commonwealth:
1. A narrative for each major recycling project approved for a tax credit,
describing:
a. The taxpayer claiming the tax credit;
b. The industry sector within which the taxpayer operates in this
state, including the NAICS code for the taxpayer; and
c. The type of recycling or composting equipment purchased by the
taxpayer;
2. The location, by county, of the major recycling project;
3. The installed cost of the recycling or composting equipment;
4. The total amount of tax credit approved for the major recycling project;
5. The amount of tax credit allowed for the major recycling project for
each taxable year; and
6. a. In the case of all taxpayers other than corporations, based on
ranges of adjusted gross income of no larger than five thousand
dollars ($5,000) for the taxable year, the total amount of tax credits
claimed and the number of returns claiming a tax credit for each
adjusted gross income range; and
b. In the case of all corporations, based on ranges of net income no
larger than fifty thousand dollars ($50,000) for the taxable year, the
total amount of tax credit claimed and the number of returns
claiming a tax credit for each net income range.
(c) The report required by paragraph (b) of this subsection shall be submitted to
the Interim Joint Committee on Appropriations and Revenue beginning no
later than November 1, 2021, and no later than each November 1 thereafter, as
long as the credit is claimed on any return processed by the department.