KRS 141.407 — Determination of allowable income tax credit approved company may retain

(1) As used in this section, unless the context requires otherwise:
(a) "Approved company" shall have the same meaning as set forth in KRS
154.24-010;
(b) "Economic development project" shall have the same meaning as economic
development project as set forth in KRS 154.24-010;
(c) "Tax credit" means the tax credit allowed in KRS 154.24-020 to 154.24-150;
(d) "Kentucky gross receipts" means Kentucky gross receipts as defined in KRS
141.0401; and
(e) "Kentucky gross profits" means Kentucky gross profits as d efined 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 limited 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 t his
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.
(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 same method used under paragraph (a)2. of this su bsection,
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 th is subsection exceeds the tax computed under paragraph
(b)3. of this subsection; however, the credit shall not exceed the limits set
forth in KRS 154.24-020 to 154.24-150.
(4) (a) Notwithstanding any other provisions of this chapter, an approved company
which is a pass-through entity not subject to the tax imposed by KRS 141.040
or a trust not subject to the tax imposed by 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 or
beneficiaries of the pass-through entity or trust, and shall be paid on behalf of
the partners, members, shareholders, or beneficiaries.
(c) The tax credit or estimated payment shall not exceed the limits set forth in
KRS 154.24-020 to 154.24-150.
(d) If the tax computed herein exceeds the credit, the excess shall be paid by the
pass-through entity or trust at the times provided by KRS 141.160 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 i ncome 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 KRS Chapter 141 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 incom e attributable to the entire facility shall be determined under the
separate accounting method reflecting only the gross income, deductions,
expenses, gains, and losses allowed under KRS Chapter 141 directly
attributable to the facility and overhead expens es apportioned to the facility,
and the net income attributable 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 facil ity to the
economic development project by a formula approved 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 directly
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 Kentucky 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 th e 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 g ross profits from the facility at
which the economic development 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 appro ved by the
Department of Revenue.
(9) The Department of Revenue may promulgate administrative regulations and require
the filing of forms designed by the Department of Revenue to reflect the intent of
KRS 154.24 -010 to 154.24 -150 and the allowable income t ax credit which an
approved company may retain under KRS 154.24-010 to 154.24-150.