KRS 141.414 — Computation of tax and credit

(1) A qualified farming operation 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 qualified farming operation's participation in a
networking project.
2. Compute the limited liability entity tax imposed under KRS 141.0401,
including Kentucky gross profits or Kentucky gross receipts from the
qualified farming operation's participation in a networking project; and
3. Add the amounts computed under subparagraphs 1. and 2. of this
paragraph and, if ap plicable, 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 applies on net income or taxable net income,
excluding net income attributable to the qualified farming operation's
participation in a networking project;
2. Using the same method used under paragraph (a)2. of this subsection,
compute the limited liability entity tax imp osed under KRS 141.0401,
excluding Kentucky gross profits or Kentucky gross receipts from the
qualified farming operation's participation in a networking project; and
3. Add the amounts computed under subparagraphs 1. and 2. of this
paragraph and, if appli cable, 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; and
(c) Be entitled to a tax credit in the amount by which the tax computed under
paragraph (a)3. of this subse ction exceeds the tax computed under paragraph
(b)3. of this subsection. The credit shall not exceed the farming operation's
approved costs, as defined in KRS 141.410.
(2) Notwithstanding any other provisions of this chapter, a qualified farming operation
which is a pass -through entity not subject to the tax imposed by KRS 141.040 or
trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax
on the net income attributable to its participation in a networking project at the rates
provided in KRS 141.020, and the amount of the tax credit shall be the same as the
amount of the tax computed in this subsection. The credit shall not exceed the
farming operation's approved costs, as defined in KRS 141.410. If the tax computed
in this subsect ion exceeds the tax credit, the difference shall be paid by the pass -
through entity or trust at the times provided by KRS 141.160 for filing the returns.
(3) Notwithstanding any other provisions of this chapter, the net income subject to tax
and the tax cr edit determined under subsection (2) 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.
(4) If the networking entity is a separate facility:
(a) Net income attributable to the project for the purposes of subsections (1), (2),
and (3) of this section shall be determined under the separate accounting
method reflecting only the gross income, deductions, expenses, gains, and
losses allowed under KRS Ch apter 141 directly attributable to the project 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 (1) 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.
(5) If the networking project is an expansion to a previously existing farming operation:
(a) Net income attrib utable to the entire operation 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 farming operation's participation in t he networking project and overhead
expenses apportioned to the networking project, and the net income
attributable to the networking project for the purposes of subsections (1), (2),
and (3) of this section shall be determined by apportioning the separate
accounting net income of the entire networking project to the networking
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 (1) 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.
(6) 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 farming operation 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 networking
project, the approved farming operation shall determine net income, Kentucky gross
receipts, or Kentucky gross profits from its participation in the networking project
using an alternative method approved by the Department of Revenue.
(7) The Department of Revenue may promulgate administrative regulations pursuant to
KRS Chapter 13A and require the filing of forms designed by the Department of
Revenue necessary to effectuate KRS 141.0101 and KRS 141.410 to 141.414 and
the allowable income tax credit which an approved farming operation may retain
under the provisions of KRS 141.412 and this section.