KRS 141.415 — Computation of income tax and credit for approved company

(1) As used in this section, unless the context requires otherwise:
(a) "Approved company" means the same as defined in KRS 154.32 -010 or
154.34-010;
(b) "Economic development project" means the same as defined in KRS 154.32 -
010;
(c) "Reinvestment project" means the same as defined in KRS 154.34-010;
(d) "Tax credit" means the tax credit allowed in KRS 154.34 -120 or the credit
allowed in KRS 154.32-070, as the case may be;
(e) "Kentucky gross receipts" means the same as defined in KRS 141.0401; and
(f) "Kentucky gross profits" means the same as defined in KRS 141.0401.
(2) An approved company shall determine the income 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 in come, including
income from a reinvestment project or 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
reinvestment project or 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.
(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 a reinvestment project or economic development
project;
2. Using the same method used under paragraph (a)2. of this subsec tion,
compute the limited liability entity tax imposed under KRS 141.0401,
including Kentucky gross profits or Kentucky gross receipts from the
reinvestment project or 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 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
154.32-070 or 154.34-120, as the case may be.
(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 trust not subject to the tax imposed by KRS 141.040 shall be subject to
income tax on the net income attributable to a reinvestment project or
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, shareholders, or
beneficiaries.
(c) The tax credit or estimated payment shall not exceed the limits set forth in
KRS 154.32-070 or 154.34-120, as the case may be.
(d) If the tax computed in this section 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.
(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 income 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 inco me or credit of a pass -
through entity or trust.
(6) If the reinvestment project or 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 sha ll 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 reinvestment project or economic development project is an expansion to a
previously existing facility:
(a) Net income attributable to the entire facility shall be determined under the
separate accounting me thod 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 the net income attributable to the reinvestment projec t or 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 reinvestment project or economic
development project by a formula approved by the department; 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 prof its directly
attributable to the facility, and Kentucky gross receipts or Kentucky gross
profits attributable to the reinvestment project or 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 reinvestment project or economic
development project by a formula approved by the department.
(8) If an approved company can show to the satisfaction o f the department 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 facil ity at which the
reinvestment project or economic development project is located, the approved
company shall determine net income, Kentucky gross receipts, or Kentucky gross
profits from the reinvestment project or economic development project using an
alternative method approved by the department.
(9) The department may promulgate administrative regulations and require the filing of
forms designed by the department to reflect the intent of KRS 154.34 -010 to
154.34-100 and Subchapter 32 of KRS Chapter 154, and the allowable income tax
credit which an approved company may retain under KRS 154.34 -010 to 154.34 -
100 or Subchapter 32 of KRS Chapter 154.