KRS 141.428 — Kentucky Clean Coal Incentive Act -- Definitions -- Tax credit -- Administrative regulations

(1) As used in this section:
(a) "Clean coal facility" means an electric generation facility beginning
commercial operation on or after January 1, 2 005, at a cost greater than one
hundred fifty million dollars ($150,000,000) that is located in the
Commonwealth of Kentucky and is certified by the Energy and Environment
Cabinet as reducing emissions of pollutants released during generation of
electricity through the use of clean coal equipment and technologies;
(b) "Clean coal equipment" means equipment purchased and installed for
commercial use in a clean coal facility to aid in reducing the level of
pollutants released during the generation of electricity from eligible coal;
(c) "Clean coal technologies" means technologies incorporated for use within a
clean coal facility to lower emissions of pollutants released during the
generation of electricity from eligible coal;
(d) "Eligible coal" means coal tha t is subject to the tax imposed under KRS
143.020;
(e) "Ton" means a unit of weight equivalent to two thousand (2,000) pounds; and
(f) "Taxpayer" means taxpayer as defined in KRS 131.010(4).
(2) Effective for tax years ending on or after December 31, 2006, a nonrefundable,
nontransferable credit shall be allowed for:
(a) Any electric power company subject to tax under KRS 136.120 and certified
as a clean coal facility or any taxpayer that owns or operates a clean coal
facility and purchases eligible coal th at is used by the taxpayer in a certified
clean coal facility; or
(b) A parent company of an entity identified in paragraph (a) of this subsection if
the subsidiary is wholly owned.
(3) (a) The credit may be taken against the taxes imposed by:
1. KRS 136.120; or
2. KRS 141.020 or 141.040, and 141.0401.
(b) The credit shall not be carried forward and must be used on the tax return filed
for the period during which the eligible coal was purchased. The Energy and
Environment Cabinet must approve and certify use of the clean coal
equipment and technologies withi n a clean coal facility before any taxpayer
may claim the credit.
(c) The credit allowed under paragraph (a) of this subsection shall be applied both
to the income tax imposed under KRS 141.020 or 141.040 and to the limited
liability entity tax imposed und er KRS 141.0401, with the ordering of credits
as provided in KRS 141.0205.
(4) The amount of the allowable credit shall be two dollars ($2) per ton of eligible coal
purchased that is used to generate electric power at a certified clean coal facility.
(5) Each taxpayer eligible for the credit provided under subsection (2) of this section
shall file a clean coal incentive credit claim on forms prescribed by the department.
At the time of filing for the credit, the taxpayer shall submit an electronic report
verifying the tons of coal subject to the tax imposed by KRS 143.020 purchased for
each year in which the credit is claimed. The department shall determine the amount
of the approved credit and issue a credit certificate to the taxpayer.
(6) Corporations and pass-through entities subject to the tax imposed under KRS
141.040 or 141.0401 shall be eligible to apply, subject to the conditions imposed
under this section, the approved credit against its liability for the taxes, in
consecutive order as follows:
(a) The credit shall first be applied against both the tax imposed by KRS
141.0401 and the tax imposed by KRS 141.020 or 141.040, with the ordering
of credits as provided in KRS 141.0205;
(b) The credit shall then be applied to the tax imposed by KRS 136.120.
The credit shall meet the entirety of the taxpayer's liability under the first tax listed
in consecutive order before applying any remaining credit to the next tax listed. The
taxpayer's total liability under each preceding tax must be fully met before th e
remaining credit can be applied to the subsequent tax listed in consecutive order.
(7) If the taxpayer is a pass -through entity not subject to tax under KRS 141.040, the
amount of approved credit shall be applied against the tax imposed by KRS
141.0401 at the entity level, and shall also be distributed to each partner, member,
or shareholder based on the partner's, member's, or shareholder's distributive share
of the income of the pass -through entity. The credit shall be claimed in the same
manner as specified in subsection (6) of this section. Each pass -through entity shall
notify the department electronically of all partners, members, or shareholders who
may claim any amount of the approved credit. Failure to provide information to the
department in a ma nner prescribed by regulation may constitute the forfeiture of
available credits to all partners, members, or shareholders associated with the pass -
through entity.
(8) The taxpayer shall maintain all records associated with the credit for a period of five
(5) years. Acceptable verification of eligible coal purchased shall include invoices
that indicate the tons of eligible coal purchased from a Kentucky supplier of coal
and proof of remittance for that purchase.
(9) The department shall develop the forms re quired under this section, specifying the
procedure for claiming the credit, and applying the credit against the taxpayer's
liability in the order provided under subsections (6) and (7) of this section.
(10) The Office of Energy Policy within the Energy an d Environment Cabinet and the
department shall promulgate administrative regulations necessary to administer this
section.
(11) This section shall be known as the Kentucky Clean Coal Incentive Act.