KRS 141.900 — Definitions for KRS Chapter 141 -- Taxable years beginning prior to January 1, 2018

The definitions in this section are the same as the definitions appearing in KRS 141.010
prior to its repeal and reenactment in Section 53 of 2018 Ky. Acts chs . 171 and 207. For
taxable years beginning prior to January 1, 2018, as used in this chapter, unless the
context requires otherwise:
(1) "Commissioner" means the commissioner of the department;
(2) "Department" means the Department of Revenue;
(3) "Internal Revenue Code" means the Internal Revenue Code in effect on December
31, 2015, exclusive of any amendments made subsequent to that date, other than
amendments that extend provisions in effect on December 31, 2015, that would
otherwise terminate, and as modified by KRS 141.0101;
(4) "Dependent" means those persons defined as dependents in the Internal Revenue
Code;
(5) "Fiduciary" means "fiduciary" as defined in Section 7701(a)(6) of the Internal
Revenue Code;
(6) "Fiscal year" means "fiscal year" as define d in Section 7701(a)(24) of the Internal
Revenue Code;
(7) "Individual" means a natural person;
(8) "Modified gross income" means the greater of:
(a) Adjusted gross income as defined in Section 62 of the Internal Revenue Code
of 1986, including any subsequ ent amendments in effect on December 31 of
the taxable year, and adjusted as follows:
1. Include interest income derived from obligations of sister states and
political subdivisions thereof; and
2. Include lump -sum pension distributions taxed under the spe cial
transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or
(b) Adjusted gross income as defined in subsection (10) of this section and
adjusted to include lump -sum pension distributions taxed under the special
transition rules of Pub. L. No. 104-188, sec. 1401(c)(2);
(9) "Gross income," in the case of taxpayers other than corporations, means "gross
income" as defined in Section 61 of the Internal Revenue Code;
(10) "Adjusted gross income," in the case of taxpayers other than corporations, means
gross income as defined in subsection (9) of this section minus the deducti ons
allowed individuals by Section 62 of the Internal Revenue Code and as modified by
KRS 141.0101 and adjusted as follows, except that deductions shall be limited to
amounts allocable to income subject to taxation under the provisions of this chapter,
and except that nothing in this chapter shall be construed to permit the same item to
be deducted more than once:
(a) Exclude income that is exempt from state taxation by the Kentucky
Constitution and the Constitution and statutory laws of the United States a nd
Kentucky;
(b) Exclude income from supplemental annuities provided by the Railroad
Retirement Act of 1937 as amended and which are subject to federal income
tax by Public Law 89-699;
(c) Include interest income derived from obligations of sister states a nd political
subdivisions thereof;
(d) Exclude employee pension contributions picked up as provided for in KRS
6.505, 16.545, 21.360, 61.523, 61.560, 65.155, 67A.320, 67A.510, 78.610,
and 161.540 upon a ruling by the Internal Revenue Service or the federal
courts that these contributions shall not be included as gross income until such
time as the contributions are distributed or made available to the employee;
(e) Exclude Social Security and railroad retirement benefits subject to federal
income tax;
(f) Include, for taxable years ending before January 1, 1991, all overpayments of
federal income tax refunded or credited for taxable years;
(g) Deduct, for taxable years ending before January 1, 1991, federal income tax
paid for taxable years ending before January 1, 1990;
(h) Exclude any money received because of a settlement or judgment in a lawsuit
brought against a manufacturer or distributor of "Agent Orange" for damages
resulting from exposure to Agent Orange by a member or veteran of the
Armed Forces of the United States or any dependent of such person who
served in Vietnam;
(i) 1. For taxable years ending prior to December 31, 2005, exclude the
applicable amount of total distributions from pension plans, annuity
contracts, profit -sharing plans, retiremen t plans, or employee savings
plans. The "applicable amount" shall be:
a. Twenty-five percent (25%), but not more than six thousand two
hundred fifty dollars ($6,250), for taxable years beginning after
December 31, 1994, and before January 1, 1996;
b. Fifty percent (50%), but not more than twelve thousand five
hundred dollars ($12,500), for taxable years beginning after
December 31, 1995, and before January 1, 1997;
c. Seventy-five percent (75%), but not more than eighteen thousand
seven hundred fifty dollar s ($18,750), for taxable years beginning
after December 31, 1996, and before January 1, 1998; and
d. One hundred percent (100%), but not more than thirty -five
thousand dollars ($35,000), for taxable years beginning after
December 31, 1997.
2. For taxable y ears beginning after December 31, 2005, exclude up to
forty-one thousand one hundred ten dollars ($41,110) of total
distributions from pension plans, annuity contracts, profit -sharing plans,
retirement plans, or employee savings plans.
3. As used in this paragraph:
a. "Distributions" includes but is not limited to any lump -sum
distribution from pension or profit -sharing plans qualifying for the
income tax averaging provisions of Section 402 of the Internal
Revenue Code; any distribution from an individual r etirement
account as defined in Section 408 of the Internal Revenue Code;
and any disability pension distribution;
b. "Annuity contract" has the same meaning as set forth in Section
1035 of the Internal Revenue Code; and
c. "Pension plans, profit-sharing plans, retirement plans, or employee
savings plans" means any trust or other entity created or organized
under a written retirement plan and forming part of a stock bonus,
pension, or profit -sharing plan of a public or private employer for
the exclusive ben efit of employees or their beneficiaries and
includes plans qualified or unqualified under Section 401 of the
Internal Revenue Code and individual retirement accounts as
defined in Section 408 of the Internal Revenue Code;
(j) 1. a. Exclude the portion of the distributive share of a shareholder's net
income from an S corporation subject to the franchise tax imposed
under KRS 136.505 or the capital stock tax imposed under KRS
136.300; and
b. Exclude the portion of the distributive share of a shareholder's ne t
income from an S corporation related to a qualified subchapter S
subsidiary subject to the franchise tax imposed under KRS
136.505 or the capital stock tax imposed under KRS 136.300.
2. The shareholder's basis of stock held in a S corporation where the S
corporation or its qualified subchapter S subsidiary is subject to the
franchise tax imposed under KRS 136.505 or the capital stock tax
imposed under KRS 136.300 shall be the same as the basis for federal
income tax purposes;
(k) Exclude, to the extent not already excluded from gross income, any amounts
paid for health insurance, or the value of any voucher or similar instrument
used to provide health insurance, which constitutes medical care coverage for
the taxpayer, the taxpayer 's spouse, and dependents, or for any person
authorized to be provided excludable coverage by the taxpayer pursuant to the
federal Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111 -
148, or the Health Care and Education Reconciliation Act of 2010, Pub. L.
No. 111-152, during the taxable year. Any amounts paid by the taxpayer for
health insurance that are excluded pursuant to this paragraph shall not be
allowed as a deduction in computing the taxpayer's net income under
subsection (11) of this section;
(l) Exclude income received for services performed as a precinct worker for
election training or for working at election booths in state, county, and local
primary, regular, or special elections;
(m) Exclude any amount paid during the taxable y ear for insurance for long -term
care as defined in KRS 304.14-600;
(n) Exclude any capital gains income attributable to property taken by eminent
domain;
(o) Exclude any amount received by a producer of tobacco or a tobacco quota
owner from the multistate settlement with the tobacco industry, known as the
Master Settlement Agreement, signed on November 22, 1998;
(p) Exclude any amount received from the secondary settlement fund, referred to
as "Phase II," established by tobacco companies to compensate tobac co
farmers and quota owners for anticipated financial losses caused by the
national tobacco settlement;
(q) Exclude any amount received from funds of the Commodity Credit
Corporation for the Tobacco Loss Assistance Program as a result of a
reduction in the quantity of tobacco quota allotted;
(r) Exclude any amount received as a result of a tobacco quota buydown program
that all quota owners and growers are eligible to participate in;
(s) Exclude state Phase II payments received by a producer of tobacco or a
tobacco quota owner;
(t) Exclude all income from all sources for active duty and reserve members and
officers of the Armed Forces of the United States or National Guard who are
killed in the line of duty, for the year during which the death occurred and t he
year prior to the year during which the death occurred. For the purposes of this
paragraph, "all income from all sources" shall include all federal and state
death benefits payable to the estate or any beneficiaries; and
(u) For taxable years beginning on or after January 1, 2010, exclude all military
pay received by active duty members of the Armed Forces of the United
States, members of reserve components of the Armed Forces of the United
States, and members of the National Guard, including compensatio n for state
active duty as described in KRS 38.205;
(11) "Net income," in the case of taxpayers other than corporations, means adjusted
gross income as defined in subsection (10) of this section, minus:
(a) The deduction allowed by KRS 141.0202 as it exist ed prior to January 1,
2018;
(b) Any amount paid for vouchers or similar instruments that provide health
insurance coverage to employees or their families;
(c) For taxable years beginning on or after January 1, 2010, the amount of
domestic production activ ities deduction calculated at six percent (6%) as
allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years
beginning before 2010; and
(d) 1. All the deductions allowed individuals by Chapter 1 of the Internal
Revenue Code as modified by KRS 141.0101 except:
a. Any deduction allowed by the Internal Revenue Code for state or
foreign taxes measured by gross or net income, including state and
local general sales taxes allowed in lieu of state and local income
taxes under the provisions of Sec tion 164(b)(5) of the Internal
Revenue Code;
b. Any deduction allowed by the Internal Revenue Code for amounts
allowable under KRS 140.090(1)(h) in calculating the value of the
distributive shares of the estate of a decedent, unless there is filed
with the income return a statement that such deduction has not
been claimed under KRS 140.090(1)(h);
c. The deduction for personal exemptions allowed under Section 151
of the Internal Revenue Code and any other deductions in lieu
thereof;
d. For taxable years begi nning on or after January 1, 2010, the
domestic production activities deduction allowed under Section
199 of the Internal Revenue Code;
e. Any deduction for amounts paid to any club, organization, or
establishment which has been determined by the courts or an
agency established by the General Assembly and charged with
enforcing the civil rights laws of the Commonwealth, not to afford
full and equal membership and full and equal enjoyment of its
goods, services, facilities, privileges, advantages, or
accommodations to any person because of race, color, religion,
national origin, or sex, except nothing shall be construed to deny a
deduction for amounts paid to any religious or denominational
club, group, or establishment or any organization operated solely
for charitable or educational purposes which restricts membership
to persons of the same religion or denomination in order to
promote the religious principles for which it is established and
maintained;
f. Any deduction directly or indirectly allocable to inc ome which is
either exempt from taxation or otherwise not taxed under this
chapter;
g. The itemized deduction limitation established in 26 U.S.C. sec. 68
shall be determined using the applicable amount from 26 U.S.C.
sec. 68 as it existed on December 31, 2006; and
h. A taxpayer may elect to claim the standard deduction allowed by
KRS 141.081 instead of itemized deductions allowed pursuant to
26 U.S.C. sec. 63 and as modified by this section; and
2. Nothing in this chapter shall be construed to permit the sa me item to be
deducted more than once;
(12) "Gross income," in the case of corporations, means "gross income" as defined in
Section 61 of the Internal Revenue Code and as modified by KRS 141.0101 and
adjusted as follows:
(a) Exclude income that is exempt from state taxation by the Kentucky
Constitution and the Constitution and statutory laws of the United States;
(b) Exclude all dividend income received after December 31, 1969;
(c) Include interest income derived from obligati ons of sister states and political
subdivisions thereof;
(d) Exclude fifty percent (50%) of gross income derived from any disposal of coal
covered by Section 631(c) of the Internal Revenue Code if the corporation
does not claim any deduction for percentage depletion, or for expenditures
attributable to the making and administering of the contract under which such
disposition occurs or to the preservation of the economic interests retained
under such contract;
(e) Include the amount calculated under KRS 141.205;
(f) Ignore the provisions of Section 281 of the Internal Revenue Code in
computing gross income;
(g) Exclude income from "safe harbor leases" (Section 168(f)(8) of the Internal
Revenue Code);
(h) Exclude any amount received by a producer of tobacco or a tobacco quota
owner from the multistate settlement with the tobacco industry, known as the
Master Settlement Agreement, signed on November 22, 1998;
(i) Exclude any amount received from the secondary settlement fund, referred to
as "Phase II," establish ed by tobacco companies to compensate tobacco
farmers and quota owners for anticipated financial losses caused by the
national tobacco settlement;
(j) Exclude any amount received from funds of the Commodity Credit
Corporation for the Tobacco Loss Assistanc e Program as a result of a
reduction in the quantity of tobacco quota allotted;
(k) Exclude any amount received as a result of a tobacco quota buydown program
that all quota owners and growers are eligible to participate in;
(l) For taxable years beginning after December 31, 2004, and before January 1,
2007, exclude the distributive share income or loss received from a
corporation defined in subsection (24)(b) of this section whose income has
been subject to the tax imposed by KRS 141.040. The exclusion pro vided in
this paragraph shall also apply to a taxable year that begins prior to January 1,
2005, if the tax imposed by KRS 141.040 is paid on the distributive share
income by a corporation defined in subparagraphs 2. to 8. of subsection
(24)(b) of this sec tion with a return filed for a period of less than twelve (12)
months that begins on or after January 1, 2005, and ends on or before
December 31, 2005. This paragraph shall not be used to delay payment of the
tax imposed by KRS 141.040; and
(m) Exclude sta te Phase II payments received by a producer of tobacco or a
tobacco quota owner;
(13) "Net income," in the case of corporations, means "gross income" as defined in
subsection (12) of this section minus:
(a) The deduction allowed by KRS 141.0202 as it exist ed prior to January 1,
2018;
(b) Any amount paid for vouchers or similar instruments that provide health
insurance coverage to employees or their families;
(c) For taxable years beginning on or after January 1, 2010, the amount of
domestic production activ ities deduction calculated at six percent (6%) as
allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years
beginning before 2010; and
(d) All the deductions from gross income allowed corporations by Chapter 1 of
the Internal Revenue Code and as modified by KRS 141.0101, except:
1. Any deduction for a state tax which is computed, in whole or in part, by
reference to gross or net income and which is paid or accrued to any
state of the United States, the District of Columbia, the Commonwealt h
of Puerto Rico, any territory or possession of the United States, or to any
foreign country or political subdivision thereof;
2. The deductions contained in Sections 243, 245, and 247 of the Internal
Revenue Code;
3. The provisions of Section 281 of the Internal Revenue Code shall be
ignored in computing net income;
4. Any deduction directly or indirectly allocable to income which is either
exempt from taxation or otherwise not taxed under the provisions of this
chapter, and nothing in this chapter shall be construed to permit the
same item to be deducted more than once;
5. Exclude expenses related to "safe harbor leases" (Section 168(f)(8) of
the Internal Revenue Code);
6. Any deduction for amounts paid to any club, organization, or
establishment which ha s been determined by the courts or an agency
established by the General Assembly and charged with enforcing the
civil rights laws of the Commonwealth, not to afford full and equal
membership and full and equal enjoyment of its goods, services,
facilities, privileges, advantages, or accommodations to any person
because of race, color, religion, national origin, or sex, except nothing
shall be construed to deny a deduction for amounts paid to any religious
or denominational club, group, or establishment or an y organization
operated solely for charitable or educational purposes which restricts
membership to persons of the same religion or denomination in order to
promote the religious principles for which it is established and
maintained;
7. Any deduction prohibited by KRS 141.205;
8. Any dividends-paid deduction of any captive real estate investment trust;
and
9. For taxable years beginning on or after January 1, 2010, the domestic
production activities deduction allowed under Section 199 of the
Internal Revenue Code;
(14) (a) "Taxable net income," in the case of corporations that are taxable in this state,
means "net income" as defined in subsection (13) of this section;
(b) "Taxable net income," in the case of c orporations that are taxable in this state
and taxable in another state, means "net income" as defined in subsection (13)
of this section and as allocated and apportioned under KRS 141.901. A
corporation is taxable in another state if, in any state other t han Kentucky, the
corporation is required to file a return for or pay a net income tax, franchise
tax measured by net income, franchise tax for the privilege of doing business,
or corporate stock tax;
(c) "Taxable net income," in the case of homeowners' as sociations as defined in
Section 528(c) of the Internal Revenue Code, means "taxable income" as
defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the
provisions of subsection (3) of this section, the Internal Revenue Code
sections referred to in this paragraph shall be those code sections in effect for
the applicable tax year; and
(d) "Taxable net income," in the case of a corporation that meets the requirements
established under Section 856 of the Internal Revenue Code to be a real es tate
investment trust, means "real estate investment trust taxable income" as
defined in Section 857(b)(2) of the Internal Revenue Code, except that a
captive real estate investment trust shall not be allowed any deduction for
dividends paid;
(15) "Person" means "person" as defined in Section 7701(a)(1) of the Internal Revenue
Code;
(16) "Taxable year" means the calendar year or fiscal year ending during such calendar
year, upon the basis of which net income is computed, and in the case of a return
made for a fractional part of a year under the provisions of this chapter or under
regulations prescribed by the commissioner, "taxable year" means the period for
which the return is made;
(17) "Resident" means an individual domiciled within this state or an indiv idual who is
not domiciled in this state, but maintains a place of abode in this state and spends in
the aggregate more than one hundred eighty -three (183) days of the taxable year in
this state;
(18) "Nonresident" means any individual not a resident of this state;
(19) "Employer" means "employer" as defined in Section 3401(d) of the Internal
Revenue Code;
(20) "Employee" means "employee" as defined in Section 3401(c) of the Internal
Revenue Code;
(21) "Number of withholding exemptions claimed" means the nu mber of withholding
exemptions claimed in a withholding exemption certificate in effect under KRS
141.325, except that if no such certificate is in effect, the number of withholding
exemptions claimed shall be considered to be zero (0);
(22) "Wages" means "wages" as defined in Section 3401(a) of the Internal Revenue
Code and includes other income subject to withholding as provided in Section
3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code;
(23) "Payroll period" means "payrol l period" as defined in Section 3401(b) of the
Internal Revenue Code;
(24) (a) For taxable years beginning before January 1, 2005, and after December 31,
2006, "corporation" means "corporation" as defined in Section 7701(a)(3) of
the Internal Revenue Code; and
(b) For taxable years beginning after December 31, 2004, and before January 1,
2007, "corporations" means:
1. "Corporations" as defined in Section 7701(a)(3) of the Internal Revenue
Code;
2. S corporations as defined in Section 1361(a) of the Internal Revenue
Code;
3. A foreign limited liability company as defined in KRS 275.015;
4. A limited liability company as defined in KRS 275.015;
5. A professional limited liability company as defined in KRS 275.015;
6. A foreign limited partnership as defined in KRS 362.2-102(9);
7. A limited partnership as defined in KRS 362.2-102(14);
8. A limited liability partnership as defined in KRS 362.155(7) or in 362.1-
101(7) or (8);
9. A real estate investment trust as defined in Section 856 of the Internal
Revenue Code;
10. A regulated investment company as defined in Section 851 of the
Internal Revenue Code;
11. A real estate mortgage investment conduit as defined in Section 860D of
the Internal Revenue Code;
12. A financial asset securitization investment trust as defined in Section
860L of the Internal Revenue Code; and
13. Other similar entities created with limited liability for their partners,
members, or shareholders.
For purposes of this paragraph, "corpora tion" shall not include any publicly
traded partnership as defined by Section 7704(b) of the Internal Revenue Code
that is treated as a partnership for federal tax purposes under Section 7704(c)
of the Internal Revenue Code or its publicly traded partnersh ip affiliates. As
used in this paragraph, "publicly traded partnership affiliates" shall include
any limited liability company or limited partnership for which at least eighty
percent (80%) of the limited liability company member interests or limited
partner interests are owned directly or indirectly by the publicly traded
partnership;
(25) "Doing business in this state" includes but is not limited to:
(a) Being organized under the laws of this state;
(b) Having a commercial domicile in this state;
(c) Owning or leasing property in this state;
(d) Having one (1) or more individuals performing services in this state;
(e) Maintaining an interest in a pass-through entity doing business in this state;
(f) Deriving income from or attributable to sources within th is state, including
deriving income directly or indirectly from a trust doing business in this state,
or deriving income directly or indirectly from a single -member limited
liability company that is doing business in this state and is disregarded as an
entity separate from its single member for federal income tax purposes; or
(g) Directing activities at Kentucky customers for the purpose of selling them
goods or services.
Nothing in this subsection shall be interpreted in a manner that goes beyond the
limitations imposed and protections provided by the United States Constitution or
Pub. L. No. 86-272;
(26) "Pass-through entity" means any partnership, S corporation, limited liability
company, limited liability partnership, limited partnership, or similar ent ity
recognized by the laws of this state that is not taxed for federal purposes at the
entity level, but instead passes to each partner, member, shareholder, or owner their
proportionate share of income, deductions, gains, losses, credits, and any other
similar attributes;
(27) "S corporation" means "S corporation" as defined in Section 1361(a) of the Internal
Revenue Code;
(28) "Limited liability pass -through entity" means any pass -through entity that affords
any of its partners, members, shareholders, or owners, through function of the laws
of this state or laws recognized by this state, protection from general liability for
actions of the entity; and
(29) "Captive real estate investment trust" means a real estate investment trust as defined
in Section 856 of the Internal Revenue Code that meets the following requirements:
(a) 1. The shares or other ownership interests of the real estate investment trust
are not regularly traded on an established securities market; or
2. The real estate investment trust doe s not have enough shareholders or
owners to be required to register with the Securities and Exchange
Commission; and
(b) 1. The maximum amount of stock or other ownership interest that is owned
or constructively owned by a corporation equals or exceeds:
a. Twenty-five percent (25%), if the corporation does not occupy
property owned, constructively owned, or controlled by the real
estate investment trust; or
b. Ten percent (10%), if the corporation occupies property owned,
constructively owned, or controlled by the real estate investment
trust.
The total ownership interest of a corporation shall be determined by
aggregating all interests owned or constructively owned by a
corporation;
2. For the purposes of this paragraph:
a. "Corporation" means a corporation taxable under KRS 141.040,
and includes an affiliated group as defined in KRS 141.200, that is
required to file a consolidated return pursuant to the provisions of
KRS 141.200; and
b. "Owned or constructively owned" means owning shares or having
an ownership interest in the real estate investment trust, or owning
an interest in an entity that owns shares or has an ownership
interest in the real estate investment trust. Constructive ownership
shall be determined by looking a cross multiple layers of a
multilayer pass-through structure; and
(c) The real estate investment trust is not owned by another real estate investment
trust.