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136.070 Corporation license tax -- Exemptions -- Apportionment -- Credit.
(1)
(2)
(3)
Every corporation organized under the laws of this state, every corporation
having its commercial domicile in this state, and every foreign corporation
owning or leasing property located in this state or having one (1) or more
individuals receiving compensation in this state, except financial institutions as
defined in KRS 136.500, savings and loan associations organized under the
laws of this state and under the laws of the United States and making loans to
members only, open-end registered investment companies organized under
the laws of this state and registered under the Investment Company Act of
1940, production credit associations, insurance companies, including farmers'
or other mutual hail, cyclone, windstorm or fire insurance companies, insurers
and reciprocal underwriters, public service companies subject to taxation under
KRS 136.120, those corporations exempted by Section 501 of the Internal
Revenue Code, any property or facility which has been certified as an alcohol
production facility as defined in KRS 247.910, any property or facility which has
been certified as a fluidized bed energy production facility as defined in KRS
211.390, and any other religious, educational, charitable, or like corporations
not organized or conducted for pecuniary profit, shall pay to the state an annual
license tax of two dollars and ten cents ($2.10) on each one thousand dollars
($1,000) of the capital employed in the business as computed under the
provisions of subsections (2) and (3) of this section, subject to the credit
provided in subsection (6) of this section.
(a) The term "capital" as used in this section means capital stock, surplus,
advances by affiliated companies, intercompany accounts, borrowed
moneys or any other accounts representing additional capital used and
employed in the business. Accounts properly defined as "capital" in this
section shall be reported at the value reflected on financial statements
prepared for book purposes as of the last day of the calendar or fiscal
year;
(b) "Capital employed," in the case of corporations having property or payroll
only in this state, means "capital" as defined above;
(c) "Capital employed," in the case of corporations having property or payroll
both within and without this state means "capital" as defined above and
as apportioned under subsection (3) of this section;
(d) Property means either real property or tangible personal property which is
either owned or leased. Payroll means compensation, paid to one (1) or
more individuals, as described in subsection (3) of this section. Property
and payroll are deemed to be entirely within this state if all other states
are prohibited by Public Law 86-272, as it existed on December 31, 1975,
from enforcing income tax jurisdiction.
The total capital, as determined under subsection (2) of this section, shall be
apportioned as follows:
(a) The total capital shall be multiplied by a fraction, the numerator of which
is the property factor plus the payroll factor, plus the sales factor, and the
denominator of which is three (3); provided, however, that effective with
taxable years beginning after July 31, 1985, in lieu of the equally weighted
three (3) factor apportionment fraction based on property, payroll, and
(b)
(c)
(d)
sales, an apportionment fraction composed of a sales factor representing
fifty percent (50%) of the fraction, a property factor representing
twenty-five percent (25%) of the fraction, and a payroll factor representing
twenty-five percent (25%) of the fraction shall be used;
The property factor is a fraction, the numerator of which is the average
value of the taxpayer's real and tangible personal property owned or
rented and used in this state during the tax period and the denominator of
which is the average value of all the taxpayer's real and tangible personal
property owned or rented and used during the tax period; provided,
however, that property which has been certified as a pollution control
facility as defined in KRS 224.1-300 shall be excluded from the property
factor:
1.
Property owned by the taxpayer is valued at its original cost. If the
original cost of any property is not determinable or is nominal or
zero, such property shall be valued by the department under
regulations promulgated by the department. Property rented by the
taxpayer is valued at eight (8) times the net annual rental rate. Net
annual rental rate is the annual rental rate paid by the taxpayer less
any annual rental rate received by the taxpayer from subrentals,
provided that such rental and such subrentals are reasonable. If the
department determines that the annual rental or subrental rate is
unreasonable, or if nominal or zero rate is charged, the department
may determine and apply such rental rate as will reasonably reflect
the value of the property rented by the taxpayer; and
2.
The average value of property shall be determined by averaging the
values at the beginning and ending of the tax period but the
department may require the averaging of monthly values during the
tax period if reasonably required to reflect properly the average
value of the taxpayer's property;
The payroll factor is a fraction, the numerator of which is the total amount
paid or payable in this state during the tax period by the taxpayer for
compensation, and the denominator of which is the total compensation
paid or payable everywhere during the tax period. Compensation is paid
or payable in this state if:
1.
The individual's service is performed entirely within the state;
2.
The individual's service is performed both within and without the
state, but the service performed without the state is incidental to the
individual's service within the state; or
3.
Some of the service is performed in the state and the base of
operations or, if there is no base of operations, the place from which
the service is directed or controlled is in the state, or the base of
operations or the place from which the service is directed or
controlled is not in any state in which some part of the service is
performed, but the individual's residence is in this state;
The sales factor is a fraction, the numerator of which is the total sales of
the taxpayer in this state during the tax period, and the denominator of
which is the total sales of the taxpayer everywhere during the tax period.
(4)
(5)
(6)
Sales of tangible personal property are in this state if:
1.
The property is delivered or shipped to a purchaser, other than the
United States government, or to the designee of the purchaser
within this state regardless of the f.o.b. point or other conditions of
the sale;
2.
The property is shipped from an office, store, warehouse, factory, or
other place of storage in this state and the purchaser is the United
States government; or
3.
Sales, other than sales of tangible personal property, are in this
state if the income-producing activity is performed in this state; or
the income-producing activity is performed both in and outside this
state and a greater proportion of the income-producing activity is
performed in this state than in any other state, based on costs of
performance.
If the apportionment provisions of this section do not fairly measure the
taxpayer's capital in this state, the taxpayer may petition for or the department
may require:
(a) The exclusion of any one (1) or more of the factors;
(b) The inclusion of one (1) or more additional factors which will fairly
measure the taxpayer's capital in this state; or
(c) The employment of any other method to produce an equitable
apportionment of the taxpayer's capital.
No corporation required to pay an annual license tax under this section shall
pay less than thirty dollars ($30).
Every corporation with a gross income of not more than five hundred thousand
dollars ($500,000) shall be entitled to a credit equivalent to one dollar and forty
cents ($1.40) per one thousand dollars ($1,000) of the initial three hundred and
fifty thousand dollars ($350,000) of capital employed in the business, as
computed under the provisions of KRS 136.070(2) and (3).
Effective:June 20, 2005
History: Amended 2005 Ky. Acts ch. 85, sec. 295, effective June 20, 2005. -Amended 1996 Ky. Acts ch. 254, sec. 31, effective July 15, 1996. -- Amended
1986 Ky. Acts ch. 476, sec. 4, effective July 15, 1986. -- Amended 1985 (1st
Extra. Sess.) Ky. Acts ch. 6, Pt. III, sec. 3, effective July 29, 1985. -- Amended
1980 Ky. Acts ch. 181, sec. 1, effective July 15, 1980; and ch. 210, sec. 5,
effective July 15, 1980. -- Amended 1976 Ky. Acts ch. 155, sec. 5. -- Amended
1974 Ky. Acts ch. 137, sec. 3. -- Amended 1972 Ky. Acts ch. 84, Pt. II, sec. 1. -Amended 1970 Ky. Acts ch. 14, sec. 4. -- Amended 1966 Ky. Acts ch. 187,
Part II, sec. 1; and ch. 255, sec. 129. -- Amended 1962 Ky. Acts ch. 94, sec. 1.
-- Recodified 1942 Ky. Acts ch. 208, sec. 1, effective October 1, 1942, from Ky.
Stat. secs. 4189-1, 4189-2, 4189-8.
Legislative Research Commission Note. 1985 Acts Ex. Sess., ch. 6, Part II,
Section 5, directs that the provisions of this section shall apply to taxable years
ending after 7/31/85.
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