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136.530 Calculation of receipts factor.
(1)
The receipts factor is a fraction, the numerator of which is the receipts of the
financial institution in this Commonwealth during the taxable year as
determined by subsection (2) of this section and the denominator of which is
the receipts of the financial institution within and without this Commonwealth
during the taxable year. Receipts shall include the following:
(a) Receipts from the lease or rental of real property owned by the financial
institution;
(b) Receipts from the lease or rental of tangible personal property owned by
the financial institution;
(c) Interest and fees or penalties in the nature of interest from loans secured
by real property;
(d) Interest and fees or penalties in the nature of interest from loans not
secured by real property;
(e) Net gains from the sale of loans. Net gains from the sale of loans includes
income recorded under the coupon stripping rules of Section 1286 of the
Internal Revenue Code;
(f) Interest and fees or penalties in the nature of interest from credit card
receivables and receipts from fees charged to card holders, such as
annual fees;
(g) Net gains, but not less than zero (0), from the sale of credit card
receivables;
(h) All credit card issuer's reimbursement fees;
(i) Receipts from merchant discount. Receipts from merchant discount shall
be computed net of any cardholder charge backs, but shall not be
reduced by any interchange transaction fees or by any issuer's
reimbursement fees paid to another for charges made by its card holders;
(j) Loan servicing fees derived from loans secured by real property;
(k) Loan servicing fees derived from loans not secured by real property;
(l) Interest, dividends, net gains, but not less than zero (0), and other income
from investment assets and activities and from trading assets and
activities. Investment assets and activities and trading assets and
activities include but are not limited to investment securities, trading
account assets, federal funds, securities purchased and sold under
agreements to resell or repurchase, options, futures contracts, forward
contracts, notional principal contracts such as swaps, equities, and
foreign currency transactions. The receipts factor shall include the
following amounts:
1.
The amount by which interest from federal funds sold and securities
purchased under resale agreements exceeds interest expense on
federal funds purchased and securities sold under repurchase
agreements; and
2.
The amount by which interest, dividends, gains, and other income
from trading assets and activities, including but not limited to assets
and activities in the matched book, in the arbitrage book, and foreign
(2)
currency transactions, exceed amounts paid in lieu of interest,
amounts paid in lieu of dividends, and losses from these assets and
activities;
(m) All receipts derived from sales that would be included in the factor
established by KRS 141.120(8)(c); and
(n) Receipts from services not otherwise specifically listed.
A determination of whether receipts should be included in the numerator of the
fraction shall be made as follows:
(a) Receipts from the lease or rental of real property owned by the financial
institution shall be included in the numerator if the property is located
within this Commonwealth or receipts from the sublease of real property if
the property is located within this Commonwealth.
(b) 1.
Except as described in subparagraph 2. of this paragraph, receipts
from the lease or rental of tangible personal property owned by the
financial institution shall be included in the numerator if the property
is located within this Commonwealth when it is first placed in service
by the lessee.
2.
Receipts from the lease or rental of transportation property owned
by the financial institution are included in the numerator of the
receipts factor to the extent that the property is used in this
Commonwealth. The extent an aircraft will be deemed to be used in
this Commonwealth and the amount of receipts that is to be included
in the numerator of this Commonwealth's receipts factor is
determined by multiplying all the receipts from the lease or rental of
the aircraft by a fraction, the numerator of which is the number of
landings of the aircraft in this Commonwealth and the denominator
of which is the total number of landings of the aircraft. If the extent of
the use of any transportation property within this Commonwealth
cannot be determined, then the property shall be deemed to be used
wholly in the state in which the property has its principal base of
operations. A motor vehicle shall be deemed to be used wholly in
the state in which it is registered.
(c) 1.
Interest and fees or penalties in the nature of interest from loans
secured by real property shall be included in the numerator if the
property is located within this Commonwealth. If the property is
located both within this Commonwealth and one (1) or more other
states, receipts shall be included if more than fifty percent (50%) of
the fair market value of the real property is located within this
Commonwealth. If more than fifty percent (50%) of the fair market
value of the real property is not located within any one (1) state, then
the receipts described in this subparagraph shall be included in the
numerator if the borrower is located in this Commonwealth.
2.
The determination of whether the real property securing a loan is
located within this Commonwealth shall be made as of the time the
original agreement was made, and any subsequent substitutions of
collateral shall be disregarded.
(d) Interest and fees or penalties in the nature of interest from loans not
(e)
(f)
(g)
(h)
(i)
(j)
secured by real property shall be included in the numerator if the borrower
is located in this Commonwealth.
Net gains from the sale of loans shall be included in the numerator as
provided in subparagraphs 1. and 2. of this paragraph. Net gains from the
sale of loans includes income recorded under the coupon stripping rules
of Section 1286 of the Internal Revenue Code.
1.
The amount of net gains, but not less than zero (0), from the sale of
loans secured by real property included in the numerator is
determined by multiplying net gains by a fraction the numerator of
which is the amount included in the numerator of the receipts factor
pursuant to paragraph (c) of this subsection and the denominator of
which is the total amount of interest and fees or penalties in the
nature of interest from loans secured by real property.
2.
The amount of net gains, but not less than zero (0), from the sale of
loans not secured by real property included in the numerator is
determined by multiplying net gains by a fraction the numerator of
which is the amount included in the numerator of the receipts factor
pursuant to paragraph (d) of this subsection and the denominator of
which is the total amount of interest and fees or penalties in the
nature of interest from loans not secured by real property.
Interest and fees or penalties in the nature of interest from credit card
receivables and receipts from fees charged to card holders, such as
annual fees, shall be included in the numerator if the billing address of the
card holder is in this Commonwealth.
Net gains, but not less than zero (0), from the sale of credit card
receivables to be included in the numerator shall be determined by
multiplying the amount established in paragraph (g) of subsection (1) of
this section by a fraction the numerator of which is the amount included in
the numerator of the receipts factor pursuant to paragraph (f) of this
subsection and the denominator of which is the financial institution's total
amount of interest and fees or penalties in the nature of interest from
credit card receivables and fees charged to card holders.
Credit card issuer's reimbursement fees to be included in the numerator
shall be determined by multiplying the amount established in paragraph
(h) of subsection (1) of this section by a fraction the numerator of which is
the amount included in the numerator of the receipts factor pursuant to
paragraph (f) of this subsection and the denominator of which is the
financial institution's total amount of interest and fees or penalties in the
nature of interest from credit card receivables and fees charged to card
holders.
Receipts from merchant discount shall be included in the numerator if the
commercial domicile of the merchant is in this Commonwealth. Receipts
from merchant discount shall be computed net of any cardholder charge
backs but shall not be reduced by any interchange transaction fees or by
any issuer's reimbursement fees paid to another for charges made by its
card holders.
1.
a.
Loan servicing fees derived from loans secured by real
(k)
(l)
property to be included in the numerator shall be determined
by multiplying the amount determined under paragraph (j) of
subsection (1) of this section by a fraction the numerator of
which is the amount included in the numerator of the receipts
factor pursuant to paragraph (c) of this subsection and the
denominator of which is the total amount of interest and fees or
penalties in the nature of interest from loans secured by real
property.
b.
Loan servicing fees derived from loans not secured by real
property to be included in the numerator shall be determined
by multiplying the amount determined under paragraph (k) of
subsection (1) of this section by a fraction the numerator of
which is the amount included in the numerator of the receipts
factor pursuant to paragraph (d) of this subsection and the
denominator of which is the total amount of interest and fees or
penalties in the nature of interest from loans not secured by
real property.
2.
In circumstances in which the financial institution receives loan
servicing fees for servicing either the secured or the unsecured
loans of another, the numerator of the receipts factor shall include
the fees if the borrower is located in this Commonwealth.
Receipts from services not otherwise apportioned under this section shall
be included in the numerator if the service is performed in this
Commonwealth. If the service is performed both within and without this
Commonwealth, the numerator of the receipts factor includes receipts
from services not otherwise apportioned under this section, if a greater
proportion of the income-producing activity is performed in this
Commonwealth based on cost of performance.
1.
The numerator of the receipts factor includes interest, dividends, net
gains, but not less than zero (0), and other income from investment
assets and activities and from trading assets and activities described
in paragraph (l) of subsection (1) of this section that are attributable
to this Commonwealth.
a.
The amount of interest, dividends, net gains, but not less than
zero (0), and other income from investment assets and
activities in the investment account to be attributed to this
Commonwealth and included in the numerator is determined
by multiplying all income from the assets and activities by a
fraction the numerator of which is the average value of the
assets that are properly assigned to a regular place of
business of the financial institution within this Commonwealth
and the denominator of which is the average value of all the
assets.
b.
The amount of interest from federal funds sold and purchased
and from securities purchased under resale agreements and
securities sold under repurchase agreements attributable to
this Commonwealth and included in the numerator is
2.
determined by multiplying the amount described in
subparagraph 1. of paragraph (l) of subsection (1) of this
section from funds and securities by a fraction the numerator of
which is the average value of federal funds sold and securities
purchased under agreements to resell which are properly
assigned to a regular place of business of the financial
institution within this Commonwealth and the denominator of
which is the average value of all funds and securities.
c.
The amount of interest, dividends, gains, and other income
from trading assets and activities, including but not limited to
assets and activities in the matched book, in the arbitrage
book, and foreign currency transactions, but excluding
amounts described in subdivisions a. and b. of this
subparagraph, attributable to this Commonwealth and included
in the numerator is determined by multiplying the amount
described in subparagraph 2. of paragraph (l) of subsection (1)
of this section by a fraction the numerator of which is the
average value of trading assets which are properly assigned to
a regular place of business of the financial institution within this
Commonwealth and the denominator of which is the average
value of all assets.
d.
For purposes of this subparagraph, average value shall be
determined using the rules for determining the average value
of tangible personal property set forth in KRS 136.535(3) and
(4).
In lieu of using the method set forth in subparagraph 1. of this
paragraph, the financial institution may elect, or the department may
require in order to fairly represent the business activity of the
financial institution in this Commonwealth, the use of the method set
forth in this subparagraph.
a.
The amount of interest, dividends, net gains, but not less than
zero (0), and other income from investment assets and
activities in the investment account to be attributed to this
Commonwealth and included in the numerator is determined
by multiplying all income from assets and activities by a
fraction the numerator of which is the gross income from
assets and activities which are properly assigned to a regular
place of business of the financial institution within this
Commonwealth and the denominator of which is the gross
income from all assets and activities.
b.
The amount of interest from federal funds sold and purchased
and from securities purchased under resale agreements and
securities sold under repurchase agreements attributable to
this Commonwealth and included in the numerator is
determined by multiplying the amount described in
subparagraph 1. of paragraph (l) of subsection (1) of this
section from funds and securities by a fraction the numerator of
which is the gross income from funds and securities which are
properly assigned to a regular place of business of the financial
institution within this Commonwealth and the denominator of
which is the gross income from all funds and securities.
c.
The amount of interest, dividends, gains, and other income
from trading assets and activities, including but not limited to
assets and activities in the matched book, in the arbitrage book
and foreign currency transactions, but excluding amounts
described in subdivisions a. and b. of this subparagraph,
attributable to this Commonwealth and included in the
numerator is determined by multiplying the amount described
in subparagraph 2. of paragraph (l) of subsection (1) of this
section by a fraction the numerator of which is the gross
income from trading assets and activities which are properly
assigned to a regular place of business of the financial
institution within this Commonwealth and the denominator of
which is the gross income from all assets and activities.
3.
If the financial institution elects or is required by the department to
use the method set forth in subparagraph 2. of this paragraph, it
shall use this method on all subsequent returns unless the financial
institution receives prior permission from the department to use, or
the department requires, a different method.
4.
The financial institution shall have the burden of proving that an
investment asset or activity or trading asset or activity was properly
assigned to a regular place of business outside this Commonwealth
by demonstrating that the day-to-day decisions regarding the asset
or activity occurred at a regular place of business outside this
Commonwealth. Where the day-to-day decisions regarding an
investment asset or activity or trading asset or activity occur at more
than one (1) regular place of business and one (1) regular place of
business is in this Commonwealth and one (1) regular place of
business is outside this Commonwealth, the asset or activity shall be
considered to be located at the regular place of business of the
financial institution where the investment or trading policies or
guidelines with respect to the asset or activity are established.
Unless the financial institution demonstrates to the contrary, the
policies and guidelines shall be presumed to be established at the
commercial domicile of the financial institution.
(m) The numerator of the receipts factor includes all other receipts derived
from sales as determined pursuant to the provisions set forth in KRS
141.120(8)(c).
(n) 1.
All receipts that would be assigned under this section to a state in
which the financial institution is not taxable shall be included in the
numerator of the receipts factor, if the financial institution's
commercial domicile is in this Commonwealth.
2.
For purposes of subparagraph 1. of this paragraph, "taxable" means
either:
a.
b.
That a financial institution is subject in another state to a net
income tax, a franchise tax measured by net income, a
franchise tax for the privilege of doing business, a corporate
stock tax including a bank shares tax, a single business tax, an
earned surplus tax, or any tax which is imposed upon or
measured by net income; or
That another state has statutory authority to subject the
financial institution to any of the taxes in subdivision a. of this
subparagraph, whether in fact the state does or does not
impose the tax.
Effective:June 20, 2005
History: Amended 2005 Ky. Acts ch. 85, sec. 332, effective June 20, 2005; and ch.
168, sec. 33, effective March 18, 2005. -- Created 1996 Ky. Acts ch. 254, sec. 8,
effective July 15, 1996.
Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec.
165, provides that this section shall apply to tax years beginning on or after
January 1, 2005.
Legislative Research Commission Note (3/18/2005). This section was amended
by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and
have been codified together.
Legislative Research Commission Note (7/15/96). In codifying subsections (1)(m)
and (2)(m) of this statute, references to Section 28 of 1996 Ky. Acts ch. 254
(KRS 134.380) have been shown instead as references to Section 31 of that Act
(KRS 136.070). Without changing these references or the text of the material
referred to, House Floor Amendment 1 to House Bill 416 (which became Acts
ch. 254) added three new sections to the bill and changed the numbering of the
original Section 28 (KRS 136.070) to Section 31 but did not make the necessary
corresponding adjustment to these internal references. This action has been
taken under KRS 7.136(1)(h).
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