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141.390 Tax credit for recycling or composting equipment.
(1)
(2)
As used in this section:
(a) "Postconsumer waste" means any product generated by a business or
consumer which has served its intended end use, and which has been
separated from solid waste for the purposes of collection, recycling,
composting, and disposition and which does not include secondary waste
material or demolition waste;
(b) "Recycling equipment" means any machinery or apparatus used
exclusively to process postconsumer waste material and manufacturing
machinery used exclusively to produce finished products composed of
substantial postconsumer waste materials;
(c) "Composting equipment" means equipment used in a process by which
biological decomposition of organic solid waste is carried out under
controlled aerobic conditions, and which stabilizes the organic fraction
into a material which can easily and safely be stored, handled, and used
in a environmentally acceptable manner;
(d) "Recapture period" means:
1.
For qualified equipment with a useful life of five (5) or more years,
the period from the date the equipment is purchased to five (5) full
years from that date; or
2.
For qualified equipment with a useful life of less than five (5) years,
the period from the date the equipment is purchased to three (3) full
years from that date;
(e) "Useful life" means the period determined under Section 168 of the
Internal Revenue Code;
(f) "Baseline tax liability" means the tax liability of the taxpayer for the most
recent tax year ending prior to January 1, 2005; and
(g) "Major recycling project" means a project where the taxpayer:
1.
Invests more than ten million dollars ($10,000,000) in recycling or
composting equipment to be used exclusively in this state;
2.
Has more than seven hundred fifty (750) full-time employees with an
average hourly wage of more than three hundred percent (300%) of
the federal minimum wage; and
3.
Has plant and equipment with a total cost of more than five hundred
million dollars ($500,000,000).
(a) A taxpayer that purchases recycling or composting equipment to be used
exclusively within this state for recycling or composting postconsumer
waste materials shall be entitled to a credit against the income taxes
imposed pursuant to this chapter, including any tax due under the
provisions of KRS 141.040, in an amount equal to fifty percent (50%) of
the installed cost of the recycling or composting equipment. Any credit
allowed against the income taxes imposed pursuant to this chapter shall
also be applied against the limited liability entity tax imposed by KRS
141.0401, with the ordering of credits as provided in KRS 141.0205. The
amount of credit claimed in the tax year during which the recycling
(3)
(4)
equipment is purchased shall not exceed ten percent (10%) of the amount
of the total credit allowable and shall not exceed twenty-five percent
(25%) of the total of each tax liability which would be otherwise due.
(b) For taxable years beginning after December 31, 2004, a taxpayer that
has a major recycling project containing recycling or composting
equipment to be used exclusively within this state for recycling or
composting postconsumer waste material shall be entitled to a credit
against the income taxes imposed pursuant to this chapter, including any
tax due under the provisions of KRS 141.040, in an amount equal to fifty
percent (50%) of the installed cost of the recycling or composting
equipment. Any credit allowed against the income taxes imposed
pursuant to this chapter shall also be applied against the limited liability
entity tax imposed by KRS 141.0401, with the ordering of credits as
provided in KRS 141.0205. The credit described in this paragraph shall be
limited to a period of ten (10) years commencing with the approval of the
recycling credit application. In each taxable year, the amount of credits
claimed for all major recycling projects shall be limited to:
1.
Fifty percent (50%) of the excess of the total of each tax liability over
the baseline tax liability of the taxpayer; or
2.
Two million five hundred thousand dollars ($2,500,000), whichever
is less.
(c) A taxpayer with one (1) or more major recycling projects shall be entitled
to a total credit including the amount computed in paragraph (a) of this
subsection plus the amount of credit computed in paragraph (b) of this
subsection.
(d) A taxpayer shall not be permitted to utilize a credit computed under
paragraph (a) of this subsection and a credit computed under paragraph
(b) of this subsection on the same recycling or composting equipment.
Application for a tax credit shall be made to the Department of Revenue on or
before the first day of the seventh month following the close of the taxable year
in which the recycling or composting equipment is purchased. The application
shall include a description of each item of recycling equipment purchased, the
date of purchase and the installed cost of the recycling equipment, a statement
of where the recycling equipment is to be used, and any other information as
the Department of Revenue may require. The Department of Revenue shall
review all applications received to determine whether expenditures for which
credits are required meet the requirements of this section and shall advise the
taxpayer of the amount of credit for which the taxpayer is eligible under this
section. Any corporation as defined in KRS 141.010(24)(b)2. to 8. may elect to
claim the balance of a recycling credit approved prior to March 18, 2005,
against its tax liability imposed under KRS 141.040 and 141.0401. The election
shall be binding on the taxpayer and the Department of Revenue until the
balance of the recycling credit is used.
Except as provided in subsection (6) of this section, if a taxpayer that receives
a tax credit under this section sells, transfers, or otherwise disposes of the
qualifying recycling or composting equipment before the end of the recapture
period, the tax credit shall be redetermined under subsection (5) of this section.
(5)
(6)
(7)
If the total credit taken in prior taxable years exceeds the redetermined credit,
the difference shall be added to the taxpayer's tax liability under this chapter for
the taxable year in which the sale, transfer, or disposition occurs. If the
redetermined credit exceeds the total credit already taken in prior taxable
years, the taxpayer shall be entitled to use the difference to reduce the
taxpayer's tax liability under this chapter for the taxable year in which the sale,
transfer, or disposition occurs.
The total tax credit allowable under subsection (2) of this section for equipment
that is sold, transferred, or otherwise disposed of before the end of the
recapture period shall be adjusted as follows:
(a) For equipment with a useful life of five (5) or more years that is sold,
transferred, or otherwise disposed of:
1.
One (1) year or less after the purchase, no credit shall be allowed.
2.
Between one (1) year and two (2) years after the purchase, twenty
percent (20%) of the total allowable credit shall be allowed.
3.
Between two (2) and three (3) years after the purchase, forty
percent (40%) of the total allowable credit shall be allowed.
4.
Between three (3) and four (4) years after the purchase, sixty
percent (60%) of the total allowable credit shall be allowed.
5.
Between four (4) and five (5) years after the purchase, eighty
percent (80%) of the total allowable credit shall be allowed.
(b) For equipment with a useful life of less than five (5) years that is sold,
transferred, or otherwise disposed of:
1.
One (1) year or less after the purchase, no credit shall be allowed.
2.
Between one (1) year and two (2) years after the purchase,
thirty-three percent (33%) of the total allowable credit shall be
allowed.
3.
Between two (2) and three (3) years after the purchase, sixty-seven
percent (67%) of the total allowable credit shall be allowed.
Subsections (4) and (5) of this section shall not apply to transfers due to death,
or transfers due merely to a change in business ownership or organization as
long as the equipment continues to be used exclusively in recycling or
composting, or transactions to which Section 381(a) of the Internal Revenue
Code applies.
The Department of Revenue may promulgate administrative regulations to
carry out the provisions of this section.
Effective:June 28, 2006
History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 21, effective June
28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 5, effective April 25,
2006. -- Amended 2005 Ky. Acts ch. 85, sec. 504, effective June 20, 2005; and
ch. 168, sec. 23, effective March 18, 2005. -- Created 1991 (1st Extra. Sess.)
Acts ch. 12, sec. 63, effective February 26, 1991.
Legislative Research Commission Note (6/28/2006). 2006 (1st Extra Sess.) Ky.
Acts ch. 2, sec. 73, provides that "unless a provision of this Act specifically
applies to an earlier tax year, the provisions of this Act shall apply to taxable
years beginning on or after January 1, 2007."
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). 2005 Ky. Acts chs. 11, 85,
95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory
references to agencies and officers whose names have been changed in 2005
legislation confirming the reorganization of the executive branch. Such a
correction has been made in this section.
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