2014 Kentucky Revised Statutes CHAPTER 141 - INCOME TAXES 141.420 Taxable income of individuals from pass through entities -- Allowable credits from pass through entities -- Determining basis in ownership interest.
Download as PDF
141.420 Taxable income of individuals from pass through entities -- Allowable
credits from pass through entities -- Determining basis in ownership
interest.
For taxable years beginning after December 31, 2004, and before January 1, 2007:
(1) (a) Every corporation identified in KRS 141.010(24)(b)2. to 8. that is doing
business in this state shall, on or before the fifteenth day of the fourth
month following the close of its annual accounting period, file a copy of its
applicable federal return with the form prescribed and furnished by the
department.
(b) For a corporation filing a return under paragraph (a) of this subsection,
the individual partner's, member's, or shareholder's distributive share of
net income, gain, loss, or deduction shall be computed as nearly as
practicable in a manner identical to that required for federal income tax
purposes except to the extent required by differences between this
chapter and the federal income tax law and regulations.
(2) (a) Resident individuals who are members, partners, or shareholders of a
corporation required to file a return under subsection (1)(a) of this section
shall report and pay tax on the distributive share of net income, gain, loss,
or deduction as determined in subsection (1)(b) of this section.
(b) Nonresident individuals who are members, partners, or shareholders of a
corporation required to file a return under subsection (1)(a) of this section
shall report and pay tax on the distributive share of net income, gain, loss,
or deduction as determined in subsection (1)(b) of this section multiplied
by the apportionment fraction in KRS 141.120(8).
(3) (a) Resident and nonresident individuals who are members, shareholders, or
partners of a corporation required to file a return under paragraph (a) of
subsection (1) of this section shall be entitled to a nonrefundable credit
against the tax imposed under KRS 141.020.
(b) The credit determined under this subsection shall be the member's,
shareholder's, or partner's proportionate share of the tax due from the
corporation as determined under KRS 141.040, before the application of
any credits identified in KRS 141.0205(5) and reduced by the required
minimum imposed by KRS 141.040(7).
(c) Notwithstanding the provisions of paragraph (a) of this subsection, for
taxable years beginning after December 31, 2004, and before January 1,
2007, the portion of the credit computed under paragraph (b) of this
subsection that exceeds the credit that would have been utilized if the
corporation's income were taxed at the rates in KRS 141.020 shall be
refundable. The refundable portion of the credit shall be the individual
member's, shareholder's, or partner's proportionate share of the amount
computed by multiplying the amount the corporation's income exceeds
two hundred sixteen thousand six hundred dollars ($216,600) by one
percent (1%).
(d) The credit determined under paragraphs (a) and (b) of this subsection
shall not operate to reduce the member's, shareholder's, or partner's tax
due to an amount that is less than what would have been payable were
(4)
(5)
the income attributable to doing business in this state by the corporation
ignored.
(e) If a corporation identified in KRS 141.010(24)(b)1. to 8. is a partner,
shareholder, or member of another corporation identified in KRS
141.010(24)(b)2. to 8., the amount of income, gain, loss, deduction,
refundable credit, or nonrefundable credit that the entity receives from the
entity in which it is a partner, shareholder, or member shall
proportionately pass through to the corporation's individual partners,
members, or shareholders based upon the distributive share ratio. The
phrase "a corporation identified in KRS 141.010(24)(b)1. to 8. is a partner,
shareholder, or member of another corporation identified in KRS
141.010(24)(b)2. to 8." shall extend through each level of multitiered
ownership.
(f) The nonrefundable and refundable credits provided by this section shall
be allowed only to the extent that the tax is paid by the corporation. If after
the credits are disallowed the corporation subsequently pays the tax due,
the nonrefundable and refundable credits shall then be allowed.
For purposes of computing the basis of an ownership interest or stock in a
corporation identified in KRS 141.010(24)(b)2. to 8., the basis attributable to a
member, partner, or shareholder shall be adjusted by the distributive share of
the items of net income, gain, loss and deduction as though the items had
been passed through to the member, partner, or shareholder.
Except as otherwise provided in this chapter, distributions by or from a
corporation shall be treated in the same manner as they are treated for federal
tax purposes.
Effective:June 28, 2006
History: Amended 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 11, effective June
28, 2006. -- Amended 2006 Ky. Acts ch. 252, Pt. XIII, sec. 14, effective April 25,
2006; and ch. 6, sec. 17, effective March 6, 2006. -- Created 2005 Ky. Acts
ch. 168, sec. 18, effective March 18, 2005.
Legislative Research Commission Note (7/12/2006). This section was amended
by 2006 Ky. Acts chs. 6 and 252, which do not appear to be in conflict and have
been codified together.
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 (3/6/2006). 2006 Ky. Acts ch. 6, sec. 31,
provides that this section is effective for taxable years beginning on or after
January 1, 2006.
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.
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.
Disclaimer: These codes may not be the most recent version. Kentucky may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.