2020 Kentucky Revised Statutes Chapter 141 - Income taxes 141.039 Calculation of gross income and net income -- Taxable years beginning on or after January 1, 2018, in the case of corporations.
Download as PDF
141.039 Calculation of gross income and net income -- Taxable years beginning on
or after January 1, 2018, in the case of corporations.
For taxable years beginning on or after January 1, 2018, in the case of corporations:
(1) Gross income shall be calculated by adjusting federal gross income as defined in
Section 61 of the Internal Revenue Code 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;
(c) Include interest income derived from obligations 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) Include the amount of deprecation deduction calculated under 26 U.S.C. sec.
167 or 168; and
(2) Net income shall be calculated by subtracting from gross income:
(a) The deduction for depreciation allowed by KRS 141.0101;
(b) Any amount paid for vouchers or similar instruments that provide health
insurance coverage to employees or their families;
(c) All the deductions from gross income allowed corporations by Chapter 1 of
the Internal Revenue Code, 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 Commonwealth
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.
Any deduction for amounts paid to any club, organization, or
6.
7.
(d)
1.
2.
3.
4.
5.
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;
Any deduction prohibited by KRS 141.205; and
Any dividends-paid deduction of any captive real estate investment trust;
and
A deferred tax deduction in an amount computed in accordance with this
paragraph.
For purposes of this paragraph:
a.
"Net deferred tax asset" means that deferred tax assets exceed the
deferred tax liabilities of the combined group, as computed in
accordance with accounting principles generally accepted in the
United States of America; and
b.
"Net deferred tax liability" means deferred tax liabilities that
exceed the deferred tax assets of a combined group as defined in
KRS 141.202, as computed in accordance with accounting
principles generally accepted in the United States of America.
Only publicly traded companies, including affiliated corporations
participating in the filing of a publicly traded company's financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America, as of January 1, 2019, shall be
eligible for this deduction.
If the provisions of KRS 141.202 result in an aggregate increase to the
member's net deferred tax liability, an aggregate decrease to the
member's net deferred tax asset, or an aggregate change from a net
deferred tax asset to a net deferred tax liability, the combined group
shall be entitled to a deduction, as determined in this paragraph.
For ten (10) years beginning with the combined group's first taxable year
beginning on or after January 1, 2024, a combined group shall be
entitled to a deduction from the combined group's entire net income
equal to one-tenth (1/10) of the amount necessary to offset the increase
in the net deferred tax liability, decrease in the net deferred tax asset, or
aggregate change from a net deferred tax asset to a net deferred tax
liability. The increase in the net deferred tax liability, decrease in the net
6.
7.
8.
deferred tax asset, or the aggregate change from a net deferred tax asset
to a net deferred tax liability shall be computed based on the change that
would result from the imposition of the combined reporting requirement
under KRS 141.202, but for the deduction provided under this paragraph
as of June 27, 2019.
The deferred tax impact determined in subparagraph 5. of this paragraph
shall be converted to the annual deferred tax deduction amount, as
follows:
a.
The deferred tax impact determined in subparagraph 5. of this
paragraph shall be divided by the tax rate determined under KRS
141.040;
b.
The resulting amount shall be further divided by the apportionment
factor determined by KRS 141.120 or 141.121 that was used by the
combined group in the calculation of the deferred tax assets and
deferred tax liabilities as described in subparagraph 5. of this
paragraph; and
c.
The resulting amount represents the total net deferred tax
deduction available over the ten (10) year period as described in
subparagraph 5. of this paragraph.
The deduction calculated under this paragraph shall not be adjusted as a
result of any events happening subsequent to the calculation, including
but not limited to any disposition or abandonment of assets. The
deduction shall be calculated without regard to the federal tax effect and
shall not alter the tax basis of any asset. If the deduction under this
section is greater than the combined group's entire Kentucky net income,
any excess deduction shall be carried forward and applied as a deduction
to the combined group's entire net income in future taxable years until
fully utilized.
Any combined group intending to claim a deduction under this
paragraph shall file a statement with the department on or before July 1,
2019. The statement shall specify the total amount of the deduction
which the combined group claims on the form, including calculations
and other information supporting the total amounts of the deduction as
required by the department. No deduction shall be allowed under this
paragraph for any taxable year, except to the extent claimed on the
timely filed statement in accordance with this paragraph.
Effective: April 15, 2020
History: Amended 2020 Ky. Acts ch. 91, sec. 7, effective April 15, 2020. -- Amended
2019 Ky. Acts ch. 196, sec. 4, effective June 27, 2019. -- Created 2018 Ky. Acts ch.
171, sec. 56, effective April 14, 2018; and ch. 207, sec. 56, effective April 27, 2018.
Legislative Research Commission Note (4/15/2020). 2020 Ky. Acts ch. 91, sec. 76
provides that the changes made to this statute in Section 7 of that Act apply to taxable
years beginning on or after January 1, 2019.
Legislative Research Commission Note (6/27/2019). Under the authority of KRS
7.136(1), the Reviser of Statutes has rearranged the subdivisions in subsection
(2)(d)2. of this statute to place the definitions in alphabetical order. No words in the
definitions were changed in this process.
Legislative Research Commission Note (4/27/2018). Pursuant to 2018 Ky. Acts ch.
207, sec. 153, the provisions created for this statute in that Act apply to taxable years
beginning on or after January 1, 2018.
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.