The 2005 Kentucky General Assembly enacted legislation that defines “Corporation” to include a C Corporation, S Corporation, Limited Partnership, Limited Liability Partnership (LLP), Limited Liability Company (LLC), Professional Limited Company (PLLC), Real Estate Investment Trust (REIT), Regulated Investment Company (RIC), Real Estate Mortgage Investment Conduit (REMIC), Financial Asset Securitization Investment Trust (FASIT), or similar entities created with limited liability for the partners, members, or shareholders. These entities are subject to the Kentucky Corporation Income Tax for periods beginning on or after January 1, 2005, regardless of how they file with the Internal Revenue Service.
Every corporation organized under the laws of Kentucky, having a commercial domicile in Kentucky, owning or leasing property in Kentucky, having one or more individuals performing service in Kentucky, maintaining an interest in a general partnership doing business in Kentucky, deriving income from or attributable to sources within Kentucky including deriving income directly or indirectly from a trust doing business in Kentucky; or directing activities at Kentucky customers for the purpose of selling them goods or services must file a Kentucky Corporation Income Tax return except for financial institutions, as defined in KRS 136.500, except bankers banks organized under KRS 287.135; 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; banks for cooperatives; production credit associations; insurance companies, including farmers or other mutual hail, cyclone, windstorm, or other entities exempt under Section 501 of the Internal Revenue Code; religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit; and corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that: (1) the property consists of the final printed product, or copy from which the printed product is produced; and (2) the corporation has no individuals receiving compensation in this state as provided in KRS 141.120(8)(b).
Kentucky's definition of net income for corporations is based on the federal definition of gross income in Section 61 of the Internal Revenue Code less any deductions allowed in Chapter 1 of the Internal Revenue Code in effect as of December 31, 2004.
Corporation Income tax laws are located in Chapters 141 of the Kentucky Revised Statues.
The 2005 Kentucky General Assembly enacted legislation to abolish the corporation license tax imposed by KRS 136.070 shall not apply to tax periods ending on or after December 31, 2005.
The 2006 Extraordinary Special Session of the General Assembly passed House Bill 1 which defines a “Corporation” to mean a “corporation” as provided by Section 7701(a)(3) of the Internal Revenue Code effective for tax years beginning before January 1, 2005 and after December 31, 2006. Corporations will be subject to the tax imposed by KRS 141.040 and KRS 141.0401 (2). Limited liability pass-through entities will be subject to the Limited Liability Entity Tax (LLET) imposed by KRS 141.0401 (2). The LLET shall not apply to entities listed in KRS 141.0401 (6). Pass-through entities and limited liability pass through entities shall withhold Kentucky income tax on the distributive share income, whether distributed or undistributed, of each nonresident partner, member, or shareholder, or each corporate partner or member that is doing business in Kentucky only through its ownership interest in a pass-through entity. A nonresident individual partner, member, or shareholder whose only source of income within this state is distributive share income from one (1) or more pass-through entities may elect to be included in a composite income tax return filed pursuant to KRS 141.206 (13).