Beginning January 1, 2021, the bank franchise tax will no longer apply to financial institutions. In its place, banks will be taxed similarly to other corporations in Kentucky. The corporation and limited liability entity tax will be applied to banks beginning in 2021.
Every financial institution regularly engaged in business in Kentucky at any time during the taxable year must file Bank Franchise Tax. A financial institution is presumed to be regularly engaging in business in Kentucky if during any taxable year it obtains or solicits business with 20 or more persons within Kentucky, or if receipts attributable to sources in Kentucky equal or exceed $100,000.
The Bank Franchise Tax is assessed at the rate of 1.1% of net capital with a minimum of $300 due per year.
Every financial institution regularly engaged in business in Kentucky will be subject to all state taxes except the corporation income tax levied in KRS Chapter 141 and the corporation license tax levied in KRS Chapter 136. The bank franchise tax is in lieu of all city, county and local taxes, except the real estate transfer tax levied in KRS Chapter 142, real property and tangible personal property taxes levied in KRS Chapter 132, the local franchise tax levied in KRS 136.575 and taxes upon users of utility services.
Each financial institution engaging in business in Kentucky should complete the Kentucky Registration Application for Bank Franchise Tax, Form 73A800, which is page 21 of the Bank Franchise Tax Packet, 73A801-P. For calendar year 2018, changes have been made to the tax-exempt obligations included in the Bank Franchise Tax Packet; please review these changes before completing the form.