103 KAR 15:020. Election to pay share of tax on behalf of corporation.

 

      RELATES TO: KRS 131.081, 131.110, 141.010(24), 141.040, 141.200

      STATUTORY AUTHORITY: KRS 141.050(4), 141.040(9)(b)

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 141.050(4) and 141.040(9)(b) require the Department of Revenue to promulgate administrative regulations and prescribe the forms and reports necessary to the proper administration of any and all provisions of KRS Chapter 141. This administrative regulation explains the method for electing to pay the member’s, partner’s, or shareholder’s proportionate share of the tax imposed by KRS 141.040.

 

      Section 1. Definitions. (1) "Pass-through entity" means any corporation identified in KRS 141.010(24)(b)1 to 8, except a corporation required to be included in a consolidated return under the provisions of KRS 141.200.

      (2) "Proportionate share of tax due" means the member's, partner's or shareholder’s pro rata share of the total of the pass-through entity’s tax due under KRS 141.040 after the application of any credits taken by the corporation but not less than the required minimum tax imposed by KRS 141.040(6).

      (3) "Taxpayer making an election" means a member, partner, or shareholder that has filed an election under the provisions of this administrative regulation.

 

      Section 2. Election to Pay Proportionate Share of Tax Due. (1) For taxable years ending on or after December 31, 2005, a member, partner or shareholder may file with the pass-through entity before the due date of the entity’s annual return, including extensions, a signed notarized statement of intent to pay the member's, partner's or shareholder’s proportionate share of tax due. This election to assume a payment obligation shall entitle the taxpayer making an election to the protest and appeals rights provided under KRS 131.110 and any rights provided under KRS 131.081 in relation to the amount of tax due under the election.

      (2) The statement shall include the following:

      (a) The tax period for which the statement is valid;

      (b) An acknowledgement of liability for the proportionate share of tax due for the tax period, including any additional tax due that results from audit adjustments or amended returns filed by the pass-through entity;

      (c) An acknowledgement of the jurisdiction of the commonwealth to collect on the member's, partner's, or shareholder’s proportionate share of tax due from audit adjustments or amended returns filed by the pass-through entity; and

      (d) The payment method.

      (3) An election may include the following example language:

"I, ______________ on behalf of myself {or as representative of ____________}, agree to pay the proportionate share of tax due for the tax period ending __________, and any additional tax assessments from audit adjustments or amended returns filed by the pass-through entity. I agree that ___________________ {Name of pass-through entity} may deduct from funds available to me as a member, partner, or shareholder if I fail to promptly pay the proportionate share of tax due. I also agree that any refunds resulting from audit adjustments or amended returns filed by the pass-through entity shall be issued by the department to the pass-through entity. I agree that I am subject to jurisdiction of the courts of the Commonwealth of Kentucky for collection of any tax penalty and interest due."

      (4) The pass-through entity shall maintain the original statements and make copies available to the department upon request.

 

      Section 3. Filing Requirements. (1) The pass-through entity, on or before the 15th day of the fourth month after the end of its taxable year or by its extended due date, shall:

      (a) File with the Department of Revenue as part of the pass-through entity’s annual return, a statement identifying the name, address, and Social Security number or federal identification number of each electing member, partner, or shareholder; and

      (b) Provide each electing member, partner, or shareholder with a statement showing the member’s, partner’s or shareholder’s proportionate share of tax due.

 

      Section 4. Payment of Tax Due. (1) The pass-through entity shall collect and remit the amount of tax due from each electing member, partner or shareholder and remit the tax due with the original tax return.

      (2) The election shall be void if the payment of tax is not remitted with the pass-through entity’s timely filed annual return. The pass-through entity shall remain liable for the entire tax liability.

 

      Section 5. Audit Adjustments and Amended Returns. (1) The pass-through entity shall collect and remit on behalf of each electing member, partner, or shareholder additional tax including penalties and interest, if applicable, that results from audit adjustments or amended tax returns filed by the entity.

      (2) Overpayments resulting from audit adjustments or amended tax returns filed by the entity shall be issued to the pass-through entity. The entity shall distribute the proportionate share of overpayment to each electing member, partner, or shareholder. (32 Ky.R. 1815; Am. 32 Ky.R. 2283; 33 Ky.R. 377; eff. 9-1-2006.)