103 KAR 15:140. Biodiesel tax credit.

      RELATES TO: KRS 141.010, 141.020, 141.040, 141.422, 141.423, 141.424

      STATUTORY AUTHORITY: KRS 131.130(1), 141.018, 141.425

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 141.425 authorizes the department to promulgate administrative regulations necessary to administer KRS 141.422 to 141.425 regarding the biodiesel tax credit. This administrative regulation establishes guidelines and filing requirements for the credit.

      Section 1. Definitions. (1) "Applicant" means any person who applies for the biodiesel tax credit as allowed in KRS 141.422 - 141.425.

      (2) "Application" means a request for the biodiesel tax credit as allowed in KRS 141.422 - 141.425.

      (3) "ASTM" means American Society for Testing and Materials.

      (4) "Blender" means any person who combines biodiesel with petroleum diesel to create a mixture with a minimum of two (2) percent biodiesel.

      (5) "Corporation" is defined by KRS 141.010(24).

      (6) "Department" is defined by KRS 141.010(2).

      (7) "Distributive share" means the percentage of profits of a general partnership to which a partner is entitled.

      (8) "Identification number" means:

      (a) Social Security number for individuals;

      (b) Federal Employee Identification Number for general partnerships;

      (c) Kentucky Corporation Account Number for corporations.

      (9) "Person" means any corporation, company, association, partnership, limited liability company, limited liability partnership, other business association, or individual.

      Section 2. Application for Tax Credit. (1) Any person requesting a biodiesel credit shall file an application with the Department on the Schedule BIO (Form number 41A720BIO).

      (2) All applications for the biodiesel credit shall be mailed to the department on or before January 15 for the preceding calendar year.

      Section 3. Information Required on or attached to the Schedule Bio. The following information shall be required on or attached to the Schedule BIO:

      (1) The applicant’s name and identification number;

      (2) A description of how the applicant is taxed for Kentucky income tax purposes;

      (3) The applicant’s Kentucky Special Fuels License Dealer Account Number;

      (4) The number of gallons of biodiesel produced during the calendar year;

      (5) The number of gallons of blended biodiesel produced during the calendar year; and

      (6) A copy of the certificate for biodiesel or statement of biodiesel reseller submitted to the Internal Revenue Service for federal tax purposes shall be attached to the Schedule BIO. The certificate for biodiesel or statement of biodiesel reseller submitted shall be the form submitted for the federal tax period that most closely corresponds with the period covered by the Schedule Bio.

      Section 4. Proof of ASTM Standard. (1) A producer shall provide proof that biodiesel gallons reported on the Schedule BIO meet ASTM standard D6751-03.

      (2) A blender shall provide proof that the biodiesel reported on the Schedule BIO as part of blended biodiesel meets ASTM standard D6751-03.

      (3) Proof submitted by a producer or blender shall be in the form of documentation of laboratory results that certify that the biodiesel reported on the Schedule BIO meets the ASTM standard. A blender shall obtain a copy of laboratory results from the producer of the biodiesel that is blended and reported on the Schedule BIO. An independent laboratory or a laboratory designated by the Kentucky Department of Agriculture shall be used to generate the laboratory results.

      (4) Failure to submit documented laboratory results that certify that the biodiesel produced or blended meets the ASTM standard shall result in the department disallowing the credit. The biodiesel produced or blended shall not be eligible for the tax credit until proof is received that the biodiesel produced or biodiesel that is blended meets the ASTM standard. Gallons produced or blended after a new sample is proved to meet the ASTM standard shall be eligible for the credit, subject to the provisions of KRS 141.422 to 141.424 and this administrative regulation.

      (5)(a) Separate proof of the ASTM standard shall be provided to the department by a producer or blender on July 1 and December 31 for each calendar year that a Schedule BIO is submitted. For the calendar year ending December 31, 2006, proof shall be submitted only on December 31, 2006.

      (b) Failure to submit proof of the ASTM standard by the dates prescribed in this subsection shall result in the denial of the credit.

      (c) If proof is timely submitted and the proof certifies that the biodiesel does not meet the ASTM standard, then:

      1. All credit claimed for biodiesel or blended biodiesel gallons back to the previous testing date of July 1 or December 31 shall be disallowed;

      2. For the calendar year ending December 31, 2006, all credit claimed for biodiesel or blended biodiesel gallons back to July 1, 2006 shall be disallowed; and

      3. Subsequent samples submitted after a test sample is proved not to meet the ASTM standard may be submitted at any time during the calendar year that a Schedule BIO is submitted, subject to the provisions of subsection (4) of this section.

      Section 5. Use of the Credit. (1) Any applicant who is an individual shall apply any credit due against the tax liability imposed by KRS 141.020.

      (2) Any applicant that is a corporation shall apply any credit due against the tax liability imposed by KRS 141.040.

      (3) Any person except partners in a general partnership claiming the biodiesel tax credit shall attach the approved Schedule BIO to the tax return on which the biodiesel credit is claimed.

      (4) Any partner in a general partnership claiming the biodiesel tax credit shall attach the Schedule BIO K-1, Form number 41A720BIO (K-1), to the tax return on which the biodiesel credit is claimed.

      Section 6. Electronic Filings for General Partnerships. (1) Each general partnership claiming the biodiesel tax credit shall file a report with the department by electronic mail at KRC.WEBResponseEconomicDevelopmentCredits@ky.gov.

      (2) The electronic filing shall contain:

      (a) Each partner’s name, address, telephone number, and identification number; and

      (b) The partner’s distributive share.

      (3) Any information required by subsection (2) of this section filed as a separate document attached to the electronic mail message shall be in plain format text or plain ASCII format.

      Section 7. Incorporation by Reference. (1) The following material is incorporated by reference:

      (a) "Schedule BIO - Application and Credit Certificate of Income Tax Credit Biodiesel (Form 41A720BIO)", October 2005; and

      (b) "Schedule BIO (K-1) - Distributive Share of Approved Biodiesel and/or Blended Biodiesel Tax Credit - Form number 41A720BIO (K-1)", October 2005.

      (2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Kentucky Department of Revenue, 200 Fair Oaks Lane, Frankfort, Kentucky 40620, or at any Kentucky Department of Revenue Taxpayer Service Center, Monday through Friday, 8 a.m. to 4:30 p.m. (32 Ky.R. 1817; Am. 33 Ky.R. 378; eff. 9-1-2006.)