††††† 103 KAR 16:220. Alternative minimum calculation.

 

††††† RELATES TO: KRS 141.040

††††† STATUTORY AUTHORITY: KRS 131.130, 141.018

††††† NECESSITY, FUNCTION, AND CONFORMITY: KRS 141.018 requires the department to promulgate administrative regulations necessary to explain or implement 2005 Ky. Acts ch. 168 relative to the imposition of the income tax assessed on individuals, the passed-through income of entities taxable under KRS 141.040, and any related item of income, deduction, or credit. This administrative regulation establishes criteria for computing gross receipts and gross profits for purposes of computing the alternative minimum calculation of the corporation income tax imposed by KRS 141.040.

 

††††† Section 1. Alternative Minimum Calculation of Corporationís Kentucky Gross Receipts. (1) If a corporation is required to apportion taxable net income, the amount of Kentucky gross receipts shall equal the amount reported as the total Kentucky sales in the numerator of the sales factor pursuant to KRS 141.120(8)(c) and 103 KAR 16:270.

††††† (2) If a corporation is not required to apportion taxable net income, the amount of Kentucky gross receipts shall equal the total sales of the corporation in Kentucky as determined in accordance with KRS 141.120(8)(c) and 103 KAR 16:270.

††††† (3) For taxable years beginning on or after January 1, 205, and before January 1, 2006, the alternative minimum calculation shall be computed as follows:

††††† (a) Add Kentucky gross receipts from sales of tangible personal property in this state reduced by returns and allowances attributable to Kentucky gross receipts. Returns and allowances attributable to Kentucky gross receipts shall be determined by separate accounting;

††††† (b) Add Kentucky gross receipts from sales other than sales of tangible personal property in this state;

††††† (c) Subtract intercompany sales of the members of the affiliated group, if a consolidated return is filed under the provisions of KRS 141.200 in computing the consolidated alternative minimum calculation; and

††††† (d) Multiply the total of paragraphs (a) and (b) of this subsection by $0.00095. For taxable years beginning on or after January 1, 2006, and before January 1, 2007, the alternative minimum calculation shall include the thresholds for gross profits in accordance with KRS 141.040(12).

††††† (a) If gross profits from all sources are under the threshold in KRS 141.040(12)(b)1, the alternative minimum calculation shall be the amount provided in KRS 141.040(12)(b)1.

††††† (b) If gross profits from all sources are within the thresholds in KRS 141.040(12)(b)2, the alternative minimum calculation based on Kentucky gross profits shall be computed by the method provided in subsection (1) of this section minus the reduction provided in KRS 141.040(12)(b)2.

††††† (c) If gross profits from all sources exceed the threshold in KRS 141.040(12)(b)3, the alternative minimum calculation based on Kentucky gross profits shall be computed by the method provided in subsection (1) of this section.

 

††††† Section 2. Alternative Minimum Calculation of Corporationís Kentucky Gross Profits.

††††† (1) For taxable years beginning on or after January 1, 2005, and before January 1, 2006, the alternative minimum calculation shall be computed as follows:

††††† (a) Add Kentucky gross receipts:

††††† 1. Reduced by returns and allowances attributable to Kentucky gross receipts. Returns and allowances attributable to Kentucky gross receipts shall be determined by separate accounting. For purposes of the gross profits calculation, a corporation that is not taxable in another state under KRS 141.010(14)(b) shall only include gross receipts attributable to Kentucky; and

††††† 2. Reduced by the cost of goods sold attributable to Kentucky gross receipts. In determining the method specified by the Internal Revenue Service, the Internal Revenue Code, regulations explaining the Internal Revenue Code, private letter rulings, or other guidance as issued by the Internal Revenue Service concerning the amount of cost of goods sold allowable for federal income tax purposes shall apply; and

††††† (b) Multiply the total of paragraph (a) by $0.0075.

††††† (2) For taxable years beginning on or after January 1, 2006 and before January 1, 2007, "the alternative minimum calculation shall include the thresholds for gross profits in accordance with KRS 141.040(12).

††††† (a) If gross profits from all sources are under the threshold in KRS 141.040(12)(b)1, the alternative minimum calculation shall be the amount provided in KRS 141.040(12)(b)1.

††††† (b) If gross profits from all sources are within the thresholds in KRS 141.040(12)(b)2, the alternative minimum calculation based on Kentucky gross profits shall be computed by the method provided in subsection (1) of this section minus the reduction provided in KRS 141.040(12)(b)2.

††††† (c) If gross profits from all sources exceed the threshold in KRS 141.040(12)(b)3, the alternative minimum calculation based on Kentucky gross profits shall be computed by the method provided in subsection (1) of this section.

 

††††† Section 3. Comparison of Alternative Minimum Calculation Amounts. The corporationís tax liability shall be the greater of:

††††† (1) The tax computation based on net income;

††††† (2) The lesser of the alternative minimum calculation based on:

††††† (a) Gross receipts; or

††††† (b) Gross profits; or

††††† (3) $175.

 

††††† Section 4. This administrative regulation shall apply to taxable years beginning on or after January 1, 2005, and before January 1, 2007. (32 Ky.R. 1821; Am. 2288; 33 Ky.R. 379; eff. 9-1-2006.)