103 KAR 16:300. Calculation of taxable net income for disregarded single member LLCs.

 

      RELATES TO: KRS 141.010, 141.208

      STATUTORY AUTHORITY: KRS 131.130(1), 141.050(4), 141.018

      NECESSITY, FUNCTION AND CONFORMITY: KRS 131.130(1) authorizes the Department of Revenue to promulgate administrative regulations necessary to administer and enforce Kentucky's tax laws. 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 tax assessed under KRS Chapter 141 on individuals, the passed-through income of entities taxable under KRS 141.040, and any related item of income, deduction, or credit. KRS 141.010, 141.040, and 141.208 require limited liability entities to pay tax on net income because the entity is doing business in Kentucky. This administrative regulation explains how net taxable income shall be calculated for single member limited liability companies that are disregarded for federal income tax purposes.

 

      Section 1. Definitions. (1) "Single corporation" means a corporation defined in KRS 141.010(24) or a corporation that is the single member of a single LLC.

      (2) "Single member LLC" means a single member limited liability company that is disregarded as an entity separate from its member for federal income tax purposes.

 

      Section 2. In General; Doing Business. For taxable years beginning after December 31, 2004, Kentucky shall impose a tax on the net income of certain business entities doing business in Kentucky. In the case of a single member LLC, if the single member LLC is doing business in Kentucky, the single corporation shall be deemed to be doing business in Kentucky.

 

      Section 3. Calculation of Net Income. When calculating Kentucky taxable net income, the single corporation and any single member LLCs doing business in Kentucky shall be treated as one corporation in determining taxable income and the applicable apportionment factor.

 

      Section 4. The provisions of this administrative regulation shall apply to taxable years beginning on or after January 1, 2005 except where noted in Section 2. (32 Ky.R. 1832; 2292; 33 Ky.R. 73; eff. 8-7-2006.)