103 KAR 17:150. New home tax credit.

 

      RELATES TO: KRS 141.010, 141.020, 141.0205, 141.180, 141.210, 141.388

      STATUTORY AUTHORITY: KRS 131.130(1), 141.388

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 141.388(3)(b) requires the Department of Revenue to promulgate administrative regulations to administer the new home tax credit. This administrative regulation establishes guidelines and filing requirements for the new home tax credit.

 

      Section 1. Definitions. (1) "Application" means Application for New Home Tax Credit (Form number 40A103).

      (2) "Authorization Code" means the four (4) digit code provided with the credit allocation letter.

      (3) "Credit allocation letter" means a letter sent by the department to a qualified buyer signifying approval of the application.

      (4) "Deed" means any document, instrument, or writing other than a will and other than a lease or easement, regardless of where made, executed, or delivered, by which any real property in Kentucky, or any interest therein, is conveyed, vested, granted, bargained, sold, transferred, or assigned.

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

      (6) "Manufactured home" means a single-family residential dwelling including a house trailer or modular home constructed in accordance with the national Manufactured Home Construction and Safety Standards Act of 1974, 42 U.S.C. Section 5401, et seq., as amended, and constructed as a single-family residential dwelling with a permanent foundation if connected to the required utilities, and which includes the plumbing, heating, air conditioning and electrical systems contained therein.

      (7) "Married filing separately" means a husband and wife that file separate Kentucky individual income tax returns and includes:

      (a) Married filing separately on a combined return; or

      (b) Married filing separate returns.

      (8) "New home tax credit cap" is defined by KRS 141.388(1)(b).

      (9) "Purchase" is defined by KRS 141.388(1)(c).

      (10) "Qualified buyer" is defined by KRS 141.388(1)(d).

      (11) "Qualified principal residence" is defined by KRS 141.388(1)(e).

      (12) "Single-family dwelling" means a new residential structure built to be occupied by a single family including:

      (a) A detached house;

      (b) An attached condominium or townhouse; or

      (c) A manufactured home.

      (13) "Unmarried co-purchasers" means two (2) or more unmarried residents that purchase a qualified principal residence.

 

      Section 2. Determining Principal Residence. (1) If a qualified buyer uses more than one (1) property as a residence, the property which is used as the qualified buyer’s residence for a majority of time for a minimum of two (2) years shall be considered the qualified buyer’s principal residence.

      (2) In accordance with KRS 141.050(1) and 26 C.F.R. 1.121-1(b)(2), if a qualified buyer resides at more than one (1) property in equal amounts of time, the following factors shall be used to determine the qualified buyer’s principal residence:

      (a) The qualified buyer’s place of employment;

      (b) The principal place of abode of the qualified buyer’s family members(;).

      (c) The address listed on the qualified buyer’s federal and state tax returns, driver’s license, automobile registration, and voter registration card;

      (d) The qualified buyer’s mailing address for bills and correspondence;

      (e) The location of the qualified buyer’s bank; and

      (f) The location of religious organization and recreational clubs with which the qualified buyer is affiliated.

 

      Section 3. Application for New Home Tax Credit. (1) All applications for the new home tax credit shall include the following information:

      (a) Name, Social Security number, and signature of the qualified buyers that are submitting the application;

      (b) Date of purchase of the qualified principal residence;

      (c) Address of the qualified principal residence; and

      (d) A statement signed by the seller that certifies that the qualified principal residence has never been occupied.

      (2) The department shall approve or deny the application and shall notify all qualified buyers listed on the application of the approval or denial.

      (a) If the application is approved, a credit allocation letter shall be issued to the qualified buyers.

      (b) If the application is denied, the denial letter shall notify the buyer of the reasons for the denial and the appeal rights provided under KRS 131.110.

      (3) An application shall be denied if:

      (a) The application is not complete or is not faxed to the department within seven (7) calendar days of purchase;

      (b) The residence is not a qualified principal residence;

      (c) The taxpayer is not a qualified buyer; or

      (d) The new home tax credit cap has been reached.

 

      Section 4. Use of the Credit. (1) A qualified buyer claiming the new home tax credit on a tax return submitted in paper form shall attach the original credit allocation letter to the return.

      (2) A qualified buyer claiming the new home tax credit on an electronically submitted tax return shall include the authorization code provided on the credit allocation letter.

      (3) Qualified buyers who are approved for the new home tax credit and are married filing separately shall apportion the credit based upon the percentage of ownership of the qualified principal residence. It shall be presumed that the ownership is equally shared unless otherwise indicated in a deed for the qualified principal residence.

      (4) Qualified buyers who are approved for the new home tax credit and are unmarried co-purchasers shall be entitled to the credit in the same manner as each unmarried co-purchaser’s percentage of ownership of the qualified principal residence. It shall be presumed that the ownership is equally shared unless otherwise indicated in a deed for the qualified principal residence.

 

      Section 5. Recapture of the New Home Tax Credit. (1) If a qualified buyer does not maintain the qualified principal residence as his or her principal residence for two (2) years from the date of purchase, the qualified buyer shall file an amended return for the taxable year of the purchase and pay the amount of credit taken as tax due plus any applicable interest.

      (a) A married qualified buyer that fails to maintain the qualified principal residence as his or her principal residence for two (2) years from the date of purchase shall be liable for his or her portion of any tax and interest due based upon the qualified buyer’s percentage of ownership of the qualified principal residence.

      (b) An unmarried co-purchaser that fails to maintain the qualified principal residence as his or her principal residence for two (2) years from the date of purchase shall be liable for the amount of tax and interest due in an amount based on the unmarried co-purchaser’s percentage of ownership of the qualified principal residence.

      (2) Subject to the limitations provided in KRS 141.210, the department shall issue an assessment for any tax, penalty and interest due from a qualified buyer for failure to maintain the qualified principal residence as his or her principal residence for two (2) years from the date of purchase if the qualified buyer does not file an amended return and pay the appropriate tax and interest due as required by subsection (1) of this section.

      (3) If a qualified buyer dies within two (2) years of the date of purchase, the approved credit applicable to the deceased shall not be subject to recapture. A surviving spouse or surviving unmarried co-purchaser that is also a qualified buyer for the same home shall not be required to recapture the credit unless the surviving spouse or unmarried co-purchaser does not maintain the home as his or her principal residence for two (2) years from the date of purchase.

 

      Section 6. Incorporation by Reference. (1) "Application for New Home Tax Credit", Form 40A103, July 2009, is incorporated by reference.

      (2) This material may be inspected, copied, or obtained, subject to applicable copyright law, at the Kentucky Department of Revenue, 501 High Street, Frankfort, Kentucky 40601, or at any Kentucky Department of Revenue Taxpayer Service Center, Monday through Friday, 8 a.m. to 4:30 p.m. ( 36 Ky. R. 704, Am. 1011; eff. 12-4-2009.)