Kentucky Statutes 141.209 – Annual election to have tax under KRS 141.020 imposed on pass-through entity — Refundable tax credit — Report to owner — Administrative regulations
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(1) For purposes of this section:
(a) “Authorized person” means any individual with the authority from the electing entity to bind the electing entity or sign returns on its behalf;
(b) “Direct owner” means a partner, member, or shareholder that holds an interest directly in a pass-through entity;
(c) “Electing entity” means a pass-through entity that makes an election under this section;
(d) “Entity owner” means the direct or indirect owners of an electing entity receiving a proportionate share of the entity’s income;
(e) “Indirect owner” means a partner, member, or shareholder in a pass-through entity that holds an interest indirectly, or through another indirect partner, member, or shareholder in a pass-through entity; and
(f) “Owner” means a direct or indirect partner, member, or shareholder of an electing entity and includes a beneficiary of an estate or trust.
(2) (a) For taxable years beginning on or after January 1, 2022, an authorized person may elect annually, on behalf of the electing entity, to have the tax under KRS
141.020 imposed upon the electing entity and based upon the ordinary income and the separately stated items of income calculated under KRS § 141.206.
(b) 1. All calculations for the return shall continue to be made as provided under KRS § 141.206.
2. The election shall be made on a form prescribed by the department.
(c) For taxable years beginning on or after January 1, 2023, the election may be made at any time during the taxable year or after the end of the taxable year, but not later than the:
1. Fifteenth day of the fourth month after the close of the taxable year; or
2. Fifteenth day of the tenth month after the close of the taxable year, if the return is filed under KRS § 141.170.
(d) For taxable years beginning on or after January 1, 2022, but before January 1,
2023:
1. The election may be made after March 31, 2023, but shall be made before August 31, 2024;
2. As a result of the electing entity making the election as described in subparagraph 1. of this paragraph:
a. No late payment, late filing, or other similar penalty under KRS
131.180 shall be imposed on an electing entity; and
b. No interest under KRS § 131.183 shall apply to the tax paid by the electing entity.
(e) 1. For taxable years beginning on or after January 1, 2022, but before
January 1, 2024, an electing entity is not required to make estimated
income tax payments and no estimated tax penalty shall be assessed under KRS § 141.985.
2. For taxable years beginning on or after January 1, 2024, an electing entity shall be:
a. Required to make estimated income tax payments if the provisions of KRS § 141.305 are met; and
b. Subject to the estimated tax penalty under KRS § 141.985 if the estimated income tax payments are not properly made.
(f) The election, once made for a taxable year, is irrevocable and binding upon all entity owners.
(3) For taxable years beginning on or after January 1, 2022, there shall be allowed a refundable pass-through entity tax credit which shall be:
(a) Equal to one hundred percent (100%) of the entity owner‘s proportionate share of the tax paid by the pass-through entity for the taxable year;
(b) Claimed against the tax imposed under KRS § 141.020 on a return filed by the entity owner, with the ordering of credits as provided in KRS § 141.0205; and
(c) Based on the pro rata share of the entity owner’s income from the pass- through entity.
(4) An electing entity shall report to each direct owner of the entity the direct owner’s proportionate share of the tax paid for the taxable year for purposes of the pass- through entity tax credit created in subsection (3) of this section.
(5) The department shall prescribe forms and may promulgate administrative regulations as needed to administer this section.
Effective: March 31, 2023
History: Created 2023 Ky. Acts ch. 148, sec. 9, effective March 31, 2023.
Legislative Research Commission Note (3/31/2023). 2023 Ky. Acts ch. 148, sec. 9, which created this statute, contained an erroneous reference in subsection (3)(b) to “the ordering of credits as provided in Section 9 of this Act,” although Section 6 (KRS § 141.0205) is the only section in that Act that sets forth the ordering of tax credits. The Reviser of Statutes has corrected this manifest clerical or typographical error during codification under the authority of KRS § 7.136(1).
(a) “Authorized person” means any individual with the authority from the electing entity to bind the electing entity or sign returns on its behalf;
Terms Used In Kentucky Statutes 141.209
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Department: means the Department of Revenue. See Kentucky Statutes 141.010
- Individual: means a natural person. See Kentucky Statutes 141.010
- Month: means calendar month. See Kentucky Statutes 446.010
- Owner: when applied to any animal, means any person having a property interest in such animal. See Kentucky Statutes 446.010
- Pass-through entity: means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity recognized by the laws of this state that is not taxed for federal purposes at the entity level, but instead passes to each partner, member, shareholder, or owner their proportionate share of income, deductions, gains, losses, credits, and any other similar attributes. See Kentucky Statutes 141.010
- Person: means "person" as defined in Section 7701(a)(1) of the Internal Revenue
Code. See Kentucky Statutes 141.900 - Statute: A law passed by a legislature.
- Taxable year: means the calendar year or fiscal year ending during such calendar year, upon the basis of which net income is computed, and in the case of a return made for a fractional part of a year under the provisions of this chapter or under administrative regulations prescribed by the commissioner, "taxable year" means the period for which the return is made. See Kentucky Statutes 141.010
- Year: means calendar year. See Kentucky Statutes 446.010
(b) “Direct owner” means a partner, member, or shareholder that holds an interest directly in a pass-through entity;
(c) “Electing entity” means a pass-through entity that makes an election under this section;
(d) “Entity owner” means the direct or indirect owners of an electing entity receiving a proportionate share of the entity’s income;
(e) “Indirect owner” means a partner, member, or shareholder in a pass-through entity that holds an interest indirectly, or through another indirect partner, member, or shareholder in a pass-through entity; and
(f) “Owner” means a direct or indirect partner, member, or shareholder of an electing entity and includes a beneficiary of an estate or trust.
(2) (a) For taxable years beginning on or after January 1, 2022, an authorized person may elect annually, on behalf of the electing entity, to have the tax under KRS
141.020 imposed upon the electing entity and based upon the ordinary income and the separately stated items of income calculated under KRS § 141.206.
(b) 1. All calculations for the return shall continue to be made as provided under KRS § 141.206.
2. The election shall be made on a form prescribed by the department.
(c) For taxable years beginning on or after January 1, 2023, the election may be made at any time during the taxable year or after the end of the taxable year, but not later than the:
1. Fifteenth day of the fourth month after the close of the taxable year; or
2. Fifteenth day of the tenth month after the close of the taxable year, if the return is filed under KRS § 141.170.
(d) For taxable years beginning on or after January 1, 2022, but before January 1,
2023:
1. The election may be made after March 31, 2023, but shall be made before August 31, 2024;
2. As a result of the electing entity making the election as described in subparagraph 1. of this paragraph:
a. No late payment, late filing, or other similar penalty under KRS
131.180 shall be imposed on an electing entity; and
b. No interest under KRS § 131.183 shall apply to the tax paid by the electing entity.
(e) 1. For taxable years beginning on or after January 1, 2022, but before
January 1, 2024, an electing entity is not required to make estimated
income tax payments and no estimated tax penalty shall be assessed under KRS § 141.985.
2. For taxable years beginning on or after January 1, 2024, an electing entity shall be:
a. Required to make estimated income tax payments if the provisions of KRS § 141.305 are met; and
b. Subject to the estimated tax penalty under KRS § 141.985 if the estimated income tax payments are not properly made.
(f) The election, once made for a taxable year, is irrevocable and binding upon all entity owners.
(3) For taxable years beginning on or after January 1, 2022, there shall be allowed a refundable pass-through entity tax credit which shall be:
(a) Equal to one hundred percent (100%) of the entity owner‘s proportionate share of the tax paid by the pass-through entity for the taxable year;
(b) Claimed against the tax imposed under KRS § 141.020 on a return filed by the entity owner, with the ordering of credits as provided in KRS § 141.0205; and
(c) Based on the pro rata share of the entity owner’s income from the pass- through entity.
(4) An electing entity shall report to each direct owner of the entity the direct owner’s proportionate share of the tax paid for the taxable year for purposes of the pass- through entity tax credit created in subsection (3) of this section.
(5) The department shall prescribe forms and may promulgate administrative regulations as needed to administer this section.
Effective: March 31, 2023
History: Created 2023 Ky. Acts ch. 148, sec. 9, effective March 31, 2023.
Legislative Research Commission Note (3/31/2023). 2023 Ky. Acts ch. 148, sec. 9, which created this statute, contained an erroneous reference in subsection (3)(b) to “the ordering of credits as provided in Section 9 of this Act,” although Section 6 (KRS § 141.0205) is the only section in that Act that sets forth the ordering of tax credits. The Reviser of Statutes has corrected this manifest clerical or typographical error during codification under the authority of KRS § 7.136(1).