141.010 Definitions for chapter. As used in this chapter, unless the context requires otherwise: <br>(1) "Commissioner" means the commissioner of the Department of Revenue; <br>(2) "Department" means the Department of Revenue; <br>(3) "Internal Revenue Code" means the Internal Revenue Code in effect on December 31, 2006, exclusive of any amendments made subsequent to that date, other than <br>amendments that extend provisions in effect on December 31, 2006, that would <br>otherwise terminate, and as modified by KRS 141.0101, except that for property <br>placed in service after September 10, 2001, only the depreciation and expense <br>deductions allowed under Sections 168 and 179 of the Internal Revenue Code in <br>effect on December 31, 2001, exclusive of any amendments made subsequent to <br>that date, shall be allowed, and including the provisions of the Military Family Tax <br>Relief Act of 2003, Pub. L. No. 108-121, effective on the dates specified in that <br>Act; (4) "Dependent" means those persons defined as dependents in the Internal Revenue Code; (5) "Fiduciary" means "fiduciary" as defined in Section 7701(a)(6) of the Internal Revenue Code; (6) "Fiscal year" means "fiscal year" as defined in Section 7701(a)(24) of the Internal Revenue Code; (7) "Individual" means a natural person; <br>(8) "Modified gross income" means the greater of: (a) Adjusted gross income as defined in Section 62 of the Internal Revenue Code of 1986, including any subsequent amendments in effect on December 31 of <br>the taxable year, and adjusted as follows: <br>1. Include interest income derived from obligations of sister states and <br>political subdivisions thereof; and 2. Include lump-sum pension distributions taxed under the special <br>transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or (b) Adjusted gross income as defined in subsection (10) of this section and adjusted to include lump-sum pension distributions taxed under the special <br>transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); (9) "Gross income," in the case of taxpayers other than corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code; (10) "Adjusted gross income," in the case of taxpayers other than corporations, means gross income as defined in subsection (9) of this section minus the deductions <br>allowed individuals by Section 62 of the Internal Revenue Code and as modified by <br>KRS 141.0101 and adjusted as follows, except that deductions shall be limited to <br>amounts allocable to income subject to taxation under the provisions of this chapter, <br>and except that nothing in this chapter shall be construed to permit the same item to <br>be deducted more than once: (a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States and <br>Kentucky; (b) Exclude income from supplemental annuities provided by the Railroad Retirement Act of 1937 as amended and which are subject to federal income <br>tax by Public Law 89-699; (c) Include interest income derived from obligations of sister states and political subdivisions thereof; (d) Exclude employee pension contributions picked up as provided for in KRS 6.505, 16.545, 21.360, 61.560, 65.155, 67A.320, 67A.510, 78.610, and <br>161.540 upon a ruling by the Internal Revenue Service or the federal courts <br>that these contributions shall not be included as gross income until such time <br>as the contributions are distributed or made available to the employee; (e) Exclude Social Security and railroad retirement benefits subject to federal income tax; (f) Include, for taxable years ending before January 1, 1991, all overpayments of federal income tax refunded or credited for taxable years; (g) Deduct, for taxable years ending before January 1, 1991, federal income tax paid for taxable years ending before January 1, 1990; (h) Exclude any money received because of a settlement or judgment in a lawsuit brought against a manufacturer or distributor of "Agent Orange" for damages <br>resulting from exposure to Agent Orange by a member or veteran of the <br>Armed Forces of the United States or any dependent of such person who <br>served in Vietnam; (i) 1. For taxable years ending prior to December 31, 2005, exclude the <br>applicable amount of total distributions from pension plans, annuity <br>contracts, profit-sharing plans, retirement plans, or employee savings <br>plans. The "applicable amount" shall be: <br>a. Twenty-five percent (25%), but not more than six thousand two <br>hundred fifty dollars ($6,250), for taxable years beginning after <br>December 31, 1994, and before January 1, 1996; b. Fifty percent (50%), but not more than twelve thousand five <br>hundred dollars ($12,500), for taxable years beginning after <br>December 31, 1995, and before January 1, 1997; c. Seventy-five percent (75%), but not more than eighteen thousand <br>seven hundred fifty dollars ($18,750), for taxable years beginning <br>after December 31, 1996, and before January 1, 1998; and d. One hundred percent (100%), but not more than thirty-five <br>thousand dollars ($35,000), for taxable years beginning after <br>December 31, 1997. 2. For taxable years beginning after December 31, 2005, exclude up to <br>forty-one thousand one hundred ten dollars ($41,110) of total <br>distributions from pension plans, annuity contracts, profit-sharing plans, <br>retirement plans, or employee savings plans. 3. As used in this paragraph: <br>a. "Distributions" includes but is not limited to any lump-sum <br>distribution from pension or profit-sharing plans qualifying for the <br>income tax averaging provisions of Section 402 of the Internal <br>Revenue Code; any distribution from an individual retirement <br>account as defined in Section 408 of the Internal Revenue Code; <br>and any disability pension distribution; b. "Annuity contract" has the same meaning as set forth in Section <br>1035 of the Internal Revenue Code; and c. "Pension plans, profit-sharing plans, retirement plans, or employee <br>savings plans" means any trust or other entity created or organized <br>under a written retirement plan and forming part of a stock bonus, <br>pension, or profit-sharing plan of a public or private employer for <br>the exclusive benefit of employees or their beneficiaries and <br>includes plans qualified or unqualified under Section 401 of the <br>Internal Revenue Code and individual retirement accounts as <br>defined in Section 408 of the Internal Revenue Code; (j) 1. a. Exclude the portion of the distributive share of a shareholder's net <br>income from an S corporation subject to the franchise tax imposed <br>under KRS 136.505 or the capital stock tax imposed under KRS <br>136.300; and b. Exclude the portion of the distributive share of a shareholder's net <br>income from an S corporation related to a qualified subchapter S <br>subsidiary subject to the franchise tax imposed under KRS <br>136.505 or the capital stock tax imposed under KRS 136.300. 2. The shareholder's basis of stock held in a S corporation where the S <br>corporation or its qualified subchapter S subsidiary is subject to the <br>franchise tax imposed under KRS 136.505 or the capital stock tax <br>imposed under KRS 136.300 shall be the same as the basis for federal <br>income tax purposes; (k) Exclude for taxable years beginning after December 31, 1998, to the extent not already excluded from gross income, any amounts paid for health <br>insurance, or the value of any voucher or similar instrument used to provide <br>health insurance, which constitutes medical care coverage for the taxpayer, the <br>taxpayer's spouse, and dependents during the taxable year. Any amounts paid <br>by the taxpayer for health insurance that are excluded pursuant to this <br>paragraph shall not be allowed as a deduction in computing the taxpayer's net <br>income under subsection (11) of this section; (l) Exclude income received for services performed as a precinct worker for election training or for working at election booths in state, county, and local <br>primary, regular, or special elections; (m) Exclude any amount paid during the taxable year for insurance for long-term care as defined in KRS 304.14-600; (n) Exclude any capital gains income attributable to property taken by eminent domain; (o) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the <br>Master Settlement Agreement, signed on November 22, 1998; (p) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco <br>farmers and quota owners for anticipated financial losses caused by the <br>national tobacco settlement; (q) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a <br>reduction in the quantity of tobacco quota allotted; (r) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in; (s) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner; (t) Exclude all income from all sources for active duty and reserve members and officers of the Armed Forces of the United States or National Guard who are <br>killed in the line of duty, for the year during which the death occurred and the <br>year prior to the year during which the death occurred. For the purposes of this <br>paragraph, "all income from all sources" shall include all federal and state <br>death benefits payable to the estate or any beneficiaries; and (u) For taxable years beginning on or after January 1, 2010, exclude all military pay received by active duty members of the Armed Forces of the United <br>States, members of reserve components of the Armed Forces of the United <br>States, and members of the National Guard, including compensation for state <br>active duty as described in KRS 38.205; (11) "Net income," in the case of taxpayers other than corporations, means adjusted gross income as defined in subsection (10) of this section, minus: <br>(a) The standard deduction allowed by KRS 141.081, or, at the option of the taxpayer, the deduction allowed by KRS 141.0202; (b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families; (c) For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as <br>allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years <br>beginning before 2010; and (d) 1. All the deductions allowed individuals by Chapter 1 of the Internal <br>Revenue Code as modified by KRS 141.0101 except: <br>a. Any deduction allowed by the Internal Revenue Code for state or <br>foreign taxes measured by gross or net income, including state and <br>local general sales taxes allowed in lieu of state and local income <br>taxes under the provisions of Section 164(b)(5) of the Internal <br>Revenue Code; b. Any deduction allowed by the Internal Revenue Code for amounts <br>allowable under KRS 140.090(1)(h) in calculating the value of the <br>distributive shares of the estate of a decedent, unless there is filed <br>with the income return a statement that such deduction has not <br>been claimed under KRS 140.090(1)(h); c. The deduction for personal exemptions allowed under Section 151 <br>of the Internal Revenue Code and any other deductions in lieu <br>thereof; d. For taxable years beginning on or after January 1, 2010, the <br>domestic production activities deduction allowed under Section <br>199 of the Internal Revenue Code; e. Any deduction for amounts paid to any club, organization, or <br>establishment which has been determined by the courts or an <br>agency established by the General Assembly and charged with <br>enforcing the civil rights laws of the Commonwealth, not to afford <br>full and equal membership and full and equal enjoyment of its <br>goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, <br>national origin, or sex, except nothing shall be construed to deny a <br>deduction for amounts paid to any religious or denominational <br>club, group, or establishment or any organization operated solely <br>for charitable or educational purposes which restricts membership <br>to persons of the same religion or denomination in order to <br>promote the religious principles for which it is established and <br>maintained; and f. Any deduction directly or indirectly allocable to income which is <br>either exempt from taxation or otherwise not taxed under this <br>chapter; and 2. Nothing in this chapter shall be construed to permit the same item to be <br>deducted more than once; (12) "Gross income," in the case of corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code and as modified by KRS 141.0101 and <br>adjusted as follows: <br>(a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States; (b) Exclude all dividend income received after December 31, 1969; (c) Include interest income derived from obligations of sister states and political subdivisions thereof; (d) Exclude fifty percent (50%) of gross income derived from any disposal of coal covered by Section 631(c) of the Internal Revenue Code if the corporation <br>does not claim any deduction for percentage depletion, or for expenditures <br>attributable to the making and administering of the contract under which such <br>disposition occurs or to the preservation of the economic interests retained <br>under such contract; (e) Include in the gross income of lessors income tax payments made by lessees to lessors, under the provisions of Section 110 of the Internal Revenue Code, <br>and exclude such payments from the gross income of lessees; (f) Include the amount calculated under KRS 141.205; <br>(g) Ignore the provisions of Section 281 of the Internal Revenue Code in computing gross income; (h) Exclude income from "safe harbor leases" (Section 168(f)(8) of the Internal Revenue Code); (i) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the <br>Master Settlement Agreement, signed on November 22, 1998; (j) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco <br>farmers and quota owners for anticipated financial losses caused by the <br>national tobacco settlement; (k) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a <br>reduction in the quantity of tobacco quota allotted; (l) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in; (m) For taxable years beginning after December 31, 2004, and before January 1, 2007, exclude the distributive share income or loss received from a <br>corporation defined in subsection (24)(b) of this section whose income has <br>been subject to the tax imposed by KRS 141.040. The exclusion provided in <br>this paragraph shall also apply to a taxable year that begins prior to January 1, <br>2005, if the tax imposed by KRS 141.040 is paid on the distributive share <br>income by a corporation defined in subparagraphs 2. to 8. of subsection <br>(24)(b) of this section with a return filed for a period of less than twelve (12) <br>months that begins on or after January 1, 2005, and ends on or before <br>December 31, 2005. This paragraph shall not be used to delay payment of the <br>tax imposed by KRS 141.040; and (n) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner; (13) "Net income," in the case of corporations, means "gross income" as defined in subsection (12) of this section minus: (a) The deduction allowed by KRS 141.0202; <br>(b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families; (c) For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as <br>allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years <br>beginning before 2010; and (d) All the deductions from gross income allowed corporations by Chapter 1 of the Internal Revenue Code and as modified by KRS 141.0101, except: <br>1. Any deduction for a state tax which is computed, in whole or in part, by <br>reference to gross or net income and which is paid or accrued to any <br>state of the United States, the District of Columbia, the Commonwealth <br>of Puerto Rico, any territory or possession of the United States, or to any <br>foreign country or political subdivision thereof; 2. The deductions contained in Sections 243, 244, 245, and 247 of the <br>Internal Revenue Code; 3. The provisions of Section 281 of the Internal Revenue Code shall be <br>ignored in computing net income; 4. Any deduction directly or indirectly allocable to income which is either <br>exempt from taxation or otherwise not taxed under the provisions of this <br>chapter, and nothing in this chapter shall be construed to permit the <br>same item to be deducted more than once; 5. Exclude expenses related to "safe harbor leases" (Section 168(f)(8) of <br>the Internal Revenue Code); 6. Any deduction for amounts paid to any club, organization, or <br>establishment which has been determined by the courts or an agency <br>established by the General Assembly and charged with enforcing the <br>civil rights laws of the Commonwealth, not to afford full and equal <br>membership and full and equal enjoyment of its goods, services, <br>facilities, privileges, advantages, or accommodations to any person <br>because of race, color, religion, national origin, or sex, except nothing <br>shall be construed to deny a deduction for amounts paid to any religious <br>or denominational club, group, or establishment or any organization <br>operated solely for charitable or educational purposes which restricts <br>membership to persons of the same religion or denomination in order to <br>promote the religious principles for which it is established and <br>maintained; 7. Any deduction prohibited by KRS 141.205; 8. Any dividends-paid deduction of any captive real estate investment trust; <br>and 9. For taxable years beginning on or after January 1, 2010, the domestic <br>production activities deduction allowed under Section 199 of the <br>Internal Revenue Code; (14) (a) "Taxable net income," in the case of corporations that are taxable in this state, means "net income" as defined in subsection (13) of this section; (b) "Taxable net income," in the case of corporations that are taxable in this state and taxable in another state, means "net income" as defined in subsection (13) <br>of this section and as allocated and apportioned under KRS 141.120. A <br>corporation is taxable in another state if, in any state other than Kentucky, the <br>corporation is required to file a return for or pay a net income tax, franchise <br>tax measured by net income, franchise tax for the privilege of doing business, <br>or corporate stock tax; (c) "Taxable net income," in the case of homeowners' associations as defined in Section 528(c) of the Internal Revenue Code, means "taxable income" as <br>defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the <br>provisions of subsection (3) of this section, the Internal Revenue Code <br>sections referred to in this paragraph shall be those code sections in effect for <br>the applicable tax year; and (d) "Taxable net income," in the case of a corporation that meets the requirements established under Section 856 of the Internal Revenue Code to be a real estate <br>investment trust, means "real estate investment trust taxable income" as <br>defined in Section 857(b)(2) of the Internal Revenue Code, except that a <br>captive real estate investment trust shall not be allowed any deduction for <br>dividends paid; (15) "Person" means "person" as defined in Section 7701(a)(1) of the Internal Revenue Code; (16) "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 <br>made for a fractional part of a year under the provisions of this chapter or under <br>regulations prescribed by the commissioner, "taxable year" means the period for <br>which the return is made; (17) "Resident" means an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in <br>the aggregate more than one hundred eighty-three (183) days of the taxable year in <br>this state; (18) "Nonresident" means any individual not a resident of this state; <br>(19) "Employer" means "employer" as defined in Section 3401(d) of the Internal Revenue Code; (20) "Employee" means "employee" as defined in Section 3401(c) of the Internal Revenue Code; (21) "Number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under KRS <br>141.325, except that if no such certificate is in effect, the number of withholding <br>exemptions claimed shall be considered to be zero; (22) "Wages" means "wages" as defined in Section 3401(a) of the Internal Revenue Code and includes other income subject to withholding as provided in Section <br>3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code; (23) "Payroll period" means "payroll period" as defined in Section 3401(b) of the Internal Revenue Code; (24) (a) For taxable years beginning before January 1, 2005, and after December 31, 2006, "corporation" means "corporation" as defined in Section 7701(a)(3) of <br>the Internal Revenue Code; and (b) For taxable years beginning after December 31, 2004, and before January 1, 2007, "corporations" means: <br>1. "Corporations" as defined in Section 7701(a)(3) of the Internal Revenue <br>Code; 2. S corporations as defined in Section 1361(a) of the Internal Revenue <br>Code; 3. A foreign limited liability company as defined in KRS 275.015; 4. A limited liability company as defined in KRS 275.015; 5. A professional limited liability company as defined in KRS 275.015; 6. A foreign limited partnership as defined in KRS 362.2-102(9); 7. A limited partnership as defined in KRS 362.2-102(14); 8. A limited liability partnership as defined in KRS 362.155(7) or in 362.1-<br>101(7) or (8); 9. A real estate investment trust as defined in Section 856 of the Internal <br>Revenue Code; 10. A regulated investment company as defined in Section 851 of the Internal Revenue Code; 11. A real estate mortgage investment conduit as defined in Section 860D of the Internal Revenue Code; 12. A financial asset securitization investment trust as defined in Section 860L of the Internal Revenue Code; and 13. Other similar entities created with limited liability for their partners, members, or shareholders. For purposes of this paragraph, "corporation" shall not include any publicly <br>traded partnership as defined by Section 7704(b) of the Internal Revenue Code <br>that is treated as a partnership for federal tax purposes under Section 7704(c) <br>of the Internal Revenue Code or its publicly traded partnership affiliates. As <br>used in this paragraph, "publicly traded partnership affiliates" shall include <br>any limited liability company or limited partnership for which at least eighty <br>percent (80%) of the limited liability company member interests or limited <br>partner interests are owned directly or indirectly by the publicly traded <br>partnership; (25) "Doing business in this state" includes but is not limited to: (a) Being organized under the laws of this state; <br>(b) Having a commercial domicile in this state; <br>(c) Owning or leasing property in this state; <br>(d) Having one (1) or more individuals performing services in this state; <br>(e) Maintaining an interest in a pass-through entity doing business in this state; <br>(f) Deriving income from or attributable to sources within this state, including deriving income directly or indirectly from a trust doing business in this state, <br>or deriving income directly or indirectly from a single-member limited <br>liability company that is doing business in this state and is disregarded as an <br>entity separate from its single member for federal income tax purposes; or (g) Directing activities at Kentucky customers for the purpose of selling them goods or services. Nothing in this subsection shall be interpreted in a manner that goes beyond the <br>limitations imposed and protections provided by the United States Constitution or <br>Pub. L. No. 86-272; (26) "Pass-through entity" means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity <br>recognized by the laws of this state that is not taxed for federal purposes at the <br>entity level, but instead passes to each partner, member, shareholder, or owner their <br>proportionate share of income, deductions, gains, losses, credits, and any other <br>similar attributes; (27) "S corporation" means "S corporation" as defined in Section 1361(a) of the Internal Revenue Code; (28) "Limited liability pass-through entity" means any pass-through entity that affords any of its partners, members, shareholders, or owners, through function of the laws <br>of this state or laws recognized by this state, protection from general liability for <br>actions of the entity; and (29) "Captive real estate investment trust" means a real estate investment trust as defined in Section 856 of the Internal Revenue Code that meets the following requirements: <br>(a) 1. The shares or other ownership interests of the real estate investment trust <br>are not regularly traded on an established securities market; or 2. The real estate investment trust does not have enough shareholders or <br>owners to be required to register with the Securities and Exchange <br>Commission; and (b) 1. The maximum amount of stock or other ownership interest that is owned <br>or constructively owned by a corporation equals or exceeds: <br>a. Twenty-five percent (25%), if the corporation does not occupy <br>property owned, constructively owned, or controlled by the real <br>estate investment trust; or b. Ten percent (10%), if the corporation occupies property owned, <br>constructively owned, or controlled by the real estate investment <br>trust. The total ownership interest of a corporation shall be determined by <br>aggregating all interests owned or constructively owned by a <br>corporation; 2. For the purposes of this paragraph: <br>a. "Corporation" means a corporation taxable under KRS 141.040, <br>and includes an affiliated group as defined in KRS 141.200, that is <br>required to file a consolidated return pursuant to the provisions of <br>KRS 141.200; and b. "Owned or constructively owned" means owning shares or having <br>an ownership interest in the real estate investment trust, or owning <br>an interest in an entity that owns shares or has an ownership <br>interest in the real estate investment trust. Constructive ownership <br>shall be determined by looking across multiple layers of a <br>multilayer pass-through structure; and (c) The real estate investment trust is not owned by another real estate investment trust. Effective: June 4, 2010 <br>History: Amended 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 3, effective June 4, 2010. -- Repealed and reenacted 2010 Ky. Acts ch. 51, sec. 42, effective July 15, 2010. -- <br>Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 105, effective June 26, 2009. -- <br>Amended 2007 Ky. Acts ch. 52, sec. 2, effective June 26, 2007; and ch. 137, sec. 42, <br>effective June 26, 2007. -- Amended 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 1, <br>effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 149, sec. 202, effective July <br>12, 2006; ch. 251, sec. 13, effective July 12, 2006; and ch. 252, Pt. XXVIII, sec. 16, <br>effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 471, effective June <br>20, 2005; ch. 168, sec. 3, effective March 18, 2005; and ch. 173, Part XVIII, sec. 1, <br>effective March 20, 2005. -- Amended 2004 Ky. Acts ch. 135, sec. 1, effective July <br>13, 2004. -- Amended 2002 Ky. Acts ch. 206, sec. 1, effective July 15, 2002; and <br>ch. 367, sec. 1, effective July 15, 2002. -- Amended 2001 Ky. Acts ch. 67, sec. 1, <br>effective March 15, 2001. -- Amended 2000 Ky. Acts ch. 337, sec. 1, effective July <br>14, 2000; and ch. 533, sec. 1, effective April 26, 2000. -- Amended 1998 Ky. Acts <br>ch. 1, sec. 1, effective February 6, 1998; ch. 365, sec. 1, effective July 15, 1998; <br>ch. 402, sec. 3, effective April 7, 1998; ch. 496, sec. 63, effective April 10, 1998; <br>ch. 509, sec. 8, effective July 15, 1998; ch. 550, sec. 1, effective July 15, 1998; and <br>ch. 586, sec. 8, effective July 15, 1998. -- Amended 1996 Ky. Acts ch. 69, sec. 1, <br>effective July 15, 1996. -- Amended 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 1, <br>effective April 28, 1995. -- Amended 1994 Ky. Acts ch. 45, sec. 1, effective July 15, <br>1994. -- Amended 1992 Ky. Acts ch. 165, sec. 1, effective July 14, 1992. -- Amended <br>1990 Ky. Acts ch. 163, sec. 8, effective July 13, 1990; ch. 242, sec. 2, effective July <br>13, 1990; ch. 303, sec. 1, effective July 1, 1990; and ch. 476, Pt. VII D, sec. 630, <br>effective April 11, 1990. -- Amended 1988 Ky. Acts ch. 174, sec. 1, effective July <br>15, 1988. -- Amended 1986 Ky. Acts ch. 459, sec. 3, effective July 15, 1986. -- <br>Amended 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. V, sec. 14, effective July 29, <br>1985. -- Amended 1984 Ky. Acts ch. 378, sec. 1, effective July 1, 1984. -- Amended <br>1982 Ky. Acts ch. 105, sec. 1, effective March 24, 1982; and ch. 166, sec. 15, <br>effective July 15, 1982. -- Amended 1980 Ky. Acts ch. 176, sec. 1, effective July 15, <br>1980. -- Amended 1978 Ky. Acts ch. 233, sec. 10, effective June 17, 1978. -- <br>Amended 1976 Ky. Acts ch. 155, sec. 7. -- Amended 1974 Ky. Acts ch. 163, sec. 2. -<br>- Amended 1972 Ky. Acts ch. 62, Pt. III, sec. 1. -- Amended 1970 Ky. Acts ch. 216, sec. 3. -- Amended 1968 Ky. Acts ch. 40, Part II, sec. 1. -- Amended 1966 Ky. Acts <br>ch. 176, Part I, sec. 1. -- Amended 1962 Ky. Acts ch. 124, sec. 1. -- Amended 1960 <br>Ky. Acts ch. 5, Art. III, sec. 1. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, <br>sec. 1. -- Amended 1954 Ky. Acts ch. 79, sec. 1. -- Amended 1952 Ky. Acts ch. 194, <br>secs. 1 and 2. -- Amended 1948 Ky. Acts ch. 93, sec. 1. -- Recodified 1942 Ky. Acts <br>ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-1, 4281b-2, <br>4281b-5. Legislative Research Commission Note (6/26/2007). 2007 Ky. Acts ch. 52, sec. 3, provides that the amendments to KRS 141.010 in 2007 Ky. Acts ch. 52, sec. 2, "shall <br>apply to tax years beginning on or after January 1, 2007." Legislative Research Commission Note (6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 73, provides that "unless a provision of this Act specifically applies to an <br>earlier tax year, the provisions of this Act shall apply to taxable years beginning on or <br>after January 1, 2007." Legislative Research Commission Note (6/28/2006). Under the authority of KRS 7.136, a manifest clerical or typographical error has been corrected. In the first <br>sentence of 2006 (1st Extra. Sess.) Ky. Acts ch 2, sec. 11, the citation to KRS <br>141.010(24)(b) to (h) has been changed to KRS 141.010(24)(b)2. to 8. to conform to <br>other amendments citing this statute elsewhere in the Act. Legislative Research Commission Note (4/25/2006). 2006 Ky. Acts ch. 252, Pt. XXVIII, sec. 18 provides that "The amendment in Section 16 of this Part is <br>applicable for tax years beginning after December 31, 2001." Legislative Research Commission Note (3/20/2005). 2005 Ky. Acts ch. 173, Part XVIII, sec. 2, provides that changes made to subsection (11)(a) of this section are <br>effective for taxable years beginning after December 1, 2004. Legislative Research Commission Note (7/13/2004). The amendments made to subsections (10)(r) and (12)(l) of this statute in 2004 Ky. Acts ch. 135, sec. 1, "shall <br>apply for taxable years beginning after December 31, 2003." 2004 Ky. Acts ch. 135, <br>sec. 4. Legislative Research Commission Note (7/15/2002). The change of dates in subsection (3) of this statute from December 31, 1999, to December 31, 2001, applies to <br>"taxable years beginning after December 31, 2001." 2002 Ky. Acts. ch. 367, sec. 4. Legislative Research Commission Note (7/15/2002). The amendments made to subsections (10)(k), (11), and (13) of this statute in 2002 Ky. Acts ch. 206, sec. 1, <br>"shall apply for taxable years beginning after December 31, 2001." 2002 Ky. Acts <br>ch. 206, sec. 2. Legislative Research Commission Note (7/14/2000). The change of dates in subsection (3) of this statute from December 1, 1997, to December 31, 1999, applies to "taxable <br>years beginning after December 31, 1999." 2000 Ky. Acts ch. 337, sec. 4. Legislative Research Commission Note (4/26/2000). The exclusions set forth in subsection (10)(p) and (q) and subsection (12)(i) to (k) of this statute took effect <br>April 26, 2000, and "retroactively apply to tax years beginning after December 31, <br>1998. 2000 Ky. Acts. ch. 533, secs. 4 and 5. Legislative Research Commission Note (4/28/95). The exclusion set forth in subsection (10)(i) of this statute applies "to income received after December 31, 1994," pursuant <br>to 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 11.
141.010 Definitions for chapter. As used in this chapter, unless the context requires otherwise: <br>(1) "Commissioner" means the commissioner of the Department of Revenue; <br>(2) "Department" means the Department of Revenue; <br>(3) "Internal Revenue Code" means the Internal Revenue Code in effect on December 31, 2006, exclusive of any amendments made subsequent to that date, other than <br>amendments that extend provisions in effect on December 31, 2006, that would <br>otherwise terminate, and as modified by KRS 141.0101, except that for property <br>placed in service after September 10, 2001, only the depreciation and expense <br>deductions allowed under Sections 168 and 179 of the Internal Revenue Code in <br>effect on December 31, 2001, exclusive of any amendments made subsequent to <br>that date, shall be allowed, and including the provisions of the Military Family Tax <br>Relief Act of 2003, Pub. L. No. 108-121, effective on the dates specified in that <br>Act; (4) "Dependent" means those persons defined as dependents in the Internal Revenue Code; (5) "Fiduciary" means "fiduciary" as defined in Section 7701(a)(6) of the Internal Revenue Code; (6) "Fiscal year" means "fiscal year" as defined in Section 7701(a)(24) of the Internal Revenue Code; (7) "Individual" means a natural person; <br>(8) "Modified gross income" means the greater of: (a) Adjusted gross income as defined in Section 62 of the Internal Revenue Code of 1986, including any subsequent amendments in effect on December 31 of <br>the taxable year, and adjusted as follows: <br>1. Include interest income derived from obligations of sister states and <br>political subdivisions thereof; and 2. Include lump-sum pension distributions taxed under the special <br>transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or (b) Adjusted gross income as defined in subsection (10) of this section and adjusted to include lump-sum pension distributions taxed under the special <br>transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); (9) "Gross income," in the case of taxpayers other than corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code; (10) "Adjusted gross income," in the case of taxpayers other than corporations, means gross income as defined in subsection (9) of this section minus the deductions <br>allowed individuals by Section 62 of the Internal Revenue Code and as modified by <br>KRS 141.0101 and adjusted as follows, except that deductions shall be limited to <br>amounts allocable to income subject to taxation under the provisions of this chapter, <br>and except that nothing in this chapter shall be construed to permit the same item to <br>be deducted more than once: (a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States and <br>Kentucky; (b) Exclude income from supplemental annuities provided by the Railroad Retirement Act of 1937 as amended and which are subject to federal income <br>tax by Public Law 89-699; (c) Include interest income derived from obligations of sister states and political subdivisions thereof; (d) Exclude employee pension contributions picked up as provided for in KRS 6.505, 16.545, 21.360, 61.560, 65.155, 67A.320, 67A.510, 78.610, and <br>161.540 upon a ruling by the Internal Revenue Service or the federal courts <br>that these contributions shall not be included as gross income until such time <br>as the contributions are distributed or made available to the employee; (e) Exclude Social Security and railroad retirement benefits subject to federal income tax; (f) Include, for taxable years ending before January 1, 1991, all overpayments of federal income tax refunded or credited for taxable years; (g) Deduct, for taxable years ending before January 1, 1991, federal income tax paid for taxable years ending before January 1, 1990; (h) Exclude any money received because of a settlement or judgment in a lawsuit brought against a manufacturer or distributor of "Agent Orange" for damages <br>resulting from exposure to Agent Orange by a member or veteran of the <br>Armed Forces of the United States or any dependent of such person who <br>served in Vietnam; (i) 1. For taxable years ending prior to December 31, 2005, exclude the <br>applicable amount of total distributions from pension plans, annuity <br>contracts, profit-sharing plans, retirement plans, or employee savings <br>plans. The "applicable amount" shall be: <br>a. Twenty-five percent (25%), but not more than six thousand two <br>hundred fifty dollars ($6,250), for taxable years beginning after <br>December 31, 1994, and before January 1, 1996; b. Fifty percent (50%), but not more than twelve thousand five <br>hundred dollars ($12,500), for taxable years beginning after <br>December 31, 1995, and before January 1, 1997; c. Seventy-five percent (75%), but not more than eighteen thousand <br>seven hundred fifty dollars ($18,750), for taxable years beginning <br>after December 31, 1996, and before January 1, 1998; and d. One hundred percent (100%), but not more than thirty-five <br>thousand dollars ($35,000), for taxable years beginning after <br>December 31, 1997. 2. For taxable years beginning after December 31, 2005, exclude up to <br>forty-one thousand one hundred ten dollars ($41,110) of total <br>distributions from pension plans, annuity contracts, profit-sharing plans, <br>retirement plans, or employee savings plans. 3. As used in this paragraph: <br>a. "Distributions" includes but is not limited to any lump-sum <br>distribution from pension or profit-sharing plans qualifying for the <br>income tax averaging provisions of Section 402 of the Internal <br>Revenue Code; any distribution from an individual retirement <br>account as defined in Section 408 of the Internal Revenue Code; <br>and any disability pension distribution; b. "Annuity contract" has the same meaning as set forth in Section <br>1035 of the Internal Revenue Code; and c. "Pension plans, profit-sharing plans, retirement plans, or employee <br>savings plans" means any trust or other entity created or organized <br>under a written retirement plan and forming part of a stock bonus, <br>pension, or profit-sharing plan of a public or private employer for <br>the exclusive benefit of employees or their beneficiaries and <br>includes plans qualified or unqualified under Section 401 of the <br>Internal Revenue Code and individual retirement accounts as <br>defined in Section 408 of the Internal Revenue Code; (j) 1. a. Exclude the portion of the distributive share of a shareholder's net <br>income from an S corporation subject to the franchise tax imposed <br>under KRS 136.505 or the capital stock tax imposed under KRS <br>136.300; and b. Exclude the portion of the distributive share of a shareholder's net <br>income from an S corporation related to a qualified subchapter S <br>subsidiary subject to the franchise tax imposed under KRS <br>136.505 or the capital stock tax imposed under KRS 136.300. 2. The shareholder's basis of stock held in a S corporation where the S <br>corporation or its qualified subchapter S subsidiary is subject to the <br>franchise tax imposed under KRS 136.505 or the capital stock tax <br>imposed under KRS 136.300 shall be the same as the basis for federal <br>income tax purposes; (k) Exclude for taxable years beginning after December 31, 1998, to the extent not already excluded from gross income, any amounts paid for health <br>insurance, or the value of any voucher or similar instrument used to provide <br>health insurance, which constitutes medical care coverage for the taxpayer, the <br>taxpayer's spouse, and dependents during the taxable year. Any amounts paid <br>by the taxpayer for health insurance that are excluded pursuant to this <br>paragraph shall not be allowed as a deduction in computing the taxpayer's net <br>income under subsection (11) of this section; (l) Exclude income received for services performed as a precinct worker for election training or for working at election booths in state, county, and local <br>primary, regular, or special elections; (m) Exclude any amount paid during the taxable year for insurance for long-term care as defined in KRS 304.14-600; (n) Exclude any capital gains income attributable to property taken by eminent domain; (o) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the <br>Master Settlement Agreement, signed on November 22, 1998; (p) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco <br>farmers and quota owners for anticipated financial losses caused by the <br>national tobacco settlement; (q) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a <br>reduction in the quantity of tobacco quota allotted; (r) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in; (s) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner; (t) Exclude all income from all sources for active duty and reserve members and officers of the Armed Forces of the United States or National Guard who are <br>killed in the line of duty, for the year during which the death occurred and the <br>year prior to the year during which the death occurred. For the purposes of this <br>paragraph, "all income from all sources" shall include all federal and state <br>death benefits payable to the estate or any beneficiaries; and (u) For taxable years beginning on or after January 1, 2010, exclude all military pay received by active duty members of the Armed Forces of the United <br>States, members of reserve components of the Armed Forces of the United <br>States, and members of the National Guard, including compensation for state <br>active duty as described in KRS 38.205; (11) "Net income," in the case of taxpayers other than corporations, means adjusted gross income as defined in subsection (10) of this section, minus: <br>(a) The standard deduction allowed by KRS 141.081, or, at the option of the taxpayer, the deduction allowed by KRS 141.0202; (b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families; (c) For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as <br>allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years <br>beginning before 2010; and (d) 1. All the deductions allowed individuals by Chapter 1 of the Internal <br>Revenue Code as modified by KRS 141.0101 except: <br>a. Any deduction allowed by the Internal Revenue Code for state or <br>foreign taxes measured by gross or net income, including state and <br>local general sales taxes allowed in lieu of state and local income <br>taxes under the provisions of Section 164(b)(5) of the Internal <br>Revenue Code; b. Any deduction allowed by the Internal Revenue Code for amounts <br>allowable under KRS 140.090(1)(h) in calculating the value of the <br>distributive shares of the estate of a decedent, unless there is filed <br>with the income return a statement that such deduction has not <br>been claimed under KRS 140.090(1)(h); c. The deduction for personal exemptions allowed under Section 151 <br>of the Internal Revenue Code and any other deductions in lieu <br>thereof; d. For taxable years beginning on or after January 1, 2010, the <br>domestic production activities deduction allowed under Section <br>199 of the Internal Revenue Code; e. Any deduction for amounts paid to any club, organization, or <br>establishment which has been determined by the courts or an <br>agency established by the General Assembly and charged with <br>enforcing the civil rights laws of the Commonwealth, not to afford <br>full and equal membership and full and equal enjoyment of its <br>goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, <br>national origin, or sex, except nothing shall be construed to deny a <br>deduction for amounts paid to any religious or denominational <br>club, group, or establishment or any organization operated solely <br>for charitable or educational purposes which restricts membership <br>to persons of the same religion or denomination in order to <br>promote the religious principles for which it is established and <br>maintained; and f. Any deduction directly or indirectly allocable to income which is <br>either exempt from taxation or otherwise not taxed under this <br>chapter; and 2. Nothing in this chapter shall be construed to permit the same item to be <br>deducted more than once; (12) "Gross income," in the case of corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code and as modified by KRS 141.0101 and <br>adjusted as follows: <br>(a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States; (b) Exclude all dividend income received after December 31, 1969; (c) Include interest income derived from obligations of sister states and political subdivisions thereof; (d) Exclude fifty percent (50%) of gross income derived from any disposal of coal covered by Section 631(c) of the Internal Revenue Code if the corporation <br>does not claim any deduction for percentage depletion, or for expenditures <br>attributable to the making and administering of the contract under which such <br>disposition occurs or to the preservation of the economic interests retained <br>under such contract; (e) Include in the gross income of lessors income tax payments made by lessees to lessors, under the provisions of Section 110 of the Internal Revenue Code, <br>and exclude such payments from the gross income of lessees; (f) Include the amount calculated under KRS 141.205; <br>(g) Ignore the provisions of Section 281 of the Internal Revenue Code in computing gross income; (h) Exclude income from "safe harbor leases" (Section 168(f)(8) of the Internal Revenue Code); (i) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the <br>Master Settlement Agreement, signed on November 22, 1998; (j) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco <br>farmers and quota owners for anticipated financial losses caused by the <br>national tobacco settlement; (k) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a <br>reduction in the quantity of tobacco quota allotted; (l) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in; (m) For taxable years beginning after December 31, 2004, and before January 1, 2007, exclude the distributive share income or loss received from a <br>corporation defined in subsection (24)(b) of this section whose income has <br>been subject to the tax imposed by KRS 141.040. The exclusion provided in <br>this paragraph shall also apply to a taxable year that begins prior to January 1, <br>2005, if the tax imposed by KRS 141.040 is paid on the distributive share <br>income by a corporation defined in subparagraphs 2. to 8. of subsection <br>(24)(b) of this section with a return filed for a period of less than twelve (12) <br>months that begins on or after January 1, 2005, and ends on or before <br>December 31, 2005. This paragraph shall not be used to delay payment of the <br>tax imposed by KRS 141.040; and (n) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner; (13) "Net income," in the case of corporations, means "gross income" as defined in subsection (12) of this section minus: (a) The deduction allowed by KRS 141.0202; <br>(b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families; (c) For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as <br>allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years <br>beginning before 2010; and (d) All the deductions from gross income allowed corporations by Chapter 1 of the Internal Revenue Code and as modified by KRS 141.0101, except: <br>1. Any deduction for a state tax which is computed, in whole or in part, by <br>reference to gross or net income and which is paid or accrued to any <br>state of the United States, the District of Columbia, the Commonwealth <br>of Puerto Rico, any territory or possession of the United States, or to any <br>foreign country or political subdivision thereof; 2. The deductions contained in Sections 243, 244, 245, and 247 of the <br>Internal Revenue Code; 3. The provisions of Section 281 of the Internal Revenue Code shall be <br>ignored in computing net income; 4. Any deduction directly or indirectly allocable to income which is either <br>exempt from taxation or otherwise not taxed under the provisions of this <br>chapter, and nothing in this chapter shall be construed to permit the <br>same item to be deducted more than once; 5. Exclude expenses related to "safe harbor leases" (Section 168(f)(8) of <br>the Internal Revenue Code); 6. Any deduction for amounts paid to any club, organization, or <br>establishment which has been determined by the courts or an agency <br>established by the General Assembly and charged with enforcing the <br>civil rights laws of the Commonwealth, not to afford full and equal <br>membership and full and equal enjoyment of its goods, services, <br>facilities, privileges, advantages, or accommodations to any person <br>because of race, color, religion, national origin, or sex, except nothing <br>shall be construed to deny a deduction for amounts paid to any religious <br>or denominational club, group, or establishment or any organization <br>operated solely for charitable or educational purposes which restricts <br>membership to persons of the same religion or denomination in order to <br>promote the religious principles for which it is established and <br>maintained; 7. Any deduction prohibited by KRS 141.205; 8. Any dividends-paid deduction of any captive real estate investment trust; <br>and 9. For taxable years beginning on or after January 1, 2010, the domestic <br>production activities deduction allowed under Section 199 of the <br>Internal Revenue Code; (14) (a) "Taxable net income," in the case of corporations that are taxable in this state, means "net income" as defined in subsection (13) of this section; (b) "Taxable net income," in the case of corporations that are taxable in this state and taxable in another state, means "net income" as defined in subsection (13) <br>of this section and as allocated and apportioned under KRS 141.120. A <br>corporation is taxable in another state if, in any state other than Kentucky, the <br>corporation is required to file a return for or pay a net income tax, franchise <br>tax measured by net income, franchise tax for the privilege of doing business, <br>or corporate stock tax; (c) "Taxable net income," in the case of homeowners' associations as defined in Section 528(c) of the Internal Revenue Code, means "taxable income" as <br>defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the <br>provisions of subsection (3) of this section, the Internal Revenue Code <br>sections referred to in this paragraph shall be those code sections in effect for <br>the applicable tax year; and (d) "Taxable net income," in the case of a corporation that meets the requirements established under Section 856 of the Internal Revenue Code to be a real estate <br>investment trust, means "real estate investment trust taxable income" as <br>defined in Section 857(b)(2) of the Internal Revenue Code, except that a <br>captive real estate investment trust shall not be allowed any deduction for <br>dividends paid; (15) "Person" means "person" as defined in Section 7701(a)(1) of the Internal Revenue Code; (16) "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 <br>made for a fractional part of a year under the provisions of this chapter or under <br>regulations prescribed by the commissioner, "taxable year" means the period for <br>which the return is made; (17) "Resident" means an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in <br>the aggregate more than one hundred eighty-three (183) days of the taxable year in <br>this state; (18) "Nonresident" means any individual not a resident of this state; <br>(19) "Employer" means "employer" as defined in Section 3401(d) of the Internal Revenue Code; (20) "Employee" means "employee" as defined in Section 3401(c) of the Internal Revenue Code; (21) "Number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under KRS <br>141.325, except that if no such certificate is in effect, the number of withholding <br>exemptions claimed shall be considered to be zero; (22) "Wages" means "wages" as defined in Section 3401(a) of the Internal Revenue Code and includes other income subject to withholding as provided in Section <br>3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code; (23) "Payroll period" means "payroll period" as defined in Section 3401(b) of the Internal Revenue Code; (24) (a) For taxable years beginning before January 1, 2005, and after December 31, 2006, "corporation" means "corporation" as defined in Section 7701(a)(3) of <br>the Internal Revenue Code; and (b) For taxable years beginning after December 31, 2004, and before January 1, 2007, "corporations" means: <br>1. "Corporations" as defined in Section 7701(a)(3) of the Internal Revenue <br>Code; 2. S corporations as defined in Section 1361(a) of the Internal Revenue <br>Code; 3. A foreign limited liability company as defined in KRS 275.015; 4. A limited liability company as defined in KRS 275.015; 5. A professional limited liability company as defined in KRS 275.015; 6. A foreign limited partnership as defined in KRS 362.2-102(9); 7. A limited partnership as defined in KRS 362.2-102(14); 8. A limited liability partnership as defined in KRS 362.155(7) or in 362.1-<br>101(7) or (8); 9. A real estate investment trust as defined in Section 856 of the Internal <br>Revenue Code; 10. A regulated investment company as defined in Section 851 of the Internal Revenue Code; 11. A real estate mortgage investment conduit as defined in Section 860D of the Internal Revenue Code; 12. A financial asset securitization investment trust as defined in Section 860L of the Internal Revenue Code; and 13. Other similar entities created with limited liability for their partners, members, or shareholders. For purposes of this paragraph, "corporation" shall not include any publicly <br>traded partnership as defined by Section 7704(b) of the Internal Revenue Code <br>that is treated as a partnership for federal tax purposes under Section 7704(c) <br>of the Internal Revenue Code or its publicly traded partnership affiliates. As <br>used in this paragraph, "publicly traded partnership affiliates" shall include <br>any limited liability company or limited partnership for which at least eighty <br>percent (80%) of the limited liability company member interests or limited <br>partner interests are owned directly or indirectly by the publicly traded <br>partnership; (25) "Doing business in this state" includes but is not limited to: (a) Being organized under the laws of this state; <br>(b) Having a commercial domicile in this state; <br>(c) Owning or leasing property in this state; <br>(d) Having one (1) or more individuals performing services in this state; <br>(e) Maintaining an interest in a pass-through entity doing business in this state; <br>(f) Deriving income from or attributable to sources within this state, including deriving income directly or indirectly from a trust doing business in this state, <br>or deriving income directly or indirectly from a single-member limited <br>liability company that is doing business in this state and is disregarded as an <br>entity separate from its single member for federal income tax purposes; or (g) Directing activities at Kentucky customers for the purpose of selling them goods or services. Nothing in this subsection shall be interpreted in a manner that goes beyond the <br>limitations imposed and protections provided by the United States Constitution or <br>Pub. L. No. 86-272; (26) "Pass-through entity" means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity <br>recognized by the laws of this state that is not taxed for federal purposes at the <br>entity level, but instead passes to each partner, member, shareholder, or owner their <br>proportionate share of income, deductions, gains, losses, credits, and any other <br>similar attributes; (27) "S corporation" means "S corporation" as defined in Section 1361(a) of the Internal Revenue Code; (28) "Limited liability pass-through entity" means any pass-through entity that affords any of its partners, members, shareholders, or owners, through function of the laws <br>of this state or laws recognized by this state, protection from general liability for <br>actions of the entity; and (29) "Captive real estate investment trust" means a real estate investment trust as defined in Section 856 of the Internal Revenue Code that meets the following requirements: <br>(a) 1. The shares or other ownership interests of the real estate investment trust <br>are not regularly traded on an established securities market; or 2. The real estate investment trust does not have enough shareholders or <br>owners to be required to register with the Securities and Exchange <br>Commission; and (b) 1. The maximum amount of stock or other ownership interest that is owned <br>or constructively owned by a corporation equals or exceeds: <br>a. Twenty-five percent (25%), if the corporation does not occupy <br>property owned, constructively owned, or controlled by the real <br>estate investment trust; or b. Ten percent (10%), if the corporation occupies property owned, <br>constructively owned, or controlled by the real estate investment <br>trust. The total ownership interest of a corporation shall be determined by <br>aggregating all interests owned or constructively owned by a <br>corporation; 2. For the purposes of this paragraph: <br>a. "Corporation" means a corporation taxable under KRS 141.040, <br>and includes an affiliated group as defined in KRS 141.200, that is <br>required to file a consolidated return pursuant to the provisions of <br>KRS 141.200; and b. "Owned or constructively owned" means owning shares or having <br>an ownership interest in the real estate investment trust, or owning <br>an interest in an entity that owns shares or has an ownership <br>interest in the real estate investment trust. Constructive ownership <br>shall be determined by looking across multiple layers of a <br>multilayer pass-through structure; and (c) The real estate investment trust is not owned by another real estate investment trust. Effective: June 4, 2010 <br>History: Amended 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 3, effective June 4, 2010. -- Repealed and reenacted 2010 Ky. Acts ch. 51, sec. 42, effective July 15, 2010. -- <br>Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 105, effective June 26, 2009. -- <br>Amended 2007 Ky. Acts ch. 52, sec. 2, effective June 26, 2007; and ch. 137, sec. 42, <br>effective June 26, 2007. -- Amended 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 1, <br>effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 149, sec. 202, effective July <br>12, 2006; ch. 251, sec. 13, effective July 12, 2006; and ch. 252, Pt. XXVIII, sec. 16, <br>effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 471, effective June <br>20, 2005; ch. 168, sec. 3, effective March 18, 2005; and ch. 173, Part XVIII, sec. 1, <br>effective March 20, 2005. -- Amended 2004 Ky. Acts ch. 135, sec. 1, effective July <br>13, 2004. -- Amended 2002 Ky. Acts ch. 206, sec. 1, effective July 15, 2002; and <br>ch. 367, sec. 1, effective July 15, 2002. -- Amended 2001 Ky. Acts ch. 67, sec. 1, <br>effective March 15, 2001. -- Amended 2000 Ky. Acts ch. 337, sec. 1, effective July <br>14, 2000; and ch. 533, sec. 1, effective April 26, 2000. -- Amended 1998 Ky. Acts <br>ch. 1, sec. 1, effective February 6, 1998; ch. 365, sec. 1, effective July 15, 1998; <br>ch. 402, sec. 3, effective April 7, 1998; ch. 496, sec. 63, effective April 10, 1998; <br>ch. 509, sec. 8, effective July 15, 1998; ch. 550, sec. 1, effective July 15, 1998; and <br>ch. 586, sec. 8, effective July 15, 1998. -- Amended 1996 Ky. Acts ch. 69, sec. 1, <br>effective July 15, 1996. -- Amended 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 1, <br>effective April 28, 1995. -- Amended 1994 Ky. Acts ch. 45, sec. 1, effective July 15, <br>1994. -- Amended 1992 Ky. Acts ch. 165, sec. 1, effective July 14, 1992. -- Amended <br>1990 Ky. Acts ch. 163, sec. 8, effective July 13, 1990; ch. 242, sec. 2, effective July <br>13, 1990; ch. 303, sec. 1, effective July 1, 1990; and ch. 476, Pt. VII D, sec. 630, <br>effective April 11, 1990. -- Amended 1988 Ky. Acts ch. 174, sec. 1, effective July <br>15, 1988. -- Amended 1986 Ky. Acts ch. 459, sec. 3, effective July 15, 1986. -- <br>Amended 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. V, sec. 14, effective July 29, <br>1985. -- Amended 1984 Ky. Acts ch. 378, sec. 1, effective July 1, 1984. -- Amended <br>1982 Ky. Acts ch. 105, sec. 1, effective March 24, 1982; and ch. 166, sec. 15, <br>effective July 15, 1982. -- Amended 1980 Ky. Acts ch. 176, sec. 1, effective July 15, <br>1980. -- Amended 1978 Ky. Acts ch. 233, sec. 10, effective June 17, 1978. -- <br>Amended 1976 Ky. Acts ch. 155, sec. 7. -- Amended 1974 Ky. Acts ch. 163, sec. 2. -<br>- Amended 1972 Ky. Acts ch. 62, Pt. III, sec. 1. -- Amended 1970 Ky. Acts ch. 216, sec. 3. -- Amended 1968 Ky. Acts ch. 40, Part II, sec. 1. -- Amended 1966 Ky. Acts <br>ch. 176, Part I, sec. 1. -- Amended 1962 Ky. Acts ch. 124, sec. 1. -- Amended 1960 <br>Ky. Acts ch. 5, Art. III, sec. 1. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, <br>sec. 1. -- Amended 1954 Ky. Acts ch. 79, sec. 1. -- Amended 1952 Ky. Acts ch. 194, <br>secs. 1 and 2. -- Amended 1948 Ky. Acts ch. 93, sec. 1. -- Recodified 1942 Ky. Acts <br>ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-1, 4281b-2, <br>4281b-5. Legislative Research Commission Note (6/26/2007). 2007 Ky. Acts ch. 52, sec. 3, provides that the amendments to KRS 141.010 in 2007 Ky. Acts ch. 52, sec. 2, "shall <br>apply to tax years beginning on or after January 1, 2007." Legislative Research Commission Note (6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 73, provides that "unless a provision of this Act specifically applies to an <br>earlier tax year, the provisions of this Act shall apply to taxable years beginning on or <br>after January 1, 2007." Legislative Research Commission Note (6/28/2006). Under the authority of KRS 7.136, a manifest clerical or typographical error has been corrected. In the first <br>sentence of 2006 (1st Extra. Sess.) Ky. Acts ch 2, sec. 11, the citation to KRS <br>141.010(24)(b) to (h) has been changed to KRS 141.010(24)(b)2. to 8. to conform to <br>other amendments citing this statute elsewhere in the Act. Legislative Research Commission Note (4/25/2006). 2006 Ky. Acts ch. 252, Pt. XXVIII, sec. 18 provides that "The amendment in Section 16 of this Part is <br>applicable for tax years beginning after December 31, 2001." Legislative Research Commission Note (3/20/2005). 2005 Ky. Acts ch. 173, Part XVIII, sec. 2, provides that changes made to subsection (11)(a) of this section are <br>effective for taxable years beginning after December 1, 2004. Legislative Research Commission Note (7/13/2004). The amendments made to subsections (10)(r) and (12)(l) of this statute in 2004 Ky. Acts ch. 135, sec. 1, "shall <br>apply for taxable years beginning after December 31, 2003." 2004 Ky. Acts ch. 135, <br>sec. 4. Legislative Research Commission Note (7/15/2002). The change of dates in subsection (3) of this statute from December 31, 1999, to December 31, 2001, applies to <br>"taxable years beginning after December 31, 2001." 2002 Ky. Acts. ch. 367, sec. 4. Legislative Research Commission Note (7/15/2002). The amendments made to subsections (10)(k), (11), and (13) of this statute in 2002 Ky. Acts ch. 206, sec. 1, <br>"shall apply for taxable years beginning after December 31, 2001." 2002 Ky. Acts <br>ch. 206, sec. 2. Legislative Research Commission Note (7/14/2000). The change of dates in subsection (3) of this statute from December 1, 1997, to December 31, 1999, applies to "taxable <br>years beginning after December 31, 1999." 2000 Ky. Acts ch. 337, sec. 4. Legislative Research Commission Note (4/26/2000). The exclusions set forth in subsection (10)(p) and (q) and subsection (12)(i) to (k) of this statute took effect <br>April 26, 2000, and "retroactively apply to tax years beginning after December 31, <br>1998. 2000 Ky. Acts. ch. 533, secs. 4 and 5. Legislative Research Commission Note (4/28/95). The exclusion set forth in subsection (10)(i) of this statute applies "to income received after December 31, 1994," pursuant <br>to 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 11.
141.010 Definitions for chapter. As used in this chapter, unless the context requires otherwise: <br>(1) "Commissioner" means the commissioner of the Department of Revenue; <br>(2) "Department" means the Department of Revenue; <br>(3) "Internal Revenue Code" means the Internal Revenue Code in effect on December 31, 2006, exclusive of any amendments made subsequent to that date, other than <br>amendments that extend provisions in effect on December 31, 2006, that would <br>otherwise terminate, and as modified by KRS 141.0101, except that for property <br>placed in service after September 10, 2001, only the depreciation and expense <br>deductions allowed under Sections 168 and 179 of the Internal Revenue Code in <br>effect on December 31, 2001, exclusive of any amendments made subsequent to <br>that date, shall be allowed, and including the provisions of the Military Family Tax <br>Relief Act of 2003, Pub. L. No. 108-121, effective on the dates specified in that <br>Act; (4) "Dependent" means those persons defined as dependents in the Internal Revenue Code; (5) "Fiduciary" means "fiduciary" as defined in Section 7701(a)(6) of the Internal Revenue Code; (6) "Fiscal year" means "fiscal year" as defined in Section 7701(a)(24) of the Internal Revenue Code; (7) "Individual" means a natural person; <br>(8) "Modified gross income" means the greater of: (a) Adjusted gross income as defined in Section 62 of the Internal Revenue Code of 1986, including any subsequent amendments in effect on December 31 of <br>the taxable year, and adjusted as follows: <br>1. Include interest income derived from obligations of sister states and <br>political subdivisions thereof; and 2. Include lump-sum pension distributions taxed under the special <br>transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or (b) Adjusted gross income as defined in subsection (10) of this section and adjusted to include lump-sum pension distributions taxed under the special <br>transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); (9) "Gross income," in the case of taxpayers other than corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code; (10) "Adjusted gross income," in the case of taxpayers other than corporations, means gross income as defined in subsection (9) of this section minus the deductions <br>allowed individuals by Section 62 of the Internal Revenue Code and as modified by <br>KRS 141.0101 and adjusted as follows, except that deductions shall be limited to <br>amounts allocable to income subject to taxation under the provisions of this chapter, <br>and except that nothing in this chapter shall be construed to permit the same item to <br>be deducted more than once: (a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States and <br>Kentucky; (b) Exclude income from supplemental annuities provided by the Railroad Retirement Act of 1937 as amended and which are subject to federal income <br>tax by Public Law 89-699; (c) Include interest income derived from obligations of sister states and political subdivisions thereof; (d) Exclude employee pension contributions picked up as provided for in KRS 6.505, 16.545, 21.360, 61.560, 65.155, 67A.320, 67A.510, 78.610, and <br>161.540 upon a ruling by the Internal Revenue Service or the federal courts <br>that these contributions shall not be included as gross income until such time <br>as the contributions are distributed or made available to the employee; (e) Exclude Social Security and railroad retirement benefits subject to federal income tax; (f) Include, for taxable years ending before January 1, 1991, all overpayments of federal income tax refunded or credited for taxable years; (g) Deduct, for taxable years ending before January 1, 1991, federal income tax paid for taxable years ending before January 1, 1990; (h) Exclude any money received because of a settlement or judgment in a lawsuit brought against a manufacturer or distributor of "Agent Orange" for damages <br>resulting from exposure to Agent Orange by a member or veteran of the <br>Armed Forces of the United States or any dependent of such person who <br>served in Vietnam; (i) 1. For taxable years ending prior to December 31, 2005, exclude the <br>applicable amount of total distributions from pension plans, annuity <br>contracts, profit-sharing plans, retirement plans, or employee savings <br>plans. The "applicable amount" shall be: <br>a. Twenty-five percent (25%), but not more than six thousand two <br>hundred fifty dollars ($6,250), for taxable years beginning after <br>December 31, 1994, and before January 1, 1996; b. Fifty percent (50%), but not more than twelve thousand five <br>hundred dollars ($12,500), for taxable years beginning after <br>December 31, 1995, and before January 1, 1997; c. Seventy-five percent (75%), but not more than eighteen thousand <br>seven hundred fifty dollars ($18,750), for taxable years beginning <br>after December 31, 1996, and before January 1, 1998; and d. One hundred percent (100%), but not more than thirty-five <br>thousand dollars ($35,000), for taxable years beginning after <br>December 31, 1997. 2. For taxable years beginning after December 31, 2005, exclude up to <br>forty-one thousand one hundred ten dollars ($41,110) of total <br>distributions from pension plans, annuity contracts, profit-sharing plans, <br>retirement plans, or employee savings plans. 3. As used in this paragraph: <br>a. "Distributions" includes but is not limited to any lump-sum <br>distribution from pension or profit-sharing plans qualifying for the <br>income tax averaging provisions of Section 402 of the Internal <br>Revenue Code; any distribution from an individual retirement <br>account as defined in Section 408 of the Internal Revenue Code; <br>and any disability pension distribution; b. "Annuity contract" has the same meaning as set forth in Section <br>1035 of the Internal Revenue Code; and c. "Pension plans, profit-sharing plans, retirement plans, or employee <br>savings plans" means any trust or other entity created or organized <br>under a written retirement plan and forming part of a stock bonus, <br>pension, or profit-sharing plan of a public or private employer for <br>the exclusive benefit of employees or their beneficiaries and <br>includes plans qualified or unqualified under Section 401 of the <br>Internal Revenue Code and individual retirement accounts as <br>defined in Section 408 of the Internal Revenue Code; (j) 1. a. Exclude the portion of the distributive share of a shareholder's net <br>income from an S corporation subject to the franchise tax imposed <br>under KRS 136.505 or the capital stock tax imposed under KRS <br>136.300; and b. Exclude the portion of the distributive share of a shareholder's net <br>income from an S corporation related to a qualified subchapter S <br>subsidiary subject to the franchise tax imposed under KRS <br>136.505 or the capital stock tax imposed under KRS 136.300. 2. The shareholder's basis of stock held in a S corporation where the S <br>corporation or its qualified subchapter S subsidiary is subject to the <br>franchise tax imposed under KRS 136.505 or the capital stock tax <br>imposed under KRS 136.300 shall be the same as the basis for federal <br>income tax purposes; (k) Exclude for taxable years beginning after December 31, 1998, to the extent not already excluded from gross income, any amounts paid for health <br>insurance, or the value of any voucher or similar instrument used to provide <br>health insurance, which constitutes medical care coverage for the taxpayer, the <br>taxpayer's spouse, and dependents during the taxable year. Any amounts paid <br>by the taxpayer for health insurance that are excluded pursuant to this <br>paragraph shall not be allowed as a deduction in computing the taxpayer's net <br>income under subsection (11) of this section; (l) Exclude income received for services performed as a precinct worker for election training or for working at election booths in state, county, and local <br>primary, regular, or special elections; (m) Exclude any amount paid during the taxable year for insurance for long-term care as defined in KRS 304.14-600; (n) Exclude any capital gains income attributable to property taken by eminent domain; (o) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the <br>Master Settlement Agreement, signed on November 22, 1998; (p) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco <br>farmers and quota owners for anticipated financial losses caused by the <br>national tobacco settlement; (q) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a <br>reduction in the quantity of tobacco quota allotted; (r) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in; (s) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner; (t) Exclude all income from all sources for active duty and reserve members and officers of the Armed Forces of the United States or National Guard who are <br>killed in the line of duty, for the year during which the death occurred and the <br>year prior to the year during which the death occurred. For the purposes of this <br>paragraph, "all income from all sources" shall include all federal and state <br>death benefits payable to the estate or any beneficiaries; and (u) For taxable years beginning on or after January 1, 2010, exclude all military pay received by active duty members of the Armed Forces of the United <br>States, members of reserve components of the Armed Forces of the United <br>States, and members of the National Guard, including compensation for state <br>active duty as described in KRS 38.205; (11) "Net income," in the case of taxpayers other than corporations, means adjusted gross income as defined in subsection (10) of this section, minus: <br>(a) The standard deduction allowed by KRS 141.081, or, at the option of the taxpayer, the deduction allowed by KRS 141.0202; (b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families; (c) For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as <br>allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years <br>beginning before 2010; and (d) 1. All the deductions allowed individuals by Chapter 1 of the Internal <br>Revenue Code as modified by KRS 141.0101 except: <br>a. Any deduction allowed by the Internal Revenue Code for state or <br>foreign taxes measured by gross or net income, including state and <br>local general sales taxes allowed in lieu of state and local income <br>taxes under the provisions of Section 164(b)(5) of the Internal <br>Revenue Code; b. Any deduction allowed by the Internal Revenue Code for amounts <br>allowable under KRS 140.090(1)(h) in calculating the value of the <br>distributive shares of the estate of a decedent, unless there is filed <br>with the income return a statement that such deduction has not <br>been claimed under KRS 140.090(1)(h); c. The deduction for personal exemptions allowed under Section 151 <br>of the Internal Revenue Code and any other deductions in lieu <br>thereof; d. For taxable years beginning on or after January 1, 2010, the <br>domestic production activities deduction allowed under Section <br>199 of the Internal Revenue Code; e. Any deduction for amounts paid to any club, organization, or <br>establishment which has been determined by the courts or an <br>agency established by the General Assembly and charged with <br>enforcing the civil rights laws of the Commonwealth, not to afford <br>full and equal membership and full and equal enjoyment of its <br>goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, <br>national origin, or sex, except nothing shall be construed to deny a <br>deduction for amounts paid to any religious or denominational <br>club, group, or establishment or any organization operated solely <br>for charitable or educational purposes which restricts membership <br>to persons of the same religion or denomination in order to <br>promote the religious principles for which it is established and <br>maintained; and f. Any deduction directly or indirectly allocable to income which is <br>either exempt from taxation or otherwise not taxed under this <br>chapter; and 2. Nothing in this chapter shall be construed to permit the same item to be <br>deducted more than once; (12) "Gross income," in the case of corporations, means "gross income" as defined in Section 61 of the Internal Revenue Code and as modified by KRS 141.0101 and <br>adjusted as follows: <br>(a) Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States; (b) Exclude all dividend income received after December 31, 1969; (c) Include interest income derived from obligations of sister states and political subdivisions thereof; (d) Exclude fifty percent (50%) of gross income derived from any disposal of coal covered by Section 631(c) of the Internal Revenue Code if the corporation <br>does not claim any deduction for percentage depletion, or for expenditures <br>attributable to the making and administering of the contract under which such <br>disposition occurs or to the preservation of the economic interests retained <br>under such contract; (e) Include in the gross income of lessors income tax payments made by lessees to lessors, under the provisions of Section 110 of the Internal Revenue Code, <br>and exclude such payments from the gross income of lessees; (f) Include the amount calculated under KRS 141.205; <br>(g) Ignore the provisions of Section 281 of the Internal Revenue Code in computing gross income; (h) Exclude income from "safe harbor leases" (Section 168(f)(8) of the Internal Revenue Code); (i) Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the <br>Master Settlement Agreement, signed on November 22, 1998; (j) Exclude any amount received from the secondary settlement fund, referred to as "Phase II," established by tobacco companies to compensate tobacco <br>farmers and quota owners for anticipated financial losses caused by the <br>national tobacco settlement; (k) Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a <br>reduction in the quantity of tobacco quota allotted; (l) Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in; (m) For taxable years beginning after December 31, 2004, and before January 1, 2007, exclude the distributive share income or loss received from a <br>corporation defined in subsection (24)(b) of this section whose income has <br>been subject to the tax imposed by KRS 141.040. The exclusion provided in <br>this paragraph shall also apply to a taxable year that begins prior to January 1, <br>2005, if the tax imposed by KRS 141.040 is paid on the distributive share <br>income by a corporation defined in subparagraphs 2. to 8. of subsection <br>(24)(b) of this section with a return filed for a period of less than twelve (12) <br>months that begins on or after January 1, 2005, and ends on or before <br>December 31, 2005. This paragraph shall not be used to delay payment of the <br>tax imposed by KRS 141.040; and (n) Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner; (13) "Net income," in the case of corporations, means "gross income" as defined in subsection (12) of this section minus: (a) The deduction allowed by KRS 141.0202; <br>(b) Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families; (c) For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as <br>allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years <br>beginning before 2010; and (d) All the deductions from gross income allowed corporations by Chapter 1 of the Internal Revenue Code and as modified by KRS 141.0101, except: <br>1. Any deduction for a state tax which is computed, in whole or in part, by <br>reference to gross or net income and which is paid or accrued to any <br>state of the United States, the District of Columbia, the Commonwealth <br>of Puerto Rico, any territory or possession of the United States, or to any <br>foreign country or political subdivision thereof; 2. The deductions contained in Sections 243, 244, 245, and 247 of the <br>Internal Revenue Code; 3. The provisions of Section 281 of the Internal Revenue Code shall be <br>ignored in computing net income; 4. Any deduction directly or indirectly allocable to income which is either <br>exempt from taxation or otherwise not taxed under the provisions of this <br>chapter, and nothing in this chapter shall be construed to permit the <br>same item to be deducted more than once; 5. Exclude expenses related to "safe harbor leases" (Section 168(f)(8) of <br>the Internal Revenue Code); 6. Any deduction for amounts paid to any club, organization, or <br>establishment which has been determined by the courts or an agency <br>established by the General Assembly and charged with enforcing the <br>civil rights laws of the Commonwealth, not to afford full and equal <br>membership and full and equal enjoyment of its goods, services, <br>facilities, privileges, advantages, or accommodations to any person <br>because of race, color, religion, national origin, or sex, except nothing <br>shall be construed to deny a deduction for amounts paid to any religious <br>or denominational club, group, or establishment or any organization <br>operated solely for charitable or educational purposes which restricts <br>membership to persons of the same religion or denomination in order to <br>promote the religious principles for which it is established and <br>maintained; 7. Any deduction prohibited by KRS 141.205; 8. Any dividends-paid deduction of any captive real estate investment trust; <br>and 9. For taxable years beginning on or after January 1, 2010, the domestic <br>production activities deduction allowed under Section 199 of the <br>Internal Revenue Code; (14) (a) "Taxable net income," in the case of corporations that are taxable in this state, means "net income" as defined in subsection (13) of this section; (b) "Taxable net income," in the case of corporations that are taxable in this state and taxable in another state, means "net income" as defined in subsection (13) <br>of this section and as allocated and apportioned under KRS 141.120. A <br>corporation is taxable in another state if, in any state other than Kentucky, the <br>corporation is required to file a return for or pay a net income tax, franchise <br>tax measured by net income, franchise tax for the privilege of doing business, <br>or corporate stock tax; (c) "Taxable net income," in the case of homeowners' associations as defined in Section 528(c) of the Internal Revenue Code, means "taxable income" as <br>defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the <br>provisions of subsection (3) of this section, the Internal Revenue Code <br>sections referred to in this paragraph shall be those code sections in effect for <br>the applicable tax year; and (d) "Taxable net income," in the case of a corporation that meets the requirements established under Section 856 of the Internal Revenue Code to be a real estate <br>investment trust, means "real estate investment trust taxable income" as <br>defined in Section 857(b)(2) of the Internal Revenue Code, except that a <br>captive real estate investment trust shall not be allowed any deduction for <br>dividends paid; (15) "Person" means "person" as defined in Section 7701(a)(1) of the Internal Revenue Code; (16) "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 <br>made for a fractional part of a year under the provisions of this chapter or under <br>regulations prescribed by the commissioner, "taxable year" means the period for <br>which the return is made; (17) "Resident" means an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in <br>the aggregate more than one hundred eighty-three (183) days of the taxable year in <br>this state; (18) "Nonresident" means any individual not a resident of this state; <br>(19) "Employer" means "employer" as defined in Section 3401(d) of the Internal Revenue Code; (20) "Employee" means "employee" as defined in Section 3401(c) of the Internal Revenue Code; (21) "Number of withholding exemptions claimed" means the number of withholding exemptions claimed in a withholding exemption certificate in effect under KRS <br>141.325, except that if no such certificate is in effect, the number of withholding <br>exemptions claimed shall be considered to be zero; (22) "Wages" means "wages" as defined in Section 3401(a) of the Internal Revenue Code and includes other income subject to withholding as provided in Section <br>3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code; (23) "Payroll period" means "payroll period" as defined in Section 3401(b) of the Internal Revenue Code; (24) (a) For taxable years beginning before January 1, 2005, and after December 31, 2006, "corporation" means "corporation" as defined in Section 7701(a)(3) of <br>the Internal Revenue Code; and (b) For taxable years beginning after December 31, 2004, and before January 1, 2007, "corporations" means: <br>1. "Corporations" as defined in Section 7701(a)(3) of the Internal Revenue <br>Code; 2. S corporations as defined in Section 1361(a) of the Internal Revenue <br>Code; 3. A foreign limited liability company as defined in KRS 275.015; 4. A limited liability company as defined in KRS 275.015; 5. A professional limited liability company as defined in KRS 275.015; 6. A foreign limited partnership as defined in KRS 362.2-102(9); 7. A limited partnership as defined in KRS 362.2-102(14); 8. A limited liability partnership as defined in KRS 362.155(7) or in 362.1-<br>101(7) or (8); 9. A real estate investment trust as defined in Section 856 of the Internal <br>Revenue Code; 10. A regulated investment company as defined in Section 851 of the Internal Revenue Code; 11. A real estate mortgage investment conduit as defined in Section 860D of the Internal Revenue Code; 12. A financial asset securitization investment trust as defined in Section 860L of the Internal Revenue Code; and 13. Other similar entities created with limited liability for their partners, members, or shareholders. For purposes of this paragraph, "corporation" shall not include any publicly <br>traded partnership as defined by Section 7704(b) of the Internal Revenue Code <br>that is treated as a partnership for federal tax purposes under Section 7704(c) <br>of the Internal Revenue Code or its publicly traded partnership affiliates. As <br>used in this paragraph, "publicly traded partnership affiliates" shall include <br>any limited liability company or limited partnership for which at least eighty <br>percent (80%) of the limited liability company member interests or limited <br>partner interests are owned directly or indirectly by the publicly traded <br>partnership; (25) "Doing business in this state" includes but is not limited to: (a) Being organized under the laws of this state; <br>(b) Having a commercial domicile in this state; <br>(c) Owning or leasing property in this state; <br>(d) Having one (1) or more individuals performing services in this state; <br>(e) Maintaining an interest in a pass-through entity doing business in this state; <br>(f) Deriving income from or attributable to sources within this state, including deriving income directly or indirectly from a trust doing business in this state, <br>or deriving income directly or indirectly from a single-member limited <br>liability company that is doing business in this state and is disregarded as an <br>entity separate from its single member for federal income tax purposes; or (g) Directing activities at Kentucky customers for the purpose of selling them goods or services. Nothing in this subsection shall be interpreted in a manner that goes beyond the <br>limitations imposed and protections provided by the United States Constitution or <br>Pub. L. No. 86-272; (26) "Pass-through entity" means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity <br>recognized by the laws of this state that is not taxed for federal purposes at the <br>entity level, but instead passes to each partner, member, shareholder, or owner their <br>proportionate share of income, deductions, gains, losses, credits, and any other <br>similar attributes; (27) "S corporation" means "S corporation" as defined in Section 1361(a) of the Internal Revenue Code; (28) "Limited liability pass-through entity" means any pass-through entity that affords any of its partners, members, shareholders, or owners, through function of the laws <br>of this state or laws recognized by this state, protection from general liability for <br>actions of the entity; and (29) "Captive real estate investment trust" means a real estate investment trust as defined in Section 856 of the Internal Revenue Code that meets the following requirements: <br>(a) 1. The shares or other ownership interests of the real estate investment trust <br>are not regularly traded on an established securities market; or 2. The real estate investment trust does not have enough shareholders or <br>owners to be required to register with the Securities and Exchange <br>Commission; and (b) 1. The maximum amount of stock or other ownership interest that is owned <br>or constructively owned by a corporation equals or exceeds: <br>a. Twenty-five percent (25%), if the corporation does not occupy <br>property owned, constructively owned, or controlled by the real <br>estate investment trust; or b. Ten percent (10%), if the corporation occupies property owned, <br>constructively owned, or controlled by the real estate investment <br>trust. The total ownership interest of a corporation shall be determined by <br>aggregating all interests owned or constructively owned by a <br>corporation; 2. For the purposes of this paragraph: <br>a. "Corporation" means a corporation taxable under KRS 141.040, <br>and includes an affiliated group as defined in KRS 141.200, that is <br>required to file a consolidated return pursuant to the provisions of <br>KRS 141.200; and b. "Owned or constructively owned" means owning shares or having <br>an ownership interest in the real estate investment trust, or owning <br>an interest in an entity that owns shares or has an ownership <br>interest in the real estate investment trust. Constructive ownership <br>shall be determined by looking across multiple layers of a <br>multilayer pass-through structure; and (c) The real estate investment trust is not owned by another real estate investment trust. Effective: June 4, 2010 <br>History: Amended 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 3, effective June 4, 2010. -- Repealed and reenacted 2010 Ky. Acts ch. 51, sec. 42, effective July 15, 2010. -- <br>Amended 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 105, effective June 26, 2009. -- <br>Amended 2007 Ky. Acts ch. 52, sec. 2, effective June 26, 2007; and ch. 137, sec. 42, <br>effective June 26, 2007. -- Amended 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 1, <br>effective June 28, 2006. -- Amended 2006 Ky. Acts ch. 149, sec. 202, effective July <br>12, 2006; ch. 251, sec. 13, effective July 12, 2006; and ch. 252, Pt. XXVIII, sec. 16, <br>effective April 25, 2006. -- Amended 2005 Ky. Acts ch. 85, sec. 471, effective June <br>20, 2005; ch. 168, sec. 3, effective March 18, 2005; and ch. 173, Part XVIII, sec. 1, <br>effective March 20, 2005. -- Amended 2004 Ky. Acts ch. 135, sec. 1, effective July <br>13, 2004. -- Amended 2002 Ky. Acts ch. 206, sec. 1, effective July 15, 2002; and <br>ch. 367, sec. 1, effective July 15, 2002. -- Amended 2001 Ky. Acts ch. 67, sec. 1, <br>effective March 15, 2001. -- Amended 2000 Ky. Acts ch. 337, sec. 1, effective July <br>14, 2000; and ch. 533, sec. 1, effective April 26, 2000. -- Amended 1998 Ky. Acts <br>ch. 1, sec. 1, effective February 6, 1998; ch. 365, sec. 1, effective July 15, 1998; <br>ch. 402, sec. 3, effective April 7, 1998; ch. 496, sec. 63, effective April 10, 1998; <br>ch. 509, sec. 8, effective July 15, 1998; ch. 550, sec. 1, effective July 15, 1998; and <br>ch. 586, sec. 8, effective July 15, 1998. -- Amended 1996 Ky. Acts ch. 69, sec. 1, <br>effective July 15, 1996. -- Amended 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 1, <br>effective April 28, 1995. -- Amended 1994 Ky. Acts ch. 45, sec. 1, effective July 15, <br>1994. -- Amended 1992 Ky. Acts ch. 165, sec. 1, effective July 14, 1992. -- Amended <br>1990 Ky. Acts ch. 163, sec. 8, effective July 13, 1990; ch. 242, sec. 2, effective July <br>13, 1990; ch. 303, sec. 1, effective July 1, 1990; and ch. 476, Pt. VII D, sec. 630, <br>effective April 11, 1990. -- Amended 1988 Ky. Acts ch. 174, sec. 1, effective July <br>15, 1988. -- Amended 1986 Ky. Acts ch. 459, sec. 3, effective July 15, 1986. -- <br>Amended 1985 (1st Extra. Sess.) Ky. Acts ch. 6, Pt. V, sec. 14, effective July 29, <br>1985. -- Amended 1984 Ky. Acts ch. 378, sec. 1, effective July 1, 1984. -- Amended <br>1982 Ky. Acts ch. 105, sec. 1, effective March 24, 1982; and ch. 166, sec. 15, <br>effective July 15, 1982. -- Amended 1980 Ky. Acts ch. 176, sec. 1, effective July 15, <br>1980. -- Amended 1978 Ky. Acts ch. 233, sec. 10, effective June 17, 1978. -- <br>Amended 1976 Ky. Acts ch. 155, sec. 7. -- Amended 1974 Ky. Acts ch. 163, sec. 2. -<br>- Amended 1972 Ky. Acts ch. 62, Pt. III, sec. 1. -- Amended 1970 Ky. Acts ch. 216, sec. 3. -- Amended 1968 Ky. Acts ch. 40, Part II, sec. 1. -- Amended 1966 Ky. Acts <br>ch. 176, Part I, sec. 1. -- Amended 1962 Ky. Acts ch. 124, sec. 1. -- Amended 1960 <br>Ky. Acts ch. 5, Art. III, sec. 1. -- Amended 1956 (4th Extra. Sess.) Ky. Acts ch. 4, <br>sec. 1. -- Amended 1954 Ky. Acts ch. 79, sec. 1. -- Amended 1952 Ky. Acts ch. 194, <br>secs. 1 and 2. -- Amended 1948 Ky. Acts ch. 93, sec. 1. -- Recodified 1942 Ky. Acts <br>ch. 208, sec. 1, effective October 1, 1942, from Ky. Stat. secs. 4281b-1, 4281b-2, <br>4281b-5. Legislative Research Commission Note (6/26/2007). 2007 Ky. Acts ch. 52, sec. 3, provides that the amendments to KRS 141.010 in 2007 Ky. Acts ch. 52, sec. 2, "shall <br>apply to tax years beginning on or after January 1, 2007." Legislative Research Commission Note (6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 73, provides that "unless a provision of this Act specifically applies to an <br>earlier tax year, the provisions of this Act shall apply to taxable years beginning on or <br>after January 1, 2007." Legislative Research Commission Note (6/28/2006). Under the authority of KRS 7.136, a manifest clerical or typographical error has been corrected. In the first <br>sentence of 2006 (1st Extra. Sess.) Ky. Acts ch 2, sec. 11, the citation to KRS <br>141.010(24)(b) to (h) has been changed to KRS 141.010(24)(b)2. to 8. to conform to <br>other amendments citing this statute elsewhere in the Act. Legislative Research Commission Note (4/25/2006). 2006 Ky. Acts ch. 252, Pt. XXVIII, sec. 18 provides that "The amendment in Section 16 of this Part is <br>applicable for tax years beginning after December 31, 2001." Legislative Research Commission Note (3/20/2005). 2005 Ky. Acts ch. 173, Part XVIII, sec. 2, provides that changes made to subsection (11)(a) of this section are <br>effective for taxable years beginning after December 1, 2004. Legislative Research Commission Note (7/13/2004). The amendments made to subsections (10)(r) and (12)(l) of this statute in 2004 Ky. Acts ch. 135, sec. 1, "shall <br>apply for taxable years beginning after December 31, 2003." 2004 Ky. Acts ch. 135, <br>sec. 4. Legislative Research Commission Note (7/15/2002). The change of dates in subsection (3) of this statute from December 31, 1999, to December 31, 2001, applies to <br>"taxable years beginning after December 31, 2001." 2002 Ky. Acts. ch. 367, sec. 4. Legislative Research Commission Note (7/15/2002). The amendments made to subsections (10)(k), (11), and (13) of this statute in 2002 Ky. Acts ch. 206, sec. 1, <br>"shall apply for taxable years beginning after December 31, 2001." 2002 Ky. Acts <br>ch. 206, sec. 2. Legislative Research Commission Note (7/14/2000). The change of dates in subsection (3) of this statute from December 1, 1997, to December 31, 1999, applies to "taxable <br>years beginning after December 31, 1999." 2000 Ky. Acts ch. 337, sec. 4. Legislative Research Commission Note (4/26/2000). The exclusions set forth in subsection (10)(p) and (q) and subsection (12)(i) to (k) of this statute took effect <br>April 26, 2000, and "retroactively apply to tax years beginning after December 31, <br>1998. 2000 Ky. Acts. ch. 533, secs. 4 and 5. Legislative Research Commission Note (4/28/95). The exclusion set forth in subsection (10)(i) of this statute applies "to income received after December 31, 1994," pursuant <br>to 1995 (2d Extra. Sess.) Ky. Acts ch. 1, sec. 11.
