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Changes to the Louisville Occupational License Tax

The Kentucky General Assembly has standardized the definition of "compensation," set forth in KRS 67.750(2), for purposes of city/county occupational license taxes throughout Kentucky, in an effort to facilitate the calculation and reporting of such taxes in the Commonwealth.

This portion of House Bill 107, originally enacted in 2003, is now in effect. Accordingly, amounts excluded from federal gross income under sections 125 and 132 of the Internal Revenue Code no longer are excludible from compensation subject to the city/county occupational license taxes in Kentucky.

This means that amounts redirected by employees under cafeteria plans (including flexible spending accounts) to purchase benefits on a pre-tax basis (for federal income tax purposes) now are subject to the Louisville occupational license tax. The Louisville occupational license tax also will be assessed on fringe benefits eligible for federal exclusion under section 132 of the Code. The same applies to other city/county occupational license taxes in Kentucky.

Employers immediately should make the appropriate changes to their payroll practices or should contact their payroll providers to coordinate making this change.

If you have any questions regarding this, or any other legal issue, please feel free to contact a member of Greenebaum's Employee Benefits Team.
Even though the content of the above Greenebaum Doll & McDonald e-bulletin is primarily informative, state and federal law obligates us to inform you that this is an advertisement. You have received this advisory because you are a client or friend of the firm.

As a result of perceived abuses, the U.S. Department of the Treasury has recently promulgated Regulations for practice before the Internal Revenue Service. These Circular 230 Regulations require all attorneys and accountants to provide extensive disclosure when providing certain written tax communications to clients. In order to comply with our obligations under these Regulations, we would like to inform you that, because this communication does not contain all of such disclosure, you may not rely on any tax advice contained in this communication to avoid tax penalties, nor may any portion of this communication be referred to in any marketing or promotional materials.

About Greenebaum Doll & McDonald PLLC
Greenebaum Doll & McDonald PLLC is a widely-respected business law firm with approximately 200 legal professionals in six offices, serving local, national and international clients in virtually every industry. A forward-thinking business law firm, Greenebaum is committed to the practice of Breakthrough Law®.

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