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Department of Revenue Proposes New Regulation Regarding Energy Efficient Products


The Kentucky Department of Revenue (“Department”) recently proposed a new Administrative Regulation, 103 KAR 31:200, establishing requirements for sales and use tax refund claims for purchases of new or replacement machinery or equipment that reduces the consumption of energy or energy-producing fuels in the manufacturing process at a Kentucky plant facility by at least fifteen percent (15%).

The proposed Regulation provides that in order to calculate the fifteen percent (15%) reduction in energy or energy-production fuels the total energy consumed within all combined manufacturing and processing production processes at one plant facility must be considered.

Under the proposed Regulation, the refund application requirements include:

  • The applicant shall file Form 51A300, Application for Preapproval for Energy Efficiency Machinery or Equipment, with the Department, along with energy and energy producing fuel consumption documentation for the preceding twelve (12) months;
  • The applicant shall file, within eighteen (18) months from the date the energy efficiency products are placed into service, the following documentation demonstrating that the fifteen percent (15%) energy efficiency threshold was achieved: (a) Form 51A351, Application for Energy Efficiency Machinery or Equipment – Sales and Use Tax Incentive; (b) Form 51A350, Information Sharing and Assignment Agreement for Energy Efficiency Project Incentive and (c) Form 51A350 completed and signed by the manufacturer, vendor, and contractor as applicable.
  • The applicant shall submit purchase invoices for the machinery and equipment at issue.

The manufacturer is required to keep complete records supporting its refund request for five years. The Department may audit part or all of the records of all parties involved in the refund request in order to verify its validity and to ensure compliance with regulatory and statutory requirements.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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