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Department Promulgates Emergency Regulation Regarding New Motor Vehicle Credit Cap

10.30.2009

The Kentucky Department of Revenue (“Department”) recently proposed Administrative Regulation, 103 KAR 44:130 (“Regulation”), establishing a method for new vehicle dealers and county clerks to determine the balance of the new motor vehicle credit cap provided by KRS 138.4602.

KRS 138.4602 temporarily provides for a trade-in allowance for the Motor Vehicle Usage Tax calculation for new vehicle purchases.  The trade-in allowance has been available on a first-come, first-served basis since September 1, 2009 and ends on August 31, 2010 or before, if the total amount of “trade-in credits” reduces the Motor Vehicle Usage Tax by the $25,000,000 maximum amount authorized.

Under this provision, a new motor vehicle’s retail price is determined by reducing the amount of the total consideration given by the allowance for any trade-in.  The value of the purchased motor vehicle offered for registration and the value of the trade-in must be attested to in a notarized affidavit; however, the retail price cannot be less than fifty percent (50%) of the difference between the applicable values of the purchased motor vehicle and the trade-in.  If a notarized affidavit is not available, the retail price is ninety-percent (90%) of the manufacturer’s retail price of the vehicle or in the case of a new truck with a gross weight in excess of ten thousand pounds, eighty-one percent (81%) of the manufacturer’s retail price.

103 KAR 44:130 states that the Department will track the amount of the trade-in credits used and post the amount on its motor vehicle usage tax website, http://revenue.ky.gov/business/motorvehicleusage.htm.  The accumulated total is to be updated on each business day and once the $25,000,000 credit cap is reached, the Regulation requires the Department to notify taxpayers on its website.

The Department simultaneously promulgated 103 KAR 44:130 as an Emergency Regulation, 103 KAR 44:130E, which is effective immediately.

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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