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Kentucky: Wrap-up of 2015 Tax Legislation


The Kentucky General Assembly’s 2015 legislative session recently concluded with little legislation of note. However, 2016 could be a big year.

Road Fund Stabilization and Kentucky Department of Revenue “Clean-Up” Bill: HB 299 (BR 1165) freezes the gasoline tax at 26 cents per gallon to prevent an anticipated shortfall in the Road Fund. This provision was added to HB 299 which also revises several provisions in the tax code sought by the Department.

Tax Bills signed into law by Governor Beshear also include:

HB 20 (BR 71) amends KRS 132.485 to clarify the appraisal standards for motor vehicles 20 years old or older for property tax purposes. The law provides that there will be no presumption that a vehicle of that age has been maintained or restored to either original factory condition or otherwise classic condition.

HB 136 (BR 388) amends KRS 91A.070 to establish certain procedures for city ad valorem taxes that are not collected by the sheriff. The bill establishes the due date of ad valorem taxes, creates the possibility for installment payments, and creates penalties and interest for nonpayment, among other provisions not in conflict with existing tax law. The bill also allows for the creation of an ordinance to create an amnesty program for forgiveness or reduction of taxpayer penalties or interest.

HB 202 (BR 159) amends KRS 91A.392 to allow any excess money collected from the transient room tax to go toward reducing the cost to operate, renovate, or expand a governmental or nonprofit convention center or fine arts center as long as an amount equal to one year’s required debt service is held in reserve to satisfy any future debt service obligations of the bond.

HB 340 (BR 1260) expands film tax credits and establishes thresholds for Kentucky-based companies to qualify for the film tax credit. It increases incentives for a motion picture or entertainment production filmed or produced in a county other than in an “enhanced inventive county” and also increases the incentives for those who chose to film in one of those special counties.

HB 378 (BR 1681) exempts from the motor vehicle usage tax any resident member of the military who is assigned to duty in Kentucky and who purchases a vehicle from a Kentucky dealer.

Several significant tax bills did not pass both houses. Among them were:

Local Option Sales Tax (LOST): Supporters call it “LIFT”, Local Investments for Transportation. HB 1 (BR 107) would have amended the state constitution to give local governments the power to enact a local sales and use tax for specific projects.

Combined Reporting and Throwback: HB 374 (BR 1104) would have amended KRS 141.200 to require unitary combined reporting on corporate income tax returns. It also would have created a throwback rule for Kentucky for income not taxed in other jurisdictions. The bill would have also disallowed tax haven transactions and implemented a Kentucky earned income tax credit.

Limited Liability Entity Tax (LLET) “Fix” Bill: HB 331 (BR 1114) would have amended and simplified the cost of goods sold (COGS) definition for purposes of computing the LLET using the gross profits method. House Bill 331 would have clearly defined COGS to include any costs allowed by the Internal Revenue Code.

Taxpayer Rights Enhancement Act (TREA): HB 361 (BR 831) was a comprehensive taxpayer rights bill. It would have formally defined “taxpayer representative” to include accountants, attorneys, tax practitioners or other persons designated in writing by the taxpayer to represent them before the Department. The bill would have also formalized the Kentucky tax education and information program. In addition, the bill would have required all determinations from the Department of Revenue to be issued within 6 months. The bill would have also placed mandates that an assessment must be voided if the Department does not respond to taxpayers within certain amounts of time. The bill would have also required the Department to abate penalties and interest if they accrued for unreasonable delay on behalf of the Department. It also would have required the Department to post on its website all training manuals, determinations, final rulings, and any other writings indicating the Department’s position on tax matters.

Look for these tax-related issues to be raised again in the 2016 legislative session.

To view a complete PDF of April 2, 2015 SALT Law Letter, please click here.

To learn more about Mark A. Loyd and his practice, please visit his profile.

To learn more about Bailey Roese and her practice, please visit her profile.


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