Proposed Regulation Establishes Guidelines and Filing Requirements for “Endow Kentucky Tax Credit”
The Kentucky Department of Revenue (“Department”) recently proposed Administrative Regulation 103 KAR 15:190 (“Regulation”) in an effort to establish guidelines and filing requirements for a nonrefundable tax credit (“Endow Kentucky Tax Credit”) for a taxpayer making an endowment gift to a permanent endowment fund of a qualified community foundation, county-specific component fund or affiliate community foundation that has been certified under KRS 147A.325 [Certification of qualified community foundation, county-specific component, or affiliate community foundation; Commission to maintain and publish list of certified entities; biennial review; administrative regulations].
The Endow Kentucky Tax Credit was passed by the General Assembly during its 2010 Extraordinary Session and signed into law by the Governor on June 4, 2010. It is codified in KRS 141.438 [Endow Kentucky tax credit] and provides a tax credit in an amount equal to twenty percent (20%) of the value of the endowment gift provided by the taxpayer, not to exceed ten thousand dollars ($10,000). The credit is nonrefundable and cannot be sold or transferred, but may be carried forward for use in a subsequent taxable year within five (5) years. The total amount of the tax credit that may be awarded by the Department is limited to $500,000.00 in each fiscal year.
KRS 141.438 provides that a taxpayer seeking the Endow Kentucky Tax Credit must file an application for preliminary authorization of the tax credit with the Department. Within thirty (30) days of receiving preliminary authorization from the Department, the taxpayer must make the endowment gift and provide proof of the endowment gift to the Department within ten (10) days thereafter via a Schedule, discussed below.
The proposed Regulation sets forth additional guidelines and filing requirements in order for a taxpayer to obtain preliminary authorization and final approval of the tax credit from the Department. It references Revenue Form 41A720-S85, Application for Preliminary Authorization of the Endow Kentucky Tax Credit, (“Application”), and lists specific information that must be included in the Application. Once an endowment gift has been made, the Regulation provides that Schedule ENDOW, Notice of Endow Kentucky Tax Credit and Certification, must be filed with the Department within ten (10) days. The Regulation lists specific information that must be included on the Schedule ENDOW.
The Regulation provides that once the Department verifies that the endowment gift was made, the Schedule ENDOW will be returned to the taxpayer with the Department’s final approval of the tax credit. The Regulation also requires a taxpayer claiming the Endow Kentucky Tax Credit to attached a copy of the approved Schedule ENDOW to each tax return on which the credit is claimed.
A public hearing regarding the Regulation is scheduled for February 23, 2011, and written comments are being accepted until February 28, 2011.