CHAPTER 131 Department of Revenue

131.010. Definitions for chapter.

As used in this chapter, unless the context requires otherwise:

  1. “Commissioner” means the commissioner of revenue;
  2. “Department” means the Department of Revenue;
  3. “Fiduciary” means a guardian, trustee, executor, administrator, receiver, conservator, or any individual or corporation acting in a fiduciary capacity for any other person;
  4. “Taxpayer” means any person required or permitted by law or administrative regulation to perform any act subject to the administrative jurisdiction of the department including the following:
    1. File a report, return, statement, certification, claim, estimate, declaration, form, or other document;
    2. Furnish any information;
    3. Withhold, collect, or pay any tax, installment, estimate, or other funds;
    4. Secure any license, permit, or other authorization to conduct a business or exercise any privilege, right, or responsibility;
  5. “Adjusted prime rate charged by banks” means the average predominant prime rate quoted by commercial banks to large businesses, as determined by the board of governors of the Federal Reserve System;
  6. “Tax interest rate” means the interest rate determined under KRS 131.183 ;
  7. “Tax” includes any assessment or license fee administered by the department; however, it shall not include moneys withheld or collected by the department pursuant to KRS 131.560 or 160.627 ;
  8. “Return” or “report” means any properly completed and, if required, signed form, statement, certification, claim estimate, declaration, or other document permitted or required to be submitted or filed with the department, including returns and reports or composites thereof which are permitted or required to be electronically transmitted;
  9. “Reasonable cause” means an event, happening, or circumstance entirely beyond the knowledge or control of a taxpayer who has exercised due care and prudence in the filing of a return or report or the payment of moneys due the department pursuant to law or administrative regulation;
  10. “Fraud” means:
    1. Intentional or reckless disregard for the law, administrative regulations, or the department’s established policies to evade the filing of any return, report, or the payment of any moneys due to the department pursuant to law or administrative regulation; or
    2. The deliberate false reporting of returns or reports with the intent to gain a monetary advantage;
  11. “Hard copy” means any document, record, report, or other data printed on paper or stored by an imaging system that does not permit additions, deletions, or other changes to the original documents;
  12. “Electronic record” means a collection of related information stored as bits of data in a medium that supports electronic extraction of the data at the field level, but does not include electronic imaging systems;
  13. “Electronic imaging systems” means a computer-based system used to store reproductions of documents and records through the use of electronic data processing, or computerized, digital, or optical scanning which records and indexes the document, but does not support electronic extraction of the data at the field level;
  14. “Electronic fund transfer” means an electronic data processing medium that takes the place of a paper check for debiting or crediting an account and of which a permanent record is made;
  15. “Specified tax return preparer” has the same meaning as in 26 U.S.C. sec. 6011(e)(3) ; and
  16. “Tax return preparer” has the same meaning as in 26 U.S.C. sec. 7701(a)(36) (A).

HISTORY: 4114h-1: amend. Acts 1982, ch. 452, § 1, effective July 1, 1982; 1992, ch. 403, § 1, effective July 14, 1992; 2005, ch. 85, § 107, effective June 20, 2005; 2005, ch. 184, § 1, effective June 20, 2005; 2010, ch. 147, § 1, effective July 15, 2010; 2018 ch. 207, § 116, effective April 27, 2018.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992, and all taxes assessed by the cabinet on or after December 31, 1992.”

Legislative Research Commission Notes.

(6/20/2005). Under 2005 Ky. Acts ch. 184, sec. 18, changes in the names of agencies and officers that are made in bills confirming a reorganization of the executive branch are to be codified only to the extent those changes do not conflict with other 2005 amendments. Accordingly, an amendment to this section in Acts ch. 184 prevails over a name change made in Acts ch. 85.

2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

  1. Taxpayer.
  2. —Liability of Corporate Officer.
  3. Department.
1. Taxpayer.

The term “taxpayer” as used in chapter 141 must follow the definition in this section and KRS 134.010 . Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

Where a defendant chiropractor was held to be a taxpayer as defined by this section, he could not refuse to disclose his records, under KRS 131.130 , based on claim that it might subject him to state criminal prosecution where the Commonwealth granted him immunity from criminal prosecution based on disclosure of his records for tax auditing purposes. Boulton v. Commonwealth by Calvert, 896 S.W.2d 614, 1994 Ky. App. LEXIS 159 (Ky. Ct. App. 1994).

2. —Liability of Corporate Officer.

A corporate officer acting as the taxpayer for withholding tax purposes, was personally liable for penalties and interest due for the late payment of taxes. Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

3. Department.

Because KRS 131.183 authorizes interest only on taxes administered by the Kentucky Department of Revenue, as indicated in KRS 131.010 , prejudgment interest was not recoverable in an action by another agency to recover unpaid service charges. Moreover, a good faith dispute existed. Virgin Mobile USA, L.P. v. Commonwealth, 2012 Ky. App. LEXIS 104 (Ky. Ct. App. June 29, 2012), aff'd in part and rev'd in part, 2014 Ky. LEXIS 334 (Ky. Aug. 21, 2014).

Opinions of Attorney General.

The tax interest rate is that rate in effect the next day after the tax became due and such tax remained unpaid; thus, under the 1982 amendments to this section, KRS 131.183 and 139.650 , the tax interest rate on any delinquent taxes (regardless of the year) on and after July 1, 1982, shall be sixteen percent (16%). However, the sixteen percent (16%) rate is not to be retroactively applied to delinquent taxes which were due prior to July 1, 1982. OAG 83-12 .

Research References and Practice Aids

Cross-References.

Collection of public claims by action, KRS ch. 135.

Corporation and utility taxes, KRS ch. 136.

Excise taxes, KRS ch. 138.

Finance and revenue of cities of the first class, KRS ch. 91.

Finance and revenue of cities, generally, KRS ch. 91A.

Finance and revenue of cities other than the first class, KRS ch. 92.

Gasoline tax, KRS 138.210 et seq.

Income taxes, KRS ch. 141.

Inheritance and estate taxes, KRS ch. 140.

Levy and assessment of property taxes, KRS ch. 132.

License taxes, KRS ch. 137.

Licensing of motor vehicles, operators and trailers, KRS ch. 186.

Miscellaneous taxes, KRS ch. 142.

Payment, collection and refund of taxes, KRS ch. 134.

Supervision, equalization and review of assessments, KRS ch. 133.

Kentucky Law Journal.

Martin, Practice Before the Kentucky Department of Revenue, 28 Ky. L.J. 4 (1939).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

131.020. Major organizational units of the Department of Revenue — Functions and duties.

  1. The Department of Revenue, headed by a commissioner appointed by the secretary with the approval of the Governor, shall be organized into the following functional units:
    1. Office of the Commissioner, which shall consist of:
      1. The Division of Protest Resolution, headed by a division director who shall report directly to the commissioner. The division shall administer the protest functions for the department from office resolution through court action; and
      2. The Division of Taxpayer Ombudsman, headed by a division director who shall report to the commissioner. The division shall perform those duties set out in KRS 131.083 ;
    2. Office of Tax Policy and Regulation, headed by an executive director who shall report directly to the commissioner. The office shall be responsible for:
      1. Providing oral and written technical advice on Kentucky tax law;
      2. Drafting proposed tax legislation and regulations;
      3. Testifying before legislative committees on tax matters;
      4. Analyzing tax publications;
      5. Providing expert witness testimony in tax litigation cases;
      6. Providing consultation and assistance in protested tax cases; and
      7. Conducting training and education programs;
    3. Office of Processing and Enforcement, headed by an executive director who shall report directly to the commissioner. The office shall be responsible for processing documents, depositing funds, collecting debt payments, and coordinating, planning, and implementing a data integrity strategy. The office shall consist of the:
      1. Division of Operations, which shall be responsible for opening all tax returns, preparing the returns for data capture, coordinating the data capture process, depositing receipts, maintaining tax data, and assisting other state agencies with similar operational aspects as negotiated between the department and the other agency;
      2. Division of Collections, which shall be responsible for initiating all collection enforcement activity related to due and owing tax assessments, including protest resolution, and for assisting other state agencies with similar collection aspects as negotiated between the department and the other state agency;
      3. Division of Registration and Data Integrity, which shall be responsible for registering businesses for tax purposes, ensuring that the data entered into the department’s tax systems is accurate and complete, and assisting the taxing areas in proper procedures to ensure the accuracy of the data over time; and
      4. Division of Application Development and Support, which shall be responsible for providing project management, planning, analysis, application development, implementation, security, support and maintenance for new and legacy systems of the Department of Revenue;
    4. Office of Property Valuation, headed by an executive director who shall report directly to the commissioner. The office shall consist of the:
      1. Division of Local Support, which shall be responsible for providing supervision, assistance, and training to the property valuation administrators and sheriffs within the Commonwealth;
      2. Division of State Valuation, which shall be responsible for providing assessments of public service companies and motor vehicles, and providing assistance to property valuation administrators and sheriffs with the administration of tangible and omitted property taxes within the Commonwealth; and
      3. Division of Minerals Taxation and Geographical Information System Services, which shall be responsible for providing geographical information system mapping support, ensuring proper filing of severance tax returns, ensuring consistency of unmined coal assessments, and gathering and providing data to properly assess minerals to the property valuation administrators within the Commonwealth;
    5. Office of Sales and Excise Taxes, headed by an executive director who shall report directly to the commissioner. The office shall administer all matters relating to sales and use taxes and miscellaneous excise taxes, including but not limited to technical tax research, compliance, taxpayer assistance, tax-specific training, and publications. The office shall consist of the:
      1. Division of Sales and Use Tax, which shall administer the sales and use tax; and
      2. Division of Miscellaneous Taxes, which shall administer various other taxes, including but not limited to alcoholic beverage taxes; cigarette enforcement fees, stamps, meters, and taxes; gasoline tax; bank franchise tax; inheritance and estate tax; insurance premiums and insurance surcharge taxes; motor vehicle tire fees and usage taxes; and special fuels taxes;
    6. Office of Income Taxation, headed by an executive director who shall report directly to the commissioner. The office shall administer all matters related to income and corporation license taxes, including technical tax research, compliance, taxpayer assistance, tax-specific training, and publications. The office shall consist of the:
      1. Division of Individual Tax, which shall administer the following taxes or returns: individual income, fiduciary, and employer withholding; and
      2. Division of Corporation Tax, which shall administer the corporation income tax, corporation license tax, pass-through entity withholding, and pass-through entity reporting requirements; and
    7. Office of Field Operations, headed by an executive director who shall report directly to the commissioner. The office shall manage the regional taxpayer service centers and the field audit program.
  2. The functions and duties of the department shall include conducting conferences, administering taxpayer protests, and settling tax controversies on a fair and equitable basis, taking into consideration the hazards of litigation to the Commonwealth of Kentucky and the taxpayer. The mission of the department shall be to afford an opportunity for taxpayers to have an independent informal review of the determinations of the audit functions of the department, and to attempt to fairly and equitably resolve tax controversies at the administrative level.
  3. The department shall maintain an accounting structure for the one hundred twenty (120) property valuation administrators’ offices across the Commonwealth in order to facilitate use of the state payroll system and the budgeting process.
  4. Except as provided in KRS 131.190(4), the department shall fully cooperate with and make tax information available as prescribed under KRS 131.190(3) to the Governor’s Office for Economic Analysis as necessary for the office to perform the tax administration function established in KRS 42.410 .
  5. Executive directors and division directors established under this section shall be appointed by the secretary with the approval of the Governor.

HISTORY: 4618-92, 4618-93: amend. Acts 1960, ch. 186, Art. I, § 29; 1964, ch. 141, § 39; 1984, ch. 404, § 10, effective July 13, 1984; 1988, ch. 273, § 8, effective July 15, 1988; 1990, ch. 316, § 1, effective July 13, 1990; 1990, ch. 321, § 8, effective July 13, 1990; 1992, ch. 13, § 6, effective July 14, 1992; 1992, ch. 361, § 1, effective July 14, 1992; 1994, ch. 65, § 1, effective July 15, 1994; 1994, ch. 422, § 2, effective April 16, 1994; 1994, ch. 508, § 42, effective July 15, 1994; 1998, ch. 134, § 1, effective July 15, 1998; 1998, ch. 396, § 1, effective July 15, 1998; 2000, ch. 46, § 23, effective July 14, 2000; 2005, ch. 85, § 19, effective June 20, 2005; 2005, ch. 168, § 52, effective June 20, 2005; 2007, ch. 95, § 26, effective March 23, 2007; 2008, ch. 178, § 23, effective July 15, 2008; 2009, ch. 12, § 36, effective June 25, 2009; 2012, ch. 69, § 14, effective July 12, 2012; 2014, ch. 48, § 1, effective July 15, 2014; 2016 ch. 84, § 2, effective July 15, 2016; 2017 ch. 131, § 5, effective June 29, 2017; 2018 ch. 171, § 104, effective April 14, 2018; 2018 ch. 207, § 104, effective April 27, 2018; 2018 ch. 78, § 9, effective July 14, 2018.

Legislative Research Commission Notes.

(7/14/2018). This statute was amended by 2018 Ky. Acts chs. 78, 171, and 207, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

Cited in:

Reeves v. Fries, 292 Ky. 450 , 166 S.W.2d 985, 1942 Ky. LEXIS 116 ( Ky. 1942 ); Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ); Russman v. Luckett, 391 S.W.2d 694, 1965 Ky. LEXIS 322 ( Ky. 1965 ); Circle “C” Coal Co. v. Commonwealth, 628 S.W.2d 883, 1981 Ky. App. LEXIS 317 (Ky. Ct. App. 1981).

Research References and Practice Aids

Cross-References.

Bond of secretary of revenue, amount and conditions, KRS 62.160 , 62.180 .

Heads of statutory administrative departments, appointment, term, salary, functions, KRS 12.040 .

Oath to witnesses, cabinet head or representative may administer, KRS 12.120 .

State property and buildings commission, secretary of revenue is member of, KRS 56.450 .

Kentucky Law Journal.

Muehlenkamp, Remedies for Disproportionate Tax Assessment in Kentucky, 36 Ky. L.J. 401 (1948).

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Revenue Assessment Levels and Taxing Rates: The Kentucky Rollback Law, 60 Ky. L.J. 105 (1971).

131.025. Coverage for employes under Workmen’s Compensation Law. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 144, § 1) was repealed by Acts 1956, ch. 147.

131.030. Functions of department — Settlement of tax cases — Collection of debts referred under KRS 45.237 and 45.241.

  1. The Department of Revenue shall exercise all administrative functions of the state in relation to the state revenue and tax laws, the licensing and registering of motor vehicles, the equalization of tax assessments, the assessment of public utilities and public service corporations for taxes, the assessment of franchises, the supervision of tax collections, and the enforcement of revenue and tax laws, either directly or through supervision of tax administration activity in other departments to which the department may commit administration of certain taxes.
  2. The department shall have all the powers and duties with reference to assessment or equalization of the assessment of property heretofore exercised or performed by any state board or commission.
  3. The department shall have all the powers and duties necessary to consider and settle tax cases under KRS 131.110 and refund claims made under KRS 134.580 . The department is encouraged to settle controversies on a fair and equitable basis and shall be authorized to settle tax controversies based on the hazards of litigation applicable to them.
  4. The department shall have all the powers and duties necessary to collect any debts owed to the Commonwealth, or any local government of the Commonwealth, that are referred to the department by an organizational unit or administrative body in the executive branch of state government, as defined in KRS 12.010 , the Court of Justice in the judicial branch of state government, and any local government, under KRS 45.237 and 45.241 .

History. 4114h-2, 4149b-12, 4202a-31, 4223b-10, 4224a-5, 4224c-3, 4257b-1, 4281a-33, 4281a-40, 4281b-23, 4281c-20, 4281e-9, 4281f-5, 4281f-27, 4281g-13, 4281h-12, 4281i-6, 4281j-4, 4618-30, 4618-91: amend. Acts 1992, ch. 361, § 2, effective July 14, 1992; 2004, ch. 118, § 3, effective July 13, 2004; 2005, ch. 85, § 108, effective June 20, 2005; 2013, ch. 88, § 6, effective June 25, 2013.

NOTES TO DECISIONS

  1. Assessment.
  2. Authority of County Clerks.
1. Assessment.

The power of the department of revenue (now revenue cabinet) and the Kentucky tax commission to assess property is purely administrative, and not judicial, being limited to assessment after finding of facts establishing the existence of the property to be assessed. If the property is found to exist, the taxpayer upon being notified of the assessment must follow the statutory procedure for obtaining correction or relief from the assessment, but where there is no factual basis for the finding that the taxable property exists, as in the case where a taxpayer who is sought to be charged with a franchise tax has no property with a taxable situs in the state, the purported assessment is void and the taxpayer may proceed by suit for injunction to restrain collection of tax. Reeves v. Service Lines, Inc., 291 Ky. 410 , 164 S.W.2d 593, 1942 Ky. LEXIS 236 ( Ky. 1942 ).

2. Authority of County Clerks.

County clerks were not entitled to summary judgment in their action to enforce a state transfer tax against two federal secondary lenders because, while they had standing to bring the suit, they lacked authority to do so, the federal charter exemptions were constitutional as an appropriate exercise of Congress’ powers in regulating the secondary mortgage market, and there was no federal interference in the State’s power to tax. Spoonamore v. Fed. Hous. Fin. Agency, 2014 U.S. Dist. LEXIS 6210 (E.D. Ky. Jan. 17, 2014).

Cited in:

Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ); Reeves v. Talbott, 289 Ky. 581 , 159 S.W.2d 51, 1941 Ky. LEXIS 37 ( Ky. 1941 ); Reeves v. Fries, 292 Ky. 450 , 166 S.W.2d 985, 1942 Ky. LEXIS 116 ( Ky. 1942 ); Blue Diamond Coal Co. v. Cornett, 300 Ky. 647 , 189 S.W.2d 963, 1945 Ky. LEXIS 618 ( Ky. 1945 ); Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ).

Research References and Practice Aids

Cross-References.

Alcoholic beverages, functions of cabinet with respect to, KRS 241.020 .

Auditor of public accounts, functions with respect to revenue, KRS 43.050 .

County finance, functions of cabinet with respect to, KRS chs. 66, 68.

Finance and administration cabinet, functions in relation to state finances and budget, KRS 41.070 , 45.301 .

Escheats, functions of cabinet with respect to, KRS ch. 393.

Estimate of income to department of highways, KRS 176.270 , 177.360 .

Fire protection districts, functions of cabinet, KRS 75.040 .

Model procurement code, functions in relation thereto, KRS 45A.030 et seq.

Motor carriers, nonresident, administration of reciprocal tax and fee exemption agreements for, KRS 281.835 .

State purchasing, functions in relation thereto, KRS 45A.665 to 45A.685 .

131.032. Criminal background investigation required for department’s employees with access to or use of federal tax information.

  1. Each employee of the Department of Revenue, including contract staff, with access to or use of federal tax information shall submit to a criminal background investigation by means of a fingerprint check by the Department of Kentucky State Police and the Federal Bureau of Investigation.
  2. The Department of Revenue shall promulgate administrative regulations in accordance with KRS Chapter 13A to implement this section.

History. 2017 ch. 97, § 2, effective March 21, 2017.

131.040. Associate commission members; terms; funds for operation. [Repealed.]

Compiler’s Notes.

This section (4618-92: amend. Acts 1946, ch. 193, § 1; 1960, ch. 186, Art. I, § 30) was repealed by Acts 1964, ch. 141, § 39.

Kentucky Taxpayers’ Bill of Rights

131.041. Short title.

The provisions of KRS 131.041 to 131.081 shall be known and may be cited as the “Kentucky Taxpayers’ Bill of Rights.”

History. Enact. Acts 1990, ch. 423, § 8, effective July 13, 1990.

131.050. Division of General Taxation. [Repealed.]

Compiler’s Notes.

This section (4618-94) was repealed by Acts 1960, ch. 186, art. I, § 33, effective June 16, 1960.

131.051. “Taxpayer representative” defined for KRS 131.041 to 131.081.

As used in KRS 131.041 to 131.081 , unless the context requires otherwise, “taxpayer representative” means any attorney, tax practitioner, or other person designated by a taxpayer to represent him before the department in any matter relating to taxes administered by the department.

History. Enact. Acts 1990, ch. 423, § 1, effective July 13, 1990; 2005, ch. 85, § 109, effective June 20, 2005; 2009, ch. 12, § 37, effective June 25, 2009.

131.060. Division of Motor Vehicles. [Repealed.]

Compiler’s Notes.

This section (4816-95) was repealed by Acts 1960, ch. 186, Art. I, § 33, effective June 16, 1960.

131.061. KRS 131.041 to 131.081 to apply to all taxes administered by Department of Revenue.

In addition to all other rights or privileges afforded Kentucky taxpayers, and notwithstanding any provisions of the Kentucky Revised Statutes to the contrary, the provisions of KRS 131.041 to 131.081 shall apply with regard to all taxes administered by the Department of Revenue.

History. Enact. Acts 1990, ch. 423, § 2, effective July 13, 1990; 2005, ch. 85, § 110, effective June 20, 2005.

131.070. Division of Local Finance. [Repealed.]

Compiler’s Notes.

This section (4618-96) was repealed by Acts 1960, ch. 68, Art. V, § 7 and Acts 1960, ch. 186, Art. I, § 33.

131.071. Office of the Taxpayer Ombudsman — Qualifications and duties of tax ombudsman. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1990, ch. 423, § 3, effective July 13, 1990; 1994, ch. 10, § 1, effective July 15, 1994; 2005, ch. 85, § 20, effective June 20, 2005) was repealed by Acts 2009, ch. 12, § 56, effective June 25, 2009.

131.080. Division of research and statistics. [Repealed.]

Compiler’s Notes.

This section (4618-97) was repealed by Acts 1960, ch. 186, Art. I, § 33.

131.081. Rules applicable to the administration of all taxes under jurisdiction of Department of Revenue.

The following rules, principles, or requirements shall apply in the administration of all taxes subject to the jurisdiction of the Department of Revenue.

  1. The department shall develop and implement a Kentucky tax education and information program directed at new taxpayers, taxpayer and industry groups, and department employees to enhance the understanding of and compliance with Kentucky tax laws, including the application of new tax legislation to taxpayer activities and areas of recurrent taxpayer noncompliance or inconsistency of administration.
  2. The department shall publish brief statements in simple and nontechnical language which explain procedures, remedies, and the rights and obligations of taxpayers and the department. These statements shall be provided to taxpayers with the initial notice of audit; each original notice of tax due; each denial or reduction of a refund or credit claimed by a taxpayer; each denial, cancellation, or revocation of any license, permit, or other required authorization applied for or held by a taxpayer; and, if practical and appropriate, in informational publications by the department distributed to the public.
  3. Taxpayers shall have the right to be assisted or represented by an attorney, accountant, or other person in any conference, hearing, or other matter before the department. The taxpayer shall be informed of this right prior to conduct of any conference or hearing.
  4. The department shall perform audits and conduct conferences and hearings only at reasonable times and places.
  5. Taxpayers shall have the right to make audio recordings of any conference with or hearing by the department. The department may make similar audio recordings if prior written notice is given to the taxpayer or if the taxpayer records the conference or hearing. The taxpayer shall be entitled to a copy of this department recording or a transcript as provided in KRS 61.874 .
  6. If any taxpayer’s failure to submit a timely return or payment to the department is due to the taxpayer’s reasonable reliance on written advice from the department, the taxpayer shall be relieved of any penalty or interest with respect thereto, provided the taxpayer requested the advice in writing from the department and the specific facts and circumstances of the activity or transaction were fully described in the taxpayer’s request, the department did not subsequently rescind or modify the advice in writing, and there were no subsequent changes in applicable laws or regulations or a final decision of a court which rendered the department’s earlier written advice no longer valid.
  7. Taxpayers shall have the right to receive a copy of any audit of the department by the Auditor of Public Accounts relating to the department’s compliance with the provisions of KRS 131.041 to 131.081 .
  8. The department shall include with each notice of tax due a clear and concise description of the basis and amount of any tax, penalty, and interest assessed against the taxpayer, and copies of the agent’s audit workpapers and the agent’s written narrative setting forth the grounds upon which the assessment is made. Taxpayers shall be similarly notified regarding the denial or reduction of any refund or credit claim filed by a taxpayer.
    1. Taxpayers shall have the right to an installment payment agreement for the payment of delinquent taxes, penalties, and interest owed, provided the taxpayer requests the agreement in writing clearly demonstrating: (9) (a) Taxpayers shall have the right to an installment payment agreement for the payment of delinquent taxes, penalties, and interest owed, provided the taxpayer requests the agreement in writing clearly demonstrating:
      1. His or her inability to pay in full; and
      2. That the agreement will facilitate collection by the department of the amounts owed.
    2. The department may modify or terminate an installment payment agreement and may pursue statutory remedies against the taxpayer if it determines that:
      1. The taxpayer has not complied with the terms of the agreement, including minimum payment requirements established by the agreement;
      2. The taxpayers’ financial condition has sufficiently changed;
      3. The taxpayer fails to provide any requested financial condition update information;
      4. The taxpayer gave false or misleading information in securing the agreement; or
      5. The taxpayer fails to timely report and pay any other tax due the Commonwealth.
    3. The department shall give written notice to the taxpayer at least thirty (30) days prior to modifying or terminating an installment payment agreement unless the department has reason to believe that collection of the amounts owed will be jeopardized in whole or in part by delay.
  9. The department shall not knowingly authorize, require, or conduct any investigation or surveillance of any person for nontax administration related purposes, except internal security related investigations involving Department of Revenue personnel.
  10. In addition to the circumstances under which an extension of time for filing reports or returns may be granted pursuant to KRS 131.170 , taxpayers shall be entitled to the same extension of the due date of any comparable Kentucky tax report or return for which the taxpayer has secured a written extension from the Internal Revenue Service provided the taxpayer notifies the department in writing and provides a copy of the extension at the time and in the manner which the department may require.
  11. The department shall bear the cost or, if paid by the taxpayer, reimburse the taxpayer for recording or bank charges as the direct result of any erroneous lien or levy by the department, provided the erroneous lien or levy was caused by department error and, prior to issuance of the erroneous lien or levy, the taxpayer timely responded to all contacts by the department and provided information or documentation sufficient to establish his or her position. When the department releases any erroneous lien or levy, notice of the fact shall be mailed to the taxpayer and, if requested by the taxpayer, a copy of the release, together with an explanation, shall be mailed to the major credit reporting companies located in the county where it was filed.
    1. The department shall not evaluate individual officers or employees on the basis of taxes assessed or collected or impose or suggest tax assessment or collection quotas or goals. (13) (a) The department shall not evaluate individual officers or employees on the basis of taxes assessed or collected or impose or suggest tax assessment or collection quotas or goals.
    2. No arrangement or contract shall be entered into for the service to:
      1. Examine a taxpayer’s books and records;
      2. Collect a tax from a taxpayer; or
      3. Provide legal representation of the department;
  12. Taxpayers shall have the right to bring an action for damages against the Commonwealth to the Kentucky Claims Commission for actual and direct monetary damages sustained by the taxpayer as a result of willful, reckless, or intentional disregard by department employees of the rights of taxpayers as set out in KRS 131.041 to 131.081 or in the tax laws administered by the department. In the awarding of damages pursuant to this subsection, the commission shall take into consideration the negligence or omissions, if any, on the part of the taxpayer which contributed to the damages. If any proceeding brought by a taxpayer is ruled frivolous by the commission, the department shall be reimbursed by the taxpayer for its costs in defending the action. Any claims brought pursuant to this subsection shall be in accordance with KRS 49.040 to 49.180 .
  13. Taxpayers shall have the right to privacy with regard to the information provided on their Kentucky tax returns and reports, including any attached information or documents. Except as provided in KRS 131.190 , no information pertaining to the returns, reports, or the affairs of a person’s business shall be divulged by the department to any person or be intentionally and without authorization inspected by any present or former commissioner or employee of the Department of Revenue, member of a county board of assessment appeals, property valuation administrator or employee, or any other person.

if any part of the compensation or other benefits paid or payable for the service is contingent upon or otherwise related to the amount of tax, interest, fee, or penalty assessed against or collected from the taxpayer. Any such arrangement or contract shall be void and unenforceable.

HISTORY: Enact. Acts 1990, ch. 423, § 4, effective July 13, 1990; 1992, ch. 361, § 3, effective July 14, 1992; 1994, ch. 508, § 43, effective July 15, 1994; 1998, ch. 134, § 2, effective July 15, 1998; 2000, ch. 503, § 1, effective July 14, 2000; 2005, ch. 85, § 111, effective June 20, 2005; 2006, ch. 251, § 2, effective July 12, 2006; 2013, ch. 119, § 1, effective July 1, 2013; 2017 ch. 74, § 63, effective June 29, 2017; 2018 ch. 171, § 100, effective April 14, 2018; 2018 ch. 207, § 100, effective April 27, 2018.

Legislative Research Commission Notes.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

NOTES TO DECISIONS

  1. Elements of Notice.
  2. Deficiency Interest.
  3. Privacy.
1. Elements of Notice.

Department’s initial, timely letter, which notified the telephone company of a sales tax assessment and of the amount of the assessed tax deficiency, was sufficient to satisfy the statute of limitations, KRS 139.620(1), and to allow collection of the tax because the letter was not required to contain all five requirements of KRS 131.081(8). Revenue Cabinet v. GTE South, Inc., 238 S.W.3d 655, 2007 Ky. LEXIS 160 ( Ky. 2007 ).

2. Deficiency Interest.

Assessment of deficiency interest added to a taxpayer’s assessed tax for certain years was not abated pursuant to KRS 131.081(8) because the provision did not appear to address the issue of interest and penalty abatement. In any event, the taxpayer did not cite to written advice from an administrative agency which the taxpayer relied upon in failing to properly report its separate accounts in its filings. Monumental Life Ins. Co. v. Dep't of Revenue, 294 S.W.3d 10, 2008 Ky. App. LEXIS 207 (Ky. Ct. App. 2008), cert. denied, 559 U.S. 1037, 130 S. Ct. 2062, 176 L. Ed. 2d 414, 2010 U.S. LEXIS 2866 (U.S. 2010).

3. Privacy.

Because records that identified registered payers of utility license tax easily could be redacted to comply with privacy requirements and a state website did not provide an alternative remedy, the records were not exempt from open records disclosure after redaction; moreover, the evidence supported a finding that the documents requested were maintained. Dep't of Revenue v. Eifler, 436 S.W.3d 530, 2013 Ky. App. LEXIS 140 (Ky. Ct. App. 2013).

NOTES TO UNPUBLISHED DECISIONS

1. Privacy.

Unpublished decision: Department of Revenue was required to produce for inspection redacted copies of its final rulings because the production of the material a tax attorney and tax analysts sought was required by the Open Records Act; the Department's final rulings contained information related to its reasoning and analysis with respect to its task in administration of the tax laws, and that information could be made available without jeopardizing taxpayers' privacy interests under the Taxpayers' Bill of Rights. Fin. & Admin. Cabinet v. Sommer, 2017 Ky. App. LEXIS 9 (Ky. Ct. App.), sub. op., 2017 Ky. App. Unpub. LEXIS 624 (Ky. Ct. App. Jan. 13, 2017).

Opinions of Attorney General.

Direct pay authorization is directly related to a taxpayer’s status. It is an arrangement between the Department and the taxpayer, in which the taxpayer pays the sales or use tax directly to the Department. Disclosure by the Department or any of its employees of information revealing taxpayers’ DPA status, permit numbers and addresses would be divulging information of the business affairs of those taxpayers in violation of the confidentiality provisions of KRS 131.190(1). OAG 04-ORD-42.

Where the open records request requested contracts, memorandums of agreement or understanding, or similar documents reflecting the Department’s participation in the Joint Audit Program of the Multistate Tax Commission, it is highly unlikely that a contract or memorandum of agreement would contain sufficient detail to divulge information pertaining to the tax schedules, returns, reports or the affairs of a person’s business, in violation of the confidentiality provisions of KRS Chapter 131. OAG 2006-ORD-032.

131.083. Division of Taxpayer Ombudsman — Duties — Annual reports.

The department shall provide the services of a Division of Taxpayer Ombudsman to carry out the spirit and specific purposes of KRS 131.041 to 131.081 . The division shall:

  1. Coordinate the resolution of taxpayer complaints and problems, if so requested by a taxpayer or the taxpayer’s representative;
  2. Provide recommendations to the department for new or revised informational publications and recommend taxpayer and department employee education programs needed to reduce or eliminate errors or improve voluntary taxpayer compliance;
  3. Provide recommendations to the department for simplification or other improvements needed in tax laws, regulations, forms, systems, and procedures to promote better understanding and voluntary compliance by taxpayers; and
  4. At least annually, on or before October 1, prepare and submit a report to the commissioner of the Department of Revenue summarizing the activities of the division during the immediately preceding fiscal year, describing any recommendations made pursuant to subsections (2) and (3) of this section, including the progress in implementing such recommendations, and providing such other information as the division deems appropriate relating to the rights of Kentucky taxpayers.

History. Enact. Acts 2012, ch. 69, § 1, effective July 12, 2012; 2016 ch. 84, § 3, effective July 15, 2016.

131.090. Functions of tax commission. [Repealed.]

Compiler’s Notes.

This section (4114h-3, 4618-93: amend. Acts 1960, ch. 186, Art. I, § 31) was repealed by Acts 1964, ch. 141, § 39.

131.100. Commission may compel giving of testimony and production of evidence. [Repealed.]

Compiler’s Notes.

This section (4114h-3) was repealed by Acts 1964, ch. 141, § 39.

General Provisions

131.110. Protest of assessment by Department of Revenue — Review — Appeal.

    1. The Department of Revenue shall mail to the taxpayer a notice of any tax assessed by it. The assessment shall be due and payable if not protested in writing to the department within: (1) (a) The Department of Revenue shall mail to the taxpayer a notice of any tax assessed by it. The assessment shall be due and payable if not protested in writing to the department within:
      1. Forty-five (45) days from the date of notice, for assessments issued prior to July 1, 2018; and
      2. Sixty (60) days from the date of notice, for assessments issued on or after July 1, 2018.
    2. Claims for refund of paid assessments may be made under KRS 134.580 and denials appealed under KRS 49.220 .
      1. The protest shall be accompanied by a supporting statement setting forth the grounds upon which the protest is made. (c) 1. The protest shall be accompanied by a supporting statement setting forth the grounds upon which the protest is made.
      2. Upon written request, the department may extend the time for filing the supporting statement if it appears the delay is necessary and unavoidable.
      3. The refusal of the extension may be reviewed in the same manner as a protested assessment.
  1. After a timely protest has been filed, the taxpayer may request a conference with the department. The request shall be granted in writing stating the date and time set for the conference. The taxpayer may appear in person or by representative. Further conferences may be held by mutual agreement.
  2. After considering the taxpayer’s protest, including any matters presented at the final conference, the department shall issue a final ruling on any matter still in controversy, which shall be mailed to the taxpayer. The ruling shall state that it is a final ruling of the department, generally state the issues in controversy, the department’s position thereon and set forth the procedure for prosecuting an appeal to the Kentucky Claims Commission.
  3. The taxpayer may request in writing a final ruling at any time after filing a timely protest and supporting statement. When a final ruling is requested, the department shall issue such ruling within thirty (30) days from the date the request is received by the department.
  4. After a final ruling has been issued, the taxpayer may appeal to the Kentucky Claims Commission pursuant to the provisions of KRS 49.220 .

History. 4114h-4, 4114h-5: amend. Acts 1946, ch. 233, § 1; 1958, ch. 69, § 1; 1964, ch. 141, § 13; 1978, ch. 233, § 32, effective June 17, 1978; 1990, ch. 120, § 1, effective July 13, 1990; 1990, ch. 423, § 9, effective July 13, 1990; 1992, ch. 361, § 4, effective July 14, 1992; 2005, ch. 85, § 112, effective June 20, 2005; 2017 ch. 74, § 64, effective June 29, 2017; 2018 ch. 171, § 106, effective April 14, 2018; 2018 ch. 207, § 106, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(7/13/90) This section was amended by two 1990 Acts (ch. 120 and ch. 423) which are in conflict. Pursuant to KRS 446.250 , the Act which was last enacted by the General Assembly (ch. 423) prevails.

NOTES TO DECISIONS

  1. In General.
  2. Assessment Void.
  3. Taxes Due.
  4. Notice of Assessment.
  5. Petition for Review.
  6. Time of Filing.
  7. Hearing.
  8. Remedy Exclusive.
  9. Sales and Use Taxes.
  10. Judicial Review.
  11. Supporting Statement.
  12. Mandatory Nature of Requirements.
  13. Final Ruling Necessary.
  14. Claim for Refund.
  15. Cabinet's Authority.
1. In General.

The Revenue Cabinet is not required to consider every variable in assessing the tax value of unmined coal tracts; its consideration of mineable and merchantable acres, average clean coal seam thickness, location by county, and whether the coal was idle, permitted, or permitted and producing provided sufficient information to make a logical and reasonable estimate of the property’s cash value. Prior to initiating a lawsuit, taxpayers who believe their valuations are in excess of fair cash value should exhaust the administrative remedies of formally protesting the assessment and, if necessary, appealing any final determination by the Cabinet to the Kentucky Board of Tax Appeals. Revenue Cabinet v. Gillig, 957 S.W.2d 206, 1997 Ky. LEXIS 91 ( Ky. 1997 ).

2. Assessment Void.

Where the undisputed facts showed that taxpayer had no property within the jurisdiction of this state, and did no business therein, attempted assessment of franchise tax by Department of Revenue was void, and could be enjoined. Reeves v. Service Lines, Inc., 291 Ky. 410 , 164 S.W.2d 593, 1942 Ky. LEXIS 236 ( Ky. 1942 ).

3. Taxes Due.

Under this section taxes become due and payable on the day the assessment becomes final. Commonwealth ex rel. Luckett v. Kettenacker, 335 S.W.2d 339, 1960 Ky. LEXIS 256 ( Ky. 1960 ).

4. Notice of Assessment.

Where in an action to collect unpaid sales taxes, the defendant corporation claimed that it had never received notice of the assessment, and the record disclosed that the commonwealth did not or could not offer any proof that the subject notice of taxes due had been mailed to, or received by, the defendant corporation, the commonwealth was not entitled to a presumption that the tax notices were properly mailed as a usual business practice; therefore, where there was no proof by the commonwealth of a regular system or scheme for mailing the tax notices, it was a question of fact as to whether the defendant received the notice of assessment, and the trial court erred when it granted summary judgment in favor of the commonwealth. Koscot Interplanetary, Inc. v. Commonwealth, 649 S.W.2d 201, 1983 Ky. LEXIS 243 ( Ky. 1983 ).

Notice of tax assessment was properly addressed, for purposes of the presumption that a properly mailed letter is received in due course, where it was shown that the correct zip code and the incorrect one used were both used to deliver mail on the same road in the same city, and that the taxpayer received other correspondence from the department (now cabinet) with the same incorrect zip code. Zeigler Coal Co. v. Commonwealth, Dep't of Revenue, 691 S.W.2d 216, 1985 Ky. App. LEXIS 495 (Ky. Ct. App. 1985).

Department’s initial, timely letter, which notified the telephone company of a sales tax assessment and of the amount of the assessed tax deficiency, was sufficient to satisfy the statute of limitations, KRS 139.620(1), and to allow collection of the tax because the letter was not required to contain all five requirements of KRS 131.081(8). Revenue Cabinet v. GTE South, Inc., 238 S.W.3d 655, 2007 Ky. LEXIS 160 ( Ky. 2007 ).

5. Petition for Review.

The department or commissioner need not submit a petition for review to the tax commission unless the petition is filed within 15 days. Reeves v. Fries, 292 Ky. 450 , 166 S.W.2d 985, 1942 Ky. LEXIS 116 ( Ky. 1942 ) (decided under prior law).

6. Time of Filing.

Where taxpayer did not file petition for review within 15-day period, his right to relief was barred. The action of the commissioner (now secretary) of revenue in ruling on the merits of the taxpayer’s complaint did not operate to waive the statute, where the commissioner in making the ruling expressly reserved the question as to whether the complaint was timely, and finally rejected the complaint on the ground that it was not filed in time. Reeves v. Fries, 292 Ky. 450 , 166 S.W.2d 985, 1942 Ky. LEXIS 116 ( Ky. 1942 ) (decided under prior law).

7. Hearing.

The hearing by the tax commission is not an appeal, but a de novo redetermination. Reeves v. Fries, 292 Ky. 450 , 166 S.W.2d 985, 1942 Ky. LEXIS 116 ( Ky. 1942 ).

8. Remedy Exclusive.

Where the defendant failed to object to or appeal from the department’s (now cabinet’s) classification of income, the remedy was exclusive and the assessment became final. Koehler v. Commonwealth, 432 S.W.2d 397, 1968 Ky. LEXIS 325 ( Ky. 1968 ).

The question of the defendant’s residence was foreclosed when he neglected to pursue his statutory remedy and the issue could not be raised in an action to collect the delinquent tax. Koehler v. Commonwealth, 432 S.W.2d 397, 1968 Ky. LEXIS 325 ( Ky. 1968 ).

9. Sales and Use Taxes.

The general provisions contained in this section do not govern appeals as to overdue sales and use taxes where the chapter concerned with the levy and collection of such taxes has provisions that are exclusive and controlling in all matters concerning the due date, penalties and interest. Kentucky Board of Tax Appeals v. Brown Hotel Co., 528 S.W.2d 715, 1975 Ky. LEXIS 83 ( Ky. 1975 ).

10. Judicial Review.

Where religious organization failed to exhaust administrative remedies by filing protest under this section within 30 days after jeopardy assessment under KRS 131.150 , there was judicial review by trial court considering separate temporary injunction issue since it determined that activities at state fair were sales not protected by constitutional privileges of the First Amendment to the United States Constitution; thus, failure to exhaust remedies was not fatal to right of judicial review. International Soc. for Krishna Consciousness, Inc. v. Commonwealth, 610 S.W.2d 910, 1980 Ky. App. LEXIS 406 (Ky. Ct. App. 1980).

Court of Appeals erred in determining that a facial constitutional issue raised by a taxpayer was one that the Kentucky Board of Tax Appeals could not decide because the case did not challenge the constitutionality of the administrative process for collecting a tax refund, there were several administrative issues that had to be resolved prior to addressing the statute's constitutionality, which necessitated formal written findings, and the deference afforded the findings would be dependent upon their sufficiency. Commonwealth v. AT&T Corp., 462 S.W.3d 399, 2015 Ky. LEXIS 1631 ( Ky. 2015 ).

11. Supporting Statement.

Something more substantial than mere denials of tax liability is required as a “supporting statement” under this section. Eagle Machine Co. v. Commonwealth, 698 S.W.2d 528, 1985 Ky. App. LEXIS 600 (Ky. Ct. App. 1985).

The term “supporting statement” is not limited to full and complete tax returns; however, a taxpayer has an obligation to provide financial statements, records or some other documentation that would allow the revenue department some basis for reconsideration. Eagle Machine Co. v. Commonwealth, 698 S.W.2d 528, 1985 Ky. App. LEXIS 600 (Ky. Ct. App. 1985).

12. Mandatory Nature of Requirements.

Regardless of the motive of the entity being assessed, this section is mandatory in nature and, therefore, a taxpayer who failed to submit the required documentation before the Revenue Cabinet issued its final order, failed to preserve his right to review of a delinquency assessed by the Revenue Cabinet for sales and use taxes. Scotty's Constr. Co. v. Commonwealth Revenue Cabinet, 779 S.W.2d 234, 1989 Ky. App. LEXIS 146 (Ky. Ct. App. 1989).

13. Final Ruling Necessary.

This statute clearly indicates that after a protest to a tax assessment has been made by a taxpayer, the Cabinet shall issue a final ruling or determination on the matter. It is only when such ruling is final—and so states—that it can be appealed to the Board of Tax Appeals. Revenue Cabinet v. Castleton, Inc., 826 S.W.2d 334, 1992 Ky. App. LEXIS 67 (Ky. Ct. App. 1992).

14. Claim for Refund.

The remedy for filing a claim for a refund of taxes pursuant to KRS 134.580 is not conditioned upon satisfaction of the procedural requirements provided in this section for filing a protest of a tax assessment. Subsection (1) of this section allows a taxpayer 30 (now 45) days within which to file such a protest. KRS 134.580 (3) and 139.770(1), on the other hand, are concerned with requests for refunds of taxes already paid and provide that claims for refund must be made within four (4) years of the due date of the return or the date the money was paid into the treasury, whichever is later. Revenue Cabinet v. Castleton, Inc., 826 S.W.2d 334, 1992 Ky. App. LEXIS 67 (Ky. Ct. App. 1992).

Under KRS 134.580 , an “overpayment” or “payment where no tax was due” must occur before a refund is authorized under KRS 139.770 , and, thus, a taxpayer is only entitled to a refund if he has overpaid his tax liability; therefore, although the court had held that a timely notice of assessment issued by the Commonwealth of Kentucky, Revenue Cabinet was deficient under KRS 131.081(8) and KRS 131.110(1) and that its subsequent notice was barred by the statute of limitations under KRS 139.620(1), it accepted the Cabinet’s alternative argument that the taxpayer was not entitled to a refund concerning the sales and use taxes it paid during a certain period because it did not “overpay” its taxes for that period, and it held that the Cabinet had the right to retain prior excess payments for that time period to the extent that they did not exceed the amount which might have been properly assessed and demanded. GTE South, Inc. v. Commonwealth, 2004 Ky. App. LEXIS 86 (Ky. Ct. App. 2004), rehearing denied, 2004 Ky. App. LEXIS 180 (Ky. Ct. App. 2004), rev’d, Revenue Cabinet v. GTE South, Inc., 238 S.W.3d 655, 2007 Ky. LEXIS 160 ( Ky. 2007 ) (reversed on grounds that the notice of assessment was sufficient).

Company could receive a refund of its payment of an ad valorem tax assessment, where the company filed its refund claim within the statute of limitations provided by KRS 134.590 , protested the denial of its claim in accordance with KRS 131.110 , and exhausted the administrative remedies available. Dep't of Revenue, Fin. & Admin. Cabinet v. Cox Interior, Inc., 2010 Ky. App. Unpub. LEXIS 1008 (Ky. Ct. App. Nov. 5, 2010), aff'd, 400 S.W.3d 240, 2013 Ky. LEXIS 288 ( Ky. 2013 ).

“Or other administrative remedy procedures” language at the end of KRS 134.590(2) is an acknowledgement that a protest pursuant to KRS 131.110 is not the only administrative remedy procedure that may be applicable in a refund situation. Indeed, the disjunctive use of the word “or” which joins “other administrative remedy procedures,” evidences an intention that all prior references in the sentence are not to be treated as conjunctive, or in steps, but in the disjunctive, and this affords the taxpayer the option to use any one and maybe all of the administrative remedies available. Dep't of Revenue, Fin. & Admin. Cabinet v. Cox Interior, Inc., 2010 Ky. App. Unpub. LEXIS 1008 (Ky. Ct. App. Nov. 5, 2010), aff'd, 400 S.W.3d 240, 2013 Ky. LEXIS 288 ( Ky. 2013 ).

No specific administrative protest procedures are required for a tax refund claim involving a classification issue, which may be brought within two years after payment; thus, by filing for a refund of tangible personal property tax and appealing its denial before seeking judicial review, a taxpayer properly challenged the classification and tax rate applied to manufacturing machinery without going through the expedited assessment protest procedure. Dep't of Revenue, Fin. & Admin. Cabinet v. Cox Interior, Inc., 400 S.W.3d 240, 2013 Ky. LEXIS 288 ( Ky. 2013 ).

15. Cabinet's Authority.

Revenue Cabinet initiated an audit of defendant to address the failure of defendant’s earlier management to maintain exemption certificates representing that sales of thoroughbred yearlings to out-of-state buyers were not subject to sales tax, according to KRS 139.531 . When defendant submitted 22 exemption certificates to the Cabinet, under the language of KRS 139.531 it did not place those sales “in controversy”—absent fraud, it disposed of the controversy. The Cabinet does not have the arbitrary authority to at any time determine that a taxpayer, who in a good faith manner began the submission of evidence, has in fact supplied a quanta of evidence insufficient to perfect a protest and place a matter “in controversy”, and thereupon issue an “Eagle Machine Letter”, (Eagle Machine Co. v. Commonwealth, 698 S.W.2d 528, 529, 1985 Ky. App. LEXIS 600 (1985)) (1) which does not advise the taxpayer of the finality of the Cabinet’s ruling; (2) which does not let the taxpayer know that no additional documentation will be accepted by the Cabinet; (3) which does not state the pertinent issues and the Cabinet’s position thereon; and, perhaps most egregiously on a practical level, (4) which does not notify the taxpayer of the procedure for undertaking an appeal to the Kentucky Board of Tax Appeals—all things required of the Cabinet by KRS 131.110(3). Commonwealth, Revenue Cabinet v. Kenington Sales, Inc., 836 S.W.2d 902, 1992 Ky. App. LEXIS 129 (Ky. Ct. App. 1992).

Cited in:

Reeves v. Kentucky Utilities Co., 291 Ky. 226 , 163 S.W.2d 482, 1942 Ky. LEXIS 211 ( Ky. 1942 ); Todd County v. Bond Bros., 300 Ky. 224 , 188 S.W.2d 325, 1945 Ky. LEXIS 521 ( Ky. 1945 ); Kentucky Tax Com. v. Sandman, 300 Ky. 423 , 189 S.W.2d 407, 1945 Ky. LEXIS 563 , 166 A.L.R. 512 ( Ky. 1945 ); Fields v. Reeves, 314 Ky. 163 , 234 S.W.2d 661, 1950 Ky. LEXIS 1044 ( Ky. 1950 ); Reeves v. Jefferson County, 245 S.W.2d 606, 1951 Ky. LEXIS 1263 ( Ky. 1951 ); Fontaine v. Department of Finance, 249 S.W.2d 799, 1952 Ky. LEXIS 872 ( Ky. 1952 ); Hahn v. Allphin, 282 S.W.2d 824, 1955 Ky. LEXIS 263 ( Ky. 1955 ); Bobinchuck v. Levitch, 380 S.W.2d 233, 1964 Ky. LEXIS 292 ( Ky. 1964 ); Department of Conservation v. Co-De Coal Co., 388 S.W.2d 614, 1964 Ky. LEXIS 537 ( Ky. 1964 ); Revenue Cabinet, Commonwealth v. Plasma Alliance, Inc., 794 S.W.2d 639, 1990 Ky. App. LEXIS 60 (Ky. Ct. App. 1990); Revenue Cabinet v. Charles R. Gaba, P.S.C., 885 S.W.2d 706, 1994 Ky. App. LEXIS 122 (Ky. Ct. App. 1994).

NOTES TO UNPUBLISHED DECISIONS

1. In General.

Unpublished decision: Department of Revenue was required to produce for inspection redacted copies of its final rulings because the production of the material a tax attorney and tax analysts sought was required by the Open Records Act; the Department's final rulings contained information related to its reasoning and analysis with respect to its task in administration of the tax laws, and that information could be made available without jeopardizing taxpayers' privacy interests under the Taxpayers' Bill of Rights. Fin. & Admin. Cabinet v. Sommer, 2017 Ky. App. LEXIS 9 (Ky. Ct. App.), sub. op., 2017 Ky. App. Unpub. LEXIS 624 (Ky. Ct. App. Jan. 13, 2017).

Unpublished decision: Final rulings of the Department of Revenue must contain a general statement of the issues in controversy and the Department's position with respect to them; consequently, the substantive portions of final rulings contain a wealth of information relative to the implementation of our tax laws. Fin. & Admin. Cabinet v. Sommer, 2017 Ky. App. LEXIS 9 (Ky. Ct. App.), sub. op., 2017 Ky. App. Unpub. LEXIS 624 (Ky. Ct. App. Jan. 13, 2017).

Opinions of Attorney General.

Letter of electric corporation attached to payment of ad valorem taxes protesting payment and asking the sheriff to sign the letter acknowledging receipt of the protest did not constitute a valid or legal protest, since such taxes are assessed by the Revenue Cabinet and thus protests of such assessments must be made to the Revenue Cabinet; therefore, the sheriff should not sign such protest. OAG 83-202 .

Research References and Practice Aids

Cross-References.

Appeal procedure, KRS 133.120 .

Kentucky Law Journal.

Oberst, Lewis, Claims Against the State of Kentucky, 42 Ky. L.J. 65 (1953).

131.120. Appeal to Franklin circuit court from commission. [Repealed.]

Compiler’s Notes.

This section (4114h-5, 4114h-6: amend. Acts 1960, ch. 186, Art. I, §§ 31, 32; 1962, ch. 56, § 1) was repealed by Acts 1964, ch. 141, § 39.

131.125. Appeal under KRS 131.110 and 131.120 is exclusive remedy. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 233, § 2; 1960, ch. 186, Art. I, §§ 31, 32) was repealed by Acts 1964, ch. 141, § 39.

131.130. General powers and duties of department — Prosecution duties.

Without limitation of other duties assigned to it by law, the following powers and duties are vested in the Department of Revenue:

  1. The department may promulgate administrative regulations, and direct proceedings and actions, for the administration and enforcement of all tax laws of this state. To assist taxpayers in understanding and interpreting the tax laws, the department may, through incorporation by reference, include examples as part of any administrative regulation. The examples may include demonstrative, nonexclusive lists of items if the department determines the lists would be helpful to taxpayers in understanding the application of the tax laws.
  2. The department, by representatives it appoints in writing, may take testimony or depositions, and may examine hard copy or electronic records, any person’s documents, files, and equipment if those records, documents, or equipment will furnish knowledge concerning any taxpayer’s tax liability, when it deems this reasonably necessary to the performance of its functions. The department may enforce this right by application to the Circuit Court in the county where the person is domiciled or has his or her principal office, or by application to the Franklin Circuit Court, which courts may compel compliance with the orders of the department.
  3. The department shall prescribe the style, and determine and enforce the use or manner of keeping, of all assessment and tax forms and records employed by state and county officials, and may prescribe forms necessary for the administration of any revenue law.
  4. The department shall advise on all questions respecting the construction of state revenue laws and its application to various classes of taxpayers and property.
  5. Attorneys employed by the Finance and Administration Cabinet and approved by the Attorney General as provided in KRS 15.020 may prosecute all violations of the criminal and penal laws relating to revenue and taxation. If a Finance and Administration Cabinet attorney undertakes any of the actions prescribed in this subsection, that attorney shall be authorized to exercise all powers and perform all duties in respect to the criminal actions or proceedings which the prosecuting attorney would otherwise perform or exercise, including the authority to sign, file, and present any complaints, affidavits, information, presentments, accusations, indictments, subpoenas, and processes of any kind, and to appear before all grand juries, courts, or tribunals.
  6. In the event of the incapacity of attorneys employed by the Finance and Administration Cabinet or at the request of the secretary of the Finance and Administration Cabinet, the Attorney General or his or her designee shall prosecute all violations of the criminal and penal laws relating to revenue and taxation. If the Attorney General undertakes any of the actions prescribed in this subsection, he or she shall be authorized to exercise all powers and perform all duties in respect to the criminal actions or proceedings which the prosecuting attorney would otherwise perform or exercise, including but not limited to the authority to sign, file, and present any and all complaints, affidavits, information, presentments, accusations, indictments, subpoenas, and processes of any kind, and to appear before all grand juries, courts, or tribunals.
  7. The department may require the Commonwealth’s attorneys and county attorneys to prosecute actions and proceedings and perform other services incident to the enforcement of laws assigned to the department for administration.
  8. Notwithstanding KRS Chapter 13A, the department may research the fields of taxation, finance, and local government administration, publish its findings, respond to the public’s and taxpayers’ questions, and publish its responses, as the commissioner may deem wise. To assist taxpayers and the public in understanding and interpreting the tax laws, the department may include examples as part of any response or publication. The examples may include demonstrative, nonexclusive lists of items, if the department determines that the list would be helpful to taxpayers in understanding the application of the tax laws.
  9. The department may promulgate administrative regulations necessary to establish a system of taxpayer identifying numbers for the purpose of securing proper identification of taxpayers subject to any tax laws or other revenue measure of this state, and may require the taxpayer to place on any return, report, statement, or other document required to be filed, any number assigned pursuant to the administrative regulations.
  10. The department may, when it is in the best interest of the Commonwealth and helpful to the efficient and effective enforcement, administration, or collection of sales and use tax, motor fuels tax, or the petroleum environmental assurance fee, enter into agreements with out-of-state retailers or other persons for the collection and remittance of sales and use tax, the motor fuels tax, or the petroleum environmental assurance fee.
  11. The department may enter into annual memoranda of agreement with any state agency, officer, board, commission, corporation, institution, cabinet, department, or other state organization to assume the collection duties for any debts due the state entity and may renew that agreement for up to five (5) years. Under such an agreement, the department shall have all the powers, rights, duties, and authority with respect to the collection, refund, and administration of those liquidated debts as provided under:
    1. KRS Chapters 131, 134, and 135 for the collection, refund, and administration of delinquent taxes; and
    2. Any applicable statutory provisions governing the state agency, officer, board, commission, corporation, institution, cabinet, department, or other state organization for the collection, refund, and administration of any liquidated debts due the state entity.
  12. The department may refuse to accept a personal check in payment of taxes due or collected from any person who has ever tendered a check to the state which, when presented for payment, was not honored. Any check so refused shall be considered as never having been tendered.

HISTORY: 4019a-10c, 4114h-2, 4149b-12, 4202a-31, 4223b-10, 4224a-5, 4224c-3, 4224c-5, 4281a-33, 4281a-40, 4281b-23, 4281c-20, 4281e-9, 4281f-5, 4281f-27, 4281g-13, 4281h-12, 4281i-6, 4281j-4: amend. Acts 1962, ch. 56, § 2; 1988, ch. 322, § 12, effective July 15, 1988; 1996, ch. 56, § 1, effective July 15, 1996; 1998, ch. 314, § 3, effective July 15, 1998; 1998, ch. 536, § 2, effective July 15, 1998; 2002, ch. 117, § 1, effective July 15, 2002; 2003, ch. 135, § 1, effective June 24, 2003; 2004, ch. 118, § 5, effective July 13, 2004; 2005, ch. 85, § 113, effective June 20, 2005; 2005, ch. 184, § 2, effective June 20, 2005; 2009, ch. 10, § 31, effective January 1, 2010; 2010, ch. 81, § 1, effective July 15, 2010; 2016 ch. 82, § 32, effective July 15, 2016; 2017 ch. 95, § 1, effective June 29, 2017.

NOTES TO DECISIONS

  1. Purpose.
  2. Application.
  3. Production of Files and Reports.
  4. —Subpoena of Records.
  5. Actions to Collect Taxes.
1. Purpose.

The purpose of this section is to aid the Department of Revenue in performing its administrative duties and not to affect any provision relative to court procedure. Commonwealth v. American Creosoting Co., 296 Ky. 858 , 178 S.W.2d 988, 1944 Ky. LEXIS 677 ( Ky. 1944 ).

This section deals exclusively with the administrative powers of the Department of Revenue and was intended to enable the department to obtain the information necessary to make the assessments directed by law. Commonwealth v. American Creosoting Co., 296 Ky. 858 , 178 S.W.2d 988, 1944 Ky. LEXIS 677 ( Ky. 1944 ).

2. Application.

Until the assessment is made and the Circuit Court of the county in which it is sought to be enforced has acquired jurisdiction by appeal from the county court this section applies, but it was not intended to alter or supplant existing court procedure where the Circuit Court of the county “wherein the person is domiciled or has his principal office” has acquired jurisdiction for the purpose of determining the correctness of the assessment made by the county court. Commonwealth v. American Creosoting Co., 296 Ky. 858 , 178 S.W.2d 988, 1944 Ky. LEXIS 677 ( Ky. 1944 ).

3. Production of Files and Reports.

For the purpose of determining whether a rural electric cooperative corporation is actually operating on a nonprofit basis, the Department of Revenue may require it to file schedules and reports showing that it has no franchise value over and above the value of its tangible property. Inter-County Rural Electric Co-operative Corp. v. Reeves, 294 Ky. 458 , 171 S.W.2d 978, 1943 Ky. LEXIS 446 ( Ky. 1943 ).

Where a defendant chiropractor was held to be a taxpayer as defined by KRS 131.010 , he could not refuse to disclose his records, under this section, based on claim that it might subject him to state criminal prosecution where the Commonwealth granted him immunity from criminal prosecution based on disclosure of his records for tax auditing purposes. Boulton v. Commonwealth by Calvert, 896 S.W.2d 614, 1994 Ky. App. LEXIS 159 (Ky. Ct. App. 1994).

4. —Subpoena of Records.

This section gives the Revenue Cabinet no independent power to either summon or subpoena the taxpayers records, and an administrative summons issued thereby is nothing more than a request, lacking the force of law. Revenue Cabinet, Commonwealth v. Cherry, 803 S.W.2d 570, 1990 Ky. LEXIS 110 ( Ky. 1990 ).

5. Actions to Collect Taxes.

Action to collect distilled spirits excise tax was properly brought in the name of the Commonwealth by the commissioner of revenue. Kentucky ex rel. Martin v. Morris Wholesale Liquor Distributing Co., 29 F. Supp. 310, 1939 U.S. Dist. LEXIS 2306 (D. Ky. 1939 ).

Cited in:

Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ), appeal denied, Reynolds Metals Co. v. Martin, 302 U.S. 646, 58 S. Ct. 146, 82 L. Ed. 502, 1937 U.S. LEXIS 585 (1937); Old Lewis Hunter Distillery Co. v. Kentucky Tax Com., 302 Ky. 68 , 193 S.W.2d 464, 1945 Ky. LEXIS 759 ( Ky. 1945 ); Allphin v. Joseph E. Seagram & Sons, Inc., 294 S.W.2d 515, 1956 Ky. LEXIS 122 ( Ky. 1956 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

Opinions of Attorney General.

The county sheriff should list in his cash book the name of every taxpayer who pays taxes to the county sheriff. OAG 66-60 .

A county conservation district, which assists individual landowners with the development and implementation of a resource conservation plan for a unit of land, is required to allow Department of Revenue representatives access to individual resource conservation plans upon request on a confidential basis. OAG 76-272 .

A deputy property valuation administrator (PVA) has no recourse for appeal other than the Department of Revenue and, if a deputy PVA believes that the department is misapplying its statutory authority to administer the PVA personnel system, he may seek judicial review of the department’s action in Circuit Court. Venue would lie in the Franklin Circuit Court since the main office of the Department of Revenue is located in Frankfort and the action forming the basis for the litigation would occur in Frankfort. OAG 82-360 .

Deputy property valuation administrators are deputy state officers and state employes under the direct administrative control of the Department of Revenue. OAG 82-360 .

The Department of Revenue has the authority to set specifications for deputy property valuation administrators (PVAs) if it does so in a reasonable manner. The department is not required to adhere to the rules and regulations of the personnel system when applied to the PVA deputies, but is required to establish an administrative organizational structure and to operate within standard personnel policies pursuant to the statutory guidelines contained in KRS Chapter 132; a system that is comparable to that utilized by the department of personnel for the classified service or in the regulations governing the unclassified service is reasonable for this purpose. OAG 82-360 .

Research References and Practice Aids

Cross-References.

Administrative regulations, adoption and effective date, KRS 13A.330 .

Claims due state, attorney general and auditor of public accounts shall aid in collection, KRS 15.060 .

Department of Revenue to prorate and distribute to counties, cities and school districts payments made to department by T.V.A., KRS 96.895 .

Right to inspect books and records of alcoholic beverage licensees, KRS 244.150 .

Tax bill forms, Department of Revenue to furnish to county clerks, KRS 133.220 .

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

131.131. Department to publish forms and instructions without promulgation of administrative regulation.

Notwithstanding KRS 13A.110 , the Department of Revenue shall publish tax forms and instructions to those forms without promulgation of an administrative regulation.

HISTORY: 2016 ch. 82, § 35, effective July 15, 2016.

Legislative Research Commission Notes.

(7/15/2016). 2016 Ky. Acts ch. 82, sec. 35 directed that a new section of KRS Chapter 141 be created for the text of this statute. The subject matter of KRS Chapter 141 relates to income taxes. Since this statute authorizes the Department of Revenue to publish forms and instructions relating to all types of taxes, not just forms and instructions relating to income taxes, in codification the Reviser of Statutes created a new section of KRS Chapter 131, which addresses the duties of the Department of Revenue and taxes in general, as a more appropriate statutory designation under the authority of KRS 7.136(1)(a).

131.135. Annual report by employers on workers’ compensation coverage.

  1. Each employer subject to KRS Chapter 342 shall file annually with the Department of Revenue, in accordance with administrative regulations, a report providing the policy number and the name and address of the employer’s workers’ compensation insurance carrier.
  2. The report may be made available to other state agencies notwithstanding the confidentiality provisions of KRS 131.190 .

History. Enact. Acts 1996 (1st Ex. Sess.), ch. 1, § 50, effective December 12, 1996; 2005, ch. 85, § 114, effective June 20, 2005.

131.140. Powers and duties of department concerning local finance — Supervision of local officials in revenue duties.

  1. The department shall requisition the Finance and Administration Cabinet to furnish to local officials an adequate supply of forms for listing property for taxation and other forms and blanks the state is required by law to provide. The books and records prescribed for use by property valuation administrators, county clerks, sheriffs and other county tax collectors shall be designed to promote economical operation, adequate control, availability of useful information, and safekeeping.
  2. The department may confer with, advise and direct local officials respecting their duties relating to taxation, and shall supervise the officials in the performance of those duties. The department shall provide to the property valuation administrators up-to-date appraisal manuals outlining uniform procedures for appraising all types of real and personal property assessed by them. The property valuation administrators shall follow the uniform procedures for appraising property outlined in these manuals. The department shall maintain and make accessible to all property valuation administrators a statewide commercial real property comparative sales file. The department, by authorized agents, may visit local governmental units and officers for investigational purposes, when necessary.
  3. The Department of Revenue shall conduct a biennial performance audit of each property valuation administrator’s office. This audit shall include, but shall not be limited to, an inspection of maps and records, an appraisal study of real property, and an evaluation of the overall effectiveness of the office. Each property valuation administrator’s office shall provide the department with access to its files, maps and records during the audit. The department shall prepare a report on assessment equity and quality for each county based on the performance audit, and shall provide a copy to the Legislative Research Commission.
  4. The department shall arrange for an annual conference of the property valuation administrators, or the county officers whose duty it is to assess property for taxation, to give them systematic instruction in the fair and just valuation and assessment of property, and their duty in connection therewith. The conference shall continue not more than five (5) days. The officers shall attend and take part in the conference, unless prevented by illness or other reason satisfactory to the commissioner. Any officer willfully failing to attend the conference may be removed from office by the Circuit Court of the county where he was elected. If the officer participates in all sessions of the conference, one-half (1/2) of his actual and necessary expenses in attending the conference shall be paid by the state, and the other half shall be paid by the county from which he attends. Each officer shall prepare an itemized statement showing his actual and necessary expenses, and if it is found regular and supported by proper receipts it shall be approved by the department before payment.

History. 4114h-2: amend. Acts 1960, ch. 68, Art. V, § 6; 1974, ch. 74, Art. II, § 9(1); 1978, ch. 384, § 256, effective June 17, 1978; 1988, ch. 418, § 1, effective July 15, 1988; 2005, ch. 85, § 115, effective June 20, 2005; 2005, ch. 168, § 53, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

Cited in:

Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ).

Opinions of Attorney General.

The county sheriff should list in his cash book the name of every taxpayer who pays taxes to the county sheriff. OAG 66-660 .

Research References and Practice Aids

Cross-References.

Candidate for property valuation administrator to have certificate of examination from department, KRS 132.380 .

Emergency assessment of property by Department of Revenue, KRS 132.660 .

Equalization of assessment of property in county, KRS 133.150 to 133.170 .

Post-auditing of county records by auditor of public accounts, KRS 43.070 , 43.080 .

Property valuation administrator duties partially transferred to department, KRS 132.420 .

Supplies and equipment for property valuation administrator, department may buy and lend, KRS 132.605 .

131.150. Jeopardy assessments.

  1. When the Department of Revenue reasonably believes that any taxpayer has withdrawn from the state or concealed his assets or a material part thereof so as to hinder or evade the assessment or collection of taxes, or has desisted from any taxable activity in the state, or has become domiciled elsewhere, or has departed from this state with fraudulent intent to hinder or evade the assessment or collection of taxes, or has done any other act tending to render partly or wholly ineffective proceedings to assess or collect any such taxes, or contemplates doing any of these acts in the immediate future, or that any tax claim for any other reason is being endangered, such tax liability shall become due and payable immediately upon assessment or determination of the amount of taxes due, as authorized in this section.
  2. Under any of the circumstances set out in subsection (1) of this section, the department may make a tentative assessment or determination of the taxes due, and may proceed immediately to bring garnishment, attachment or any other legal proceedings to collect the taxes so assessed or determined to be due. Notwithstanding the provisions of KRS 131.180(1), if the tax so assessed is due to the failure of the taxpayer to file a required tax return a minimum penalty of one hundred dollars ($100) shall be assessed unless the taxpayer demonstrates that the failure to file was due to reasonable cause as defined in KRS 131.010(9). This penalty shall be applicable whether or not any tax is determined to be due on a subsequently filed return or if the subsequently filed return results in a refund. No bond shall be required of the department in such proceedings. The taxpayer may stay legal proceedings by filing a bond in an amount sufficient in the opinion of the department to cover the taxes, penalties, interest, and costs. If no legal proceedings have been instituted, the department may require a bond adequate to cover all taxes, penalties, and interest. On making bond, exception to the assessment or determination of tax liability may be filed in the same manner and time as provided in KRS 131.110 . If no exceptions are filed to the tentative assessment or determination, it shall become final.
  3. The department may require any such taxpayer to file with it forthwith the reports required by law or regulation, or any additional reports or other information necessary to assess the property or determine the amount of tax due.
  4. If the department fails to exercise the authority conferred by this section, such taxpayer shall report and pay all taxes due as otherwise provided by law.

History. 4114h-9: amend. Acts 1984, ch. 141, § 39; 2002, ch. 366, § 13, effective January 1, 2003; 2005, ch. 85, § 116, effective June 20, 2005.

NOTES TO DECISIONS

  1. Judicial Review.
  2. Evasion of Taxes.
  3. Priority of Liens.
1. Judicial Review.

Where religious organization failed to exhaust administrative remedies by filing protest under KRS 131.110 within 30 days after jeopardy assessment under this section, since there was judicial review by trial court considering separate temporary injunction issue where it determined that activities at state fair were sales not protected by constitutional privileges of the First Amendment to the United States Constitution and thus, failure to exhaust remedies was not fatal to right of judicial review. International Soc. for Krishna Consciousness, Inc. v. Commonwealth, 610 S.W.2d 910, 1980 Ky. App. LEXIS 406 (Ky. Ct. App. 1980).

2. Evasion of Taxes.

When a taxpayer has been apprised of a tax liability, disputes that liability, but never offers any material to support that denial, the Department of Revenue is reasonable in believing that the taxpayer is attempting to “evade the assessment or collection of taxes.” Eagle Machine Co. v. Commonwealth, 698 S.W.2d 528, 1985 Ky. App. LEXIS 600 (Ky. Ct. App. 1985).

3. Priority of Liens.

Judgment lien would be given priority over Revenue Cabinet’s tax lien, resulting from a jeopardy assessment pursuant to this section, notwithstanding the priority rules enacted at KRS 134.420 , where the Revenue Cabinet failed to present any evidence regarding the validity or amount of its lien. Commonwealth, Revenue Cabinet v. Liberty Nat'l Bank, 858 S.W.2d 199, 1993 Ky. App. LEXIS 40 (Ky. Ct. App. 1993).

Cited in:

Commonwealth ex rel. Luckett v. Kettenacker, 335 S.W.2d 339, 1960 Ky. LEXIS 256 ( Ky. 1960 ).

131.155. Tax payments to be made by electronic fund transfer — Administrative regulations — Waiver — Refund by electronic fund transfer.

  1. For the purpose of facilitating the administration, payment, or collection of the taxes, the department may require any tax payment to be made by electronic fund transfer.
  2. The following payments shall be made by electronic fund transfer:
    1. The payment required by KRS 136.620 ;
    2. For tax periods beginning on or after January 1, 2007, the payment required by KRS 138.280 ;
    3. For collections on or after August 1, 2010, the clerk shall deposit motor vehicle usage tax and sales and use tax collections in the clerk’s local depository account not later than the next business day following receipt. The clerk shall cause the funds to be electronically transferred from the clerk’s local depository account to the State Treasury in the manner and at the times prescribed by the department;
    4. For any period beginning after December 31, 2000, any payment required under KRS Chapter 139, if the taxpayer’s average payment per reporting period during the lookback period exceeds twenty-five thousand dollars ($25,000);
    5. For any period beginning after December 31, 2000, any payment required under KRS 141.330 , if the taxpayer’s average payment per reporting period during the lookback period exceeds twenty-five thousand dollars ($25,000); and
    6. For tax periods beginning on or after July 1, 2005, the payment required under KRS 160.615 .
    1. The electronic fund transfer shall be made on or before the date the tax is due. (3) (a) The electronic fund transfer shall be made on or before the date the tax is due.
    2. The department may permit the filing of the tax return following the date of the tax payment.
    3. The department shall promulgate administrative regulations establishing electronic fund transfer requirements for the payment of taxes and fees administered by the department.
  3. The department may waive the requirement that a qualifying taxpayer remit the payment by electronic fund transfer if the taxpayer is unable to remit funds electronically.
  4. Taxpayers and any other persons who are required to collect or remit taxes administered by the department by electronic fund transfer shall be entitled to receive refunds for any overpayment of taxes or fees, on or after July 1, 2001, by electronic fund transfer.

History. Enact. Acts 1994, ch. 4, § 1, effective July 15, 1994; 1998, ch. 314, § 1, effective July 15, 1998; 2000, ch. 184, § 1, effective August 1, 2000; 2005, ch. 85, § 117, effective June 20, 2005; 2010, ch. 147, § 3, effective July 15, 2010.

Compiler’s Notes.

Section 3 of Acts 1994, ch. 4, provided that this section “shall apply to taxable periods beginning after December 31, 1994.”

Section 4 of Acts 1998, ch. 314, provided that the 1998 amendments to this section “shall apply for payments remitted on or after August 1, 1998.”

131.160. Collection on bond for taxes.

If any taxpayer required to make bond for the payment of taxes fails to pay the taxes when due, the department shall notify him and his surety by mailing notice to their last known addresses. If, after expiration of a reasonable time from the date of the notice, the amount due remains unpaid, the commissioner shall proceed by suit to collect the amount due, including the penalties, interest and costs. The defaulting taxpayer need not be made a party to any suit brought against his surety.

History. 4114h-10: amend. Acts 2005, ch. 85, § 118, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Bond for alcoholic beverage taxes, KRS 243.400 to 243.420 .

131.170. Extension of time for filing reports and returns.

The Department of Revenue may, when extension is not otherwise provided for, grant a reasonable extension of time for filing reports or returns whenever, in its judgment, good cause therefor exists. The department shall keep a record of such extensions. Except where a taxpayer is abroad, no extension shall be granted for more than six (6) months, and in no case for more than one (1) year. If any extension operates to postpone a tax payment, interest at the tax interest rate as defined in KRS 131.010(6) shall be collected. The department may condition the extension upon a bond sufficient to cover any tax and penalty determined to be due. The department may, on request, permit a person to file a tax return or report or pay tax on a date other than that prescribed by statute, or to change the fiscal period covered by such return or report, if the variation will not ultimately effect a reduction in revenue.

History. 4114h-13: amend. Acts 1992, ch. 338, § 1, effective August 1, 1992; 2005, ch. 85, § 119, effective June 20, 2005.

131.175. Commissioner authorized to waive penalty, but not interest.

Notwithstanding any other provisions of KRS Chapters 131 to 143A, for all taxes payable directly to the Department of Revenue, the sheriff or the county clerk, the commissioner shall have authority to waive the penalty, but not interest, where it is shown to the satisfaction of the department that failure to file or pay timely is due to reasonable cause. For purposes of this section, any addition to tax provided in KRS 141.044 and 141.305 shall be considered as penalty.

History. Enact. Acts 1986, ch. 459, § 6, effective July 15, 1986; 1990, ch. 27, § 1, effective July 13, 1990; 2005, ch. 85, § 120, effective June 20, 2005; 2019 ch. 151, § 3, effective June 27, 2019.

Legislative Research Commission Notes.

Acts 1986, ch. 459, § 7, states that the provisions of this section apply to taxable years beginning after December 31, 1985.

131.180. Uniform Civil Penalty Act.

The provisions of this section shall be known as the “Uniform Civil Penalty Act.” Penalties to be assessed in accordance with this section shall apply as follows unless otherwise provided by law:

  1. Any taxpayer who files any return or report after the due date prescribed for filing or the due date as extended by the department shall, unless it is shown to the satisfaction of the department that the failure is due to reasonable cause, pay a penalty equal to two percent (2%) of the total tax due for each thirty (30) days or fraction thereof that the report or return is late. The total penalty levied pursuant to this subsection shall not exceed twenty percent (20%) of the total tax due; however, the penalty shall not be less than ten dollars ($10).
  2. Any taxpayer who fails to withhold or collect any tax as required by law, fails to pay the tax computed due on a return or report on or before the due date prescribed for it or the due date as extended by the department or, excluding underpayments determined under KRS 141.044 or 141.305 , fails to have timely paid at least seventy-five percent (75%) of the tax determined due by the department shall, unless it is shown to the satisfaction of the department that the failure is due to reasonable cause, pay a penalty equal to two percent (2%) of the tax not withheld, collected, or timely paid for each thirty (30) days or fraction thereof that the withholding, collection, or payment is late. The total penalty levied pursuant to this subsection shall not exceed twenty percent (20%) of the tax not timely withheld, collected, or paid; however, the penalty shall not be less than ten dollars ($10).
  3. If any taxpayer fails or refuses to make and file a report or return or furnish any information requested in writing by the department, the department may make an estimate of the tax due from any information in its possession, assess the tax at not more than twice the amount estimated to be due, and add a penalty equal to five percent (5%) of the tax assessed for each thirty (30) days or fraction thereof that the return or report is not filed. The total penalty levied pursuant to this subsection shall not exceed fifty percent (50%) of the tax assessed; however, the penalty shall not be less than one hundred dollars ($100) unless the taxpayer demonstrates that the failure to file was due to reasonable cause as defined in KRS 131.010(9). This penalty shall be applicable whether or not any tax is determined to be due on a subsequently filed return or if the subsequently filed return results in a refund.
  4. If any taxpayer fails or refuses to pay within sixty (60) days of the due date any tax assessed by the department which is not protested in accordance with KRS 131.110 , there shall be added a penalty equal to two percent (2%) of the unpaid tax for each thirty (30) days or fraction thereof that the tax is final, due, and owing, but not paid.
  5. Any taxpayer who fails to obtain any identification number, permit, license, or other document of authority from the department within the time required by law shall, unless it is shown to the satisfaction of the department that the failure is due to reasonable cause, pay a penalty equal to ten percent (10%) of any cost or fee required to be paid for the identification number, permit, license, or other document of authority; however, the penalty shall not be less than fifty dollars ($50).
  6. If any tax assessed by the department is the result of negligence by a taxpayer or other person, a penalty equal to ten percent (10%) of the tax so assessed shall be paid by the taxpayer or other person who was negligent.
  7. If any tax assessed by the department is the result of fraud committed by the taxpayer or other person, a penalty equal to fifty percent (50%) of the tax so assessed shall be paid by the taxpayer or other person who committed fraud.
  8. If any check tendered to the department is not paid when presented to the drawee bank for payment, there shall be paid as a penalty by the taxpayer who tendered the check, upon notice and demand of the department, an amount equal to ten percent (10%) of the check. The penalty under this section shall not be less than ten dollars ($10) nor more than one hundred dollars ($100). If the taxpayer who tendered the check shows to the department’s satisfaction that the failure to honor payment of the check resulted from error by parties other than the taxpayer, the department shall waive the penalty.
  9. Any person who fails to make any tax report or return or pay any tax within the time, or in the manner required by law, for which a specific civil penalty is not provided by law, shall pay a penalty as provided in this section, with interest from the date due at the tax interest rate as defined in KRS 131.010(6).
  10. The penalties levied pursuant to subsection (4) of this section shall apply to any tax assessment protested pursuant to KRS 131.110 to the extent that any appeal of the assessment or portion of it is ruled by the Kentucky Claims Commission or, if appealed from, the court of last resort, as not protested, appealed, or pursued in good faith by the taxpayer.
  11. Nothing in this section shall be construed to prevent the assessment or collection of more than one (1) of the penalties levied under this section or any other civil or criminal penalty provided for violation of the law for which penalties are imposed.
  12. All penalties levied pursuant to this section shall be assessed, collected, and paid in the same manner as taxes. Any corporate officer or other person who becomes liable for payment of any tax assessed by the department shall likewise be liable for all penalties and interest applicable thereto.

HISTORY: 4114h-12: amend. Acts 1982, ch. 452, § 2, effective July 1, 1982; 1992, ch. 403, § 2, effective July 14, 1992; 1994, ch. 4, § 2, effective July 15, 1994; 2002, ch. 366, § 14, effective January 1, 2003; 2005, ch. 85, § 121, effective June 20, 2005; 2017 ch. 74, § 65, effective June 29, 2017; 2018 ch. 171, § 107, effective April 14, 2018; 2018 ch. 207, § 107, effective April 27, 2018; 2019 ch. 151, § 4, effective June 27, 2019.

NOTES TO DECISIONS

  1. Application.
  2. Predeprivation Remedies.
1. Application.

The penalty provision in this section is not applicable to the occupational license fee levied in KRS 91.200 . Louisville v. Fischer Packing Co., 520 S.W.2d 744, 1975 Ky. LEXIS 171 ( Ky. 1975 ).

2. Predeprivation Remedies.

Because the statutory scheme of Kentucky is pointedly designed to coerce taxpayers into remitting taxes before challenging any liability to avoid potential economic disadvantage, this state does not offer meaningful, adequate predeprivation remedies for purposes of federal law. Revenue Cabinet v. Gossum, 887 S.W.2d 329, 1994 Ky. LEXIS 85 ( Ky. 1994 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

131.181. Coal mining license revocation for or denial to delinquent taxpayer or his agent, contract miner, or delegate.

  1. Whenever it is determined that a taxpayer, who holds a license to mine coal in Kentucky under KRS 351.175 , is a “delinquent taxpayer” as defined in subsection (3) of this section, the Department of Revenue shall, after giving notice as provided in subsection (4) of this section, submit the name of the taxpayer to the Department for Natural Resources for revocation of the license issued under KRS 351.175 .
  2. If it is determined that a person who is an agent, contract miner, or delegate of a delinquent taxpayer as defined in subsection (3) holds a license to mine coal for the delinquent taxpayer in Kentucky under KRS 351.175 , the Department of Revenue shall, after giving notice as provided in subsection (4) of this section, submit the name of the agent, contract miner, or delegate to the Department for Natural Resources for revocation of the license issued under KRS 351.175 to mine coal for the delinquent taxpayer.
  3. Any of the following situations is sufficient to cause a taxpayer to be classified as a “delinquent taxpayer” for purposes of this section:
    1. When a taxpayer has an overdue state tax liability arising directly or indirectly from the mining, transportation, or processing of coal, for which all protest and appeal rights granted by law have expired and has been contacted by the department concerning the overdue tax liability. This does not include a taxpayer who is making current timely installment payments on the overdue tax liability under agreement with the department.
    2. When a taxpayer has not filed a required tax return as of thirty (30) days after the due date or after the extended due date, and has been contacted by the department concerning the delinquent return. This applies only to tax returns required as the result of the taxpayer’s involvement in the mining, transportation, or processing of coal.
    3. When an owner, partner, or corporate officer of a proprietorship, partnership, or corporation holding a license under KRS 351.175 , held a similar position in a business whose license was revoked as a “delinquent taxpayer”, and the tax liability remains unpaid.
  4. At least twenty (20) days in advance of submitting a taxpayer’s name to the Department for Natural Resources as provided in subsection (1) or (2) of this section, the department shall notify the taxpayer by certified mail that the action is to be taken. The notice shall state the reason for the action and shall set out the amount of any tax liability including any applicable penalties and interest and any other area of noncompliance which must be satisfied in order to prevent the submission of his name to the Department for Natural Resources as a “delinquent taxpayer.”
  5. If it is determined that an applicant for a license to mine coal under the provisions of KRS 351.175 is a delinquent taxpayer as defined in subsection (3) of this section, or is an agent, contract miner, or delegate of a delinquent taxpayer, the Department for Natural Resources shall refuse a mine license to the applicant.

History. Enact. Acts 1978, ch. 233, § 35, effective June 17, 1978; 1992, ch. 271, § 1, effective July 14, 1992; 2005, ch. 85, § 122, effective June 20, 2005.

Opinions of Attorney General.

It is apparent that the purpose of KRS 351.175(3) (now (4)) is to deny a mine license to an applicant who is a “delinquent taxpayer” as defined by KRS Chapter 131. Therefore, it appears that KRS 351.175(3) (now (4)) authorizes the department of mines and minerals to refuse a mine license to any applicant whose license has been previously revoked because of tax delinquencies as defined in this section so long as those delinquencies remain unsatisfied. OAG 83-157 .

131.1815. Revocation of alcoholic beverage license issued to person who becomes a delinquent taxpayer.

  1. Whenever it is determined that a taxpayer, who holds a license under KRS Chapter 243, is a delinquent taxpayer as defined in subsection (2) of this section, the department may, after giving notice as provided in subsection (3) of this section, submit the name of the taxpayer to the Department of Alcoholic Beverage Control for revocation of any license issued under KRS Chapter 243.
  2. Any of the following situations shall be sufficient to cause a taxpayer to be classified as a “delinquent taxpayer” for purposes of this section:
    1. When a taxpayer has an overdue state tax liability arising directly or indirectly from the manufacture, sale, transportation, or distribution of alcoholic beverages, for which all protest and appeal rights granted by law have expired, and the taxpayer has been contacted by the department concerning the overdue tax liability. This does not include a taxpayer who is making current timely installment payments on the overdue tax liability under agreement with the department;
    2. When a taxpayer has not filed a required tax return as of ninety (90) days after the due date or after the extended due date, and the taxpayer has been contacted by the department concerning the delinquent return; or
    3. When an owner, partner, or corporate officer of a proprietorship, partnership, or corporation holding a license under KRS Chapter 243 held a similar position in a business whose license was revoked as a “delinquent taxpayer,” and the tax liability remains unpaid as of ninety (90) days after the due date.
  3. At least twenty (20) days before submitting a taxpayer’s name to the Department of Alcoholic Beverage Control as provided in subsection (1) of this section, the department shall notify the taxpayer by certified mail that the action is to be taken. The notice shall state the reason for the action and shall set out the amount of any tax liability including any applicable penalties and interest and any other area of noncompliance that must be satisfied in order to prevent the submission of his name to the Department of Alcoholic Beverage Control as a delinquent taxpayer.

History. Enact. Acts 1996, ch. 329, § 1, effective July 15, 1996; 2005, ch. 85, § 123, effective June 20, 2005; 2010, ch. 24, § 91, effective July 15, 2010.

131.1817. Delinquent taxpayer subject to revocation or denial of professional or occupational license, driver’s license, and motor vehicle registration — Agencies’ duties to assist department — Notice — Appeal — Written tax clearance before reissuance.

  1. As used in this section:
    1. “Attorney’s license” means a license issued pursuant to the rules of the Supreme Court of Kentucky authorizing the practice of law in the Commonwealth;
    2. “Delinquent taxpayer” means:
      1. A taxpayer with an overdue state tax liability:
        1. That is not covered by a current installment payment agreement;
        2. For which all protest and appeal rights under the law have expired; and
        3. About which the department has contacted the taxpayer; or
      2. A taxpayer who:
        1. Has not filed a required tax return within ninety (90) days following the due date of the return, or if the due date was extended, within ninety (90) days following the extended due date of the return; and
        2. Was contacted by the department about the delinquent return;
    3. “Driver’s license” means a license issued by the Transportation Cabinet;
    4. “License” means any occupational or professional certification, license, registration, or certificate issued by a licensing agency that is required to engage in an occupation, profession, or trade in the Commonwealth, other than a license issued to an attorney; and
    5. “Licensing agency” means any instrumentality, agency, board, commission, or department established by statute that has the power and authority within the Commonwealth to issue any license, except “licensing agency” shall not include the Supreme Count of Kentucky, relating to licenses issued to attorneys to practice law in the Commonwealth.
  2. The department may identify licensing agencies from which it wants to obtain information for the purpose of tax compliance.
  3. Any licensing agency identified by the department shall work with the department to develop a process to provide the department with information about its licensees.
  4. Any delinquent taxpayer who:
    1. Holds a license;
    2. Is an attorney licensed to practice law in the Commonwealth;
    3. Holds a driver’s license; or
    4. Owns a motor vehicle registered in the Commonwealth;
    1. To begin the process of revocation of a license, or suspension of the ability to register a motor vehicle, the department shall notify the delinquent taxpayer by certified mail at least twenty (20) days prior to submission of the name of a delinquent taxpayer to the relevant agency that his or her name will be submitted to: (5) (a) To begin the process of revocation of a license, or suspension of the ability to register a motor vehicle, the department shall notify the delinquent taxpayer by certified mail at least twenty (20) days prior to submission of the name of a delinquent taxpayer to the relevant agency that his or her name will be submitted to:
      1. The licensing agency, for revocation of a license;
      2. The Transportation Cabinet, for revocation of a driver’s license or denial of the ability to register a motor vehicle in the Commonwealth; or
      3. The Kentucky Supreme Court, for the revocation of a license to practice law in the Commonwealth.
    2. The notice shall:
      1. State the reason for the action;
      2. Set forth the amount of any overdue tax liability, including any applicable penalties and interest;
      3. Explain any other area of noncompliance that must be satisfied to prevent the submission of the taxpayer’s name to the licensing agency as a delinquent taxpayer; and
      4. List all licenses or registrations for which revocation will be sought.
    3. After the passage of at least twenty (20) days from the date the notice was sent under paragraph (a) of this subsection, and if the issues identified in the notice were not resolved to the satisfaction of the department, the department may:
      1. Submit the name of the delinquent taxpayer to the licensing agency or the Transportation Cabinet; or
      2. If the delinquent taxpayer is an attorney licensed to practice law in the Commonwealth, submit the name of the attorney to the Kentucky Supreme Court for appropriate action to enforce Supreme Court Rules.
    4. Upon notification by the department that the licensee or motor vehicle owner is a delinquent taxpayer, the licensing agency or Transportation Cabinet, as the case may be, shall deny or revoke any license held or applied for by the licensee, and the Transportation Cabinet shall not allow the delinquent taxpayer to register a motor vehicle in the Commonwealth.
    5. Any delinquent taxpayer who has had a license denied or revoked, or who has been denied the ability to register a motor vehicle shall have the right to appeal to the licensing agency or the Transportation Cabinet as authorized by law, provided that appeals shall only be permitted based upon a mistake in facts relied upon by the department, the licensing agency, or the Transportation Cabinet that the licensee or motor vehicle owner is a delinquent taxpayer.
    6. A license that has been denied or revoked under this section shall not be reissued or renewed, and a motor vehicle registration that has been denied under this section shall not be permitted, until a written tax clearance has been received from the department by the licensing agency or the Transportation Cabinet, as the case may be.
    7. The department may promulgate administrative regulations under KRS Chapter 13A to implement the provisions of this section.

may have that license or driver’s license suspended or revoked, and may be denied the ability to register his or her motor vehicle in the Commonwealth as provided in subsection (5) of this section.

History. Enact. Acts 2012, ch. 110, § 7, effective April 11, 2012; 2013, ch. 119, § 2, effective July 1, 2013.

131.182. Refusal of drawee to honor check. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1970, ch. 216, § 1) was repealed by Acts 1992, ch. 403, § 25, effective July 14, 1992.

131.183. Tax interest rate.

    1. Except for the addition to tax required when an underpayment of estimated tax occurs under KRS 141.044 and 141.305 , all taxes payable to the Commonwealth not paid at the time prescribed by statute shall accrue interest at the tax interest rate. (1) (a) Except for the addition to tax required when an underpayment of estimated tax occurs under KRS 141.044 and 141.305 , all taxes payable to the Commonwealth not paid at the time prescribed by statute shall accrue interest at the tax interest rate.
    2. The tax interest rate shall be equal to the adjusted prime rate charged by banks rounded to the nearest full percent as adjusted by subsection (2) of this section.
    3. The commissioner of revenue shall adjust the tax interest rate not later than November 15 of each year if the adjusted prime rate charged by banks during September of that year, rounded to the nearest full percent, is at least one (1) percentage point more or less than the tax interest rate which is then in effect. The adjusted tax interest rate shall become effective on January 1 of the immediately succeeding year.
      1. All taxes payable to the Commonwealth that have not been paid at the time prescribed by statute shall accrue interest at the tax interest rate as determined in accordance with subsection (1) of this section until May 1, 2008. (2) (a) 1. All taxes payable to the Commonwealth that have not been paid at the time prescribed by statute shall accrue interest at the tax interest rate as determined in accordance with subsection (1) of this section until May 1, 2008.
      2. Beginning on May 1, 2008, all taxes payable to the Commonwealth that have not been paid at the time prescribed by statute shall accrue interest at the tax interest rate as determined in accordance with subsection (1) of this section plus two percent (2%).
      1. Interest shall be allowed and paid upon any overpayment as defined in KRS 134.580 in respect of any of the taxes provided for in Chapters 131, 132, 134, 136, 137, 138, 139, 140, 141, 142, 143, 143A, and 243 of the Kentucky Revised Statutes and KRS 160.613 and 160.614 at the rate provided in subsection (1) of this section until May 1, 2008. (b) 1. Interest shall be allowed and paid upon any overpayment as defined in KRS 134.580 in respect of any of the taxes provided for in Chapters 131, 132, 134, 136, 137, 138, 139, 140, 141, 142, 143, 143A, and 243 of the Kentucky Revised Statutes and KRS 160.613 and 160.614 at the rate provided in subsection (1) of this section until May 1, 2008.
      2. Beginning on May 1, 2008, interest shall be allowed and paid upon any overpayment as defined in KRS 134.580 at the rate provided in subsection (1) of this section minus two percent (2%).
      3. Effective for refunds issued after April 24, 2008, except for the provisions of KRS 138.351 , 141.044(2), 141.235(3), and subsection (3) of this section, interest authorized under this subsection shall begin to accrue sixty (60) days after the latest of:
        1. The due date of the return;
        2. The date the return was filed;
        3. The date the tax was paid;
        4. The last day prescribed by law for filing the return; or
        5. The date an amended return claiming a refund is filed.
    1. In no case shall interest be paid in an amount less than five dollars ($5).
    2. No refund shall be made of any estimated tax paid unless a return is filed as required by KRS Chapter 141.
  1. Effective for refund claims filed on or after July 15, 1992, if any overpayment of the tax imposed under KRS Chapter 141 results from a carryback of a net operating loss or a net capital loss, the overpayment shall be deemed to have been made on the date the claim for refund was filed. Interest authorized under subsection (2) of this section shall begin to accrue ninety (90) days from the date the claim for refund was filed.
  2. No interest shall be allowed or paid on any sales tax refund as provided by KRS 139.536 .
  3. For purposes of this section, any addition to tax provided in KRS 141.044 and 141.305 shall be considered a penalty.

History. Enact. Acts 1982, ch. 452, § 3, effective July 1, 1982; 1990, ch. 423, § 5, effective July 13, 1990; 1992, ch. 98, § 1, effective July 14, 1992; 1992, ch. 264, § 1, effective July 14, 1992; 1998, ch. 238, § 5, effective April 1, 1998; 2005, ch. 85, § 124, effective June 20, 2005; 2006, ch. 6, § 1, effective March 6, 2006; 2008, ch. 132, § 8, effective April 24, 2008; repealed and reenact., Acts 2009, ch. 86, § 7, effective March 24, 2009; 2015 ch. 67, § 11, effective June 24, 2015; 2020 ch. 91, § 1, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 1 of that Act apply to taxable years beginning on or after January 1, 2019.

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 15, provides that “the provisions of Sections 7 to 10 of this Act shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that “The intent of the General Assembly in repealing and reenacting KRS 136.392 , 138.195 , 141.160 , 160.6156 , 160.6157 , 160.6158 , 131.183 , 141.044 , 141.235 , 134.580 , 393.060 , and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides “To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood.”

(4/24/2008). 2008 Ky. Acts chs. 80 and 132, sec. 15 provides that the amendments made to this statute by that Act “shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act (April 24, 2008) and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 26, provides that this section applies retroactively to January 1, 2006.

NOTES TO DECISIONS

  1. In General.
  2. Predeprivation Remedies.
  3. Applicability.
1. In General.

KRS 134.590 , which authorizes reimbursements for unconstitutional taxes, as opposed to overpayments, does not provide for interest; and the tax interest rate statute applies only to overpayments. Commonwealth Revenue Cabinet v. St. Ledger, 955 S.W.2d 539, 1997 Ky. App. LEXIS 57 (Ky. Ct. App. 1997).

2. Predeprivation Remedies.

Because the statutory scheme of Kentucky is pointedly designed to coerce taxpayers into remitting taxes before challenging any liability to avoid potential economic disadvantage, this state does not offer meaningful, adequate predeprivation remedies for purposes of federal law. Revenue Cabinet v. Gossum, 887 S.W.2d 329, 1994 Ky. LEXIS 85 ( Ky. 1994 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

3. Applicability.

Because KRS 131.183 authorizes interest only on taxes administered by the Kentucky Department of Revenue, as indicated in KRS 131.010 , prejudgment interest was not recoverable in an action by another agency to recover unpaid service charges. Moreover, a good faith dispute existed. Virgin Mobile USA, L.P. v. Commonwealth, 2012 Ky. App. LEXIS 104 (Ky. Ct. App. June 29, 2012), aff'd in part and rev'd in part, 2014 Ky. LEXIS 334 (Ky. Aug. 21, 2014).

Cited in:

Department of Revenue v. To Your Door Pizza, Inc., 670 S.W.2d 482, 1983 Ky. App. LEXIS 358 (Ky. Ct. App. 1983); Commonwealth v. Cromwell Louisville Assocs., — S.W.3d —, 2008 Ky. App. LEXIS 250 (Ky. Ct. App. 2008).

Opinions of Attorney General.

The tax interest rate is that rate in effect the next day after the tax became due and such tax remained unpaid; thus, under the 1982 amendments to this section, KRS 131.010 and 139.650 , the tax interest rate on any delinquent taxes (regardless of the year) on and after July 1, 1982, shall be sixteen percent (16%). However, the sixteen percent (16%) rate is not to be retroactively applied to delinquent taxes which were due prior to July 1, 1982. OAG 83-12 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

131.185. Period for which records to be preserved.

Income tax returns shall be kept for five (5) years; primary accounting records of tax payments, seven (7) years; and records containing all data of motor vehicle registration, three (3) years. Records of the department which are not required by this section or other statutory provisions to be preserved for a fixed period may be kept or disposed of according to the discretion of the department.

History. Enact. Acts 1942, ch. 144, § 3; 1950, ch. 75; 1992, ch. 88, § 1, effective July 14, 1992; 2005, ch. 85, § 125, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Records of examination of candidates for property valuation administrator to be preserved one year, KRS 132.380 .

Tax schedules to be preserved 7 years, KRS 133.040 .

131.190. Information acquired in tax administration not to be divulged — Exceptions.

  1. No present or former commissioner or employee of the department, present or former member of a county board of assessment appeals, present or former property valuation administrator or employee, present or former secretary or employee of the Finance and Administration Cabinet, former secretary or employee of the Revenue Cabinet, or any other person, shall intentionally and without authorization inspect or divulge any information acquired by him of the affairs of any person, or information regarding the tax schedules, returns, or reports required to be filed with the department or other proper officer, or any information produced by a hearing or investigation, insofar as the information may have to do with the affairs of the person’s business.
  2. The prohibition established by subsection (1) of this section shall not extend to:
    1. Information required in prosecutions for making false reports or returns of property for taxation, or any other infraction of the tax laws;
    2. Any matter properly entered upon any assessment record, or in any way made a matter of public record;
    3. Furnishing any taxpayer or his properly authorized agent with information respecting his own return;
    4. Testimony provided by the commissioner or any employee of the department in any court, or the introduction as evidence of returns or reports filed with the department, in an action for violation of state or federal tax laws or in any action challenging state or federal tax laws;
    5. Providing an owner of unmined coal, oil or gas reserves, and other mineral or energy resources assessed under KRS 132.820 , or owners of surface land under which the unmined minerals lie, factual information about the owner’s property derived from third-party returns filed for that owner’s property, under the provisions of KRS 132.820 , that is used to determine the owner’s assessment. This information shall be provided to the owner on a confidential basis, and the owner shall be subject to the penalties provided in KRS 131.990(2). The third-party filer shall be given prior notice of any disclosure of information to the owner that was provided by the third-party filer;
    6. Providing to a third-party purchaser pursuant to an order entered in a foreclosure action filed in a court of competent jurisdiction, factual information related to the owner or lessee of coal, oil, gas reserves, or any other mineral resources assessed under KRS 132.820. The department may promulgate an administrative regulation establishing a fee schedule for the provision of the information described in this paragraph. Any fee imposed shall not exceed the greater of the actual cost of providing the information or ten dollars ($10);
    7. Providing information to a licensing agency, the Transportation Cabinet, or the Kentucky Supreme Court under KRS 131.1817 ;
    8. Statistics of gasoline and special fuels gallonage reported to the department under KRS 138.210 to 138.448 ;
    9. Providing any utility gross receipts license tax return information that is necessary to administer the provisions of KRS 160.613 to 160.617 to applicable school districts on a confidential basis;
    10. Providing documents, data, or other information to a third party pursuant to an order issued by a court of competent jurisdiction; or
    11. Providing information to the Legislative Research Commission under:
      1. KRS 139.519 for purposes of the sales and use tax refund on building materials used for disaster recovery;
      2. KRS 141.436 for purposes of the energy efficiency products credits;
      3. KRS 141.437 for purposes of the ENERGY STAR home and the ENERGY STAR manufactured home credits;
      4. KRS 148.544 for purposes of the film industry incentives;
      5. KRS 154.26-095 for purposes of the Kentucky industrial revitalization tax credits and the job assessment fees;
      6. KRS 141.068 for purposes of the Kentucky investment fund;
      7. KRS 141.396 for purposes of the angel investor tax credit;
      8. KRS 141.389 for purposes of the distilled spirits credit;
      9. KRS 141.408 for purposes of the inventory credit;
      10. KRS 141.390 for purposes of the recycling and composting credit;
      11. KRS 141.3841 for purposes of the selling farmer tax credit; and
      12. KRS 141.4231 for purposes of the renewable chemical production credit.
  3. The commissioner shall make available any information for official use only and on a confidential basis to the proper officer, agency, board or commission of this state, any Kentucky county, any Kentucky city, any other state, or the federal government, under reciprocal agreements whereby the department shall receive similar or useful information in return.
  4. Access to and inspection of information received from the Internal Revenue Service is for department use only, and is restricted to tax administration purposes. Information received from the Internal Revenue Service shall not be made available to any other agency of state government, or any county, city, or other state, and shall not be inspected intentionally and without authorization by any present secretary or employee of the Finance and Administration Cabinet, commissioner or employee of the department, or any other person.
  5. Statistics of crude oil as reported to the Department of Revenue under the crude oil excise tax requirements of KRS Chapter 137 and statistics of natural gas production as reported to the Department of Revenue under the natural resources severance tax requirements of KRS Chapter 143A may be made public by the department by release to the Energy and Environment Cabinet, Department for Natural Resources.
  6. Notwithstanding any provision of law to the contrary, beginning with mine-map submissions for the 1989 tax year, the department may make public or divulge only those portions of mine maps submitted by taxpayers to the department pursuant to KRS Chapter 132 for ad valorem tax purposes that depict the boundaries of mined-out parcel areas. These electronic maps shall not be relied upon to determine actual boundaries of mined-out parcel areas. Property boundaries contained in mine maps required under KRS Chapters 350 and 352 shall not be construed to constitute land surveying or boundary surveys as defined by KRS 322.010 and any administrative regulations promulgated thereto.

HISTORY: 4114h-15: amend. Acts 1942, ch. 64, §§ 1, 3; 1974, ch. 163, § 1; 1978, ch. 233, § 8, effective June 17, 1978; 1982, ch. 47, § 1, effective July 15, 1982; 1994, ch. 326, § 1, effective July 15, 1994; 1994, ch. 508, § 44, effective July 15, 1994; 1998, ch. 134, § 3, effective July 15, 1998; 2000, ch. 503, § 2, effective July 14, 2000; 2003, ch. 87, § 1, effective June 24, 2003; 2005, ch. 85, § 126, effective June 20, 2005; 2005, ch. 123, § 14, effective June 20, 2005; 2005, ch. 184, § 5, effective June 20, 2005; 2010, ch. 24, § 92, effective July 15, 2010; 2010, ch. 75, § 14, effective April 7, 2010; 2013, ch. 119, § 3, effective July 1, 2013; 2018 ch. 171, § 102, effective April 14, 2018; 2018 ch. 207, § 102, effective April 27, 2018; 2019 ch. 196, § 1, effective June 27, 2019; 2020 ch. 91, § 21, effective April 15, 2020.

Legislative Research Commission Notes.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 5 (HB 354) and ch. 196, sec. 1 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 5, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 5, was not codified.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

NOTES TO DECISIONS

  1. Application.
  2. Constitutionality of Regulation.

4. —Inspection.

5. —Confidential.

6. Right of Privacy.

1. Application.

This section applies only to tax officials and employees. Tomlin v. Taylor, 290 Ky. 619 , 162 S.W.2d 210, 1942 Ky. LEXIS 468 ( Ky. 1942 ).

This section applies only to tax officials and employees and other officials authorized to receive tax schedules, returns, or reports and publicizing such confidential information. Maysville Transit Co. v. Ort, 296 Ky. 524 , 177 S.W.2d 369, 1943 Ky. LEXIS 161 ( Ky. 1943 ); Maysville Transit Co. v. Taylor, 296 Ky. 527 , 177 S.W.2d 371, 1943 Ky. LEXIS 162 ( Ky. 1943 ).

This section and subsection (3) of KRS 131.990 apply only to officials dealing with state and county taxes, and therefore the fact that the provision in an ordinance levying an occupational license tax penalizing the disclosure of information received by city officials through tax returns and examination of taxpayers’ records imposed a penalty less than that imposed by these sections for the same offense did not violate Const., § 168. Kohler v. Benckart, 252 S.W.2d 854, 1952 Ky. LEXIS 1025 ( Ky. 1952 ).

2. Constitutionality of Regulation.

Regulation of Department of Revenue, adopted pursuant to reciprocal agreement with other states, requiring Kentucky cigarette exporters to report names and addresses of persons to whom cigarettes were sold in interstate commerce and for which tax exemption was claimed, did not violate the federal Constitution, although information was to be made available to authorities of other states. Dixie Wholesale Grocery, Inc. v. Martin, 278 Ky. 705 , 129 S.W.2d 181, 1939 Ky. LEXIS 485 (Ky.), cert. denied, 308 U.S. 609, 60 S. Ct. 173, 84 L. Ed. 509, 1939 U.S. LEXIS 113 (U.S. 1939).

4. —Inspection.

A county has no right to inspect the reports which corporations paying franchise taxes are required to file under KRS 136.130 . Fayette County v. Martin, 279 Ky. 387 , 130 S.W.2d 838, 1939 Ky. LEXIS 299 ( Ky. 1939 ), overruled, St. Matthews v. Voice of St. Matthews, Inc., 519 S.W.2d 811, 1974 Ky. LEXIS 12 ( Ky. 1974 ).

5. —Confidential.

A city desiring information for the purpose of assessing omitted property or collecting taxes has the right to inspect, on a confidential basis only, the reports which corporations paying franchise taxes are required to file, and the right may be enforced by mandamus. Fayette County v. Martin, 279 Ky. 387 , 130 S.W.2d 838, 1939 Ky. LEXIS 299 ( Ky. 1939 ), overruled, St. Matthews v. Voice of St. Matthews, Inc., 519 S.W.2d 811, 1974 Ky. LEXIS 12 ( Ky. 1974 ).

One making a tax report to the state Department of Revenue has the right, under this section, to have the report treated in a confidential manner, and if it is not so treated, and he can show he has been damaged thereby, he may assert a cause of action against the offender. Maysville Transit Co. v. Ort, 296 Ky. 524 , 177 S.W.2d 369, 1943 Ky. LEXIS 161 ( Ky. 1943 ).

The president of a corporation has no personal right of action for violation of this section by the publicizing of the confidential tax returns of the corporation. Tomlin v. Ort, 296 Ky. 528 , 177 S.W.2d 371, 1943 Ky. LEXIS 163 ( Ky. 1943 ).

6. Right of Privacy.

A violation of this section is not a violation of one’s right of privacy and damages for such a violation must be actual. Maysville Transit Co. v. Ort, 296 Ky. 524 , 177 S.W.2d 369, 1943 Ky. LEXIS 161 ( Ky. 1943 ).

Because records that identified registered payers of utility license tax easily could be redacted to comply with privacy requirements and a state website did not provide an alternative remedy, the records were not exempt from open records disclosure after redaction; moreover, the evidence supported a finding that the documents requested were maintained. Dep't of Revenue v. Eifler, 436 S.W.3d 530, 2013 Ky. App. LEXIS 140 (Ky. Ct. App. 2013).

Cited in:

Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ); Louisville Title Mortg. Co. v. Commonwealth, 299 Ky. 224 , 184 S.W.2d 963, 1944 Ky. LEXIS 1041 ( Ky. 1944 ); Curd v. Commonwealth, 312 Ky. 457 , 227 S.W.2d 1003, 1950 Ky. LEXIS 677 ( Ky. 1950 ); St. Matthews v. Voice of St. Matthews, Inc., 519 S.W.2d 811, 1974 Ky. LEXIS 12 ( Ky. 1974 ).

NOTES TO UNPUBLISHED DECISIONS

1. Right of Privacy.

Unpublished decision: Department of Revenue was required to produce for inspection redacted copies of its final rulings because the production of the material a tax attorney and tax analysts sought was required by the Open Records Act; the Department's final rulings contained information related to its reasoning and analysis with respect to its task in administration of the tax laws, and that information could be made available without jeopardizing taxpayers' privacy interests under the Taxpayers' Bill of Rights. Fin. & Admin. Cabinet v. Sommer, 2017 Ky. App. LEXIS 9 (Ky. Ct. App.), sub. op., 2017 Ky. App. Unpub. LEXIS 624 (Ky. Ct. App. Jan. 13, 2017).

Opinions of Attorney General.

This section does not apply to escheat records required to be filed under former KRS 393.110 . OAG 71-482 .

Although records in the property valuation administrator’s office are public records open to inspection by any interested person, only tax rolls can be inspected, for the working papers consisting of property record cards in individual file folders from which the tax rolls are made are not a part of the material that is open to public inspection. OAG 76-182 .

A county conservation district, which assists individual landowners with the development and implementation of a resource conservation plan for a unit of land, is required to allow Department of Revenue representatives access to individual resource conservation plans upon request on a confidential basis. OAG 76-272 .

The Department of Revenue can legally engage in a lockboxing arrangement with a selected depository bank which acts as an agent of the department in carrying out duties relative to tax collections and deposits in the state treasury and which is bound by the confidentiality provisions of this section. OAG 76-510 .

Records held by the city finance director which show the total amount of the city payroll tax received by the city from a medical center are not exempt from public disclosure since the total amount of payroll tax paid by an employer is not exempt under this section, as records of individual employee payroll tax would be, so that records of total payroll tax would not be exempt under subsection (1)(j) (now (1)( l )) of KRS 61.878 , and similarly, the fact that such records are made confidential by a city ordinance would not prevent disclosure under subsection (1) of KRS 61.878 . OAG 81-286 .

City records which disclose the names of employers who are delinquent in paying occupational taxes are open to public inspection, since a city is a public agency and is subject to the provisions of the Open Records Law, KRS 61.870 to 61.884 ; this section prohibits the disclosure of information from tax records “insofar as the information may have to do with the affairs of the person’s business”, but does not prohibit the disclosure of the fact that a person is delinquent in paying his taxes, for although tax records cannot be made totally available for public inspection because of the restrictions of this section, non-exempt material can and must be made available under KRS 61.878(3). OAG 81-309 .

The date of application and effective period of a county business license is not such information as reveals the affairs of a person’s business contrary to subsection (1) of this section; however, before making such information available to the public the division of tax collection should either delete confidential matter from the licenses prior to public inspection or provide the requested information in lieu of allowing personal inspection. OAG 82-2 .

One of the purposes of the Open Records Law is to allow any member of the public to personally check on the operation of the government by inspecting the original records of public agencies or by purchasing copies thereof, and the question whether taxes are being paid by all persons who are legally obligated to pay them is a legitimate interest of the public on which any person has a right to check; accordingly, confidentiality provisions of ordinance which imposed an annual license for privilege of doing business in city contravened the Open Records Law since every licensee in the city was required to pay a $25 minimum license fee and the public disclosure of who had paid the fee revealed no private detail concerning a taxpayer’s business. OAG 82-435 .

Request to inspect and copy cost reports filed with the Department of Revenue by group self-insureds was properly denied since subsection ( 1 ) of this section makes tax records and reports to the department concerning taxes confidential and that specific statute dealing with the subject prevails over any provisions of the Kentucky Open Records Law; moreover, the open records statute, in KRS 61.878(1)(j) (now (1)( l )), also expressly exempts from its open records requirements public records or information the disclosure of which is prohibited or restricted or otherwise made confidential by enactment of the General Assembly. OAG 83-78 .

A request for the names and addresses of all taxpayers who had protested assessment of sales tax resulting from audit or otherwise by the sales and use tax section of the Revenue Cabinet was a request for a list which did not exist, and the request was properly denied since an agency is not required to prepare a list which is not already in existence. The subject request could also be denied under KRS 61.878(1)(g) (now (1)(i)) which exempts from mandatory public disclosure “correspondence with private individuals.” OAG 83-167 .

The Revenue Cabinet could not deny request for information regarding the motor vehicle tax account of deceased county clerk under either KRS 61.878(1)(g), (h) (now (1)(i), (j)) or subsection (1) of this section since the permissive exceptions provided in the Open Records Law by KRS 61.878(1)(g) and (h) have no application to reports required to be filed by local officers with a state cabinet or department and subsection (1) of this section provides a cloak of confidentiality for taxpayers, not for public officials and applies only to living taxpayers who are still in business and not to deceased persons. OAG 83-257 .

The Revenue Cabinet properly denied request to inspect all correspondence sent or received regarding the feasibility of an unmined minerals tax because they consisted entirely of intraoffice memoranda which were preliminary in nature and which contained expressions of opinion, recommendations and proposals from subordinate state employees to their superiors and thus they were exempt from mandatory public disclosure by KRS 61.878(1)(g) and (h) (now (1)(i) and (j)). Such records were not made confidential by subsection (1) of this section because they made no mention of any individual taxpayer or information concerning any taxpayer’s business. However, since the records may be withheld from public inspection by the permissive exemptions of KRS 61.878(1)(g) and (h), the Revenue Cabinet has the option of either allowing inspection of the records or keeping them confidential as it sees fit, provided that it treats all requests to inspect the records according to the same policy. OAG 83-263 .

Subsection (1) of this section makes tax records confidential only insofar as the information may have to do with the person’s business; information such as the names of businesses licensed, the dates of the applications, and the dates of the effectiveness of licenses are not such information as reveals the affairs of a person’s business, and access to such information is not an unwarranted invasion of personal privacy under KRS 61.878(1)(a). OAG 85-1 .

The records requested of the Revenue Cabinet, the names and addresses of coal companies which paid severance taxes in 1985, were not information having to do with the affairs of the coal companies’ business and thus were not privileged information under this section and subdivision (1)(j) (now (1)( l )) of KRS 61.878 . OAG 86-11 .

The county improperly denied the request to inspect county records relative to occupational license fees or taxes to obtain the names of the contractors or construction companies that are paying the county occupational tax; the county may compile the list containing such information or allow the requesting party to prepare his or her own list, with the excepted material separated from the nonexcepted material before he or she examines the records. OAG 87-57 .

A request that addresses be provided to correspond with names and social security numbers presented by requester is not one properly founded upon Open Records provisions. In any event, the Revenue Cabinet had no compiled record corresponding to the request, and is banned by this section from divulging address information from tax returns, from which information conforming to request would have to have been extracted, thus its denial of address information was proper. OAG 89-45 .

“Affairs of any person” and “affairs of the person’s business,” as used in subsection (1) of this section, refer to matters associated with a person that are recognized as being private, and not subject to routine public perusal; stock holdings and other intangibles, and business inventories fall in the category of information regarding the “affairs of a person or their business,” and such information, in accordance with KRS 131.190(1) and KRS 61.878(1)(j) (now (1)(1)), may not be divulged by a property valuation administrator or employee thereof. OAG 89-50 .

Information properly excepted from inspection pursuant to KRS 61.878 , or this section, that is contained on property assessment and property record cards, must be separated from nonexcepted information, as by masking. OAG 89-50 .

Disclosure of information concerning stock holdings and intangibles, as well as other personal property not subject to public recordation and valuation, may be deemed an unwarranted invasion of personal privacy; similarly, disclosure of intangibles, and business inventories might also be an invasion, since such information may relate to the “affairs of any person” or “their business,” within the meaning of this section. OAG 92-30 .

The public’s interest in what businesses are taxed, where they are located, and whether they are delinquent in paying their taxes (but not the amount of taxes owed or any other information that reveals the affairs of their businesses), is superior to any privacy interest asserted. The City and the Tourist & Convention Commission improperly withheld records containing “the names and locations of businesses that are delinquent on the payment of their food/restaurant taxes” notwithstanding the city ordinance that deemed those records confidential. OAG 01-ORD-63.

Conference records containing the information required to be kept by KRS 133.120(1) and other information of a confidential nature that is information about property that constitutes the “affairs of any person” and “affairs of a person’s business,” as set forth in KRS 131.190(1) and is not of general recordation or routine observation may properly be withheld from disclosure under KRS 131.190(1) and KRS 61.878(1)( l ). However, information contained in the records that is either publicly recorded in records recognized as being subject to routine public scrutiny, or that may be relatively readily observed from a public street, should be made available for inspection. OAG 04-ORD-38.

Direct pay authorization is directly related to a taxpayer’s status. It is an arrangement between the Department and the taxpayer, in which the taxpayer pays the sales or use tax directly to the Department. Disclosure by the Department or any of its employees of information revealing taxpayers’ DPA status, permit numbers and addresses would be divulging information of the business affairs of those taxpayers in violation of the confidentiality provisions of KRS 131.190(1). OAG 04-ORD-42.

Since it is the Revenue Cabinet’s interpretation that the requester must certify that he is currently an authorized agent of the defunct corporation and that, without that status, the Department would be divulging information of the business affairs of the corporation in violation of the confidentiality provisions of KRS 131.190(1), in the absence of any legal authority which is contrary to this position, the Attorney General defers to the Department in its interpretation of the confidentiality provision that is binding on the Department. OAG 04-ORD-152.

Where the open records request requested contracts, memorandums of agreement or understanding, or similar documents reflecting the Department’s participation in the Joint Audit Program of the Multistate Tax Commission, it is highly unlikely that a contract or memorandum of agreement would contain sufficient detail to divulge information pertaining to the tax schedules, returns, reports or the affairs of a person’s business, in violation of the confidentiality provisions of KRS Chapter 131. OAG 2006-ORD-032.

Research References and Practice Aids

Kentucky Law Journal.

Comments, Access to Public Documents in Kentucky, 64 Ky. L.J. 165 (1975-76).

131.191. Prohibition against employment of prisoners in jobs with access to taxpayer information.

The Department of Revenue shall not enter into any contract with the Department of Corrections, the United States Government, any local government, or any private contractor operating a correctional institution on behalf of the Department of Corrections, the United States Government, or any local government for the use or employment of prisoners in any capacity that allows prisoners access to taxpayer information, including, but not limited to, tax returns, informational reporting returns, social security numbers, telephone numbers, or addresses.

History. Enact. Acts 1998, ch. 383, § 2, effective July 15, 1998; 2005, ch. 85, § 127, effective June 20, 2005.

131.192. Duplication of records by department.

Whenever it becomes necessary within the discretion of the commissioner of revenue to photostat, duplicate, publish or supply for the use and benefit of persons or agencies, other than agencies of state government, information contained in official records of the Department of Revenue, whose contents are not confidential according to law, the Department of Revenue is hereby authorized to photostat, duplicate or publish the said information and supply the same to the requesting person or agency. For such services the department may charge a fee which will be adequate to cover the expenses of photostating, duplicating or publishing such information and any expense incidental to supplying the same.

History. Enact. Acts 1958, ch. 64, § 1, effective June 19, 1958; 2005, ch. 85, § 128, effective June 20, 2005.

131.194. Disposition of fee charged for duplicating records.

All money received by the Department of Revenue, for supplying to persons or agencies other than state agencies information which is contained in the official files of the department, shall be promptly deposited with the State Treasurer in the same manner as provided by law for other deposits. The amount of money so deposited shall be treated as a reimbursement to the appropriation of the Department of Revenue from which the disbursements were made for expenses incurred in performing the services authorized by KRS 131.192 .

History. Enact. Acts 1958, ch. 64, § 2, effective June 19, 1958; 2005, ch. 85, § 129, effective June 20, 2005.

131.200. Field agents and accountants to execute bond. [Repealed.]

Compiler’s Notes.

This section (4259) was repealed by Acts 1946, ch. 27, § 11.

131.205. Temporary deposits of collections by field representatives — Transmittal to department.

  1. Any field representative of the Department of Revenue who is authorized to collect taxes or money due the Commonwealth may deposit to his special account as field representative of the department any money so collected in a state or national bank in this Commonwealth.
  2. He shall within forty-eight (48) hours after making such deposits draw a check or checks payable to the State Treasurer for the full amount of the deposit and mail same to the department or transmit same in a manner approved by the department. Nothing in this section shall be construed as authorizing any field representative of the department to enforce or cash, even for the purpose of a deposit, any check or other instrument of value payable to the Commonwealth or any agency thereof.
  3. Deposits shall be made in such banks as the department may by regulation designate, and subject to such further conditions as the department may prescribe. Any reasonable service charges made by the bank may be paid by the department from its appropriation as other claims against it are paid.

History. Enact. Acts 1942, ch. 144, § 2; 2005, ch. 85, § 130, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Public money to be paid into state depositories promptly; procedures, KRS 41.070 .

131.207. Disposition of amounts collected. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 29, § 9) was repealed by Acts 1968, ch. 152, § 168.

131.210. Investigation of officers’ accounts.

Any field agent, accountant or attorney, when authorized in writing by the commissioner of revenue, may investigate the accounts, books and records of all officers whose duty it is to receive or collect money due the state, county, school district or other taxing district, and report to the commissioner all delinquent officers and the amounts collected by them which they have failed to pay into the State Treasury, or into the treasury of the county, school district or other taxing district. Every such field agent, accountant or attorney shall report to the fiscal court of the county all delinquent officers and the amounts owing by them to the county and all amounts which such officers should have collected and which they failed to collect, and the person owing same. Every field agent, accountant or attorney shall report all excessive charges made by such officers, and shall report all officers who have received or retained a greater sum for their services or the services of their deputies than is allowed by law. Every field agent, accountant or attorney shall report all other facts by which any taxing authority is being unlawfully deprived of any money, and any other facts that he deems important touching the interest of any taxing authority, or of which the commissioner of revenue, county attorney, county judge/executive or fiscal court may require information.

History. 4262: amend. Acts 2005, ch. 85, § 131, effective June 20, 2005.

NOTES TO DECISIONS

1. Employment of Auditor.

This section does not deprive county board of education of power to employ an auditor to examine the books of sheriff who is delinquent in school tax collections. Bell County Board of Education v. Lee, 239 Ky. 317 , 39 S.W.2d 492, 1931 Ky. LEXIS 775 ( Ky. 1931 ).

Research References and Practice Aids

Cross-References.

Examination of records of county officers, post-audit by auditor of public accounts, KRS 43.050 , 43.070 to 43.090 .

131.220. Reporting and prosecution of tax law violators. [Repealed.]

Compiler’s Notes.

This section (4261) was repealed by Acts 1988, ch. 322, § 14, effective July 15, 1988.

131.230. Interstate comity.

The courts of this state shall recognize and enforce statutes concerning taxation constitutionally imposed by other states that extend like comity.

History. 4114h-17.

NOTES TO DECISIONS

Cited in:

Dixie Wholesale Grocery, Inc. v. Martin, 278 Ky. 705 , 129 S.W.2d 181, 1939 Ky. LEXIS 485 ( Ky. 1939 ), cert. denied, Dixie Wholesale Grocery v. Martin, 308 U.S. 609, 60 S. Ct. 173, 84 L. Ed. 509, 1939 U.S. LEXIS 113 (1939); State of Ohio ex rel. Duffy v. Arnett, 314 Ky. 403 , 234 S.W.2d 722, 1950 Ky. LEXIS 1058 ( Ky. 1950 ).

Research References and Practice Aids

Cross-References.

Interstate comity as to inheritance tax on intangible personal property of nonresident decedent held by Kentucky trustee, KRS 140.275 .

Kentucky Law Journal.

Walden, Enforcement by State Courts of Tax Claims of Sister States — Ohio v. Arnett, 39 Ky. L.J. 472 (1950).

131.240. Taxpayer’s records in electronic format — Requirements — Satisfaction of requirements.

  1. If a taxpayer’s required records are maintained as both electronic records and hard copies, the taxpayer shall make the records available to the department in electronic record format upon the department’s request and in accordance with the following:
    1. Electronic records used to establish tax compliance shall contain sufficient information so that the details underlying the electronic record can be identified and made available to the department upon request;
    2. Taxpayers shall not be required to construct electronic records for tax purposes other than those created in the course of business;
    3. If a taxpayer uses codes to identify some element in an electronic record or hard copy, the taxpayer shall provide the department with a method to interpret the coded information; and
    4. The taxpayer’s computer hardware or software shall accommodate the extraction and conversion of retained electronic records.
  2. A taxpayer may create electronic records solely for the department’s use if the taxpayer documents the process that created the record and the relationship between the electronic record and the original record.
  3. Nothing in this section shall relieve taxpayers of the responsibility to retain hard-copy records that are created or received in the ordinary course of business as required by existing law.
  4. Nothing in this section shall prevent the department from requesting, in lieu of electronic records, any hard-copy printouts that the taxpayer possesses at the time of examination.
  5. The department’s access to electronic records as required in subsection (1) of this section may be satisfied by:
    1. The taxpayer providing the department with the hardware, software, and personnel resources to access the electronic records;
    2. The taxpayer arranging for a third party to provide the hardware, software, and personnel resources necessary to access the electronic records. Contracting with a third party does not relieve the taxpayer of its responsibilities under this section; or
    3. The taxpayer converting the electronic records to a standard record format specified by the department, including copies of files, on a medium to which the department agrees.

History. Enact. Acts 2005, ch. 184, § 3, effective June 20, 2005.

131.250. Returns, reports, and statements to be filed electronically — Waiver.

  1. For the purpose of facilitating the administration of the taxes it administers, the department may require any tax return, report, or statement to be electronically filed.
    1. A person required to electronically file a return, report, or statement may apply for a waiver from the requirement by submitting the request on a form prescribed by the department. (2) (a) A person required to electronically file a return, report, or statement may apply for a waiver from the requirement by submitting the request on a form prescribed by the department.
    2. The request shall indicate the lack of one (1) or more of the following:
      1. Compatible computer hardware;
      2. Internet access; or
      3. Other technological capabilities determined relevant by the department.

HISTORY: Enact. Acts 2010, ch. 147, § 2, effective July 15, 2010; 2018 ch. 207, § 117, effective April 27, 2018; 2019 ch. 151, § 6, effective June 27, 2019; 2020 ch. 91, § 2, effective April 15, 2020.

Legislative Research Commission Notes.

(7/15/2010) Following the enactment of 2010 House Bill 319, which became 2010 Ky. Acts ch. 147, the drafter informed the Reviser of Statutes that the date, August 1, 2010, in subsection (2)(c) of this statute should have been January 1, 2007. Following an examination of the materials in the bill folder, the Reviser determined that the statutory authority necessary to make this adjustment was lacking, and the date has not been altered.

Kentucky Board of Tax Appeals

131.310. Kentucky Board of Tax Appeals created. [Repealed]

History. Enact. Acts 1964, ch. 141, § 1; 1968, ch. 152, § 168; 2010, ch. 24, § 93, effective July 15, 2010; repealed by 2017 ch. 74, § 106, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 1; 1968, ch. 152, § 168; 2010, ch. 24, § 93, effective July 15, 2010) was repealed by Acts 2017, ch. 74, § 106, effective June 29, 2017.

131.311. Appeals to Tax Commission preserved. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 38) was repealed by Acts 1968, ch. 152, § 168.

131.315. Members of board, appointment — Terms — Chairman — Vacancies. [Repealed]

History. Enact. Acts 1964, ch. 141, § 2; repealed by 2017 ch. 74, § 106, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 2) was repealed by Acts 2017, ch. 74, § 106, effective June 29, 2017.

131.320. Qualifications of members — Removal — Salary — Location of office — Training. [Repealed]

History. Enact. Acts 1964, ch. 141, § 3; 1976, ch. 206, § 30; 1992, ch. 449, § 1, effective April 13, 1992; 1994, ch. 191, § 1, effective July 15, 1994; 1996, ch. 318, § 31, effective July 15, 1996; 2005, ch. 85, § 132, effective June 20, 2005; repealed by 2017 ch. 74, § 106, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 3; 1976, ch. 206, § 30; 1992, ch. 449, § 1, effective April 13, 1992; 1994, ch. 191, § 1, effective July 15, 1994; 1996, ch. 318, § 31, effective July 15, 1996; 2005, ch. 85, § 132, effective June 20, 2005) was repealed by Acts 2017, ch. 74, § 106, effective June 29, 2017.

131.325. Record of board. [Renumbered]

History. Enact. Acts 1964, ch. 141, § 4; renumbered to § 49.200 by 2017 ch. 74, § 20, effective June 29, 2017.

131.330. Clerk of Board of Tax Appeals — Appointment — Qualifications. [Repealed]

History. Enact. Acts 1964, ch. 141, § 5(1); 1982, ch. 448, § 66, effective July 15, 1982; 2010, ch. 24, § 94, effective July 15, 2010; repealed by 2017 ch. 74, § 106, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 5(1); 1982, ch. 448, § 66, effective July 15, 1982; 2010, ch. 24, § 94, effective July 15, 2010) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.

131.335. Expenses of hearings outside offices. [Renumbered]

History. Enact. Acts 1964, ch. 141, § 5 (2); renumbered 2017, ch. 74, § 21, effective June 29, 2017.

Compiler’s Notes.

This section was renumbered as KRS 49.210 effective June 29, 2017.

131.340. Jurisdiction of board — Notice of rulings of county or state agencies — Appeals to board — Procedure. [Renumbered]

History. Enact. Acts 1964, ch. 141, § 6; 1984, ch. 111, § 71, effective July 13, 1984; 1986, ch. 410, § 1, effective July 15, 1986; 1996, ch. 318, § 32, effective July 15, 1996; 2005, ch. 85, § 133, effective June 20, 2005; renumbered 2017, ch. 74, § 22, effective June 29, 2017.

Compiler’s Notes.

This section was renumbered as KRS 49.220 effective June 29, 2017.

131.345. Conduct of proceedings before board — Persons who may be compensated for representation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 7; 1992, ch. 449, § 2, effective April 13, 1992; 1994, ch. 85, § 2, effective July 15, 1994) was repealed by Acts 1996, ch. 318, § 357, effective July 15, 1996.

131.350. Subpoenas — Depositions — Enforcement of process — Administration of oaths. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 8) was repealed by Acts 1996, ch. 318, § 357, effective July 15, 1996.

131.355. Proceedings before board public in nature — Exception — Appeal procedure. [Renumbered]

History. Enact. Acts 1964, ch. 141, § 9; 1972, ch. 316, § 1; 1990, ch. 288, § 1, effective July 13, 1990; 1996, ch. 255, § 1, effective April 4, 1996; 1996, ch. 318, § 33, effective July 15, 1996; 2005, ch. 85, § 134, effective June 20, 2005; renumbered 2017, ch. 74, § 23, effective June 29, 2017.

Compiler's Notes.

This section was renumbered as KRS 49.230 effective June 29, 2017.

131.360. Written decisions required — Contents — Refunds. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 141, § 10) was repealed by Acts 1996, ch. 318, § 357, effective July 15, 1996.

131.365. Effect of board decisions — Remand to agency — Refund. [Renumbered]

History. Enact. Acts 1964, ch. 141, § 11; 1996, ch. 318, § 34, effective July 15, 1996; renumbered 2017, ch. 74, § 24, effective June 29, 2017.

Compiler's Notes.

This section (Enact. 1996 Ky. Acts ch. 318, § 34, effective July 15, 1996), was repealed by Acts 2017, ch. 74, § 24, effective June 29, 2017.

This section was renumbered as KRS 49.240 effective June 29, 2017.

131.370. Judicial review of board decisions — Stay of collection of tax. [Renumbered]

History. Enact. Acts 1964, ch. 141, § 12; 1968, ch. 152, § 99; 1978, ch. 233, § 33, effective June 17, 1978; 1990, ch. 140, § 1, effective July 13, 1990; 1994, ch. 65, § 21, effective July 15, 1994; 1996, ch. 318, § 35, effective July 15, 1996; renumbered 2017, ch. 74, § 25, effective June 29, 2017.

Compiler’s Notes.

This section was renumbered as KRS 49.250 effective June 29, 2017.

Tax Amnesty Program

131.400. Definitions — Amnesty period — Tax liabilities and taxable periods eligible.

  1. KRS 131.410 to 131.445 shall be known as and may be cited as the “Kentucky Tax Amnesty Act.”
  2. The department shall develop and administer tax amnesty programs as provided in KRS 131.410 to 131.445 .
  3. As used in KRS 131.410 to 131.445 , unless the context requires otherwise:
    1. “Amnesty period” means the period of time established pursuant to subsection (4)(a) or (b) of this section during which a taxpayer may apply for tax amnesty;
    2. “Taxpayer” means any individual, partnership, joint venture, association, corporation, receiver, trustee, guardian, executor, administrator, fiduciary, limited liability company, limited liability partnership, or any other entity of any kind subject to any tax set forth in subsection (4) of this section or any person required to collect any such tax under subsection (4) of this section;
    3. “Account receivable” means an amount of state tax, penalty, fee, or interest which has been recorded as due and entered in the account records of the department, or which the taxpayer should reasonably expect to become due as a direct or indirect result of any pending or completed audit or investigation which the taxpayer knows is being conducted by any federal or state government taxing authority; and
    4. “Due and owing” means an assessment which has become final and is owed to the Commonwealth due to either the expiration of the taxpayer’s appeal rights pursuant to KRS 131.110 or, if an assessment has been appealed, the issuance of a final order by the board or by any court of this Commonwealth. For the purposes of KRS 131.410 to 131.445 , assessments that have been appealed shall be final, due and owing fifteen (15) days after the last unappealed or unappealable order sustaining the assessment or any part thereof has become final.
    1. Notwithstanding the provisions of any other law to the contrary, a tax amnesty program shall be conducted by the department during the fiscal year ending June 30, 2003, for a period of not less than sixty (60) days nor more than one hundred and twenty (120) days and shall apply to all taxpayers owing taxes, penalties, fees, or interest subject to the administrative jurisdiction of the department, with the exceptions of ad valorem taxes levied on real property pursuant to KRS Chapter 132, ad valorem taxes on motor vehicles and motorboats collected by the county clerks, and ad valorem taxes on personal property levied pursuant to KRS Chapter 132 that are payable to local officials. The program shall apply to tax liabilities for taxable periods ending or transactions occurring after December 1, 1987, but prior to December 1, 2001. Amnesty tax return forms shall be in a form prescribed by the department. (4) (a) Notwithstanding the provisions of any other law to the contrary, a tax amnesty program shall be conducted by the department during the fiscal year ending June 30, 2003, for a period of not less than sixty (60) days nor more than one hundred and twenty (120) days and shall apply to all taxpayers owing taxes, penalties, fees, or interest subject to the administrative jurisdiction of the department, with the exceptions of ad valorem taxes levied on real property pursuant to KRS Chapter 132, ad valorem taxes on motor vehicles and motorboats collected by the county clerks, and ad valorem taxes on personal property levied pursuant to KRS Chapter 132 that are payable to local officials. The program shall apply to tax liabilities for taxable periods ending or transactions occurring after December 1, 1987, but prior to December 1, 2001. Amnesty tax return forms shall be in a form prescribed by the department.
    2. Notwithstanding the provisions of any other law to the contrary, a tax amnesty program shall be conducted by the department during the fiscal year ending June 30, 2013, for a period of not less than sixty (60) days nor more than one hundred twenty (120) days. The program shall be available to all taxpayers owing taxes, penalties, fees, or interest subject to the administrative jurisdiction of the department, with the exception of:
      1. Ad valorem taxes levied on real property pursuant to KRS Chapter 132;
      2. Ad valorem taxes on motor vehicles and motorboats collected by the county clerks;
      3. Ad valorem taxes on personal property levied pursuant to KRS Chapter 132 that are payable to local officials; and
      4. Any penalties imposed under KRS 131.630 or 138.205 .

The program shall apply to tax liabilities for taxable periods ending or transactions occurring after December 1, 2001, and prior to October 1, 2011. Amnesty tax forms and submissions shall be in a form prescribed by the department.

History. Enact. Acts 1988, ch. 322, § 1, effective July 15, 1988; 2002, ch. 366, § 1, effective July 15, 2002; 2005, ch. 85, § 135, effective June 20, 2005; 2012, ch. 110, § 1, effective April 11, 2012.

131.410. Circumstances for waiver of criminal prosecution and civil penalties — Exceptions — Refunds and credits.

  1. For any taxpayer who meets the requirements of KRS 131.420 :
      1. For taxes which are owed as a result of the nonreporting or underreporting of tax liabilities or the nonpayment of any account receivable owed by an eligible taxpayer, the Commonwealth shall waive criminal prosecution and all civil penalties and fees which may be assessed under any KRS chapter subject to the administrative jurisdiction of the department for the taxable years or periods for which tax amnesty is requested. (a) 1. For taxes which are owed as a result of the nonreporting or underreporting of tax liabilities or the nonpayment of any account receivable owed by an eligible taxpayer, the Commonwealth shall waive criminal prosecution and all civil penalties and fees which may be assessed under any KRS chapter subject to the administrative jurisdiction of the department for the taxable years or periods for which tax amnesty is requested.
      2. For the amnesty periods described in KRS 131.400(4), the Commonwealth shall waive interest as provided in subsection (1) of KRS 131.425 .
    1. Except when the taxpayer and department enter into an installment payment agreement authorized under subsection (3) of KRS 131.420 , failure to pay all taxes as shown on the taxpayer’s amnesty tax return shall invalidate any amnesty granted pursuant to KRS 131.410 to 131.445 .
  2. This section shall not apply to any taxpayer who is on notice, written or otherwise, of a criminal investigation being conducted by an agency of the state or any political subdivision thereof or the United States, nor shall this section apply to any taxpayer who is the subject of any criminal litigation which is pending on the date of the taxpayer’s application in any court of this state or the United States for nonpayment, delinquency, evasion or fraud in relation to any federal taxes or to any of the taxes to which this amnesty program is applicable.
  3. No refund or credit shall be granted for any interest, fee, or penalty paid prior to the time the taxpayer requests amnesty pursuant to KRS 131.420 .
  4. Unless the department in its own discretion redetermines the amount of taxes due, no refund or credit shall be granted for any taxes paid under the amnesty program. Any administrative or judicial proceeding or claim seeking the refund or recovery of any amount paid under an amnesty program is hereby barred.

History. Enact. Acts 1988, ch. 322, § 2, effective July 15, 1988; 2002, ch. 366, § 2, effective July 15, 2002; 2005, ch. 85, § 136, effective June 20, 2005; 2012, ch. 110, § 2, effective April 11, 2012.

131.420. Requirements for amnesty — Installment payments — Invalidation of amnesty — Protests.

  1. The provisions of KRS 131.400 to 131.445 shall apply to any eligible taxpayer who files an application for amnesty within the time prescribed by the department and does the following:
    1. Files completed tax returns for all years or tax reporting periods as stated on the application for which returns have not previously been filed and files completed amended tax returns for all years or tax reporting periods as stated on the application for which the tax liability was underreported, except in cases in which the tax liability has been established through audit;
    2. Pays in full the taxes due for the periods and taxes applied for at the time the application or amnesty tax returns are filed within the amnesty period and pays the amount of any additional tax owed within thirty (30) days of notification by the department;
    3. Pays in full within the amnesty period all taxes previously assessed by the department that are due and owing at the time the application or amnesty tax returns are filed; and
    4. With regard to the program described in KRS 131.400 (4)(b), agrees to file all tax returns when due and make all tax payments when due for three (3) years following the date amnesty is granted to the taxpayer.
  2. An eligible taxpayer may participate in the amnesty program whether or not the taxpayer is under audit, notwithstanding the fact that the amount due is included in a proposed assessment or an assessment, bill, notice, or demand for payment issued by the department, and without regard to whether the amount due is subject to a pending administrative or judicial proceeding. An eligible taxpayer may participate in the amnesty program to the extent of the uncontested portion of any assessed liability. However, participation in the program shall be conditioned upon the taxpayer’s agreement that the right to protest or initiate an administrative or judicial proceeding or to claim any refund of moneys paid under the program is barred with respect to the amounts paid under the amnesty programs.
    1. The department may enter into an installment payment agreement as provided in KRS 131.081(9) in cases of severe hardship in lieu of the complete payment required under subsection (1) of this section. (3) (a) The department may enter into an installment payment agreement as provided in KRS 131.081(9) in cases of severe hardship in lieu of the complete payment required under subsection (1) of this section.
    2. Failure of the taxpayer to make timely payments shall void the amnesty granted the taxpayer.
      1. All agreements and payments under the program described in KRS 131.400(4)(a) shall include interest as provided under subsection (2) of KRS 131.425 . (c) 1. All agreements and payments under the program described in KRS 131.400(4)(a) shall include interest as provided under subsection (2) of KRS 131.425 .
      2. All agreements and payments under the program described in KRS 131.400(4)(b) shall include interest as provided under KRS 131.425(3).
    3. All required payments under an installment payment agreement under the program described in KRS 131.400(4)(b) shall be made on or before May 31, 2013.
      1. If a taxpayer fails to make all required payments under paragraph (d) of this subsection by May 31, 2013, the amnesty received by the taxpayer shall be invalidated, and all civil penalties, fees, and interest waived under the amnesty agreement shall: (e) 1. If a taxpayer fails to make all required payments under paragraph (d) of this subsection by May 31, 2013, the amnesty received by the taxpayer shall be invalidated, and all civil penalties, fees, and interest waived under the amnesty agreement shall:
        1. Be reinstated;
        2. Be subject to immediate collection by the department; and
        3. Not be subject to protest under KRS 131.110 .
      2. The department may utilize any remedy allowed by law to recover the amounts reinstated, and no statute of limitations shall apply.
  3. If, following the termination of the tax amnesty period, the department issues a deficiency assessment based upon information independent of that shown on a return filed pursuant to subsection (1) of this section, the department shall have the authority to impose penalties and criminal action may be brought where authorized by law only with respect to the difference between the amount shown on the amnesty tax return and the correct amount of tax due. The imposition of penalties or criminal action shall not invalidate any waiver granted under KRS 131.410 . With the exception of the cost-of-collection fee imposed under subsection (1) of KRS 131.440 , all assessments issued by the department under KRS 131.410 to 131.445 may be protested by the taxpayer in the same manner as other assessments pursuant to the terms of this chapter.

History. Enact. Acts 1988, ch. 322, § 3, effective July 15, 1988; 2002, ch. 366, § 3, effective July 15, 2002; 2005, ch. 85, § 137, effective June 20, 2005; 2012, ch. 110, § 3, effective April 11, 2012.

131.425. Interest on taxes paid under amnesty.

  1. Notwithstanding the provisions of KRS 131.183(1), all taxes paid under an amnesty program return:
    1. Filed under the program described in KRS 131.400(4)(a) shall bear no interest imposed under KRS 131.183(1) or other applicable statutes; and
    2. Filed under the program described in KRS 131.400(4)(b) shall bear interest at one-half (1/2) the tax interest rate established by KRS 131.183(1) or other applicable statutes.
  2. Notwithstanding the provisions of KRS 131.183(2) and 141.235 , if any overpayment of tax under KRS 131.410 to 131.445 is refunded or credited within one hundred eighty (180) days after the return is filed, no interest shall be allowed.
  3. All installment payment agreements entered into pursuant to KRS 131.420 relating to the program described in KRS 131.400(4)(b) shall bear interest on the outstanding amount of tax due during the installment period at the full rate established by KRS 131.183 or other applicable provisions of the Kentucky Revised Statutes.

History. Enact. Acts 1988, ch. 322, § 4, effective July 15, 1988; 2002, ch. 366, § 4, effective July 15, 2002; 2012, ch. 110, § 4, effective April 11, 2012.

131.430. Administration and publicizing of program.

The department shall promulgate administrative regulations as necessary, issue forms and instructions, and take all actions necessary to implement the provisions of KRS 131.410 to 131.445 . The department shall extensively publicize the tax amnesty program in order to maximize the public awareness of and participation in the program.

History. Enact. Acts 1988, ch. 322, § 5, effective July 15, 1988; 2005, ch. 85, § 138, effective June 20, 2005.

131.435. Tax amnesty receipt account.

For purposes of accounting for the revenues received pursuant to KRS 131.410 to 131.445 , the department shall establish within the general fund a separate and distinct tax amnesty receipt account. All receipts collected as a result of the amnesty program shall be paid into this account, and all transactions involving this account shall be accounted for and reported as such.

History. Enact. Acts 1988, ch. 322, § 6, effective July 15, 1988; 2009, ch. 12, § 38, effective June 25, 2009.

131.440. Cost-of-collection fees — Accrual of interest — Applicability.

    1. For purposes of the program described in KRS 131.400(4)(a), in addition to all other penalties provided under KRS 131.180 , 131.410 to 131.445 , and 131.990 and any other law, there is hereby imposed after the expiration of the tax amnesty period the following cost-of-collection fees: (1) (a) For purposes of the program described in KRS 131.400(4)(a), in addition to all other penalties provided under KRS 131.180 , 131.410 to 131.445 , and 131.990 and any other law, there is hereby imposed after the expiration of the tax amnesty period the following cost-of-collection fees:
      1. A cost-of-collection fee of twenty-five percent (25%) on all taxes which are or become due and owing to the department for any reporting period, regardless of when due. This fee shall be in addition to any other applicable fee provided in this paragraph;
      2. Taxes which are assessed and collected after the amnesty period for taxable periods ending or transactions occurring prior to December 1, 2001, shall be charged a cost-of-collection fee of twenty-five percent (25%) at the time of assessment; and
      3. For any taxpayer who failed to file a return for any previous tax period for which amnesty is available and fails to file the return during the amnesty period, the cost-of-collection fee shall be fifty percent (50%) of any tax deficiency assessed after the amnesty period.
    2. For purposes of the program described in KRS 131.400(4)(b):
      1. In addition to all other penalties provided under KRS 131.180, 131.410 to 131.445, 131.990 and any other law, there are hereby imposed after the expiration of the tax amnesty period the following cost-of-collection fees:
        1. A cost-of-collection fee of twenty-five percent (25%) on all taxes which are or become due and owing to the department for any reporting period, regardless of when due. This fee shall be in addition to any other applicable fee provided in this paragraph;
        2. Taxes which are assessed and collected after the amnesty period for taxable periods ending or transactions occurring prior to October 1, 2011, shall be charged a cost-of-collection fee of twenty-five percent (25%) at the time of assessment; and
        3. For any taxpayer who failed to file a return for any previous tax period for which amnesty is available and fails to file the return during the amnesty period, the cost-of-collection fee shall be fifty percent (50%) of any tax deficiency assessed after the amnesty period.
      2. After expiration of the tax amnesty period, an amnesty-eligible tax liability that remains unpaid and that is not covered by an installment agreement as provided in KRS 131.420 shall accrue interest at a rate that is two percent (2%) above the interest rate established by KRS 131.183 or other applicable provisions of the Kentucky Revised Statutes, beginning on the day after the tax amnesty period ends.
  1. The commissioner shall have the right to waive any penalties or collection fees when it is demonstrated that any deficiency of the taxpayer was due to reasonable cause as defined in KRS 131.010(9). However, any taxes that cannot be paid under the amnesty program because of the exclusions in subsection (2) of KRS 131.410 shall not be subject to these fees.
  2. The provisions of subsection (1) of this section shall not relate to any account which has been protested pursuant to KRS 131.110 as of the expiration of the amnesty period and which does not become due and owing, or to any account on which the taxpayer is remitting timely payments under a payment agreement negotiated with the department prior to or during the amnesty period.
  3. The fee levied under subsection (1) of this section shall not apply to taxes paid pursuant to the terms of the amnesty program nor shall the judgment penalty of twenty percent (20%) levied under KRS 135.060(3) apply in any case in which the fee levied under this section is applicable.

History. Enact. Acts 1988, ch. 322, § 7, effective July 15, 1988; 2002, ch. 366, § 5, effective July 15, 2002; 2005, ch. 85, § 139, effective June 20, 2005; 2012, ch. 110, § 5, effective April 11, 2012.

NOTES TO DECISIONS

1. Bankruptcy Proceedings.

Debt for state withholding taxes was nondischargeable, under bankruptcy proceedings; however, under federal law the penalties due on the nondischargeable withholding taxes, owed to the Kentucky Revenue Cabinet, pursuant to this section and KRS 141.990 , were dischargeable. Hardin v. United States, 140 B.R. 158, 1992 Bankr. LEXIS 704 (Bankr. E.D. Ky. 1992 ).

131.445. Civil and criminal penalties following amnesty — Invalidation of amnesty.

  1. After the expiration of the tax amnesty period, the department shall vigorously pursue all civil, administrative, and criminal penalties authorized by state and federal law for all taxes found to be due the Commonwealth.
  2. In addition to all other penalties provided under KRS 131.180 , 131.410 to 131.445 , 131.990 , and any other law, any taxpayer who willfully fails to make a return or willfully makes a false return, or who willfully fails to pay taxes owing or collected, with intent to evade payment of the tax or amount collected, or any part thereof, shall be guilty of a Class D felony.
    1. Amnesty received by a taxpayer under the program described in KRS 131.400(4)(b) shall be invalidated if: (3) (a) Amnesty received by a taxpayer under the program described in KRS 131.400(4)(b) shall be invalidated if:
      1. The taxpayer fails to timely file any tax return or timely pay any tax and interest due for any period ending after December 31, 2001, and prior to October 1, 2011; or
      2. The taxpayer fails to timely file any tax return or timely pay any tax for any period beginning October 1, 2011, and ending within three (3) years of the date amnesty was granted to the taxpayer.
    2. Except as provided in paragraph (d) of this subsection, if the provisions of paragraph (a) of this subsection apply, then the civil penalties, fees, and interest waived pursuant to KRS 131.410 shall:
      1. Be reinstated;
      2. Be subject to immediate collection by the department; and
      3. Not be subject to protest under KRS 131.110 .
    3. The department may utilize any remedy permitted under the law to collect amounts due under this subsection, and no statute of limitations shall apply.
    4. If paragraph (a) of this subsection applies to a taxpayer as the result of an audit or other investigation by the department, the amnesty shall not be invalidated until the taxpayer has had the opportunity to protest as provided in KRS 131.110 , and has failed to pay the tax within thirty (30) days of the date on which the assessment becomes final, due, and owing as provided in KRS 131.500(1).

History. Enact. Acts 1988, ch. 322, § 8, effective July 15, 1988; 1992, ch. 403, § 3, effective July 14, 1992; 2002, ch. 366, § 6, effective July 15, 2002; 2005, ch. 85, § 140, effective June 20, 2005; 2012, ch. 110, § 6, effective April 11, 2012.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provided: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Research References and Practice Aids

Cross-References.

Class D felony, penalties, KRS 532.060 .

Procedure When Tax Not Paid

131.500. Demand for payment — Levy upon and sale of property of taxpayer to satisfy demand — Maintenance of property.

    1. In addition to any other remedy provided by the laws of the Commonwealth, if any person has been assessed for a tax the collection of which is administered by the Department of Revenue as provided by the laws of the Commonwealth and if the person has not sought administrative or judicial review of the assessment as provided for in KRS 131.110 , or if the person has sought but exhausted all administrative and judicial review so that the assessment is final, due, and owing, the commissioner of revenue or his delegate may cause a demand to be made on the person for the payment thereof. (1) (a) In addition to any other remedy provided by the laws of the Commonwealth, if any person has been assessed for a tax the collection of which is administered by the Department of Revenue as provided by the laws of the Commonwealth and if the person has not sought administrative or judicial review of the assessment as provided for in KRS 131.110 , or if the person has sought but exhausted all administrative and judicial review so that the assessment is final, due, and owing, the commissioner of revenue or his delegate may cause a demand to be made on the person for the payment thereof.
    2. If the tax remains unpaid for thirty (30) days after the demand, the commissioner or his delegate may levy upon and sell all property and rights to property found within the Commonwealth belonging to the person or on which there is a lien provided by KRS 131.515 or 134.420 , except the property that is exempt from an execution on a judgment in favor of the Commonwealth as provided in KRS Chapter 427, for the payment of the amount of the tax, penalty, interest, fees, and cost of the levy.
  1. As soon as practicable after seizure of property, notice in writing shall be given by the commissioner or his delegate to the owner of the property. The notice shall be given to the owner either in person or by certified mail to his or her last known address. The notice shall specify the sum demanded and shall contain, in the case of personal property, an account of the property seized and, in the case of real property, a description with reasonable certainty of the property seized.
  2. The commissioner or his or her designee shall as soon as practicable after the seizure of the property cause a notification of the sale of the seized property to be published in the newspaper with the largest circulation within the county where the seizure is made. The notice shall be published once each week for three (3) successive weeks. In addition, the notice shall be posted at the courthouse in the county where the seizure is made for fifteen (15) days next preceding sale. The notice shall specify the property to be sold, and the time, place, manner, and condition of the sale thereof.
  3. If any property liable to levy is not divisible, so as to enable the commissioner or the commissioner’s designee by sale of a part thereof to raise the whole amount of the tax, penalty, fees, interest, and cost of the levy, the whole of the property shall be sold.
  4. The time of sale shall not be less than thirty (30) nor more than ninety (90) days from the time the seizure is made. The place of sale shall be within the county in which the property is seized, except by special order of the commissioner.
  5. The sale shall be conducted by public auction, or by public sale under sealed bids. In the case of the seizure of several items of property, the commissioner or his or her delegate may offer the items for sale separately, in groups, or in the aggregate and accept whichever method produces the highest aggregate amount.
    1. The commissioner or his or her delegate shall determine whether payment in full shall be required at the time of acceptance of a bid, or whether a part of the payment may be deferred for such period, not to exceed one (1) month, as he or she may determine to be appropriate. (7) (a) The commissioner or his or her delegate shall determine whether payment in full shall be required at the time of acceptance of a bid, or whether a part of the payment may be deferred for such period, not to exceed one (1) month, as he or she may determine to be appropriate.
    2. If payment in full is required at the time of acceptance of a bid and is not then and there paid, the commissioner or his or her delegate shall forthwith proceed to again sell the property as provided in subsection (6) of this section.
    3. If the conditions of the sale permit part of the payment to be deferred, and if such part is not paid, within the prescribed period, suit may be instituted in the Franklin Circuit Court or the Circuit Court of the county where the sale was conducted against the purchaser for the purchase price or such part thereof as has not been paid, together with interest at the rate of twelve percent (12%) per annum from the date of the sale; or, in the discretion of the commissioner, the sale may be declared to be null and void for failure to make full payment of the purchase price and the property may again be advertised and sold as provided in this section.
    4. If readvertisement and sale occur, any new purchaser shall receive the property or rights to property, free and clear of any claim or right of the former defaulting purchaser, of any nature whatsoever, and the amount paid upon the bid price by the defaulting purchaser shall be forfeited.
  6. If the commissioner or his or her delegate determines that any property seized is liable to perish or become greatly reduced in price or value by keeping, or that the property cannot be kept without great expense, he or she shall appraise the value of the property and, if the owner of the property can be readily found, the commissioner or his or her delegate shall give him or her notice of the determination of the appraised value of the property. The property shall be returned to the owner if, within the time specified in the notice, the owner pays to the commissioner or his or her delegate an amount equal to the appraised value, or gives bond in the form, with the sureties, and in the amount as the commissioner or his or her delegate determines to be appropriate in the circumstances. If the owner does not pay the amount or furnish the bond in accordance with this subsection, the commissioner or his or her delegate shall as soon as practicable make public sale of the property without regard to the advertisement requirements or the time limitations contained in subsections (3) and (5) of this section.
  7. No proceedings under this section shall be commenced more than ten (10) years after the assessment becomes final.
  8. The term “levy” as used in this section shall include the power of distraint and seizure by any means. Except as otherwise provided in KRS 131.510(2)(a), a levy shall extend only to property possessed and obligations existing at the time thereof. In any case in which the commissioner or his or her delegate may levy upon property or rights to property, he or she may seize and sell the property or rights whether real, personal, tangible or intangible.
  9. Notwithstanding the provisions of KRS Chapters 45, 45A, and 56, the department may take all necessary steps to provide for the protection, maintenance, or transportation of all property seized by the department pursuant to the provisions of this section, including but not limited to negotiating directly for the procurement of contractual services, including professionals, supplies, materials, equipment, or the leasing of real and personal property. Every effort shall be made to effect a competitively established price for purchases made pursuant to this section. The department shall report any procurements of contractual services, supplies, materials, equipment, or the leasing of real and personal property, to the secretary of the Finance and Administration Cabinet within sixty (60) days of the transaction. Nothing in this section shall preclude the department from complying with the provisions of KRS Chapters 45 and 56 relating to the requirements to report the purchase or lease of real property or equipment to the Capital Projects and Bond Oversight Committee.

History. Enact. Acts 1980, ch. 262, § 1, effective July 15, 1980; 1982, ch. 238, § 1, effective July 15, 1982; 1990, ch. 164, § 1, effective July 13, 1990; 1990, ch. 423, § 6, effective July 13, 1990; 1996, ch. 344, § 8, effective July 15, 1996; 2005, ch. 85, § 141, effective June 20, 2005; 2009, ch. 10, § 32, effective January 1, 2010.

Compiler’s Notes.

Section 11 of Acts 1996, ch. 344 read, “The provisions of this Act shall apply for taxable years beginning after December 31, 1995.”

Opinions of Attorney General.

The administrative collection procedure set forth in KRS 131.500 to 131.550 is not available to the county attorney for the collection of delinquent property taxes. OAG 82-250 .

The administrative collection procedures stated in this section are modeled after the collection procedures used by the federal government and many state jurisdictions, and the procedures are constitutional. OAG 82-288 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

131.510. Notice and demand before levy — Continuous effect of levy — Prompt release of levy.

  1. Levy may be made with respect to any unpaid tax only after the department has given notice and demand to such person in writing of the intention to make such levy. Such notice and demand shall be given in person, or shall be sent by certified mail to such person’s last known address, no less than ten (10) days before the date of levy.
    1. The effect of a levy on salary or wages payable to or received by a person shall be continuous from the date such levy is first made until the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time. (2) (a) The effect of a levy on salary or wages payable to or received by a person shall be continuous from the date such levy is first made until the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time.
    2. With respect to a levy described in paragraph (a) of this subsection, the department shall promptly release the levy when the liability out of which such levy arose is satisfied or becomes unenforceable by reason of lapse of time, and shall promptly notify the person upon whom such levy was made that such levy has been released.

History. Enact. Acts 1980, ch. 262, § 2, effective July 15, 1980; 2005, ch. 85, § 142, effective June 20, 2005.

131.515. Delinquent taxes, penalties, interest, and other costs constitute lien in favor of Commonwealth — Duration — Notice.

  1. If any person liable to pay any tax administered by the department, other than a tax subject to the provisions of KRS 134.420 , neglects or refuses to pay the tax after demand, the tax due together with all penalties, interest, and other costs applicable provided by law shall be a lien in favor of the Commonwealth of Kentucky. The lien shall attach to all property and rights to property owned or subsequently acquired by the person neglecting or refusing to pay the tax.
  2. The lien imposed by subsection (1) of this section shall remain in force for ten (10) years from the date the notice of tax lien has been filed by the commissioner, or his or her designee with the county clerk of any county or counties in which the taxpayer’s business or residence is located, or any county in which the taxpayer has an interest in property.
  3. The tax lien imposed by subsection (1) of this section shall not be valid as against any purchaser, judgment lien creditor, or holder of a security interest or mechanic’s lien until notice of the tax lien has been filed by the commissioner or his or her designee with the county clerk of any county or counties in which the taxpayer’s business or residence is located, or in any county in which the taxpayer has an interest in property. The recording of the tax lien shall constitute notice of both the original assessment and all subsequent assessments of liability against the same taxpayer. Upon request, the department shall disclose the specific amount of liability at a given date to any interested party legally entitled to the information.
  4. Even though notice of a tax lien has been filed as provided by subsection (3) of this section, and notwithstanding the provisions of KRS 382.520 , the tax lien imposed by subsection (1) of this section shall not be valid with respect to a security interest which came into existence after tax lien filing by reason of disbursements made within forty-five (45) days after the date of tax lien filing or the date the person making the disbursements had actual notice or knowledge of tax lien filing, whichever is earlier, provided the security interest:
    1. Is in property which:
      1. At the time of tax lien filing is subject to the tax lien imposed by subsection (1) of this section; and
      2. Is covered by the terms of a written agreement entered into before tax lien filing; and
    2. Is protected under local law against a judgment lien arising, as of the time of tax lien filing, out of an unsecured obligation.

History. Enact. Acts 2009, ch. 10, § 33, effective January 1, 2010.

131.520. Surrender of property upon which levy made — Effect of surrender or failure to do so.

  1. Any person in possession of or obligated with respect to property or rights to property subject to levy upon which a levy has been made shall, upon demand of the commissioner or his delegate, surrender such property or rights or discharge such obligation to the commissioner or his delegate, except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process.
  2. Any person who fails or refuses to surrender any property or rights to property subject to levy shall be liable in his own person and estate to the Commonwealth in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made, together with costs and interest on such sum at the rate of twelve percent (12%) per annum from the date of such levy. Any amount other than costs recovered under this paragraph shall be credited against the tax liability for the collection of which such levy was made.
  3. Any person in possession of or obligated with respect to property or rights to property subject to levy upon which a levy has been made who, upon demand by the commissioner or his delegate, surrenders such property or rights to property or discharges such obligation to the commissioner or his delegate shall be discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from such surrender or payment.

History. Enact. Acts 1980, ch. 262, § 3, effective July 15, 1980; 1982, ch. 238, § 2, effective July 15, 1982; 2005, ch. 85, § 143, effective June 20, 2005.

131.530. Right of redemption.

  1. Any person whose property has been levied upon shall have the right to pay the amount due, together with the expense of the proceeding, to the commissioner or his delegate at any time prior to the sale thereof and upon such payment the commissioner or his delegate shall cause such property to be restored to him and all further proceedings in connection with the levy on such property shall cease from the time of such payment.
  2. The owner of any real property sold as provided in KRS 131.500(1), his heirs, executors, or administrators, or any person having an interest therein, or a lien thereon, or any person in his behalf, shall be permitted to redeem the real property sold or any particular tract of such property, at any time within one hundred twenty (120) days after the date of the sale. Such property or tract of property shall be permitted to be redeemed only upon payment to the purchaser, or in case he cannot be found in the county in which the property to be redeemed is situated, then to the commissioner or his delegate, for the use of the purchaser, his heirs, or assigns, the amount paid by such purchaser and interest thereon at the rate of twenty percent (20%) per annum from the date of sale.
  3. In the case of property sold pursuant to KRS 131.500(1), the commissioner or his delegate shall give to the purchaser a certificate of sale upon payment in full of the purchase price. The certificate shall set forth a description of the property purchased, for whose taxes the property was sold, and the price paid therefor.
  4. In all cases where property is sold pursuant to KRS 131.500(1), except real property, the certificate of sale issued pursuant to subsection (3) of this section shall have the following effect:
    1. Shall be prima facie evidence of the rights of the commissioner or his delegate to make such sale, and of the regularity of the proceeding of the sale; and
    2. Shall transfer to the purchaser all right, title and interest of the taxpayer in and to the property sold; and
    3. If such property consists of stock, shall be notice, when received, to any corporation, company, or association of such transfer, and shall be authority to such corporation, company, or association to record the transfer on its books and records in the same manner as if the stocks were transferred or assigned by the party holding the same, in lieu of any prior certificate, which shall be void, whether canceled or not; and
    4. If the subject of sale is securities or other evidences of debt, shall be a good and valid receipt to the person holding the same, as against any person holding or claiming to hold possession of such securities or other evidences of debt; and
    5. If such property consists of a motor vehicle, shall be notice, when received by any public official charged with the registration of title to motor vehicles, of such transfer and shall be authority to such official to record the transfer on his books and records in the same manner as if title to such motor vehicle were transferred or assigned by the party holding the same, in lieu of any original or prior title, which shall be void, whether canceled or not.
  5. In the case of any real property sold pursuant to KRS 131.500 (1) and not redeemed in the manner and within the time provided in subsection (2) of this section, the commissioner or his delegate shall execute in accordance with the laws of the Commonwealth, to the purchaser of such real property upon surrender of the certificate of sale, a deed to the real property so purchased by him, reciting the facts set forth in the certificate. The deed executed pursuant to this subsection shall have the following effect:
    1. Shall be prima facie evidence of the rights of the commissioner or his delegate to make such sale, and of the regularity of the proceedings of the sale; and
    2. If the proceedings of the commissioner or his delegate have been substantially in accordance with the provisions of KRS 131.500 , such deed shall be considered and operate as a conveyance of all right, title and interest the taxpayer has in and to the real property thus sold at the time the lien of the Commonwealth attached thereto.
  6. A certificate of sale of personal property given or a deed to real property executed pursuant to this section shall discharge such property from all liens, encumbrances, and titles over which the lien of the Commonwealth, with respect to which the levy was made, had priority.

History. Enact. Acts 1980, ch. 262, § 4, effective July 15, 1980; 1982, ch. 238, § 3, effective July 15, 1982; 2005, ch. 85, § 144, effective June 20, 2005.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

131.540. Release or return of property.

  1. It shall be lawful for the commissioner or his delegate, under regulations prescribed by the commissioner, to release the levy upon all or part of the property or rights to property levied upon where the commissioner or his delegate determines that such action will facilitate the collection of the liability, but such release shall not operate to prevent any subsequent levy.
  2. If the commissioner determines that property has been wrongfully levied upon, it shall be lawful for the commissioner to return the specific property levied upon, or an amount of money equal to the amount of money levied upon, or any amount of money equal to the amount of money received by the commissioner from a sale of such property.
  3. Property may be returned at any time. An amount equal to the amount of money levied upon or received from such sale may be returned at any time before the expiration of four (4) years from the date of such levy.

History. Enact. Acts 1980, ch. 262, § 5, effective July 15, 1980; 1982, ch. 238, § 4, effective July 15, 1982; 2005, ch. 85, § 145, effective June 20, 2005.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

131.550. Assessment against transferee of a fraudulent conveyance made with intent to hinder or evade collection of tax due from transferor.

  1. When the Department of Revenue reasonably believes that any taxpayer has divested himself by gift, conveyance, assignment, transfer of, or charge upon any property, whether real, personal, tangible or intangible, with the intent to hinder or evade the collection of any tax assessed or to be assessed by the department or declared by the taxpayer on a return filed with the department, any transferee of such property may be assessed by the Department of Revenue an amount equal to the lesser of the amount of tax assessed against the transferor taxpayer or the fair market value of the property so transferred. However, no assessment shall be made pursuant to this section against a transferee who takes the property for full and valuable consideration in money or money’s worth, unless it appears that such transferee had notice of the intent of the transferor taxpayer to hinder or evade the collection of any tax.
  2. Any assessment made by the Department of Revenue against a transferee pursuant to subsection (1) of this section is, except as provided in this section, subject to the same provisions and limitations as in the case of the taxes for which the liabilities were incurred.
  3. The period of limitation for assessment of any liability against a transferee pursuant to subsection (1) of this section shall be as follows:
    1. In the case of an initial transferee, within one (1) year after the expiration of the period of limitation for assessment against the transferor taxpayer; and
    2. In the case of the liability of a transferee of a transferee, within one (1) year after the expiration of the period of limitation for assessment against the preceding transferee, but not more than three (3) years after the expiration of the period of limitation for assessment against the initial transferor taxpayer.
  4. The notice of any assessment against a transferee made pursuant to subsection (1) of this section shall be either given to the transferee in person or sent by mail to such transferee’s last known address.

History. Enact. Acts 1982, ch. 238, § 5, effective July 15, 1982; 2005, ch. 85, § 146, effective June 20, 2005.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Application of Refunds to Taxes Due

131.560. Withholding of individual income tax refund to satisfy certain liabilities — Priority of claims.

Notwithstanding the provisions of KRS 44.030 or 131.190 , the Department of Revenue shall withhold the Kentucky individual income tax refund otherwise due a taxpayer under KRS Chapter 141 who owes overdue child support or is indebted to any state agency, officer, board, commission, corporation, institution, cabinet, department or other state organization, or any county, city, urban-county government, consolidated local government, or charter county government duly organized in this state, which has complied with the requirements of KRS 131.565 . After satisfaction of any undisputed delinquent tax liability due the Department of Revenue from such taxpayer, the tax refund balance so withheld shall, except as provided in KRS 131.565 , be transmitted as soon as practicable to the state agency, or the county, city, urban-county government, consolidated local government, or charter county government duly organized in this state, having established a claim therefor. In the case of multiple state agency or any county, city, urban-county government, consolidated local government, or charter county government duly organized in this state claims against the same tax refund, the state agency having the larger pending claim shall have priority after satisfaction of any undisputed delinquent tax liabilities due the Department of Revenue, followed by other state agency claims. After all state agency claims have been satisfied, the claims of any county, city, urban-county government, consolidated local government, or charter county government duly organized in this state shall be satisfied with the larger pending claims satisfied first, and other claims satisfied in descending order.

History. Enact. Acts 1984, ch. 405, § 7, effective July 13, 1984; 1986, ch. 487, § 10, effective July 15, 1986; 2005, ch. 85, § 147, effective June 20, 2005; 2006, ch. 252, Pt. XVI, § 3, effective April 25, 2006.

131.565. Definition of “state agency” — Establishment of claim by state agency pursuant to statutory provision, administrative regulation, or ordinance — Requests to withhold individual income tax refund.

  1. For purposes of KRS 131.560 to 131.595 , “state agency” or “state agencies” shall include the Court of Justice and any local government, as those terms are defined in KRS 45.241 .
  2. No state agency shall request the withholding of any individual income tax refund unless there is specific provision in statute, administrative regulation, or, in the case of a local government, ordinance, for debtor appeal and hearing rights for that particular debt.
  3. State agencies having the statutory, regulatory, or other legal provisions described in subsection (2) of this section shall establish claims against Kentucky individual income tax refunds by notifying the commissioner of revenue in writing by a date established by the department and, by dates agreed to by the department and each state agency, shall furnish a list of all liquidated debts due the agency for which withholding is required for individual income tax refunds due to be paid to the debtor of the claimant agency. This list shall be submitted in such form and contain such information as may be required by the commissioner of revenue to facilitate identification of the refunds to be withheld. As used in this section the term “liquidated debt” means a legal debt for a sum certain, which has been certified by the claimant agency as final due and owing. The claimant agency must have made reasonable efforts to collect such debt, and must have provided the debtor the opportunity for appeal and formal hearing as provided by statute, administrative regulation, or local ordinance. The claimant agency shall send thirty (30) days’ prior written notification to the debtor of the intention to submit the claim to the department for setoff as provided in KRS 131.570 .
  4. The individual income tax refund withholding procedures provided in KRS 131.560 to 131.595 shall be in lieu of the procedures set forth in KRS 427.130 and 44.030 only with regard to sums due to a debtor from the department.
  5. No state agency shall request the withholding of any individual income tax refund unless the debt for which withholding is requested is in a liquidated amount.
  6. Each state agency requesting the withholding of any individual income tax refund shall indemnify the department against any and all damages, court costs, attorneys fees, and any other expenses related to litigation which arises concerning the administration of KRS 131.560 to 131.595 as it pertains to a refund withholding action requested by such agency.
  7. Those state agencies requesting the withholding of individual income tax refunds shall, on a per unit cost or other equitable basis determined by the department, reimburse the department for all development, implementation, and administration costs incurred but not otherwise funded under the provisions of KRS 131.560 to 131.595 .
  8. The department may decline the withholding of individual income tax refunds from agencies if the request would adversely impact the operation of the department.

History. Enact. Acts 1984, ch. 405, § 8, effective July 13, 1984; 2004, ch. 118, § 4, effective July 13, 2004; 2005, ch. 85, § 148, effective June 20, 2005; 2013, ch. 88, § 7, effective June 25, 2013.

131.570. Debtor to be notified that refund is subject to setoff — Hearing — Transfer of refund — Payment of excess to taxpayer.

  1. Upon determining that a pending individual income tax refund is subject to setoff as authorized under this section, the debtor shall be notified in writing by the department of the claim made against such refund by the named claimant agency, and of the department’s intention to set off the refund against the debt to the claimant agency. The notice shall provide that the debtor, within thirty (30) days from the date of the notice, may request a hearing before the claimant agency as provided by statute or local ordinance. No issues at such hearing may be considered that have been litigated previously, and the debtor, after being given due notice of rights of appeal, must exercise such rights in a timely manner. The decision of the claimant agency shall be subject to appeal as all other decisions rendered by the claimant agency. No funds shall be transferred to a claimant agency until the debtor’s appeal rights have been exhausted.
  2. Any excess of the pending refund amount over the total claim filed against such refund shall be promptly issued to the taxpayer by the department.
  3. In the event funds transmitted to a claimant agency are subsequently determined by the claimant agency to be in excess of the liquidated debt, such claimant agency shall promptly refund the excess to the taxpayer.
  4. In the event the department erroneously transfers funds to a claimant agency, the claimant agency shall immediately upon notification thereof reimburse the department for the amount erroneously transmitted to such agency. The department shall promptly refund to the taxpayer the appropriate amount of such returned funds with interest as provided in KRS 131.183(2).

History. Enact. Acts 1984, ch. 405, § 9, effective July 13, 1984; 2005, ch. 85, § 149, effective June 20, 2005; 2013, ch. 88, § 8, effective June 25, 2013.

131.575. Apportionment of refund on separate return between spouses.

  1. Any individual income tax refund determined as a consequence of taxpayers filing separate returns on a combined Kentucky individual income tax form may be apportioned by the Department of Revenue between the spouses based on the ratio of the adjusted gross incomes of each spouse to the total adjusted gross income. The amount of the refund computed to be due the spouse who is not indebted to the claimant agency shall be refunded by the Department of Revenue to such spouse. In the event such refunded amount has been transmitted to the claimant agency, the Department of Revenue shall recover such amount from the claimant agency as provided in KRS 131.570(4).
  2. Any individual income tax refund determined as a consequence of taxpayers filing a joint Kentucky individual income tax return shall be deemed as coupled together in interest or liability and shall be subject to transfer to a claimant agency in its entirety.

History. Enact. Acts 1984, ch. 405, § 10, effective July 13, 1984; 2005, ch. 85, § 150, effective June 20, 2005.

131.580. Rules and regulations.

The Department of Revenue may promulgate rules and regulations necessary to develop, implement and administer the provisions of KRS 131.560 to 131.595 .

History. Enact. Acts 1984, ch. 405, § 11, effective July 13, 1984; 2005, ch. 85, § 151, effective June 20, 2005.

131.585. State debt offset account.

There is hereby created within the Department of Revenue a state debt offset account, which will be subject to the provisions of the restricted fund group, as provided in KRS 48.010(15)(f), and all funds collected under KRS 131.565(6) shall be credited thereto with only the expenses of the Department of Revenue related to development, implementation and administration of KRS 131.560 to 131.595 to be paid therefrom. This account shall not lapse.

History. Enact. Acts 1984, ch. 405, § 12, effective July 13, 1984; 2004, ch. 118, § 6, effective July 13, 2004; 2005, ch. 85, § 152, effective June 20, 2005; 2009, ch. 78, § 37, effective June 25, 2009.

131.590. Credit to state debt offset account.

To defray the cost of development and implementation of KRS 131.560 to 131.595 , there shall be credited to the state debt offset account an amount not to exceed $175,000, such amount to be derived from the amount of the Kentucky individual income tax refunds withheld under the provisions of KRS 131.560 to 131.595 for undisputed delinquent taxes due the Department of Revenue.

History. Enact. Acts 1984, ch. 405, § 13, effective July 13, 1984; 2005, ch. 85, § 154, effective June 20, 2005.

131.595. Procedure exclusive for withholding or transmitting individual income tax refund.

Except as is necessary in order to comply with exchange of information agreements with the United States Internal Revenue Service and notwithstanding the provisions of KRS 134.580 and 427.130 , no Kentucky individual income tax refund shall be withheld for or transmitted to any other person, agency, officer, board, commission, corporation, institution, cabinet, department, or other organization except as provided by KRS 131.560 to 131.595 .

History. Enact. Acts 1984, ch. 405, § 14, effective July 13, 1984.

Tobacco Master Settlement Agreement

131.600. Definitions for KRS 131.600 to 131.630.

As used in KRS 131.600 to 131.630 :

  1. “Adjusted for inflation” means increased in accordance with the formula for inflation adjustment set forth in Exhibit C to the master settlement agreement;
  2. “Affiliate” means a person who directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or control with, another person. Solely for purposes of this definition, the terms “owns,” “is owned,” and “ownership” mean ownership of an equity interest, or the equivalent thereof, of ten percent (10%) or more, and the term “person” means an individual, partnership, committee, association, corporation, or any other organization or group of persons;
  3. “Allocable share” means allocable share as that term is defined in the master settlement agreement;
  4. “Brand family” means all styles of cigarettes sold under the same trademark and differentiated from one another by means of additional modifiers or descriptors, including but not limited to menthol, kings, and 100’s, and includes any brand name alone or in conjunction with any other word, trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other indicia of product identification identical or similar to, or identifiable with, a previously known brand of cigarettes;
  5. “Cigarette” means any product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains:
    1. Any roll of tobacco wrapped in paper or in any substance not containing tobacco;
    2. Tobacco, in any form, that is functional in the product, which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette; or
    3. Any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in paragraph (a) of this subsection.
  6. “Commissioner” means the commissioner of the department;
  7. “Department” means the Department of Revenue;
  8. “Directory” means the directory as provided in KRS 131.610 ;
  9. “Distributor” means a person, wherever residing or located, who purchases nontax-paid cigarettes and stores, sells, or otherwise disposes of the cigarettes. This includes resident wholesalers, nonresident wholesalers, and unclassified acquirers as defined in KRS 138.130 ;
  10. “Financial instrument” has the same meaning as in KRS 138.210 ;
  11. “Importer” has the same meaning as in KRS 248.750 ;
  12. “Master settlement agreement” means the settlement agreement and related documents entered into on November 23, 1998, by Kentucky and leading United States tobacco product manufacturers;
  13. “Nonparticipating manufacturer” means any tobacco product manufacturer that is not a participating manufacturer;
  14. “Participating manufacturer” has the meaning given the term in Section II(jj) of the master settlement agreement and all amendments thereto;
  15. “Qualified escrow fund” means an escrow arrangement with a federally or state-chartered financial institution having no affiliation with any tobacco product manufacturer and having assets of at least one billion dollars ($1,000,000,000) where such arrangement requires that such financial institution hold the escrowed funds’ principal for the benefit of releasing parties and prohibits the tobacco product manufacturer placing the funds into escrow from using, accessing, or directing the use of the funds’ principal except as consistent with KRS 131.602(3);
  16. “Released claims” means released claims as that term is defined in the master settlement agreement;
  17. “Releasing parties” means releasing parties as that term is defined in the master settlement agreement;
  18. “Stamping agent” means a person, including a distributor, that is authorized to affix tax stamps to packages or other containers of cigarettes pursuant to KRS 138.146 or any person that is required to pay the excise tax imposed pursuant to KRS 138.155 ;
  19. “Tobacco product manufacturer” means an entity that after June 30, 2000, directly and not exclusively through any affiliate:
    1. Manufactures cigarettes anywhere that such manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer, except where such importer is an original participating manufacturer, as that term is defined in the master settlement agreement, that will be responsible for the payments under the master settlement agreement with respect to such cigarettes as a result of the provisions of subsection II(mm) of the master settlement agreement and that pays the taxes specified in subsection II(z) of the master settlement agreement, and provided that the manufacturer of such cigarettes does not market or advertise such cigarettes in the United States;
    2. Is the first purchaser anywhere for resale in the United States of cigarettes manufactured anywhere that the manufacturer does not intend to be sold in the United States; or
    3. Becomes a successor of an entity described in paragraph (a) or (b) of this subsection.
  20. “Units sold” means the number of individual cigarettes sold in Kentucky by the applicable tobacco product manufacturer, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, during the year in question, as measured by excise taxes collected by Kentucky on packs or “roll-your-own” tobacco. The department shall promulgate administrative regulations as are necessary to ascertain the amount of state excise tax paid on the cigarettes of the tobacco product manufacturer for each year.

The term “cigarette” includes “roll-your-own”, i.e., any tobacco which, because of its appearance, type, packaging, or labeling is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes. For purposes of this definition of “cigarette,” nine-hundredths (0.09) ounces of “roll-your-own” tobacco shall constitute one (1) individual “cigarette”;

The term “tobacco product manufacturer” shall not include an affiliate of a tobacco product manufacturer unless such affiliate itself falls within any of the definitions described in paragraph (a), (b), or (c) of this subsection; and

History. Enact. Acts 2000, ch. 342, § 1, effective June 30, 2000; 2005, ch. 85, §§ 153 and 155, effective June 20, 2005; 2006, ch. 252, Pt. XXXII, § 1, effective April 25, 2006; 2015 ch. 55, § 1, effective July 1, 2015.

NOTES TO DECISIONS

1. Preemption.

KRS 131.600 and 131.602 , which implemented a settlement agreement with cigarette manufacturers regarding the manufacturers’ payments to offset certain government costs for smoking-related diseases were not preempted by the Sherman Act, 15 USCS § 1, because these laws did not mandate or authorize violation of the Sherman Act in order to achieve compliance. Tritent Int'l Corp. v. Commonwealth, 2005 U.S. Dist. LEXIS 20233 (E.D. Ky. Sept. 8, 2005), aff'd, 467 F.3d 547, 2006 FED App. 0400P, 2006 U.S. App. LEXIS 26911 (6th Cir. Ky. 2006 ).

Cited in:

Commonwealth ex rel. Stumbo v. Philip Morris, USA, 244 S.W.3d 116, 2007 Ky. App. LEXIS 424 (Ky. Ct. App. 2007).

131.602. Tobacco product manufacturer’s options to become participating manufacturer or to contribute to qualified escrow fund on quarterly basis — Management of escrow fund — Penalties for failure to place required funds in escrow — Assignment of escrow funds to Commonwealth — Credit of assigned funds against judgment — Opinion of Attorney General required prior to assignment — Importers jointly and severally liable with non-U.S. manufacturers for escrow amounts — Posting of financial instrument.

  1. Any tobacco product manufacturer selling cigarettes to consumers within this state, whether directly or through a distributor, retailer, or similar intermediary or intermediaries, after June 30, 2000, shall do one (1) of the following:
    1. Become a participating manufacturer, as that term is defined in section II(jj) of the master settlement agreement, and generally perform its financial obligations under the master settlement agreement; or
      1. Place into a qualified escrow fund the following amounts, as adjusted for inflation: (b) 1. Place into a qualified escrow fund the following amounts, as adjusted for inflation:
        1. For 2000: $0.0104712 per unit sold after June 30, 2000;
        2. For each of 2001 and 2002: $0.0136125 per unit sold;
        3. For each of 2003 through 2006: $0.0167539 per unit sold; and
        4. For 2007 and each year thereafter: $0.0188482 per unit sold; and
      2. Post a financial instrument with the Attorney General as provided in subsection (10) of this section.
  2. The nonparticipating manufacturer shall place the amount required under this section into the qualified escrow fund on a quarterly basis.
  3. A nonparticipating manufacturer that places funds into escrow pursuant to this section shall receive the interest or other appreciation on such funds as earned. Such funds themselves shall be released from escrow only under the following circumstances:
    1. To pay a judgment or settlement on any released claim brought against the nonparticipating manufacturer by Kentucky or any releasing party located or residing in Kentucky. Funds shall be released from escrow under this paragraph in the order in which they were placed into escrow and only to the extent and at the time necessary to make payments required under the judgment or settlement;
    2. To the extent that a nonparticipating manufacturer establishes that the amount it was required to place into escrow on account of units sold in the state in a particular year was greater than the master settlement agreement payments, as determined pursuant to section IX(i) of that agreement, including after final determination of all adjustments, that the nonparticipating manufacturer would have been required to make on account of the units sold had it been a participating manufacturer, the excess shall be released from escrow and revert back to the nonparticipating manufacturer; or
    3. To the extent not released from escrow under paragraph (a) or (b) of this subsection, funds shall be released from escrow and revert back to the nonparticipating manufacturer twenty-five (25) years after the date on which they were placed into escrow.
  4. Each nonparticipating manufacturer shall annually certify to the Attorney General that it is in compliance with KRS 131.600 to 131.630 , 138.130 to 138.205 , 248.752 , and 248.754 and any administrative regulations promulgated thereunder.
  5. In addition to subsection (10)(g) of this section, the Attorney General may bring a civil action on behalf of Kentucky against any nonparticipating manufacturer that fails in any quarter to place into escrow the funds required under this section. Any nonparticipating manufacturer that fails in any quarter to place into escrow the funds required under this section shall:
    1. Be required within fifteen (15) days to place sufficient funds into escrow to bring it into compliance with this section. The court, upon a finding of a violation of this section, may impose a civil penalty, to be paid to the general fund of Kentucky, in an amount not to exceed five percent (5%) of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed one hundred percent (100%) of the original amount improperly withheld from escrow;
    2. In the case of a knowing violation, be required within fifteen (15) days to place sufficient funds into escrow to bring it into compliance with this section. The court, upon a finding of a knowing violation of this section, may impose a civil penalty, to be paid to the general fund of Kentucky, in an amount not to exceed fifteen percent (15%) of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed three hundred percent (300%) of the original amount improperly withheld from escrow; and
    3. In the case of a second knowing violation, be prohibited from selling cigarettes to consumers within Kentucky, whether directly or through a distributor, retailer, or similar intermediary, for a period not to exceed two (2) years or, if later, until fully compliant with KRS 131.600 to 131.630 , 138.130 to 138.205 , 248.752 , and 248.754 and any administrative regulations promulgated thereunder.
  6. Notwithstanding the provisions of subsection (3) of this section, a nonparticipating manufacturer that elects to place funds into escrow pursuant to this section may make an irrevocable assignment of its interest in the funds to the benefit of the Commonwealth of Kentucky. Such assignment shall be permanent and apply to all funds in the subject qualified escrow fund or that may subsequently come into the fund, including those deposited into the qualified escrow fund prior to the assignment being executed, those deposited into the qualified escrow fund after the assignment is executed, and interest or other appreciation on the funds. The nonparticipating manufacturer, the Attorney General, and the financial institution where the qualified escrow fund is maintained may make amendments to the qualified escrow fund agreement as may be necessary to effectuate an assignment of rights executed pursuant to this subsection or a withdrawal of funds from the qualified escrow fund pursuant to subsection (7) of this section. An assignment of rights executed pursuant to this subsection shall be in writing, signed by a duly authorized representative of the nonparticipating manufacturer making the assignment, and shall become effective upon delivery of the assignment to the Attorney General and the financial institution where the qualified escrow fund is maintained.
  7. Notwithstanding the provisions of subsection (3) of this section, any escrow funds assigned to the Commonwealth pursuant to subsection (6) of this section shall be withdrawn by the Commonwealth upon request by the Treasurer of the Commonwealth and approval of the Attorney General. Any funds withdrawn pursuant to this subsection shall be deposited in the general fund and shall be calculated on a dollar-for-dollar basis as a credit against any judgment or settlement described in subsection (3) (a) of this section which may be obtained against the nonparticipating manufacturer who has assigned the funds in the subject qualified escrow fund. Nothing in this subsection or in subsection (6) of this section shall be construed to relieve a nonparticipating manufacturer from any past, current, or future obligations the manufacturer may have pursuant to this chapter.
  8. Notwithstanding subsections (6) and (7) of this section, no assignment of escrows created pursuant to this section shall be made by a nonparticipating manufacturer, or shall be accepted by the Treasurer of the Commonwealth, unless and until the Attorney General has provided an opinion to the Treasurer, with a copy of the opinion provided to the Governor and the Legislative Research Commission, that amendments to KRS 131.600 and subsections (6) and (7) of this section shall not substantially jeopardize the Commonwealth’s payments under the master settlement agreement.
  9. For any nonparticipating manufacturer that is located outside the United States, each importer of the nonparticipating manufacturer’s cigarettes shall be jointly and severally liable with the nonparticipating manufacturer for the deposit of all escrow amounts due under subsection (1) of this section, and the payment of all civil penalties imposed under subsection (5) of this section for the units sold in this state.
    1. A nonparticipating manufacturer shall post a financial instrument with the Attorney General as a condition of the nonparticipating manufacturer and its brand families being included in the state directory for that quarter. (10) (a) A nonparticipating manufacturer shall post a financial instrument with the Attorney General as a condition of the nonparticipating manufacturer and its brand families being included in the state directory for that quarter.
    2. The amount of the financial instrument shall be the greater of fifty thousand dollars ($50,000) or the greatest required escrow amount due from the nonparticipating manufacturer or its predecessor for the immediately preceding twelve (12) calendar quarters.
    3. The financial instrument shall be posted at least ten (10) days in advance of each calendar quarter.
    4. The nonparticipating manufacturer shall be the obligor.
    5. The State Treasurer shall be the obligee.
    6. The financial instrument shall be conditioned on the performance by the nonparticipating manufacturer of all of its escrow deposit and other financial obligations under Kentucky law.
    7. In addition to subsection (5) of this section, if:
      1. The nonparticipating manufacturer fails to make its escrow deposits equal to the full amount owed for the quarter within thirty (30) days following the end of the quarter, the Attorney General may execute the financial instrument in the amount equal to any remaining amount of escrow due. The amount collected shall be deposited in the general fund and shall reduce the amount of escrow due from the nonparticipating manufacturer by the dollar amount collected. Escrow obligations that remain after the collection on the financial instrument shall remain due from the nonparticipating manufacturer and each of its importers; and
      2. The Attorney General obtains a judgment against the nonparticipating manufacturer for its failure to make the required escrow deposit, the Attorney General may also execute on the financial instrument to recover the amount of the costs of investigation, expert witness fees, costs of action, civil penalties, and attorneys’ fees obtained in that judgment. Funds collected from the financial instrument shall be counted first toward the amount of escrow due but not deposited into escrow by the nonparticipating manufacturer.

Each failure to place sufficient funds into escrow as required under this section on a quarterly basis as required by subsection (2) of this section shall constitute a separate violation.

History. Enact. Acts 2000, ch. 342, § 2, effective June 30, 2000; 2004, ch. 135, § 2, effective July 13, 2004; 2006, ch. 252, Pt. XIX, § 1, effective April 25, 2006; 2015 ch. 55, § 2, effective July 1, 2015.

Legislative Research Commission Notes.

(7/1/2015). During codification, the Reviser of Statutes has changed the numbering of paragraph (b) of subsection (1) of this statute from the way it appeared in 2015 Ky. Act ch. 55, sec. 2. None of the text of the subsection was changed.

Compiler’s Notes.

Acts 2015, ch. 55, § 2, amended this section and created subsection (b)(2) without a subsection (b)(1).

NOTES TO DECISIONS

1. Preemption.

District Court properly granted the Commonwealth of Kentucky’s motion to dismiss a lawsuit filed by a Brazilian cigarette manufacturer, an importer, and a Kentucky wholesaler, as non-participants in the Master Settlement Agreement (MSA); the Sherman Act, 15 USCS § 1 et seq., did not preempt KRS 131.602 , 131.610 , and 131.612 because the anticompetitive behavior of the participating cigarette manufacturers was neither mandated nor explicitly authorized by the statutes. The fact that the volume-based payment scale in the MSA and in KRS 131.602 (2)(b) influenced the participating manufacturers to raise their prices and lower their output was not enough to satisfy the first prong of the preemption analysis. Tritent Int'l Corp. v. Kentucky, 467 F.3d 547, 2006 FED App. 0400P, 2006 U.S. App. LEXIS 26911 (6th Cir. Ky. 2006 ).

KRS 131.602 and 131.610 , which were adopted to effectuate the Master Settlement Agreement, a voluntary agreement that has been entered into by 46 states and several tobacco companies, are not subject to preemption by the Sherman Act, 15 USCS § 1 et seq. Tritent Int'l Corp. v. Kentucky, 467 F.3d 547, 2006 FED App. 0400P, 2006 U.S. App. LEXIS 26911 (6th Cir. Ky. 2006 ).

Cited in:

Commonwealth v. China Tobacco Anyang Cigarette Factory, 383 F. Supp. 2d 917, 2005 U.S. Dist. LEXIS 16606 (Sept. 8, 2005); Commonwealth ex rel. Stumbo v. Philip Morris, USA, 244 S.W.3d 116, 2007 Ky. App. LEXIS 424 (Ky. Ct. App. 2007).

Tobacco Master Settlement Agreement Complementary Act

131.604. Definitions for KRS 131.604 to 131.630. [Repealed.]

History. Enact. Acts 2003, ch. 194, § 1, effective April 6, 2003; 2005, ch. 85, § 156, effective June 20, 2005; 2009, ch. 84, § 1, effective July 1, 2009; repealed by 2015 ch. 55, § 18, effective July 1, 2015.

Compiler’s Notes.

This section (Enact. 2009 Ky. Act ch. 84, § 1, effective July 1, 2009), was repealed by Acts 2015, ch. 138, § 18, effective July 15, 2015.

131.606. Legislative findings and purposes.

The General Assembly finds that violations of KRS 131.600 and 131.602 threaten the integrity of the tobacco master settlement agreement, the fiscal soundness of the state, and the public health. The legislature finds that enacting procedural enhancements will aid enforcement of KRS 131.600 and 131.602 and thereby safeguard the master settlement agreement, the fiscal soundness of the state, and the public health.

History. Enact. Acts 2003, ch. 194, § 2, effective April 6, 2003.

131.608. Annual and quarterly certifications to Attorney General by participating and nonparticipating manufacturers — Contents — Scope — Records.

  1. Prior to selling cigarettes in Kentucky, directly or through a distributor, retailer, or similar intermediary or intermediaries, every tobacco product manufacturer shall certify as true under penalty of perjury that, as of the date of certification, the tobacco product manufacturer is a:
    1. Participating manufacturer; or
    2. Nonparticipating manufacturer;
  2. A participating manufacturer shall include in its certification a list of its brand families. The participating manufacturer shall update the list thirty (30) calendar days prior to any addition to or modification of its brand families by executing and delivering a supplemental certification to the Attorney General.
  3. A nonparticipating manufacturer shall include in its certification:
    1. A complete list of its brand families;
    2. A separate list of its brand families and the number of units sold in Kentucky for each brand family during the preceding calendar year;
    3. A separate list of all of its brand families that have been sold in Kentucky at any time during the current calendar year including:
      1. Indicating by an asterisk any brand family sold in Kentucky during the preceding calendar year that is no longer being sold in Kentucky as of the date of the certification; and
      2. Identifying by name and address any other manufacturer of such brand families in the preceding or current calendar year;
    4. A full disclosure of any removals or notices of removal from other state directories, which may be used as a basis to deny certification;
    5. A listing of and a declaration from each of its importers of any of its brand families. The declaration shall state the following:
      1. The importer accepts joint and several liability with the nonparticipating manufacturer for all obligations to place funds into a qualified escrow fund, for payment of all civil penalties, and for payment of all reasonable costs and expenses of investigation and prosecution, including attorneys’ fees, as provided in KRS 131.602 ;
      2. The importer consents to personal jurisdiction in this state for the purpose of claims by the state for any obligation to place funds into a qualified escrow fund, for payment of all civil penalties, and for payment of any reasonable costs and expenses of investigation or prosecution, including attorneys’ fees, as provided in KRS 131.602 ;
      3. The importer has appointed a registered agent for service of process in this state according to the same requirements established for the nonparticipating manufacturer as provided in KRS 131.614 ;
      4. The importer holds a valid permit under 26 U.S.C. sec. 5713 ;
      5. The importer is in compliance with the federal Jenkins Act, 15 U.S.C. secs. 375 et seq., as amended by the Prevent All Cigarette Trafficking (Pact) Act, Pub. L. No. 111-154, 124 Stat. 108; and
      6. The importer has complied with KRS 138.130 to 138.205 , 248.752 , and 248.754 and any administrative regulations promulgated thereunder; and
    6. Verification that the nonparticipating manufacturer has provided the following:
      1. The name, address, and telephone number of the financial institution where the nonparticipating manufacturer has established a qualified escrow fund required under KRS 131.602 and all administrative regulations promulgated thereunder;
      2. The account number of the qualified escrow fund and any subaccount number for the state of Kentucky;
      3. The amount the nonparticipating manufacturer placed in the fund for cigarettes sold in Kentucky during the preceding calendar year, the date and amount of each deposit and evidence or verification, as may be deemed necessary, by the Attorney General to confirm the foregoing;
      4. The amount and date of any withdrawal or transfer of funds the nonparticipating manufacturer made at any time from the fund, or from any other qualified escrow fund into which it ever made escrow payments pursuant to KRS 131.602 and all administrative regulations promulgated thereunder.
  4. A nonparticipating manufacturer requesting certification shall further certify that it:
    1. Is registered to do business in Kentucky or has appointed a resident agent for service of process and provided notice as required by KRS 131.614 ;.
    2. Holds a valid permit under 26 U.S.C. sec. 5713 ;
    3. Has established and continues to maintain a qualified escrow fund pursuant to KRS 131.602 and has executed a qualified escrow agreement that governs the qualified escrow fund and that has been reviewed and approved by the Attorney General;
    4. Is in full compliance with KRS 131.600 to 131.630 and 138.130 to 138.205 and any administrative regulations promulgated thereunder;
    5. Is in compliance with the federal Jenkins Act, 15 U.S.C. secs. 375 et seq., as amended by the Prevent All Cigarette Trafficking (Pact) Act, Pub. L. No. 111-154, 124 Stat. 108; and
    6. Whether acting as an individual, entity, or any other group or combination acting as a unit, or any partner, director, principal officer, or manager of the entity or any other group or combination acting as a unit, has not been convicted of or entered a plea of guilty or nolo contendere to:
      1. A crime relating to the reporting, distribution, sale, or taxation of cigarettes or tobacco products; or
      2. A crime involving fraud, falsification of records, improper business transactions, or reporting;
  5. A tobacco product manufacturer may not include a brand family in its certification unless:
    1. In the case of a participating manufacturer, the participating manufacturer affirms that the brand family is to be deemed to be its cigarettes for purposes of calculating its payments under the master settlement agreement for the relevant year, in the volume and shares determined pursuant to the master settlement agreement; and
    2. In the case of a nonparticipating manufacturer, the nonparticipating manufacturer affirms that the brand family is to be deemed to be its cigarettes pursuant to KRS 131.602 .
  6. The nonparticipating manufacturer shall update all lists thirty (30) calendar days prior to any addition to or modification of its brand families by executing and delivering a supplemental certification to the Attorney General.
  7. Nothing in this section shall be construed as limiting or otherwise affecting the state’s right to maintain that a brand family constitutes cigarettes of a different tobacco product manufacturer for purposes of calculating payments under the master settlement agreement or for purposes of KRS 131.602 .
  8. The tobacco product manufacturers shall maintain all invoices and documentation of sales and other information relied upon for a certification for a period of five (5) years.

in full compliance with the provisions of KRS 131.600 to 131.630 , 138.130 to 138.205 , 248.752 , and 248.754 and any administrative regulations promulgated thereunder. The participating manufacturer and the nonparticipating manufacturer shall execute and deliver an annual certification to the Attorney General on a form prescribed by the Attorney General no later than April 30 of each year. The nonparticipating manufacturer shall also submit a quarterly certification at the time and on a form prescribed by the Attorney General.

for ten (10) years from the expiration of probation or final discharge from parole or maximum expiration of sentence.

History. Enact. Acts 2003, ch. 194, § 3, effective April 6, 2003; 2015 ch. 55, § 3, effective July 1, 2015.

131.610. Directory of certified tobacco product manufacturers and brand families — Requirements for inclusion — Removal — Notice.

  1. The Attorney General shall develop and make available to the department for public inspection, to include publishing on the department’s Web site, a listing of all tobacco product manufacturers that have provided current and accurate certifications pursuant to KRS 131.608 and all brand families that are listed in the certifications. The listing shall be referred to as the “directory” and completed no later than July 1 of each certification year.
  2. The department shall not include or retain in the directory the name or brand families of any nonparticipating manufacturer that has failed to provide the required certification or whose certification the Attorney General determines is not in compliance with KRS 131.608 , unless the Attorney General has determined that such violation has been satisfactorily cured.
  3. Neither a nonparticipating manufacturer nor a brand family shall be included or retained in the directory if the Attorney General determines that:
    1. Any escrow payment required pursuant to KRS 131.602 for any period for any brand family, whether or not listed by the nonparticipating manufacturer, has not been fully paid into a qualified escrow fund governed by a qualified escrow agreement that has been approved by the Attorney General;
    2. Any outstanding final judgment, including interest thereon, for a violation of KRS 131.602 has not been fully satisfied for the brand family or the manufacturer;
    3. The requirements for certification under KRS 131.608 have not been met; or
    4. The financial instrument required by KRS 131.602(10) has not been posted.
  4. Upon receipt of information from the Attorney General, the department shall update the directory as necessary in order to correct mistakes and to add or remove a tobacco product manufacturer or brand family to keep the directory in conformity with the requirements of this section and KRS 131.608 and 131.620 .
    1. The department shall transmit, by electronic mail or other practicable means, notice to each stamping agent and distributor of any addition to or removal from the directory of any tobacco product manufacturer or brand family. (5) (a) The department shall transmit, by electronic mail or other practicable means, notice to each stamping agent and distributor of any addition to or removal from the directory of any tobacco product manufacturer or brand family.
    2. Within seven (7) days of receiving a removal notice from the department, each stamping agent or distributor shall forward:
      1. A copy of the removal notice to each of the stamping agent’s or distributor’s retail customers; and
      2. To the department, a list of the retail customers and any other person to whom the removal notices were sent.
    3. The retailer shall not sell any cigarettes of a tobacco product manufacturer or brand family that has been removed from the directory.
    4. The department shall work cooperatively with the stamping agents and distributors to develop an electronic system which will be used to notify, as soon as possible, all retail customers and any other person to whom the nonparticipating manufacturer’s products were sold that:
      1. A notice of intent to remove the nonparticipating manufacturer from the directory has been issued by the Attorney General; and
      2. A subsequent change in that status has occurred as a result of the nonparticipating manufacturer coming into compliance prior to being removed from the directory.
  5. Every stamping agent and distributor shall provide and update as necessary an electronic mail address to the department for the purpose of receiving any notifications that may be required by this section and KRS 131.608 , 131.616 , 131.620 , and 131.624 .
  6. Notwithstanding the provisions of subsections (2) and (3) of this section, in the case of any nonparticipating manufacturer who has established a qualified escrow fund pursuant to KRS 131.602 that has been approved by the Attorney General, the Attorney General may not remove the nonparticipating manufacturer or its brand families from the directory unless the nonparticipating manufacturer has been given at least thirty (30) days’ notice of the intended action. For the purposes of this section, notice shall be deemed sufficient if it is sent either electronically to an electronic-mail address or by first class to a postal mailing address provided by the nonparticipating manufacturer in its most recent certification filed pursuant to KRS 131.608 . The notified nonparticipating manufacturer shall have thirty (30) days from receipt of the notice to comply. At the time that the Attorney General sends notice of his or her intent to remove the nonparticipating manufacturer from the directory, the Attorney General shall post the notice in the directory.
  7. Beginning on the day after the Attorney General posts a notice in the directory of the Attorney General’s intent to remove the nonparticipating manufacturer from the directory as provided in subsection (7) of this section, a stamping agent or distributor shall not purchase cigarettes from the nonparticipating manufacturer or any of its importers unless and until the Attorney General determines that the nonparticipating manufacturer is in compliance with KRS 131.608 and posts the notification of compliance in the directory.

History. Enact. Acts 2003, ch. 194, § 4, effective April 6, 2003; 2005, ch. 85, § 157, effective June 20, 2005; 2009, ch. 84, § 2, effective July 1, 2009; 2015 ch. 55, § 4, effective July 1, 2015.

NOTES TO DECISIONS

1. Preemption.

District Court properly granted the Commonwealth of Kentucky’s motion to dismiss a lawsuit filed by a Brazilian cigarette manufacturer, an importer, and a Kentucky wholesaler, as non-participants in the Master Settlement Agreement (MSA); the Sherman Act, 15 USCS § 1 et seq., did not preempt KRS 131.602 , 131.610 , and 131.612 because the anticompetitive behavior of the participating cigarette manufacturers was neither mandated nor explicitly authorized by the statutes. The fact that the volume-based payment scale in the MSA and in KRS 131.602 (2)(b) influenced the participating manufacturers to raise their prices and lower their output was not enough to satisfy the first prong of the preemption analysis. Tritent Int'l Corp. v. Kentucky, 467 F.3d 547, 2006 FED App. 0400P, 2006 U.S. App. LEXIS 26911 (6th Cir. Ky. 2006 ).

KRS 131.602 and 131.610 , which were adopted to effectuate the Master Settlement Agreement, a voluntary agreement that has been entered into by 46 states and several tobacco companies, are not subject to preemption by the Sherman Act, 15 USCS § 1 et seq. Tritent Int'l Corp. v. Kentucky, 467 F.3d 547, 2006 FED App. 0400P, 2006 U.S. App. LEXIS 26911 (6th Cir. Ky. 2006 ).

131.612. Prohibition against affixing stamp to cigarettes of tobacco product manufacturer or brand family not in directory — Prohibition against selling cigarettes after manufacturer or brand family removed from directory.

It shall be unlawful for:

  1. Any stamping agent, distributor, or any other person to affix a stamp to a package or other container of cigarettes of a tobacco product manufacturer or brand family not included in the directory; or
  2. Any retailer or any other person to sell cigarettes from a tobacco product manufacturer or brand family after the effective date of the removal of the tobacco product manufacturer or brand family from the directory.

HISTORY: Enact. Acts 2003, ch. 194, § 5, effective April 6, 2003; 2009, ch. 84, § 3, effective July 1, 2009; 2015 ch. 55, § 5, effective July 1, 2015.

NOTES TO DECISIONS

1. Preemption.

KRS 131.612 , which implemented a settlement agreement with cigarette manufacturers regarding the manufacturers’ payments to offset certain government costs for smoking-related diseases, and which made it illegal for distributors to place Kentucky tax stamps on cigarettes purchased from manufacturers that were not in compliance with other laws implementing the settlement agreement, was not preempted by the Sherman Act, 15 USCS § 1, because it did not mandate or authorize violation of the Sherman Act in order to achieve compliance. Tritent Int'l Corp. v. Commonwealth, 2005 U.S. Dist. LEXIS 20233 (E.D. Ky. Sept. 8, 2005), aff'd, 467 F.3d 547, 2006 FED App. 0400P, 2006 U.S. App. LEXIS 26911 (6th Cir. Ky. 2006 ).

District Court properly granted the Commonwealth of Kentucky’s motion to dismiss a lawsuit filed by a Brazilian cigarette manufacturer, an importer, and a Kentucky wholesaler, as non-participants in the Master Settlement Agreement (MSA); the Sherman Act, 15 USCS § 1 et seq., did not preempt KRS 131.602 , 131.610 , and 131.612 because the anticompetitive behavior of the participating cigarette manufacturers was neither mandated nor explicitly authorized by the statutes. The fact that the volume-based payment scale in the MSA and in KRS 131.602 (2)(b) influenced the participating manufacturers to raise their prices and lower their output was not enough to satisfy the first prong of the preemption analysis. Tritent Int'l Corp. v. Kentucky, 467 F.3d 547, 2006 FED App. 0400P, 2006 U.S. App. LEXIS 26911 (6th Cir. Ky. 2006 ).

131.614. Appointment of agent by nonresident nonparticipating tobacco product manufacturer and each of its importers for service of process.

  1. Any nonresident or foreign nonparticipating manufacturer that has not registered to do business in the state as a foreign corporation or business entity shall, as a condition precedent to having its brand families included or retained in the directory:
    1. Appoint and continually engage without interruption the services of an agent in this state to act as agent for the service of process on whom all process, and any action or proceeding against it concerning or arising out of the enforcement of KRS 131.600 to 131.630 , may be served in any manner authorized by law. The service shall constitute legal and valid service of process on the nonparticipating manufacturer. The nonparticipating manufacturer shall provide the name, address, phone number, and proof of the appointment and availability of the agent to the Attorney General; and
    2. Cause each of its importers of each of its brand families to be sold in the state to appoint and continually engage without interruption the services of an agent in this state for the purposes outlined in paragraph (a) of this subsection.
  2. The nonparticipating manufacturer and each of its importers shall provide notice to the Attorney General thirty (30) calendar days prior to termination of the authority of an agent and shall further provide proof of the appointment of a new agent no less than five (5) calendar days prior to the termination of an existing agent appointment. If an agent terminates an agency appointment, the nonparticipating manufacturer and each of its importers shall notify the Secretary of State and the Attorney General of the termination within five (5) calendar days and shall include proof of the appointment of a new agent.
  3. If a nonparticipating manufacturer or any of its importers do not appoint or designate an agent as required by this section, the Secretary of State shall serve as its agent and the nonparticipating manufacturer or its importers, as the case may be, may be proceeded against in courts of this state by service of process upon the Secretary of State. The appointment of the Secretary of State as its agent shall not satisfy the condition precedent to having the nonparticipating manufacturer’s brand families listed or retained in the directory.
  4. The Attorney General may by administrative regulation establish criteria for validating the appointment of an agent for the purposes of this section.

HISTORY: Enact. Acts 2003, ch. 194, § 6, effective April 6, 2003; 2015 ch. 55, § 6, effective July 1, 2015.

131.616. Submission of documentation by stamping agent.

On or before the twentieth day of each month, each stamping agent and distributor shall submit documentation that the commissioner requires to facilitate compliance with this section, including but not limited to a list by brand family of the total number of cigarettes for which the stamping agent or distributor affixed stamps during the previous calendar month or otherwise paid the tax due for the cigarettes. The stamping agent or distributor shall maintain, and make available to the commissioner, all invoices and documentation of sales of all nonparticipating manufacturer cigarettes and any other information relied upon in reporting to the commissioner for a period of five (5) years.

History. Enact. Acts 2003, ch. 194, § 7, effective April 6, 2003; 2005, ch. 85, § 158, effective June 20, 2005.

131.618. Disclosure of records by commissioner and Attorney General — Authority to require submission of additional information.

  1. Notwithstanding KRS 131.190 , the commissioner is authorized to disclose to the Attorney General the name and address of a stamping agent or distributor and the number of sticks by brand name that have been purchased from a nonparticipating manufacturer and have been stamped with Kentucky stamps by that agent or distributor. The Attorney General may share this information with federal, other state, or local agencies only for the purposes of enforcement of KRS 131.600 to 131.630 or corresponding laws of other states. The Attorney General is further authorized to disclose to a nonparticipating manufacturer or its importers this information that has been provided by a stamping agent regarding the purchases from that nonparticipating manufacturer or its importers. This information provided by a stamping agent may be used in any enforcement action against the nonparticipating manufacturer or its importers by the Attorney General.
  2. In addition to the information required to be submitted pursuant to KRS 131.608 , 131.614 , and 131.620 , the Attorney General or the commissioner may require a stamping agent, distributor, participating manufacturer, nonparticipating manufacturer, or a nonparticipating manufacturer’s importers to submit any additional information including but not limited to samples of the packaging or labeling of each brand family as is necessary to enable the Attorney General to determine whether the participating manufacturer or the nonparticipating manufacturer and its importers are in compliance with KRS 131.600 to 131.630 .

HISTORY: Enact. Acts 2003, ch. 194, § 8, effective April 6, 2003; 2005, ch. 85, § 159, effective June 20, 2005; 2015 ch. 55, § 7, effective July 1, 2015.

131.620. Proof of qualified escrow fund.

  1. The Attorney General may, at any time, require from the nonparticipating manufacturer proof from the financial institution in which the manufacturer has established a qualified escrow fund, for the purpose of compliance with KRS 131.600 and 131.602 , of the amount of money in the fund, exclusive of interest, the amount and date of each deposit to the fund, and the amount and date of each withdrawal from the fund.
  2. To promote compliance with the provisions of KRS 131.602 , the Attorney General may promulgate regulations requiring a nonparticipating manufacturer subject to the requirements of KRS 131.602 to make the escrow deposits required in quarterly installments during the year in which the sales covered by such deposits are made. The Attorney General may require production of information sufficient to enable the Attorney General to determine the adequacy of the amount of the installment deposit.

History. Enact. Acts 2003, ch. 194, § 9, effective April 6, 2003; 2004, ch. 135, § 3, effective July 13, 2004.

131.622. When cigarettes deemed contraband — Seizure and destruction — Injunction to compel compliance — Prohibition against sale — Penalty.

    1. The following shall be contraband and subject to seizure and destruction: (1) (a) The following shall be contraband and subject to seizure and destruction:
      1. Any cigarettes that have been affixed with a stamp in this state in violation of KRS 131.612 ; or
      2. Any cigarettes in the possession of a retailer from a tobacco product manufacturer or brand family that has been removed from the directory.
    2. Whenever any peace officer of this state, or any representative of the department, finds any contraband cigarettes, the cigarettes shall be immediately seized and stored in a depository to be selected by the officer or representative.
    3. The seized cigarettes shall be held for a period of twenty (20) days to allow the owner or any person having an interest in the cigarettes to protest the seizure.
    4. At the time of seizure, the officer or representative shall:
      1. Notify the department of the nature and quantity of the cigarettes seized; and
      2. Deliver to the person in whose custody the cigarettes are found a receipt for the cigarettes. The receipt shall state on its face the date of seizure, and a notice that the cigarettes shall be destroyed if the seizure is not protested in writing to the Department of Revenue, Frankfort, Kentucky, within twenty (20) days from the seizure.
    5. The owner or any person having an interest in the seized cigarettes may appeal to the Kentucky Claims Commission a final determination made by the department pursuant to KRS 49.220 .
    6. If the owner or any person having an interest in the seized cigarettes fails to protest the seizure before the end of the twenty (20) day holding period, the department shall destroy the seized cigarettes.
  1. The Attorney General may seek an injunction to restrain a violation of KRS 131.612 or 131.616 by a distributor or stamping agent and to compel the distributor or stamping agent to comply with KRS 131.612 and 131.616 . In any action brought pursuant to this section, the state shall be entitled to recover the costs of investigation, costs of the action, and attorneys’ fees from any distributor or stamping agent found to be in violation of KRS 131.612 or 131.616.
  2. No stamping agent, distributor, retailer, or any other person shall sell or distribute cigarettes, or acquire, hold, own, possess, transport, import, or cause to be imported cigarettes that the stamping agent, distributor, retailer, or person knows are intended for distribution or sale in the state in violation of KRS 131.612 . A violation of this section is a Class A misdemeanor.
  3. Nothing in this section shall prohibit a stamping agent or distributor from possessing unstamped containers of cigarettes held in inventory for delivery to, or for sale in, another state if in possession of proof that the cigarettes are intended for sale in another state.
  4. In addition to or in lieu of any other civil or criminal remedy provided by law, upon a determination that a stamping agent or distributor has violated KRS 131.612 or any administrative regulation promulgated pursuant to KRS 131.600 to 131.630 , the commissioner may suspend the sale of cigarette stamps to the stamping agent or distributor for failure to comply with the provisions of KRS 131.600 to 131.630 .

HISTORY: Enact. Acts 2003, ch. 194, § 10, effective April 6, 2003; 2005, ch. 85, § 160, effective June 20, 2005; 2009, ch. 84, § 4, effective July 1, 2009; 2015 ch. 55, § 8, effective July 1, 2015; 2017 ch. 74, § 66, effective June 29, 2017.

NOTES TO DECISIONS

1. Applicability.

Defendant facing a sale of contraband cigarettes charge failed to show that KRS 131.622(4) applied where he failed to show that the statute supersedes the specific excise tax provisions, including those that applied to cigarettes, and the statute only applied to KRS 121.622; it did not say that taxes due under other provisions of Kentucky law were inapplicable to such cigarettes. United States v. Cooper, 2013 U.S. Dist. LEXIS 69003 (W.D. Ky. May 15, 2013).

131.624. Appeal of exclusion from directory — Authority for administrative regulations.

  1. Any person aggrieved by a determination of the Attorney General to not include or to remove from the directory created in KRS 131.610 a brand family or tobacco product manufacturer may appeal the determination to the Franklin Circuit Court, or to the Circuit Court of the county in which the aggrieved party resides or conducts his place of business. For the purposes of a temporary injunction sought pursuant to this subsection, loss of the ability to sell tobacco products as a result of removal from the directory may be deemed to constitute irreparable harm.
  2. No person shall be issued a license or granted a renewal of a license to act as a distributor or stamping agent unless the person is in compliance with the provisions of KRS 131.600 to 131.630 .
  3. The Attorney General or the department may promulgate administrative regulations necessary to effect the purposes of KRS 131.600 to 131.630 .

HISTORY: Enact. Acts 2003, ch. 194, § 11, effective April 6, 2003; 2005, ch. 85, § 161, effective June 20, 2005; 2015 ch. 55, § 9, effective July 1, 2015.

131.626. State entitled to recover costs of enforcement action — Tobacco control special fund created.

  1. In any action brought by the state to enforce KRS 131.600 to 131.630 , the state shall be entitled to recover the costs of investigation, expert witness fees, costs of the action, and attorneys’ fees from any entity or person found to be in violation of KRS 131.600 to 131.630 .
  2. If a court determines that a person has violated KRS 131.600 to 131.630 , the court shall order any profits, gain, gross receipts, or other benefit from the violation to be relinquished and paid to the State Treasurer for deposit in the tobacco control special fund, which is hereby created. Moneys in the fund shall be used for the sole purpose of enforcement of KRS 131.600 to 131.630 .
  3. Unless otherwise expressly provided, the remedies or penalties provided by KRS 131.600 to 131.630 are cumulative to each other and to the remedies or penalties available under all other laws of this state.

History. Enact. Acts 2003, ch. 194, § 12, effective April 6, 2003; 2015 ch. 55, § 10, effective July 1, 2015.

131.628. Severability of provisions.

If any section, subsection, subdivision, paragraph, sentence, clause, or phrase of KRS 131.600 to 131.630 causes KRS 131.600 and 131.602 to no longer constitute a model statute, as it is set out in Exhibit T to the master settlement agreement, then that portion of KRS 131.600 to 131.630 shall not be valid.

HISTORY: Enact. Acts 2003, ch. 194, § 13, effective April 6, 2003; 2015 ch. 55, § 11, effective July 1, 2015.

131.630. Revocation or suspension of distributor’s or stamping agent’s license — Civil penalties.

  1. In addition to or in lieu of any other civil or criminal remedy provided by law, upon a determination that a stamping agent or distributor has violated any provision of KRS 131.600 to 131.630 or any administrative regulations promulgated thereunder, the commissioner may revoke or suspend the license of any stamping agent or distributor pursuant to KRS 138.195 and 138.205 .
  2. Each stamp affixed in violation of KRS 131.612 shall constitute a separate violation.
  3. The commissioner may impose a civil penalty of twenty-five dollars ($25) per violation, not to exceed five thousand dollars ($5,000), upon a determination of a violation of KRS 131.612 or any administrative regulations promulgated thereunder. The penalty shall be imposed in the manner provided by KRS 138.195 and 138.205 .

HISTORY: Enact. Acts 2003, ch. 194, § 14, effective April 6, 2003; 2005, ch. 85, § 162, effective June 20, 2005; 2015 ch. 55, § 12, effective July 1, 2015.

List of Delinquent Taxpayers

131.650. List of taxpayers owing delinquent taxes or fees.

  1. Notwithstanding the provisions of KRS 131.190 or any other confidentiality law to the contrary, the department may publish a list or lists of taxpayers that owe delinquent taxes or fees administered by the Department of Revenue, and that meet the requirements of KRS 131.652 .
  2. For purposes of this section, a taxpayer may be included on a list if:
    1. The taxes or fees owed remain unpaid at least sixty (60) days after the dates they became due and payable; and
    2. A tax lien or judgment lien has been filed of public record against the taxpayer before notice is given under KRS 131.654 .
  3. In the case of listed taxpayers that are business entities, the Department of Revenue may also list the names of responsible persons assessed pursuant to KRS 136.565 , 138.885 , 139.185 , 141.340 , and 142.357 for listed liabilities, who are not protected from publication by subsection (2) of this section, and for whom the requirements of KRS 131.652 are satisfied with regard to the personal assessment.
  4. Before any list is published under this section, the department shall document that each of the conditions for publication as provided in this section has been satisfied, and that procedures were followed to ensure the accuracy of the list and notice was given to the affected taxpayers.

HISTORY: Enact. Acts 2002, ch. 366, § 7, effective January 1, 2003; 2005, ch. 85, § 163, effective June 20, 2005; 2018 ch. 171, § 108, effective April 14, 2018; 2018 ch. 207, § 108, effective April 27, 2018.

Legislative Research Commission Notes.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

131.652. Taxes and fees subject to publication.

  1. The Department of Revenue may publish a list of all of the taxpayers described in KRS 131.650 .
  2. For the purposes of this section, a tax or fee is not delinquent if:
    1. The procedures enumerated in KRS 131.110 have not been waived or exhausted at the time when notice would be given under KRS 131.654 ; or
    2. The liability is subject to a payment agreement and there is no delinquency in the payments required under the agreement.
  3. Unpaid liabilities are not subject to publication if:
    1. The department is in the process of reviewing or adjusting the liability;
    2. The taxpayer is a debtor in a bankruptcy proceeding and the automatic stay is in effect;
    3. The department has been notified that the taxpayer is deceased; or
    4. The time period for enforced collection of the taxes or fees has expired.

History. Enact. Acts 2002, ch. 366, § 8, effective January 1, 2003; 2005, ch. 85, §§ 164 and 165, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts ch. 85, §§ 164 and 165, which are identical and have been codified together.

131.654. Notice to delinquent taxpayer before publication of name.

  1. At least sixty (60) days before publishing the name of a delinquent taxpayer, the department shall mail a written notice to the taxpayer, detailing the amount and nature of each liability and the intended publication of the information listed in KRS 131.656 related to the liability. The notice shall be mailed by first class mail addressed to the last known address of the taxpayer. The notice shall include information regarding the exceptions listed in KRS 131.652 and shall state that the taxpayer’s information will not be published if the taxpayer pays the delinquent obligation, enters into an agreement to pay, or provides information establishing that KRS 131.652 prohibits publication of the taxpayer’s name.
  2. After at least sixty (60) days have elapsed since the notice was mailed and the delinquent tax or fee has not been paid and the taxpayer has not proved to the department that KRS 131.652 prohibits publication, the department may publish in a list of delinquent taxpayers the information about the taxpayer that is listed in KRS 131.656 .

History. Enact. Acts 2002, ch. 366, § 9, effective January 1, 2003; 2009, ch. 12, § 39, effective June 25, 2009.

131.656. Method of publication of list — Contents.

The list may be published by any medium or method. The list may contain the name, address, type of tax or fee, and period for which payment is due for each liability, including penalties, interest, and other charges owed by each listed delinquent taxpayer.

History. Enact. Acts 2002, ch. 366, § 10, effective January 1, 2003.

131.658. Removal of name from list of delinquent taxpayers.

The department shall remove the name of a taxpayer from the list of delinquent taxpayers after the department receives written notice of and verifies any of the following facts about the liability in question:

  1. The taxpayer has contacted the department and arranged resolution of the liability;
  2. An active bankruptcy proceeding has been initiated for the liability; or
  3. A bankruptcy proceeding concerning the liability has resulted in discharge of the liability.

History. Enact. Acts 2002, ch. 366, § 11, effective January 1, 2003; 2005, ch. 85, § 166, effective June 20, 2005.

131.660. Rights of taxpayer whose name is erroneously published.

If the department publishes a name under KRS 131.650 in error, the taxpayer whose name was erroneously published has all the rights enumerated in KRS 131.081 for an aggrieved taxpayer.

History. Enact. Acts 2002, ch. 366, § 12, effective January 1, 2003; 2005, ch. 85, § 167, effective June 20, 2005.

Financial Institution Data Match System

131.670. Definitions for KRS 131.670 to 131.676.

As used in KRS 131.670 to 131.676 :

  1. “Debt” means a liquidated debt as defined in KRS 45.241(1)(b)
  2. “Debtor” means any person liable for a debt;
  3. “Department” means the Department of Revenue;
  4. “Delinquent taxpayer” means a person who has been assessed for a tax, the collection of which is administered by the Department of Revenue, and who has not sought administrative or judicial review of the assessment as provided in KRS 131.110 , or who has sought but exhausted all administrative and judicial review so that the assessment is final, due, and owing. For a person to be considered a “delinquent taxpayer,” the following conditions must also be met:
    1. The tax remains unpaid after thirty (30) days from demand for payment by the department; and
    2. The person is not making current timely installment payments on the tax liability under agreement with the department; and
  5. “Financial institution” means:
    1. A depository institution and an institution-affiliated party as defined in 12 U.S.C. sec. 1813(c) and (u);
    2. Any federal or state credit union, including an institution-affiliated party as defined in 12 U.S.C. secs. 1752 and 1786(r); or
    3. Any benefit association, insurance company, safe deposit company, money market mutual fund, brokerage firm, trust company, or similar entity authorized to do business in the Commonwealth.

History. Enact. Acts 2006, ch. 252, Pt. XVII, § 1, effective April 25, 2006.

131.672. Collection of delinquent taxes or debts — Financial institution data match system — Requirements for implementation of system — Lien or levy on account assets — Notice — Fees — Erroneous lien or levy — Administrative regulations.

  1. To assist the department in the collection of delinquent taxes and debts owed to the Commonwealth, the department shall implement and operate a financial institution match system for the purpose of identifying and seizing the financial assets of delinquent taxpayers and debtors as identified by the department. The provisions of KRS 131.670 to 131.676 shall be applied uniformly to all financial institutions within the Commonwealth holding accounts subject to levy as authorized by KRS 131.500 and shall not be implemented in any financial institution unless and until the department is prepared to implement the system in ninety percent (90%) of all financial institutions within a period of no longer than eighteen (18) months from June 26, 2007, or unless the financial institution in which the system will be implemented and the department agree, in writing, to implement the system sooner in that financial institution.
  2. The department and the financial institution shall implement and operate the system identified in subsection (1) of this section by use of the data match system operated by the financial institution as required by KRS 205.772 and 205.774 for the purpose of administering the child support enforcement programs of the Commonwealth.
    1. When the department determines that the name, record address, and either Social Security number or taxpayer identification number of an account with a financial institution matches the name, record address, and either the Social Security number or taxpayer identification number of a delinquent taxpayer or debtor, a lien or levy shall, subject to the provisions of subsection (4) of this section, arise against the assets in the account at the time of receipt of the notice by the financial institution at which the account is maintained. (3) (a) When the department determines that the name, record address, and either Social Security number or taxpayer identification number of an account with a financial institution matches the name, record address, and either the Social Security number or taxpayer identification number of a delinquent taxpayer or debtor, a lien or levy shall, subject to the provisions of subsection (4) of this section, arise against the assets in the account at the time of receipt of the notice by the financial institution at which the account is maintained.
    2. The department shall provide notice of the following to the debtor or delinquent taxpayer and the financial institution:
      1. The match;
      2. The lien or levy arising therefrom; and
      3. The action to be taken to surrender or encumber the account with the lien or levy for delinquent taxes.
  3. A financial institution ordered to surrender or encumber an account shall be entitled to collect its normally scheduled account activity fees to maintain the account during the period of time the account is seized or encumbered.
  4. A financial institution may charge an account levied on by the department a fee of not more than twenty dollars ($20), which may be deducted from the account prior to remitting any funds to the department.
  5. The department shall bear the cost or, if paid by the delinquent taxpayer or debtor, reimburse the delinquent taxpayer or debtor for any bank charges incurred as a result of any erroneous lien or levy by the department, provided the erroneous lien or levy was caused by department error and, prior to the issuance of the erroneous lien or levy, the delinquent taxpayer or debtor timely responded to all contacts by the department and provided information or documentation sufficient to establish his or her position.
  6. The department shall promulgate administrative regulations to implement KRS 131.670 to 131.676 .
  7. For purposes of this section, “financial institution” has the same meaning as provided in KRS 205.772 .

Notice shall be provided to the debtor or delinquent taxpayer within two (2) business days of the date the notice is sent to the financial institution.

History. Enact. Acts 2006, ch. 252, Pt. XVII, § 2, effective April 25, 2006; 2007, ch. 68, § 1, effective June 26, 2007.

131.674. Financial institutions to provide department with identifying information on delinquent taxpayers and debtors with account — Fee for conducting data matches — Confidentiality of information — Limitation on liability.

  1. Financial institutions doing business in the Commonwealth shall provide identifying information each calendar quarter to the department for each delinquent taxpayer or debtor identified by the department that is indebted to the Commonwealth for delinquent taxes or debts and who maintains an account at the institution.
  2. The financial institution shall be paid a fee for conducting data matches from the delinquent taxpayer’s account, not to exceed the actual cost.
  3. Except for the exchange of information between the department and financial institutions necessary for the enforcement of KRS 131.670 to 131.676 , any information obtained by the department from financial institutions shall be subject to confidentiality restrictions imposed on the department by KRS 131.190 .
  4. A financial institution shall not be liable for encumbering or surrendering any assets held by the financial institution in response to a lien or notice of levy issued by the department, or any other action taken in good faith to comply with the requirements of KRS 131.670 to 131.676 .

History. Enact. Acts 2006, ch. 252, Pt. XVII, § 3, effective April 25, 2006.

131.676. Provision of identifying or asset information not to be disclosed to delinquent taxpayer or debtor — Penalty — Financial institutions not liable — General notice to account holders.

  1. A financial institution furnishing a report or providing asset information about a delinquent taxpayer or debtor to the department shall not disclose to the delinquent taxpayer or debtor that the name of that person has been received from or furnished to the department. A financial institution may disclose to its depositors or account holders that, under the financial institution match system, the department has the authority to request certain identifying information on certain depositors or account holders.
  2. If a financial institution willfully violates the provisions of this section, the institution shall pay to the department the lesser of one thousand dollars ($1,000) or the amount on deposit or in the account of the person to whom the disclosure was made.
  3. A financial institution shall incur no obligation or liability to a depositor or account holder or any other person arising from the furnishing of a report or information to the department pursuant to Sections 1 to 4 of this Part, or from the failure to disclose to a depositor or account holder that the name of the person was included in a list or report furnished by the financial institution to the department.
  4. A financial institution shall not give notice to an account holder or customer of the financial institution that the financial institution has provided information or taken any action pursuant to Sections 1 to 4 of this Part and shall not be liable for failure to provide that notice; provided, however, that a financial institution may disclose to its depositors or account holders that, under the data match system, the department has the authority to request certain identifying information on certain depositors or account holders. The department shall notify, not less than annually, affected depositors or account holders who have not otherwise received notification.

History. Enact. Acts 2006, ch. 252, Pt. XVII, § 4, effective April 25, 2006.

Penalties

131.990. Penalties.

      1. Any person who violates the intentional unauthorized inspection provisions of KRS 131.190(1) shall be fined not more than five hundred dollars ($500) or imprisoned for not more than six (6) months, or both. (1) (a) 1. Any person who violates the intentional unauthorized inspection provisions of KRS 131.190(1) shall be fined not more than five hundred dollars ($500) or imprisoned for not more than six (6) months, or both.
      2. Any person who violates the provisions of KRS 131.190(1) by divulging confidential taxpayer information shall be fined not more than one thousand dollars ($1,000) or imprisoned for not more than one (1) year, or both.
      3. Any person who violates the intentional unauthorized inspection provisions of KRS 131.190(4) shall be fined not more than one thousand dollars ($1,000) or imprisoned for not more than one (1) year, or both.
      4. Any person who violates the provisions of KRS 131.190(4) by divulging confidential taxpayer information shall be fined not more than five thousand dollars ($5,000) or imprisoned for not more than five (5) years, or both.
      5. Any present secretary or employee of the Finance and Administration Cabinet, commissioner or employee of the department, member of a county board of assessment appeals, property valuation administrator or employee, or any other person, who violates the provisions of KRS 131.190(1) or (4) may, in addition to the penalties imposed under this subsection, be disqualified and removed from office or employment.
    1. This subsection does not apply to any person who divulges or otherwise discloses documents, data, or other information prohibited from divulgence or disclosure pursuant to an order by a court of competent jurisdiction.
  1. Any person who willfully fails to comply with the rules and regulations promulgated by the department for the administration of delinquent tax collections shall be fined not less than twenty dollars ($20) nor more than one thousand dollars ($1,000).
  2. Any person who fails to do any act required or does any act forbidden by KRS 131.210 shall be fined not less than ten dollars ($10) nor more than five hundred dollars ($500).
  3. Any person who fails to comply with the provisions of KRS 131.155 shall, unless it is shown to the satisfaction of the department that the failure is due to reasonable cause, pay a penalty of one-half of one percent (0.5%) of the amount that should have been remitted under the provisions of KRS 131.155 for each failure to comply.
    1. Any person or financial institution that fails to comply with the provisions of KRS 131.672 and 131.674 within ninety (90) days after notification by the department shall, unless the failure is due to reasonable cause as defined in KRS 131.010 , be fined not less than one thousand dollars ($1,000) and no more than five thousand dollars ($5,000) for each full month of noncompliance. The fine shall begin on the first day of the month beginning after the expiration of the ninety (90) days. (5) (a) Any person or financial institution that fails to comply with the provisions of KRS 131.672 and 131.674 within ninety (90) days after notification by the department shall, unless the failure is due to reasonable cause as defined in KRS 131.010 , be fined not less than one thousand dollars ($1,000) and no more than five thousand dollars ($5,000) for each full month of noncompliance. The fine shall begin on the first day of the month beginning after the expiration of the ninety (90) days.
    2. Any financial institution that fails or refuses to comply with the provisions of KRS 131.672 and 131.674 within one hundred twenty (120) days after the notification by the department shall, unless the failure is due to reasonable cause as defined in KRS 131.010, forfeit its right to do business within the Commonwealth, unless and until the financial institution is in compliance. Upon notification by the department, the commissioner of the Department of Financial Institutions shall, as applicable, revoke the authority of the financial institution or its agents to do business in the Commonwealth.
  4. Any taxpayer or tax return preparer who fails or refuses to comply with the provisions of KRS 131.250 or an administrative regulation promulgated under KRS 131.250 shall, unless it is shown to the satisfaction of the department that the failure is due to reasonable cause, pay a return processing fee of ten dollars ($10) for each return not filed as required.

History. 4029, 4114h-3, 4114h-12, 4114h-15, 4149b-12: amend. Acts 1962, ch. 210, § 20; 1966, ch. 255, § 126; 1978, ch. 233, § 9, effective June 17, 1978; 1988, ch. 322, § 13, effective July 15, 1988; 1996, ch. 318, § 36, effective July 15, 1996; 1998, ch. 314, § 2, effective July 15, 1998; 2000, ch. 503, § 3, effective July 14, 2000; 2005, ch. 85, § 168, effective June 20, 2005; 2007, ch. 68, § 2, effective June 26, 2007; 2010, ch. 24, § 95, effective July 15, 2010; 2010, ch. 147, § 4, effective July 15, 2010; 2017 ch. 74, § 67, effective June 29, 2017; 2019 ch. 151, § 7, effective June 27, 2019.

NOTES TO DECISIONS

1. Application.

KRS 131.190 and former subsection (3) of this section apply only to officials dealing with state and county taxes, and therefore the fact that the provision in an ordinance levying an occupational license tax penalizing the disclosure of information received by city officials through tax returns and examination of taxpayers' records imposed a penalty less than that imposed by these sections for the same offense, did not violate Ky. Const. § 168. Kohler v. Benckart, 252 S.W.2d 854, 1952 Ky. LEXIS 1025 ( Ky. 1952 ).

Cited in:

Tomlin v. Taylor, 290 Ky. 619 , 162 S.W.2d 210, 1942 Ky. LEXIS 468 ( Ky. 1942 ).

Research References and Practice Aids

Northern Kentucky Law Review.

2011 Kentucky Survey Issue: Article: Personal Liability Regarding Taxation of Kentucky Corporations: Responsible Person Obligations Under the IRC and the KRS, 38 N. Ky. L. Rev. 285 (2011).

CHAPTER 132 Levy and Assessment of Property Taxes

132.010. Definitions for chapter.

As used in this chapter, unless the context otherwise requires:

  1. “Department” means the Department of Revenue;
  2. “Taxpayer” means any person made liable by law to file a return or pay a tax;
  3. “Real property” includes all lands within this state and improvements thereon;
  4. “Personal property” includes every species and character of property, tangible and intangible, other than real property;
  5. “Resident” means any person who has taken up a place of abode within this state with the intention of continuing to abide in this state; any person who has had his or her actual or habitual place of abode in this state for the larger portion of the twelve (12) months next preceding the date as of which an assessment is due to be made shall be deemed to have intended to become a resident of this state;
  6. “Compensating tax rate” means that rate which, rounded to the next higher one-tenth of one cent ($0.001) per one hundred dollars ($100) of assessed value and applied to the current year’s assessment of the property subject to taxation by a taxing district, excluding new property and personal property, produces an amount of revenue approximately equal to that produced in the preceding year from real property. However, in no event shall the compensating tax rate be a rate which, when applied to the total current year assessment of all classes of taxable property, produces an amount of revenue less than was produced in the preceding year from all classes of taxable property. For purposes of this subsection, “property subject to taxation” means the total fair cash value of all property subject to full local rates, less the total valuation exempted from taxation by the homestead exemption provision of the Constitution and the difference between the fair cash value and agricultural or horticultural value of agricultural or horticultural land;
  7. “Net assessment growth” means the difference between:
    1. The total valuation of property subject to taxation by the county, city, school district, or special district in the preceding year, less the total valuation exempted from taxation by the homestead exemption provision of the Constitution in the current year over that exempted in the preceding year, and
    2. The total valuation of property subject to taxation by the county, city, school district, or special district for the current year;
  8. “New property” means the net difference in taxable value between real property additions and deletions to the property tax roll for the current year. “Real property additions” shall mean:
    1. Property annexed or incorporated by a municipal corporation, or any other taxing jurisdiction; however, this definition shall not apply to property acquired through the merger or consolidation of school districts, or the transfer of property from one (1) school district to another;
    2. Property, the ownership of which has been transferred from a tax-exempt entity to a nontax-exempt entity;
    3. The value of improvements to existing nonresidential property;
    4. The value of new residential improvements to property;
    5. The value of improvements to existing residential property when the improvement increases the assessed value of the property by fifty percent (50%) or more;
    6. Property created by the subdivision of unimproved property, provided, that when the property is reclassified from farm to subdivision by the property valuation administrator, the value of the property as a farm shall be a deletion from that category;
    7. Property exempt from taxation, as an inducement for industrial or business use, at the expiration of its tax exempt status;
    8. Property, the tax rate of which will change, according to the provisions of KRS 82.085 , to reflect additional urban services to be provided by the taxing jurisdiction, provided, however, that the property shall be considered “real property additions” only in proportion to the additional urban services to be provided to the property over the urban services previously provided; and
    9. The value of improvements to real property previously under assessment moratorium.
  9. “Agricultural land” means:
    1. Any tract of land, including all income-producing improvements, of at least ten (10) contiguous acres in area used for the production of livestock, livestock products, poultry, poultry products and/or the growing of tobacco and/or other crops including timber;
    2. Any tract of land, including all income-producing improvements, of at least five (5) contiguous acres in area commercially used for aquaculture; or
    3. Any tract of land devoted to and meeting the requirements and qualifications for payments pursuant to agriculture programs under an agreement with the state or federal government;
  10. “Horticultural land” means any tract of land, including all income-producing improvements, of at least five (5) contiguous acres in area commercially used for the cultivation of a garden, orchard, or the raising of fruits or nuts, vegetables, flowers, or ornamental plants;
  11. “Agricultural or horticultural value” means the use value of “agricultural or horticultural land” based upon income-producing capability and comparable sales of farmland purchased for farm purposes where the price is indicative of farm use value, excluding sales representing purchases for farm expansion, better accessibility, and other factors which inflate the purchase price beyond farm use value, if any, considering the following factors as they affect a taxable unit:
    1. Relative percentages of tillable land, pasture land, and woodland;
    2. Degree of productivity of the soil;
    3. Risk of flooding;
    4. Improvements to and on the land that relate to the production of income;
    5. Row crop capability including allotted crops other than tobacco;
    6. Accessibility to all-weather roads and markets; and
    7. Factors which affect the general agricultural or horticultural economy, such as: interest, price of farm products, cost of farm materials and supplies, labor, or any economic factor which would affect net farm income;
  12. “Deferred tax” means the difference in the tax based on agricultural or horticultural value and the tax based on fair cash value;
  13. “Homestead” means real property maintained as the permanent residence of the owner with all land and improvements adjoining and contiguous thereto including but not limited to lawns, drives, flower or vegetable gardens, outbuildings, and all other land connected thereto;
  14. “Residential unit” means all or that part of real property occupied as the permanent residence of the owner;
  15. “Special benefits” are those which are provided by public works not financed through the general tax levy but through special assessments against the benefited property;
  16. “Mobile home” means a structure, transportable in one (1) or more sections, which when erected on site measures eight (8) body feet or more in width and thirty-two (32) body feet or more in length, and which is built on a permanent chassis and designed to be used as a dwelling, with or without a permanent foundation, when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein. It may be used as a place of residence, business, profession, or trade by the owner, lessee, or their assigns and may consist of one (1) or more units that can be attached or joined together to comprise an integral unit or condominium structure;
  17. “Recreational vehicle” means a vehicular type unit primarily designed as temporary living quarters for recreational, camping, or travel use, which either has its own motive power or is mounted on or drawn by another vehicle. The basic entities are: travel trailer, camping trailer, truck camper, and motor home.
    1. Travel trailer: A vehicular unit, mounted on wheels, designed to provide temporary living quarters for recreational, camping, or travel use, and of a size or weight that does not require special highway movement permits when drawn by a motorized vehicle, and with a living area of less than two hundred twenty (220) square feet, excluding built-in equipment (such as wardrobes, closets, cabinets, kitchen units or fixtures) and bath and toilet rooms.
    2. Camping trailer: A vehicular portable unit mounted on wheels and constructed with collapsible partial side walls which fold for towing by another vehicle and unfold at the camp site to provide temporary living quarters for recreational, camping, or travel use.
    3. Truck camper: A portable unit constructed to provide temporary living quarters for recreational, travel, or camping use, consisting of a roof, floor, and sides, designed to be loaded onto and unloaded from the bed of a pick-up truck.
    4. Motor home: A vehicular unit designed to provide temporary living quarters for recreational, camping, or travel use built on or permanently attached to a self-propelled motor vehicle chassis or on a chassis cab or van which is an integral part of the completed vehicle;
  18. “Hazardous substances” shall have the meaning provided in KRS 224.1-400 ;
  19. “Pollutant or contaminant” shall have the meaning provided in KRS 224.1-400 ;
  20. “Release” shall have the meaning as provided in either or both KRS 224.1-400 and KRS 224.60-115 ;
  21. “Qualifying voluntary environmental remediation property” means real property subject to the provisions of KRS 224.1-400 and 224.1-405 , or 224.60-135 where the Energy and Environment Cabinet has made a determination that:
    1. All releases of hazardous substances, pollutants, contaminants, petroleum, or petroleum products at the property occurred prior to the property owner’s acquisition of the property;
    2. The property owner has made all appropriate inquiry into previous ownership and uses of the property in accordance with generally accepted practices prior to the acquisition of the property;
    3. The property owner or a responsible party has provided all legally required notices with respect to hazardous substances, pollutants, contaminants, petroleum, or petroleum products found at the property;
    4. The property owner is in compliance with all land use restrictions and does not impede the effectiveness or integrity of any institutional control;
    5. The property owner complied with any information request or administrative subpoena under KRS Chapter 224; and
    6. The property owner is not affiliated with any person who is potentially liable for the release of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property pursuant to KRS 224.1-400 , 224.1-405 , or 224.60-135 , through:
      1. Direct or indirect familial relationship;
      2. Any contractual, corporate, or financial relationship, excluding relationships created by instruments conveying or financing title or by contracts for sale of goods or services; or
      3. Reorganization of a business entity that was potentially liable;
  22. “Intangible personal property” means stocks, mutual funds, money market funds, bonds, loans, notes, mortgages, accounts receivable, land contracts, cash, credits, patents, trademarks, copyrights, tobacco base, allotments, annuities, deferred compensation, retirement plans, and any other type of personal property that is not tangible personal property;
    1. “County” means any county, consolidated local government, urban-county government, unified local government, or charter county government; (23) (a) “County” means any county, consolidated local government, urban-county government, unified local government, or charter county government;
    2. “Fiscal court” means the legislative body of any county, consolidated local government, urban-county government, unified local government, or charter county government; and
    3. “County judge/executive” means the chief executive officer of any county, consolidated local government, urban-county government, unified local government, or charter county government;
  23. “Taxing district” means any entity with the authority to levy a local ad valorem tax, including special purpose governmental entities;
  24. “Special purpose governmental entity” shall have the same meaning as in KRS 65A.010 , and as used in this chapter shall include only those special purpose governmental entities with the authority to levy ad valorem taxes, and that are not specifically exempt from the provisions of this chapter by another provision of the Kentucky Revised Statutes;
    1. “Broadcast” means the transmission of audio, video, or other signals, through any electronic, radio, light, or similar medium or method now in existence or later devised over the airwaves to the public in general. (26) (a) “Broadcast” means the transmission of audio, video, or other signals, through any electronic, radio, light, or similar medium or method now in existence or later devised over the airwaves to the public in general.
    2. “Broadcast” shall not apply to operations performed by multichannel video programming service providers as defined in KRS 136.602 or any other operations that transmit audio, video, or other signals, exclusively to persons for a fee;
  25. “Livestock” means cattle, sheep, swine, goats, horses, alpacas, llamas, buffaloes, and any other animals of the bovine, ovine, porcine, caprine, equine, or camelid species;
  26. “Heavy equipment rental agreement” means the short-term rental contract under which qualified heavy equipment is rented without an operator for a period:
    1. Not to exceed three hundred sixty-five (365) days; or
    2. That is open-ended under the terms of the contract with no specified end date;
  27. “Heavy equipment rental company” means an entity that is primarily engaged in a line of business described in Code 532412 or 532310 of the North American Industry Classification System Manual in effect on January 1, 2019; and
  28. “Qualified heavy equipment” means machinery and equipment, including ancillary equipment and any attachments used in conjunction with the machinery and equipment, that is:
    1. Primarily used and designed for construction, mining, forestry, or industrial purposes, including but not limited to cranes, earthmoving equipment, well-drilling machinery and equipment, lifts, material handling equipment, pumps, generators, and pollution-reducing equipment; and
    2. Held in a heavy equipment rental company’s inventory for:
      1. Rental under a heavy equipment rental agreement; or
      2. Sale in the regular course of business.

“Real property deletions” shall be limited to the value of real property removed from, or reduced over the preceding year on, the property tax roll for the current year;

History. 4020a-1, 4022, 4114h-1; Acts 1964, ch. 141, § 39; 1965 (1st Ex. Sess.), ch. 2, § 11; 1970, ch. 249, § 1; 1972, ch. 285, § 1; 1976, ch. 260, § 1; 1976, ch. 315, § 1; 1979 (Ex. Sess.), ch. 25, § 1, effective February 13, 1979; 1980, ch. 319, § 1, effective July 15, 1980; 1982, ch. 327, § 5, effective July 15, 1982; 1982, ch. 395, § 1, effective July 15, 1982; 1984, ch. 111, § 72, effective July 13, 1984; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 306, effective July 13, 1990; 1992, ch. 397, § 1, effective July 14, 1992; 1994, ch. 263, § 2, effective July 15, 1994; 2002, ch. 198, § 1, effective July 15, 2002; 2005, ch. 85, § 169, effective June 20, 2005; 2005, ch. 168, § 54(18), effective January 1, 2005; 2005, ch. 168, § 54(19), effective January 1, 2006; 2007, ch. 100, § 1, effective June 26, 2007; 2010, ch. 24, § 96, effective July 15, 2010; 2010, ch. 95, § 1, effective July 15, 2010; 2013, ch. 40, § 86, effective March 21, 2013; 2013, ch. 119, § 6, effective January 1, 2014; 2017 ch. 129, § 2, effective June 29, 2017; 2019 ch. 151, § 8, effective June 27, 2019.

Compiler’s Notes.

Former KRS 132.010 (4020a-1, 4022, 4114h-1: amend. Acts 1964, ch. 141, § 39; 1965 (1st Ex. Sess.), ch. 2, § 11; 1970, ch. 249, § 1; 1972, ch. 285, § 1; 1976, ch. 260, § 1; 1976, ch. 315, § 1; 1979 (Ex. Sess.), ch. 25, § 1, effective February 13, 1979; 1980, ch. 319, § 1, effective July 15, 1980; 1982, ch. 327, § 5, effective July 15, 1982; 1982, ch. 395, § 1, effective July 15, 1982; 1984, ch. 111, § 72, effective July 13, 1984) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 306, effective July 13, 1990.

Legislative Research Commission Notes.

(1/1/2014). 2013 Ky. Acts ch. 119, sec. 26, provides that the amendments to this statute in 2013 Ky. Acts ch. 119, sec. 6, shall apply to property assessed on or after January 1, 2014.

(7/15/2010). Under the authority of KRS 7.136 , the Reviser of Statutes has corrected manifest clerical or typographical errors by inserting “a” before the first occurrence of “charter county government” and “the” before “legislative body” and “chief executive officer” in subsection (23) of this section.

(6/26/2007) A manifest clerical or typographical error in subsection (21)(f)2. has been corrected by the Reviser of Statutes under the authority of KRS 7.136 .

(6/20/2005). 2005 Ky. Acts ch. 168, sec. 170, provided: “Subsection (18) of Section 54 of this Act, relating to property tax changes, take[s] effect January 1, 2006. Subsection (19) of Section 54 of this Act, relating to the voluntary environmental remediation credit, takes effect January 1, 2005.” Because of the order in which the subsections become effective, the Statute Reviser, under the authority of KRS 7.136 , has codified subsection (18) of Section 54, relating to property tax changes, as KRS 132.010(19), and subsection (19) of Section 54, relating to the voluntary remediation credit, as KRS 132.010(18).

NOTES TO DECISIONS

  1. Constitutionality.
  2. Construction.
  3. Property.
  4. —Real.
  5. —Personal.
  6. —Leased.
  7. Resident.
  8. —Change.
  9. —Declared Intention.
  10. —Summer Home.
  11. Compensating Tax Rate.
  12. Roll Back.
  13. Royalties.
  14. Notice.
  15. Agricultural Land.
1. Constitutionality.

Subsections (9) and (10) of this section and KRS 132.450(2)(a) do not violate the Constitution of Kentucky; dwelling houses are to be assessed at fair cash value, and the income and acreage standards to qualify for “agricultural land” or “horticultural land” are not unreasonable. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ) (decided under prior law).

2. Construction.

In enacting subsection (1) of former KRS 160.477 and subsection (6) of this section in the same special session, the legislature was expressing its intention that the authorization for a levy of 50¢ should yet prevail notwithstanding the “roll-back” provisions also enacted. Mullen v. Board of Education, 440 S.W.2d 261, 1969 Ky. LEXIS 336 ( Ky. 1969 ) (decided under prior law).

3. Property.

“Property” means everything of value that a person owns that is or may be the subject of sale or exchange or that when offered for sale will bring some price. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ) (decided under prior law).

Amounts due whiskey warehouseman for storage on whiskey against which negotiable warehouse receipts had been issued, which amounts were due when whiskey was withdrawn from warehouse, were “property” subject to taxation. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ) (decided under prior law).

Any existing, enforceable, collectible demand that one person has against another person or against property upon which it is a lien, and out of which it can be collected, is property. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ) (decided under prior law).

In determining whether a thing is “property” within the meaning of the tax laws, the test is whether the thing has a cash value in some amount, and whether a bidder could be found who would pay a cash price, no matter how small, for it. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ) (decided under prior law).

4. —Real.

Where right-of-way for oil pipeline was acquired by deed granting perpetual right, rather than by lease, the right-of-way was real property, notwithstanding that grantee had right to remove line. Cumberland Pipe Line Co. v. Lewis, 17 F.2d 167, 1926 U.S. Dist. LEXIS 1652 (D. Ky. 1926 ) (decided under prior law).

Pipe imbedded in ground in right-of-way, and pumping machinery set in concrete rigidly attached to ground, were real property. Cumberland Pipe Line Co. v. Lewis, 17 F.2d 167, 1926 U.S. Dist. LEXIS 1652 (D. Ky. 1926 ) (decided under prior law).

“Real property” does not include mineral rights which the owner of the land, by lease or otherwise, has severed from the land itself. Commonwealth by Revenue Agent v. Garrett, 202 Ky. 548 , 260 S.W. 379, 1924 Ky. LEXIS 766 ( Ky. 1924 ) (decided under prior law).

Grasses, fruits and perennial crops are considered a part of the realty. Burley Tobacco Growers' Co-op. Asso. v. Carrollton, 208 Ky. 270 , 270 S.W. 749, 1925 Ky. LEXIS 268 ( Ky. 1925 ) (decided under prior law).

The interest of the lessee in a coal mining lease is real property. Commonwealth v. Elkhorn-Piney Coal Min. Co., 241 Ky. 245 , 43 S.W.2d 684, 1931 Ky. LEXIS 51 ( Ky. 1931 ) (decided under prior law).

5. —Personal.

Annual crops are generally regarded as personalty. Burley Tobacco Growers' Co-op. Asso. v. Carrollton, 208 Ky. 270 , 270 S.W. 749, 1925 Ky. LEXIS 268 ( Ky. 1925 ) (decided under prior law).

Poles and wires of rural electric cooperative corporation located on rights of way acquired under easement agreements are personal property. Inter-County Rural Electric Co-operative Corp. v. Reeves, 294 Ky. 458 , 171 S.W.2d 978, 1943 Ky. LEXIS 446 ( Ky. 1943 ) (decided under prior law).

Where an easement for a right-of-way across land does not subsist as an appurtenance to any interest in land owned by the person who owns the easement, and there is no dominant estate, the easement and any fixtures upon the right of way are personal property. Inter-County Rural Electric Co-operative Corp. v. Reeves, 294 Ky. 458 , 171 S.W.2d 978, 1943 Ky. LEXIS 446 ( Ky. 1943 ) (decided under prior law).

Distilled spirits are personal property within meaning of Ky. Const., §§ 171 and 172. Reeves v. Jefferson County, 245 S.W.2d 606, 1951 Ky. LEXIS 1263 ( Ky. 1951 ) (decided under prior law).

6. —Leased.

An oil lease giving the exclusive right of development is “property” in the hands of the lessee, even though no wells have been drilled and no oil discovered in paying quantities. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ) (decided under prior law).

Where land was leased for 99-year term, at a nominal rental, with covenant by lessor to renew for successive 99-year terms perpetually, the leasehold was taxable against the lessee, whether considered as real or personal property, and the leasehold was not such an interest as was required to be listed by the owner of the fee under KRS 132.220 . Purcell v. Lexington, 186 Ky. 381 , 216 S.W. 599, 1919 Ky. LEXIS 226 ( Ky. 1919 ), writ of error dismissed, 253 U.S. 476, 40 S. Ct. 583, 64 L. Ed. 1021, 1920 U.S. LEXIS 1430 (U.S. 1920).

Ordinarily, the value of the interest of the lessee in a lease of real estate is not taxable, the owner of the real estate being required to pay taxes on all interests connected with the real estate. Purcell v. Lexington, 186 Ky. 381 , 216 S.W. 599, 1919 Ky. LEXIS 226 ( Ky. 1919 ), writ of error dismissed, 253 U.S. 476, 40 S. Ct. 583, 64 L. Ed. 1021, 1920 U.S. LEXIS 1430 (U.S. 1920).

Where the owner is a municipality or for some other reason is not required to pay taxes on the fee, the interest of the lessee is taxable. Purcell v. Lexington, 186 Ky. 381 , 216 S.W. 599, 1919 Ky. LEXIS 226 ( Ky. 1919 ), writ of error dismissed, 253 U.S. 476, 40 S. Ct. 583, 64 L. Ed. 1021, 1920 U.S. LEXIS 1430 (U.S. 1920).

7. Resident.

Where a mental incompetent who had been a resident of Kentucky prior to being declared incompetent was sent by his committee to an asylum in another state for care and treatment, his residence for the purpose of taxation remained in Kentucky. Sumrall's Committee v. Commonwealth, 162 Ky. 658 , 172 S.W. 1057, 1915 Ky. LEXIS 129 ( Ky. 1915 ) (decided under prior law).

The fact that an individual purchased the controlling interest in a Kentucky corporation doing business in Louisville, maintained a personal checking account in a Louisville bank, and took a year’s lease on an apartment in Louisville, did not constitute him a resident of Kentucky for the purpose of taxation, where the purchase of the corporation was for speculative purposes only, the banking account and apartment were used only for his convenience during trips to Louisville, and he spent the greater portion of his time in Texas, where he had a permanent dwelling and which he always claimed as his home. Semple v. Commonwealth, 181 Ky. 675 , 205 S.W. 789, 1918 Ky. LEXIS 601 ( Ky. 1918 ) (decided under prior law).

The fact that a person who was originally a resident of Tennessee bought a farm in Kentucky, improved and furnished the house on the farm and resided there a substantial portion of his time, personally managed the farm, kept a bank account in a Kentucky bank and occasionally referred to the farm as his “home,” did not fix his legal residence in Kentucky, where he continued to maintain a home for his mother, brothers and sisters in Tennessee, where he kept his personal belongings, participated in church and lodge affairs in Tennessee, purchased a family cemetery lot there, and always claimed to be a resident of Tennessee. Millett's Ex'r v. Commonwealth, 184 Ky. 193 , 211 S.W. 562, 1919 Ky. LEXIS 39 ( Ky. 1919 ) (decided under prior law).

A person may have more than one actual residence but he can have but one domicile or legal residence. The place where a person is born is his legal residence until he establishes another by choice, and when a legal residence has been established by choice it continues indefinitely until he establishes a new one, which may be done by actual residence and intention. Millett's Ex'r v. Commonwealth, 184 Ky. 193 , 211 S.W. 562, 1919 Ky. LEXIS 39 ( Ky. 1919 ) (decided under prior law).

The question of residence is one of fact and intention. The fact of actual residence joined with the intention fixes legal residence. But the fact is more powerful than the intention, for intention may be inferred from the fact, whereas the fact cannot be shown by or inferred from intention. Where one’s residence is shown by his conduct to be in one place, his expressed intention that it shall be in another will not control. Pettit's Ex'x v. Lexington, 193 Ky. 679 , 237 S.W. 391, 1922 Ky. LEXIS 64 ( Ky. 1922 ) (decided under prior law).

Where taxpayer maintained a permanent dwelling for himself and family in Lexington, his legal residence was there, although he owned a farm in the county where he spent part of the time each summer, reserved rooms in the farm house in leasing it, voted in the county rather than in the city, and publicly declared that his residence was in the county. Pettit's Ex'x v. Lexington, 193 Ky. 679 , 237 S.W. 391, 1922 Ky. LEXIS 64 ( Ky. 1922 ) (decided under prior law).

Where person resided part of time each year in Florida, where he paid personal property taxes and was a registered voter, and resided balance of time in Kentucky, he was not taxable as a Kentucky resident in absence of proof that during years tax was sought to be imposed he resided in Kentucky more than six months. Utz v. Wallace's Adm'x, 249 Ky. 296 , 60 S.W.2d 614, 1933 Ky. LEXIS 510 ( Ky. 1933 ) (decided under prior law).

8. —Change.

Where resident of Kentucky announced his intention to move to Texas and make his home there, and left Kentucky for that purpose a few days before the date as of which property is assessed in Kentucky, but did not reach Texas until several days after such date, he was a legal resident of Kentucky on the assessment date, his Texas residence not becoming effective until he reached that state. Boyd's Ex'r v. Commonwealth, 149 Ky. 764 , 149 S.W. 1022, 1912 Ky. LEXIS 716 ( Ky. 1912 ) (decided under prior law).

In order to change residence there must be an intention to make the change and the taking up of an actual abode at the place selected as the new domicile. Boyd's Ex'r v. Commonwealth, 149 Ky. 764 , 149 S.W. 1022, 1912 Ky. LEXIS 716 ( Ky. 1912 ) (decided under prior law).

The committee of an incompetent has no power to change the legal residence of the incompetent from one state to another, although it may change his local residence. Sumrall's Committee v. Commonwealth, 162 Ky. 658 , 172 S.W. 1057, 1915 Ky. LEXIS 129 ( Ky. 1915 ) (decided under prior law).

The fact that the purpose of a taxpayer in changing his residence is to avoid taxation does not affect the validity of the change. Covington v. Shinkle, 175 Ky. 530 , 194 S.W. 766, 1917 Ky. LEXIS 351 ( Ky. 1917 ) (decided under prior law).

9. —Declared Intention.

The declared intention of a person as to his residence will control unless his acts or conduct are inconsistent therewith. Semple v. Commonwealth, 181 Ky. 675 , 205 S.W. 789, 1918 Ky. LEXIS 601 ( Ky. 1918 ) (decided under prior law).

10. —Summer Home.

Where taxpayer owned home in city of Covington, farm in Kenton County, and summer home in Rhode Island, and divided his time between those places and Florida, it was held that his legal residence was at the farm in Kenton County, based on his repeated declarations, voting, and tax listing, although he had a business office in Covington and in one or two deeds was described as a resident of Covington. Covington v. Shinkle, 175 Ky. 530 , 194 S.W. 766, 1917 Ky. LEXIS 351 ( Ky. 1917 ) (decided under prior law).

11. Compensating Tax Rate.

Where the legislation established a maximum of 50¢ and the district had obtained a 50¢ authorization by a 1953 election, the effect of the 1965 “roll back” legislation was to reduce that authorization from 50¢ to 13.8¢ leaving the school board with an unused authorization of 36.2¢. Mullen v. Board of Education, 440 S.W.2d 261, 1969 Ky. LEXIS 336 ( Ky. 1969 ) (decided under prior law).

The special school tax election was proper as being within the unused statutory authorization for the special tax where 13.8¢ already being levied and the 15¢ to be levied still fell short of the 50¢ statutory maximum. Mullen v. Board of Education, 440 S.W.2d 261, 1969 Ky. LEXIS 336 ( Ky. 1969 ) (decided under prior law).

12. Roll Back.

Although the “roll back” prevented the governmental body from levying a greatly increased tax by application of an old voted rate to greatly increased assessments, the voters possessed power to impose upon themselves an additional tax, levied pursuant to current assessments so long as the rate of the combined voted taxes did not exceed the statutorily permitted limit of 50¢ per $100. Mullen v. Board of Education, 440 S.W.2d 261, 1969 Ky. LEXIS 336 ( Ky. 1969 ) (decided under prior law).

A tax voted in 1968 after enactment of the “roll back” provision, was not subject to being “rolled back.” Mullen v. Board of Education, 440 S.W.2d 261, 1969 Ky. LEXIS 336 ( Ky. 1969 ) (decided under prior law).

The roll-back provisions of this chapter apply to tax levies to maintain public libraries. Under this chapter, a taxing district’s revenue from ad valorem taxes is limited; this chapter has the effect of rolling back the tax rate to maintain a constant revenue. Taxes levied to support a library created under KRS 173.310 or KRS 173.450 would have to comply with this chapter; however, where the library is not maintained by a tax levy, but by appropriation of funds from the local government, KRS 173.310 does not mandate a levy to maintain libraries created under that section. Lexington-Fayette Urban County Government v. Hayse, 684 S.W.2d 301, 1984 Ky. App. LEXIS 586 (Ky. Ct. App. 1984) (decided under prior law).

13. Royalties.

Royalties due owner of real estate from oil lease were taxable, as against contention that the value of the royalty interest could not be separately assessed from the land itself. Commonwealth by Revenue Agent v. Garrett, 202 Ky. 548 , 260 S.W. 379, 1924 Ky. LEXIS 766 ( Ky. 1924 ) (decided under prior law).

14. Notice.

Where the new property valuation administrator had attempted to reassess, upward, property valuations, but had only sent notices to about 40 percent of the affected property owners, but where some owners had actual notice and had appealed their valuations, the proper remedy would be to allow the increase as to those owners who had notice or had actual notice and appealed, subject to the outcome of those appeals, and to void the increases as to those property owners without notice and who had not appealed their reassessments. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978) (decided under prior law).

15. Agricultural Land.

Housing located on farm property occupied by a nonowner and used in income-producing activity of the farm as dwellings for tenant farmers and farm workers is not a “residential unit”; such dwellings are “income-producing improvements” and a part of the agricultural land for ad valorem assessment purposes. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ) (decided under prior law).

Cited in:

Breathitt County Board of Sup’rs v. Ware Cannel Coal Co., 297 Ky. 117 , 179 S.W.2d 225, 1944 Ky. LEXIS 691 ( Ky. 1944 ); Jefferson County Fiscal Court v. Trager, 302 Ky. 361 , 194 S.W.2d 851, 1946 Ky. LEXIS 686 ( Ky. 1946 ); Boggs v. Reep, 404 S.W.2d 24, 1966 Ky. LEXIS 286 ( Ky. 1966 ); Fayette County Board of Education v. White, 410 S.W.2d 612, 1966 Ky. LEXIS 37 ( Ky. 1966 ); Board of Education v. Harville, 416 S.W.2d 730, 1967 Ky. LEXIS 280 ( Ky. 1967 ); Kelley v. Ashland, 562 S.W.2d 312, 1978 Ky. LEXIS 325 ( Ky. 1978 ); Home Folks Mobile Homes, Inc. v. Revenue Cabinet, 700 S.W.2d 75, 1985 Ky. App. LEXIS 686 (Ky. Ct. App. 1985); Dean v. Commonwealth ex rel. Revenue Cabinet, 967 S.W.2d 594, 1998 Ky. App. LEXIS 34 (Ky. Ct. App. 1998); Campbell County Fiscal Court v. Nash, — S.W.3d —, 2008 Ky. App. LEXIS 373 (Ky. Ct. App. 2008); Dep't of Revenue, Fin. & Admin. Cabinet v. Shinin' B Trailer Sales, LLC, 2015 Ky. App. LEXIS 131 (Sept. 4, 2015).

Opinions of Attorney General.

A soldier stationed in Kentucky did not acquire residence in the state for purposes of taxation by reason of being stationed there until he acted affirmatively to make the state his permanent residence. OAG 61-354 .

A watershed conservancy district which is comprised of parts of four (4) counties is a “taxing district” within the meaning of this section and must make a determination of one uniform standard tax rate to be applied against all of the real property within the district. OAG 66-386 .

For the 1966 assessment, all of the property in the city, including merchants’ inventories, is subjected to the city tax rate but the rate must be computed so that the amount of total revenue produced in 1966 will be no more than that produced in 1965 plus a ten per cent (10%) increase. OAG 67-13 .

Tax rate for tangible personal property cannot be separated for rates from all other property subject to ad valorem property taxes in the city; the same rate must be applied to such property as is applied to real property in the city. OAG 67-101 .

A city which did not levy a public works cumulative reserve fund in 1965 could do so in a later year by allocating or earmarking a portion of its overall compensating tax rate for that purpose. OAG 67-351 .

Where a fire protection district came into existence after the roll-back provisions on tax rates and budgets, the tax rate could be computed on the current assessed value of property in the district. OAG 68-244 .

Where after the rollback a library district did not have sufficient funds to operate, under KRS 173.610 a petition could be filed putting the question of an increased tax levy to a vote of the people, and if the vote was affirmative the tax could be raised to exceed the roll-back rate. OAG 68-606 .

The compensating tax rate provisions of this section apply to the assessed value of automobiles in the city as it does to all other property subject to ad valorem tax. OAG 68-610 .

Each year the library district tax rate must be so adjusted, assuming a change in assessment valuation, in connection with the current property assessment, that the amount of revenue produced in the particular tax year is approximately equal to that produced in 1965. OAG 69-330 .

An area planning commission could not levy a tax rate which exceeded the compensating tax rate defined in KRS 132.010 . OAG 69-532 .

The property valuation administrator may, under the direction and supervision of the Department of Revenue, keep a record of the property of public utility corporations, but this does not constitute an assessment. OAG 71-249 .

Where a city failed to include or omitted in its 1965 property assessment a class of personal property, it could not for a subsequent year assess such personal property and not include the property value in arriving at the compensating tax rate as defined in this section. OAG 71-395 .

A city may increase its general fund tax rate to offset a revenue loss occasioned by property being exempted from property tax by the homestead exemption amendment to Ky. Const., § 170. OAG 71-537 .

The rollback provision of subsection (6) of this section applies to a proposed five cent ($0.05) levy on property in a fourth-class city under KRS 97.590 for the purpose of purchasing and maintaining a public park in the city limits. OAG 72-193 .

Under the terms of this section and KRS 132.425 (repealed), it is clear that the legislature intended to guarantee to the taxing districts and authorities a level of tax revenue approximately equal to that produced in 1971, excluding net assessment growth. OAG 72-726 .

After a city has sufficient revenue in a sinking fund bonds for which a specific tax has been levied, the city would then be bound by subsection (6) of this section and KRS 132.027 with respect to the tax rate which could be applied for general municipal purposes and it would be a violation of KRS 92.330 and 92.340 to continue to levy the specific tax and divert it to general municipal purposes. OAG 74-368 .

Once funding bonds have been paid off, levy must be discontinued. OAG 75-162 .

The 65-year-old or older owner-occupant of a mobile home, which is a single-unit residence, placed on a rented lot is entitled to the homestead exemption if the mobile home qualifies as real property under KRS 132.750 (now repealed) by resting on a permanent fixed foundation and having the wheels or mobile parts removed. OAG 75-264 .

This section, which sets out the compensating tax rate, is locked in as of 1972, since it does not provide for a “compensating tax rate” for any year subsequent to 1972, and therefore the city may not raise its tax rate as a result of the decline in value of stored whiskey which is stored in the city. OAG 75-433 .

Even though “net assessment growth,” as defined in KRS 132.425 (repealed), refers only to the county or a school district, this section encompasses a taxing district and KRS 132.023 and 132.027 clearly show that KRS 132.425 (repealed) is by reference made applicable to cities so that any city which levied a poll tax in 1973 may adjust its compensating tax rate to reflect the loss in poll tax revenue. OAG 75-544 .

On the basis of subsection (6) of this section, cities presumably have the authority to reduce their tax rates for the following school year and increase it in a subsequent year so long as the increased rate does not go above the compensating tax rate established in 1972. OAG 75-677 .

Where a third-class city operates jointly with the county a system of parks under a city-county parks and recreation board, under KRS 97.080 (repealed) such a city may provide funds for park and recreation purposes controlled by the revenue limitations set out in KRS 132.027 and this section. OAG 76-85 .

A county conservation district, which assists individual landowners with the development and implementation of a resource conservation plan for a unit of land, is required to allow Department of Revenue representatives access to individual resource conservation plans upon request on a confidential basis. OAG 76-272 .

There would not be a substantial increase in revenue from real estate tax simply by increasing the assessed value of property in a city. OAG 79-90 .

Insofar as they are used in KRS 132.023 and KRS 132.027 , as amended by Acts 1979 (Ex. Sess.), ch. 25, for those governmental units operating on a calendar basis: (1) “ . . . . . a tax rate for 1979-80 . . . . . ” means that unit’s tax rate for the 1980 calendar year; (2) “ . . . . . application of the maximum tax rate that could have been levied in 1978-79 . . . . . ” means the unit’s compensating tax rate for the 1979 calendar year, calculated in accordance with KRS 132.010(6) as it read prior to February 13, 1979; and (3) “ . . . . . the 1978-79 assessment” means the unit’s assessment as of January 1, 1979, assuming that the unit’s assessment date is January 1. OAG 79-217 .

KRS 132.023(1)(a) and (2) (now (2)(a) and (3)) makes the compensating tax rate provisions of subsection (6) of this section apply specifically to public health taxing districts. OAG 79-344 .

This section and KRS 132.023 apply to the tax rate to be set by a county hospital board for setting a tax rate for 1979-1980 and thereafter. OAG 79-422 .

The compensating tax rate would be computed on the rate passed by the voters of a county library district, whatever that rate may be for the previous year. OAG 79-597 .

A special tax assessment to pay a tort judgment can be levied by a city where the city has levied its statutory maximum assessment pursuant to this chapter, under the basic principle that to hold otherwise would permit cities to take advantage of their own negligence by depriving a person who has been injured of all effective remedies. OAG 80-253 .

Because the clear and unambiguous intent of the general assembly was to place a ceiling upon real property tax rates while specifically exempting personal property tax rates, the unavoidable conclusion is that the county fiscal court may establish two separate tax rates—one for real property and one for personal property. OAG 80-545 .

If the city governing body proposes to impose the same tax rate for the succeeding year as the preceding year but due to increased assessments more than four percent (4%) revenue is produced in the succeeding year than had been produced in the preceding year, that portion of the tax rate which causes a breach in the four percent (4%) ceiling is subject to recall. OAG 80-558 .

If the proposed county tax rate used to fund emergency ambulance service is more than four percent (4%) over the amount of revenue produced by the compensating tax rate, as defined in this section, a recall vote or reconsideration by the county voters, as provided in KRS 132.017 , shall be advertised as directed in KRS 68.245(6)(b); however, upon a recall petition being filed, the fiscal court may cancel an election on the question of exceeding four percent (4%) over the compensating tax rate by simply reducing the tax rate so as not to exceed four percent (4%). OAG 81-344 .

Where a court decision greatly increased a 1981 city tax assessment so that the application of 1980 tax rates would result in a tax revenue increase greater than four percent (4%) over the previous year, the city must comply with the recall vote or reconsideration provisions of KRS 132.027 , since an assessment increase resulting from a court decision is not the type of increase contemplated in the definition of “net assessment growth” under subsection (7) of this section and the resulting revenue cannot, therefore, be excluded under subdivision (1)(b) of KRS 132.027 . OAG 81-425 (Opinion prior to 1990 amendment).

Acts 1979 (Ex. Sess.), ch. 25, which limits a county’s increase in property taxes, does not limit in effect the public health district tax which is levied by a county pursuant to either KRS 212.725 or 212.755 . OAG 82-151 .

This section and KRS 132.750 (now repealed) concerning the treatment of mobile homes as real estate do not abrogate the requirement that in order for tangible personal property to become an improvement to the land it must be attached to or built upon the soil. In the case of mobile homes, this occurs when the utilities are connected or when some other relatively permanent attachment to the land is formed. The amendments of former KRS 132.750 are intended to allow, and effectuate the purpose of allowing, similar tax treatment for similarly situated mobile homes regardless of vestigial differences between them. OAG 82-584 .

The recall provisions of KRS 68.245(6) are only triggered when a real property tax rate exceeds, by more than four percent, the compensating tax rate as defined in KRS 132.010(6). In calculating the compensating tax rate, personal property must be included when applying a rate to “all classes of taxable property” to determine whether use of a substitute rate is required by KRS 132.010(6). OAG 10-005 .

Research References and Practice Aids

Cross-References.

Assessments by Department of Revenue, protest against; when final; appeal from, KRS 131.110 .

City taxes, levy and assessment of:

Cities of first class, KRS 91.200 , 91.260 , 91.310 .

Cities of second class, KRS 92.280 , 92.330 .

Cities of third class, KRS 92.280 , 92.290 .

Cities of fourth class, KRS 92.280 .

Cities of fifth class, KRS 92.280 , 92.290 .

Cities of sixth class, KRS 92.280 , 92.290 .

Classification of property for taxation, referendum, Ky. Const., § 171.

Corporate property to pay same rate as individual property, Ky. Const., § 174.

Corporation and utility taxes, KRS ch. 136.

County revenue limits, procedure for increase, KRS 68.245 .

County road bonds, retirement, local tax levy, KRS 178.200 .

County taxes, levy of, KRS 68.090 .

Department of Revenue, powers and duties in tax assessment, KRS 131.030 , 131.130 , 131.140 .

District cooperative extension education tax, local tax levy, KRS 164.655 .

Excise taxes, KRS ch. 138.

Finance and revenue of cities of other than the first class, KRS ch. 92.

Finance and revenue of cities of the first class, KRS ch. 91.

Flood control districts, local tax levy, KRS 104.670 .

Governor’s cabinet to prepare long range financial programs, real property inventories, tax maps, KRS 147.100 .

Income taxes, KRS ch. 141.

Inheritance and estate taxes, KRS ch. 140.

Jefferson County children’s home, local tax levy, KRS 201.160 , 201.170 .

Levees, local tax levy, KRS 266.150 , 266.190 .

License and excise taxes on distilled spirits, KRS ch. 243.

License taxes, KRS ch. 137.

Municipal band or orchestra, local tax levy, KRS 97.610 .

Municipal universities and colleges, local tax levy, KRS 165.030 , 165.160 , 165.170 .

Payment, collection, and refund of taxes, KRS ch. 134.

Power to tax may be conferred on local authorities, Ky. Const., § 181.

Purposes for which county and city taxes are levied must be specified, KRS 68.100 , 92.330 , 92.340 .

“Real estate” and “land” defined, KRS 446.010 .

Roads, local tax levy, Ky. Const., § 157a; KRS 178.210 .

Sanitation districts, local tax levy, KRS 220.360 .

Schools, local tax levy, KRS 160.460 to 160.530 .

Supervision, equalization and review of assessments, KRS ch. 133.

Uniformity of taxes on property required, Ky. Const., § 171.

Value of property for taxation, how estimated, tax to be based on value, Ky. Const., §§ 172, 174.

Kentucky Law Journal.

Combs, Taxation — Constitutionality of Ad Valorem Taxes on Annuities Arising Out of Insurance Policies in Kentucky, 34 Ky. L.J. 316 (1946).

Property Tax Revenue Assessment Levels and Taxing Rate: The Kentucky Rollback Law, 60 Ky. L.J. 105 (1971).

Public Schools: Serrano v. Priest — A Challenge to Kentucky, 60 Ky. L.J. 156 (1971).

The Property Tax — A Withering Vine, 60 Ky. L.J. 174 (1971).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Bratt, Material Participation and the Valuation of Farm Land for Estate Tax Purposes Under the Tax Reform Act of 1976, 66 Ky. L.J. 848 (1977-78).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Note, Historic Preservation — An Individual’s Perspective, 67 Ky. L.J. 1018 (1978-1979).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Homestead Exemption, § 155.00.

132.011. “Public charity” defined. [Repealed.]

Compiler’s Notes.

Former KRS 132.011 (Enact. Acts 1988, ch. 252, § 1, effective July 15, 1988) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 307, effective July 13, 1990.

This section (Repealed and reenact. Acts 1990, ch. 476, Pt. V, § 307, effective July 13, 1990) was repealed by Acts 1992, ch. 338, § 21, effective July 14, 1992.

132.012. “Abandoned urban property” defined — Classification as real property for tax purposes.

As used in this section and in KRS 92.305 and 91.285 , unless the context otherwise requires:

  1. “Abandoned urban property” means any vacant structure or vacant or unimproved lot or parcel of ground in a predominantly developed urban area which has been vacant or unimproved for a period of at least one (1) year and which:
    1. Because it is dilapidated, unsanitary, unsafe, vermin infested, or otherwise dangerous to the safety of persons, it is unfit for its intended use;
    2. By reason of neglect or lack of maintenance has become a place for the accumulation of trash and debris, or has become infested with rodents or other vermin;
    3. Has been tax delinquent for a period of at least three (3) years;
    4. Has had a methamphetamine contamination notice posted as provided in KRS 224.1-410 for a period of at least ninety (90) days, and the owner has neither appealed the notice nor provided a certificate of decontamination during the ninety (90) days; or
    5. Is located within a development area established under KRS 65.7049 , 65.7051 , and 65.7053 .
  2. For purposes of local taxation in cities of any class or consolidated local governments, there shall be a classification of real property known as abandoned urban property. The legislative body of a city of any class, county containing a city of the first class, or consolidated local government may levy a rate of taxation on abandoned urban property higher than the prevailing rate of taxation on other real property in the city, county containing a city of the first class, or consolidated local government. The limitation upon tax rates established by KRS 132.027 shall not apply to the rate of taxation on abandoned urban property.

History. Enact. Acts 1990, ch. 513, § 1, effective July 13, 1990; 2002, ch. 346, § 160, effective July 15, 2002; 2004, ch. 76, § 2, effective July 13, 2004; 2007, ch. 95, § 25, effective March 23, 2007; 2019 ch. 52, § 3, effective June 27, 2019.

132.015. List of real property additions and deletions to tax rolls to be maintained by property valuation administrator.

The property valuation administrator shall maintain lists of all real property additions and real property deletions to the property tax rolls for the county, consolidated local government, or urban-county, and each city, school district, and special district in the county, consolidated local government, or urban-county, and shall certify such lists to the Department of Revenue, the city clerk of each city in the county which elects to use the annual county assessment as provided for in KRS 132.285 , the treasurer or chief officer of each special district in the county, and the chief administrative officer of the urban-county and the consolidated local government at the time he files his recapitulation of property assessed on the tax roll with the Department of Revenue.

History. Enact. Acts 1979 (Ex. Sess.), ch. 25, § 2, effective February 13, 1979; 1980, ch. 319, § 2, effective July 15, 1980; 2002, ch. 346, § 161, effective July 15, 2002; 2005, ch. 85, § 170, effective June 20, 2005.

NOTES TO DECISIONS

1. In General.

The zoning ordinances assisted the county clerk and the Property Valuation Administrator (PVA) in properly performing their statutorily required duties, including the county clerk’s duty to record lawful deeds under KRS 382.110 and KRS 382.335 , and the PVA’s duty to maintain lists of all real property additions to the property tax rolls for the county under KRS 132.015 . A ruling that the ordinances interfered with those duties ignored that, under KRS 100.277 , a planning commission was authorized to approve plats of subdivisions of land, such approval had to be obtained before plats may be recorded, and instruments referring to unapproved plats or subdivisions were void. Campbell County Fiscal Court v. Nash, 2008 Ky. App. LEXIS 373 (Ky. Ct. App. Dec. 12, 2008), review granted, transferred, 2010 Ky. LEXIS 40 (Ky. Jan. 13, 2010), aff'd in part and rev'd in part, 345 S.W.3d 811, 2011 Ky. LEXIS 57 ( Ky. 2011 ).

132.017. Recall petition — Requirements and procedures — Reconsideration — Election — Second billing.

  1. As used in this section, “local governmental entity” includes a county fiscal court and legislative body of a city, urban-county government, consolidated local government, charter county government, unified local government, or other taxing district.
      1. Except as provided in subparagraph 2. of this paragraph, the portion of a tax rate levied by an ordinance, order, resolution, or motion of a local governmental entity or district board of education subject to recall as provided for in KRS 68.245 , 132.023 , 132.027 , and 160.470 , shall go into effect forty-five (45) days after its passage. (2) (a) 1. Except as provided in subparagraph 2. of this paragraph, the portion of a tax rate levied by an ordinance, order, resolution, or motion of a local governmental entity or district board of education subject to recall as provided for in KRS 68.245 , 132.023 , 132.027 , and 160.470 , shall go into effect forty-five (45) days after its passage.
      2. When a tax rate is levied by a district board of education or other taxing district that is primarily located in a county containing an urban-county government or a consolidated local government, the portion of a tax rate levied by an ordinance, order, resolution, or motion of a district board of education or other taxing district subject to recall as provided for in KRS 68.245, 132.023, 132.027, and 160.470, shall go into effect fifty (50) days after its passage.
    1. During the same forty-five (45) day or fifty (50) day time period provided by paragraph (a) of this subsection, any five (5) qualified voters, who reside in the area where the tax levy will be imposed, may commence petition proceedings to protest the passage of the ordinance, order, resolution, or motion by filing an affidavit with the county clerk. The affidavit shall state:
      1. The five (5) qualified voters constitute the members of the petition committee;
      2. The petition committee will be responsible for circulating the petition;
      3. The petition committee will file the petition in the proper form within the same forty-five (45) day or fifty (50) day time period provided by paragraph (a) of this subsection;
      4. The names and addresses of the petition committee members;
      5. The address to which all notices to the committee are to be sent; and
      6. For petition committees filing petitions in response to a tax rate levied by a district board of education or other taxing district that is primarily located in a county containing an urban-county government or a consolidated local government, whether or not the petition committee is willing to incur all of the expenses associated with electronic petition signatures. If the petition committee is not willing to incur all of the expenses, then electronic petition signatures shall not be allowed for the petition.
    2. Upon receipt of the affidavit, the county clerk shall immediately:
      1. Notify the petition committee of all statutory requirements for the filing of a valid petition under this section;
      2. Notify the petition committee that the clerk will publish a notice identifying the tax levy being challenged and providing the names and addresses of the petition committee in a newspaper of general circulation within the county, if:
        1. There is a newspaper within the county in which to publish the notice; and
        2. The petition committee remits an amount equal to the cost of publishing the notice determined in accordance with the provisions of KRS 424.160 at the time of the filing of the affidavit.
      3. Deliver a copy of the affidavit to the appropriate local governmental entity or district board of education.
    3. The petition shall be filed with the county clerk within the same forty-five (45) day or fifty (50) day time period provided by paragraph (a) of this subsection and meet the following requirements:
      1. All papers of the petition shall be substantially uniform in size and style and shall be assembled in one (1) instrument for filing;
      2. For a district board of education or other taxing district that is primarily located in a county containing an urban-county government or a consolidated local government, each sheet of the petition may contain the names of voters from more than one (1) voting precinct, and for a district board of education or other taxing district that is not primarily located in a county containing an urban-county government or a consolidated local government, each sheet of the petition shall contain the names of voters from one (1) voting precinct;
      3. Each nonelectronic petition signature shall be executed in ink or indelible pencil;
      4. Each electronic petition signature shall comply with the requirements of the Uniform Electronic Transactions Act, KRS 369.101 to 369.120;
      5. Each electronic and nonelectronic petition signature shall be followed by the printed name, street address, Social Security number or birthdate, and the name and number of the designated voting precinct of the person signing; and
      6. The petition shall be signed by a number of registered and qualified voters residing in the affected jurisdiction equal to at least ten percent (10%) of the total number of votes cast in the last preceding presidential election. Electronic petition signatures shall be included in determining whether the required number of petition signatures has been obtained when the expenses associated with the electronic petition signatures have been incurred in accordance with paragraph (b)6. of this subsection, the electronic petition signatures comply with the requirements of this subsection, and the petition was filed in response to a tax rate levied by a district board of education or other taxing district that is primarily located in a county containing an urban-county government or a consolidated local government. The inclusion of an invalid electronic or nonelectronic petition signature on a page shall not invalidate the entire page of the petition, but shall instead result in the invalid petition signature being stricken and not counted.
    4. Upon the filing of the petition with the county clerk, the ordinance, order, resolution, or motion shall be suspended from going into effect until after the election referred to in subsection (3) of this section is held, or until the petition is finally determined to be insufficient and no further action may be taken pursuant to paragraph (i) of this subsection.
    5. The county clerk shall immediately notify the presiding officer of the appropriate local governmental entity or district board of education that the petition has been received and shall, within thirty (30) days of the receipt of the petition, make a determination of whether the petition contains enough signatures of qualified voters to place the ordinance, order, resolution, or motion before the voters.
    6. If the county clerk finds the petition to be sufficient, the clerk shall certify to the petition committee and the local governmental entity or district board of education within the thirty (30) day period provided for in paragraph (f) of this subsection that the petition is properly presented and in compliance with the provisions of this section, and that the ordinance, order, resolution, or motion levying the tax will be placed before the voters for approval.
    7. If the county clerk finds the petition to be insufficient, the clerk shall, within the thirty (30) day period provided for in paragraph (f) of this subsection, notify, in writing, the petition committee and the local governmental entity or district board of education of the specific deficiencies found. Notification shall be sent by certified mail and shall be published at least one (1) time in a newspaper of general circulation within the county containing the local governmental entity or district board of education levying the tax. If there is not a newspaper within the county in which to publish the notification, then the notification shall be posted at the courthouse door.
    8. A final determination of the sufficiency of a petition shall be subject to final review by the Circuit Court of the county in which the local governmental entity or district board of education is located, and shall be limited to the validity of the county clerk’s determination. Any petition challenging the county clerk’s final determination shall be filed within ten (10) days of the issuance of the clerk’s final determination.
    9. The local governmental entity or district board of education may cause the cancellation of the election by reconsidering and amending the ordinance, order, resolution, or motion to levy a tax rate which will produce no more revenue from real property, exclusive of revenue from new property as defined in KRS 132.010 , than four percent (4%) over the amount of revenue produced by the compensating tax rate defined in KRS 132.010 from real property. The action by the local governmental entity or district board of education shall be valid only if taken within fifteen (15) days following the date the clerk finds the petition to be sufficient.
    1. If an election is necessary under the provisions of subsection (2) of this section, the local governmental entity shall cause to be submitted to the voters of the district at the next regular election, the question as to whether the property tax rate shall be levied. The question shall be submitted to the county clerk not later than the second Tuesday in August preceding the regular election. (3) (a) If an election is necessary under the provisions of subsection (2) of this section, the local governmental entity shall cause to be submitted to the voters of the district at the next regular election, the question as to whether the property tax rate shall be levied. The question shall be submitted to the county clerk not later than the second Tuesday in August preceding the regular election.
    2. If an election is necessary for a school district under the provisions of subsection (2) of this section, the district board of education may cause to be submitted to the voters of the district in a called common school election not less than thirty-five (35) days nor more than forty-five (45) days from the date the signatures on the petition are validated by the county clerk, or at the next regular election, at the option of the district board of education, the question as to whether the property tax rate shall be levied. If the election is held in conjunction with a regular election, the question shall be submitted to the county clerk not later than the second Tuesday in August preceding the regular election. The cost of a called common school election shall be borne by the school district holding the election. Any called common school election shall comply with the provisions of KRS 118.025 .
    3. In an election held under paragraph (a) or (b) of this subsection, the question shall be so framed that the voter may by his or her vote answer “for” or “against.” If a majority of the votes cast upon the question oppose its passage, the ordinance, order, resolution, or motion shall not go into effect. If a majority of the votes cast upon the question favor its passage, the ordinance, order, resolution, or motion shall become effective.
    4. If the ordinance, order, resolution, or motion fails to pass pursuant to an election held under paragraph (a) or (b) of this subsection, the property tax rate which will produce four percent (4%) more revenues from real property, exclusive of revenue from new property as defined in KRS 132.010 , than the amount of revenue produced by the compensating tax rate defined in KRS 132.010 , shall be levied without further approval by the local governmental entity or district board of education.
  2. Notwithstanding any statutory provision to the contrary, if a local governmental entity or district board of education has not established a final tax rate as of September 15, due to the recall provisions of this section, KRS 68.245 , 132.027 , or 160.470 , regular tax bills shall be prepared as required in KRS 133.220 for all districts having a tax rate established by that date; and a second set of bills shall be prepared and collected in the regular manner, according to the provisions of KRS Chapter 132, upon establishment of final tax rates by the remaining districts.
  3. If a second billing is necessary, the collection period shall be extended to conform with the second billing date.
  4. All costs associated with the second billing shall be paid by the taxing district or districts requiring the second billing.

If the petition committee elects to have the notice published, the clerk shall publish the notice within five (5) days of receipt of the affidavit; and

History. Enact. Acts 1979 (Ex. Sess.), ch. 25, § 8, effective February 13, 1979; 1980, ch. 270, § 2, effective July 15, 1980; 1980, ch. 319, § 7, effective July 15, 1980; 1990, ch. 48, § 83, effective July 13, 1990; 1990, ch. 476, Pt. V, § 308, effective July 13, 1990; 1996, ch. 195, § 54, effective July 15, 1996; 2002, ch. 346, § 162, effective July 15, 2002; 2005, ch. 121, § 1, effective June 20, 2005; 2019 ch. 83, § 1, effective June 27, 2019.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts ch. 121, § 6, provides: “The provisions of this Act shall apply to ordinances, orders, resolutions or motions passed after July 15, 2005.”

(7/13/90) The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

  1. Timeliness.
  2. Sufficiency of Recall Petition.
1. Timeliness.

As to the timing of filing tax protest petitions, because KRS 132.017(1)(a) specifically governs the levy and assessment of property taxes, it controls over the general statute in KRS 118.365(7), concerning the conduct of elections; therefore, the trial court correctly determined that the taxpayers had 45 days in which to file their recall petition, and that the petition was valid and timely filed even though it did not specify “that portion” of the rate subject to recall. Daviess County Pub. Library Taxing Dist. v. Boswell, 185 S.W.3d 651, 2005 Ky. App. LEXIS 263 (Ky. Ct. App. 2005).

2. Sufficiency of Recall Petition.

Circuit court erred in granting summary judgment to a board of education and declaring that the county clerk erred in certifying a tax recall petition because “petition committee” was merely a convenient way to refer to the individuals who initiated the petition and did not deprive them of standing, although there were technical flaws, given the liberal construction afforded to statutes, the petition substantially complied with the statutory requirements, and the county clerk properly determined that because the committee did not request publication of notice, none was required. Petition Comm. v. Bd. of Educ., 509 S.W.3d 58, 2016 Ky. App. LEXIS 109 (Ky. Ct. App. 2016).

Opinions of Attorney General.

Insofar as they are used in KRS 132.023 and KRS 132.027 , as amended by Acts 1979 (Ex. Sess.), ch. 25, for those governmental units operating on a calendar basis: (1) “ . . . . . a tax rate for 1979-80 . . . . . ” means that unit’s tax rate for the 1980 calendar year; (2) “ . . . . . application of the maximum tax rate that could have been levied in 1978-79 . . . . . ” means the unit’s compensating tax rate for the 1979 calendar year, calculated in accordance with subsection (6) of this section as it read prior to February 13, 1979; and (3) “ . . . . . the 1978-79 assessment” means the unit’s assessment as of January 1, 1979, assuming that the unit’s assessment date is January 1. OAG 79-217 .

Under the literal language of KRS 133.220 , when read together with this section, a county clerk was not required to wait until the library board established a final tax rate in order to get out the tax bills in the regular way envisioned by KRS 133.220 but should make up the tax bills, based upon the already established tax rates relating to the state, county, school and other taxing districts, and place the bills with the sheriff; in connection with the library district tax levy, which had not been established because of the recall provisions, a second set of bills must be prepared in the regular manner upon the establishment of the final tax rate by any remaining districts and all costs associated with the second billing must be paid by the taxing district or districts requiring the second billing. OAG 80-503 .

If the proposed county tax rate used to fund emergency ambulance service is more than four percent over the amount of revenue produced by the compensating tax rate as defined in KRS 132.010 , a recall vote or reconsideration by the county voters, as provided in this section, shall be advertised as directed in subsection (6)(b) of KRS 68.245 ; however, upon a recall petition being filed, the fiscal court may cancel an election on the question of exceeding four percent over the compensating tax rate by simply reducing the tax rate so as not to exceed four percent. OAG 81-344 .

Even though, due to a delay in certifying the county assessment, the advertising and hearing requirements necessary to levying a school district’s tax rate would not be completed 45 days before the date of the next regular election, the school district, of its own volition, could waive the petition and place the question on the ballet. OAG 82-485 .

If a Board of Education desires to increase the rate of tax levied pursuant to KRS 160.477 (now repealed), it must comply with the terms of KRS 160.470 . This provides for hearings and in certain cases makes the setting of the rate subject to a recall vote or reconsideration as provided for in this section. OAG 83-201 .

132.018. Reduction of tax rate on personal property.

  1. If the tax rate applicable to real property levied by a county fiscal court, district board of education, or legislative body of a city, consolidated local government, urban-county government, or other taxing district is reduced as a result of reconsideration by the county fiscal court, district board of education, or legislative body of a city, consolidated local government, urban-county government, or other taxing district under the provisions of KRS 132.017(2)(j), the tax rate applicable to personal property levied under the provisions of KRS 68.248(1), 132.024(1), 132.029(1), and 160.473(1) shall be reduced by the respective county fiscal court, district board of education, or legislative body of a city, consolidated local government, urban-county government, or other taxing district to an amount which will produce the same percentage increase in revenue from personal property as the percentage increase in revenue from real property resulting from the reduced tax rate applicable to real property.
  2. If the tax rate applicable to real property levied by a county fiscal court, district board of education, or legislative body of a city, consolidated local government, urban-county government, or other taxing district is reduced, under the provisions of KRS 132.017(3), as a result of a majority of votes cast in an election being opposed to such a rate, the tax rate applicable to personal property levied by the respective county fiscal court, district board of education, or legislative body of a city, consolidated local government, urban-county government, or other taxing district shall be reduced, without further action by the levying body, to an amount which will produce the same percentage increase in revenue from personal property as the percentage increase in revenue from real property resulting from the reduced tax rate applicable to real property.

History. Enact. Acts 1982, ch. 397, § 9, effective July 15, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 309, effective July 13, 1990; 2002, ch. 346, § 163, effective July 15, 2002; 2005, ch. 121, § 5, effective June 20, 2005; 2019 ch. 83, § 2, effective June 27, 2019.

Compiler’s Notes.

Former KRS 132.018 (Enact. Acts 1982, ch. 397, § 9, effective July 15, 1982) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 309, effective July 13, 1990.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts ch. 121, § 6, provides: “The provisions of this Act shall apply to ordinances, orders, resolutions or motions passed after July 15, 2005.”

(6/20/2005). The paragraph in KRS 132.017(2) that is referred to in subsection (1) of this section has been changed in codification by the Reviser of Statutes under the authority of KRS 7.136 to reflect the correct lettering of paragraphs in 2005 Ky. Acts ch. 121, § 1, subsec. (2).

132.020. State ad valorem taxes.

  1. The owner or person assessed shall pay an annual ad valorem tax for state purposes at the rate of:
    1. Thirty-one and one-half cents ($0.315) upon each one hundred dollars ($100) of value of all real property directed to be assessed for taxation;
    2. Twenty-five cents ($0.25) upon each one hundred dollars ($100) of value of all motor vehicles qualifying for permanent registration as historic motor vehicles under KRS 186.043 ;
    3. Fifteen cents ($0.15) upon each one hundred dollars ($100) of value of all:
      1. Machinery actually engaged in manufacturing;
      2. Commercial radio and television equipment used to receive, capture, produce, edit, enhance, modify, process, store, convey, or transmit audio or video content or electronic signals which are broadcast over the air to an antenna, including radio and television towers used to transmit or facilitate the transmission of the signal broadcast and equipment used to gather or transmit weather information, but excluding telephone and cellular communication towers; and
      3. Tangible personal property which has been certified as a pollution control facility as defined in KRS 224.1-300 . In the case of tangible personal property certified as a pollution control facility which is incorporated into a landfill facility, the tangible personal property shall be presumed to remain tangible personal property for purposes of this paragraph if the tangible personal property is being used for its intended purposes;
    4. Ten cents ($0.10) upon each one hundred dollars ($100) of value on the operating property of railroads or railway companies that operate solely within the Commonwealth;
    5. Five cents ($0.05) upon each one hundred dollars ($100) of value of goods held for sale in the regular course of business, which includes:
      1. Machinery and equipment held in a retailer’s inventory for sale or lease originating under a floor plan financing arrangement;
      2. Motor vehicles:
        1. Held for sale in the inventory of a licensed motor vehicle dealer, including licensed motor vehicle auction dealers, which are not currently titled and registered in Kentucky and are held on an assignment pursuant to KRS 186A.230 ; or
        2. That are in the possession of a licensed motor vehicle dealer, including licensed motor vehicle auction dealers, for sale, although ownership has not been transferred to the dealer;
      3. Raw materials, which includes distilled spirits and distilled spirits inventory;
      4. In-process materials, which includes distilled spirits and distilled spirits inventory, held for incorporation in finished goods held for sale in the regular course of business; and
      5. Qualified heavy equipment;
    6. One and one-half cents ($0.015) upon each one hundred dollars ($100) of value of all:
      1. Privately owned leasehold interests in industrial buildings, as defined under KRS 103.200 , owned and financed by a tax-exempt governmental unit, or tax-exempt statutory authority under the provisions of KRS Chapter 103, upon the prior approval of the Kentucky Economic Development Finance Authority, except that the rate shall not apply to the proportion of value of the leasehold interest created through any private financing;
      2. Qualifying voluntary environmental remediation property, provided the property owner has corrected the effect of all known releases of hazardous substances, pollutants, contaminants, petroleum, or petroleum products located on the property consistent with a corrective action plan approved by the Energy and Environment Cabinet pursuant to KRS 224.1-400 , 224.1-405 , or 224.60-135 , and provided the cleanup was not financed through a public grant or the petroleum storage tank environmental assurance fund. This rate shall apply for a period of three(3) years following the Energy and Environment Cabinet’s issuance of a No Further Action Letter or its equivalent, after which the regular tax rate shall apply;
      3. Tobacco directed to be assessed for taxation;
      4. Unmanufactured agricultural products;
      5. Aircraft not used in the business of transporting persons or property for compensation or hire;
      6. Federally documented vessels not used in the business of transporting persons or property for compensation or hire, or for other commercial purposes; and
      7. Privately owned leasehold interests in residential property described in KRS 132.195(2)(g);
    7. One-tenth of one cent ($0.001) upon each one hundred dollars ($100) of value of all:
      1. Farm implements and farm machinery owned by or leased to a person actually engaged in farming and used in his farm operations;
      2. Livestock and domestic fowl;
      3. Tangible personal property located in a foreign trade zone established pursuant to 19 U.S.C. sec. 81 , provided that the zone is activated in accordance with the regulations of the United States Customs Service and the Foreign Trade Zones Board; and
      4. Property which has been certified as an alcohol production facility as defined in KRS 247.910 , or as a fluidized bed energy production facility as defined in KRS 211.390 ; and
    8. Forty-five cents ($0.45) upon each one hundred dollars ($100) of value of all other property directed to be assessed for taxation shall be paid by the owner or person assessed, except as provided in KRS 132.030 , 132.200 , 136.300 , and 136.320 , providing a different tax rate for particular property.
  2. Notwithstanding subsection (1)(a) of this section, the state tax rate on real property shall be reduced to compensate for any increase in the aggregate assessed value of real property to the extent that the increase exceeds the preceding year’s assessment by more than four percent (4%), excluding:
    1. The assessment of new property as defined in KRS 132.010(8);
    2. The assessment from property which is subject to tax increment financing pursuant to KRS Chapter 65; and
    3. The assessment from leasehold property which is owned and financed by a tax-exempt governmental unit, or tax-exempt statutory authority under the provisions of KRS Chapter 103 and entitled to the reduced rate of one and one-half cents ($0.015) pursuant to subsection (1)(f) of this section. In any year in which the aggregate assessed value of real property is less than the preceding year, the state rate shall be increased to the extent necessary to produce the approximate amount of revenue that was produced in the preceding year from real property.
  3. By July 1 each year, the department shall compute the state tax rate applicable to real property for the current year in accordance with the provisions of subsection (2) of this section and certify the rate to the county clerks for their use in preparing the tax bills. If the assessments for all counties have not been certified by July 1, the department shall, when either real property assessments of at least seventy-five percent (75%) of the total number of counties of the Commonwealth have been determined to be acceptable by the department, or when the number of counties having at least seventy-five percent (75%) of the total real property assessment for the previous year have been determined to be acceptable by the department, make an estimate of the real property assessments of the uncertified counties and compute the state tax rate.
  4. If the tax rate set by the department as provided in subsection (2) of this section produces more than a four percent (4%) increase in real property tax revenues, excluding:
    1. The revenue resulting from new property as defined in KRS 132.010(8);
    2. The revenue from property which is subject to tax increment financing pursuant to KRS Chapter 65; and
    3. The revenue from leasehold property which is owned and financed by a tax-exempt governmental unit, or tax-exempt statutory authority under the provisions of KRS Chapter 103 and entitled to the reduced rate of one and one-half cents ($0.015) pursuant to subsection (1) of this section;
  5. The provisions of subsection (2) of this section notwithstanding, the assessed value of unmined coal certified by the department after July 1, 1994, shall not be included with the assessed value of other real property in determining the state real property tax rate. All omitted unmined coal assessments made after July 1, 1994, shall also be excluded from the provisions of subsection (2) of this section. The calculated rate shall, however, be applied to unmined coal property, and the state revenue shall be devoted to the program described in KRS 146.550 to 146.570 , except that four hundred thousand dollars ($400,000) of the state revenue shall be paid annually to the State Treasury and credited to the Office of Energy Policy for the purpose of public education of coal-related issues.

the rate shall be adjusted in the succeeding year so that the cumulative total of each year’s property tax revenue increase shall not exceed four percent (4%) per year.

History. 4019: amend. Acts 1948, ch. 95, § 1; 1950, ch. 186; 1954, ch. 161; 1965 (1st Ex. Sess.), ch. 2, § 1; 1968, ch. 207, § 1; 1976, ch. 84, § 7, effective March 29, 1976; 1976, ch. 93, § 9, effective January 1, 1977; 1978, ch. 116, § 3, effective January 1, 1979; 1978, ch. 404, § 1, effective March 30, 1978; 1979 (Ex. Sess.), ch. 3, § 1, effective May 12, 1979; 1979 (Ex. Sess.), ch. 25, § 3, effective February 13, 1979; 1980, ch. 188, § 102, effective July 15, 1980; 1980, ch. 210, § 6, effective July 15, 1980; 1980, ch. 317, § 1, effective July 15, 1980; 1980, ch. 319, § 3, effective July 15, 1980; 1980, ch. 395, § 1, effective July 15, 1980; 1982, ch. 229, § 1, effective July 15, 1982; 1984, ch. 169, § 1, effective July 13, 1984; Acts 1985 (1st Ex. Sess.), ch. 6, part 1, § 1, effective July 29, 1985; 1986, ch. 359, § 1, effective July 15, 1986; 1986, ch. 431, § 16, effective July 15, 1986; 1986, ch. 476, § 5, effective July 15, 1986; 1990, ch. 345, § 1, effective July 13, 1990; 1990, ch. 437, § 4, effective July 13, 1990; 1990, ch. 461, § 1, effective July 13, 1990; 1990, ch. 476, Pt. V, § 310, effective July 13, 1990; 1992, ch. 338, § 21, effective July 14, 1992; 1994, ch. 65, § 2, effective July 15, 1994; 1994, ch. 263, § 3, effective July 15, 1994; 1994, ch. 328, § 4, effective July 15, 1994; 1996, ch. 254, § 22, effective July 15, 1996; 1998, ch. 55, § 1, effective July 15, 1998; 1998, ch. 72, § 1, effective July 15, 1998; 1998, ch. 266, § 1, effective July 15, 1998; 1998, ch. 385, § 1, effective July 15, 1998; 2000, ch. 2, § 2, effective July 14, 2000; 2000, ch. 327, § 1, effective July 14, 2000; 2002, ch. 324, § 1, effective July 15, 2002; 2002, ch. 338, § 17, effective July 15, 2002; 2005, ch. 85, § 171, effective June 20, 2005; 2005, ch. 168, § 55, effective January 1, 2006; 2006, ch. 152, § 3, effective April 5, 2006; 2007, ch. 100, § 2, effective June 26, 2007; 2010, ch. 24, § 97, effective July 15, 2010; 2013, ch. 94, § 1, effective June 25, 2013; 2013, ch. 119, § 7, effective January 1, 2014; 2016 ch. 93, § 2, effective July 15, 2016; 2018 ch. 29, § 4, effective July 14, 2018; 2019 ch. 151, § 9, effective June 27, 2019; 2020 ch. 91, § 61, effective April 15, 2020.

Compiler’s Notes.

Section 4 of Acts 1994, ch. 263, provided that the 1994 amendment to this section “shall apply for the 1994 tax assessment year.”

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 79 provides that the changes made to this statute in Section 61 of that Act apply to privately owned leasehold interests in residential property assessed on or after January 1, 2021.

(6/27/2019). Section 81 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 9 of that Act apply to tangible personal property assessed on or after January 1, 2020.

(1/1/2014). 2013 Ky. Acts ch. 119, sec. 26, provides that the amendments to this statute in 2013 Ky. Acts, ch. 119, sec. 7, shall apply to property assessed on or after January 1, 2014.

(1/1/2014). 2013 Ky. Acts ch. 119, sec. 24, provides, “It is the intent of the General Assembly that the changes made in [this statute and KRS 132.200 ], relating to tangible personal property which has been certified as a pollution control facility, are to clarify existing provisions in the law, as follows:

“(1) That the tax rate of fifteen cents ($0.15) upon each one hundred dollars ($100) of value only applies to tangible personal property which has been certified as a pollution control facility; and

(2) That only tangible personal property certified as a pollution control facility is subject to taxation for state purposes only while being exempt from taxation in the county, city, school, or other taxing district in which it has a taxable situs.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 171, provides that: “Sections 55 (KRS 132.020 ) and 57 (KRS 132.200 of this Act, relating to property tax changes, take effect on January 1, 2006, except the changes made to paragraph (c) of subsection (1) of Section 55, relating to the voluntary environmental remediation credit, paragraph (a) of subsection (2) of Section 55, and paragraph (a) of subsection (4) of Section 55 of this Act, relating to new property and the state property assessment, and subsection (21) of Section 57 of this Act, which shall take effect on the effective date of this Act and which shall apply to tax years beginning on or after January 1, 2005.”

NOTES TO DECISIONS

  1. In General.
  2. Constitutionality.
  3. Insurance Beneficiary.
  4. Bank Deposits.
  5. Federal Postal Savings Deposits.
  6. Legislative Power.
  7. Industrial Loan Corporations.
  8. State Tax Rate.
  9. Real Property.
  10. Priorities.
  11. Refunds.
  12. Industrial Buildings.
1. In General.

Law which repealed law providing for state ad valorem taxes and enacted a new law in its place, exempting real estate from taxation, was unconstitutional because the legislature has no power to exempt property from state taxation and as a result the law remained in force as it was prior to the attempted repeal. Martin v. High Splint Coal Co., 268 Ky. 11 , 103 S.W.2d 711, 1937 Ky. LEXIS 421 ( Ky. 1937 ).

Intent of the Legislature in passing Corporate Shares Tax (KRS 132.020 ) and Exemptions Statutes (former KRS 136.030(1) (now repealed)) was to avoid double taxation of both a corporation and its shareholders. St. Ledger v. Revenue Cabinet, 942 S.W.2d 893, 1997 Ky. LEXIS 17 ( Ky. 1997 ), modified, 1997 Ky. LEXIS 45 (Ky. Apr. 24, 1997), reprinted, 942 S.W.2d 893 ( Ky. 1997 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

2. Constitutionality.

It is not unconstitutional to tax deposits in out-of-state banks at 50¢ per $100 under this section, while deposits in domestic banks are taxed at only 10¢ per $100 under KRS 132.030 . Madden v. Kentucky, 309 U.S. 83, 60 S. Ct. 406, 84 L. Ed. 590, 1940 U.S. LEXIS 956 (U.S. 1940).

Former subsection (5) of this section, creating a separate tax classification for unmined coal by treating it differently from all other interests in real estate, including other interests with similar characteristics such as oil and gas in its natural state, is a classification that is not related to a constitutionally permissible classification for the purpose of raising revenue and is therefore unconstitutional. Gillis v. Yount, 748 S.W.2d 357, 1988 Ky. LEXIS 13 ( Ky. 1988 ).

Having declared former subsection (10) of this section unconstitutional the court properly used its discretion, and chose not to apply the general tax rate retroactively to distilled spirits but to impose the increased rate prospectively only. Yount v. Calvert, 826 S.W.2d 833, 1991 Ky. App. LEXIS 102 (Ky. Ct. App. 1991).

Subsection (10) (since repealed) of this section is repugnant to the Kentucky Constitution. It is a manifest violation of both the letter and the spirit of the law. Accordingly, the judgment of the Circuit Court declaring KRS 132.020(10) to be an unconstitutional infringement upon the Constitution and mandating that the Kentucky Revenue Cabinet tax distilled spirits at the rate provided for under the general provisions set forth in this section was proper. Yount v. Calvert, 826 S.W.2d 833, 1991 Ky. App. LEXIS 102 (Ky. Ct. App. 1991).

The corporate shares tax, KRS 132.020 and the exemption statute, former KRS 136.030(1) (now repealed), are inseparable because the striking of the exemption statute would result in the taxation not only of corporations, but their shareholders which result would be in direct contravention of the expressed intent of the General Assembly; thus both statutes are invalid as they discriminate against interstate commerce and thus violate the Commerce Clause of the United States Constitution under the reasoning of Fulton Corp. v. Faulkner, 516 U.S. 325, 116 S. Ct. 848, 133 L. Ed. 2d 796, 1996 U.S. LEXIS 1379 (1996). St. Ledger v. Revenue Cabinet, 942 S.W.2d 893, 1997 Ky. LEXIS 17 ( Ky. 1997 ), modified, 1997 Ky. LEXIS 45 (Ky. Apr. 24, 1997), reprinted, 942 S.W.2d 893 ( Ky. 1997 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

3. Insurance Beneficiary.

Where widow beneficiary had the right to withdraw the entire principal of insurance policy on deceased husband, such right was much more than a “right to receive income” under former KRS 132.215 and this section governs. Luckett v. Fergerson, 302 S.W.2d 114, 1957 Ky. LEXIS 174 ( Ky. 1957 ).

4. Bank Deposits.

Bank deposits of a resident of Kentucky in banks outside of Kentucky are subject to the rate of 50¢ per $100 imposed by this section, and not the rate of 10¢ per $100 imposed by KRS 132.030 . Madden v. Kentucky, 309 U.S. 83, 60 S. Ct. 406, 84 L. Ed. 590, 1940 U.S. LEXIS 956 (U.S. 1940).

5. Federal Postal Savings Deposits.

Federal postal savings deposits could not be subjected to tax imposed by this section, since to do so would result in unjust discrimination against federal instrumentality in favor of domestic banks, whose deposits are taxable at only 10¢ per $100 under KRS 132.030 . In re Kentucky Fuel Gas Corp., 127 F.2d 657, 1942 U.S. App. LEXIS 3945 (6th Cir. Ky.), cert. denied, 317 U.S. 593, 63 S. Ct. 71, 87 L. Ed. 485, 1942 U.S. LEXIS 185 (U.S. 1942).

6. Legislative Power.

The Legislature has no power to substitute a license tax for an ad valorem tax. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ).

Absent the element of arbitrariness, the legislature is free to provide various classes, especially in the field of taxation. Paducah v. T.C.B., Inc., 817 S.W.2d 234, 1991 Ky. App. LEXIS 119 (Ky. Ct. App. 1991).

7. Industrial Loan Corporations.

Although the business of an industrial loan corporation resembles the operation of part of the usual business of a bank, the resemblance did not entitle it to be regarded as a bank under former KRS 136.270 (now repealed) and former KRS 136.280 (now repealed) and it was liable for payment of a tax on intangibles imposed by this section. First Industrial Plan v. Kentucky Board of Tax Appeals, 500 S.W.2d 70, 1973 Ky. LEXIS 203 ( Ky. 1973 ).

8. State Tax Rate.

KRS 133.185 , which relates to the imposition of a tax rate for a taxing district, such as a city, county or school, has no relationship to Ky. Const., § 171 which requires that the General Assembly shall provide an annual tax sufficient to defray the estimated expenses of the commonwealth; the state tax rate on all personal property, including motor vehicles, is not fixed by the processes outlined in KRS 133.185 , 132.487(2), or 132.487(6) which provide for submission of a proposal, recapitulation of motor vehicles by the property valuation administrator, and certification by the Department of Revenue, but rather, the state tax rate is fixed by the General Assembly and is currently embodied in this section. There is no conflict between KRS 132.487(2) and 132.487(6) with the constitutional provision that the taxes shall be sufficient to defray the expenses of the state. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

9. Real Property.

Where a taxpayer held equitable title in real estate consisting of all incidents of ownership except legal title and the taxpayer paid ad valorem tax on the property, former KRS 134.060 (now repealed), Ky. Const., § 172 and this section did not require the taxation of the power to dispose of the property as an intangible, separate and distinct from the underlying real property. Kentucky Power Co. v. Revenue Cabinet, 705 S.W.2d 904, 1985 Ky. LEXIS 293 ( Ky. 1985 ).

10. Priorities.

Ad valorem taxes assessed after a duly recorded mortgage do not become liens until assessed, but are given priority over mortgages. Liberty Nat'l Bank & Trust Co. v. Vanderkraats, 899 S.W.2d 511, 1995 Ky. App. LEXIS 114 (Ky. Ct. App. 1995).

11. Refunds.

Where suit challenged the constitutionality of an exemption statute (former KRS 136.030(1) (now repealed)), a corporate shares tax statute (KRS 132.020 ), and involved the Revenue Cabinet and such statutes were declared unconstitutional, taxpayers were required to file for a refund for taxes paid under such statutes within two (2) years of payment of such taxes as provided in KRS 134.590(1) and (2), not two (2) years from the date of filing the lawsuit challenging the constitutionality of the statutes as provided in KRS 134.590(6). St. Ledger v. Revenue Cabinet, 942 S.W.2d 893, 1997 Ky. LEXIS 17 ( Ky. 1997 ), modified, 1997 Ky. LEXIS 45 (Ky. Apr. 24, 1997), reprinted, 942 S.W.2d 893 ( Ky. 1997 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

12. Industrial Buildings.

It is not clear whether the exemption for an industrial building that is “owned and financed” by a tax-exempt entity (KRS 132.200(8)) (now (7)) was intended to apply after the collateral is no longer financed; therefore, the statute must be construed against the taxpayers and they are not permitted to take advantage of the exemption and the reduced state rate pursuant to this section. Owens-Illinois Labels, Inc. v. Commonwealth, 27 S.W.3d 798, 2000 Ky. App. LEXIS 48 (Ky. Ct. App. 2000).

Cited in:

Kentucky Finance Co. v. McCord, 290 S.W.2d 481, 1956 Ky. LEXIS 324 ( Ky. 1956 ); Kentucky Dep’t of Revenue v. Bomar, 486 S.W.2d 532, 1972 Ky. LEXIS 111 , 59 A.L.R.3d 830 ( Ky. 1972 ); Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ); Revenue Cabinet v. Barbour, 836 S.W.2d 418, 1992 Ky. App. LEXIS 14 (Ky. Ct. App. 1992).

Opinions of Attorney General.

A fifth-class city must, by ordinance, levy an annual tax rate, prepare an annual budget and publish both the budget or summary thereof together with the rate in the local newspaper. OAG 70-630 .

A mortgage and deed of trust secured by real estate and other tangible property is not a property interest subject to ad valorem property tax under this section nor intangible property subject to tax under subsection (1) of KRS 132.190 . OAG 74-352 .

Payments made, pursuant to a lease for a building constructed by a city beyond its boundaries under the provisions of KRS 103.200 et seq., are in lieu of all other taxes except those under this section, and, as such payments are not technically city revenue, the city is free to designate the local school district as beneficiary of the contract if it so desires. OAG 79-132 .

“Money in hand,” under former subsection (1) of this section, means literally what it says: money in the personal control or possession of the taxpayer. OAG 79-140 .

The state tax rate computed by the Revenue Cabinet pursuant to former subsection (8) of this section is a single tax rate applicable to all counties and the limitation on the increase of real property tax revenues to four percent in any single year provided for by former subsections (7) and (9) of this section is a limitation in the aggregate so that, in determining whether the four percent limit has been violated, one must look at the real property tax revenues of the state as a whole. Thus, the percentage increase or decrease in real property tax revenues in any particular county as a result of the application of the state tax rate is irrelevant in determining whether the four percent rule has been violated. OAG 83-17 .

Investments of the Kenton-Boone Cable Television Board in time deposits in an Ohio bank are subject to the intangible property tax levied by subsection (1) of this section since intangibles, like other personalty, are generally sitused at the domicile of their owner. OAG 84-296 .

The words “actually engaged in manufacturing,” as used in subsection (1) of this section and KRS 132.200(4) modify “individuals or corporations,” not “machinery.” OAG 90-5 .

Machinery owned by an individual or corporation, which individual or corporation is actually engaged in manufacturing, awaiting to be installed and put into use in the manufacturing plant should be classified as manufacturing machinery at the state rate of 15¢ per $100 of assessed valuation and is exempt from local taxation. OAG 90-5 .

Research References and Practice Aids

Cross-References.

Power to tax may be conferred on local authorities, Ky. Const., § 181.

State taxes shall be levied by general laws and for public purposes only, uniformity required, Ky. Const., § 171.

Surrender of power to tax, Ky. Const., § 175.

Tax rate of local taxing units, Ky. Const., § 157.

Taxes to be paid into state treasury and credited to general fund, KRS 47.010 .

Journal of Mineral Law & Policy.

Comments, Constitutional Validity of the Kentucky Unmined Coal Tax: Gillis v. Yount, 4 J.M.L. & P. 159 (1988).

Kentucky Bench & Bar.

Tobergte, The Impact of Kentucky’s Present Constitution Upon Business Growth & Development, Volume 51, No. 3, Summer 1987 Ky. Bench & B. 21.

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

The Property Tax — A Withering Vine, 60 Ky. L.J. 174 (1971).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.0225. Deadline for establishing final tax rate — Exemption — Procedure if increased revenue is greater than four percent.

  1. A taxing district that does not elect to attempt to set a rate that will produce more than four percent (4%) in additional revenue, exclusive of revenue from new property as defined in KRS 132.010 , over the amount of revenue produced by the compensating tax rate as defined in KRS 132.010 shall establish a final tax rate within forty-five (45) days of the department’s certification of the county’s property tax roll. A city that does not elect to have city ad valorem taxes collected by the sheriff as provided in KRS 91A.070(1) shall be exempt from this deadline. Any nonexempt taxing district that fails to meet this deadline shall be required to use the compensating tax rate for that year’s property tax bills.
  2. A taxing district that elects to attempt to set a rate that will produce more than four percent (4%) in additional revenue, exclusive of revenue from new property as defined in KRS 132.010 , over the amount of revenue produced by the compensating tax rate as defined in KRS 132.010 shall follow the provisions of KRS 132.017 .

History. Enact. Acts 1994, ch. 9, § 3, effective July 15, 1994; 2009, ch. 69, § 1, effective June 25, 2009.

Compiler’s Notes.

Section 4 of Acts 1994, ch. 9, provided that this section and the 1994 amendment to KRS 132.487 “shall be effective for property assessed on or after January 1, 1995.”

Legislative Research Commission Notes.

(10/21/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

1. Applicability.

Even though KRS 132.0225 requires all taxing districts to levy their tax rates within forty-five (45) days, cities that have elected to adopt a county’s assessment are empowered by KRS 132.285 to fix the time for levying their tax rates, notwithstanding any other statutory provisions to the contrary. Light v. City of Louisville, 248 S.W.3d 559, 2008 Ky. LEXIS 68 ( Ky. 2008 ).

As the more specific language of KRS 132.285 controlled over the more general language in KRS 132.0225 , a city did not violate KRS 132.0225 when it adopted its ad valorem tax rates more than 45 days after county assessments had been certified. Once the city elected to operate under KRS 132.285 , the city could set its own date for levying its taxes. Light v. City of Louisville, 248 S.W.3d 559, 2008 Ky. LEXIS 68 ( Ky. 2008 ).

132.023. Limits for special purpose governmental entities — Procedure for exceeding limits.

  1. No special purpose governmental entity shall levy a tax rate which exceeds the compensating tax rate until the taxing district has complied with the provisions of KRS 65A.110 and subsection (2) of this section.
    1. A special purpose governmental entity proposing to levy a tax rate which exceeds the compensating tax rate shall submit the proposed rate as required by KRS 65A.110 and shall hold a public hearing to hear comments from the public regarding the proposed tax rate. The hearing shall be held in the same location where the governing body of the city or county where the largest number of citizens served by the special purpose governmental entity reside meets, and shall be held immediately before a regularly scheduled meeting of that governing body. (2) (a) A special purpose governmental entity proposing to levy a tax rate which exceeds the compensating tax rate shall submit the proposed rate as required by KRS 65A.110 and shall hold a public hearing to hear comments from the public regarding the proposed tax rate. The hearing shall be held in the same location where the governing body of the city or county where the largest number of citizens served by the special purpose governmental entity reside meets, and shall be held immediately before a regularly scheduled meeting of that governing body.
    2. The special purpose governmental entity shall advertise the hearing by causing to be published at least twice in two (2) consecutive weeks, in the newspaper of largest circulation in the county, a display type advertisement of not less than twelve (12) column inches, the following:
      1. The tax rate levied in the preceding year, and the revenue produced by that rate;
      2. The tax rate proposed for the current year and the revenue expected to be produced by that rate;
      3. The compensating tax rate and the revenue expected from it;
      4. The revenue expected from new property and personal property;
      5. The general areas to which revenue in excess of the revenue produced in the preceding year is to be allocated;
      6. A time and place for the public hearing which shall be held not less than seven (7) days, nor more than ten (10) days, after the day that the second advertisement is published;
      7. The purpose of the hearing; and
      8. A statement to the effect that the General Assembly has required publication of the advertisement and the information contained therein.
    3. In lieu of the two (2) published notices, a single notice containing the required information may be sent by first-class mail to each person owning real property in the special purpose governmental entity, addressed to the property owner at his residence or principal place of business as shown on the current year property tax roll.
    4. The hearing shall be open to the public. All persons desiring to be heard shall be given an opportunity to present oral testimony. The special purpose governmental entity may set reasonable time limits for testimony.
    1. That portion of a tax rate levied by an action of a special purpose governmental entity which will produce revenue from real property, exclusive of revenue from new property, more than four percent (4%) over the amount of revenue produced by the compensating tax rate shall be subject to a recall vote or reconsideration by the special purpose governmental entity, as provided for in KRS 132.017 , and shall be advertised as provided in paragraph (b) of this subsection. (3) (a) That portion of a tax rate levied by an action of a special purpose governmental entity which will produce revenue from real property, exclusive of revenue from new property, more than four percent (4%) over the amount of revenue produced by the compensating tax rate shall be subject to a recall vote or reconsideration by the special purpose governmental entity, as provided for in KRS 132.017 , and shall be advertised as provided in paragraph (b) of this subsection.
    2. The special purpose governmental entity shall, within seven (7) days following adoption of an ordinance, order, resolution, or motion to levy a tax rate which will produce revenue from real property, exclusive of revenue from new property, more than four percent (4%) over the amount of revenue produced by the compensating tax rate, cause to be published, in the newspaper of largest circulation in the county, a display type advertisement of not less than twelve (12) column inches the following:
      1. The fact that the taxing district has adopted a rate;
      2. The fact that the part of the rate which will produce revenue from real property, exclusive of new property, in excess of four percent (4%) over the amount of revenue produced by the compensating tax rate is subject to recall; and
      3. The name, address, and telephone number of the county clerk of the county in which the special purpose governmental entity is located, with a notation to the effect that that official can provide the necessary information about the petition required to initiate recall of the tax rate.

History. Enact. Acts 1965 (1st Ex. Sess.), ch. 2, § 13; 1966, ch. 62, § 1; 1972, ch. 285, § 2; 1979 (Ex. Sess.), ch. 25, § 4, effective February 13, 1979; 1980, ch. 319, § 8, effective July 15, 1980; 1990, ch. 343, § 5, effective July 13, 1990; 1990, ch. 476, Pt. V, § 311, effective July 13, 1990; 2002, ch. 346, § 164, effective July 15, 2002; 2013, ch. 40, § 87, effective March 21, 2013; 2020 ch. 90, § 2, effective January 1, 2021.

Compiler’s Notes.

Section 11 of Acts 1990, ch. 343 provided: “The provisions of this Act shall be effective for tax years with assessment dates on or after January 1, 1991.”

Legislative Research Commission Notes.

(3/21/2013). Two manifest clerical or technical errors have been corrected in this statute. When the statute was amended in 2013 Ky. Acts ch. 40, sec. 87, the phrase “as defined in KRS 132.010 ,” including the comma, was deleted twice in subsection (3)(b). Under the authority of KRS 7.136 , the Reviser of Statutes has restored both of the deleted commas.

(7/13/90). The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

  1. Motor Vehicles.
  2. Library districts.
1. Motor Vehicles.

The language of KRS 132.487(3), governing a centralized ad valorem tax system for motor vehicles, clearly and unequivocally removes all valuations of and tax revenues from motor vehicles from the base amount used in determining the compensating tax rate and maximum possible tax rate envisioned under the provisions of this section and KRS 68.245 , 132.027 , and 160.470 . Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

2. Library districts.

Circuit courts erred in rendering summary judgments in favor of two library districts because, while the applicable statutes were facially in conflict, they were both applicable to library districts formed by petition and could be harmonized in their application, where, if revenue from ad valorem taxes was to be increased above four percent, the increase had to be approved by petition of the voters. Campbell County Library Bd. of Trs. v. Coleman, 475 S.W.3d 40, 2015 Ky. App. LEXIS 39 (Ky. Ct. App. 2015).

Cited in:

Baker v. Strode, 348 F. Supp. 1257, 1971 U.S. Dist. LEXIS 14893 (W.D. Ky. 1971 ); Miller v. Nunnelley, 468 S.W.2d 298, 1971 Ky. LEXIS 334 ( Ky. 1971 ).

Opinions of Attorney General.

Public health taxing districts are limited to a compensating tax rate based on the actual 1965 levy and not the maximum voted for the county. OAG 66-22 .

Since extension service districts have not been excepted from the compensating tax rate defined in KRS 132.010 , the rate should be applied to the tax imposed by such districts. OAG 66-229 .

A public health taxing district is a taxing district within the meaning of this section despite the fact that the voters had previously approved a higher rate. OAG 66-356 .

A county soil conservation district board may request and the fiscal court of such county may levy a tax of two cents ($0.02) per acre, even though such tax rate is an increase from the rate levied in previous years. OAG 67-346 .

Where after the roll back a library district did not have sufficient funds to operate, under KRS 173.610 a petition could be filed putting the question of an increased tax levy to a vote of the people, and if the vote was affirmative the tax could be raised to exceed the roll back rate. OAG 68-606 .

Each year the library district tax rate must be so adjusted, assuming a change in assessment valuation, in connection with the current property assessment, that the amount of revenue produced in the particular tax year is approximately equal to that produced in 1965. OAG 69-330 .

This section does not apply to a county library established under KRS 173.310 . OAG 69-394 .

An area planning commission could not levy a tax rate which exceeded the compensating tax rate defined in KRS 132.010 . OAG 69-532 .

In view of the fact that the present rollback statutes in effect provide a maximum revenue level, the library tax rate may be adjusted and applied against the assessment base such as to produce the maximum revenue provided by the rollback law as if the homestead exemption to § 170 of the Kentucky Constitution had never come into being. OAG 72-124 .

As the 1972 amendment to this section was passed before the 1972 amendment to KRS 75.040 , the provisions of the latter section as to the tax rate for fire prevention districts will prevail. OAG 72-646 .

Even though “net assessment growth,” as defined in KRS 132.425 (repealed), refers only to the county or a school district, KRS 132.010 encompasses a taxing district and this section and KRS 132.027 clearly show that KRS 132.425 (repealed) is by reference made applicable to cities so that any city which levied a poll tax in 1973 may adjust its compensating tax rate to reflect the loss in poll tax revenue. OAG 75-544 .

Insofar as they are used in this section and KRS 132.027 , as amended by Acts 1979 (Ex. Sess.), ch. 25, for those governmental units operating on a calendar basis: (1) “ . . . . . a tax rate for 1979-80 . . . . . ” means that unit’s tax rate for the 1980 calendar year; (2) “ . . . . . application of the maximum tax rate that could have been levied in 1978-79 . . . . . ” means the unit’s compensating tax rate for the 1979 calendar year, calculated in accordance with KRS 132.010(6) as it read prior to February 13, 1979; and (3) “ . . . . . the 1978-79 assessment” means the unit’s assessment as of January 1, 1979, assuming that the unit’s assessment date is January 1. OAG 79-217 .

Hearings held pursuant to this section must be held by the board of directors of an extension district, and by a fiscal court, in the case of a county health district. OAG 79-365 .

In the case of a county extension district the responsibility to set tax rates in compliance with the law is that of the board of directors of the district, while in the case of a county health district, it is the fiscal court’s responsibility. OAG 79-365 .

KRS 132.010 and this section apply to the tax rate to be set by a county hospital board for setting a tax rate for 1979-1980 and thereafter. OAG 79-422 .

In determining the net assessment growth, “revenue” does not include moneys earned from interest, special fees, contributions, or any other nontaxing revenue. OAG 79-478 .

Former subsection (4)(a) of this section applies to the first fiscal year 1979-80 and the maximum tax rate allowed is something less than 10 cents per $100 of assessed valuation. OAG 79-478 (Opinion prior to 1990 amendment).

This section applies to fire protection districts and volunteer fire departments. OAG 79-478 .

Acts 1979 (Ex. Sess.), ch. 25, amending this section, applies to the 1979-1980 tax rate for a county library district established pursuant to KRS 173.450 et seq. OAG 79-479 .

An ambulance district, created under KRS 108.100 , may levy a tax rate that does not exceed the rate voted on in creating the district, without being subject to the special tax limitations of this section. OAG 81-99 .

Where an ambulance district is created pursuant to KRS 108.105 , the statutory tax rate limits of this section would apply to the special district, since no voted levy is involved. OAG 81-99 .

The amendment of subsection (4) of KRS 262.200 to limit the maximum total tax revenue from real property millage tax to $25,000 per year does not unconstitutionally impact upon this section, since the General Assembly may constitutionally levy rates which lessen taxes. OAG 81-174 .

Acts 1979 (Ex. Sess.), ch. 25, which limits a county’s increase in property taxes, does not limit in effect the public health district tax which is levied by a county pursuant to either KRS 212.725 or 212.755 . OAG 82-151 .

If there is any conflict between KRS 75.040(1) and this section, it relates to what tax rate may be set initially; there is no inconsistency between the statutes and this section applies whenever an already established rate is increased. OAG 82-323 .

Research References and Practice Aids

Kentucky Law Journal.

The Property Tax — A Withering Vine, 60 Ky. L.J. 174 (1971).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.024. Limits for special purpose governmental entities on personal property tax rate.

  1. If the tax rate applicable to real property levied by a special purpose governmental entity will produce a percentage increase in revenue from personal property less than the percentage increase in revenue from real property, the special purpose governmental entity may levy a tax rate applicable to personal property which will produce the same percentage increase in revenue from personal property as the percentage increase in revenue from real property.
  2. The tax rate applicable to personal property levied by a special purpose governmental entity under the provisions of subsection (1) of this section shall not be subject to the public hearing provisions of KRS 132.023(2) and to the recall provisions of KRS 132.023(3).

History. Enact. Acts 1982, ch. 397, § 3, effective July 15, 1982; 1990, ch. 343, § 6, effective July 13, 1990; 1990, ch. 476, Pt. V, § 312, effective July 13, 1990; 2013, ch. 40, § 88, effective March 21, 2013.

Compiler’s Notes.

Section 11 of Acts 1990, ch. 343 provided: “The provisions of this Act shall be effective for tax years with assessment dates on or after January 1, 1991.”

Legislative Research Commission Notes.

(7/13/90) The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

Opinions of Attorney General.

Subsection (2) of former KRS 68.249 (now repealed), limiting the increase in the county tax rate on personal property, means that the tax rate levied under KRS 68.248 on such property for 1982-83 cannot exceed the tax rate levied in 1981-82; additionally, the tax rate levied under subsection (1) of former KRS 68.249 cannot exceed the tax rate levied in 1981-82; however, the two rates collectively may exceed such rate. This determination is extended to all similar provisions of Acts 1982, ch. 397, i.e., KRS 132.024 , 132.025 , 132.029 , 132.0291 , 160.473 and 160.474 . OAG 83-221 (Opinion prior to 1990 amendment to KRS 68.249 and 132.024 , 132.025 , 132.029 , 160.473 and repeal of KRS 132.0291 and 160.474 ).

132.025. Cumulative increase for 1982-83 only by taxing district — Limit — Public hearing and recall provisions not applicable.

  1. In the event that the tax rate levied by an action of a taxing district, other than the state, counties, school districts, cities, and urban-county governments, for 1979-80, 1980-81, or 1981-82 produced a percentage increase in revenue from personal property less than the percentage increase in revenue from real property for the respective year, the taxing district, other than the state, counties, school districts, cities, and urban-county governments, may levy a tax rate applicable to personal property for 1982-83 only, which will produce the same cumulative percentage increase in revenue from personal property as was produced from real property in 1979-80, 1980-81 and 1981-82. Such a tax rate may be in addition to the tax rate levied under the provisions of KRS 132.024 .
  2. The tax rate levied under the provision of KRS 132.024 and subsection (1) of this section shall not exceed the tax rate applicable to personal property levied by the respective taxing district, other than the state, counties, school districts, cities, and urban-county governments, in 1981-82.
  3. The tax rate applicable to personal property levied by a taxing district, other than the state, counties, school districts, cities, and urban-county governments shall not be subject to the public hearing provisions of KRS 132.023(2) and to the recall provisions of KRS 132.023(3).

History. Enact. Acts 1982, ch. 397, § 4, effective July 15, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 313, effective July 13, 1990; 2020 ch. 90, § 3, effective January 1, 2021.

Compiler’s Notes.

Former KRS 132.025 (Enact. Acts 1982, ch. 397, § 4, effective July 15, 1982) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 313, effective July 13, 1990.

Legislative Research Commission Notes.

(7/13/90) Pursuant to Section 653(2) of 1990 House Bill 940, Acts Ch. 476, the repeal and reenactment of this section in that Act prevails over its repeal in another Act (ch. 343, § 10) of the 1990 Regular Session.

Opinions of Attorney General.

Subsection (2) of former KRS 68.249 (now repealed), limiting the increase in the county tax rate on personal property, means that the tax rate levied under KRS 68.248 on such property for 1982-83 cannot exceed the tax rate levied in 1981-82; additionally, the tax rate levied under subsection (1) of former KRS 68.249 cannot exceed the tax rate levied in 1981-82; however, the two rates collectively may exceed such rate. This determination is extended to all similar provisions of Acts 1982, ch. 397, i.e., KRS 132.024 , 132.025 , 132.029 , 132.0291 , 160.473 and 160.474 . OAG 83-221 (Opinion prior to 1990 amendment of KRS 68.249, 132.024 , 132.025 , 132.029 , 160.473 and the repeal of KRS 132.0291 and 160.474 ).

132.027. City and urban-county government tax rate limitation — Levy exceeding compensating tax rate subject to recall vote or reconsideration.

  1. No city or urban-county government shall levy a tax rate which exceeds the compensating tax rate defined in KRS 132.010 until the city or urban-county government has complied with the provisions of subsection (2) of this section.
    1. Cities or urban-county governments proposing to levy a tax rate which exceeds the compensating tax rate defined in KRS 132.010 shall hold a public hearing to hear comments from the public regarding the proposed tax rate. The hearing shall be held in the principal office of the taxing district, or, in the event the taxing district has no office, or the office is not suitable for a hearing, the hearing shall be held in a suitable facility as near as possible to the geographic center of the district. (2) (a) Cities or urban-county governments proposing to levy a tax rate which exceeds the compensating tax rate defined in KRS 132.010 shall hold a public hearing to hear comments from the public regarding the proposed tax rate. The hearing shall be held in the principal office of the taxing district, or, in the event the taxing district has no office, or the office is not suitable for a hearing, the hearing shall be held in a suitable facility as near as possible to the geographic center of the district.
    2. The city or urban-county government shall advertise the hearing by causing to be published at least twice in two (2) consecutive weeks, in the newspaper of largest circulation in the county, a display type advertisement of not less than twelve (12) column inches, the following:
      1. The tax rate levied in the preceding year, and the revenue produced by that rate;
      2. The tax rate proposed for the current year and the revenue expected to be produced by that rate;
      3. The compensating tax rate and the revenue expected from it;
      4. The revenue expected from new property and personal property;
      5. The general areas to which revenue in excess of the revenue produced in the preceding year is to be allocated;
      6. A time and place for the public hearing which shall be held not less than seven (7) days nor more than ten (10) days after the day the second advertisement is published;
      7. The purpose of the hearing; and
      8. A statement to the effect that the General Assembly has required publication of the advertisement and the information contained therein.
    3. In lieu of the two (2) published notices, a single notice containing the required information may be sent by first-class mail to each person owning real property in the taxing district, addressed to the property owner at his residence or principal place of business as shown on the current year property tax roll.
    4. The hearing shall be open to the public. All persons desiring to be heard shall be given an opportunity to present oral testimony. The taxing district may set reasonable time limits for testimony.
    1. That portion of a tax rate levied by an action of a city or urban-county government which will produce revenue from real property, exclusive of revenue from new property, more than four percent (4%) over the amount of revenue produced by the compensating tax rate defined in KRS 132.010 shall be subject to a recall vote or reconsideration by the taxing district, as provided for in KRS 132.017 , and shall be advertised as provided for in paragraph (b) of this subsection. (3) (a) That portion of a tax rate levied by an action of a city or urban-county government which will produce revenue from real property, exclusive of revenue from new property, more than four percent (4%) over the amount of revenue produced by the compensating tax rate defined in KRS 132.010 shall be subject to a recall vote or reconsideration by the taxing district, as provided for in KRS 132.017 , and shall be advertised as provided for in paragraph (b) of this subsection.
    2. The city or urban-county government shall, within seven (7) days following adoption of an ordinance to levy a tax rate which will produce revenue from real property, exclusive of revenue from new property as defined in KRS 132.010, more than four percent (4%) over the amount of revenue produced by the compensating tax rate defined in KRS 132.010, cause to be published, in the newspaper of largest circulation in the county, a display type advertisement of not less than twelve (12) column inches the following:
      1. The fact that the city or urban-county government has adopted a rate;
      2. The fact that the part of the rate which will produce revenue from real property, exclusive of new property as defined in KRS 132.010, in excess of four percent (4%) over the amount of revenue produced by the compensating tax rate defined in KRS 132.010 is subject to recall, and
      3. The name, address, and telephone number of the county clerk of the county or urban-county in which the taxing district is located, with a notation to the effect that that official can provide the necessary information about the petition required to initiate recall of the tax rate.

History. Enact. Acts 1965 (1st Ex. Sess.), ch. 2, § 14; 1972, ch. 285, § 3; 1974, ch. 316, § 5; 1979 (Ex. Sess.), ch. 25, § 5, effective February 13, 1979; 1980, ch. 319, § 9, effective July 15, 1980; 1990, ch. 343, § 7, effective July 13, 1990; 1990, ch. 476, Pt. V, § 314, effective July 13, 1990.

Compiler’s Notes.

Section 11 of Acts 1990, ch. 343 provided: “The provisions of this Act shall be effective for tax years with assessment dates on or after January 1, 1991.”

Legislative Research Commission Notes.

(7/13/90) The Act amending this section prevails over its repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Application.
  3. Legislative Intent.
  4. Motor Vehicles.
1. Constitutionality.

This section does not unconstitutionally discriminate against cities’ taxation powers even though the counties are allowed “net assessment growth” while the cities are not, since no constitutional provision requires cities to be treated the same as counties as far as concerns the extent of their tax-levying powers. Ashland v. Webb, 470 S.W.2d 604, 1971 Ky. LEXIS 279 ( Ky. 1971 ) (decision prior to 1972 amendment).

2. Application.

The limitation on indebtedness imposed by this section is not applicable to limit the rate at which taxes must necessarily be levied to pay an indebtedness incurred by authority of a vote of the people under Ky. Const., § 157. Raque v. Louisville, 402 S.W.2d 697, 1966 Ky. LEXIS 375 ( Ky. 1966 ).

3. Legislative Intent.

The limitation on indebtedness imposed by this section was intended by the Legislature to safeguard against unintended tax burdens and not those that are specifically intended and authorized. Raque v. Louisville, 402 S.W.2d 697, 1966 Ky. LEXIS 375 ( Ky. 1966 ).

4. Motor Vehicles.

The language of KRS 132.487(3), governing a centralized ad valorem tax system for motor vehicles, clearly and unequivocally removes all valuations of and tax revenues from motor vehicles from the base amount used in determining the compensating tax rate and maximum possible tax rate envisioned under the provisions of this section and KRS 68.245 , 132.023 , and 160.470 . Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

Cited in:

Kelley v. Ashland, 562 S.W.2d 312, 1978 Ky. LEXIS 325 ( Ky. 1978 ); Bischoff v. Newport, 733 S.W.2d 762, 1987 Ky. App. LEXIS 525 (Ky. Ct. App. 1987).

Opinions of Attorney General.

KRS 95.627 and 95.629 supersede and provide an exception to this section. OAG 66-562 .

A city of the third class may levy a tax in excess of the compensating tax rate to the extent that it is necessary to do so in order to maintain the alternative pension plan authorized by KRS 95.621 to 95.629 . OAG 66-562 .

For the 1966 assessment, all of the property in the city, including merchants’ inventories, is subject to the city tax rate but the rate must be computed so that the amount of total revenue produced in 1966 will be no more than that produced in 1965 plus a ten percent (10%) increase. OAG 67-13 .

The general intent of the 1965 legislation establishing a “compensating tax rate” was to limit property tax revenue (and the burden of the taxpayers) to the same level in existence before 100 per cent assessments were put into effect (plus two (2) permissible percentage increases) and other revenue derived from property newly added to the tax rolls. OAG 67-40 .

Tax rates for tangible personal property cannot be separated from all other property subject to ad valorem property taxes in the city; the same rate must be applied to such property as is applied to all property in the city. OAG 67-101 .

A city which did not levy a public works cumulative reserve fund in 1965 could do so in a later year by allocating or earmarking a portion of its overall compensating tax rate for that purpose. OAG 67-351 .

A city which was levying a public works cumulative reserve fund property tax in 1965 could continue to do so in 1966 and subsequent years at the appropriate compensating tax rate or at such other rate as the city chose provided the overall tax rate did not exceed the compensating rate applicable to the overall levy. OAG 67-351 .

The fact that a town did not collect taxes in 1965 would not prevent it from collecting taxes in subsequent years using Ky. Const., § 157 to find the base rate and applying the compensating factor of this section to it. OAG 67-449 .

If a city failed to increase its tax rate by ten percent (10%) increases in each of the years 1966 and 1967, it is bound by the tax rate it now has in effect. OAG 68-222 .

The ten percent (10%) increases permitted by subsection (2) of this section, if not taken in the years 1966-67 and 1967-68, were waived. OAG 68-246 .

The tax rate levied by a municipality for library services under subsection (1) of KRS 173.360 is subject to the compensating tax rate provisions of this section even when this section would require a lower tax levy than the minimum established in subsection (1) of KRS 173.360 . OAG 68-259 .

A library created under KRS 173.310 is not a separate taxing district. The library tax must be included in the city’s general tax levy and the city’s legislative body establishes the library tax, under the provisions of KRS 173.360 , at a rate which cannot be lower than five cents, subject to the roll-back provisions of KRS 132.027 . OAG 68-320 .

An area planning commission could not levy a tax rate which exceeded the compensating tax rate defined in KRS 132.010 . OAG 69-532 .

Where libraries were established under KRS 173.310 , prior to the 1965 roll-back legislation, the city or county which established such libraries must reduce its respective library tax to the applicable compensating tax rate, or restricted budget, regardless of whether that rate or revenue would be less than five cents on the 100. OAG 69-590 .

A city would be barred under this section from taking any increase in its tax rate to become effective in 1971. OAG 70-576 .

Initiative and referendum cannot be used to increase the tax rate in a fourth-class city with the councilmanic form of government. OAG 70-576 .

A city may increase its general fund tax rate to offset a revenue loss occasioned by property being exempted from property tax by the homestead exemption amendment to Ky. Const., § 170. OAG 71-537 .

The rollback provision of this section applies to a proposed five cent levy on property in a fourth-class city under KRS 97.590 for the purpose of purchasing and maintaining a public park in the city limits. OAG 72-193 .

After a city has sufficient revenue in a sinking fund to retire bonds for which a specific tax has been levied, the city would then be bound by KRS 132.010 and this section with respect to the tax rate which could be applied for general municipal purposes and it would be a violation of KRS 92.330 and 92.340 to continue to levy the specific tax and divert it to general municipal purposes. OAG 74-368 .

Once funding bonds have been paid off, levy must be discontinued. OAG 75-162 .

A third-class city may levy a tax in excess of the compensating tax rate where such is necessary to provide support for the alternative pension plan provided for in KRS 95.621 to 95.629 . OAG 75-203 .

Even though “net assessment growth,” as defined in KRS 132.425 (repealed), refers only to the county or a school district, KRS 132.010 encompasses a taxing district and KRS 132.023 and this section clearly show that KRS 132.425 (repealed) is by reference made applicable to cities so that any city which levied a poll tax in 1973 may adjust its compensating tax rate to reflect the loss in poll tax revenue. OAG 75-544 .

Where a third-class city operates jointly with the county a system of parks under a city-county parks and recreation board, under KRS 97.080 (repealed) such a city may provide funds for park and recreation purposes controlled by the revenue limitations set out in KRS 132.010 and this section. OAG 76-85 .

A city cannot raise its tax rate by a referendum vote. OAG 77-112 .

If the sinking fund rate is a part of the overall general fund rate, it would appear that the only thing that is being done is a shifting of a part of the sinking fund rate to the main general fund rate, and if so it could be added to the general fund rate maintaining the overall tax rate at the same level. OAG 78-797 .

There would not be a substantial increase in revenue from real estate tax simply by increasing the assessed value of property in a city. OAG 79-90 .

Insofar as they are used in KRS 132.023 and this section, as amended by Acts 1979 (Ex. Sess.), ch. 25, for those governmental units operating on a calendar basis: (1) “ . . . . . a tax rate for 1979-80 . . . . . ” means that unit’s tax rate for the 1980 calendar year; (2) “ . . . . . application of the maximum tax rate that could have been levied in 1978-79 . . . . . ” means the unit’s compensating tax rate for the 1979 calendar year, calculated in accordance with KRS 132.010(6) as it read prior to February 13, 1979; and (3) “ . . . . . the 1978-79 assessment” means the unit’s assessment as of January 1, 1979, assuming that the unit’s assessment date is January 1. OAG 79-217 .

So long as the limitations imposed by this section are complied with, a city which wishes to increase the tax rate and return a portion of the increase to the taxpayers is free to do so. OAG 79-484 .

Acts 1979 (Ex. Sess.), ch. 25 cannot be applied retroactively to taxing districts operating on a calendar basis which had prepared their budgets prior to the effective date of that act. OAG 79-486 .

If the city governing body proposes to impose the same tax rate for the succeeding year as the preceding year but due to increased assessments more than four percent (4%) revenue is produced in the succeeding year than had been produced in the preceding year, that portion of the tax rate which causes a breach in the four percent (4%) ceiling is subject to recall. OAG 80-558 .

If a city applied its 1980 tax rate to its 1981 assessment, which greatly increased as a result of a court decision, and if the resulting increase in tax revenues was greater than four percent (4%) over the previous year, the city must comply with the recall vote or reconsideration provisions of former subsection (4) of this section, since it appears that the general assembly intended to limit revenues from property tax when assessments have increased. OAG 81-425 .

A city’s maximum tax rate is dependent upon the amount of revenue which would have been raised if the rate of the preceding year was applied to the preceding year’s assessment before it was adjusted for the homestead exemption. OAG 82-186 .

The language of former subdivision (4)(b) of this section indicates that the assessed valuations used in computing the limitations must be determinable at the time the city ordinance levying the rate is enacted. OAG 82-186 .

The limitations on the ad valorem tax rate which a city can levy are determined, in part, by applying the proposed rate levied by the city to the assessments certified by the Department of Revenue as provided in KRS 133.180 ; subsequent corrections in valuations made by the department as the result of adjustments to certain properties which were in the appeal process at the time the certification was made are not relevant in computing the limitations. OAG 82-186 .

In a year of negative net assessment growth, the maximum rate which a city or urban-county government can levy is that rate which, when applied to its current year assessments, will produce the same amount of revenue that would have been produced in the preceding tax year if all the property taxes the city or urban-county government actually levied had been collected. In such an instance, the maximum rate as provided in former subsection (1) (deleted by amendment) of this section would be greater than the rate levied in the preceding year. OAG 82-456 .

The Attorney General is not charged with the duty to interpret and enforce the requirements for legal notices codified in KRS Chapter 132, and in particular KRS 132.027 , in an open meetings appeal. OAG 04-OMD-230.

Research References and Practice Aids

Kentucky Law Journal.

Property Tax Revenue Assessment Levels and Taxing Rate: The Kentucky Rollback Law, 60 Ky. L.J. 105 (1971).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.028. Rate on business inventories levied by a city or urban-county government — Exception.

  1. Subject to the provisions of KRS 132.027 , a city or urban-county government may levy a rate on business inventories equal to or less than the prevailing rate of taxation on other tangible personal property in the respective city or urban-county government.
  2. The tangible personal property tax shall not be levied upon:
    1. The inventories of licensed motor vehicle dealers, including licensed motor vehicle auction dealers; or
    2. Motor vehicles that are in the possession of a licensed motor vehicle dealer, including licensed motor vehicle auction dealers, for sale, although ownership has not been transferred to the dealer.

History. Enact. Acts 1980, ch. 319, § 11, effective July 15, 1980; 1990, ch. 106, § 1, effective July 13, 1990; 2013, ch. 94, § 2, effective June 25, 2013.

NOTES TO DECISIONS

Cited in:

Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ).

132.029. Limits for city and urban-county government on personal property tax rate.

  1. In the event that the tax rate applicable to real property levied by a city or urban-county government will produce a percentage increase in revenue from personal property less than the percentage increase in revenue from real property, the city or urban-county government may levy a tax rate applicable to personal property which will produce the same percentage increase in revenue from personal property as the percentage increase in revenue from real property.
  2. The tax rate applicable to personal property levied by a city or urban-county government under the provisions of subsection (1) of this section shall not be subject to the public hearing provisions of KRS 132.027(2) and to the recall provisions of KRS 132.027(3).

History. Enact. Acts 1982, ch. 397, § 5, effective July 15, 1982; 1990, ch. 343, § 8, effective July 13, 1990.

Compiler’s Notes.

Section 11 of Acts 1990, ch. 343 provided: “The provisions of this Act shall be effective for tax years with assessment dates on or after January 1, 1991.”

Opinions of Attorney General.

Subsection (2) of former KRS 68.249 (now repealed), limiting the increase in the county tax rate on personal property, means that the tax rate levied under KRS 68.248 on such property for 1982-83 cannot exceed the tax rate levied in 1981-82; additionally, the tax rate levied under subsection (1) of former KRS 68.249 cannot exceed the tax rate levied in 1981-82; however, the two rates collectively may exceed such rate. This determination is extended to all similar provisions of Acts 1982, ch. 397, i.e., KRS 132.024 , 132.025 , 132.029 , 132.0291 , 160.473 and 160.474 . OAG 83-221 (Opinion prior to 1990 amendment of KRS 68.249, 132.024 , 132.025 , 132.029 , 160.473 and the repeal of KRS 132.0291 and 160.474 ).

132.0291. Cumulative increase for 1982-83 only by a city or urban-county government — Limit — Public hearing and recall not applicable. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1982, ch. 397, § 6) was repealed by Acts 1990, ch. 343, § 10, effective July 13, 1990.

132.030. Financial institution deposit tax.

  1. Every person having a deposit in any financial institution, as defined in KRS 136.500 , on January 1 of any year shall pay an annual tax to the state equal to one-thousandth of one percent (0.001%) upon the amount of the deposit, and no deduction shall be made for any indebtedness. The deposit tax shall be paid to the department by the financial institution with which the deposit is made, as the agent of the depositor, on or before March 1 following the date of the report provided for in KRS 132.040 .
  2. No other tax shall be assessed by the state or any county, city, or other taxing district on the deposits or against the depositor on account of the deposits, except as provided in KRS 136.575 .

History. 4019a-1, 4019a-2; Acts 1949 (Ex. Sess.), ch. 4, § 1; 1960, ch. 186, Art. I, § 1, effective June 16, 1960; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 315, effective July 13, 1990; 1996, ch. 254, § 23, effective July 15, 1996; 2005, ch. 85, § 172, effective June 20, 2005.

Compiler’s Notes.

Former KRS 132.030 (4019a-1, 4019a-2: amend. Acts 1949 (Ex. Sess.), ch. 4, § 1; 1960, ch. 186, Art. I, § 1, effective June 16, 1960) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 315, effective July 13, 1990.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Out-of-State Deposits.
  3. Federal Postal Savings Deposits.
  4. Bank Agent.
  5. Taxing Determination Upheld.
1. Constitutionality.

It is not unconstitutional to tax deposits in out-of-state banks at 50¢ per $100 under KRS 132.020 , while deposits in domestic banks are taxed at 10¢ per $100. Madden v. Kentucky, 309 U.S. 83, 60 S. Ct. 406, 84 L. Ed. 590, 1940 U.S. LEXIS 956 (U.S. 1940).

The placing of domestic bank deposits in a separate class, and according them a more favorable rate of taxation than other intangible property, is reasonable and valid. Madden v. Kentucky, 309 U.S. 83, 60 S. Ct. 406, 84 L. Ed. 590, 1940 U.S. LEXIS 956 (U.S. 1940).

2. Out-of-State Deposits.

Bank deposits of a resident of Kentucky in banks outside of Kentucky are subject to the rate imposed by KRS 132.020 , and not the rate imposed by this section. Madden's Ex'r v. Commonwealth, 277 Ky. 343 , 126 S.W.2d 463, 1939 Ky. LEXIS 655 ( Ky. 1939 ), aff'd, 309 U.S. 83, 60 S. Ct. 406, 84 L. Ed. 590, 1940 U.S. LEXIS 956 (U.S. 1940).

3. Federal Postal Savings Deposits.

Federal postal savings deposits are not taxable under this section. In re Kentucky Fuel Gas Corp., 127 F.2d 657, 1942 U.S. App. LEXIS 3945 (6th Cir. Ky.), cert. denied, 317 U.S. 593, 63 S. Ct. 71, 87 L. Ed. 485, 1942 U.S. LEXIS 185 (U.S. 1942).

4. Bank Agent.

Since a bank deposit is in reality the property of the depositor, a bank cannot be compelled to pay taxes on its deposits except as agent for the depositors. Commonwealth v. Bank of Commerce, 118 Ky. 547 , 81 S.W. 679, 26 Ky. L. Rptr. 407 , 1904 Ky. LEXIS 71 ( Ky. 1904 ).

5. Taxing Determination Upheld.

KRS 132.030 , 132.200 , 136.300 , 136.320 are not related to public service companies or to franchise; it is clear that the general assembly considered the types of property that should be exempt from the “catch-all” rate, and it did not include franchise of a public service company-although it identified seventeen other categories of property. Dayton Power & Light Co. v. Dep't of Revenue, 405 S.W.3d 527, 2012 Ky. App. LEXIS 232 (Ky. Ct. App. 2012).

Cited in:

First Industrial Plan v. Kentucky Board of Tax Appeals, 500 S.W.2d 70, 1973 Ky. LEXIS 203 ( Ky. 1973 ); St. Ledger v. Revenue Cabinet, 942 S.W.2d 893, 1997 Ky. LEXIS 17 ( Ky. 1997 ).

Research References and Practice Aids

Cross-References.

Bank franchise and local deposit tax, KRS 136.500 to 136.575 .

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Eifler, Kentucky Taxation of Banking Institutions (1802-1996): An Historical Overview, 90 Ky. L.J. 567 (2001-02).

132.040. Financial institutions to report and pay tax — Lien.

Each financial institution, as defined in KRS 136.500 , shall file with the department on or before March 1 of each year, a report setting forth the total amount of its deposits as of the preceding January 1 that are taxable in the name of the depositor under the laws of this state, and shall, on or before March 1 of each year, pay to the department one-thousandth of one percent (.001%) of the amount of the deposits, and may charge to and deduct from the deposit of each depositor the amount of the tax paid on his behalf. Financial institutions shall have liens on the funds belonging to the respective depositors on which the tax has been paid. Any claim for taxes against the depositor by the financial institution paying the taxes shall be asserted within six (6) months after the payment of the taxes to the department, and no claims or liens shall be asserted after that time.

History. 4019a-3, 4019a-4: amend. Acts 1949 (Ex. Sess.), ch. 4, § 2; 1960, ch. 186, Art. I, § 2, effective June 16, 1960; 1976 (Ex. Sess.), ch. 14, § 143, effective January 2, 1978; 1996, ch. 254, § 24, effective July 15, 1996; 2002, ch. 89, § 4, effective July 15, 2002; 2005, ch. 85, § 173, effective June 20, 2005.

132.043. Retirement plan, interest taxable by state — Rate — Collection — Not subject to local taxes. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1966, ch. 179, § 1; 1982, ch. 141, § 57, effective July 1, 1982) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.047. Credit union accounts — Taxation — Rate — Collection — Not subject to local taxes. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1966, ch. 179, § 2; 2005, ch. 85, § 174, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.050. Brokers’ accounts receivable tax. [Repealed.]

Compiler’s Notes.

This section (4042-1: amend. Acts 1948, ch. 95, § 2; 1949 (Ex. Sess.), ch. 4, § 3; 1968, ch. 152, § 100) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.060. Marginal accounts tax — Brokers’ report to cabinet. [Repealed.]

Compiler’s Notes.

This section (4042-2: amend. Acts 1949 (Ex. Sess.), ch. 4, § 4; 1968, ch. 152, § 101; 2000, ch. 327, § 2, effective July 14, 2000; 2005, ch. 85, § 175, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.070. Assessment of marginal accounts tax. [Repealed.]

Compiler’s Notes.

This section (4042-2: impl. amend. Acts 1960, ch. 186, Art. I, §§ 31, 32; 2005, ch. 85, § 176, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.080. Payment and collection of marginal accounts tax — Penalty. [Repealed.]

Compiler’s Notes.

This section (4042-2: amend. Acts 1982, ch. 452, § 4, effective July 1, 1982; 2005, ch. 85, § 177, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.090. Credit to broker for services. [Repealed.]

Compiler’s Notes.

This section (4042-2) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.095. Personal property in warehouse in transit, ad valorem tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 172, §§ 1, 2; 1966, ch. 41, § 2; 1985 (1st Ex. Sess.), ch. 6, part 1, § 2, effective July 29, 1985; 1998, ch. 509, § 9, effective July 15, 1998) was repealed by Acts 2000, ch. 274, § 4, effective July 14, 2000. For present law, see KRS 132.097 and 132.099 .

132.097. Exemption from state ad valorem tax of personal property held for shipment out of state.

There shall be exempt from ad valorem tax for state purposes, personal property placed in a warehouse or distribution center for the purpose of subsequent shipment to an out-of-state destination. Personal property shall be deemed to be held for shipment to an out-of-state destination if the owner can reasonably demonstrate that the personal property will be shipped out of state within the next six (6) months.

History. Enact. Acts 2000, ch. 274, § 2, effective July 14, 2000.

NOTES TO DECISIONS

1. Interpretation.

Word “destination” does not denote or require permanence; moreover, neither exemption statute requires a sale, exempts leased or rented property from its purview, or requires a property owner to prove to any high degree of certainty that the property will even leave Kentucky. Therefore, in case involving a warehouse for leased textbooks, exemptions from personal property taxes should have been given because the word “destination” did not denote or require permanence. Dep't of Revenue v. Chegg, Inc., 497 S.W.3d 771, 2016 Ky. App. LEXIS 28 (Ky. Ct. App. 2016).

132.098. Exemption from state and local ad valorem tax of computer software, except prewritten computer software.

  1. For assessment dates  beginning on or after January 1, 2019, computer software, except prewritten  computer software, shall be exempt from state and local ad valorem  taxes, including the county, city, school, or other taxing district  in which it has a taxable situs.
  2. As used in this section,  “prewritten computer software” has the same meaning  as in KRS 139.010 .

HISTORY: 2018 ch. 207, § 122, effective April 27, 2018.

132.099. Local taxation of personal property held for shipment out of state — Definitions.

  1. The tax rate levied by cities, counties, charter counties, urban-counties, and school districts on personal property placed in a warehouse or distribution center for the purpose of subsequent shipment to an out-of-state destination shall be as follows:
    1. Eighty percent (80%) of the tax rate levied on other tangible personal property for tax assessments made on January 1, 2000; and
    2. Fifty percent (50%) of the tax rate levied on other tangible personal property for tax assessments made on January 1, 2001.
  2. Personal property placed in a warehouse or distribution center for the purpose of subsequent shipment to an out-of-state destination shall be exempt from the ad valorem tax levied by cities, counties, charter counties, urban-counties, and school districts for tax assessments made on or after January 1, 2002.
  3. Any fire district or other special taxing district may exempt from the ad valorem tax personal property placed in a warehouse or distribution center for the purpose of subsequent shipment to an out-of-state destination.
    1. As used in this subsection: (4) (a) As used in this subsection:
      1. “Affiliate” means a partnership, limited liability entity, corporation, or any other business entity that directly or indirectly owns or controls, or is owned or controlled by, or is under common ownership or control with, another partnership, limited liability entity, corporation, or other business entity;
      2. “Drug” means a compound, substance, or preparation and any component of a compound, substance, or preparation that is recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, or a supplement to any of them, or is:
        1. Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans; or
        2. Intended to affect the structure or any function of the human body; and
      3. “Pharmaceutical manufacturer” means any entity which is engaged in the production, preparation, propagation, compounding, conversion, or processing of drug products, either directly or indirectly by extraction from substances of natural origin, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis; but does not include a drug wholesaler or a retail pharmacy.
    2. For assessments made on and after January 1, 2012, the maximum ad valorem tax rate that may be levied by any special taxing district on drugs held by a pharmaceutical manufacturer or by an affiliate of a pharmaceutical manufacturer in a warehouse or distribution center for the purpose of subsequent shipment to an out-of-state destination shall not exceed three cents ($0.03) upon each one hundred dollars ($100) of value. This subsection shall not apply to any fire district.
  4. For the purpose of this section, personal property shall be deemed to be held for shipment to an out-of-state destination if the owner can reasonably demonstrate that the personal property will be shipped out of state within the next six (6) months.

History. Enact. Acts 2000, ch. 274, § 3, effective July 14, 2000; 2012, ch. 110, § 11, effective April 11, 2012.

NOTES TO DECISIONS

1. Interpretation.

Word “destination” does not denote or require permanence; moreover, neither exemption statute requires a sale, exempts leased or rented property from its purview, or requires a property owner to prove to any high degree of certainty that the property will even leave Kentucky. Therefore, in case involving a warehouse for leased textbooks, exemptions from personal property taxes should have been given because the word “destination” did not denote or require permanence. Dep't of Revenue v. Chegg, Inc., 497 S.W.3d 771, 2016 Ky. App. LEXIS 28 (Ky. Ct. App. 2016).

132.100. Referendum on act classifying property for taxation — Petition.

If the General Assembly enacts any act pursuant to Section 171 of the Constitution as amended, classifying property and providing a lower rate of taxation on personal property than on real property, the provisions of the act shall be subject to a referendum upon the written petition of qualified voters equal to at least five percent (5%) of the votes cast in the state for a slate of candidates for Governor and Lieutenant Governor at the last preceding regular election. The petition shall be filed with the Secretary of State not more than four (4) months after the final adjournment of the General Assembly that passed the act on which the referendum is demanded, and shall specify the act or the item, section or part of the act on which the referendum is demanded. The petition shall be uniform in size and style and shall be assembled in one (1) instrument for filing. Each sheet of the petition shall contain the names of voters from one (1) voting precinct only, and shall include the name, number and designation of the precinct in which the voters signing the petition live. The inclusion of an invalid signature on a page shall not invalidate the entire page of the petition, but shall instead result in the invalid signature being stricken and not counted. Each signature shall be executed in ink or indelible pen and shall be followed by the printed name, residence address, and Social Security number or date of birth of legal voters.

History. 4019b-1: amend. Acts 2005, ch. 121, § 2, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts ch. 121, § 6, provides: “The provisions of this Act shall apply to ordinances, orders, resolutions or motions passed after July 15, 2005.”

132.110. Certification of petition for referendum — Publication of act.

  1. Within five (5) days after the filing of the petition for referendum, the Secretary of State shall transmit to the county judge/executive of each county in which petitioners reside the sheets containing the names of the petitioners of that county. The county judge/executive shall thereupon set a date not less than ten (10) nor more than fifteen (15) days thereafter when interested persons may appear and present proof as to the genuineness of signatures and the qualification of petitioners. After hearing proof, the county judge/executive shall determine the number of legal voters of his county who have signed the petition, cause the same to be entered upon the order book and certify it to the Secretary of State.
  2. Within thirty (30) days after receiving from the county judges/executive certification that a number of legal voters constituting in the aggregate five percent (5%) of the vote of the entire state have signed a petition for referendum, the Secretary of State shall cause the proposed act or the parts thereof affected and the fact that the act will be submitted to the voters for their acceptance or rejection at the next general election to be published pursuant to KRS Chapter 424.

History. 4019b-2, 4019b-3: amend. Acts 1966, ch. 239, § 133; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1978, ch. 384, § 257, effective June 17, 1978.

132.120. Certification of question — Vote on referendum — Certification and publication of results — Expenses.

  1. The Secretary of State shall certify to the county clerk of each county, not less than twenty (20) days before the next general election, the substance of the act or the parts of the act that are to be voted upon, and the county clerk shall have the same, as certified by the Secretary of State, appear before the voters. The elector shall designate his vote by a “Yes” or “No” vote. The votes cast for and against the measure shall be counted, canvassed and certified to the State Board of Elections in the same manner as the votes upon constitutional amendments.
  2. If it is found that a majority of votes cast on the measure are in favor thereof, the act or the part of the act voted upon shall become effective. The result of the vote shall be published by the Secretary of State pursuant to KRS Chapter 424. The expense of the publications required by this section and by KRS 132.110 shall be paid as the expense of other publications that the Secretary of State is required to make in connection with elections.

History. 4019b-4, 4019b-5: amend. Acts 1968, ch. 152, § 102; 1982, ch. 360, § 43, effective July 15, 1982.

Research References and Practice Aids

Cross-References.

Canvassing and certification of votes on constitutional amendment, KRS 118.415 .

132.130. Distilled spirits in bonded warehouses to be reported by proprietor or custodian.

  1. Effective January 1, 1967, every owner, proprietor, or custodian of a bonded warehouse or of premises under the control and supervision of the United States Internal Revenue Service, in which distilled spirits are stored shall between January 1 and February 1 of each year file with the Department of Revenue a report sworn to by him showing the quantity and kind of distilled spirits in the bonded warehouse or premises as of January 1 of that year; the quantity and kind of spirits on which the federal tax has been paid or is due; what distilled spirits have been removed from the bonded warehouse or premises for transfer in bond out of this state during the preceding twelve (12) months; the county, city, and taxing district in which such distilled spirits were certified for taxation; the fair cash value of the distilled spirits estimated at a price it would bring at a fair voluntary sale; and such other facts pertaining to the distilled spirits as the department may require.
  2. On January 1, May 1, and September 1, after the federal tax has been paid or becomes due, or after any of the distilled spirits are removed from the bonded warehouse or premises for transfer in bond out of this state, every owner, proprietor, or custodian of a bonded warehouse or premises in which distilled spirits are stored upon which taxes have accrued on assessments prior to January 1, 1967, shall file with the Department of Revenue and the county clerk, in which county the distilled spirits were at the time of the assessment, a statement, sworn to by him, showing the quantity of the distilled spirits on which the federal tax has been paid or is due; what distilled spirits have been removed from the bonded warehouse or premises or transferred in bond out of this state during the preceding four (4) months; the years in which such distilled spirits were assessed for taxation; and the county, city, or taxing district in which the distilled spirits were stored at the time of the assessment. At the same time, all taxes and interest on such distilled spirits due the state, county, or other taxing district shall be paid to the officers entitled to receive them. The report required by this section shall be made whether or not any distilled spirits are stored in the bonded warehouse or premises at the time the report is due.

History. 4105; Acts 1949 (Ex. Sess.), ch. 4, § 4 1/2; 1966, ch. 254, § 1; 1978, ch. 384, § 258, effective June 17, 1978; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 316, effective July 13, 1990; 2005, ch. 85, § 178, effective June 20, 2005.

Compiler’s Notes.

Former KRS 132.130 (4105: amend. Acts 1949 (Ex. Sess.), ch. 4, § 4 1/2; 1966, ch. 254, § 1; 1978, ch. 384, § 258, effective June 17, 1978) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 316, effective July 13, 1990.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Application.
  3. Right to Tax.
  4. Nonresident.
  5. Involuntary Report Filing.
  6. Unconstitutional Tax.
1. Constitutionality.

KRS 132.130 to 132.180 do not violate the federal Constitution. Thompson v. Kentucky, 209 U.S. 340, 28 S. Ct. 533, 52 L. Ed. 822, 1908 U.S. LEXIS 1708 (U.S. 1908).

KRS 132.130 to 132.180 are constitutional. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

2. Application.

Law providing for assessment and taxation of distilled spirits applied to any bonded warehouse in which whiskey was stored, whether owned by a distiller or by some other person, and whether or not located on the premises of a distiller. Louisville v. Louisville Public Warehouse Co., 107 Ky. 184 , 53 S.W. 291, 21 Ky. L. Rptr. 867 , 1899 Ky. LEXIS 156 ( Ky. 1899 ) (decided under prior law).

3. Right to Tax.

The fact that whiskey in bond is under the control and supervision of the federal government, and that often a substantial portion of the whiskey is owned by nonresidents does not deprive Kentucky of the right to levy ad valorem taxes on such whiskey. Thompson v. Kentucky, 209 U.S. 340, 28 S. Ct. 533, 52 L. Ed. 822, 1908 U.S. LEXIS 1708 (U.S. 1908).

4. Nonresident.

Where nonresident owner of warehouse made report under this section, and made no objection to assessment of spirits in his warehouse, he could not maintain that he was beyond jurisdiction of Kentucky and therefore not subject to personal liability for tax on spirits. Greenbaum v. Commonwealth, 147 Ky. 450 , 144 S.W. 45, 1912 Ky. LEXIS 245 ( Ky. 1912 ).

5. Involuntary Report Filing.

The fact that there is a criminal penalty for violating this section does not make the filing of a report an involuntary act to the extent that a nonresident filing a report could maintain that he had not thereby subjected his person to the taxing jurisdiction of Kentucky. Greenbaum v. Commonwealth, 147 Ky. 450 , 144 S.W. 45, 1912 Ky. LEXIS 245 ( Ky. 1912 ).

6. Unconstitutional Tax.

A law which imposed a tax of 50¢ on a gallon of whiskey withdrawn from bond in this state or transferred in bond to another state, and which was designated a “license” tax on the business of owning and storing whiskey, was in fact a property tax and therefore violated Ky, Const., § 171. Dawson v. Kentucky Distilleries & Warehouse Co., 255 U.S. 288, 41 S. Ct. 272, 65 L. Ed. 638, 1921 U.S. LEXIS 1825 (U.S. 1921) (decided under prior law). See Craig v. E. H. Taylor, Jr. & Sons, 192 Ky. 36 , 232 S.W. 395, 1921 Ky. LEXIS 28 ( Ky. 1921 ).

Cited in:

Louisville v. Martin, 284 Ky. 490 , 144 S.W.2d 1034, 1940 Ky. LEXIS 505 ( Ky. 1940 ); Schenley Distillers, Inc. v. Franklin County Board of Education, 249 S.W.2d 810, 1952 Ky. LEXIS 877 ( Ky. 1952 ).

Research References and Practice Aids

Cross-References.

License and excise taxes on distilled spirits, KRS ch. 243.

132.140. Assessment of distilled spirits by department.

  1. The Department of Revenue shall fix the value of the distilled spirits for the purpose of taxation, assess the same at its fair cash value, estimated at the price it would bring at a fair voluntary sale, and keep a record of its valuations and assessments. The department shall immediately notify the owner or proprietor of the bonded warehouse or premises of the amount fixed.
  2. If any owner, proprietor, or custodian of a bonded warehouse or premises fails to make the report required by KRS 132.130 , the department shall ascertain the necessary facts required to be reported. For that purpose the department shall have access to the records of the owner, proprietor, or custodian; and the assessment shall be made and taxes collected thereon, with interest and penalties, as though regularly reported.
  3. The assessment made under (1) of this section shall be reviewed according to KRS 131.110 .

History. 4106, 4107, 4113; Acts 1964, ch. 141, § 33; 1966, ch. 254, § 2; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 317, effective July 13, 1990; 2005, ch. 85, § 179, effective June 20, 2005.

Compiler’s Notes.

Former KRS 132.140 (4106, 4107, 4113: amend. Acts 1964, ch. 141, § 33; 1966, ch. 254, § 2) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 317, effective July 13, 1990.

NOTES TO DECISIONS

  1. Discretion.
  2. Estoppel.
1. Discretion.

Assessment of all whiskey in warehouse at flat or blanket rate regardless of age did not show arbitrary conduct or abuse of discretion by tax commission, it being common knowledge that warehouses have whiskeys of various ages and brands and that while whiskey increases in value with age some brands are of greater value than others, and fixing of average value for spirits of different ages is most feasible method of making assessment. Louisville v. Martin, 284 Ky. 490 , 144 S.W.2d 1034, 1940 Ky. LEXIS 505 ( Ky. 1940 ).

In making assessment tax commission has broad discretion and mere error in judgment as to fair cash value would not authorize court to substitute its judgment for that of commission. Louisville v. Martin, 284 Ky. 490 , 144 S.W.2d 1034, 1940 Ky. LEXIS 505 ( Ky. 1940 ).

2. Estoppel.

Where city through its assessor made an assessment of distilled spirits and tax based on it was paid, city was not estopped thereafter from repudiating such assessment and could levy additional taxes by reason of assessment made under this section which assessment was higher and which was the only assessment the city had a legal right to use. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

Cited in:

Reeves v. Jefferson County, 245 S.W.2d 606, 1951 Ky. LEXIS 1263 ( Ky. 1951 ); Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ); Commonwealth ex rel. Allphin v. Heaven Hill Distilleries, Inc., 279 S.W.2d 11, 1955 Ky. LEXIS 501 ( Ky. 1955 ).

Research References and Practice Aids

Cross-References.

Review of assessment, KRS 131.110 .

132.150. Valuation of distilled spirits certified to county clerks — Local tax rate.

Immediately after the valuation of the distilled spirits has been finally fixed, the department shall certify to the county clerks of the respective counties the amount liable for county, city, or district taxation, and the date when the bonded period will expire on the spirits. The report shall be filed by the county clerk in his office, and certified by him to the proper collecting officer of the county, city, or taxing district for collection. The spirits, in addition to the tax for state purposes, shall be taxed for county, school, and city purposes at the prevailing rates of taxation on tangible personal property in the respective counties, school districts, and cities in which the spirits are stored, but the combined rate of taxation for city and school purposes in cities of the first class shall not exceed one dollar and twenty-five cents ($1.25) on each one hundred dollars ($100) of assessed value of the spirits.

History. 4108; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 318, effective July 13, 1990; 2005, ch. 85, § 180, effective June 20, 2005.

Compiler’s Notes.

Former KRS 132.150 (4108) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 318, effective July 13, 1990.

NOTES TO DECISIONS

  1. Basis of Assessment.
  2. Tax Rate.
  3. Collector.
  4. City Taxation.
  5. Estoppel.
1. Basis of Assessment.

Cities must tax on basis of assessment made by the tax commission; they cannot make their own assessment. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

2. Tax Rate.

This section clearly provides that the prevailing tax rate applied to distilled spirits for all local purposes shall not be different from that levied on all tangible personalty. National Distillers Products Corp. v. Board of Education, 256 S.W.2d 481, 1952 Ky. LEXIS 1151 ( Ky. 1952 ).

3. Collector.

The sheriff is the collector of the tax on distilled spirits. Anderson County v. Collins, 142 Ky. 394 , 134 S.W. 463, 1911 Ky. LEXIS 203 ( Ky. 1911 ).

Taxes due city of third class on distilled spirits in bond could be collected by action brought by city attorney, city not being restricted to procedure prescribed in subsection (4) of KRS 92.780 (repealed). Kraver v. Henderson, 155 Ky. 633 , 160 S.W. 257, 1913 Ky. LEXIS 331 ( Ky. 1913 ).

4. City Taxation.

Distilled spirits in bonded warehouses are subject to city taxation. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

5. Estoppel.

Where county clerk had neglected for several years to certify valuation of distilled spirits to tax collector of city in which warehouses were located, and city therefore had never attempted to collect taxes on spirits, city had right, upon discovering clerk’s omission and obtaining certification for years in question, to maintain action to recover taxes for such years, no estoppel arising from its failure to make previous demand. Kraver v. Henderson, 155 Ky. 633 , 160 S.W. 257, 1913 Ky. LEXIS 331 ( Ky. 1913 ).

Where a city, for several years, levied and collected taxes on distilled spirits under an assessment made by the city assessor, instead of the one made by the tax commission, it was not estopped from subsequently bringing action to recover the additional taxes due for such years by reason of the fact that the tax commission assessment was higher than the city assessment as tax commissioner’s assessment was the only assessment the city had a legal right to use. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

Cited in:

George v. Bernheim Distilling Co., 300 Ky. 179 , 188 S.W.2d 321, 1945 Ky. LEXIS 519 ( Ky. 1945 ); Reeves v. Jefferson County, 245 S.W.2d 606, 1951 Ky. LEXIS 1263 ( Ky. 1951 ).

132.160. Taxes on distilled spirits and spirits on which federal taxes not paid, when due — Removal of spirits — Interest.

    1. Taxes on distilled spirits that shall be assessed while in a bonded warehouse or premises as of January 1, 1967, and January 1 of each year thereafter, shall become due September 15 following the assessment date and shall become delinquent on January 1. Delinquent taxes on such distilled spirits shall be subject to the same penalties as provided by law for other tangible personal property, and the collecting officer shall have all the powers and duties to collect such delinquent taxes, penalties, and interest as provided by law for other tangible personal property in such taxing jurisdiction. (1) (a) Taxes on distilled spirits that shall be assessed while in a bonded warehouse or premises as of January 1, 1967, and January 1 of each year thereafter, shall become due September 15 following the assessment date and shall become delinquent on January 1. Delinquent taxes on such distilled spirits shall be subject to the same penalties as provided by law for other tangible personal property, and the collecting officer shall have all the powers and duties to collect such delinquent taxes, penalties, and interest as provided by law for other tangible personal property in such taxing jurisdiction.
    2. Taxes and interest on distilled spirits assessed while in a bonded warehouse or premises for each year prior to January 1, 1967, on which the federal tax has not been paid, shall be due on January 1, May 1, and September 1 next after the federal tax becomes due or is paid, or after the distilled spirits are removed from the bonded warehouse or premises for transfer in bond out of this state. Provided, however, the remaining state taxes and interest on distilled spirits assessed while in a bonded warehouse or premises as of January 1, 1966, and January 1, 1965, shall be due on or before January 15, 1968; the remaining state taxes and interest on distilled spirits assessed while in a bonded warehouse or premises as of January 1, 1964, shall be due on or before January 15, 1969; the remaining state taxes and interest on distilled spirits assessed while in a bonded warehouse or premises as of January 1, 1963, shall become due on or before January 15, 1970; the remaining state taxes and interest on distilled spirits assessed while in a bonded warehouse or premises as of January 1, 1962, and all prior years shall become due on or before January 15, 1971. After July 1, 1970, any owner or proprietor, or custodian of a bonded warehouse or premises may elect to pay at one (1) time all accrued ad valorem taxes and interest. Such taxes and interest paid under this subsection shall be used for capital outlay by all local taxing jurisdictions.
  1. The taxes shall not become due by reason of a mere removal of the distilled spirits from one bonded warehouse or premises to another bonded warehouse or premises within this state, but in that event the owner or proprietor from whose bonded warehouse or premises the distilled spirits are moved shall execute a bond with good and sufficient surety conditioned upon a payment of all taxes that have accrued upon the distilled spirits prior to removal from the county, city, or taxing district from which the distilled spirits are removed. The bond shall be in an amount sufficient to protect the county, city, or taxing district and shall be approved by the county judge/executive for the county, the mayor for the city, the superintendent of any school district involved, and by the person whose duty it is to collect taxes for any other taxing district. Prior to removal of any distilled spirits, the owner or proprietor from whose bonded warehouse or premises they are to be removed shall give written notice of such intention to the county, city, or taxing district, addressed to the officer thereof abovementioned and stating the quantity of distilled spirits to be moved and the name and address of the bonded warehouse or premises to which they are to be taken. After the distilled spirits are moved, the owner or proprietor shall notify the same officers of the county, city, or taxing district of the amount of accrued taxes on the distilled spirits, together with interest on the taxes. After any distilled spirits have once been moved as provided in this section and are moved again, all taxes that have accrued thereon up to the time of the second removal shall immediately become due and payable to any county, city, or taxing district to which any taxes have accrued.
  2. The taxes on each year’s assessment shall bear interest at the tax interest rate as defined in KRS 131.010(6) until paid.

History. 4110; Acts 1949 (Ex. Sess.), ch. 4, § 5; 1966, ch. 254, § 3; 1982, ch. 452, § 5, effective July 1, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 319, effective July 13, 1990.

Compiler’s Notes.

Former KRS 138.160 (4110: amend. Acts 1949 (Ex. Sess.), ch. 4, § 5; 1966, ch. 254, § 3; 1982, ch. 452, § 5, effective July 1, 1982) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 319, effective July 13, 1990.

NOTES TO DECISIONS

  1. Lien.
  2. Interest.
  3. Time of Collection.
  4. Destruction.
1. Lien.

The state and county have a lien on the spirits for the taxes assessed against them. Blanton v. Kentucky Distilleries & Warehouse Co., 120 F. 318, 1902 U.S. App. LEXIS 5315 (6th Cir. 1902), aff’d, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. 1906), aff’d, Kentucky Distilleries & Warehouse Co. v. Blanton, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. 1906), cert. denied, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (1907), cert. denied, Kentucky Distilleries & Warehouse Co. v. Blanton, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (1907) (decided under prior law).

The state has a lien upon the real estate owned by a warehouseman at the time of assessment of taxes against spirits in his warehouse, for the amount of such taxes, but it has no lien upon a parcel of land sold by the warehouseman before the assessment date. Commonwealth v. Walker, 80 S.W. 185, 25 Ky. L. Rptr. 2122 (1904) (decided under prior law).

2. Interest.

The taxes on each year’s assessment bear interest not from the date they are due, but from the date the penalty for delinquency attaches to other ad valorem taxes assessed for the same year. The warehouseman may avoid paying interest by paying the taxes before that time, without waiting until the taxes become due. Commonwealth v. Rosenfield Bros. & Co., 118 Ky. 374 , 80 S.W. 1178, 25 Ky. L. Rptr. 2229 , 1904 Ky. LEXIS 52 ( Ky. 1904 ) (decided under prior law).

The fact that the state taxing authorities had for several years construed the law as not requiring the payment of interest on annual assessments of bonded whiskey, and had permitted warehousemen to withdraw whiskey on payment of the principal of the tax without interest, did not prevent the state from subsequently collecting interest from the warehousemen, notwithstanding that the warehousemen, by reason of the withdrawal of the whiskey, had lost the lien given them by KRS 132.180 and therefore might never be able to recover the interest from the owners of the whiskey. Thompson v. Kentucky, 209 U.S. 340, 28 S. Ct. 533, 52 L. Ed. 822, 1908 U.S. LEXIS 1708 (U.S. 1908) (decided under prior law).

3. Time of Collection.

Tax on distilled spirits may be collected when spirits are removed from bond or federal tax is paid, notwithstanding that purpose for which tax was levied has been accomplished prior to that time, so long as purpose had not been accomplished at time assessments were made. Wathen v. Young, 103 Ky. 36 , 44 S.W. 115, 19 Ky. L. Rptr. 1678 , 1898 Ky. LEXIS 25 ( Ky. 1898 ) (decided under prior law).

4. Destruction.

Warehouseman was liable for taxes on spirits in his warehouse destroyed by fire, the destruction being treated as a removal, and his liability included the taxes due on whiskey owned by others, for which he had issued warehouse receipts, as well as whiskey owned by him. Commonwealth ex rel. Sheriff of Woodford County v. Greenbaum, 139 Ky. 138 , 129 S.W. 555, 1910 Ky. LEXIS 16 (Ky.), modified, 140 Ky. 221 , 130 S.W. 982, 1910 Ky. LEXIS 193 ( Ky. 1910 ) (decided under prior law).

Cited in:

National Distillers Products Corp. v. Board of Education, 256 S.W.2d 481, 1952 Ky. LEXIS 1151 ( Ky. 1952 ); Patterson v. Board of Educ., 269 S.W.2d 739, 1954 Ky. LEXIS 1020 ( Ky. 1954 ); Commonwealth ex rel. Allphin v. Heaven Hill Distilleries, Inc., 279 S.W.2d 11, 1955 Ky. LEXIS 501 ( Ky. 1955 ); Caywood v. Stivers, 430 S.W.2d 327, 1968 Ky. LEXIS 398 ( Ky. 1968 ).

Opinions of Attorney General.

Since KRS 45.150 (repealed) states that capital outlays may be authorized to alter, reconstruct, or repair any road, the surfacing of county roads with bituminous asphalt with gravel base would constitute “capital outlay.” OAG 67-410 .

“Capital outlay” may include: interior reconstruction or decorating of a permanent nature (which becomes a structural part of the building) of a courthouse building, or the construction or reconstruction of a permanent nature of roads and bridges. OAG 68-91 .

Tax receipts used for road construction and reconstruction purposes do not violate Ky. Const., § 180. OAG 68-233 .

132.170. Reports on spirits on which Federal tax has been paid or is due or removed for transfer out of state; payment of taxes due. [Repealed.]

Compiler’s Notes.

This section (4111) was repealed by Acts 1966, ch. 254, § 10.

132.180. Liability for distilled spirits tax.

  1. Any person having custody of distilled spirits in a bonded warehouse or premises on the day as of which the assessment is made shall be liable for all taxes due thereon, together with all interest and penalties that may accrue. Any owner, proprietor, or custodian of such distilled spirits who pays the taxes, interest and penalties on the distilled spirits shall have a lien thereon for the amount paid, with legal interest from day of payment.
  2. Taxes on distilled spirits which are subject to the provisions of KRS 132.160(1)(a) shall become due and payable in the manner provided by KRS 134.015 , except that taxes due the state shall be paid directly to the Department of Revenue.

History. 4109, 4112: amend. Acts 1949 (Ex. Sess.), ch. 4, § 51/2; 1966, ch. 254, § 4; 2002, ch. 89, § 5, effective July 15, 2002; 2005, ch. 85, § 181, effective June 20, 2005; 2010, ch. 75, § 13, effective April 7, 2010.

NOTES TO DECISIONS

  1. Application.
  2. Collection.
  3. —Limitation on Action.
  4. Lien.
  5. Destruction.
  6. Warehouseman.
  7. Penalty.
1. Application.

Where warehouseman, for several years, promptly paid city taxes levied under ordinance which based taxes on city assessment, rather than on state assessment as required by KRS 132.150 , and city subsequently corrected its ordinance and sought to collect additional taxes due by reason of fact that state assessment was higher than city assessment, warehouseman who refused to pay such additional taxes became delinquent as of date of refusal, and the eight percent (8%) penalty attached as of that date. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

The eight percent (8%) penalty provided by this section applies only when the tax is collected without suit. If action to collect is brought under KRS 135.060 , the 20 percent penalty provided by that section is in lieu of the eight percent (8%) penalty. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

2. Collection.

When judgment was entered in favor of state against warehouseman for taxes due on spirits withdrawn from his warehouse, and execution was returned “no property found,” state had right to commence equitable proceedings to subject warehouseman’s real estate to payment of the judgment, without first attempting to collect the judgment out of whiskey still in the warehouse. Commonwealth v. Walker, 80 S.W. 185, 25 Ky. L. Rptr. 2122 (1904) (decided under prior law).

Taxes due city of third class on distilled spirits in bond could be collected by action brought by city attorney, city not being restricted to procedure prescribed in subsection (4) of KRS 92.780 (repealed). Kraver v. Henderson, 155 Ky. 633 , 160 S.W. 257, 1913 Ky. LEXIS 331 ( Ky. 1913 ) (decided under prior law).

3. —Limitation on Action.

Action to collect interest on taxes on distilled spirits in bonded warehouses was barred by limitations at the expiration of five (5) years after the cause of action arose. Commonwealth v. Rosenfield Bros. & Co., 118 Ky. 374 , 80 S.W. 1178, 25 Ky. L. Rptr. 2229 , 1904 Ky. LEXIS 52 ( Ky. 1904 ) (decided under prior law).

4. Lien.

On sale of warehouse, purchaser, if liable for taxes on spirits stored in warehouse and removed subsequent to sale, would have lien on spirits for amount of taxes, regardless of terms of warehouse receipts issued by seller. Blanton v. Kentucky Distilleries & Warehouse Co., 120 F. 318, 1902 U.S. App. LEXIS 5315 (6th Cir. 1902), aff’d, 149 F. 31, 1906 U.S. App. LEXIS 4413 (6th Cir. 1906), cert. denied, Kentucky Distilleries & Warehouse Co. v. Blanton, 205 U.S. 543, 27 S. Ct. 790, 51 L. Ed. 922, 1907 U.S. LEXIS 1433 (1907) (decided under prior law).

5. Destruction.

Warehouseman was liable for taxes on whiskey which had been destroyed by fire after assessment was made, including taxes on whiskey owned by others, for which he had issued warehouse receipts, as well as whiskey owned by him. Commonwealth ex rel. Sheriff of Woodford County v. Greenbaum, 139 Ky. 138 , 129 S.W. 555, 1910 Ky. LEXIS 16 (Ky.), modified, 140 Ky. 221 , 130 S.W. 982, 1910 Ky. LEXIS 193 ( Ky. 1910 ) (decided under prior law).

6. Warehouseman.

The warehouseman is not merely the agent for collection, but is primarily liable for the tax, and his liability does not depend upon his ability to collect the tax from the owner of the spirits. Commonwealth ex rel. Sheriff of Woodford County v. Greenbaum, 139 Ky. 138 , 129 S.W. 555, 1910 Ky. LEXIS 16 (Ky.), modified, 140 Ky. 221 , 130 S.W. 982, 1910 Ky. LEXIS 193 ( Ky. 1910 ) (decided under prior law).

The fact that warehouseman was a nonresident did not limit state to lien on spirits for taxes due, or prevent state from obtaining judgment for taxes against warehouseman in action where personal service in this state was made, at least where warehouseman had voluntarily made reports under law requiring such reports. Greenbaum v. Commonwealth, 147 Ky. 450 , 144 S.W. 45, 1912 Ky. LEXIS 245 ( Ky. 1912 ) (decided under prior law).

7. Penalty.

The court in an action to collect the tax has no discretion as to whether the eight percent (8%) penalty shall be attached; the penalty is mandatory. Commonwealth v. Rosenfield Bros. & Co., 118 Ky. 374 , 80 S.W. 1178, 25 Ky. L. Rptr. 2229 , 1904 Ky. LEXIS 52 ( Ky. 1904 ) (decided under prior law).

The penalty is to be computed on the principal of the tax, not on the tax plus interest. Commonwealth ex rel. Sheriff of Woodford County v. Greenbaum, 139 Ky. 138 , 129 S.W. 555, 1910 Ky. LEXIS 16 (Ky.), modified, 140 Ky. 221 , 130 S.W. 982, 1910 Ky. LEXIS 193 ( Ky. 1910 ) (decided under prior law).

Cited in:

Walker v. Dowling, 68 S.W. 135, 24 Ky. L. Rptr. 179 (1902); National Distillers Products Corp. v. Board of Education, 256 S.W.2d 481, 1952 Ky. LEXIS 1151 ( Ky. 1952 ).

Opinions of Attorney General.

Under this section the person having custody of distilled spirits in a bonded warehouse on the assessment date is liable for the tax thereon even though the warehouse and its contents are destroyed by fire or other cause after the assessment date. OAG 66-384 .

132.185. Optional plan for payment of distilled spirits tax and interest. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 212, § 1) was repealed by Acts 1966, ch. 254, § 10.

132.190. Property subject to taxation — Situs.

  1. All property shall be subject to taxation, unless it is exempted by the Constitution or in the case of personal property unless it is exempted by the Constitution or by statute. Twenty-five (25) domestic fowl to each family shall be exempt from taxation for any purpose.
  2. All intangible personal property of corporations organized under the laws of this state, unless it has acquired a business situs without this state, shall be considered and estimated in fixing the valuation of corporate franchises.
  3. Property shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale, except: real property qualifying for an assessment moratorium shall not have its fair cash value assessment changed while under the assessment moratorium unless the assessment moratorium expires or is otherwise canceled or revoked.
  4. Nothing contained in this section shall affect the liability for franchise taxes payable by corporations organized under the laws of this state.

History. 4019a-5, 4020, 4020a-1, 4023; Acts 1948, ch. 33; 1960, ch. 186, Art. I, § 3; 1966, ch. 255, § 127; 1982, ch. 141, § 58, effective July 1, 1982; 1982, ch. 327, § 6, effective July 15, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 320, effective July 13, 1990; 1996, ch. 254, § 25, effective July 15, 1996; 2000, ch. 274, § 1, effective July 14, 2000; 2005, ch. 168, § 56, effective January 1, 2006; 2019 ch. 196, § 6, effective June 27, 2019.

Compiler’s Notes.

Former KRS 132.190 (4019a-5, 4020, 4020a-1, 4023: amend. Acts 1948, ch. 33; 1960, ch. 186, Art. I, § 3; 1966, ch. 255, § 127; 1982, ch. 141, § 58, effective July 1, 1982; 1982, ch. 327, § 6, effective July 15, 1982) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 320, effective July 13, 1990.

Section 5 of Acts 2000, ch. 274, effective July 14, 2000, read: “The provisions of Section 1 of this Act [this section] shall apply for tax assessments made on or after January 1, 2000.”

NOTES TO DECISIONS

  1. In General.
  2. Constitutionality.
  3. Legislative Power.
  4. Contemporaneous Construction.
  5. County Tax.
  6. Property.
  7. —Lease.
  8. —Personal.
  9. —Intangible.
  10. — —Debts.
  11. — —Corporate.
  12. — —Royalties.
  13. —Tangible.
  14. —Nonresident.
  15. —Taxable.
  16. —Exemption.
  17. —Mineral Leases.
  18. —Mineral and Surface Estates.
  19. —Bank Deposits.
  20. —Claim in Litigation.
  21. —Railroad Rolling Stock.
  22. —Nonresident Business.
  23. —Interstate Commerce.
  24. Residence.
  25. —Personal Representative.
  26. —Beneficial Owner.
  27. Apportioning Taxes.
  28. Situs.
  29. —Determination.
  30. —Property at Marketing Point.
  31. —Temporary.
  32. —Settlement of Estate.
  33. —Railroad Rolling Stock.
  34. —Bank Deposits.
  35. —Patent.
  36. —Ocean-going Steamship.
  37. —Unequal.
  38. Fair Cash Value.
  39. —Reduction to Percentage of Value.
  40. —Private Sale.
  41. Taxation by Another State.
1. In General.

The oil production license tax imposed by KRS 137.120 is not a substitute for the ad valorem tax on oil leases, and could not constitutionally be such a substitute. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ).

2. Constitutionality.

The provision of this section that the situs of intangible personalty shall be at the residence of the real or beneficial owner and not at the residence of the fiduciary or agent having custody or possession, and the provision that a resident fiduciary or agent shall not be liable for taxes on intangible personalty held by him if the real or beneficial owner is a nonresident, do not violate Ky. Const., §§ 170, 171 or 172, although the effect of such provisions is to exempt some property which the legislature could make subject to taxation. Henderson v. Barrett's Ex'r, 152 Ky. 648 , 153 S.W. 992, 1913 Ky. LEXIS 718 ( Ky. 1913 ).

The assessment of one piece of property at its fair cash value, while other property is assessed at only a percentage of its value, violates the constitutional requirement of uniformity. Eminence Distillery Co. v. Henry County Board of Sup'rs, 178 Ky. 811 , 200 S.W. 347, 1918 Ky. LEXIS 473 ( Ky. 1918 ).

The provision of this section that intangible personalty is subject to taxation in this state if the owner resides in this state is constitutional, and such property may be taxed in this state even though it is employed in business wholly in another state and is also taxed by such other state. Bingham's Adm'r v. Commonwealth, 199 Ky. 402 , 251 S.W. 936, 1923 Ky. LEXIS 907 ( Ky. 1923 ).

Intangible personalty beneficially owned by a resident of this state may constitutionally be taxed in this state, despite the fact that the management of such property and the possession of the paper evidences of the property have been entrusted to a nonresident agent or fiduciary for employment in a business conducted wholly outside of this state, and regardless of whether the management and possession were entrusted to the nonresident agent or trustee by the present beneficial owner or by a previous owner from whom the beneficial title was obtained by the present owner. Bingham's Adm'r v. Commonwealth, 199 Ky. 402 , 251 S.W. 936, 1923 Ky. LEXIS 907 ( Ky. 1923 ).

A stockholder in a corporation may constitutionally be required to pay taxes on his stock, even though the property of the corporation, including its franchise, is also taxed. Shinkle's Estate v. Kenton County Board of Sup'rs, 216 Ky. 59 , 287 S.W. 209, 1926 Ky. LEXIS 829 ( Ky. 1926 ). See Siler v. Board of Sup'rs, 221 Ky. 100 , 298 S.W. 189, 1927 Ky. LEXIS 669 ( Ky. 1927 ).

The state cannot constitutionally levy an ad valorem tax upon the accounts and notes receivable and bank deposits of a Kentucky corporation where the intangibles in question admittedly have a business situs in other states. Standard Oil Co. v. Commonwealth, 311 S.W.2d 372, 1957 Ky. LEXIS 8 ( Ky. 1957 ).

3. Legislative Power.

The legislative taxing power extends to all kinds of intangible property, whether consisting of privileges, franchises, contracts or obligations. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

4. Contemporaneous Construction.

Failure of assessing officers to assess a particular class of property does not amount to a contemporaneous construction that such property is not subject to taxation. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ). See Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

5. County Tax.

Definite and specific legislation is not necessary in order to permit counties to levy ad valorem tax on personalty, for counties under their general taxing power to assess personalty for taxation could apportion or allocate to themselves a part or share of the value of an item or unit of personalty and thus they could levy such tax on towboats and barges of company where boats and barges had acquired tax situs in Kentucky and in the several counties. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 (Ky.), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (U.S. 1950).

6. Property.

Only “property” is taxable, but anything constituting property that is not exempted from taxation is taxable. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

“Property” means everything of value that a person owns that is or may be the subject of sale or exchange or that when offered for sale will bring some price. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

Amounts due whiskey warehouseman for storage on whiskey against which negotiable warehouse receipts had been issued, which amounts were due when whiskey was withdrawn from warehouse, were “property” subject to taxation. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

Every character and species of property not exempted from taxation by the constitution is subject to taxation, although it is not specifically mentioned in the schedule prepared for the guidance of the assessor and taxpayer. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ).

In determining whether a thing is “property” within the meaning of the tax laws, the test is whether the thing has a cash value in some amount, and whether a bidder could be found who would pay a cash price, no matter how small, for it. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ).

The state may tax only such property as is subject to its sovereignty, and has a taxable situs in the state. Commonwealth by Mays v. Union P. R. Co., 214 Ky. 339 , 283 S.W. 119, 1926 Ky. LEXIS 337 ( Ky. 1926 ).

7. —Lease.

Ordinarily, real property held under a lease is not taxable in the hands of the lessee. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

An oil lease giving the exclusive right of development is taxable property in the hands of the lessee, even though no wells have been drilled and no oil discovered in paying quantities. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ).

Oil and gas leases and the rights conferred thereby are “property” and are subject to taxation at their fair cash value, estimated at the price they would bring at a fair voluntary sale. Estill County v. Superior Oil Corp., 210 Ky. 539 , 276 S.W. 527, 1925 Ky. LEXIS 724 ( Ky. 1925 ).

8. —Personal.

All personal property of persons residing in this state is taxable here except tangible personalty located and having a taxable situs outside of this state. Commonwealth v. Bingham's Adm'r, 188 Ky. 616 , 223 S.W. 999, 1920 Ky. LEXIS 331 ( Ky. 1920 ).

The idea of permanency, with respect to personal property, seems generally to be that for such property to acquire a taxable situs it must have a more or less permanent location as distinguished from a transient or temporary one; however, permanency in the sense that it must be fixed like real property is not essential to the establishment of the taxable situs, it seems to be sufficient that when, in the ordinary course of business, property is present and being used and employed with a consistent continuity and not spasmodically and temporarily. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 (Ky.), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (U.S. 1950).

9. —Intangible.

The intangible personal property of a franchise-paying corporation is subject to assessment and taxation only as it constitutes part of the value of the franchise, and not separately. Commonwealth v. Cumberland Tel. & Tel. Co., 124 Ky. 535 , 99 S.W. 604, 30 Ky. L. Rptr. 723 , 1907 Ky. LEXIS 208 ( Ky. 1907 ).

The Kentucky Constitution does not prohibit the taxing of intangible personal property owned by nonresidents, where such property has a situs in this state. Higgins v. Commonwealth, 126 Ky. 211 , 103 S.W. 306, 31 Ky. L. Rptr. 653 , 1907 Ky. LEXIS 44 ( Ky. 1907 ).

The location of the paper evidences of the ownership of intangible property is of no importance in determining the situs of such property for purposes of taxation. Commonwealth v. Peebles, 134 Ky. 121 , 119 S.W. 774, 1909 Ky. LEXIS 364 ( Ky. 1909 ). See Commonwealth ex rel. Auditor's Agent v. Northwestern Mut. Life Ins. Co., 107 S.W. 233, 32 Ky. L. Rptr. 796 (1908).

Interest of seller in contract for sale of mining property was taxable property, notwithstanding that deed tendered pursuant to contract had not been accepted, no purchase notes had been executed, and contract was involved in litigation, such factors only affecting the value of the contract and not its taxability. Gish v. Shaver, 140 Ky. 647 , 131 S.W. 515, 1910 Ky. LEXIS 344 ( Ky. 1910 ).

Storage accounts due for whiskey in bonded warehouses against which warehouse receipts had been issued were taxable in Kentucky, notwithstanding that warehouse owner was a foreign corporation, where warehouses and main business office of corporation were in Kentucky. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

An account, though not due or collectible on the assessing date, may be the subject of assessment and taxation. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

Any enforceable, collectible demand that one person has against another, or against property upon which it is a lien and out of which it can be collected, is taxable property. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ). See Fayette Realty & Finance Co. v. Commonwealth, 229 Ky. 556 , 17 S.W.2d 722, 1929 Ky. LEXIS 810 ( Ky. 1929 ).

Choses in action, although representing debts owed by residents of this state, are not taxable here if the owner is a nonresident, unless they have acquired a business situs here. Commonwealth v. Prudential Life Ins. Co., 149 Ky. 380 , 149 S.W. 836, 1912 Ky. LEXIS 633 ( Ky. 1912 ).

Fact that bonds are secured by a mortgage on Kentucky property and their collection must be enforced in the Kentucky courts, if suit for that purpose is necessary, does not make them subject to taxation therein if owned by a nonresident. Commonwealth v. Consolidated Casualty Co., 170 Ky. 103 , 185 S.W. 508, 1916 Ky. LEXIS 18 ( Ky. 1916 ).

Intangible personalty has a situs for the purpose of taxation at the legal residence of the owner. Millett's Ex'r v. Commonwealth, 184 Ky. 193 , 211 S.W. 562, 1919 Ky. LEXIS 39 ( Ky. 1919 ).

Where a decedent was a resident of Kentucky at the time of her death, her intangible personalty was taxable in Kentucky in the hands of her personal representative, although she died before the assessment date and the personal representative was not appointed until after that date, and the paper evidences of ownership of the property were in a New York bank. Commonwealth v. Bingham's Adm'r, 188 Ky. 616 , 223 S.W. 999, 1920 Ky. LEXIS 331 ( Ky. 1920 ).

The fact that substantially all stock of selling corporation was owned by manufacturing corporation organized after the selling corporation does not make selling corporation a mere agent so as to subject intangible receivables transferred by selling corporation to Kentucky ad valorem taxes. Board of Tax Supervisors v. Baldwin Piano Co., 296 Ky. 673 , 178 S.W.2d 212, 1944 Ky. LEXIS 613 ( Ky. 1944 ).

If intangibles are only temporarily in this state in the agent’s or fiduciary’s possession and he does not use them in the owner’s business in Kentucky and has no control over them except to forward the intangibles to the owner within a reasonable time or in the ordinary course of business, then such intangibles do not become an integral part of the owner’s business and are not localized in Kentucky and are not taxable. Board of Tax Supervisors v. Baldwin Piano Co., 296 Ky. 673 , 178 S.W.2d 212, 1944 Ky. LEXIS 613 ( Ky. 1944 ).

Intangible personal property has its legal situs at the domicile of its owner, except where the property is so employed in business in a state other than that of the owner’s domicile as to acquire a business situs therein. Commonwealth ex rel. Luckett v. Radio Corp. of America, 299 Ky. 44 , 184 S.W.2d 250, 1944 Ky. LEXIS 1029 ( Ky. 1944 ).

While a railroad company did have the power to buy and sell securities to facilitate its corporate purposes as a common carrier, the company could not maintain that it was operating an independent and separate securities business having a business situs in New York to exempt it from ad valorem taxation in Kentucky. Commonwealth ex rel. Luckett v. Louisville & N. R. Co., 479 S.W.2d 15, 1972 Ky. LEXIS 286 (Ky.), cert. denied, 409 U.S. 949, 93 S. Ct. 269, 34 L. Ed. 2d 219, 1972 U.S. LEXIS 957 (U.S. 1972).

Foreign corporation, which conducted mercantile, manufacturing operations on leased premises in this state and did not offer evidence to show that its manufacturing operations in Kentucky were not local to Kentucky and independent of its manufacturing concerns at its domicile, failed to prove that the lease did not have a business situs within this State so as to avoid taxation of its intangible personal property, including a leasehold interest. Kentucky Dep't of Revenue v. Hobart Mfg. Co., 549 S.W.2d 297, 1977 Ky. LEXIS 408 ( Ky. 1977 ).

10. — —Debts.

Debts due to a resident of Kentucky are taxable in Kentucky, notwithstanding that the debtor is a nonresident and the debt can be enforced only in the courts of the state in which the debtor resides. Fidelity & Columbia Trust Co. v. Louisville, 245 U.S. 54, 38 S. Ct. 40, 62 L. Ed. 145, 1917 U.S. LEXIS 1787 (U.S. 1917).

A debt secured by a lien is taxable, but the lien itself is not taxable. A lien given merely for the purpose of indemnity against future loss is not taxable. Fayette Realty & Finance Co. v. Commonwealth, 229 Ky. 556 , 17 S.W.2d 722, 1929 Ky. LEXIS 810 ( Ky. 1929 ).

11. — —Corporate.

Intangible property of a domestic corporation is taxable for local purposes only at the place where the corporation has its principal office in the state, and not at places where it has branch offices. Covington v. Standard Oil Co., 137 Ky. 837 , 127 S.W. 480, 1910 Ky. LEXIS 636 ( Ky. 1910 ).

12. — —Royalties.

Where lessee of oil rights in land sold his interest in the lease to another, but reserved as part of the consideration the right to one-sixteenth of the oil produced from the lease, the right so reserved was taxable property. Mt. Sterling Oil & Gas Co. v. Ratliff, 127 Ky. 1 , 104 S.W. 993, 31 Ky. L. Rptr. 1229 , 1907 Ky. LEXIS 109 ( Ky. 1 907 ).

Royalties due owner of real estate from oil lease were taxable against him, as against contention that the value of the royalty interest could not be separately assessed from the land itself. Commonwealth by Revenue Agent v. Garrett, 202 Ky. 548 , 260 S.W. 379, 1924 Ky. LEXIS 766 ( Ky. 1924 ).

13. —Tangible.

Where tangible personal property has been exported to a foreign country, the state cannot inquire into the motives of the exporter, or levy a tax on the property on the theory that the sole purpose of the exporter was to avoid state taxation and therefore the property never lost its taxable situs in this state. Commonwealth v. Selliger, 126 Ky. 66 , 30 Ky. L. Rptr. 451 , 98 S.W. 1040, 1907 Ky. LEXIS 11 ( Ky. 1907 ), rev’d, Selliger v. Kentucky, 213 U.S. 200, 29 S. Ct. 449, 53 L. Ed. 761, 1909 U.S. LEXIS 1867 (1909) (on other grounds).

Tangible personal property permanently located outside of this state is not taxable in this state, though the owner resides in this state. Commonwealth v. Selliger, 126 Ky. 66 , 30 Ky. L. Rptr. 451 , 98 S.W. 1040, 1907 Ky. LEXIS 11 ( Ky. 1907 ), rev’d, Selliger v. Kentucky, 213 U.S. 200, 29 S. Ct. 449, 53 L. Ed. 761, 1909 U.S. LEXIS 1867 (1909) (on other grounds).

Tangible personal property having merely a temporary location at a place other than the domicile of the owner is not taxable at such place. Hill v. Caldwell, 134 Ky. 99 , 119 S.W. 749, 1909 Ky. LEXIS 357 ( Ky. 1909 ). See Semple v. Commonwealth, 181 Ky. 675 , 205 S.W. 789, 1918 Ky. LEXIS 601 ( Ky. 1918 ); John Ross & Co. v. Board of Sup'rs, 186 Ky. 589 , 217 S.W. 677, 1920 Ky. LEXIS 4 ( Ky. 1920 ); Commonwealth by Mays v. Union P. R. Co., 214 Ky. 339 , 283 S.W. 119, 1926 Ky. LEXIS 337 ( Ky. 1926 ); Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

There is a presumption that all tangible personal property in this state on the assessment date is subject to assessment at the place where it is located, and the owner seeking to avoid assessment has the burden of proving that the property was located at such place for only a temporary purpose. John Ross & Co. v. Board of Sup'rs, 186 Ky. 589 , 217 S.W. 677, 1920 Ky. LEXIS 4 ( Ky. 1920 ).

Tangible personal property that has no permanent location, or is transient, is taxable at the domicile of the owner. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

The more modern rule is that the actual situs of visible tangible personal property, and not the domicile of the owner, determines the place of taxation, and that tangible personal property may be taxed in the state where it is physically located. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 ( Ky. 1950 ), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (1950)

If it is determined that tangible personal property has a taxable situs within the state it is irrelevant that the property is employed in interstate transportation either by water or by land. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 (Ky.), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (U.S. 1950).

14. —Nonresident.

Tobacco which was purchased by a nonresident with the intention of shipping it to England in fulfillment of contracts made to deliver it to merchants there, but which was stored in warehouses in Kentucky on the assessment date and for several months prior and subsequent thereto awaiting the obtention of shipping facilities, had a taxable situs in Kentucky. John Ross & Co. v. Board of Sup'rs, 186 Ky. 589 , 217 S.W. 677, 1920 Ky. LEXIS 4 ( Ky. 1920 ).

Property sent into a state by a nonresident to be used or employed permanently there, must bear its fair share of the burden of taxation, although no one unit of such property is ever more than temporarily located within the taxing state, thus where the specific and individual items of property used and employed in the state are not continuously the same, but are constantly changing according to the exigencies of business, the tax should be fixed by an appraisement and valuation of the average amount of the property thus habitually used and employed. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 (Ky.), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (U.S. 1950).

15. —Taxable.

Warehouse receipts for whiskey are not taxable property, since they represent only a right of access to the warehoused goods. Selliger v. Kentucky, 213 U.S. 200, 29 S. Ct. 449, 53 L. Ed. 761, 1909 U.S. LEXIS 1867 (U.S. 1909). See Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

Where a refrigerator car company leased most of its cars to railroad companies for operation in other states, but operated some cars in Kentucky, those operated in Kentucky were taxable in Kentucky. Morrell Refrigerator Car Co. v. Commonwealth, 128 Ky. 447 , 108 S.W. 926, 32 Ky. L. Rptr. 1383 , 32 Ky. L. Rptr. 1389 , 1908 Ky. LEXIS 86 ( Ky. 1908 ).

The shares of federal joint stock land banks are taxable. Land v. Kentucky Joint Stock Land Bank, 279 Ky. 645 , 131 S.W.2d 838, 1939 Ky. LEXIS 327 ( Ky. 1939 ).

16. —Exemption.

Trade-marks are not taxable property. Commonwealth v. Kentucky Distilleries & Warehouse Co., 132 Ky. 521 , 116 S.W. 766, 1909 Ky. LEXIS 130 ( Ky. 1909 ).

Where a foreign corporation doing business in Kentucky does not receive sufficient income from its Kentucky business to defray expenses, money sent to Kentucky to pay expenses, and placed on deposit in Kentucky banks for that purpose, is not taxable in Kentucky. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ).

Notes given to mutual insurance company by its policyholders, which merely secured the obligation of the policyholders to pay assessments, were not taxable property in the hands of the company, the liability on such notes being contingent. Kentucky & Louisville Mut. Ins. Co. v. Commonwealth, 153 Ky. 824 , 156 S.W. 897, 1913 Ky. LEXIS 934 ( Ky. 1913 ).

The fact that a foreign insurance company had an executive office in this state, and its officers resided in this state, did not make subject to taxation in this state real estate mortgage bonds purchased by the company with funds derived from sources other than business done in this state, such bonds being kept at its home office in West Virginia. Commonwealth v. Consolidated Casualty Co., 170 Ky. 103 , 185 S.W. 508, 1916 Ky. LEXIS 18 ( Ky. 1916 ).

An unliquidated claim for damages for breach of contract is not taxable property. Commonwealth by Byars v. Travelers' Ins. Mach. Co., 181 Ky. 596 , 205 S.W. 561, 1918 Ky. LEXIS 550 ( Ky. 1918 ).

The agreement of the purchaser of mortgaged property to pay the mortgage and to indemnify the vendor against loss has no taxable value. Fayette Realty & Finance Co. v. Commonwealth, 229 Ky. 556 , 17 S.W.2d 722, 1929 Ky. LEXIS 810 ( Ky. 1929 ).

Where a corporation whose sole asset consisted of a piece of real estate mortgaged the real estate to a trustee to secure the amounts due the holders of its preferred stock, and then conveyed the real estate to a person who assumed the mortgage and agreed to pay the purchase price to the holders of the preferred stock in retirement of such stock, the deed reserving a lien to the corporation to secure it against any liability to the holders of its preferred stock which should not be paid by the purchaser of the real estate, the obligation of the purchaser to the corporation, and the lien securing such obligation, had no taxable value. Fayette Realty & Finance Co. v. Commonwealth, 229 Ky. 556 , 17 S.W.2d 722, 1929 Ky. LEXIS 810 ( Ky. 1929 ).

The fact that excursion steamers were used in coastwise traffic would not exempt them from an excise tax on their admissions, since the tax is upon the business done and is not upon navigation. Shannon v. Streckfus Steamers, Inc., 279 Ky. 649 , 131 S.W.2d 833, 1939 Ky. LEXIS 326 ( Ky. 1939 ).

The fact that excursion steamers were registered in another state would not exempt them from the ordinary rules respecting taxation of property or its use wholly within this state. Shannon v. Streckfus Steamers, Inc., 279 Ky. 649 , 131 S.W.2d 833, 1939 Ky. LEXIS 326 ( Ky. 1939 ).

17. —Mineral Leases.

Oil or gas leases are to be listed by the lessee for taxation in the county in which the leased premises are located. Mt. Sterling Oil & Gas Co. v. Ratliff, 127 Ky. 1 , 104 S.W. 993, 31 Ky. L. Rptr. 1229 , 1907 Ky. LEXIS 109 ( Ky. 1 907 ). See Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

Oil or gas leases, under which all property rights to the oil or gas that may be found in paying quantities on the leased premises are vested in the lessee, are taxable to the lessee. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

The interest of the lessor in a coal mining lease is subject to taxation, notwithstanding that the interest of the lessee in the lease, and the money received by the lessor in the way of royalties, are also taxed. Stepp v. Pike County Board of Sup'rs, 194 Ky. 176 , 238 S.W. 408, 1922 Ky. LEXIS 132 ( Ky. 1922 ).

The ordinary mining lease with a reserved royalty in the lessor has the effect to create distinct items of property for purposes of taxation in both the lessor and the lessee as to the minerals or mineral rights as distinguished from the ownership of the surface, and the lessor is liable not only for the taxes on the surface of his land but likewise upon the mineral rights reserved or created in him by the lease. Moss v. Board of Sup'rs, 203 Ky. 813 , 263 S.W. 368, 1924 Ky. LEXIS 1021 ( Ky. 1924 ).

18. —Mineral and Surface Estates.

The owner of land in fee is liable for taxes on both the mineral and surface estates. Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ).

19. —Bank Deposits.

Bank accounts in a Missouri bank, representing the profits of a business conducted in Missouri, were taxable in Kentucky where the owner of the accounts was a resident of Kentucky. Fidelity & Columbia Trust Co. v. Louisville, 245 U.S. 54, 38 S. Ct. 40, 62 L. Ed. 145, 1917 U.S. LEXIS 1787 (U.S. 1917).

20. —Claim in Litigation.

County bond was taxable property in hands of holder, notwithstanding that its value was questionable because of pending litigation in which county was seeking to avoid payment of bond. Boyd v. Commonwealth, 149 Ky. 656 , 149 S.W. 914, 1912 Ky. LEXIS 666 ( Ky. 1912 ).

21. —Railroad Rolling Stock.

Where foreign railroad company operated daily trains in and out of Kentucky, the average number of units of its rolling stock that were in Kentucky at all times were taxable in Kentucky. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

22. —Nonresident Business.

Where a nonresident established a business in Kentucky, which was managed by agents permanently residing in Kentucky, the bank accounts and business accounts of such business were taxable in Kentucky. Commonwealth v. R. G. Dun & Co., 126 Ky. 108 , 102 S.W. 859, 31 Ky. L. Rptr. 561 , 1907 Ky. LEXIS 19 ( Ky. 1907 ).

23. —Interstate Commerce.

Property in possession of common carriers in transit in interstate commerce is not taxable, at least as against the carrier. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

The fact that property is in the possession of a common carrier does not exempt it from taxation as against the owner, if the property is not moving in interstate commerce. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

Oil in the possession of a pipeline company, and in actual transit in interstate commerce, is not taxable against the company. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

24. Residence.

Where resident of Kentucky announced his intention to move to Texas and make his home there, and left Kentucky for that purpose a few days before the date as of which property is assessed in Kentucky, but did not reach Texas until several days after such date, he was a legal resident of Kentucky on the assessment date, his Texas residence not becoming effective until he reached that state. Boyd's Ex'r v. Commonwealth, 149 Ky. 764 , 149 S.W. 1022, 1912 Ky. LEXIS 716 ( Ky. 1912 ).

The committee of an incompetent has no power to change the legal residence of the incompetent from one state to another, although it may change his local residence. Sumrall's Committee v. Commonwealth, 162 Ky. 658 , 172 S.W. 1057, 1915 Ky. LEXIS 129 ( Ky. 1915 ).

Where a mental incompetent who had been a resident of Kentucky prior to being declared incompetent was sent by his committee to an asylum in another state for care and treatment, his residence for the purpose of taxation remained in Kentucky. Sumrall's Committee v. Commonwealth, 162 Ky. 658 , 172 S.W. 1057, 1915 Ky. LEXIS 129 ( Ky. 1915 ).

The fact that an individual purchased the controlling interest in a Kentucky corporation doing business in Louisville, maintained a personal checking account in a Louisville bank, and took a year’s lease on an apartment in Louisville, did not constitute him a resident of Kentucky for the purpose of taxation, where the purchase of the corporation was for a speculative purpose only, the banking account and apartment were used only for his convenience during trips to Louisville, and he spent the greater portion of his time in Texas, where he had a permanent dwelling and which he always claimed as his home. Semple v. Commonwealth, 181 Ky. 675 , 205 S.W. 789, 1918 Ky. LEXIS 601 ( Ky. 1918 ).

The fact that a person who was originally a resident of Tennessee bought a farm in Kentucky, improved and furnished the house on the farm and resided there a substantial portion of his time, personally managed the farm, kept a bank account in a Kentucky bank, and occasionally referred to the farm as his “home,” did not fix his legal residence in Kentucky, where he continued to maintain a home for his mother, brothers and sisters in Tennessee, where he kept his personal belongings, participated in church and lodge affairs, purchased a family cemetery lot there, and always claimed to be a resident of Tennessee. Millett's Ex'r v. Commonwealth, 184 Ky. 193 , 211 S.W. 562, 1919 Ky. LEXIS 39 ( Ky. 1919 ).

The fact that person who moved from Kentucky to Florida registered as a voter in Florida, listed his property for taxation there, and spent around half of his time there for a number of years, was sufficient to overcome the presumption, arising from the fact that he returned to Kentucky for several months each year, that he did not intend to establish a permanent residence in Florida. Utz v. Wallace's Adm'x, 249 Ky. 296 , 60 S.W.2d 614, 1933 Ky. LEXIS 510 ( Ky. 1933 ).

25. —Personal Representative.

In the case of the personal representative of an estate, his residence for the purpose of determining the situs of intangible property of the estate is in the state in which he was appointed as personal representative and to whose courts he is accountable, regardless of his actual residence as an individual. Commonwealth v. Peebles, 134 Ky. 121 , 119 S.W. 774, 1909 Ky. LEXIS 364 ( Ky. 1909 ).

26. —Beneficial Owner.

The provision of this section that a fiduciary or agent is not liable for taxes on intangible personalty held by him if the real or beneficial owner “resides” outside of this state refers to legal residence of the real or beneficial owner. Sumrall's Committee v. Commonwealth, 162 Ky. 658 , 172 S.W. 1057, 1915 Ky. LEXIS 129 ( Ky. 1915 ).

27. Apportioning Taxes.

Where foreign railroad company operated daily trains in and out of Kentucky, the average number or units of rolling stock was taxable according to its value, and not according to a percentage based on the ratio of mileage in Kentucky to out-of-state mileage. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

If the statutes imposing the tax provided a method of apportionment that method would be exclusive, but where the statutes did not prescribe any scheme for assessment, in taxing company’s towboats and barges court must look to see if the mileage basis was a fair and just method of calculating the aliquot part of company’s boats and barges which had acquired a tax situs in Kentucky and several taxing districts. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 (Ky.), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (U.S. 1950).

Where company conducted its operations throughout the year with relatively few interruptions and its tugs and barges moved along a route of 162 miles 94.6 percent of which was in Kentucky and thus had a taxable situs in Kentucky, to apportion the taxes against the company’s boats and barges in proportion to the length of the line operated and location in each state, county and other taxing jurisdictions was logical and fair. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 (Ky.), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (U.S. 1950).

28. Situs.

Cattle temporarily in pasture in a county other than that in which the owner resided were not taxable in such county. Hill v. Caldwell, 134 Ky. 99 , 119 S.W. 749, 1909 Ky. LEXIS 357 ( Ky. 1909 ).

Where resident managers and agents of foreign life insurance company collected premiums from policies issued to Kentucky residents, and placed them in Kentucky banks to the account of the company, and the money in such accounts was promptly transferred to the home office of the company by drafts drawn by the home office on the Kentucky banks, the resident managers having no authority to draw on the accounts and their expenses being paid by money forwarded from the home office, such bank accounts did not have a taxable situs in Kentucky. Commonwealth v. Prudential Life Ins. Co., 149 Ky. 380 , 149 S.W. 836, 1912 Ky. LEXIS 633 ( Ky. 1912 ).

Ordinarily intangible personal property follows the person of the owner, but its situs may be fixed elsewhere by the legislature. The legislature has the power to fix the situs of intangible property held in trust at the residence of the trustee or at the residence of the beneficial owner. Henderson v. Barrett's Ex'r, 152 Ky. 648 , 153 S.W. 992, 1913 Ky. LEXIS 718 ( Ky. 1913 ).

Real estate mortgage bonds secured by real estate located in Kentucky, purchased by a foreign insurance company with funds not accumulated from business done in Kentucky, did not have a taxable situs in Kentucky. Commonwealth v. Consolidated Casualty Co., 170 Ky. 103 , 185 S.W. 508, 1916 Ky. LEXIS 18 ( Ky. 1916 ).

The situs of tangible personal property is at the place where it has a permanent physical location, regardless of the residence of the owner. Millett's Ex'r v. Commonwealth, 184 Ky. 193 , 211 S.W. 562, 1919 Ky. LEXIS 39 ( Ky. 1919 ). See Commonwealth ex rel. Alexander v. Haggin, 99 S.W. 906, 30 Ky. L. Rptr. 788 (1907).

Intangible property, including bank accounts, held and managed in another state by a trustee residing in that state, for the benefit of a beneficiary residing in Kentucky, had a taxable situs in Kentucky. Bingham's Adm'r v. Commonwealth, 199 Ky. 402 , 251 S.W. 936, 1923 Ky. LEXIS 907 ( Ky. 1923 ).

Tobacco in the hands of a cooperative marketing association was subject to city taxation in the city in which the tobacco was warehoused. Burley Tobacco Growers' Co-op. Asso. v. Carrollton, 208 Ky. 270 , 270 S.W. 749, 1925 Ky. LEXIS 268 ( Ky. 1925 ).

Chattels transiently present in the transactions of commercial operations do not have a taxable situs within this state. Commonwealth by Mays v. Union P. R. Co., 214 Ky. 339 , 283 S.W. 119, 1926 Ky. LEXIS 337 ( Ky. 1926 ).

Oil in the possession of a pipeline company, awaiting shipment, was taxable at the domicile of the owner. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

Interest of Kentucky resident in assets of partnership engaged in operations on New York Stock Exchange was not taxable in Kentucky, where partnership accounts were carried with brokers in New York, securities traded in were carried in name of New York brokers, and trading was almost universally carried on in person by the Kentucky partner at the brokerage offices in New York, he spending more time there than in Kentucky. Commonwealth v. Madden's Ex'r, 265 Ky. 684 , 97 S.W.2d 561, 1936 Ky. LEXIS 551 ( Ky. 1936 ).

Life estate in trust created in another state for Kentucky resident who was to receive the income therefrom for life had its situs in Kentucky and said resident was required to list and pay taxes thereon. Commonwealth ex rel. Martin v. Sutcliffe, 283 Ky. 274 , 140 S.W.2d 1028, 1940 Ky. LEXIS 310 ( Ky. 1940 ).

Where boats and barges of company in carrying out business of company distributing annually approximately 500,000 tons of coal along a 162-mile route, 94.6 percent of which was within Kentucky, and the tugs and the barges, an indispensable part of the whole as designed by the company in the operation of its business, were as necessarily present in Kentucky as the loading and unloading facilities that had their situs in Ohio and West Virginia respectively, this continuity and consistency of presence in Kentucky attached such permanency as to take it out of the area of mere transiency or a sporadic and temporary presence and the parts of the whole received protection in Kentucky and thus they had acquired tax situs in Kentucky. Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 (Ky.), cert. denied, 340 U.S. 853, 71 S. Ct. 82, 95 L. Ed. 625, 1950 U.S. LEXIS 1535 (U.S. 1950).

Where a Kentucky resident entered into a trust agreement with a Georgia bank whereby she retained the right to control all purchases and sales which the trustee might make and to amend or revoke the trust agreement at any time, the trust did not become an integral portion of the business activity of Georgia so that it became identified with the economic structure of that state and was not exempt from taxation under the provisions of this statute. Kentucky Dep't of Revenue v. Bomar, 486 S.W.2d 532, 1972 Ky. LEXIS 111 ( Ky. 1972 ).

29. —Determination.

The situs of intangible personal property for purposes of taxation depends altogether on legislative enactment or judicial construction. Higgins v. Commonwealth, 126 Ky. 211 , 103 S.W. 306, 31 Ky. L. Rptr. 653 , 1907 Ky. LEXIS 44 ( Ky. 1907 ).

The situs of intangible personalty may be fixed by the legislature at a place other than the residence of the owner, but until the legislature chooses to exercise that power such property is taxable only at the residence of the owner. Commonwealth ex rel. Auditor's Agent v. Northwestern Mut. Life Ins. Co., 107 S.W. 233, 32 Ky. L. Rptr. 796 (1908).

The Legislature has the power to fix the taxable situs of intangible personal property, if it does not act arbitrarily in so doing. Exemption from taxation of intangible personal property owned by nonresidents did not violate Ky. Const., § 172. Commonwealth v. Sun Life Assurance Co., 294 Ky. 19 , 170 S.W.2d 890, 1943 Ky. LEXIS 376 ( Ky. 19 43 ).

30. —Property at Marketing Point.

Tobacco in warehouses of a tobacco processing and marketing corporation was taxable in the city in which the warehouses were situated, unless there for only a temporary purpose, regardless of the residence of the owners of the tobacco, so long as the owners had not listed and paid taxes on the tobacco at the place of their residence. Paris v. Burley Tobacco Soc., 154 Ky. 320 , 157 S.W. 705, 1913 Ky. LEXIS 78 ( Ky. 1913 ).

31. —Temporary.

An automobile and some furniture, kept in Louisville by a resident of Texas for his comfort and convenience when temporarily sojourning in Louisville, did not have a taxable situs in Kentucky. Semple v. Commonwealth, 181 Ky. 675 , 205 S.W. 789, 1918 Ky. LEXIS 601 ( Ky. 1918 ).

Property in transit, whether it is actually moving or has come to rest temporarily within the limits of a taxing district, does not acquire a taxable situs in such district. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

32. —Settlement of Estate.

When a decedent’s estate is in the hands of a personal representative for settlement and distribution, and before the estate has been or should have been settled or distributed, the personal representative should list the estate for taxation and pay taxes thereon in the state in which he qualified as personal representative, regardless of the residence of the beneficiaries of the estate and without reference to the extent of the debts or demands against the estate. Commonwealth v. Camden, 142 Ky. 365 , 134 S.W. 914, 1911 Ky. LEXIS 242 ( Ky. 1911 ).

33. —Railroad Rolling Stock.

Railroad freight cars owned by foreign railroad companies which neither owned nor operated any lines in Kentucky, but which cars were operated by other railroads in Kentucky from time to time under the customary per diem arrangement between railroads for the exchange of freight cars, did not have a taxable situs in Kentucky. Commonwealth by Mays v. Union P. R. Co., 214 Ky. 339 , 283 S.W. 119, 1926 Ky. LEXIS 337 ( Ky. 1926 ).

34. —Bank Deposits.

Bank deposits owned by nonresidents are not taxable in Kentucky unless the money represented by the deposits has a business situs in Kentucky arising from the use of the money in permanent business operations in Kentucky. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ).

Money on deposit in a New York bank to the joint credit of a Kentucky resident and her New York agent, which agent had the power to draw on the account and used the money to make investments for the Kentucky resident, had a taxable situs in Kentucky. Bingham's Adm'r v. Commonwealth, 199 Ky. 402 , 251 S.W. 936, 1923 Ky. LEXIS 907 ( Ky. 1923 ).

35. —Patent.

A patent right is an intangible, incorporeal right granted by the federal government and is as broad as the government’s jurisdiction, but it has no situs apart from the domicile of the owner. Commonwealth ex rel. Luckett v. Radio Corp. of America, 299 Ky. 44 , 184 S.W.2d 250, 1944 Ky. LEXIS 1029 ( Ky. 1944 ).

Where Delaware corporation, holding a patent on radio tubes, entered into a contract in New York with another Delaware corporation, which had its principal office and manufacturing plant in Kentucky, under which contract the manufacturing corporation was licensed to manufacture tubes under the patent in consideration of the payment of royalties, neither the debt for royalties due under the contract, nor the patent right, acquired a business situs in Kentucky. Commonwealth ex rel. Luckett v. Radio Corp. of America, 299 Ky. 44 , 184 S.W.2d 250, 1944 Ky. LEXIS 1029 ( Ky. 1944 ).

36. —Ocean-going Steamship.

Ocean-going steamships plying between New York and Havana, New York and New Orleans, and New York and Galveston were held not to have a permanent situs at either of such places, notwithstanding that they were enrolled at the port of New York, and they were therefore taxable at the domicile of the owner in Kentucky. Southern Pacific Co. v. Kentucky, 222 U.S. 63, 32 S. Ct. 13, 56 L. Ed. 96, 1911 U.S. LEXIS 1857 (U.S. 1911).

Evidence consisting of federal census reports, reports of state board of equalization, reports of state tax commissioner (now property valuation administrator), and affidavits of individuals from different counties, was sufficient to support finding that property was being intentionally, systematically and notoriously assessed at only a percentage of its value, and to overcome presumption that assessing officers did their duty. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

Assessment of the franchise of a public service corporation at its full value may be enjoined if other intangible property is being uniformly assessed by local assessing officers at only a percentage of its value. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (1984). See Greene v. Louisville & I. R. Co., 244 U.S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, 1917 U.S. LEXIS 1660 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

Collection of state taxes based upon an assessment at full value may be enjoined in a suit in federal court against the state assessing and collecting officers, where other property is being uniformly assessed at only a percentage of its value. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

Where the lease provides that a portion of the oil or gas shall be received by the lessor as royalty, the value of such portion is to be deducted in fixing the value of the lease. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

Amounts due whiskey warehouseman for storage of whiskey had an ascertainable market value, notwithstanding that amounts were not payable at time of assessment and persons owning whiskey might elect to abandon it. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

In assessing mining property for taxation the lack of a willing purchaser does not necessarily import that the property has no taxable value at that time for in such cases other factors such as net revenue, dividends, or profit that may be realized upon the operation of a going mine, its prospects of continuing such operation and the prospective length of time thereof, the material that had to be mined, and the physical condition of the property may be looked to for the purpose of fixing a correct market value for valuation. Carr's Fork Coal Co. v. Perry County Board of Supervisors, 263 Ky. 642 , 93 S.W.2d 359, 1936 Ky. LEXIS 232 ( Ky. 1936 ). See Letcher County Fiscal Court v. State Tax Com., 211 Ky. 609 , 277 S.W. 988, 1925 Ky. LEXIS 933 ( Ky. 1925 ); Board of Sup'rs v. Swift Coal & Timber Co., 238 Ky. 21 , 36 S.W.2d 664, 1931 Ky. LEXIS 176 ( Ky. 1931 ); Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ); Atlantic States Coal Corp. v. Letcher County, 246 Ky. 549 , 55 S.W.2d 408, 1932 Ky. LEXIS 810 ( Ky. 1932 ); Kenmont Coal Co. v. Perry County Board of Sup'rs, 262 Ky. 764 , 91 S.W.2d 47, 1936 Ky. LEXIS 95 ( Ky. 1936 ).

In the case of a going plant, it is not proper to value each separate item of property constituting a part of the plant at the price it would bring if it were sold separately, and then add the separate values together. The plant should be treated as a unit, and the parts composing the unit should be assessed at the value they have as parts of the unit. Carr's Fork Coal Co. v. Perry County Board of Supervisors, 263 Ky. 642 , 93 S.W.2d 359, 1936 Ky. LEXIS 232 ( Ky. 1936 ).

Assessed valuation of property was fixed by court at 60 percent of fair cash value, where county and city had adopted that standard for assessing property, since all taxpayers must be treated alike. Prestonsburg Water Co. v. Prestonsburg Board of Sup'rs, 279 Ky. 551 , 131 S.W.2d 451, 1939 Ky. LEXIS 305 ( Ky. 1939 ), overruled, Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ).

37. —Unequal.

Taxpayer could not obtain relief from assessment of his intangible property at its full value without showing that other intangible property was being uniformly and knowingly assessed throughout the state at only a percentage of its value. It was not enough to show that tangible property, or other intangibles in the same county, was being assessed at a percentage of its value. Siler v. Board of Sup'rs, 221 Ky. 100 , 298 S.W. 189, 1927 Ky. LEXIS 669 ( Ky. 1927 ).

In order to obtain relief from an assessment of his property at its full value, the taxpayer must show that there has been an intentional assessment of other property in the same class at only a percentage of its value. Siler v. Board of Sup'rs, 221 Ky. 100 , 298 S.W. 189, 1927 Ky. LEXIS 669 ( Ky. 1927 ).

38. Fair Cash Value.

In determining the fair cash value of a manufacturing plant, such as a distillery, where it is difficult to determine the sale value because of the infrequency of sales of that kind of property, the limited number of persons who have the financial ability to become purchasers, the small number of such plants in comparison with other species of property, and the dissimilarity in size and equipment of the various plants, the assessors must take into consideration the conditions and circumstances that surround the particular case, such as the extent and location of the property, its accessibility to market, transportation facilities, cost of equipment and construction, and its adaptability for the purpose. Eminence Distillery Co. v. Henry County Board of Sup'rs, 178 Ky. 811 , 200 S.W. 347, 1918 Ky. LEXIS 473 ( Ky. 1918 ).

The price that a piece of property would bring at a forced or involuntary sale is not to be considered as a basis for determining the fair cash value of the property, but the willingness of the owner to sell, the presence of a person desiring to buy, and the contemplation of a sale being made, must all be considered. Eminence Distillery Co. v. Henry County Board of Sup'rs, 178 Ky. 811 , 200 S.W. 347, 1918 Ky. LEXIS 473 ( Ky. 1918 ).

Property is taxable if it has a cash value. It has value if at a fair, voluntary sale it would bring anything. Estill County v. Superior Oil Corp., 210 Ky. 539 , 276 S.W. 527, 1925 Ky. LEXIS 724 ( Ky. 1925 ).

It was error to fix value of oil leases at a percentage of the gross income from the leases for the taxing period; the only permissible basis of valuation is the price the leases would bring at a fair, voluntary sale. Estill County v. Superior Oil Corp., 210 Ky. 539 , 276 S.W. 527, 1925 Ky. LEXIS 724 ( Ky. 1925 ).

The value of property for tax purposes is its fair cash value as of the assessment date, and not what it was worth in the past or might be worth in the future. Atlantic States Coal Corp. v. Letcher County, 246 Ky. 549 , 55 S.W.2d 408, 1932 Ky. LEXIS 810 ( Ky. 1932 ).

The fact that a willing purchaser is not obtainable at the time of assessment does not import that the property has no taxable value. In such a case, the net revenue that may be realized from the operation of the property, the prospects of continued operation, its physical condition, and the value of the various components of which the property consists, may be considered in fixing the value. Carr's Fork Coal Co. v. Perry County Board of Supervisors, 263 Ky. 642 , 93 S.W.2d 359, 1936 Ky. LEXIS 232 ( Ky. 1936 ).

Amount paid for purchase of property and amount expended in improvements are not a proper criterion in fixing fair value, but are elements to be considered. Prestonsburg Water Co. v. Prestonsburg Board of Sup'rs, 279 Ky. 551 , 131 S.W.2d 451, 1939 Ky. LEXIS 305 ( Ky. 1939 ), overruled, Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ).

It is the legislative intent that all property be assessed at its fair cash value, which should be the controlling standard to which all other considerations must yield. Rogers v. Pike County Bd. of Sup'rs., 288 Ky. 742 , 157 S.W.2d 346, 1941 Ky. LEXIS 199 ( Ky. 1941 ).

The value, for taxation purposes, of a life estate paying the holder $900 a month should be determined by mortality tables and the fact that such are used to arrive at value rather than speculative opinion evidence as to the cash value such an estate estimated at the price it would bring at a fair voluntary sale does not violate the spirit or intent of this section. Evans v. Boyle County Board of Sup'rs, 296 Ky. 353 , 177 S.W.2d 137, 1944 Ky. LEXIS 538 ( Ky. 1944 ).

39. —Reduction to Percentage of Value.

Where the circuit court, on appeal from the county board of supervisors, found that the fair cash value of the property involved was a certain sum, but it was established by proof that all other property in the county was uniformly assessed at only 60 percent of its value, it was the duty of the court to fix the value of the property in question at only 60 percent of its actual value, thus affording the only practical remedy available. Eminence Distillery Co. v. Henry County Board of Sup'rs, 178 Ky. 811 , 200 S.W. 347, 1918 Ky. LEXIS 473 ( Ky. 1918 ).

40. —Private Sale.

Where land was sold at private sale shortly before the assessment date, and there was nothing to indicate that the sale was not a fair, voluntary sale, the price paid for the land should have been considered as the fair cash value of the land for tax purposes. Westova Gas Co. v. Knott County Board of Sup'rs, 246 Ky. 334 , 55 S.W.2d 21, 1932 Ky. LEXIS 764 ( Ky. 1932 ).

41. Taxation by Another State.

The fact that property is taxed in one state does not necessarily exclude such property from taxation in another state. Fidelity & Columbia Trust Co. v. Louisville, 245 U.S. 54, 38 S. Ct. 40, 62 L. Ed. 145, 1917 U.S. LEXIS 1787 (U.S. 1917).

Cited in:

Planters Bank & Trust Co. v. Hopkinsville, 289 Ky. 451 , 159 S.W.2d 25, 1942 Ky. LEXIS 584 ( Ky. 1942 ); County Board of Tax Sup’rs v. Helm, 297 Ky. 803 , 181 S.W.2d 452, 1944 Ky. LEXIS 832 ( Ky. 1944 ); Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ); Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 ( Ky. 1950 ); Kentucky Tax Com. v. Jefferson Motel, Inc., 387 S.W.2d 293, 1965 Ky. LEXIS 465 ( Ky. 1965 ); Koehler v. Commonwealth, 432 S.W.2d 397, 1968 Ky. LEXIS 325 ( Ky. 1968 ).

Opinions of Attorney General.

The fact that the equipment of a West Virginia contractor doing a job in Kentucky could be assessed for taxation in both states does not constitute prohibited double taxation. OAG 61-975 .

Stock in a bank which is domiciled in Tennessee is an intangible and is taxable under this section irrespective of the fact that the owner may also have to pay a tax on the same stock in Tennessee. OAG 63-216 .

Property held in trust for the DAR, the Glasgow Garden Club, the Glasgow Business and Professional Women’s Club, and the Glasgow Matinee Music Club, is assessable under this section since the beneficial owners of the property do not qualify for an exemption as institutions of purely public charity under Ky. Const., § 170. OAG 66-122 .

A mortgage and deed of trust secured by real estate and other tangible property is not a property interest subject to ad valorem property tax under subsection (2) of KRS 132.020 nor intangible property subject to tax under this section. OAG 74-352 .

There is a presumption that all tangible personal property, such as motor vehicles, in the city on the assessment date is subject to assessment for taxes by the city, and the owner who seeks to avoid the assessment has the burden of proving that the property is located in the city for only a temporary purpose and was listed for taxes at some other place. OAG 74-369 .

If the property currently used for parking purposes by a church group is in excess of the applicable acre limitation, any excess is not exempt from taxation under the laws of this Commonwealth as long as it is not used also for worship services or as a parsonage. OAG 78-180 .

Under this section, all real and personal property within this state is subject to taxation, unless exempted by the Constitution and while household goods of a person used in his home are exempt from taxation, under § 170 of the Kentucky Constitution, the personal property of the taxpayer used in his business or profession is not exempt, which means a lawyer would have to list for taxes the personal tangible property in his law office, which could include law library, bookcases, typewriters, filing cabinets and other items of equipment used in that office. OAG 79-140 .

In connection with transfer of notes secured by mortgages on single-family dwellings within this state, where neither the corporation owning and holding the notes nor the corporation proposing to purchase them was a resident of Kentucky, the secured notes would not be subject to state or local ad valorem taxation. OAG 82-264 .

Where the property to be assessed has recently been sold and thus the assessment is being made not on the basis of an estimate but on the basis of the actual consideration recently paid, no deduction should be made for broker’s commissions, financing costs or other similar items. OAG 83-13 .

The tax assessor is not restricted to one specific method for assessing real property so long as the assessment is fair and equitable. OAG 83-13 .

Research References and Practice Aids

Cross-References.

Generally, Ky. Const., §§ 3, 170.

Airport revenue bonds, KRS 183.650 .

Airports, city and county, KRS 97.252 .

Bonds of housing authorities, KRS 80.560 .

Bonds of public road districts, KRS 184.260 .

Bonds of state, counties, cities and taxing districts, Ky. Const., § 171.

Classification of property for taxation, referendum, Ky. Const., § 171.

Corporate property to pay same rate as individual property, Ky. Const., § 174.

Electric and water plant of a third-class city may pay tax equivalent, KRS 96.179 .

Parks, recreational projects, memorials and federal areas, KRS 97.130 , 97.160 , 97.252 , 97.670 , 97.750 .

Power to tax, general assembly may confer on local authorities, Ky. Const., § 181.

Power to tax property, surrender of, Ky. Const., § 175.

Property exempt from taxation:

School building bonds, KRS 162.190 , 162.300 .

Sewer district for city of first class and surrounding area, property and bonds of, KRS 76.210 .

Special and local legislation regarding taxation not permitted, Ky. Const., § 59(15).

State fair board bonds, KRS 247.180 .

State teachers college building bonds, KRS 162.350 .

State warrants, KRS 41.200 .

Teacher retirement system funds and rights, KRS 161.700 .

Turnpikes, properties of and bonds for, KRS 177.510 .

Uniformity of taxes on property required, Ky. Const., § 171.

Value of property for taxation, how estimated, tax to be based on value, Ky. Const., §§ 172, 174.

Kentucky Law Journal.

Combs, Taxation — Constitutionality of Ad Valorem Taxes on Annuities Arising Out of Insurance Policies in Kentucky, 34 Ky. L.J. 316 (1946).

Muehlenkamp, Remedies for Disproportionate Tax Assessment in Kentucky, 36 Ky. L.J. 401 (1948).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.191. Valid valuation methods — Minimum applicable appraisal standards.

  1. The General Assembly recognizes that Section 172 of the Constitution of Kentucky requires all property, not exempted from taxation by the Constitution, to be assessed at one hundred percent (100%) of the fair cash value, estimated at the price the property would bring at a fair voluntary sale, and that it is the responsibility of the property valuation administrator to value property in accordance with the Constitution.
  2. The General Assembly further recognizes that property valuation may be determined using a variety of valid valuation methods, including but not limited to:
    1. A cost approach, which is a method of appraisal in which the estimated value of the land is combined with the current depreciated reproduction or replacement cost of improvements on the land;
    2. An income approach, which is a method of appraisal based on estimating the present value of future benefits arising from the ownership of the property;
    3. A sales comparison approach, which is a method of appraisal based on a comparison of the property with similar properties sold in the recent past; and
    4. A subdivision development approach, which is a method of appraisal of raw land:
      1. When subdivision and development are the highest and best use of the parcel of raw land being appraised; and
      2. When all direct and indirect costs and entrepreneurial incentives are deducted from the estimated anticipated gross sales price of the finished lots, and the resultant net sales proceeds are then discounted to present value at a market-derived rate over the development and absorption period.
  3. The valuation of a residential, commercial, or industrial tract development shall meet the minimum applicable appraisal standards established by:
    1. The Kentucky Department of Revenue, as stated in its Guidelines for Assessment of Vacant Lots, dated March 26, 2008; or
    2. The International Association of Assessing Officers.
  4. To be appraised using the subdivision development approach, a subdivision development shall consist of five (5) or more units. The appraisal of the development shall reflect deductions and discounts for:
    1. Holding costs, including interest and maintenance;
    2. Marketing costs, including commissions and advertising; and
    3. Entrepreneurial profit.

History. Enact. Acts 2012, ch. 94, § 1, effective July 12, 2012.

NOTES TO UNPUBLISHED DECISIONS

1. Income Generation Method.

Unpublished decision: Property Valuation Administrator did not err in its valuation of commercial real property under Ky. Const. § 172 and Ky. Rev. Stat. Ann. § 132.690 where the payments under the leasehold were indisputably benefits that arose out of the ownership of the property, and thus, it was not error to consider those payments in determining the property's fair cash value under the income generation approach of Ky. Rev. Stat. Ann. § 132.191(2)(b). Wilgreens, LLC v. O'Neill, 2016 Ky. App. Unpub. LEXIS 893 (Ky. Ct. App. Sept. 23, 2016), review denied, ordered not published, 2017 Ky. LEXIS 101 (Ky. Mar. 15, 2017).

132.192. Property tax exemption reciprocity.

All real and personal property owned by another state or a political subdivision of another state that is used exclusively for public purposes shall be exempt from taxation under this chapter if a comparable exemption is provided in that state or political subdivision for property owned by the Commonwealth of Kentucky or its political subdivisions.

History. Enact. Acts 2005, ch. 173, Pt. XXIII, § 1, effective March 20, 2005.

132.193. Assessment of possessory interests in tax-exempt personal property — Lessee’s liability.

  1. Leased personal property exempt from taxation when held by a natural person, association, or corporation in connection with a business conducted for profit, shall be subject to taxation in the same amount and to the same extent as though the lessee were the owner of the property, except personal property used in vending stands operated by blind persons under the auspices of the Division of Kentucky Business Enterprise.
  2. Taxes shall be assessed to lessees of exempt personal property and collected in the same manner as taxes assessed to owners of other personal property, except that taxes due under this section shall not become a lien against the personal property. When due, such taxes shall constitute a debt due from the lessee to the state, county, school district, special district, city, urban-county government, charter county, consolidated local government, or unified local government for which the taxes were assessed and if unpaid shall be recoverable by the state as provided in KRS Chapter 134.

History. Enact. Acts 1988, ch. 146, § 1, effective July 15, 1988; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 321, effective July 13, 1990; 2006, ch. 211, § 16, effective July 12, 2006; 2009, ch. 10, § 34, effective January 1, 2010; 2019 ch. 146, § 7, effective June 27, 2019.

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 146, § 1, effective July 15, 1988) was also repealed by Acts 1990, ch. 415, § 2, effective July 13, 1990.

Legislative Research Commission Notes.

(7/13/90) Pursuant to Section 653(2) of 1990 House Bill 940, Acts Ch. 476, the repeal and reenactment of this section by that Act prevails over its repeal in another Act of the 1990 Regular Session.

132.195. Assessment of possessory interest in tax-exempt real or personal property — Lessee’s liability.

  1. When any real or personal property which is exempt from taxation is leased or possession is otherwise transferred to a natural person, association, partnership, or corporation in connection with a business conducted for profit, the leasehold or other interest in the property shall be subject to state and local taxation at the rate applicable to real or personal property levied by each taxing jurisdiction.
  2. Subsection (1) of this section shall not apply to interests in:
    1. Industrial buildings, as defined under KRS 103.200 , owned and financed by a tax-exempt governmental unit or tax-exempt statutory authority under the provisions of KRS Chapter 103, the taxation of which is provided for under the provisions of KRS 132.020 and 132.200 ;
    2. Federal property for which payments are made in lieu of taxes in amounts equivalent to taxes which might otherwise be lawfully assessed;
    3. Property of any state-supported educational institution;
    4. Vending stand locations and facilities operated by blind persons under the auspices of the Division of Kentucky Business Enterprise, regardless of whether the property is owned by the federal, state, or a local government;
    5. Property of any free public library;
    6. Property in Fayette County, Kentucky, administered by the Department of Military Affairs, Bluegrass Station Division;
    7. All privately owned leasehold interests in residential property when the residential property is owned in fee simple by a purely public charity as of July 1, 2020:
      1. When the real property includes a residential property unit that is:
        1. Leased by the purely public charity for a period of at least one (1) year to an individual person who is fifty-five (55) years of age or older;
        2. Maintained as the individual person’s permanent residence under a lease agreement that:
          1. Prohibits the lessee from subleasing the unit; and
          2. Provides that the lessee’s possessory interest in the unit is terminable by the lessor upon the death of the lessee, the physical or mental inability of the lessee to continue to reside in the unit, or the lessee’s relocation to a nursing home or similar assisted living facility; and
        3. Constructed on or before July 1, 2020, or constructed after July 1, 2020, on land that was privately owned in fee simple by the purely public charity on or before July 1, 2020;
      2. If the fee simple ownership is transferred by the purely public charity after July 1, 2020, it shall be transferred to another purely public charity and the requirements established for the residential property unit in subparagraph 1. of this paragraph shall be maintained; and
      3. The taxation of which is provided for under KRS 132.020 and 132.200 ; or
    8. All privately owned leasehold interests in residential property owned in fee simple by a purely public charity, which is exempt from ad valorem taxation under Kentucky Constitution Section 170, when the residential property unit is leased by the purely public charity to an individual person who is:
      1. Receiving medical or educational supportive services from the purely public charity; and
        1. A postsecondary educational participant; 2. a. A postsecondary educational participant;
        2. A minor;
        3. Sick, disabled, or impoverished; or
        4. Over the age of sixty-five (65).
  3. Taxes shall be assessed to lessees of exempt real or personal property and collected in the same manner as taxes assessed to owners of other real or personal property, except that taxes due under this section shall not become a lien against the property. When due, such taxes shall constitute a debt due from the lessee to the state, county, school district, special district, or urban-county government for which the taxes were assessed and if unpaid shall be recoverable by the state as provided in KRS Chapter 134.

History. Enact. Acts 1988, ch. 146, § 2, effective July 15, 1988; 1990, ch. 415, § 1, effective July 13, 1990; 1990, ch. 476, Pt. V, § 322, effective July 13, 1990; 2006, ch. 211, § 17, effective July 12, 2006; 2009, ch. 10, § 35, effective January 1, 2010; 2013, ch. 32, § 159, effective March 19, 2013; 2019 ch. 146, § 8, effective June 27, 2019; 2020 ch. 91, § 60, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 79 provides that the changes made to this statute in Section 60 of that Act apply to privately owned leasehold interests in residential property assessed on or after January 1, 2021.

(7/13/90) The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

1. Nonprofit Use.
2. —No Exemption.

It was error to adjudge individuals’ leasehold interests in airport property to be used for building and maintaining an airplane hangar exempt from taxation because no profit was earned in connection with such property. No exemption is provided for exempt property held by nonprofit natural persons, associations or partnerships. Pike County Bd. of Assessment Appeals & Revenue Cabinet v. Friend, 932 S.W.2d 378, 1996 Ky. App. LEXIS 110 (Ky. Ct. App. 1996).

Real property owned by a charity, but exclusively occupied by several residents, was not entitled to the charitable exemption in the Kentucky Constitution because the residences were not occupied by tax exempt entities; the residents' respective possessory interests was subject to ad valorem taxation. However, the fair market value of each resident's respective possessory interest was improperly assessed; the fair market value was obtained by subtracting the fair market value of the particular unit with the resident's leasehold from the fair market value of the unit without the leasehold. Grand Lodge of Ky. Free & Accepted Masons v. City of Taylor Mill, 2017 Ky. App. LEXIS 28 (Ky. Ct. App.), sub. op., 2017 Ky. App. Unpub. LEXIS 949 (Ky. Ct. App. Feb. 10, 2017).

Opinions of Attorney General.

Subsection (1) of this section attempts to levy an ad valorem tax on the fair cash value of the property against the lessee of the property and, accordingly, this section is unconstitutional and unenforceable. OAG 89-89 (opinion prior to 1990 amendment).

This section sets up an irrebutable presumption that the fair cash value of any leasehold interest will always equal the fair cash value of the fee, and this is patently unconstitutional. OAG 89-89 .

132.200. Property subject to state tax only.

All property subject to taxation for state purposes shall also be subject to taxation in the county, city, school, or other taxing district in which it has a taxable situs, except the class of property described in KRS 132.030 and the following classes of property, which shall be subject to taxation for state purposes only:

  1. Farm implements and farm machinery owned by or leased to a person actually engaged in farming and used in his farm operation;
  2. Livestock, ratite birds, and domestic fowl;
  3. Capital stock of savings and loan associations;
  4. Machinery actually engaged in manufacturing, products in the course of manufacture, and raw material actually on hand at the plant for the purpose of manufacture. The printing, publication, and distribution of a newspaper or operating a job printing plant shall be deemed to be manufacturing;
    1. Commercial radio and television equipment used to receive, capture, produce, edit, enhance, modify, process, store, convey, or transmit audio or video content or electronic signals which are broadcast over the air to an antenna; (5) (a) Commercial radio and television equipment used to receive, capture, produce, edit, enhance, modify, process, store, convey, or transmit audio or video content or electronic signals which are broadcast over the air to an antenna;
    2. Equipment directly used or associated with the equipment identified in paragraph (a) of this subsection, including radio and television towers used to transmit or facilitate the transmission of the signal broadcast, but excluding telephone and cellular communications towers; and
    3. Equipment used to gather or transmit weather information;
  5. Unmanufactured agricultural products. They shall be exempt from taxation for state purposes to the extent of the value, or amount, of any unpaid nonrecourse loans thereon granted by the United States government or any agency thereof, and except that cities and counties may each impose an ad valorem tax of not exceeding one and one-half cents ($0.015) on each one hundred dollars ($100) of the fair cash value of all unmanufactured tobacco and not exceeding four and one-half cents ($0.045) on each one hundred dollars ($100) of the fair cash value of all other unmanufactured agricultural products, subject to taxation within their limits that are not actually on hand at the plants of manufacturing concerns for the purpose of manufacture, nor in the hands of the producer or any agent of the producer to whom the products have been conveyed or assigned for the purpose of sale;
  6. All privately owned leasehold interest in industrial buildings, as defined under KRS 103.200 , owned and financed by a tax-exempt governmental unit, or tax-exempt statutory authority under the provisions of KRS Chapter 103, except that the rate shall not apply to the proportion of value of the leasehold interest created through any private financing;
  7. Tangible personal property which has been certified as a pollution control facility as defined in KRS 224.1-300 . In the case of tangible personal property certified as a pollution control facility which is incorporated into a landfill facility, the tangible personal property shall be presumed to remain tangible personal property for purposes of this subsection if the tangible personal property is being used for its intended purposes;
  8. Property which has been certified as an alcohol production facility as defined in KRS 247.910 ;
  9. On and after January 1, 1977, the assessed value of unmined coal shall be included in the formula contained in KRS 132.590(9) in determining the amount of county appropriation to the office of the property valuation administrator;
  10. Tangible personal property located in a foreign trade zone established pursuant to 19 U.S.C. sec. 81 , provided that the zone is activated in accordance with the regulations of the United States Customs Service and the Foreign Trade Zones Board;
  11. Motor vehicles qualifying for permanent registration as historic motor vehicles under the provisions of KRS 186.043 . However, nothing herein shall be construed to exempt historical motor vehicles from the usage tax imposed by KRS 138.460 ;
  12. Property which has been certified as a fluidized bed energy production facility as defined in KRS 211.390 ;
  13. All motor vehicles:
    1. Held for sale in the inventory of a licensed motor vehicle dealer, including motor vehicle auction dealers, which are not currently titled and registered in Kentucky and are held on an assignment pursuant to the provisions of KRS 186A.230 ;
    2. That are in the possession of a licensed motor vehicle dealer, including licensed motor vehicle auction dealers, for sale, although ownership has not been transferred to the dealer; and
    3. With a salvage title held by an insurance company;
  14. Machinery or equipment owned by a business, industry, or organization in order to collect, source separate, compress, bale, shred, or otherwise handle waste materials if the machinery or equipment is primarily used for recycling purposes as defined in KRS 139.010 ;
  15. New farm machinery and other equipment held in the retailer’s inventory for sale under a floor plan financing arrangement by a retailer, as defined under KRS 365.800;
  16. New boats and new marine equipment held for retail sale under a floor plan financing arrangement by a dealer registered under KRS 235.220 ;
  17. Aircraft not used in the business of transporting persons or property for compensation or hire if an exemption is approved by the county, city, school, or other taxing district in which the aircraft has its taxable situs;
  18. Federally documented vessels not used in the business of transporting persons or property for compensation or hire or for other commercial purposes, if an exemption is approved by the county, city, school, or other taxing district in which the federally documented vessel has its taxable situs;
  19. Any nonferrous metal that conforms to the quality, shape, and weight specifications set by the New York Mercantile Exchange’s special contract rules for metals, and which is located or stored in a commodity warehouse and held on warrant, or for which a written request has been made to a commodity warehouse to place it on warrant, according to the rules and regulations of a trading facility. In this subsection:
    1. “Commodity warehouse” means a warehouse, shipping plant, depository, or other facility that has been designated or approved by a trading facility as a regular delivery point for a commodity on contracts of sale for future delivery; and
    2. “Trading facility” means a facility that is designated by or registered with the federal Commodity Futures Trading Commission under 7 U.S.C. secs. 1 et seq. “Trading facility” includes the Board of Trade of the City of Chicago, the Chicago Mercantile Exchange, and the New York Mercantile Exchange;
  20. Qualifying voluntary environmental remediation property for a period of three (3) years following the Energy and Environment Cabinet’s issuance of a No Further Action Letter or its equivalent, pursuant to the correction of the effect of all known releases of hazardous substances, pollutants, contaminants, petroleum, or petroleum products located on the property consistent with a corrective action plan approved by the Energy and Environment Cabinet pursuant to KRS 224.1-400 , 224.1-405 , or 224.60-135 , and provided the cleanup was not financed through a public grant program of the petroleum storage tank environmental assurance fund;
  21. Biotechnology products held in a warehouse for distribution by the manufacturer or by an affiliate of the manufacturer. For the purposes of this section:
    1. “Biotechnology products” means those products that are applicable to the prevention, treatment, or cure of a disease or condition of human beings and that are produced using living organisms, materials derived from living organisms, or cellular, subcellular, or molecular components of living organisms. Biotechnology products does not include pharmaceutical products which are produced from chemical compounds;
    2. “Warehouse” includes any establishment that is designed to house or store biotechnology products, but does not include blood banks, plasma centers, or other similar establishments;
    3. “Affiliate” means an individual, partnership, or corporation that directly or indirectly owns or controls, or is owned or controlled by, or is under common ownership or control with, another individual, partnership, or corporation;
  22. Recreational vehicles held for sale in a retailer’s inventory; and
  23. A privately owned leasehold interest in residential property described in KRS 132.195(2)(g), if an exemption is approved by the county, city, school, or other taxing district in which the residential property is located.

History. 4019a-5, 4019a-10, 4019a-16: amend. Acts 1948, ch. 207; 1954, ch. 159, § 1; 1965 (1st Ex. Sess.), ch. 2, § 12; 1968, ch. 152, § 103; 1970, ch. 185, § 1; 1974, ch. 137, § 5, effective June 21, 1974; 1976, ch. 84, § 5, effective March 29, 1976; 1978, ch. 116, § 1, effective June 17, 1978; 1978, ch. 404, § 2, effective March 30, 1978; 1980, ch. 210, § 7, effective July 15, 1980; 1982, ch. 229, § 2, effective July 15, 1982; 1984, ch. 169, § 2, effective July 13, 1984; 1986, ch. 359, § 2, effective July 15, 1986; 1986, ch. 431, § 17, effective Ju1y 15, 1986; 1986, ch. 476, § 6, effective July 15, 1986; 1990, ch. 106, § 3, effective July 13, 1990; 1990, ch. 461, § 2, effective July 13, 1990; 1990, ch. 476, Pt. V, § 323, effective July 13, 1990; 1991 (1st Ex. Sess.), ch. 12, § 47, effective February 26, 1991; 1992, ch. 8, § 1, effective July 14, 1992; 1992, ch. 338, § 22, effective July 14, 1992; 1994, ch. 68, § 3, effective July 15, 1994; 1996, ch. 254, § 26, effective July 15, 1996; 1998, ch. 55, § 2, effective July 15, 1998; 1998, ch. 168, § 2, effective July 15, 1998; 1998, ch. 266, § 2, effective July 15, 1998; 1998, ch. 385, § 2, effective July 15, 1998; 1998, ch. 600, § 9, effective April 14, 1998; 2000, ch. 327, § 3, effective July 14, 2000; 2001, ch. 55, § 1, effective June 21, 2001; 2002, ch. 324, § 2, effective July 15, 2002; 2005, ch. 25, § 1, effective June 20, 2005; 2005, ch. 168, § 57, effective January 1, 2006; 2007, ch. 100, § 3, effective June 26, 2007; 2008, ch. 81, § 1, effective July 15, 2008; 2008, ch. 95, § 18, effective August 1, 2008; 2010, ch. 24, § 98, effective July 15, 2010; 2013, ch. 94, § 3, effective June 25, 2013; 2013, ch. 119, § 8, effective January 1, 2014; 2014, ch. 128, § 5, effective July 15, 2014; 2016 ch. 93, § 3, effective July 15, 2016; 2020 ch. 91, § 62, effective April 15, 2020.

Compiler’s Notes.

Section 2 of Chapter 55 of the Acts of the 2001 Regular Session read: “This Act shall apply for property assessed on or after January 1, 2001.”

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 79 provides that the changes made to this statute in Section 62 of that Act apply to privately owned leasehold interests in residential property assessed on or after January 1, 2021.

(7/15/2014). 2014 Ky. Acts ch. 128, sec. 8 provides that the amendments to this statute made in 2014 Ky. Acts ch. 128, sec. 5, shall apply to property assessed on or after January 1, 2015.

(1/1/2014). 2013 Ky. Acts ch. 119, sec. 26, provides that the amendments to this statute in 2013 Ky. Acts ch. 119, sec. 8, shall apply to property assessed on or after January 1, 2014.

(1/1/2014). 2013 Ky. Acts ch. 119, sec. 24, provides, “It is the intent of the General Assembly that the changes made in [this statute and KRS 132.020 ], relating to tangible personal property which has been certified as a pollution control facility, are to clarify existing provisions in the law, as follows:

“(1) That the tax rate of fifteen cents ($0.15) upon each one hundred dollars ($100) of value only applies to tangible personal property which has been certified as a pollution control facility; and

(2) That only tangible personal property certified as a pollution control facility is subject to taxation for state purposes only while being exempt from taxation in the county, city, school, or other taxing district in which it has a taxable situs.”

(6/8/2011). The Reviser of Statutes has corrected a manifest clerical or typographical error in subsection (16) of this statute by changing the citation at the end of that subsection from “KRS 139.010 ” to “KRS 365.800.” This error occurred during the merger of amendments to this statute in 2008 Ky. Acts ch. 81, sec. 1, and ch. 95, sec. 18.

(7/15/2008). 2008 Ky. Acts ch. 81, sec. 2, provides that the amendments to this section in 2008 Ky. Acts ch. 81, sec. 1, apply to assessments made on or after January 1, 2009.

(6/20/2005). 2005 Ky. Acts ch. 25, § 2, provides that the amendments to subsection (23) of this section shall apply for tax assessment dates on or after January 1, 2002.

(3/18/2005). 2000 Ky. Acts ch. 168, § 171, provides that: “Sections 55 (KRS 132.020 ) and 57 (132.200) of this Act, relating to property tax changes, take effect on January 1, 2006, except the changes made to paragraph (c) of subsection (1) of Section 55, relating to the voluntary environmental remediation credit, paragraph (a) of subsection (2) of Section 55, and paragraph (a) of subsection (4) of Section 55 of this Act, relating to new property and the state property assessment, and subsection (21) of Section 57 of this Act (subsection (22) of this version) which shall take effect on the effective date of this Act and which shall apply to tax years beginning on or after January 1, 2005.”

(6/21/2001). Under KRS 446.280 , the words “or leased to” have been restored to subsection (1) of this statute after the words “owned by.” The phrase was added to subsection (1) by 1986 Ky. Acts ch. 359, sec. 2, but was inavertently omitted from the drafting database. Because of this, several subsequent acts amending this statute failed to include the phrase, and it mistakenly was not included in some codifications of this statute, although it had not been deleted by legislative action using the requisite brackets and strikethrough.

(7/13/90) The two Acts amending this section prevail over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts ch. 476. The amending acts do not appear to conflict and have been compiled together.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Manufacturing.
  3. —Machinery.
  4. Electronic Broadcasting Equipment.
  5. Unmanufactured Agricultural Products.
  6. Industrial Development.
  7. Raw Material.
  8. Exemption.
  9. —Strict Construction.
  10. —Discriminatory.
  11. Procedure.
  12. Injunction Against Collection.
  13. Taxing Determination Upheld.
1. Constitutionality.

The exemption of unmanufactured agricultural products from local taxation, when in the hands of the producers or his agent for the purpose of sale, is constitutional. Owensboro v. Dark Tobacco Growers' Ass'n, 222 Ky. 164 , 300 S.W. 350, 1927 Ky. LEXIS 879 ( Ky. 1927 ).

2. Manufacturing.

Where company gathered tobacco together by buying it from the farmer either directly or through a loose leaf warehouse and then rehandled, assorted and classified it by ordinary hand labor preparatory to its shipment to company’s various manufacturing plants situated in other cities, its texture remaining the same and unchanged as when bought and where it was subjected to no treatment or process which could have been said to have changed the character of the tobacco from its original state to a new and different article it was evident that nothing was manufactured at the plant and such plant was not a manufacturing establishment within the meaning of this section and thus such tobacco was not exempt from local taxation. American Tobacco Co. v. Bowling Green, 181 Ky. 416 , 205 S.W. 570, 1918 Ky. LEXIS 558 ( Ky. 1918 ). See Henderson v. George Delker Co., 193 Ky. 248 , 235 S.W. 732, 1921 Ky. LEXIS 219 ( Ky. 1921 ); Ayer & Lord Tie Co. v. Commonwealth, 208 Ky. 606 , 271 S.W. 693, 1925 Ky. LEXIS 344 ( Ky. 1925 ); Hughes & Co. v. Lexington, 211 Ky. 596 , 277 S.W. 981, 1925 Ky. LEXIS 930 ( Ky. 1925 ); Commonwealth use of Rockcastle County v. W. J. Sparks Co., 222 Ky. 606 , 1 S.W.2d 1050, 1928 Ky. LEXIS 209 ( Ky. 1928 ), limited, Colley v. Eastern Coal Corp., 470 S.W.2d 338, 1971 Ky. LEXIS 275 ( Ky. 1971 ); Lexington v. Lexington Leader Co., 193 Ky. 107 , 235 S.W. 31, 1921 Ky. LEXIS 203 ( Ky. 1921 ).

The phrases “actually engaged in manufacturing” and “actually on hand at their plants for the purpose of manufacture” mean manufacturing at the place of taxation and not at some other place. American Tobacco Co. v. Bowling Green, 181 Ky. 416 , 205 S.W. 570, 1918 Ky. LEXIS 558 ( Ky. 1918 ). See Henderson v. George Delker Co., 193 Ky. 248 , 235 S.W. 732, 1921 Ky. LEXIS 219 ( Ky. 1921 ); Ayer & Lord Tie Co. v. Commonwealth, 208 Ky. 606 , 271 S.W. 693, 1925 Ky. LEXIS 344 ( Ky. 1925 ); Hughes & Co. v. Lexington, 211 Ky. 596 , 277 S.W. 981, 1925 Ky. LEXIS 930 ( Ky. 1925 ); Commonwealth use of Rockcastle County v. W. J. Sparks Co., 222 Ky. 606 , 1 S.W.2d 1050, 1928 Ky. LEXIS 209 ( Ky. 1928 ), limited, Colley v. Eastern Coal Corp., 470 S.W.2d 338, 1971 Ky. LEXIS 275 ( Ky. 1971 ); Lexington v. Lexington Leader Co., 193 Ky. 107 , 235 S.W. 31, 1921 Ky. LEXIS 203 ( Ky. 1921 ).

This section contemplates manufacturing at the place of taxation in order to exempt the raw material from local taxation. American Tobacco Co. v. Bowling Green, 181 Ky. 416 , 205 S.W. 570, 1918 Ky. LEXIS 558 ( Ky. 1918 ). See Henderson v. George Delker Co., 193 Ky. 248 , 235 S.W. 732, 1921 Ky. LEXIS 219 ( Ky. 1921 ); Ayer & Lord Tie Co. v. Commonwealth, 208 Ky. 606 , 271 S.W. 693, 1925 Ky. LEXIS 344 ( Ky. 1925 ); Hughes & Co. v. Lexington, 211 Ky. 596 , 277 S.W. 981, 1925 Ky. LEXIS 930 ( Ky. 1925 ); Commonwealth use of Rockcastle County v. W. J. Sparks Co., 222 Ky. 606 , 1 S.W.2d 1050, 1928 Ky. LEXIS 209 ( Ky. 1928 ), limited, Colley v. Eastern Coal Corp., 470 S.W.2d 338, 1971 Ky. LEXIS 275 ( Ky. 1971 ); Lexington v. Lexington Leader Co., 193 Ky. 107 , 235 S.W. 31, 1921 Ky. LEXIS 203 ( Ky. 1921 ).

These processes do not constitute “manufacturing”: (1) redrying and stemming of tobacco, preparatory to its being manufactured into tobacco products, Gray v. R. J. Reynolds Tobacco Co., 200 Ky. 47 , 252 S.W. 134, 1923 Ky. LEXIS 16 ( Ky. 1923 ); (2) sorting, classifying, stemming and curing of tobacco, P. Lorrilard Co. v. Ross, 183 Ky. 217 , 209 S.W. 39, 1919 Ky. LEXIS 475 ( Ky. 1919 ).

It is not the means or methods employed or the number or nature of the processes resorted to, but the result accomplished, that determines whether an article is manufactured or not. P. Lorrilard Co. v. Ross, 183 Ky. 217 , 209 S.W. 39, 1919 Ky. LEXIS 475 ( Ky. 1919 ). See Lexington v. Lexington Leader Co., 193 Ky. 107 , 235 S.W. 31, 1921 Ky. LEXIS 203 ( Ky. 1921 ); Henderson v. George Delker Co., 193 Ky. 248 , 235 S.W. 732, 1921 Ky. LEXIS 219 ( Ky. 1921 ).

If raw material is converted at a factory or plant into a finished product, complete and ready for the final use for which it is intended, or so completed that in the ordinary course of business it is ready to be put upon the open market for sale to any person wishing to buy it, it has been “manufactured.” Louisville & J. Zinmeister & Sons, 188 Ky. 570 , 222 S.W. 958, 1920 Ky. LEXIS 324 ( Ky. 1920 ).

“Actually” engaged in manufacturing means “really,” “in fact,” or “in truth.” Ayer & Lord Tie Co. v. Commonwealth, 208 Ky. 606 , 271 S.W. 693, 1925 Ky. LEXIS 344 ( Ky. 1925 ).

“Manufacturing” includes every kind of business whereby a different and useful article of commerce is produced by the application of labor or skill, by hand or machinery, to any kind of material. Hughes & Co. v. Lexington, 211 Ky. 596 , 277 S.W. 981, 1925 Ky. LEXIS 930 ( Ky. 1925 ).

Word “manufacture” is not susceptible of accurate, or all-embracing or all-exclusive definition, and meaning may vary according to circumstances of particular case, but one definition is “to work, as raw materials or partly wrought materials, into suitable forms for use.” Burke v. Stitzel-Weller Distillery, 284 Ky. 676 , 145 S.W.2d 861, 1940 Ky. LEXIS 565 ( Ky. 1940 ).

Where a fertilizer plant took various chemical elements such as nitrogen, phosphate, potash, sulfur, potassium and boron and blended them in the correct proportion according to the needs of a particular customer, and where the mixture, or blend, of these fertilizing components was determined primarily by a scientific soil analysis and by the crop and yield the farmer intended to grow, the business operation fell within the definition of “manufacturing” so as to exempt machinery and materials from local taxation. Shelby County Board of Assessment Appeals v. Gro-Green Chemical Co., 602 S.W.2d 155, 1980 Ky. LEXIS 233 ( Ky. 1980 ).

3. —Machinery.

A railroad spur track, rolling stock, teams and equipment used by a lumber company in hauling logs from its timber land to its sawmill was not machinery used in manufacturing, and was not exempt from local taxation. Dawkins Lumber Co. v. Caudill, 212 Ky. 484 , 279 S.W. 617, 1926 Ky. LEXIS 179 ( Ky. 1926 ).

The words “in course of manufacture,” in subsection (4) of this section, do not qualify “machinery,” and machinery used in manufacturing other products is exempt from local taxation. Kentucky & West Virginia Power Co. v. Holliday, 216 Ky. 78 , 287 S.W. 212, 1926 Ky. LEXIS 832 ( Ky. 1926 ).

Machinery used in bottling whiskey is exempt from local taxation, since whiskey is not ready for intended use until bottled. Burke v. Stitzel-Weller Distillery, 284 Ky. 676 , 145 S.W.2d 861, 1940 Ky. LEXIS 565 ( Ky. 1940 ).

The manufacturing machinery of a public utility is not subject to local taxation. Reeves v. Louisville Gas & Electric Co., 290 Ky. 25 , 160 S.W.2d 391, 1942 Ky. LEXIS 362 ( Ky. 1942 ).

An operation is “manufacturing” if the process takes something practically unsuitable for any common use and changes it so as to adapt it to such common use. Louisville v. Howard, 306 Ky. 687 , 208 S.W.2d 522, 1947 Ky. LEXIS 1024 ( Ky. 1947 ).

It was never the legislative intent to extend tax exemption of machinery beyond the machinery itself and the actual bases of such machinery. Louisville v. Howard, 306 Ky. 687 , 208 S.W.2d 522, 1947 Ky. LEXIS 1024 ( Ky. 1947 ).

If by the processing of the raw material at the plant, the material is converted into a finished product or is so completed that in the ordinary course of business of the concern it is ready to be put on the open market for sale to any person wishing to buy it, the plant which turns it out is a manufacturing establishment within the meaning of this section. Alcoa Mining Co. v. Dickerson, 242 S.W.2d 744, 1951 Ky. LEXIS 1067 ( Ky. 1951 ).

Television tower which merely acts as a support for antenna and cable which are used for transmission purposes is not property for the process of assembling the electromagnetic waves and thus is not exempt from local taxation under subsection (4) of this section. W. A. V. E., Inc. v. Louisville, 248 S.W.2d 701, 1952 Ky. LEXIS 747 ( Ky. 1952 ).

4. Electronic Broadcasting Equipment.

Cable caster’s coaxial cable was not exempt from local ad valorem tax as equipment used to broadcast electronic signals to an antenna because, although transformers used in connection with receiving cable television signals perform a function similar to that performed by an antenna in receiving standard radio or television signals, a transformer is not an antenna within the meaning of this section. Owensboro-On-The-Air, Inc. v. Tinius, 551 S.W.2d 831, 1977 Ky. App. LEXIS 710 (Ky. Ct. App. 1977).

5. Unmanufactured Agricultural Products.

Unmanufactured agricultural products owned by a manufacturer, but not on hand at his manufacturing plant, are subject only to the rate provided by subsection (6) of this section. Gray v. R. J. Reynolds Tobacco Co., 200 Ky. 47 , 252 S.W. 134, 1923 Ky. LEXIS 16 ( Ky. 1923 ).

6. Industrial Development.

The promotion of new and expanded industrial development, by providing tax benefits, is a fixed policy of the Commonwealth. Department of Revenue v. Spalding Laundry & Dry Cleaning Co., 436 S.W.2d 522, 1968 Ky. LEXIS 184 ( Ky. 1968 ).

7. Raw Material.

Raw material is exempt from local taxation only if it is on hand at the plant of a manufacturer for the purpose of being manufactured at that plant, and not for the purpose of being prepared for manufacture at some other plant. American Tobacco Co. v. Bowling Green, 181 Ky. 416 , 205 S.W. 570, 1918 Ky. LEXIS 558 ( Ky. 1918 ).

Raw material on hand at a factory or plant for the purpose of manufacturing is not exempt from local taxation unless the manufacture of such raw material at the plant where it is on hand is so complete that the product may be sent out from that plant and sold on the market as a finished product. P. Lorrilard Co. v. Ross, 183 Ky. 217 , 209 S.W. 39, 1919 Ky. LEXIS 475 ( Ky. 1919 ).

Rough lumber used by a manufacturer in crating his products for shipment does not constitute “raw material on hand for the purpose of manufacture,” and is not exempt from local taxation. Henderson v. George Delker Co., 193 Ky. 248 , 235 S.W. 732, 1921 Ky. LEXIS 219 ( Ky. 1921 ).

“Raw material” is not necessarily crude material in its natural state, but may include a product made from the crude material and which has undergone manufacturing processes and been converted into a distinct product from which an entirely different product may be made by means of additional manufacturing processes. Henderson v. George Delker Co., 193 Ky. 248 , 235 S.W. 732, 1921 Ky. LEXIS 219 ( Ky. 1921 ).

The stemming of tobacco and getting it into shape for the purposes of manufacture does not make it a manufactured article. Gray v. R. J. Reynolds Tobacco Co., 200 Ky. 47 , 252 S.W. 134, 1923 Ky. LEXIS 16 ( Ky. 1923 ).

Products in course of manufacture are not exempt from local taxation unless they are the property of the person doing the manufacturing. Ayer & Lord Tie Co. v. Commonwealth, 208 Ky. 606 , 271 S.W. 693, 1925 Ky. LEXIS 344 ( Ky. 1925 ).

Where two (2) companies engaged in the business of manufacturing railroad ties organized a third corporation to operate a plant at which the ties were creosoted and treated with preservatives, the corporation so organized constituted a separate legal entity, notwithstanding that the other two (2) companies owned all of its stock, and ties being treated by such corporation were subject to local taxation, since they were not the property of the corporation doing such manufacturing. Ayer & Lord Tie Co. v. Commonwealth, 208 Ky. 606 , 271 S.W. 693, 1925 Ky. LEXIS 344 ( Ky. 1925 ).

Raw material at the plant of a manufacturer for the purpose of manufacture is exempt from local taxation, regardless of whether such material was produced in this state. Illinois C. R. Co. v. Paducah, 228 Ky. 65 , 14 S.W.2d 172, 1929 Ky. LEXIS 474 ( Ky. 1929 ).

Rough lumber at a sawmill, one-third (1/3) of which is sold without further processing and two-thirds (2/3) further processed by the company, is a finished product and no part of it is exempt from local taxation under this section as “raw material—for the purpose of manufacture.” Stearns Coal & Lumber Co. v. Thomas, 295 Ky. 808 , 175 S.W.2d 505, 1943 Ky. LEXIS 342 ( Ky. 1943 ).

8. Exemption.

The property exempted from local taxation by this section is exempt from school taxes, although school taxes are ordinarily considered to be state taxes. Kentucky & West Virginia Power Co. v. Holliday, 216 Ky. 78 , 287 S.W. 212, 1926 Ky. LEXIS 832 ( Ky. 1926 ).

Contracts of tobacco growers with cooperative marketing association made the association agent of producers for purpose of sale, and not owner of tobacco, with result that tobacco in possession of association was exempt from local taxation under subsection (6) of this section. Owensboro v. Dark Tobacco Growers' Ass'n, 222 Ky. 164 , 300 S.W. 350, 1927 Ky. LEXIS 879 ( Ky. 1927 ).

In order for machinery and products in course of manufacture, and raw material on hand for the purpose of manufacture, to be exempt from local taxation, it is not necessary that the manufactured goods be designed for barter and sale; the exemption exists even though the manufactured products are wholly used or consumed by the manufacturer himself. Illinois C. R. Co. v. Paducah, 228 Ky. 65 , 14 S.W.2d 172, 1929 Ky. LEXIS 474 ( Ky. 1929 ).

The exemption of machinery, products in course of manufacture, and raw materials on hand for the purpose of manufacture, applies even though the business of manufacturing is only incidental to the real business of the owner. Illinois C. R. Co. v. Paducah, 228 Ky. 65 , 14 S.W.2d 172, 1929 Ky. LEXIS 474 ( Ky. 1929 ).

The value of property exempted by this section from county taxation but not exempted by the Constitution could not be included in the computation of all taxable property in the county for the purpose of determining the maximum debt limit of the county under Const., § 158. Monroe County v. County Debt Com., 247 S.W.2d 507, 1952 Ky. LEXIS 708 ( Ky. 1952 ).

Declaratory judgment to the effect that property exempted from county taxation by this section should be included in the computation of all taxable property in county for purpose of determining maximum debt limit of county under Const., § 158 was not res judicata and binding on state local finance officer and county budget commission where such action was but a ruse to deprive finance officer and commission of jurisdiction given them by KRS 66.210 (repealed) and 66.310 in approving of bond issues, where neither the finance officer nor the commission were a party to the action and where the judgment was not appealed. Monroe County v. County Debt Com., 247 S.W.2d 507, 1952 Ky. LEXIS 708 ( Ky. 1952 ).

If machinery is not owned by a corporation actually engaged in manufacturing, it does not fall within the statutory exception. United Shoe Machinery Corp. v. McCracken County, 265 S.W.2d 929, 1953 Ky. LEXIS 1261 (Ky. Ct. App. 1953).

It is not clear whether the exemption for an industrial building that is “owned and financed” by a tax-exempt entity under subsection (8) (now (7)) was intended to apply after the collateral is no longer financed; therefore, the statute must be construed against the taxpayers and they are not permitted to take advantage of the exemption and the reduced state rate pursuant to KRS 132.020 . Owens-Illinois Labels, Inc. v. Commonwealth, 27 S.W.3d 798, 2000 Ky. App. LEXIS 48 (Ky. Ct. App. 2000).

9. —Strict Construction.

Provisions granting exemptions from taxation will be strictly construed. American Tobacco Co. v. Bowling Green, 181 Ky. 416 , 205 S.W. 570, 1918 Ky. LEXIS 558 ( Ky. 1918 ).

10. —Discriminatory.

The fact that national bank shares are subject to local taxation, while other intangible property is exempt from local taxation, does not create a discrimination in violation of 12 USCS § 548. Georgetown Nat'l Bank v. McFarland, 273 U.S. 568, 47 S. Ct. 467, 71 L. Ed. 779, 1927 U.S. LEXIS 712 (U.S. 1927).

11. Procedure.

Objection that county clerk in computing household goods exemption under KRS 132.560 (repealed) made up exemption out of property exempted from local taxation by KRS 132.200 could be raised only by taxpayer, not by sheriff in annual settlement. Livingston County v. Dunn, 244 Ky. 460 , 51 S.W.2d 450, 1932 Ky. LEXIS 453 ( Ky. 1932 ).

12. Injunction Against Collection.

The collection of a local tax on property exempt from local taxation may be enjoined. Gray v. R. J. Reynolds Tobacco Co., 200 Ky. 47 , 252 S.W. 134, 1923 Ky. LEXIS 16 ( Ky. 1923 ). See Kentucky & West Virginia Power Co. v. Holliday, 216 Ky. 78 , 287 S.W. 212, 1926 Ky. LEXIS 832 ( Ky. 1926 ).

Mistake of taxpayer in listing tobacco as taxable at regular county tax rate, when in fact it was taxable only at rate allowed by subsection (6) of this section, did not prevent taxpayer from obtaining injunction against imposition of regular rate. Gray v. R. J. Reynolds Tobacco Co., 200 Ky. 47 , 252 S.W. 134, 1923 Ky. LEXIS 16 ( Ky. 1923 ).

Where a manufacturer, in ignorance of the law, listed for city taxes raw material on hand at his plant, and paid the taxes for one year and was being threatened with distraint to collect the taxes for the following year, he had the right to maintain an action to recover the taxes paid and to enjoin collection of the taxes not paid, as against contention that his sole remedy was by statutory procedure provided for correcting assessments. Covington v. Lovell & Buffington Tobacco Co., 204 Ky. 40 , 263 S.W. 676, 1924 Ky. LEXIS 396 ( Ky. 1924 ).

Where manufacturing machinery exempt from local taxation was not listed or valued separately by the tax commissioner (now property valuation administrator) or board of supervisors, but was grouped with other personal property of the taxpayer under a gross valuation, oral evidence was admissible, in an action to enjoin collection of the local tax on such machinery, to show what portion of the gross valuation applied to the machinery. Kentucky & West Virginia Power Co. v. Holliday, 216 Ky. 78 , 287 S.W. 212, 1926 Ky. LEXIS 832 ( Ky. 1926 ).

13. Taxing Determination Upheld.

KRS 132.030 , 132.200 , 136.300 , 136.320 are not related to public service companies or to franchise; it is clear that the general assembly considered the types of property that should be exempt from the “catch-all” rate, and it did not include franchise of a public service company-although it identified seventeen other categories of property. Dayton Power & Light Co. v. Dep't of Revenue, 405 S.W.3d 527, 2012 Ky. App. LEXIS 232 (Ky. Ct. App. 2012).

Cited in:

Paducah v. Smith’s Ex’r, 273 Ky. 703 , 117 S.W.2d 924, 1938 Ky. LEXIS 7 05 ( Ky. 1938 ); Madden’s Ex’r v. Commonwealth, 277 Ky. 343 , 126 S.W.2d 463, 1939 Ky. LEXIS 655 ( Ky. 1939 ); Land v. Kentucky Joint Stock Land Bank, 279 Ky. 645 , 131 S.W.2d 838, 1939 Ky. LEXIS 327 ( Ky. 1939 ); Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ); Board of Sup’rs v. Farmers Nat’l Bank, 293 Ky. 157 , 168 S.W.2d 371, 1942 Ky. LEXIS 7 ( Ky. 1942 ); Board of Tax Supervisors v. Baldwin Piano Co., 296 Ky. 673 , 178 S.W.2d 212, 1944 Ky. LEXIS 613 ( Ky. 1944 ); Board of Sup’rs v. State Nat’l Bank, 300 Ky. 620 , 189 S.W.2d 942, 1945 Ky. LEXIS 610 ( Ky. 1945 ); Commonwealth v. Interstate Grocery Co., 283 S.W.2d 708, 1955 Ky. LEXIS 321 ( Ky. 1955 ); Kentucky Finance Co. v. McCord, 290 S.W.2d 481, 1956 Ky. LEXIS 324 ( Ky. 1956 ); Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ); Paducah v. T.C.B., Inc., 817 S.W.2d 234, 1991 Ky. App. LEXIS 119 (Ky. Ct. App. 1991).

Opinions of Attorney General.

Picture developing equipment does not come within the classification of manufacturing machinery as set out in the statute. OAG 61-134 .

Where a leased automobile was garaged in the city and licensed in the county the city could assess it for property taxes although it was owned by a corporation located in another city and county. OAG 61-233 .

The power of a public library district to levy a tax pursuant to KRS 173.460 is limited by the provisions of this section which except certain property from local taxation and, pursuant to subsection (7) of this section, a public library district may not levy a tax on stocks and bonds. OAG 62-1005 .

Drilling rigs, tools and equipment used to drill gas wells are not manufacturing machinery within the meaning of subsection (4) of this section and are not exempt from local taxation. OAG 62-1143 .

A fire protection district cannot levy any tax on unmanufactured tobacco. OAG 64-232 .

Where a citizen of the county owned a boat that was licensed in the county but docked on a lake in another county, the boat would not be subject to tax in the city where the owner lived if it were satisfactorily shown that the boat was permanently located outside the city. OAG 65-18 .

Where a citizen of the county owned a boat that was licensed in the county but docked on a lake in another county, if the boat had not acquired a permanent situs elsewhere, it was properly taxable in the city of the owner’s domicile. OAG 65-18 .

Once a beverage has been bottled and capped it is ready for market and the manufacturing process is completed, so that a “case packer,” used after soft drink bottles have been capped, is not manufacturing equipment within the meaning of this section and is not exempt from local taxation. OAG 66-604 .

Printing machinery used for printing a weekly religious paper and for commercial job printing is exempt from local city, county, school or other taxing district taxes and is subject only to state taxes. OAG 73-329 .

Conveyors, sorters, kilns, dryers and boilers are part of the manufacturing process of transforming sorted rock into flux stone to be used in steel manufacturing and therefore are classifiable as manufacturing machinery for purposes of ad valorem property taxes. OAG 76-262 .

With the exception of the property described in KRS 92.300(1), a city of the sixth class has no alternative but to assess all property located within its jurisdictional limits which is not specifically exempted from local ad valorem taxation by the Constitution or by statute; a city ordinance attempting to exempt any other property will be void. OAG 82-21 .

Grain that is in the possession of the farmer who grew it, or in the possession of an agent of the farmer for the purpose of sale, is subject to ad valorem taxation for state purposes only. However, notwithstanding the fact that such grain is not subject to ad valorem taxation by the city or county, it must be listed with the county property valuation administrator for taxation by the state. OAG 82-496 .

Ad valorem taxes and license taxes are the only kinds of taxes that a county may levy; thus, the attempted levy of an oil shale severance tax by a county would be unconstitutional. OAG 84-116 .

Machinery owned by an individual or corporation, which individual or corporation is actually engaged in manufacturing, awaiting to be installed and put into use in the manufacturing plant should be classified as manufacturing machinery at the state rate of 15¢ per $100 of assessed valuation and is exempt from local taxation. OAG 90-5 .

The words “actually engaged in manufacturing,” as used in subsection (4) of this section and KRS 132.020(1) modify “individuals or corporations,” not “machinery.” OAG 90-5 .

The words “in course of manufacture,” as used in this section, do not qualify machinery. OAG 90-5 .

Research References and Practice Aids

Cross-References.

General Assembly may authorize cities to exempt manufacturing establishments, Ky. Const., § 170.

Kentucky Law Journal.

Martin, Social Implications of Some Recent Kentucky Property Tax Cases, 29 Ky. L.J. 255 (1941).

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Revenue Assessment Levels and Taxing Rate: The Kentucky Rollback Law, 60 Ky. L.J. 105 (1971).

The Property Tax — A Withering Vine, 60 Ky. L.J. 174 (1971).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Cox, What May States Do About Out-of-State Waste in Light of Recent Supreme Court Decisions Applying the Dormant Commerce Clause? Kentucky As Case Study in the Waste Wars, 83 Ky. L.J. 551 (1994-95).

132.202. Tax on municipal solid waste disposal facility’s real and tangible personal property.

  1. As used in this section, “municipal solid waste disposal facility” has the same meaning as in KRS 224.1-010 .
    1. All municipal solid waste disposal facilities shall be assessed by the department as of January 1 each year. (2) (a) All municipal solid waste disposal facilities shall be assessed by the department as of January 1 each year.
    2. The department shall have sole power to value and assess the tangible personal property and real property of all municipal solid waste disposal facilities.
    3. The department shall bill and collect all ad valorem taxes on municipal solid waste disposal facilities and shall divide, allocate, and distribute the tax receipts.
    1. The authority of the department to assess and tax the property of a municipal solid waste disposal facility shall be limited to taxable real property and tangible personal property. (3) (a) The authority of the department to assess and tax the property of a municipal solid waste disposal facility shall be limited to taxable real property and tangible personal property.
    2. The real and tangible personal property shall be assessed and taxed in the same manner as real and tangible personal property of all other taxpayers under KRS Chapter 132, excluding KRS 132.030 .
    3. The department shall promulgate administrative regulations under KRS Chapter 13A to implement a valuation methodology for municipal solid waste disposal facilities.

HISTORY: 2016 ch. 93, § 1, effective July 15, 2016.

132.203. KRS 132.200(11) not applicable, when. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 84, § 6, effective March 29, 1976) was repealed by Acts 1992, ch. 338, § 28, effective July 14, 1992.

132.205. Exemption of bridges built by adjoining state, United States or commission created by Act of Congress over boundary line stream — Bonds.

  1. Any bridge built by an adjoining state, by the government of the United States, or by any commission created by an Act of Congress, over a boundary line stream between this state and an adjoining state, if not operated for a profit, and if connecting with a primary highway of this state, is declared to be public property used for public purposes and exempt from taxation unless the adjoining state, or other public body constructing such bridge, taxes similar bridges built by this Commonwealth in like manner.
  2. The issuance of bonds for the purpose of amortizing the cost of construction of such bridges as is described in subsection (1) hereof shall not affect the tax exemption granted herein.

History. Enact. Acts 1952, ch. 85, §§ 1, 2; 1956 (4th Ex. Sess.), ch. 9.

Opinions of Attorney General.

“Profit” as the term is used in this section, is not realized until the cost of the bridge is fully amortized and the tolls collected exceed the annual maintenance cost. OAG 62-428 .

The fact that tolls are collected does not remove the bridge from the benefit of this section, since tolls, collected for the purpose of amortizing the cost of the bridge and annual repairs, do not constitute a profit although the tolls may exceed the combined yearly costs of such expenses. OAG 62-428 .

Even though a sister state acquires a bridge by purchase, it would be entitled to the benefits of this section. OAG 62-428 .

The single fact that a bridge belonging to Ohio connects to a primary highway in Kentucky would be sufficient basis for a finding that the bridge is so connected with public property used for public purposes as to sustain a legislative exemption of the bridge from ad valorem property taxation. OAG 62-428 .

132.208. Exemption of intangible personal property from state and local ad valorem taxes — Local taxation permitted.

All intangible personal property except that which is assessed under KRS 132.030 or KRS Chapter 136 shall be exempt from state and local ad valorem tax. Nothing in this section shall forbid local taxation of franchises of corporations or of financial institutions, as provided for in KRS 136.575 , or domestic life insurance companies.

History. Enact. Acts 2000, ch. 327, § 9, effective July 14, 2000; 2005, ch. 168, § 58, effective January 1, 2006.

NOTES TO DECISIONS

1. Taxing Determination Upheld.

Department’s change which raised state tax obligation of public service company (PSC) and made it subject to local taxes was upheld because general assembly did not intend for franchise of PSCs to be exempt from state and local taxes and intended for it to be taxed separately. KRS 136.115(2) directed that taxes were assessed on operating tangible property and franchise; franchise was separate and nothing in the statutes indicated that franchise was included in operating tangible property. Additionally, KRS 132.208 provides a state and local tax exemption for intangible personal property except that which is assessed under KRS ch. 136. Dayton Power & Light Co. v. Dep't of Revenue, 405 S.W.3d 527, 2012 Ky. App. LEXIS 232 (Ky. Ct. App. 2012).

132.210. Exemption of fraternal benefit societies’ funds.

Every fraternal benefit society organized or licensed under Subtitle 29 of KRS Chapter 304 is a charitable and benevolent institution, and its funds shall be exempt from all state, county, district, city, and school taxes, other than taxes on real property and office equipment.

History. 681c-30; Acts 1972, ch. 203, § 7; 1982, ch. 320, § 51, effective July 15, 1982; 1988, ch. 310, § 38, effective January 1, 1989; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 324, effective July 13, 1990.

Compiler’s Notes.

Former KRS 132.210 (681c-30: amend. Acts 1972, ch. 203, § 7; 1982, ch. 320, § 51, effective July 15, 1982; 1988, ch. 310, § 38, effective January 1, 1989) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 324, effective July 13, 1990.

132.215. Right to receive income — Basis of assessment — Rate of tax. [Repealed.]

Compiler’s Notes.

Former KRS 132.215 (Enact. Acts 1946, ch. 39, § 1; 1949 (1st Ex. Sess.), ch. 4, § 6; 1960, ch. 186, Art. I, § 4, effective June 16, 1960; 1972, ch. 84, Pt. III, § 1) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 325, effective July 13, 1990.

This section (Repealed and reenact., Acts 1990, ch. 476, Pt. V, § 325, effective July 13, 1990) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.216. Life insurance companies to report names and addresses of residents entitled to proceeds of policies left on deposit and subject to right of withdrawal, and beneficiaries of policies taxable under KRS 132.215. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 158; 2005, ch. 85, § 182, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.220. Assessment dates — Listing — Owner — Liability — Exemptions, listing, annual review.

    1. All taxable property and all interests in taxable property, unless otherwise specifically provided by law, shall be listed, assessed, and valued as of January 1 of each year. (1) (a) All taxable property and all interests in taxable property, unless otherwise specifically provided by law, shall be listed, assessed, and valued as of January 1 of each year.
      1. It shall be the duty of the holder of the first freehold estate in any real property taxable in this state to list or have listed the property with the property valuation administrator of the county where it is located between January 1 and March 1 in each year, except as otherwise provided by law. (b) 1. It shall be the duty of the holder of the first freehold estate in any real property taxable in this state to list or have listed the property with the property valuation administrator of the county where it is located between January 1 and March 1 in each year, except as otherwise provided by law.
        1. It shall be the duty of all persons owning any tangible personal property taxable in this state to list or have listed the property, by the address at which it is located, with the property valuation administrator of the county of taxable situs or with the department between January 1 and May 15 in each year, except as provided by subdivision b. of this subparagraph or otherwise prescribed by law. 2. a. It shall be the duty of all persons owning any tangible personal property taxable in this state to list or have listed the property, by the address at which it is located, with the property valuation administrator of the county of taxable situs or with the department between January 1 and May 15 in each year, except as provided by subdivision b. of this subparagraph or otherwise prescribed by law.
        2. On January 1 of each year, for each address, if the sum of all of the taxable tangible personal property’s fair cash values is one thousand dollars ($1,000) or less, the taxpayer shall not be required to list the property in accordance with subdivision a. of this subparagraph.
        3. On January 1 of each year, for each address, if the sum of all of the taxable tangible personal property’s fair cash values exceeds one thousand dollars ($1,000) and the property is not listed as required by subdivision a. of this subparagraph, the property shall be deemed omitted property in accordance with KRS 132.290 .
        4. For any taxable tangible personal property that is not listed due to the one thousand dollar ($1,000) threshold established in subdivision b. of this subparagraph, the owner of the property shall maintain records of the property and its fair cash value calculation for five (5) years after the expiration of the listing period.
      2. The holder of legal title, the holder of equitable title, and the claimant or bailee in possession of the property on the assessment date as provided by law shall be liable for the taxes thereon, and the property may be assessed in any of their names. But, as between them, the holder of the equitable title shall pay the taxes thereon, whether or not the property is in his or her possession at the time of payment.
      3. All persons in whose name property is properly assessed shall remain bound for the tax, notwithstanding they may have sold or parted with it.
  1. Any taxpayer may list his or her property in person before the property valuation administrator or his deputy, or may file a property tax return by first class mail. Any real property correctly and completely described in the assessment record for the previous year, or purchased during the preceding year and for which a value was stated in the deed according to the provisions of KRS 382.135 , may be considered by the owner to be listed for the current year if no changes that could potentially affect the assessed value have been made to the property. However, if requested in writing by the property valuation administrator or by the department, any real property owner shall submit a property tax return to verify existing information or to provide additional information for assessment purposes. Any real property which has been underassessed as a result of the owner intentionally failing to provide information, or intentionally providing erroneous information, shall be subject to revaluation, and the difference in value shall be assessed as omitted property under the provisions of KRS 132.290 .
  2. If the owner fails to list the property, the property valuation administrator shall nevertheless assess it. The property valuation administrator may swear witnesses in order to ascertain the person in whose name to make the list. The property valuation administrator, his or her employee, or employees of the department may physically inspect, or inspect using any other method approved by the department, and revalue land and buildings in the absence of the property owner or resident. The exterior dimensions of buildings may be measured and building photographs may be taken; however, with the exception of buildings under construction or not yet occupied, an interior inspection of residential and farm buildings, and of the nonpublic portions of commercial buildings shall not be conducted in the absence or without the permission of the owner or resident.
  3. Real property shall be assessed in the name of the owner, if ascertainable by the property valuation administrator, otherwise in the name of the occupant, if ascertainable, and otherwise to “unknown owner.” The undivided real estate of any deceased person may be assessed to the heirs or devisees of the person without designating them by name.
    1. Real property tax roll entries for which tax bills have not been collected at the expiration of the one (1) year tolling period provided for in KRS 134.546 , and for which the property valuation administrator cannot physically locate and identify the real property, shall be deleted from the tax roll and the assessment shall be exonerated. (5) (a) Real property tax roll entries for which tax bills have not been collected at the expiration of the one (1) year tolling period provided for in KRS 134.546 , and for which the property valuation administrator cannot physically locate and identify the real property, shall be deleted from the tax roll and the assessment shall be exonerated.
    2. The property valuation administrator shall keep a record of these exonerations, which shall be open under the provisions of KRS 61.870 to 61.884 .
    3. If, at any time, one of these entries is determined to represent a valid parcel of property it shall be assessed as omitted property under the provisions of KRS 132.290 .
    4. Notwithstanding other provisions of the Kentucky Revised Statutes to the contrary, any loss of ad valorem tax revenue suffered by a taxing district due to the exoneration of these uncollectable tax bills may be recovered through an adjustment in the tax rate for the following year.
  4. All real property exempt from taxation by Section 170 of the Constitution shall be listed with the property valuation administrator in the same manner and at the same time as taxable real property. The property valuation administrator shall maintain an inventory record of the tax-exempt property, but the property shall not be placed on the tax rolls. A copy of this tax-exempt inventory shall be filed annually with the department within thirty (30) days of the close of the listing period. This inventory shall be in the form prescribed by the department. The department shall make an annual report itemizing all exempt properties to the Governor and the Legislative Research Commission within sixty (60) days of the close of the listing period.
  5. Each property valuation administrator, under the direction of the department, shall review annually all real property listed with him or her under subsection (6) of this section and claimed to be exempt from taxation by Section 170 of the Constitution. The property valuation administrator shall place on the tax rolls all property that is not exempt. Any property valuation administrator who fails to comply with this subsection shall be subject to the penalties prescribed in KRS 132.990(2).

History. 4024, 4025, 4042a-13, 4049, 4052; Acts 1942, ch. 131, §§ 7, 32; 1948, ch. 95, § 3; 1949 (Ex. Sess.), ch. 4, § 7; 1960, ch. 186, Art. I, § 5; 1962, ch. 29, § 1; 1968, ch. 189, § 1; 1982, ch. 46, § 1, effective July 15, 1982; 1984, ch. 85, § 1, effective July 13, 1984; 1986, ch. 371, § 2, effective July 15, 1986; 1986, ch. 459, § 1, effective July 15, 1986; 1986, ch. 496, § 1, effective August 1, 1986; 1988, ch. 303, § 1, effective July 15, 1988; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 326, effective July 13, 1990; 1992, ch. 263, § 2, effective July 14, 1992; 1994, ch. 423, § 3, effective July 15, 1994; 1996, ch. 254, § 27, effective July 15, 1996; 1998, ch. 209, § 1, effective March 30, 1998; 2000, ch. 327, § 4, effective July 14, 2000; 2005, ch. 85, § 183, effective June 20, 2005; 2005, ch. 168, § 59, effective January 1, 2006; 2009, ch. 10, § 36, effective January 1, 2010; 2012, ch. 161, § 9, effective April 23, 2012; 2017 ch. 81, § 5, effective March 21, 2017; 2019 ch. 151, § 10, effective June 27, 2019.

Compiler’s Notes.

Former KRS 132.220 (4024, 4025, 4042a-13, 4049, 4052: amend. Acts 1942, ch. 131, §§ 7, 32; 1948, ch. 95, § 3; 1949 (Ex. Sess.), ch. 4, § 7; 1960, ch. 186, Art. I, § 5; 1962, ch. 29, § 1; 1968, ch. 189, § 1; 1982, ch. 46, § 1, effective July 15, 1982; 1984, ch. 85, § 1, effective July 13, 1984; 1986, ch. 371, § 2, effective July 15, 1986; 1986, ch. 459, § 1, effective July 15, 1986; 1986, ch. 496, § 1, effective August 1, 1986; 1988, ch. 303, § 1, effective July 15, 1988) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 326, effective July 13, 1990.

Section 21 of Acts 1998, ch. 209, provided that the 1998 amendments to this section “shall apply for assessments made on or after January 1, 1998.”

Legislative Research Commission Notes.

(6/27/2019). Section 81 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 10 of that Act apply to tangible personal property assessed on or after January 1, 2020.

NOTES TO DECISIONS

  1. Situs.
  2. Owner.
  3. —Doubtful Title.
  4. Leasehold.
  5. Life Tenant.
  6. Nontaxable.
  7. Questioning Validity.
  8. Land in Hands of Receiver.
  9. Royalties.
  10. Double Payment.
  11. Annexed Territory.
  12. Corporate Liability.
  13. Decedent's Estate.
  14. Void Sale.
  15. Date of Valuation.
  16. Stocks, Notes, Bonds and Accounts.
1. Situs.

Oil or gas leases are to be listed for taxation by the lessee in the county in which the leased premises are located. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

Where Kentucky tobacco growers executed marketing agreements with tobacco marketing corporation, which agreements recited that title to the tobacco was vested in the company, the fact that the company was actually intended to be only an agent or trustee of the growers would not prevent the tobacco being taxed in the city in which the warehouses of the company were located, so long as the growers did not list the tobacco themselves. Paris v. Burley Tobacco Soc., 154 Ky. 320 , 157 S.W. 705, 1913 Ky. LEXIS 78 ( Ky. 1913 ).

Tobacco in warehouses of a tobacco processing and marketing corporation was taxable in the city in which the warehouses were situated, unless there for only a temporary purpose, regardless of the residence of the owners of the tobacco, so long as the owners had not listed and paid the taxes on the tobacco at the place of their residence. Paris v. Burley Tobacco Soc., 154 Ky. 320 , 157 S.W. 705, 1913 Ky. LEXIS 78 ( Ky. 1913 ).

The taxable situs of a partnership’s personal property is at the place where the partnership conducts its business, and not at the place where the partners intend the “home” of the partnership to be. Walter G. Hougland & Sons v. McCracken County Board of Sup'Rs., 306 Ky. 234 , 206 S.W.2d 951, 1947 Ky. LEXIS 999 ( Ky. 1947 ).

Boats and barges traveling Ohio River hauling company’s goods solely were assessable at the domicile of the taxpayer. Ashland Oil & Refining Co. v. Department of Revenue, 256 S.W.2d 359, 1953 Ky. LEXIS 721 ( Ky. 1953 ).

2. Owner.

The mortgagor of land, not the mortgagee, is the owner of the land, and is primarily liable for the taxes thereon. Caine v. Rich, 110 S.W. 289, 33 Ky. L. Rptr. 261 , 1908 Ky. LEXIS 343 (Ky. Ct. App. 1908).

Owner of land which had been sold for taxes for previous years was required to list the land of taxation during the redemption period. Southern Holding & Sec. Corp. v. Commonwealth, 245 Ky. 602 , 53 S.W.2d 974, 1932 Ky. LEXIS 638 ( Ky. 1932 ), cert. denied, 289 U.S. 757, 53 S. Ct. 788, 77 L. Ed. 1501, 1933 U.S. LEXIS 408 (U.S. 1933).

One who owns land in fee is liable for taxes on both the mineral and surface estates. Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ).

Assessment of real estate may be made by city against owner of life estate alone. Rains v. Lexington, 284 Ky. 609 , 145 S.W.2d 516, 1940 Ky. LEXIS 541 ( Ky. 1940 ).

The duty of owners of real estate is to list it for taxation with the tax commissioner (now property valuation administrator) and if the owner fails to list it the tax commissioner (now property valuation administrator) shall do so. Breathitt County Board of Sup'rs v. Ware Cannel Coal Co., 297 Ky. 117 , 179 S.W.2d 225, 1944 Ky. LEXIS 691 ( Ky. 1944 ).

Real property interests are not only to be listed by but also assessed in the name of the owner of the first freehold estate. Fayette County Board of Supervisors v. O'Rear, 275 S.W.2d 577, 1954 Ky. LEXIS 1252 ( Ky. 1954 ).

The practical administration of ad valorem tax laws requires that in ordinary circumstances one person or entity be held responsible for the tax liability on each item of property. Kentucky Power Co. v. Revenue Cabinet, 705 S.W.2d 904, 1985 Ky. LEXIS 293 ( Ky. 1985 ).

Circuit courts erred in concluding that the third-party purchasers of delinquent tax bills were eligible for refunds where it was erroneous to state that the transfer of the taxed property subject to the Commonwealth satisfied the tax liability of all of the various governmental entities, but rather the property owners remained liable for the tax under Ky. Rev. Stat. Ann. § 132.220 . Fayette Cty. Clerk v. Kings Right, LLC, 536 S.W.3d 201, 2017 Ky. App. LEXIS 634 (Ky. Ct. App. 2017).

3. —Doubtful Title.

The fact that the holder of paper title to land is in doubt as to what land is covered by his title, how much acreage is involved, and the validity of his title as to other claimants, does not excuse him from listing the land for taxation. Southern Holding & Sec. Corp. v. Commonwealth, 245 Ky. 602 , 53 S.W.2d 974, 1932 Ky. LEXIS 638 ( Ky. 1932 ), cert. denied, 289 U.S. 757, 53 S. Ct. 788, 77 L. Ed. 1501, 1933 U.S. LEXIS 408 (U.S. 1933).

4. Leasehold.

Ordinarily, real property held under a lease is not taxable in the hands of the lessee. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

Oil or gas leases, under which the lessee is vested with all property rights to the oil or gas that may be found in paying quantities on the leased premises, are taxable to the lessee. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

Where the lease provides that a portion of the oil or gas shall be received by the lessor as royalty, the value of such portion is to be deducted in fixing the value of the lease. Wolfe County v. Beckett, 127 Ky. 252 , 105 S.W. 447, 32 Ky. L. Rptr. 167 , 1907 Ky. LEXIS 136 ( Ky. 1907 ).

Where land was leased for 99-year term, at a nominal rental, with covenant by lessor to renew for successive 99-year terms perpetually, the leasehold was taxable against the lessee, whether considered as real or personal property, and was not such an interest as was required to be listed by the owner of the fee under this section. Purcell v. Lexington, 186 Ky. 381 , 216 S.W. 599, 1919 Ky. LEXIS 226 ( Ky. 1919 ), writ of error dismissed, 253 U.S. 476, 40 S. Ct. 583, 64 L. Ed. 1021, 1920 U.S. LEXIS 1430 (U.S. 1920).

Ordinarily, the value of the interest of the lessee in a lease of real estate is not taxable, the owner of the fee being required to pay taxes on all interests connected with the real estate. Purcell v. Lexington, 186 Ky. 381 , 216 S.W. 599, 1919 Ky. LEXIS 226 ( Ky. 1919 ), writ of error dismissed, 253 U.S. 476, 40 S. Ct. 583, 64 L. Ed. 1021, 1920 U.S. LEXIS 1430 (U.S. 1920).

Where the owner is a municipality or for some other reason is not required to pay taxes on the fee, the interest of the lessee is taxable. Purcell v. Lexington, 186 Ky. 381 , 216 S.W. 599, 1919 Ky. LEXIS 226 ( Ky. 1919 ), writ of error dismissed, 253 U.S. 476, 40 S. Ct. 583, 64 L. Ed. 1021, 1920 U.S. LEXIS 1430 (U.S. 1920).

The interest of a lessor in a coal mining lease is subject to taxation, notwithstanding that the interest of the lessee in the lease, and the money received by the lessor in the way of royalties, are also taxed. Stepp v. Pike County Board of Sup'rs, 194 Ky. 176 , 238 S.W. 408, 1922 Ky. LEXIS 132 ( Ky. 1922 ).

The ordinary mining lease with the reserved royalty in the lessor has the effect to create distinct items of property for purposes of taxation in both the lessor and the lessee as to the minerals or mineral rights as distinguished from the ownership of the surface, and the lessor is liable not only for the taxes on the surface of his land but likewise upon the mineral rights reserved or created in him by the lease. Moss v. Board of Sup'rs, 203 Ky. 813 , 263 S.W. 368, 1924 Ky. LEXIS 1021 ( Ky. 1924 ).

The interest of the lessee in a coal mining lease is real property, and taxable as such. Commonwealth v. Elkhorn-Piney Coal Min. Co., 241 Ky. 245 , 43 S.W.2d 684, 1931 Ky. LEXIS 51 ( Ky. 1931 ).

Where land is leased for business purpose under a long-term lease, both the lessee and the lessor have taxable interests in the land, and the payment of a tax by one will not relieve the other. Illinois C. R. Co. v. Louisville, 249 Ky. 219 , 60 S.W.2d 603, 1933 Ky. LEXIS 508 ( Ky. 1933 ).

It was not error for the property value administrator to fail to consider the lease as having any effect upon the valuation of the freehold estate, where the taxpayer was basically both lessor and lessee. Jefferson County Property Valuation Adm'r v. Ben Schore Co., 736 S.W.2d 29, 1987 Ky. App. LEXIS 553 (Ky. Ct. App. 1987).

5. Life Tenant.

It is the duty of a life tenant of land to list the land for taxation and to pay the taxes assessed against it during his term as life tenant, but his failure to pay such taxes will not deprive the taxing authority of the right to subject the fee to the payment of the taxes, during the term of the life tenant or after his death. Bradley v. Sears, 138 Ky. 230 , 127 S.W. 782, 1910 Ky. LEXIS 63 ( Ky. 1910 ).

It is the duty of a life tenant to list and pay the taxes on the land. Anderson v. Daugherty, 169 Ky. 308 , 183 S.W. 545, 1916 Ky. LEXIS 681 ( Ky. 1916 ).

Where property is in the possession of a life tenant, it should be assessed in his name. Smith v. Young, 178 Ky. 376 , 198 S.W. 1166, 1917 Ky. LEXIS 742 ( Ky. 1917 ).

A life tenant in possession must list realty for taxation and pay taxes including those levied for street improvements. The life tenant’s estate is all that can be primarily sold to satisfy taxes and is the only interest acquired by tax sale purchasers who then must list the property and pay the taxes, and purchasers are not entitled to recover from the remainderman the amount of taxes paid by them. Vaughn v. Metcalf, 274 Ky. 379 , 118 S.W.2d 727, 1938 Ky. LEXIS 273 ( Ky. 1938 ).

6. Nontaxable.

Oil pipeline company was not liable for taxes on oil stored in tanks awaiting shipment through its lines, shipment being delayed because of congestion in traffic through the lines, inability of patrons to take care of the oil at its destination, and inability of connecting lines to accept oil for ultimate delivery, the possession of the company being that of a common carrier and not a bailee, notwithstanding that the company made a demurrage charge for oil not withdrawn in 60 days. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

A common carrier is not liable for taxes on property in his possession for the purpose of shipment. Cumberland Pipe Line Co. v. Commonwealth, 258 Ky. 90 , 79 S.W.2d 366, 1934 Ky. LEXIS 575 ( Ky. 1934 ).

The power to dispose of property is an incident of ownership and not a taxable intangible; the fact that a taxpayer was required to place the property for Federal Energy Regulatory Commission accounting purposes into an account known as “other investments,” did not create a taxable intangible. Kentucky Power Co. v. Revenue Cabinet, 705 S.W.2d 904, 1985 Ky. LEXIS 293 ( Ky. 1985 ).

7. Questioning Validity.

The fact that a county tax levy ordinance is unconstitutional does not constitute grounds for enjoining the assessment of property for county taxes; the validity of the levy can be questioned only when the taxes are sought to be collected. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ).

8. Land in Hands of Receiver.

The fact that land is in control of a receiver appointed by the federal court does not excuse the owner of the land from listing it for taxation. Southern Holding & Sec. Corp. v. Commonwealth, 245 Ky. 602 , 53 S.W.2d 974, 1932 Ky. LEXIS 638 ( Ky. 1932 ), cert. denied, 289 U.S. 757, 53 S. Ct. 788, 77 L. Ed. 1501, 1933 U.S. LEXIS 408 (U.S. 1933).

9. Royalties.

Royalties due owner of real estate from oil lease were taxable, as against contention that the value of the royalty interest could not be separately assessed from the land itself. Commonwealth by Revenue Agent v. Garrett, 202 Ky. 548 , 260 S.W. 379, 1924 Ky. LEXIS 766 ( Ky. 1924 ).

10. Double Payment.

Where line of railroad owned by one railroad company was operated by another company under an operating agreement, and the taxes on the line were assessed against and paid by the operating company, the line could not be again assessed for the same tax against the owner company, notwithstanding that the assessing authorities had erroneously deducted the value of the line from the franchise value of the operating company. Commonwealth v. Kinniconick & F. S. R. Co., 104 S.W. 290, 31 Ky. L. Rptr. 859 (1907).

11. Annexed Territory.

A city cannot assess and levy taxes against annexed property that was annexed subsequent to assessment date and thus was not a part of the city on that date. St. Matthews v. Trueheart, 274 S.W.2d 52, 1954 Ky. LEXIS 1221 ( Ky. 1954 ).

Since liability for ad valorem taxes is related to assessment date and not to levy date or collection date no inequality resulted in not permitting city to assess, levy and collect taxes on territory that was not annexed to city until after assessment date. St. Matthews v. Trueheart, 274 S.W.2d 52, 1954 Ky. LEXIS 1221 ( Ky. 1954 ).

12. Corporate Liability.

Where distillery corporation actually owned and operated various distilleries and bonded warehouses, the fact that the distilleries and warehouses were operated under separate individual names did not relieve the corporation of liability for taxes due on storage accounts. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

Cooperative marketing association was liable for taxes on agricultural products in its hands, as against contention that only shares of members of association were taxable. Burley Tobacco Growers' Co-op. Asso. v. Carrollton, 208 Ky. 270 , 270 S.W. 749, 1925 Ky. LEXIS 268 ( Ky. 1925 ).

13. Decedent's Estate.

When a decedent’s estate is in the hands of a personal representative for settlement and distribution, and before the estate has been or should have been settled or distributed, the personal representative should list the estate for taxation and pay the taxes thereon, and the heirs and devisees are not required to do so. Commonwealth v. Camden, 142 Ky. 365 , 134 S.W. 914, 1911 Ky. LEXIS 242 ( Ky. 1911 ).

14. Void Sale.

Where land was assessed in the name of a person who was merely an agent for the life tenant, a sale of the land for taxes was invalid, but the purchaser had a lien on the land for the amount paid by him at the sale. Rogers v. McAlister, 151 Ky. 488 , 152 S.W. 571, 1913 Ky. LEXIS 530 ( Ky. 1913 ).

Where land owned by married woman was assessed in the name of her husband for her, sale of land for taxes was invalid as against purchaser of land from the married woman without notice of the tax lien. Wash v. Noel, 160 Ky. 847 , 170 S.W. 197, 1914 Ky. LEXIS 550 ( Ky. 1914 ).

Where land was assessed in the name of the remainderman rather than in the name of the life tenant, a sale of the land for taxes could not pass title to the life estate. Anderson v. Daugherty, 169 Ky. 308 , 183 S.W. 545, 1916 Ky. LEXIS 681 ( Ky. 1916 ).

Where person holding title bond for real estate listed it for taxation and paid taxes thereon, assessment in name of record owner of fee was void and attempted sale under such assessment was void. Mullins v. Rader, 204 Ky. 431 , 264 S.W. 1058, 1924 Ky. LEXIS 478 ( Ky. 1924 ).

Where property not owned by taxpayer was assessed in his name and taxes paid by him, and property owned by him was assessed as belonging to an “unknown owner,” the sale for taxes of the property actually owned by him was void. Gasho v. Lowe, 282 Ky. 518 , 139 S.W.2d 437, 1940 Ky. LEXIS 221 ( Ky. 1940 ).

15. Date of Valuation.

Where assessments of agricultural land for one year were unconstitutional, the correct remedy was the use of the previous year’s assessments for the subject property for the later tax year; the property valuation administrator was not entitled to belatedly assess the subject property for the later year’s taxes since subsection (1) of this section clearly states that property shall be evaluated as of January 1. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ).

16. Stocks, Notes, Bonds and Accounts.

The term “account” refers to those accounts that are similar in nature to stocks, bonds or notes; it refers to accounts created by transactions and documents separate and apart from the acquisition of an underlying asset. Kentucky Power Co. v. Revenue Cabinet, 705 S.W.2d 904, 1985 Ky. LEXIS 293 ( Ky. 1985 ).

Cited in:

Vaughn v. Metcalf, 274 Ky. 379 , 118 S.W.2d 727, 1938 Ky. LEXIS 273 ( Ky. 1938 ); Rains v. Lexington, 284 Ky. 609 , 145 S.W.2d 516, 1940 Ky. LEXIS 541 ( Ky. 1940 ); Oates v. Simpson, 295 Ky. 433 , 174 S.W.2d 505, 1943 Ky. LEXIS 234 ( Ky. 1943 ); Gilreath v. Gregory, 314 Ky. 30 , 234 S.W.2d 162, 1950 Ky. LEXIS 1010 ( Ky. 1950 ); Kentucky Tax Com. v. Jefferson Motel, Inc., 387 S.W.2d 293, 1965 Ky. LEXIS 465 ( Ky. 1965 ); Kling v. Northern Kentucky Area Planning Com., 654 S.W.2d 606, 1983 Ky. LEXIS 261 ( Ky. 1983 ); Dean v. Commonwealth ex rel. Revenue Cabinet, 967 S.W.2d 594, 1998 Ky. App. LEXIS 34 (Ky. Ct. App. 1998).

Opinions of Attorney General.

Under this section, ad valorem taxes on tangible personal property are payable in the county and city in which the property has its “situs” on assessment date. OAG 60-1081 .

The fact that the equipment of a West Virginia contractor doing a job in Kentucky could be assessed for taxation in both states does not constitute prohibited double taxation. OAG 61-975 .

Under subsection (3) of this section, a mineral right or mineral lease is an interest in property which can be separately taxed if it is reduced to ownership by the holder of the lease, but where there has been no severance, or reduction to ownership, the listing of the land by the owner of the first freehold estate would carry with it the value of the entire estate, including minerals. OAG 63-775 .

Where a taxpayer moved in September from a city where taxes were assessed on July 1 and due the next year to a city where taxes were assessed on January 1 of the year in which they were due, he was only liable for the tax assessed on July 1. OAG 64-234 .

KRS 134.060 (repealed) concerns the tax liability only as it exists between purchaser and seller and in the event of a sale within two (2) months after the assessment date, the person in whose name the property was assessed remains responsible to the taxing authority for payment of the tax pursuant to subsection (1) of this section. OAG 64-710 .

Where a citizen of the county owned a boat that was licensed in the county but docked on a lake in another county, if the boat had not acquired a permanent situs elsewhere, it was properly taxable in the city of the owner’s domicile. OAG 65-18 .

Where a citizen of the county owned a boat that was licensed in the county but docked on a lake in another county, the boat would not be subject to tax in the city where the owner lived if it was satisfactorily shown that the boat was permanently located outside the city. OAG 65-18 .

Only in unusual circumstances, such as a 99-year lease or oil and gas leases, is there justification for treating a leasehold as a separate taxable estate. OAG 76-2 .

Even though tangible personal property having merely a temporary location at a place other than the owner’s domicile is not taxable at such place, there is a presumption that such property in this state on the assessment date is subject to assessment at the place where located and the burden is upon the owner to present evidence to the assessing authorities that the property is located in the county on a temporary basis and that it has been assessed and taxes paid at the place of domicile. OAG 79-230 .

Where road equipment has only a temporary situs in a county other than the county of the owner’s domicile, it would appear that the property should be listed in the owner’s domiciliary county. OAG 79-230 .

Where a taxpayer maintained office in Harlan County but owned no real estate there and lived in Bill County, the books, furnishings and fixtures of his office are taxable for ad valorem tax purposes in Harlan County, if the property is permanently located there, since this section requires that the tax be imposed in the county where the property is located. OAG 81-59 .

Where a house is in existence and is assessed and valued in January, the owner must pay the full property tax for that year even though the house is subsequently destroyed by fire during the year, since the statute does not allow an exemption on pro rated taxation for destroyed property. OAG 81-432 .

The personal property tax on a vehicle should be based on the date of the bill of sale since the bill of sale provides evidence of ownership under the Uniform Commercial Code. OAG 82-68 .

The assessment date is the day, fixed by statute, when property is valued for ad valorem tax purposes; while the taxes which a city intends to collect must be referenced to its fiscal year, in actuality, they must be based on a tax liability that can accrue only from the presence of the property within the city’s jurisdictional limits on the assessment date. OAG 82-186 .

The levy date is the day when the legislative body of the city enacts an ordinance levying the tax; the General Assembly has not fixed a specific date on which a city must levy its ad valorem tax but it is essential that the assessment be made prior to the ordinance levying the tax. OAG 82-186 .

Where a city chose to adopt the county assessment, its assessment date was January 1 preceding the city’s fiscal year; the city’s levy date, however, must be subsequent to the certification of the county assessments by the department of revenue (now revenue cabinet). OAG 82-186 .

A sailboat is taxable in the county of the owner’s domicile, unless it can be shown that the boat is permanently located in another county. OAG 82-274 .

Where property owned by a hospital, which was a nonprofit corporation, was leased to a clinic, which was a for-profit corporation, then if the building on the property was owned by the clinic, it must be placed on the tax roll and the leasehold interest must also be placed on the tax roll. OAG 84-35 .

Whether property qualifies for the homestead exemption is determined as of January 1 each year. If one who is qualified for the homestead exemption owns the property as of that date, the property will receive the benefit of the exemption. If the property is owned as of the assessment date by one not qualified to receive the exemption, it will not receive the exemption for that year, even though it may be acquired during the course of the year by one who is entitled to the exemption. OAG 85-108 , modifying OAG 81-429 .

The docks of a marina are considered land and not buildings for the purposes of KRS 132.220(3) and are subject to administrative search in the absence of the owner, unless they are sufficiently structurally analogous to buildings. OAG 12-008 , 2012 Ky. AG LEXIS 95.

Research References and Practice Aids

Cross-References.

Assessor of first-class city may take property lists jointly with property valuation administrator, KRS 91.320 .

Jeopardy assessments by Revenue Cabinet, KRS 131.150 .

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

Weber and Olsen, Religious Property Tax Exemptions in Kentucky, 66 Ky. L.J. 651 (1977-1978).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Bratt, Family Protection Under Kentucky’s Inheritance Laws: Is the Family Really Protected? 76 Ky. L.J. 387 (1987-88).

132.225. Assessment dates for ad valorem tax on motor vehicles and trailers — Valuation — Certification — Notification of registered owner — Tax payable to county clerk on or before registration renewal date. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 371, § 1, effective January 1, 1981) was repealed by Acts 1980, ch. 240, § 7, effective July 15, 1980.

132.227. Situs of vehicle.

The taxable situs of a motor vehicle is presumed to be the county of registration as of the assessment date.

History. Enact. Acts 1978, ch. 371, § 5, effective January 1, 1981; 1980, ch. 240, § 6, effective July 15, 1980; 1982, ch. 264, § 1, effective January 1, 1984.

Opinions of Attorney General.

Property must have actual situs within the taxing unit or some legal nexus such as domicile to tie it to a taxing unit. OAG 84-142 .

While the presumption referred to in this section is a rebuttable one, clear and convincing evidence must be presented to the property valuation administrator that the taxable situs is other than the county of registration. OAG 84-142 .

132.230. Information to be given in listing property for taxation — Correction of error or informality.

  1. Every person listing his property with the property valuation administrator shall state:
    1. Each separate tract of land, with the number of acres in each tract; the value per acre; each of the improvements thereon; the name of the nearest resident thereto; where located, giving the election precinct in which it is located; the number of each city lot and the improvements thereon, in what city, on which street, the value of each, and the value of the improvements thereon to the extent that they enhance the value of each lot; whether there is any land adjoining his owned by a nonresident of the county or state, giving the name and place of residence of any such owner, if known;
    2. The number of livestock, their type, species and value; and
    3. Such other facts as may be required in the blanks provided.
  2. An error or informality in the description or location of the property, or in the name of the owner or person assessed, shall not invalidate the assessment if the property can with reasonable certainty be located or identified from the description given, in which case the collector may receive the taxes and by his receipt correct the error or informality.

History. 4056: amend. Acts 1948, ch. 95, § 4; 1949 (Ex. Sess.), ch. 2, § 1; 2005, ch. 168, § 60, effective January 1, 2006.

NOTES TO DECISIONS

  1. Purpose.
  2. Description.
  3. —Oral Evidence.
  4. Taxpayer’s Schedule.
  5. Assessment.
  6. Mistake.
  7. Farm Land.
  8. Injunction.
1. Purpose.

In action by owner of bonds secured by lien on property described in deed of trust, the listing and paying of taxes on the bonds deprived defendants of the defense that failure to list bonds for taxation purposes was a complete bar to the action as the requirement that taxes be paid on bonds is a tax measure and the purpose of this section was to enforce collection of taxes by requiring the holder to perform a duty which he was already obligated to perform. Langstaff v. Meyer, 305 Ky. 116 , 203 S.W.2d 49, 1947 Ky. LEXIS 790 ( Ky. 1947 ).

2. Description.

Description of land is sufficient, for purposes of assessment and sale for taxes, if it enables land to be identified. Moseley v. Hamilton, 136 Ky. 680 , 124 S.W. 894, 1910 Ky. LEXIS 529 ( Ky. 1910 ).

Where taxpayer did not list county bond under heading provided in schedule for listing “Bonds,” judgment assessing bond as omitted property was proper, as against taxpayer’s contention that he included value of bond under heading of miscellaneous personalty. Boyd v. Commonwealth, 149 Ky. 656 , 149 S.W. 914, 1912 Ky. LEXIS 666 ( Ky. 1912 ).

A general description of land in an assessment is valid, but the description must be sufficient to enable the land to be identified with the aid of extraneous evidence. Kypadel Coal & Lumber Co. v. Millard, 165 Ky. 432 , 177 S.W. 270, 1915 Ky. LEXIS 554 ( Ky. 1915 ).

The fact that the taxpayer in listing his real estate listed several tracts as one unit, giving only the total acreage and the general location, did not invalidate his schedule, and where the tax commissioner (now property valuation administrator) failed to assess the property the taxpayer was not liable for the 20 percent penalty in a subsequent action to assess the property as omitted. Kentucky Union Co. v. Commonwealth, 177 Ky. 746 , 198 S.W. 46, 1917 Ky. LEXIS 656 ( Ky. 1917 ).

3. —Oral Evidence.

Oral evidence may be received in aid of the listed description of land, but not to contradict the listed description. Kypadel Coal & Lumber Co. v. Millard, 165 Ky. 432 , 177 S.W. 270, 1915 Ky. LEXIS 554 ( Ky. 1915 ).

4. Taxpayer’s Schedule.

The value placed upon his property by the taxpayer, in his schedule, constitutes a strong admission on the issue of value, and the presumption exists that it is a fair value. In the absence of mistake, the taxpayer is ordinarily bound by his schedule. Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ).

The taxpayer’s schedule does not constitute the tax assessment, but is evidence from which the assessment may be made. Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ).

5. Assessment.

Where land was listed as being in a precinct other than the one in which it was actually located, the assessment was invalid. Kypadel Coal & Lumber Co. v. Millard, 165 Ky. 432 , 177 S.W. 270, 1915 Ky. LEXIS 554 ( Ky. 1915 ).

Where land is listed by the taxpayer as several separate tracts, the tax commissioner (now property valuation administrator) and board of supervisors should follow the listing in making the assessments, and not lump the tracts together or classify them differently than in the list. Letcher County v. Kentucky River Coal Corp., 250 Ky. 7 , 61 S.W.2d 891, 1933 Ky. LEXIS 620 ( Ky. 1933 ).

The assessing authorities should follow the classifications of this section in making assessments. Letcher County v. Kentucky River Coal Corp., 250 Ky. 7 , 61 S.W.2d 891, 1933 Ky. LEXIS 620 ( Ky. 1933 ).

6. Mistake.

A taxpayer who, by mistake, lists land as containing more acreage than it actually contains is not precluded by his list, and may have the acreage reduced to the proper amount on appeal from the board of supervisors. Letcher County v. Kentucky River Coal Corp., 250 Ky. 7 , 61 S.W.2d 891, 1933 Ky. LEXIS 620 ( Ky. 1933 ).

7. Farm Land.

In listing farm land for taxation the taxpayer must state with reasonable accuracy the number of acreas he owns, and if he lists a smaller number of acreas than he actually owns the omitted acreage may be assessed as omitted property, unless the taxpayer can establish by convincing proof that the value at which the land was assessed is a fair value for all the land he owns, regardless of acreage. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ).

8. Injunction.

Mistake of taxpayer in listing tobacco as taxable at regular county rate, when in fact it was taxable only at the rate allowed by subsection (5) of KRS 132.200 , did not prevent taxpayer from obtaining injunction against imposition of regular rate. Gray v. R. J. Reynolds Tobacco Co., 200 Ky. 47 , 252 S.W. 134, 1923 Ky. LEXIS 16 ( Ky. 1923 ) (decision prior to 1954 amendment).

Cited in:

Kentucky Farm & Cattle Co. v. Williams, 140 F. Supp. 449, 1956 U.S. Dist. LEXIS 3484 (D. Ky. 1956 ); Louisville Garage Corp. v. Louisville, 303 Ky. 553 , 198 S.W.2d 40, 1946 Ky. LEXIS 873 ( Ky. 1946 ).

Opinions of Attorney General.

Since a failure to correctly list all acreage creates a presumption that the acreage not listed is omitted property, the taxpayer’s failure to list a major improvement on property, such as a house, would also subject the improvement to assessment as omitted property. However, improvements not assessed for any reason other than the taxpayer’s failure to comply with this section and improvements which are merely undervalued or inadequately described are not classified as omitted property. OAG 85-143 .

Research References and Practice Aids

Cross-References.

Assessment of omitted property in action to enforce certificate of delinquency or to invalidate tax sale, KRS 135.548.

Tax returns to be confidential, KRS 131.190 .

132.240. Face value of intangibles to be stated. [Repealed.]

Compiler’s Notes.

This section (4019a-10b: amend. Acts 2000, ch. 327, § 5, effective July 14, 2000; 2005, ch. 85, § 184, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.250. Listing of property of nonresident owner. [Repealed.]

Compiler’s Notes.

This section (4039) was repealed by Acts 1949 (Ex. Sess.), ch. 5, § 6.

132.260. Rental space for parking mobile homes and recreational vehicles — Report — Right to inspect.

Every person providing rental space for the parking of mobile homes and recreational vehicles shall by February 1 of each year report the name of the owner and type and size of all mobile homes and recreational vehicles not registered in this state under KRS 186.655 on his premises on the prior January 1 to the property valuation administrator of the county in which the property is located. The report shall be made in accordance with forms prescribed by the Department of Revenue and shall be signed and verified by the chief officer or person in charge of the business. The property valuation administrator may make a personal inspection and investigation of the premises on which mobile homes and recreational vehicles are located, for the purpose of identifying and assessing such property. No person in charge of such premises shall refuse to permit the inspection and investigation.

History. 4777a-1 to 4777a-3, 4777a-5; Acts 1949 (Ex. Sess.), ch. 4, § 8; 1960, ch. 186, Art. I, § 6; 1962, ch. 262, § 3; 1982, ch. 395, § 2, effective July 15, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 327, effective July 13, 1990; 1996, ch. 317, § 1, effective July 15, 1996; 2005, ch. 85, § 185, effective June 20, 2005.

Compiler’s Notes.

Former KRS 132.260 (4777a-1 to 4777a-3, 4777a-5: amend. Acts 1949 (Ex. Sess.), ch. 4, § 8; 1960, ch. 186, Art. I, § 6; 1962, ch. 262, § 3; 1982, ch. 395, § 2, effective July 15, 1982) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 327, effective July 13, 1990.

NOTES TO DECISIONS

1. Public Warehouseman.

A public warehouseman is liable for the taxes on property in storage in the warehouse if the owners of the property have not listed it for taxation and paid the taxes. Commonwealth by Hopkins v. Tabbs Storage Warehouse & Freight Transfer Line, 150 Ky. 465 , 150 S.W. 525, 1912 Ky. LEXIS 915 ( Ky. 1912 ) (decided under prior law).

Opinions of Attorney General.

A regulation adopted by a city or county legislative body which includes modular homes in the definition of “housetrailer” is invalid, since a modular home is not a housetrailer under this section. OAG 75-249 .

Research References and Practice Aids

Cross-References.

“Mobile home”, “recreational vehicle”, and “recreational vehicle park” defined, KRS 132.720 .

132.270. Reporting and assessment of property held in pawn or pledge — Lien.

Every person engaged in the business of receiving property in pledge or as security for money or other things advanced to pawners or pledgers shall return under oath, the fair cash value of all property so pledged and held on January 1 of each year. Taxes shall be assessed on the value of such property to the person holding it as on other property owned by him and he shall have a lien on the property to secure the amount of tax due.

History. 4057: amend. Acts 1948, ch. 95, § 5; 1949 (Ex. Sess.), ch. 4, § 9; 1968, ch. 152, § 104.

132.275. Public utilities in county containing city of first class or consolidated local government to give property valuation administrator information concerning customers.

Each gas, water, electric light, and telephone company operating in a county containing a city of the first class or consolidated local government shall furnish to the property valuation administrator a list showing the names and addresses of all persons, firms, or corporations receiving service from such utilities, and thereafter on every Monday, said utility companies shall furnish to said property valuation administrator a report containing the names of all persons, firms, or corporations who have, during the week immediately preceding, ordered gas, water, electric light, or telephone service to be installed, removed, or discontinued, with the addresses at which the services were ordered to be installed, removed, or discontinued. Such information shall be treated as confidential and shall be used by said property valuation administrator only for the purpose of making accurate records. Provided, however, that said property valuation administrator shall permit the city assessor of said city of the first class or consolidated local government and any other taxing bodies of the various governments to examine said records for official purposes only, and said units of government shall treat said information as confidential.

History. Enact. Acts 1950, ch. 62; 2002, ch. 346, § 165, effective July 15, 2002.

Opinions of Attorney General.

Information concerning the names and addresses of persons obtaining utility services is required to be furnished to the property valuation administrator only by utility companies operating in counties containing a first class city. OAG 77-751 .

132.280. County tax levy to be based on state assessment — Exception for special taxing district.

The assessment made for state purposes, when supervised as required by law, shall be the basis for the levy of the ad valorem tax for county, school district, and all special taxing district purposes; except that any special taxing district established within an incorporated city under existing statutory or any independent school district whose January 1, 1975, assessment per pupil in average daily attendance would have been reduced because of the use of the assessment made for state purposes as of January 1, 1975, shall continue to use the assessment made for city purposes.

History. 1883; Acts 1976, ch. 186, § 1; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 328, effective July 13, 1990.

Compiler’s Notes.

Former KRS 132.280 (1883: amend. Acts 1976, ch. 186, § 1) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 328, effective July 13, 1990.

NOTES TO DECISIONS

  1. Application.
  2. County Assessment.
1. Application.

This section does not apply to franchise taxes assessed under KRS Chapter 136. Henderson Bridge Co. v. Commonwealth, 120 Ky. 690 , 87 S.W. 1088, 27 Ky. L. Rptr. 1104 , 27 Ky. L. Rptr. 1177 , 1905 Ky. LEXIS 154 ( Ky. 1905 ).

2. County Assessment.

A fiscal court has no power to provide for an assessment for county purposes alone, apart from the assessment for state purposes. Jefferson County v. Young, 120 Ky. 456 , 86 S.W. 985, 27 Ky. L. Rptr. 849 , 1905 Ky. LEXIS 116 ( Ky. 1905 ).

Cited in:

St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Opinions of Attorney General.

Where a board of education has had its taxes collected by a second class city that is using its city assessments, the base upon which the school tax rate will be collected for the tax year 1976 is calculated on the July 1, 1975 city assessment, and the first time the county property valuation administrator’s assessment can be used as the tax base is the assessment made as of January 1, 1977 for the 1977-78 school year. OAG 76-274 .

Research References and Practice Aids

Cross-References.

County ad valorem tax, levy, KRS 68.090 .

132.285. Use by city of county assessment allowance for costs — City’s power in adopting procedures to use county assessment — Appropriation.

    1. Except as provided in subsection (3) of this section, any city may by ordinance elect to use the annual county assessment for property situated within the city as a basis of ad valorem tax levies ordered or approved by the legislative body of the city. (1) (a) Except as provided in subsection (3) of this section, any city may by ordinance elect to use the annual county assessment for property situated within the city as a basis of ad valorem tax levies ordered or approved by the legislative body of the city.
    2. Any city making the election provided in paragraph (a) of this subsection shall notify the department and property valuation administrator prior to the next succeeding assessment to be used for city levies. In such event the assessment finally determined for county tax purposes shall serve as a basis of all city levies for the fiscal year commencing on or after the county assessment date.
    3. Each city which elects to use the county assessment shall annually appropriate and pay each fiscal year to the office of the property valuation administrator for deputy and other authorized personnel allowance, supplies, maps and equipment, and other authorized expenses of the office one-half of one cent ($0.005) for each one hundred dollars ($100) of assessment, except that sums paid shall not be:
      1. Less than two hundred fifty dollars ($250); or
      2. More than:
        1. Forty thousand dollars ($40,000) in a city having an assessment subject to city tax of less than two billion dollars ($2,000,000,000);
        2. Fifty thousand dollars ($50,000) in a city having an assessment subject to city tax of two billion dollars ($2,000,000,000) or more, but less than three billion dollars ($3,000,000,000);
        3. Sixty thousand dollars ($60,000) in a city having an assessment subject to city tax of three billion dollars ($3,000,000,000) but less than six billion dollars ($6,000,000,000); or
        4. One hundred thousand dollars ($100,000) in a city having an assessment subject to city tax of six billion dollars ($6,000,000,000) or more.
    4. This allowance shall be based on the assessment as of the previous January 1.
    5. Each property valuation administrator shall file a claim with the city for the county assessment, which shall include the recapitulation submitted to the city pursuant to KRS 133.040(2).
    6. The city shall order payment in an amount not to exceed the appropriation authorized by this section.
    7. The property valuation administrator shall be required to account for all moneys paid to his or her office by the city and any funds unexpended by the close of each fiscal year shall carry over to the next fiscal year.
    8. Notwithstanding any statutory provisions to the contrary, the assessment dates for the city shall conform to the corresponding dates for the county, and the city may by ordinance establish additional financial and tax procedures that will enable it effectively to adopt the county assessment.
    9. The legislative body of any city adopting the county assessment may fix the time for levying the city tax rate, due and delinquency dates for taxes, and any other dates that will enable it effectively to adopt the county assessment, notwithstanding any statutory provisions to the contrary.
    10. Any such city may, by ordinance, abolish any office connected with city assessment and equalization.
    11. Any city which elects to use the county assessment shall have access to the assessment records as soon as completed and may obtain a copy of that portion of the records which represents the assessment of property within the city by additional payment of the cost thereof.
    12. Once any city elects to use the county assessment, that action cannot be revoked without notice to the department and the property valuation administrator six (6) months prior to the next date as of which property is assessed for state and county taxes.
  1. In the event any omitted property is assessed by the property valuation administrator as provided by KRS 132.310 , the assessment shall be considered as part of the assessment adopted by the city according to subsection (1) of this section.
  2. For purposes of the levy and collection of ad valorem taxes on motor vehicles, cities shall use the assessment required to be made pursuant to KRS 132.487(5).
  3. Notwithstanding the provisions of subsection (1) of this section, each city which elects to use the county assessment for ad valorem taxes levied for 1996 or subsequent years, and which used the county assessment for ad valorem taxes levied for 1995, shall appropriate and pay to the office of the property valuation administrator for the purposes set out in subsection (1) of this section an amount equal to the amount paid to the office of the property valuation administrator in 1995, or the amount required by the provisions of subsection (1) of this section, whichever is greater.

HISTORY: Enact. Acts 1942, ch. 131, § 25; 1949 (Ex. Sess.), ch. 5, § 1; 1950, ch. 159; 1960, ch. 186, Art. I, § 7; 1962, ch. 29, § 2; 1966, ch. 178, § 1; 1972, ch. 245, § 4; 1984, ch. 54, § 17, effective January 1, 1985; 1996, ch. 254, § 19, effective July 15, 1996; 2005, ch. 85, § 186, effective June 20, 2005; 2009, ch. 69, § 2, effective June 25, 2009; 2018 ch. 171, § 11, effective April 14, 2018; 2018 ch. 207, § 11, effective April 27, 2018; 2020 ch. 91, § 44, effective April 15, 2020.

Legislative Research Commission Notes.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

NOTES TO DECISIONS

  1. Adoption of County Assessment.
  2. Annexed Territory.
  3. Assessment Dates.
  4. Establishing Rates.
1. Adoption of County Assessment.

Broad powers of this section authorized city to adopt county assessment as to personal property one year and county assessment as to real property the following year. Price v. Louisville, 237 S.W.2d 840, 1951 Ky. LEXIS 778 ( Ky. 1951 ).

2. Annexed Territory.

Since liability for ad valorem taxes is related to assessment date and not to levy date or collection date no inequality resulted in not permitting city to assess, levy and collect taxes on territory that was not annexed to city until after assessment date. St. Matthews v. Trueheart, 274 S.W.2d 52, 1954 Ky. LEXIS 1221 ( Ky. 1954 ).

A city cannot assess and levy taxes against annexed property that was annexed subsequent to assessment date and thus was not a part of the city on that date. St. Matthews v. Trueheart, 274 S.W.2d 52, 1954 Ky. LEXIS 1221 ( Ky. 1954 ).

3. Assessment Dates.

Insofar as it provides for different assessment dates, this section forms an exception to KRS 91.310 when a city adopts the county assessment. Price v. Louisville, 237 S.W.2d 840, 1951 Ky. LEXIS 778 ( Ky. 1951 ).

4. Establishing Rates.

As the more specific language of KRS 132.285 controlled over the more general language in KRS 132.0225 , a city did not violate KRS 132.0225 when it adopted its ad valorem tax rates more than 45 days after county assessments had been certified. Once the city elected to operate under KRS 132.285 , the city could set its own date for levying its taxes. Light v. City of Louisville, 248 S.W.3d 559, 2008 Ky. LEXIS 68 ( Ky. 2008 ).

Even though KRS 132.0225 requires all taxing districts to levy their tax rates within forty-five (45) days, cities that have elected to adopt a county’s assessment are empowered by KRS 132.285 to fix the time for levying their tax rates, notwithstanding any other statutory provisions to the contrary. Light v. City of Louisville, 248 S.W.3d 559, 2008 Ky. LEXIS 68 ( Ky. 2008 ).

Cited in:

Iroquois Post, A. L. v. Louisville, 279 S.W.2d 13, 1955 Ky. LEXIS 502 ( Ky. 1955 ); St. Matthews v. Stallings, 298 S.W.2d 676, 1957 Ky. LEXIS 378 ( Ky. 1957 ); Veith v. Louisville, 355 S.W.2d 295, 1962 Ky. LEXIS 64 ( Ky. 1962 ).

Opinions of Attorney General.

A city of the fourth class may by local ordinance adopt an assessment, valuation, assessment date, fiscal year, tax levy date, and due and delinquency dates of the county in which the city is situated, provided the requirements of this section are met. OAG 60-1243 .

Persons desiring information from the assessment records shall copy them in the county clerk’s office but shall not be permitted to remove them from that office. OAG 61-724 .

If a city has adopted the county assessments and due date, a receipt must be presented to the county clerk for the payment of city taxes due on a motor vehicle before such vehicle can be registered and licensed. OAG 61-827 .

A city of the sixth class that has adopted the county assessment and uses the calendar year as its fiscal year could adopt an ordinance under which city real estate taxes become delinquent on November 1 and a penalty of ten percent (10%) and interest of six percent (6%) are added subsequent to that date. OAG 67-61 .

The payment to the county tax commissioner’s (now property valuation administrator’s) office is only for the use of the assessment itself and not for the preparation of the city tax assessment books. OAG 67-283 .

Where a city adopted the county assessment with the county’s assessment date being January 1, territory annexed by the city in the following August could not be taxed by the city until the following year. OAG 69-663 .

The only requirement as far as the property valuation administrator is concerned, in furnishing assessment information to a city which has adopted the county assessment, is to make the record available to the city. OAG 71-87 .

Where a city has adopted the county assessment of property, it is the responsibility of the city to copy any information from the records or prepare any lists they consider necessary from which to prepare the city assessment. OAG 71-87 .

Where city chose to use the county assessment instead of a city assessment as provided in this section, it could provide for six (6) month special budget and tax period to provide for the transition from a calendar year to a fiscal year basis and could require public service company to pay a one half year’s tax bill for such period notwithstanding the use of the word “annually” in KRS 136.120 . OAG 75-435 .

A city of the fifth class may use the tax assessments of the county property valuation administrator as the assessment for city purposes by following the procedures and methods set out in this section. OAG 76-90 .

In a sixth class city the board of trustees which was sworn in on January 1, 1976 could levy an ad valorem tax on property owners for the year 1976 if the board had adopted the assessment made by the county tax commissioner (now property valuation administrator), but the board could not levy a tax for the year 1975. OAG 76-238 .

Inasmuch as the provisions designating dates and periods of time with respect to the levy, assessment and collection of taxes are, in the case of cities of the sixth class, considered directory and not mandatory, an ordinance to collect an ad valorem tax by a sixth class city would not be invalid because the city did not notify the Department of Revenue or the property valuation administrator of its election to use the county assessment. OAG 76-238 .

Where a fifth class city passed an ordinance annexing certain territory contiguous to its boundary on January 23, 1975, the city could not levy 1975 property taxes against the annexed properties on the assessment date as of January 1, 1975, and the city would have to refund to property owners in the territory any taxes collected for the year 1975. OAG 76-268 .

If a third class city’s request under the Open Records Act for the county assessment list is for informational purposes only, and not for the purpose of subverting the provisions of this section, then the city, which elected not to use the annual county assessment as a basis of ad valorem tax levies, would be entitled to a copy of the document. OAG 77-87 .

Since the property valuation administrator’s functions are regulated and supervised by the Department of Revenue, it follows in reading this section, KRS 132.590 and former 132.635 together, that the funding of that office is likewise under the regulation and supervision of the Department of Revenue, and therefore, all of the funds allocated by cities and fiscal courts for that office are subject to the applicable provisions of KRS Chapters 44 and 45 relating to the handling and disbursing of state funds. OAG 80-351 .

Relating to the city money that a city is required to annually appropriate and pay over as its contribution to the office of the property valuation administrator (PVA) under this section, the Department of Revenue has two (2) options available for supervising the money; the department could require the PVA to place said money in a special official account in a locally selected depository, which cannot be commingled with other funds, and require the city to isolate the PVA money in its annual budget; or the department could require that all city appropriations be paid into the State Treasury on a quarterly or lump sum basis, subject to necessary and reasonably imposed departmental fiscal regulations relating to disbursement. OAG 80-491 .

All ad valorem taxes levied and collected by a city must be made with reference to the city’s fiscal year regardless of the dates of the fiscal year. OAG 82-186 .

Where a city chose to adopt the county assessment, its assessment date was January 1 preceding the city’s fiscal year; the city’s levy date, however, must be subsequent to the certification of the county assessments by the Department of Revenue. OAG 82-186 .

Where a Property Valuation Administrator (PVA), acting in a purely private function, assists a city in preparing proper tax bills, and the PVA does the work alone after regular work hours, and does not make use of PVA office facilities, the PVA may perform this private work and may retain the income therefrom as nonstatutory personal income. OAG 83-449 .

Moneys recovered by the cabinet from an outgoing property valuation administrator (PVA) are state funds and thus belong in the state treasury; moreover, since the Revenue Cabinet has approval authority over PVA expenditures and has the discretion to increase or decrease the state appropriation to each PVA as the budgetary needs of each PVA’s office may require, the ultimate discretion as to disposition of nearly all of the PVA’s funds lies with the Revenue Cabinet. OAG 84-338 .

The Property Valuation Administrator’s response to the Open Records request of the city, denying access to assessment records covering much of the property in the city, was proper and supported by the provisions of subdivision (1)(j) (now (1)( l )) of KRS 61.878 and this section. OAG 88-11 .

A city is not required to pay the property valuation administrator for the use of motor vehicle assessments. OAG 88-75 .

A city need not include the motor vehicle assessments in its billing calculation, even if it has chosen to adopt the property valuation administrator’s assessment pursuant to subsection (1) of this section. OAG 89-2 .

Although KRS 65.140 does not define “vendor,” the Attorney General’s Office could see no reason why the Property Valuation Administrator (PVA) should not be considered a vendor for the purpose of billing a city for the city’s tax assessments, since the PVA is providing a service for which the city is obligated to make payment; therefore the city must make payment within 30 working days of receipt of the invoice from the Property Valuation Administrator. OAG 92-69 .

A city does not have to pay for motor vehicle assessments furnished by the Property Valuation Administrator under KRS 132.487 . OAG 92-69 .

A city “elects” to use a Property Valuation Administrator’s (PVA) assessment if, in fact, the city uses the PVA’s assessment as the basis for its own assessments, even if the assessment used is for a prior year; thus, if a city notifies the PVA that it will not use the PVA’s assessment for 1992, and then uses the PVA’s 1991 assessment as the basis for its 1992 assessment, then the city has nevertheless “elect[ed] to use the county assessment” and must pay the appropriate fee; whether the city in fact continues to use an old county assessment, however, could be conclusively determined only in a court of law and the city’s liability would be dependent on the extent to which it used the PVA’s assessment information rather than conducting independent assessments of its own. OAG 92-70 .

A city may not purchase the county assessment made by the property valuation administrator from a third party and use it as the basis for taxation without compensating the property valuation administrator pursuant to KRS 132.285 . OAG 13-002 , 2013, KY. AG LEXIS 2.

Research References and Practice Aids

Cross-References.

Assessor of first-class city may take property lists jointly with property valuation administrator, KRS 91.320 .

Kentucky Law Journal.

Lewis, Kostas, and Carnes, Consolidation — Complete or Functional — of City and County Governments in Kentucky, 42 Ky. L.J. 295 (1954).

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

The Property Tax — A Withering Vine, 60 Ky. L.J. 174 (1971).

132.290. Omitted property, what constitutes — Periods within which it may be assessed retroactively — Penalties and interest.

  1. Any real property which has not been listed for taxation, for any year in which it is taxable, by the time the board of assessment appeals completes its work for that year shall be deemed omitted property. Any personal property which has not been listed for taxation, for any year in which it is taxable, by the due date of that year shall be deemed omitted property.
  2. All omitted property shall be assessed retroactively in the manner provided by law at any time within five (5) years from the date when it became omitted, but the lien thereby accruing on any such property, except real property, shall not prejudice the rights of bona fide purchasers acquired in the meantime.
  3. All omitted property voluntarily listed shall be subject to a penalty of ten percent (10%) of the amount of taxes, and interest at the tax interest rate as defined in KRS 131.010(6) from the date when the taxes would have become delinquent had the property been listed as required by law, until the date the tax bill is paid.
  4. All omitted property not voluntarily listed shall be subject to a penalty of twenty percent (20%) of the amount of taxes, and interest at the tax interest rate as defined in KRS 131.010(6) from the date when the taxes would have become delinquent had the property been listed as required by law, until the date the tax bill is paid.
  5. When the property is assessed retroactively by action prosecuted in the manner provided by KRS 132.330 and 132.340 , an additional penalty of twenty percent (20%) of the amount of the original tax, interest and penalty may be collected for the purpose provided in KRS 134.552 and paid into the State Treasury. All other penalties and interest shall be distributed in the same manner as the tax.
  6. Taxes on omitted property shall be due and payable as provided in KRS 134.015 .

History. 4019a-12, 4021, 4149b-6: amend. Acts 1949 (Ex. Sess.), ch. 2, § 2; 1958, ch. 65, § 1; 1982, ch. 452, § 6, effective July 1, 1982; 1984, ch. 111, § 73, effective July 13, 1984; 1988, ch. 303, § 2, effective July 15, 1988; 1992, ch. 391, § 1, effective July 14, 1992; 2002, ch. 89, § 6, effective January 1, 2003; 2009, ch. 10, § 37, effective January 1, 2010.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Application.
  3. Omitted Property.
  4. Retroactive Assessment.
  5. Penalty.
  6. Bond.
  7. Limitations on Action.
  8. Lien.
  9. Adding New Parties.
1. Constitutionality.

The retrospective assessment of omitted property was constitutional. Town of London v. Hope, 80 S.W. 817, 26 Ky. L. Rptr. 112 (1904) (decided under prior law).

The penalties exacted under this section do not exceed the limitations placed upon the legislature by the Constitution. Commonwealth v. St. Matthews Gas & Electric Shop, Inc., 252 S.W.2d 673, 1952 Ky. LEXIS 1011 ( Ky. 1952 ).

2. Application.

This section applies only to actions to assess property, and not to actions to collect taxes on property that has been properly assessed. Powell County v. Clay City Nat'l Bank, 246 Ky. 326 , 55 S.W.2d 10, 1932 Ky. LEXIS 760 ( Ky. 1932 ).

3. Omitted Property.

“Omitted property” is property which is not assessed at all and does not mean that property which by mistake and in good faith has been assessed in the wrong county in the belief that it was located in that county may be treated as “omitted property.” Thomas' Ex'x v. Commonwealth, 308 Ky. 695 , 215 S.W.2d 546, 1948 Ky. LEXIS 1010 ( Ky. 1948 ).

4. Retroactive Assessment.

City of first class had the right to retrospectively assess omitted personal property at any time within five (5) years from the time the tax should have been assessed, although the city charter did not make any provision for retrospective assessment of personal property. Botto's Ex'r v. Louisville, 117 Ky. 798 , 79 S.W. 241, 25 Ky. L. Rptr. 1918 , 1904 Ky. LEXIS 249 ( Ky. 1904 ) (decided under prior law).

The state may provide for the retrospective assessment of property. Richardson v. State Nat'l Bank, 135 Ky. 772 , 123 S.W. 294, 1909 Ky. LEXIS 336 ( Ky. 1909 ), writ of error dismissed, 225 U.S. 696, 32 S. Ct. 838, 56 L. Ed. 1262, 1912 U.S. LEXIS 2120 (U.S. 1912).

Notes not listed for taxation may be assessed retroactively for only the ten (10) years (now five (5) years) preceding such assessment. Barnes v. Kennedy, 242 S.W.2d 616, 1951 Ky. LEXIS 1054 ( Ky. 1951 ).

Under this section omitted property may be assessed retroactively, “either voluntarily or by action,” within a ten (10) year (now five (5) year) limitation period. Commonwealth v. Interstate Grocery Co., 283 S.W.2d 708, 1955 Ky. LEXIS 321 ( Ky. 1955 ).

Doctrine of accord and satisfaction did not bar tax liability assessments because taxable items were not listed by a taxpayer for KRS 136.320 taxation purposes. Thus, the taxpayer’s separate accounts account for the periods in question qualified as omitted under KRS 132.290 , and the retroactivity provisions of the statute were properly applied. Monumental Life Ins. Co. v. Dep't of Revenue, 294 S.W.3d 10, 2008 Ky. App. LEXIS 207 (Ky. Ct. App. 2008), cert. denied, 559 U.S. 1037, 130 S. Ct. 2062, 176 L. Ed. 2d 414, 2010 U.S. LEXIS 2866 (U.S. 2010).

5. Penalty.

A penalty may still be attached though the taxes were paid without action or voluntarily. Davis v. Becker, 309 Ky. 775 , 219 S.W.2d 6, 1949 Ky. LEXIS 810 ( Ky. 1949 ).

6. Bond.

A written instrument lacking the element of fixing a sum certain to be paid could not be considered a “bond” or “note” within the meaning of this section. Fidelity & Columbia Trust Co. v. Lyons, 302 Ky. 839 , 196 S.W.2d 605, 1946 Ky. LEXIS 763 ( Ky. 1946 ).

7. Limitations on Action.

After judgment has been entered assessing omitted property, the taxing authorities have an additional five (5) years within which to bring action to collect the tax. Illinois C. R. Co. v. Commonwealth, 128 Ky. 268 , 108 S.W. 245, 32 Ky. L. Rptr. 1112 , 1908 Ky. LEXIS 52 ( Ky. 1908 ), aff'd, 218 U.S. 551, 31 S. Ct. 95, 54 L. Ed. 1147, 1910 U.S. LEXIS 2049 (U.S. 1910).

Where school board made demand on city assessor to make retrospective assessment of property of manufacturing concerns which had been omitted from assessment for school taxes, and the assessor refused to do so, the period during which the assessor refused to act was not to be counted in applying the five (5) year statute of limitations. North Vernon Lumber Co. v. Louisville, 163 Ky. 467 , 173 S.W. 1120, 1915 Ky. LEXIS 243 ( Ky. 1915 ).

Where bank listed its shares for taxation, but paid lower rate of tax than was actually due, under a mistake of law, an action by the county to collect the balance of taxes due was governed by the five (5) year statute of limitations and not by this section. Powell County v. Clay City Nat'l Bank, 246 Ky. 326 , 55 S.W.2d 10, 1932 Ky. LEXIS 760 ( Ky. 1932 ).

8. Lien.

Heirs of deceased taxpayer who had failed to list his property for taxation for several years took such property subject to lien for taxes that might be assessed within the statutory period allowed for retrospective assessment of omitted property. Commonwealth v. Sweigart's Adm'r, 115 Ky. 293 , 73 S.W. 758, 24 Ky. L. Rptr. 2147 , 1903 Ky. LEXIS 97 ( Ky. 1903 ) (decided under prior law).

9. Adding New Parties.

Where action to assess omitted real estate was brought within the five (5) year period, but the only defendant named in the action was a woman whose sole interest was a life tenancy in one-third of the land, a subsequent amendment, made after the five (5) year period had expired, bringing in the owners of the other interests as defendants, was too late as to such other owners. Commonwealth v. Hamilton, 72 S.W. 744, 24 Ky. L. Rptr. 1944 , 1903 Ky. LEXIS 440 (Ky. Ct. App. 1903) (decided under prior law).

Cited in:

Louisville Title Mortg. Co. v. Commonwealth, 299 Ky. 224 , 184 S.W.2d 963, 1944 Ky. LEXIS 1041 ( Ky. 1944 ); Bowles v. Gilpin, 299 Ky. 495 , 185 S.W.2d 698, 1945 Ky. LEXIS 4 43 ( Ky. 1945 ); St. Matthews Gas & Electric Shop, Inc. v. Commonwealth, 266 S.W.2d 106, 1954 Ky. LEXIS 784 ( Ky. 1954 ); Kentucky Tax Com. v. Airlene Gas Co., 328 S.W.2d 832, 1958 Ky. LEXIS 4 ( Ky. 1959 ); Revenue Cabinet v. O’Daniel, 153 S.W.3d 815, 2005 Ky. LEXIS 19 ( Ky. 2005 ).

Opinions of Attorney General.

Failure of a property valuation administrator to include improvements on real property listed for the year 1978 does not permit the assessment of such property as omitted property, rather it is merely an undervaluation of the property which should be corrected in the next assessment. OAG 79-239 (Withdrawn by OAG 85-143 to the extent of conflict).

Since a failure to correctly list all acreage creates a presumption that the acreage not listed is omitted property, the taxpayer’s failure to list a major improvement on property, such as a house, would also subject the improvement to assessment as omitted property. However, improvements not assessed for any reason other than the taxpayer’s failure to comply with KRS 132.230 , and improvements which are merely undervalued or inadequately described are not classified as omitted property. OAG 85-143 (Withdraws OAG 79-239 to the extent of conflict).

132.300. Failure to list note or bond bars action to collect. [Repealed.]

Compiler’s Notes.

This section (4019a-13) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.310. Listing and assessment of omitted property — Notice — Appeal — Penalties.

  1. Any person who has failed to list for taxation any property omitted from assessment, except such as is subject to assessment by the Department of Revenue, may at any time list such property with the property valuation administrator. The property valuation administrator shall proceed to assess any omitted real property and shall within ten (10) days from the date the real property was listed notify the taxpayer of the amount of the assessment. The notice shall be given as provided in KRS 132.450(4). The Department of Revenue shall assess any omitted personal property and provide notice to the taxpayer in the manner provided in KRS 131.110 .
  2. The property valuation administrator may at any time list and assess any real property which may have been omitted from the regular assessment. Immediately upon listing and assessing omitted real property, the property valuation administrator shall notify the taxpayer of the amount of the assessment. The notice shall be given as provided in KRS 132.450(4). If the property valuation administrator fails to assess any omitted real property, the Department of Revenue may initiate assessment and collection procedures under the same provisions it uses for omitted personal property.
  3. The notice to the taxpayer required by subsections (1) and (2) of this section shall specify a date and time at which the county board of assessment appeals will hear the taxpayer’s protest of the omitted assessment. For purposes of hearing appeals from omitted assessments the county judge/executive shall notify the chairman of the board of assessment appeals of the date set for hearing and may authorize one (1) member of the board to hear the appeal and issue a ruling of his decision on the assessment, which shall be appealable, to the Kentucky Claims Commission as provided by KRS 49.220(2).
  4. Any property voluntarily listed as omitted property for taxation under this section shall be subject to penalties provided in KRS 132.290(3). Omitted property listed for taxation under this section by the property valuation administrator shall be subject to the penalties provided in KRS 132.290(4).

HISTORY: 4064-1: amend. Acts 1949 (Ex. Sess.), ch. 2, § 3; 1960, ch. 186, Art. I, § 8, 32; 1964, ch. 141, § 39; 1974, ch. 326, § 13; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1988, ch. 303, § 3, effective July 15, 1988; 1992, ch. 391, § 2, effective July 14, 1992; 2005, ch. 85, § 187, effective June 20, 2005; 2017 ch. 74, § 68, effective June 29, 2017.

NOTES TO DECISIONS

1. Application.

Even though a taxpayer has not appeared at the property valuation administrator’s office to list his own assessment for a current year, the previously accepted assessment constitutes the continuing listing for or by the taxpayer; the assessment of unlisted property applies to previously unassessed or omitted property. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

132.320. Listing of omitted property with department — Appeal — Collection and distribution of tax — Deduction of fee from distribution.

  1. Any person who has failed to list for taxation tangible personal property, in whole or in part, because he was not called upon by the property valuation administrator or for any other reason, may at any time list the property with the department by reporting to the department the full details and a correct description of the omitted property and its value. The department may determine and fix the fair cash value, estimated at the price it would bring at a fair voluntary sale, of the property so reported and listed for taxation.
  2. Any person dissatisfied with or aggrieved by the finding or ruling of the department may appeal the finding or ruling in the manner provided in KRS 131.110 .
  3. The department may promulgate administrative regulations, and develop forms for the listing and assessment of the property assessed or to be assessed for taxation. The tax assessed shall be paid to and collected by the department. Taxes collected by the department on behalf of the county, school, and other local taxing districts shall be distributed to each district at least quarterly. From each distribution, the department shall deduct a fee which represents an allocation of department operating and overhead expenses incurred in assessing and collecting the omitted tax. The fee shall be determined by the department and shall apply to all omitted taxes collected after December 31, 1997.
  4. All property assessed pursuant to this section shall be liable for the payment of the taxes, interest, and penalties provided by law for failure to list the property with the property valuation administrator or other assessment board, commission, or authority within the time and in the manner prescribed by law, except that if the taxpayer voluntarily lists property under this section the twenty percent (20%) penalty provided to be paid to the department shall not apply, unless the taxpayer on an appeal from the action of the department attempts to reduce the assessment and is unsuccessful.
  5. If after demand by the department, any taxpayer refuses to voluntarily list any tangible personal property omitted from assessment, the department shall make an estimate of the fair cash value of the omitted tangible personal property from the information in its possession and assess the property for taxation and require payment of the taxes, penalties, and interest due to the state and local taxing districts from the person assessed. Notice of the assessment shall be mailed to the taxpayer or the taxpayer’s agent. The finality and review of any assessment made pursuant to this section shall be governed by the provisions of KRS 131.110 .

History. 4257a-3: amend. Acts 1954, ch. 147, § 1, effective June 17, 1954; 1988, ch. 303, § 4, effective July 15, 1988; 1998, ch. 391, § 1, effective July 15, 1998; 2005, ch. 85, § 188, effective June 20, 2005; 2005, ch. 168, § 61, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

  1. Certification to Local Tax Collector.
  2. Relief from Penalty.
  3. Taxing Determination Upheld.
1. Certification to Local Tax Collector.

Under this section, when an assessment of omitted accounts receivable is made by department of revenue (now Revenue Cabinet) based upon a voluntary listing by the taxpayer, there is no occasion to certify assessment to local tax collector because accounts receivable are subject to state tax only, and condition of certification is that property is liable for payment of taxes to local taxing districts. Commonwealth v. Interstate Grocery Co., 283 S.W.2d 708, 1955 Ky. LEXIS 321 ( Ky. 1955 ).

2. Relief from Penalty.

Where taxpayer listed intangible property with board of supervisors, but board did not assess property because listing was under protest, taxpayer was not liable for 20 percent penalty in subsequent action to assess property as omitted. Commonwealth v. Bingham's Adm'r, 188 Ky. 616 , 223 S.W. 999, 1920 Ky. LEXIS 331 ( Ky. 1920 ) (decided under prior law).

Where taxpayer did not list intangible property within time prescribed by law, the fact that he later voluntarily listed the property and paid the tax before the date as of which the tax would have become delinquent if the property had been duly assessed, did not relieve taxpayer of 100 percent penalty prescribed by KRS 132.290 prior to 1949 amendment of that section. Davis v. Becker, 309 Ky. 775 , 219 S.W.2d 6, 1949 Ky. LEXIS 810 ( Ky. 1949 ).

3. Taxing Determination Upheld.

KRS 132.030 , 132.200 , 136.300 , 136.320 are not related to public service companies or to franchise; it is clear that the general assembly considered the types of property that should be exempt from the “catch-all” rate, and it did not include franchise of a public service company-although it identified seventeen other categories of property. Dayton Power & Light Co. v. Dep't of Revenue, 405 S.W.3d 527, 2012 Ky. App. LEXIS 232 (Ky. Ct. App. 2012).

Research References and Practice Aids

Cross-References.

Administrative regulations, effective date, KRS 13A.330 .

Review of assessment by Kentucky board of tax appeals, KRS 131.110 .

Kentucky Law Journal.

Allphin, 1954 Kentucky Tax Legislation, 43 Ky. L.J. 76 (1954).

132.330. Action by Department of Revenue to assess omitted property.

The field agents, accountants, and attorneys of the Department of Revenue shall cause to be listed for taxation all property omitted by the property valuation administrators, county board of assessment appeals, department, or any other assessing authority, for any year omitted. The agent, accountant, or attorney proposing to have the property assessed shall file in the office of the county clerk of the county in which the property may be liable to assessment a statement containing a description and value of the property or corporate franchise proposed to be assessed, the name and place of residence of the owner, his agent or attorney, or person in possession of the property, if known, and the year the property was unassessed. The county clerk shall thereupon issue a summons against the owner, or person in possession of the property if the owner is unknown, to show cause within ten (10) days after the service of the summons, why the property or corporate franchise shall not be assessed at the value named in the statement filed. No decision shall be rendered against the alleged owner unless the statement filed contains a description of the property sought to be assessed that will enable the county judge/executive to identify it. The summons shall be executed by the sheriff by delivering a copy thereof to the owner, or if he is not in the county to his agent, attorney, or person in possession of the property. If the property is real property, and the owner is known but is absent from the state and has no attorney or agent in this state and no one is in possession of the property, the summons shall be served by posting it in a conspicuous place upon the property; if the property consists of tangible personal property the summons shall be placed in a conspicuous place where the property is located. In the case of tangible personal property, where the owner and his place of residence are unknown and no one has possession of the property, an action for assessment shall be instituted by filing the petition above mentioned and procuring constructive service against the owner under the provisions of rules 4.05, 4.06, 4.07, and 4.08 of the Rules of Civil Procedure. In all of the above cases an attachment of the property omitted from assessment may be procured from the District Court against the owner, at the time of the institution of the action or thereafter, and without the execution of a bond by the Commonwealth or its relator, by the representative of the Department of Revenue making an affidavit that the property described in the petition is subject to state, county, school, or other taxing district tax, and is unassessed for any taxable year.

History. 4260-1: impl. amend. Acts 1960, ch. 186, Art. I, § 32; amend. Acts 1962, ch. 210, § 21; 1976 (Ex. Sess.), ch. 14, § 144, effective January 2, 1978; 1978, ch. 384, § 259, effective June 17, 1978; 1984, ch. 111, § 175, effective July 13, 1984; 2005, ch. 85, § 189, effective June 20, 2005; 2005, ch. 168, § 62, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

  1. Application.
  2. Omitted Property.
  3. Undervaluation.
  4. Statement.
  5. —Description.
  6. Failure to Assess.
  7. Taxpayer’s Report.
  8. Excuse.
  9. Double Payment.
  10. Guardian and Ward.
  11. Judgment in Former Action as Bar.
  12. Action Against Personal Representative.
  13. Procedure.
  14. —Parties.
  15. —Intervention.
  16. —Action Against Person in Capacity of Agent, Bailee or Fiduciary.
  17. —Action Against Joint Owners.
  18. —Interested Parties.
  19. Collateral Attack.
  20. Attachment.
1. Application.

This section does not apply to an action to determine and collect a delinquent inheritance tax. Bosworth v. Commonwealth, 159 Ky. 771 , 169 S.W. 506, 1914 Ky. LEXIS 727 ( Ky. 1914 ). See Commonwealth v. Gaulbert's Adm'r, 134 Ky. 157 , 119 S.W. 779, 1909 Ky. LEXIS 365 ( Ky. 1909 ). See Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ).

This section does not apply to the assessment of omitted property for city taxes. Pettit's Ex'x v. Lexington, 193 Ky. 679 , 237 S.W. 391, 1922 Ky. LEXIS 64 ( Ky. 1922 ).

2. Omitted Property.

Where owner of large tract of land listed it as containing 7,000 acres, when in fact it contained 13,000 acres, the omitted acreage could be assessed as omitted property, unless the owner could establish by convincing proof that he took into consideration the total tract in fixing the value at which he listed the property, and that the listed value was a fair value for the entire tract, regardless of acreage. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ).

Where owner of property on assessment date died without having listed the property, the property could be assessed as omitted in an action against the personal representative. Boyd v. Commonwealth, 149 Ky. 656 , 149 S.W. 914, 1912 Ky. LEXIS 666 ( Ky. 1912 ).

Where taxpayer did not list specifically items of property the burden is on the Commonwealth to show what property was omitted, and its value, and when this has been done the burden is on the company to show that the value of such omitted property was considered and assessed by the tax commission, despite the omission, on information gathered from sources outside of the report. Commonwealth v. Kentucky Heating Co., 180 Ky. 607 , 203 S.W. 538, 1918 Ky. LEXIS 125 ( Ky. 1918 ).

Where a public service corporation, in its report for franchise tax purposes, has failed to report any item or species of property which is required by law to be reported, such property can be assessed as omitted property in an action under this section. Commonwealth v. Kentucky Heating Co., 180 Ky. 607 , 203 S.W. 538, 1918 Ky. LEXIS 125 ( Ky. 1918 ).

When a franchise-paying corporation, in its report for franchise tax purposes, omits any portion of its property required to be reported, or falsely or inaccurately describes any of its property in such a way as to decrease the value of its franchise, such property may be assessed as omitted property in an action for that purpose. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

Where, on assessment date, taxpayer’s claim for damages for breach of contract had not been reduced to judgment and was, therefore, not taxable, the subsequent entry of judgment on the claim would not make it subject to assessment in an action to assess it as omitted property. Commonwealth by Byars v. Travelers' Ins. Mach. Co., 181 Ky. 596 , 205 S.W. 561, 1918 Ky. LEXIS 550 ( Ky. 1918 ).

Where owner of land who had executed coal mining lease listed surface of land for taxation, but did not list the mineral rights or his rights under the lease, the value of his interest in the minerals could be assessed as omitted property. Moss v. Board of Sup'rs, 203 Ky. 813 , 263 S.W. 368, 1924 Ky. LEXIS 1021 ( Ky. 1924 ).

Where it is sought by an officer of the state or county to assess omitted property, the one seeking the assessment must show to the satisfaction of the court that the property has been omitted, and the burden then falls on the taxpayer to show by clear evidence that, notwithstanding the omission, the assessing board fixed and assessed the value of the property from information before it. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

Portion of accounts receivable representing gasoline tax which were not listed by taxpayer may be assessed as omitted property. Standard Oil Co. v. Commonwealth, 311 S.W.2d 372, 1957 Ky. LEXIS 8 ( Ky. 1957 ).

3. Undervaluation.

Where property has been listed by taxpayer, or assessed by tax commissioner (now property valuation administrator) upon information received from another source, and assessment has been reviewed by board of supervisors, but the Commonwealth considers the assessment too low, the property cannot be assessed as omitted to the extent of the undervaluation. Commonwealth v. J. M. Robinson, Norton & Co., 146 Ky. 218 , 142 S.W. 406, 1912 Ky. LEXIS 58 ( Ky. 1912 ). See Boyd v. Commonwealth, 149 Ky. 656 , 149 S.W. 914, 1912 Ky. LEXIS 666 ( Ky. 1912 ); Caldwell County v. First Nat'l Bank, 151 Ky. 720 , 152 S.W. 757, 1913 Ky. LEXIS 541 ( Ky. 1913 ); Millett's Ex'r v. Commonwealth, 184 Ky. 193 , 211 S.W. 562, 1919 Ky. LEXIS 39 ( Ky. 1919 ).

4. Statement.

In action to assess “cash on hand” and “cash on deposit in bank,” of a foreign corporation, mere allegation that the money was the proceeds of business done in Kentucky was not sufficient, without allegation that cash was on hand in Kentucky and bank deposits were in Kentucky banks. Northwestern Mut. Life Ins. Co. v. Commonwealth, 164 Ky. 255 , 175 S.W. 337, 1915 Ky. LEXIS 348 ( Ky. 1915 ).

Mere allegation that intangible property of a foreign corporation sought to be assessed as omitted property had a “taxable situs” in the county in which the action was brought was not sufficient, in the absence of an allegation of facts showing the basis for the claim of taxable situs. Northwestern Mut. Life Ins. Co. v. Commonwealth, 164 Ky. 255 , 175 S.W. 337, 1915 Ky. LEXIS 348 ( Ky. 1915 ).

The statement must allege facts which, if true, would make the property subject to taxation. Northwestern Mut. Life Ins. Co. v. Commonwealth, 164 Ky. 255 , 175 S.W. 337, 1915 Ky. LEXIS 348 ( Ky. 1915 ).

The value fixed by the agent or attorney for the Department of Revenue in his statement filed in the action is not controlling where the taxpayer contests the action, and the court may fix a value in excess of that fixed in the statement. Bingham's Adm'r v. Commonwealth, 199 Ky. 402 , 251 S.W. 936, 1923 Ky. LEXIS 907 ( Ky. 1923 ).

5. —Description.

In an action to assess omitted property the Commonwealth must describe all the property it seeks to have assessed, and if any property of the taxpayer is not so described it cannot be later assessed for the same assessment period in a subsequent action. Commonwealth v. United States Trust Co., 117 S.W. 314, 1909 Ky. LEXIS 502 ( Ky. 1909 ).

An action to assess omitted property cannot be used as a “fishing” expedition or a discovery proceeding. The property sought to be assessed must be identified. Commonwealth v. Glover, 132 Ky. 588 , 116 S.W. 769, 1909 Ky. LEXIS 131 ( Ky. 1909 ).

The statement filed by the agent, accountant or attorney need not be verified. Commonwealth v. Glover, 132 Ky. 588 , 116 S.W. 769, 1909 Ky. LEXIS 131 ( Ky. 1909 ).

Statement describing property as “cash on hand,” “household effects,” “library,” “pictures,” and “jewelry,” giving the value of each group, was sufficient as against motion to make more definite and certain. Commonwealth v. Glover, 132 Ky. 588 , 116 S.W. 769, 1909 Ky. LEXIS 131 ( Ky. 1909 ).

The description of intangible property such as accounts, notes, bonds, stocks, mortgages and “choses in action,” in order to be sufficient as against a motion to make more definite and certain, must, in the case of accounts, notes, mortgages and choses in action, describe each item separately, giving the amount and the person by whom owed, and, in the case of bonds and stocks, the name of the corporations by whom issued and the amount held in each corporation. Commonwealth v. Glover, 132 Ky. 588 , 116 S.W. 769, 1909 Ky. LEXIS 131 ( Ky. 1909 ). See Commonwealth v. J. M. Robinson, Norton & Co., 146 Ky. 218 , 142 S.W. 406, 1912 Ky. LEXIS 58 ( Ky. 1912 ); Commonwealth v. Prudential Life Ins. Co., 149 Ky. 380 , 149 S.W. 836, 1912 Ky. LEXIS 633 ( Ky. 1912 ).

The requirement that the statement describe the property sufficiently to enable the court to identify it is mandatory. Commonwealth v. Glover, 132 Ky. 588 , 116 S.W. 769, 1909 Ky. LEXIS 131 ( Ky. 1909 ).

Description of property as “a stock of goods of the value of $819,000” was not sufficient. Commonwealth v. J. M. Robinson, Norton & Co., 146 Ky. 218 , 142 S.W. 406, 1912 Ky. LEXIS 58 ( Ky. 1912 ).

Statement describing property sought to be assessed as “cash on hand, $3,000,” and “cash on deposit in bank, $7,000,” was sufficient. Commonwealth v. Prudential Life Ins. Co., 149 Ky. 380 , 149 S.W. 836, 1912 Ky. LEXIS 633 ( Ky. 1912 ).

It must be shown by the descriptive statement that the property sought to be assessed is subject to taxation in the county in which the action is instituted. Commonwealth by Hopkins v. Green, 150 Ky. 339 , 150 S.W. 353, 1912 Ky. LEXIS 885 ( Ky. 1912 ).

In an action against a public warehouseman to assess as omitted property various kinds of personal property held in storage for others, the statement describing the property was not sufficient where it did not set forth the names of the owners of the various items, since without such information the court could not determine whether the owners had listed the property. Commonwealth by Hopkins v. Tabbs Storage Warehouse & Freight Transfer Line, 150 Ky. 465 , 150 S.W. 525, 1912 Ky. LEXIS 915 ( Ky. 1912 ).

6. Failure to Assess.

If a railroad company has made the required reports to the Department of Revenue, under KRS 136.130 , for the purpose of assessment of its tangible property and franchise, the fact that the department delays in making the assessment does not furnish grounds for an action to assess the property of the railroad as omitted, so long as the department has not delayed beyond a reasonable time. Commonwealth by Anderson v. Louisville & N. R. Co., 142 Ky. 663 , 135 S.W. 280, 1911 Ky. LEXIS 288 ( Ky. 1911 ).

Tangible property of a railroad company not assessed by the state board of equalization and assessment would be assessed as omitted property, although failure of state board to assess such tangible property, and deduct its value from total franchise value, had resulted in assessment of intangible property of railroad at a higher sum than was proper. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

7. Taxpayer’s Report.

Where a franchise-paying corporation does not report, in its report for franchise tax purposes, an item of property required by law to be reported, it cannot avoid assessment of such property as omitted property except by convincing proof that such item was included in the report under some other heading, or was assessed upon information received by the state assessing board from sources other than the report. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

Where a railroad company, in its report for franchise tax purposes, reported its track mileage and other specific items of property, but did not report its rolling stock or office furniture, and the state board of equalization and assessment assessed its track mileage and “other property,” the fact that the assessment on “other property” exceeded the value reported by the company on the specific property listed by it other than track mileage did not, in an action to assess the rolling stock and office furniture as omitted property, raise a presumption that the state board actually assessed the rolling stock and furniture on information received from sources other than the railroad’s report. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

8. Excuse.

The fact that the value of tangible property of franchise-paying corporation was erroneously included in assessment of its franchise did not excuse the company from listing its tangible property, or prevent its assessment as omitted property. Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ), modified, 180 Ky. 607 , 203 S.W. 538, 1918 Ky. LEXIS 125 ( Ky. 1918 ) (on other grounds).

9. Double Payment.

Where railroad line was assessed against, and taxes were paid by operating company, it could not be assessed as omitted property against the owner company. Commonwealth v. Kinniconick & F. S. R. Co., 104 S.W. 290, 31 Ky. L. Rptr. 859 (1907).

10. Guardian and Ward.

Where judgment was entered against guardian in action to assess ward’s property, the surety on the guardian’s bond became liable for the amount of the judgment. Webber v. Commonwealth, 265 Ky. 696 , 97 S.W.2d 422, 1936 Ky. LEXIS 542 ( Ky. 1936 ).

In action against guardian to assess ward’s property which had not been listed for taxation, it was proper to enter personal judgment against the guardian, but the fact that such personal liability was imposed did not prevent the judgment from binding the estate of the ward and making it primarily liable for the taxes. Webber v. Commonwealth, 265 Ky. 696 , 97 S.W.2d 422, 1936 Ky. LEXIS 542 ( Ky. 1936 ).

Taxpayer could not maintain suit in circuit court under declaratory judgment act for declaration of rights and to enjoin commissioner of revenue from filing statement in county court to assess omitted property, since county court is proper forum. Commercial Credit Co. v. Martin, 275 Ky. 548 , 122 S.W.2d 135, 1938 Ky. LEXIS 467 ( Ky. 1938 ).

11. Judgment in Former Action as Bar.

Where revenue agent brought action against trust company to assess as omitted property the trust estates held by the company, no particular trust estate being named in the statement filed in the action, judgment against the trust company in such action, for taxes in a certain sum, was a bar to a subsequent action to assess as omitted property a particular trust estate held by the company, regardless of whether that estate was actually assessed in the first action. Commonwealth v. Churchill, 131 Ky. 251 , 115 S.W. 189, 1909 Ky. LEXIS 18 ( Ky. 1909 ).

A judgment assessing omitted property in an action for that purpose is a bar to a subsequent action against the same taxpayer to assess omitted property for the same assessment period, not only as to the property actually assessed in the judgment, but also as to any property that might have been assessed. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

Where, in action to assess tangible and intangible property of a taxpayer, the trial court sustained a demurrer to the part of the petition relating to intangible property, and entered judgment assessing only the tangible property, such judgment was a bar to any subsequent proceeding to assess the intangible property for the same period. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

The assessment of omitted real estate in an action against a person claiming title to the real estate constitutes only an assessment of the interest of such person in the real estate, and does not bar a subsequent action against another person claiming an interest in the same real estate to assess the value of his interest. Bronaugh v. Commonwealth, 188 Ky. 103 , 221 S.W. 531, 1920 Ky. LEXIS 240 ( Ky. 1920 ).

12. Action Against Personal Representative.

An action to assess omitted property of a decedent could be brought against his personal representative before the expiration of six months from the time of qualification of the representative, such action not coming within the prohibition of KRS 395.270 . Commonwealth ex rel. Cummins v. Ryan's Ex'rs, 126 Ky. 649 , 104 S.W. 727, 31 Ky. L. Rptr. 1069 , 1907 Ky. LEXIS 87 ( Ky. 1907 ).

13. Procedure.

The mere fact that the action is commenced in a certain county is not equivalent to an allegation that the property is taxable in that county. Northwestern Mut. Life Ins. Co. v. Commonwealth, 164 Ky. 255 , 175 S.W. 337, 1915 Ky. LEXIS 348 ( Ky. 1915 ).

Where property has been omitted from taxation for several years, it may be assessed for all of such years in one action, but the right to assess for each year constitutes a separate cause of action. Pettit's Ex'x v. Lexington, 193 Ky. 679 , 237 S.W. 391, 1922 Ky. LEXIS 64 ( Ky. 1922 ).

Mandamus would be available if state officers failed to perform their duty to have railroad property assessed in cities of second class entitled to tax it. Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ).

14. —Parties.

In action to assess storage accounts due whiskey warehouseman, for the storage of whiskey against which negotiable warehouse receipts had been issued, it was not necessary to give names of persons chargeable with storage, since persons chargeable would be those who ultimately presented receipts for honor, and such persons could not be presently identified. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ).

Personal property in the possession of an agent, bailee or fiduciary may be assessed in a proceeding against the agent, bailee or fiduciary, but the action must be against the person in the capacity in which he holds the property. Commonwealth by Hopkins v. Green, 150 Ky. 339 , 150 S.W. 353, 1912 Ky. LEXIS 885 ( Ky. 1912 ).

An action to assess omitted property can be brought only in the name of the Commonwealth, on the relation of some person authorized by law to act as relator. Commonwealth v. Helm, 163 Ky. 69 , 173 S.W. 389, 1915 Ky. LEXIS 207 ( Ky. 1915 ).

15. —Intervention.

In action to assess omitted land, county in which action was brought had no right to intervene and oppose assessment on ground that land sought to be assessed was not located in such county, or was not owned by person in whose name it was sought to be assessed, and that assessment in name of such person would cast cloud on land titles in such county. Commonwealth v. Leslie County, 174 Ky. 10 , 191 S.W. 657, 1917 Ky. LEXIS 142 ( Ky. 1917 ).

16. —Action Against Person in Capacity of Agent, Bailee or Fiduciary.

In an action against a person to assess property held by him as agent or fiduciary for another, property owned by such person individually cannot be assessed. Commonwealth by Hopkins v. Green, 150 Ky. 339 , 150 S.W. 353, 1912 Ky. LEXIS 885 ( Ky. 1912 ).

In an action to assess property against a person other than the sole owner, the statement must clearly show in what capacity such person is liable for the tax on the property. Commonwealth by Hopkins v. Green, 150 Ky. 339 , 150 S.W. 353, 1912 Ky. LEXIS 885 ( Ky. 1912 ).

When it is sought to assess property in the possession of an agent or fiduciary, the statement must set out facts showing the liability of the agent or fiduciary for the taxes. In the case of intangible personal property owned by a nonresident, facts must be alleged showing that its possession by a resident agent or fiduciary was for such a purpose as would give the property a taxable situs in Kentucky. Commonwealth by Hopkins v. Green, 150 Ky. 339 , 150 S.W. 353, 1912 Ky. LEXIS 885 ( Ky. 1912 ).

17. —Action Against Joint Owners.

Personal property jointly owned by two or more persons may be assessed in a proceeding against any one or more of the joint owners. Commonwealth by Hopkins v. Green, 150 Ky. 339 , 150 S.W. 353, 1912 Ky. LEXIS 885 ( Ky. 1912 ).

18. —Interested Parties.

The Commonwealth is the real party in interest in an action to assess omitted property. Commonwealth v. Helm, 163 Ky. 69 , 173 S.W. 389, 1915 Ky. LEXIS 207 ( Ky. 1915 ).

The Commonwealth and the taxpayer against whom the action is brought are the only parties who have an interest in an action to assess omitted property. Commonwealth v. Leslie County, 174 Ky. 10 , 191 S.W. 657, 1917 Ky. LEXIS 142 ( Ky. 1917 ).

19. Collateral Attack.

A judgment assessing omitted property cannot be collaterally attacked on the ground that the statement on which the action was based did not prescribe the property sufficiently to enable it to be identified. Commonwealth v. Helm, 169 Ky. 194 , 183 S.W. 502, 1916 Ky. LEXIS 674 ( Ky. 1916 ). See Commonwealth v. United States Trust Co., 117 S.W. 314, 1909 Ky. LEXIS 502 ( Ky. 1909 ).

20. Attachment.

The authorization of “an attachment of the property omitted from assessment,” means a specific attachment under KRS 425.430 to 425.465 (repealed), and not a general attachment. The order of attachment must describe the specific property sought to be reached. Commercial Credit Co. v. Martin, 275 Ky. 548 , 122 S.W.2d 135, 1938 Ky. LEXIS 467 ( Ky. 1938 ).

Cited in:

Sevier’s Ex’x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ); Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ); Texas Co. v. Commonwealth, 303 Ky. 590 , 198 S.W.2d 316, 1946 Ky. LEXIS 906 ( Ky. 1946 ); Reeves v. Island Creek Fuel & Transp. Co., 313 Ky. 400 , 230 S.W.2d 924, 1950 Ky. LEXIS 859 ( Ky. 1950 ); Commonwealth v. St. Matthews Gas & Electric Shop, Inc., 252 S.W.2d 673, 1952 Ky. LEXIS 1011 ( Ky. 1952 ); Commonwealth v. Interstate Grocery Co., 283 S.W.2d 708, 1955 Ky. LEXIS 321 ( Ky. 1955 ); Allphin v. Ohio River Co., 306 S.W.2d 94, 1957 Ky. LEXIS 17 ( Ky. 1957 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Affidavit of Field Agent Showing Examination of Record, Form 355.05.

Caldwell’s Kentucky Form Book, 5th Ed., Judgment — Omitted Property, Form 355.04.

132.340. Order of county judge/executive assessing omitted property — Certifying of assessment — Penalties — Collection.

  1. Within ten (10) days after the summons has been served, or within thirty (30) days after the warning order against the defendant whose name and place of residence are unknown has been made, if it appears to the county judge/executive that the property is liable for taxation and has not been assessed, the county judge/executive shall enter an order fixing the value at the fair cash value estimated as required by law. The county judge/executive shall certify the assessment of the property and its value, together with such other facts as may be required by law or directed by the county judge/executive to appear in the order, to the Department of Revenue and to the sheriff of the county, together with the amount of penalty and cost of assessment, in order that the taxes due the state, county, school or any other taxing district may be collected, with the penalty and costs. If the property is not liable for taxes, the county judge/executive shall make an order to that effect. Either party may appeal from the decision of the county judge/executive to the Circuit Court, and then to the Court of Appeals as in other civil cases, except that no appeal bond shall be required where the appeal is by the commissioner of revenue acting as the relator.
  2. If the owner of the property fails to pay the tax assessed, interest, penalties and costs, the lien under the attachment may be enforced and a sufficiency of the property sold to pay the obligation to the state, county, school or other taxing district. All persons owning property that is assessed as herein provided shall, in addition to the taxes and interest from the time the taxes should have been paid, pay the costs of the proceedings and a penalty of twenty percent (20%) on the amount of the taxes due, except where the property was duly listed and the taxes paid thereon within the time prescribed by law, and except where some different penalty is expressly provided by law.
  3. The taxes, costs and penalties shall be collected and accounted for as other taxes and penalties are required to be collected, and by the same officers. The county clerk shall enter all such assessments in a book to be kept for that purpose, showing the date of the assessment, the name of the person against whom the assessment is made, the location and description of the property assessed, and the value thereof. The officer collecting the taxes shall, when they are paid, notify the clerk of the payment, and the payment shall be noted by the clerk opposite the entry of the assessment.

History. 4260-1: amend. Acts 1976 (Ex. Sess.), ch. 14, § 145, effective January 2, 1978; 1978, ch. 384, § 260, effective June 17, 1978; 2005, ch. 85, § 190, effective June 20, 2005.

NOTES TO DECISIONS

  1. Jurisdiction.
  2. Certification.
  3. Omitted Property.
  4. Fair Cash Value.
  5. Franchise Tax.
  6. Failure to Assess.
  7. Penalty.
  8. Jury.
  9. Judgment.
  10. Compromise.
  11. Collection.
  12. Appeal.
  13. Remand.
  14. Collateral Attack.
1. Jurisdiction.

In assessing the franchise of a public service corporation, the county court in which action was first brought had exclusive jurisdiction, the valuation fixed by it being certified to each county in which the company operates, through the Department of Revenue. Commonwealth v. Adams Express Co., 118 Ky. 312 , 80 S.W. 1118, 26 Ky. L. Rptr. 190 , 1904 Ky. LEXIS 42 ( Ky. 1904 ) (decided under prior law).

The fact that the county court dismissed the action without indicating the reasons therefor does not prevent the Circuit Court from taking jurisdiction. Commonwealth ex rel. Alexander v. Haggin, 99 S.W. 906, 30 Ky. L. Rptr. 788 (1907) (decided under prior law).

Under this section and KRS 132.330 an action to assess omitted property must be brought in the local county court. Commonwealth v. Interstate Grocery Co., 283 S.W.2d 708, 1955 Ky. LEXIS 321 ( Ky. 1955 ).

2. Certification.

Presumption that county court clerk performed statutory duty to certify assessment of omitted property to sheriff was overcome by evidence of sheriff that no certification was made. Shanks v. Northcutt, 223 Ky. 138 , 3 S.W.2d 208, 1928 Ky. LEXIS 303 ( Ky. 1928 ).

3. Omitted Property.

County bond which had not been listed for taxation for several years was assessable as omitted property, notwithstanding that county had refused to pay bond and during years in question taxpayer was engaged in litigation with county over payment of bond, and during one of the years the lower court had held the county not liable. Boyd v. Commonwealth, 149 Ky. 656 , 149 S.W. 914, 1912 Ky. LEXIS 666 ( Ky. 1912 ) (decided under prior law).

Where taxpayer did not list county bond under heading provided in schedule for listing “Bonds,” judgment finding that bond had been omitted was proper, as against taxpayer’s contention that he included value of bond under listing of miscellaneous personalty. Boyd v. Commonwealth, 149 Ky. 656 , 149 S.W. 914, 1912 Ky. LEXIS 666 ( Ky. 1912 ) (decided under prior law).

Portion of accounts receivable representing gasoline tax which were not listed by taxpayer may be assessed as omitted property. Standard Oil Co. v. Commonwealth, 311 S.W.2d 372, 1957 Ky. LEXIS 8 ( Ky. 1957 ) (decided under prior law).

4. Fair Cash Value.

In taking evidence as to the value of omitted property, witnesses should be asked their opinion as to the fair cash value of the property estimated at the price it would bring at a fair voluntary sale, but it is proper to ask other questions for the purpose of showing how the witness arrived at the value given, or to show what knowledge he has of the value. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ) (decided under prior law).

The value fixed by the agent or attorney for the Department of Revenue in his statement filed in the action is not controlling where the taxpayer contests the action, and the court may fix a value in excess of that fixed in the statement. Bingham's Adm'r v. Commonwealth, 199 Ky. 402 , 251 S.W. 936, 1923 Ky. LEXIS 907 ( Ky. 1923 ) (decided under prior law). See Boyd v. Commonwealth, 149 Ky. 656 , 149 S.W. 914, 1912 Ky. LEXIS 666 ( Ky. 1912 ).

5. Franchise Tax.

In an action to assess as omitted property certain items of property not reported by a franchise-paying corporation in its report for franchise tax purposes, the court should determine to what extent the franchise value as fixed by the tax commission should be increased by reason of the omitted items, and certify the increase to the tax commission. Commonwealth v. Kentucky Heating Co., 180 Ky. 607 , 203 S.W. 538, 1918 Ky. LEXIS 125 ( Ky. 1918 ) (decided under prior law).

6. Failure to Assess.

The fact that the tax authorities have never attempted to assess a particular kind of property does not constitute a contemporaneous construction of the law preventing the assessment of such property. Commonwealth ex rel. Huntsman v. Kentucky Distilleries & Warehouse Co., 143 Ky. 314 , 136 S.W. 1032, 1911 Ky. LEXIS 466 ( Ky. 1911 ) (decided under prior law).

7. Penalty.

Where officers of national bank did not list its stock for taxation as required by law, the 20 percent penalty could be imposed against the bank in an action to assess the stock as omitted property. Commonwealth v. Citizens’ Nat’l Bank, 117 Ky. 946 , 25 Ky. L. Rptr. 2100 , 80 S.W. 158, 1904 Ky. LEXIS 265 ( Ky. 1904 ), dismissed, Citizens Nat’l Bank v. Kentucky, 199 U.S. 603, 26 S. Ct. 750, 50 L. Ed. 329, 1905 U.S. LEXIS 963 (1905), writ dismissed, Citizens Nat’l Bank v. Kentucky, 199 U.S. 603, 26 S. Ct. 750, 50 L. Ed. 329, 1905 U.S. LEXIS 963 (1905) (decided under prior law).

Where taxpayer listed intangible property with board of supervisors, but board did not assess property because listing was under protest, taxpayer was not liable for 20 percent penalty in subsequent action to assess property as omitted. Commonwealth v. Bingham's Adm'r, 188 Ky. 616 , 223 S.W. 999, 1920 Ky. LEXIS 331 ( Ky. 1920 ) (decided under prior law).

Where corporation made complete and accurate reports for corporation license tax purposes, but state tax commission erroneously computed tax on basis of issued capital stock, instead of authorized capital stock, and corporation paid tax on such computation, corporation was not liable for 20 percent penalty in action to collect additional tax due under correct computation. American Tobacco Co. v. Commonwealth, 162 Ky. 716 , 172 S.W. 1085, 1915 Ky. LEXIS 141 ( Ky. 1915 ) (decided under prior law).

The fact that the state assessing authorities had not required a foreign railroad company to file reports for franchise tax purposes did not operate to relieve the company of the 20 percent penalty in an action to assess its franchise as omitted property. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ) (decided under prior law).

Where taxpayer listed his property with the tax commissioner (now property valuation administrator), but the schedule was mislaid and the commissioner (now administrator) therefore made no assessment, the taxpayer was not liable for the 20 percent penalty in an action to assess the property as omitted. Kentucky Union Co. v. Commonwealth, 177 Ky. 746 , 198 S.W. 46, 1917 Ky. LEXIS 656 ( Ky. 1917 ) (decided under prior law).

Where property has not been assessed in the manner prescribed by law, the taxpayer cannot avoid the 20 percent penalty by paying the tax to the sheriff on a valuation agreed upon between the taxpayer and sheriff, even though such valuation is the proper one. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ) (decided under prior law).

Ignorance of the law, on the part of the taxpayer or the assessing officers, or failure of the assessing officers to perform their duty, will not excuse the taxpayer from penalty in the assessment of his omitted property. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ) (decided under prior law).

8. Jury.

The court has no authority to empanel a jury in an action to assess omitted property even to try the question of the domicile of the taxpayer or the value of the property. Stearns Coal & Lumber Co. v. Commonwealth, 167 Ky. 51 , 179 S.W. 1080, 1915 Ky. LEXIS 799 ( Ky. 1915 ) (decided under prior law). See Commonwealth v. Leslie County, 174 Ky. 10 , 191 S.W. 657, 1917 Ky. LEXIS 142 ( Ky. 1917 ) (decided under prior law); Covington v. Shinkle, 175 Ky. 530 , 194 S.W. 766, 1917 Ky. LEXIS 351 ( Ky. 1917 ); Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ) (decided under prior law).

9. Judgment.

In an action to assess omitted property the county judge acts in a ministerial rather than judicial capacity, but his judgment is the judgment of a court. Stearns Coal & Lumber Co. v. Commonwealth, 167 Ky. 51 , 179 S.W. 1080, 1915 Ky. LEXIS 799 ( Ky. 1915 ) (decided under prior law).

A judgment assessing omitted property can be set aside for fraud or collusion only by motion in the court in which the judgment was entered, and not by independent action. Commonwealth v. Harkness' Adm'r, 181 Ky. 709 , 205 S.W. 787, 1918 Ky. LEXIS 600 ( Ky. 1918 ) (decided under prior law). See Commonwealth v. Helm, 169 Ky. 194 , 183 S.W. 502, 1916 Ky. LEXIS 674 ( Ky. 1916 ).

10. Compromise.

The parties to an action to assess omitted property may make a stipulation as to the facts, and agree to a compromise judgment, and both parties will be bound thereby in the absence of fraud or mistake. Commonwealth v. Southern Pac. Co., 134 Ky. 421 , 120 S.W. 313, 1909 Ky. LEXIS 386 ( Ky. 1909 ) (decided under prior law).

11. Collection.

After judgment has been entered assessing omitted property, the taxing authorities have an additional five years within which to bring action to collect the tax. Illinois C. R. Co. v. Commonwealth, 128 Ky. 268 , 108 S.W. 245, 32 Ky. L. Rptr. 1112 , 1908 Ky. LEXIS 52 ( Ky. 1908 ), aff'd, 218 U.S. 551, 31 S. Ct. 95, 54 L. Ed. 1147, 1910 U.S. LEXIS 2049 (U.S. 1910).

The power of the court is limited to assessing the omitted property; the court cannot enter a judgment for the amount of taxes due, or issue a rule requiring the sheriff to collect the taxes. Commonwealth v. Southern Pac. Co., 154 Ky. 41 , 156 S.W. 865, 1913 Ky. LEXIS 4 ( Ky. 1913 ) (decided under prior law).

12. Appeal.

On appeal from judgment of county court, entered by default, where taxpayer filed no pleading and made no defense, the Circuit Court should have affirmed the county court judgment, rather than dismissing the appeal, but latter action was not prejudicial. Sebree v. Commonwealth, 115 Ky. 736 , 74 S.W. 716, 25 Ky. L. Rptr. 121 , 1903 Ky. LEXIS 147 ( Ky. 1903 ) (decided under prior law).

If the county court determined that the defendant was not the owner of any property subject to taxation, the plaintiff may have appealed. Commonwealth v. Reed, 121 Ky. 432 , 89 S.W. 294, 28 Ky. L. Rptr. 381 , 1905 Ky. LEXIS 226 ( Ky. 1905 ) (decided under prior law).

On appeal to the Circuit Court the matter was to be tried de novo. Commonwealth v. Reed, 121 Ky. 432 , 89 S.W. 294, 28 Ky. L. Rptr. 381 , 1905 Ky. LEXIS 226 ( Ky. 1905 ) (decided under prior law).

The right of appeal to the Circuit Court given by this section does not preclude the defendant of the right to proceed in the county court under C. C. 518 (now CR 60.02) to have the county court judgment set aside on the ground of unavoidable casualty or misfortune, in a case where the time for appeal has expired. Commonwealth v. Weissinger, 143 Ky. 368 , 136 S.W. 875, 1911 Ky. LEXIS 424 ( Ky. 1911 ) (decided under prior law).

Appeal to Circuit Court must be taken within 60 days. Commonwealth v. Weissinger, 143 Ky. 368 , 136 S.W. 875, 1911 Ky. LEXIS 424 ( Ky. 1911 ) (decided under prior law).

Neither party can appeal from a compromise judgment. Commonwealth v. Helm, 163 Ky. 69 , 173 S.W. 389, 1915 Ky. LEXIS 207 ( Ky. 1915 ) (decided under prior law).

Appeals to the Circuit Court and to the Court of Appeals, under this section, are governed by the provisions of the Civil Code (now Rules of Civil Procedure) relating to appeals in civil cases generally. Stearns Coal & Lumber Co. v. Commonwealth, 163 Ky. 837 , 174 S.W. 771, 1915 Ky. LEXIS 319 ( Ky. 1915 ) (decided under prior law).

On appeal to the Circuit Court, the defendant is not limited to the defenses interposed by him in the county court, but the plaintiff cannot amend his pleading in the Circuit Court to set up a new and independent cause of action. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ) (decided under prior law).

Where it is sought to assess property omitted for several years, the failure of the taxpayer to list the property constitutes a separate cause of action as to each year, and where the Circuit Court, on appeal from the county court, enters judgment dismissing the petition as to one or more of the years and assessing the property for the other years, the Commonwealth cannot obtain a review of the portion of the judgment dismissing the petition as to some of the years by cross-appealing on an appeal by the taxpayer from the judgment insofar as it assesses his property for the other years; the Commonwealth must take a direct appeal. Pettit's Ex'x v. Lexington, 193 Ky. 679 , 237 S.W. 391, 1922 Ky. LEXIS 64 ( Ky. 1922 ).

13. Remand.

If the Circuit Court reaches a different conclusion than the county court the case must be remanded to the county court in order that the latter may enter and certify the assessment. Commonwealth v. Reed, 121 Ky. 432 , 89 S.W. 294, 28 Ky. L. Rptr. 381 , 1905 Ky. LEXIS 226 ( Ky. 1905 ) (decided under prior law).

14. Collateral Attack.

A judgment of the county court assessing omitted property is conclusive as to the taxability of the property, and the question of whether the property was subject to taxation cannot be relitigated in an action to enjoin collection of the tax on such assessment or to secure a refund of the tax after it has been paid. Couty v. Bosworth, 160 Ky. 312 , 169 S.W. 742, 1914 Ky. LEXIS 449 ( Ky. 1914 ), overruled, Craig v. Security Producing & Refining Co., 189 Ky. 565 , 225 S.W. 729, 1920 Ky. LEXIS 475 (1920) (decided under prior law).

Cited in:

Webber v. Commonwealth, 265 Ky. 696 , 97 S.W.2d 422, 1936 Ky. LEXIS 542 ( Ky. 1936 ); Texas Co. v. Commonwealth, 303 Ky. 590 , 198 S.W.2d 316, 1946 Ky. LEXIS 906 ( Ky. 1946 ); Commonwealth v. St. Matthews Gas & Electric Shop, Inc., 252 S.W.2d 673, 1952 Ky. LEXIS 1011 ( Ky. 1952 ); St. Matthews Gas & Electric Shop, Inc. v. Commonwealth, 266 S.W.2d 106, 1954 Ky. LEXIS 784 ( Ky. 1954 ).

132.350. County attorney shall assist in tax assessment proceedings in court — Compensation.

The county clerk shall, upon the filing of a statement by an agent, accountant or attorney of the Department of Revenue for the assessment of omitted property, enter the name of the person signing the statement as attorney for the department, and enter the name of the county attorney as attorney for the state, county, school and other taxing districts for which the commissioner of revenue is authorized to act as relator in such proceeding. The county attorney shall appear and prosecute or assist in the prosecuting of the proceeding in all the courts to which it may be taken for trial. If there is a judgment assessing the property for taxation, the judgment in each case shall recite whether or not the county attorney was present and assisted in the trial of the proceeding. When he is present and assists in the proceeding he shall be allowed as compensation for his services ten percent (10%) of the amount of state and county taxes assessed and collected pursuant to the judgment. The state and county shall be liable respectively for the payment only of the percentage allowance of compensation to the county attorney on the amount that each collects, and this shall be paid to the county attorney within thirty (30) days after the collection of the taxes, and charged against the fund to which the tax was credited.

History. 4260b: amend. Acts 1976 (Ex. Sess.), ch. 17, § 36, effective January 1, 1978; 1978, ch. 400, § 1, effective June 17, 1978; 2005, ch. 85, § 191, effective June 20, 2005.

NOTES TO DECISIONS

  1. Application.
  2. Compromise.
  3. Compensation.
1. Application.

This section does not apply to an action under the inheritance tax law to determine and collect a delinquent inheritance tax, and in such an action the county attorney is not entitled to the fee prescribed by this section. Bosworth v. Commonwealth, 159 Ky. 771 , 169 S.W. 506 ( Ky. 1914 ).

2. Compromise.

Compromise judgment in action to assess omitted property was binding where it was entered with approval of county attorney. Commonwealth v. Southern Pac. Co., 134 Ky. 421 , 120 S.W. 313, 1909 Ky. LEXIS 386 ( Ky. 1909 ).

3. Compensation.

The compensation allowed the county attorney by this section is such compensation of the office as cannot, by Ky. Const., § 161, be changed during the term of the officer. James v. Duffy, 140 Ky. 604 , 131 S.W. 489, 1910 Ky. LEXIS 325 ( Ky. 1910 ).

Fees received by county attorney under this section in excess of his maximum constitutional compensation belong to the county and not to the state. Commonwealth v. Coleman, 245 Ky. 673 , 54 S.W.2d 42, 1932 Ky. LEXIS 662 ( Ky. 1932 ).

Opinions of Attorney General.

Neither this section nor KRS 133.120(7) requires the county attorney to defend the property valuation administrator in a legal action brought against him. OAG 91-231 .

The county attorney may represent the property valuation administrator if the fiscal court determines that the county has a definite interest in defending the action and directs the county attorney to undertake representation; but without such direction from the fiscal court, the county attorney has no duty to represent the property valuation administrator. OAG 91-231 .

Salary of the county attorney is an expense that is obviously “predominately personal” to the county attorney and therefore, moneys restricted by statute to use for “operating expenses” of the county attorney’s office per KRS 134.545 , cannot be used to pay or supplement the salary of the county attorney. OAG 94-64 .

Research References and Practice Aids

Kentucky Law Journal.

Underwood, Part-Time Prosecutors and Conflicts of Interest: A Survey and Some Proposals, 81 Ky. L.J. 1 (1993).

132.360. Reopening and increase of assessment — Notice — Protest — Certification.

  1. Any assessment of tangible personal property listed with the property valuation administrator or with the department as provided by KRS 132.220 may be reopened by the department within five (5) years after the due date of the return, unless the assessed value has been established by a court of competent jurisdiction. If upon reopening the assessment the department finds that the assessment was less than the fair cash value and should be increased, it shall provide notice to the taxpayer. If the taxpayer disagrees with the increase in the assessment, the taxpayer may protest the notice in accordance with KRS 131.110 .
  2. Upon the assessment becoming final, the department shall certify the amount due to the taxpayer. The tax bill shall be handled and collected as an omitted tax bill, and the additional tax shall be subject to the same penalties and interest as the tax on omitted property voluntarily listed.

History. 4019a-10a, 4019a-10d: amend. Acts 1949 (Ex. Sess.), ch. 2, § 4; 1954, ch. 147, § 2; 1958, ch. 65, § 2; 1966, ch. 255, § 128; 1988, ch. 303, § 5, effective July 15, 1988; 2000, ch. 327, § 6, effective July 14, 2000; 2002, ch. 89, § 7, effective July 15, 2002; 2005, ch. 85, § 192, effective June 20, 2005; 2005, ch. 168, § 63, effective January 1, 2006; 2017 ch. 74, § 69, effective June 29, 2017; 2019 ch. 151, § 11, effective June 27, 2019.

NOTES TO DECISIONS

1. Failure to List.

Where corporation had failed to list 30 percent of its accounts, claiming that amount was taxes collected for state and should not be taxed again, state could reach through omitted property statute rather than this section. Standard Oil Co. v. Commonwealth, 311 S.W.2d 372, 1957 Ky. LEXIS 8 ( Ky. 1957 ).

Cited in:

Kentucky Tax Com. v. Airlene Gas Co., 328 S.W.2d 832, 1958 Ky. LEXIS 4 ( Ky. 1959 ).

132.365. Procedure for assessment of mineral properties. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 93, § 35) was repealed by Acts 1978, ch. 116, § 2, effective June 17, 1978.

132.370. Property valuation administrator’s status as state official — Election — Qualification — Terms — Removal — Accrued leave and compensatory time.

  1. There shall be a property valuation administrator in each county in lieu of a county assessor. Property valuation administrators shall be state officials and all deputies and assistants of their offices shall be unclassified state employees.
  2. Property valuation administrators shall be elected in the year in which county elections are held and shall enter upon the discharge of the duties of their office on the first Monday in December after their election and continue in office for a period of four (4) years, and until the election and qualification of their successors. Property valuation administrators shall possess the qualifications required by Section 100 of the Constitution and by KRS 132.380 and shall be eligible for reelection.
  3. The property valuation administrators and all deputies and assistants of their offices who qualify as full-time employees shall be eligible for participation in the provisions of KRS 18A.205 , 18A.230 to 18A.355 , and 61.510 to 61.705 .
  4. A property valuation administrator may be removed from office by the Circuit Court of his or her county, upon petition of any taxpayer, or by the commissioner of revenue for willful disobedience of any just or legal order of the department, or for misfeasance or malfeasance in office or willful neglect in the discharge of his or her official duties, including but not limited to intentional underassessment or overassessment of properties and chronic underassessment of properties. For purposes of this section and KRS 133.250 , “chronic underassessment” means a widespread pattern and practice of assessing properties at levels substantially below fair market value which persists for a period of two (2) or more years as disclosed by randomly selected sample appraisals conducted under the provisions of KRS 133.250 , special audits conducted pursuant to KRS 133.250, or other means.
  5. If the commissioner determines that a property valuation administrator should be removed from office, the property valuation administrator shall be notified in writing, and the notice of intent to remove shall state the specific reasons for removal. The notice shall also advise the property valuation administrator of his or her right to a preremoval conference and an administrative hearing.
  6. A property valuation administrator may request a preremoval conference to appear with or without counsel before the commissioner or his or her designee to answer the charges against him or her. The preremoval conference shall be requested in writing within six (6) working days of the date on which the notice of intent to remove is received, and a preremoval conference shall be scheduled within seven (7) working days of the date on which the request is received. The commissioner or his or her designee shall render a decision within five (5) working days of the conclusion of the preremoval conference. Failure of a property valuation administrator to request a preremoval hearing shall not waive his or her right to contest his or her removal through an administrative hearing.
  7. If an action to remove a property valuation administrator is initiated by the commissioner of revenue, the property valuation administrator shall have the right to appeal and upon appeal an administrative hearing shall be conducted in accordance with KRS Chapter 13B. Appeal of the final order of the commissioner of revenue may be filed in a Circuit Court of an adjacent judicial circuit in accordance with KRS Chapter 13B, notwithstanding the provisions of KRS Chapter 18A.
  8. If a property valuation administrator is removed from office as provided in subsections (4) to (7) of this section, he or she shall be ineligible to serve in the office at any future date and shall forfeit any and all certification from the Department of Revenue pertaining to the office.
  9. Notwithstanding the provisions of KRS 18A.110(5)(c), the department shall promulgate administrative regulations allowing property valuation administrators and their deputies to receive lump-sum payments for accrued annual leave and compensatory time when separated from employment because of termination by the employer, resignation, retirement, or death.

History. 4042a-1 to 4042a-3, 4042a-7: amend. Acts 1942, ch. 131, § 32; 1949 (Ex. Sess.), ch. 3, § 1; 1960, ch. 186, Art. I, § 9; 1968, ch. 212, § 1; 1978, ch. 233, § 1, effective June 17, 1978; 1980, ch. 188, § 103, effective July 15, 1980; 1982, ch. 448, § 67, effective July 15, 1982; 1988, ch. 418, § 2, effective July 15, 1988; 1990, ch. 411, § 1, effective July 13, 1990; 1996, ch. 318, § 37, effective July 15, 1996; 2000, ch. 392, § 1, effective July 14, 2000; 2005, ch. 85, § 193, effective June 20, 2005; 2009, ch. 10, § 38, effective January 1, 2010.

NOTES TO DECISIONS

  1. Removal.
  2. Injunction.
  3. Sovereign Immunity.
  4. State Officials.
1. Removal.

Tax commissioner (now property valuation administrator) could not be removed for misfeasance for failure to assess property at fair cash value in accordance with a custom which had obtained for over 75 years but the right to remove such officer will exist in 1966 and thereafter when property must be assessed at full value. Miller v. Layne, 391 S.W.2d 701, 1965 Ky. LEXIS 324 ( Ky. 1965 ).

2. Injunction.

Democratic nominee for county tax commissioner could not maintain action to enjoin printing of Republican nominee’s name on ballot for regular election on ground that latter was not 24 years of age as required by Ky. Const., § 100. Little v. Bogie, 300 Ky. 668 , 190 S.W.2d 26, 1945 Ky. LEXIS 625 ( Ky. 1945 ).

Since the Department of Revenue has various statutory remedies to force a county property valuation administrator to assess the taxable property at full valuation, a suit seeking an injunction to compel the administrator to so perform would not lie. Commonwealth by Luckett v. Monson, 465 S.W.2d 719, 1971 Ky. LEXIS 466 ( Ky. 1971 ).

3. Sovereign Immunity.

Fire protection district’s suit against tax collection officials, including a county court clerk, a sheriff, and a county assessor or property valuation administrator, based on the officials’ failure to collect personal property tax pursuant to KRS 75.015 , was properly dismissed because sovereign immunity shielded the officials from liability; Ky. Const. § 99 and KRS 132.370(1) provided for the election of a property valuation administrator, who, having been sued only in an official capacity, was afforded the same immunity as that to which the county was itself entitled. St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

4. State Officials.

Because property valuation administrators (PVAs) were state level “officers” subject to the Executive Branch Code of Ethics, KRS ch. 11A, the trial court improperly instructed the Kentucky Executive Branch Ethics Commission to dismiss charges against the PVAs for hiring family members, on the basis that they were local officials. Ky. Exec. Branch Ethics Comm'n v. Atkinson, 339 S.W.3d 472, 2010 Ky. App. LEXIS 105 (Ky. Ct. App. 2010).

Cited in:

Talbott v. Burke, 287 Ky. 187 , 152 S.W.2d 586, 1941 Ky. LEXIS 515 ( Ky. 1941 ); Russman v. Luckett, 391 S.W.2d 694, 1965 Ky. LEXIS 322 ( Ky. 1965 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

Opinions of Attorney General.

The offices of city tax assessor and county tax commissioner (now property valuation administrator) cannot be merged. OAG 67-64 .

If a county sheriff is elected to the office of property valuation administrator or to any other county office and he assumes the office, the sheriff’s office immediately becomes vacant and he would no longer be entitled to any compensation from the sheriff’s office. OAG 76-237 .

Since property valuation administrator’s (PVAs) and their deputies and employees are specifically authorized to participate in the public employees deferred compensation system and both PVAs and circuit court clerks are state officers, they meet the definition of “employee” set out in KRS 18.510(1) (now see KRS 18A.230 ), and so do their deputies and employees, therefor, they may all participate in the public employees deferred compensation plan. OAG 80-246 .

Property valuation administrators and their deputies may take reasonable annual and sick leave time with pay, and the Department of Revenue can control the maximum via its powers to approve their budgets. OAG 80-287 .

Under the present statutes there is no authority for the payment of accrued annual leave to property valuation administrators and their deputies. OAG 80-287 .

The state Legislature cannot establish a six-year term for the office of property valuation administrator in view of the fact that this office is a minor state office, the term of which is limited to four years pursuant to Ky. Const., § 93. OAG 82-38 .

A deputy property valuation administrator (PVA) has no recourse for appeal other than the Department of Revenue and, if a deputy PVA believes that the Department is misapplying its statutory authority to administer the PVA personnel system, he may seek judicial review of the Department’s action in Circuit Court. Venue would lie in the Franklin Circuit Court since the main office of the Department of Revenue is located in Frankfort and the action forming the basis for the litigation would occur in Frankfort. OAG 82-360 .

Deputy property valuation administrators are deputy state officers and state employes under the direct administrative control of the Department of Revenue. OAG 82-360 .

The Department of Revenue has the authority to set specifications for deputy property valuation administrators (PVAs) if it does so in a reasonable manner. The department is not required to adhere to the rules and regulations of the personnel system when applied to the PVA deputies, but is required to establish an administrative organizational structure and to operate within standard personnel policies pursuant to the statutory guidelines contained in KRS Chapter 132; a system that is comparable to that utilized by the department of personnel for the classified service or in the regulations governing the unclassified service is reasonable for this purpose. OAG 82-360 .

Where one (1) or more persons were running as write-in candidates in an upcoming election for county PVA even though they had not passed the examination required of PVA candidates, and where neither of the eligible persons filed to run for PVA, it was necessary for the Revenue Cabinet to wait until the expiration of the current term to give an examination. The Cabinet can do nothing until after the election, then if an unqualified candidate won the election, there would be absolutely no question that a vacancy in office would occur and the Cabinet could then give the examination; a delay in the giving of the examination at that time would serve only to delay the filing of the office for no reason. OAG 93-56 .

The Revenue Cabinet can require a non-qualified PVA-elect to successfully complete the qualifying examination subsequent to the election; and, if the PVA-elect fails the examination, the Revenue Cabinet can declare the office vacant and initiate proceedings to fill the office under KRS 132.375 . OAG 93-56 .

Research References and Practice Aids

Cross-References.

Control of office of assessor, abolishment, Ky. Const., § 104.

Penalty for malfeasance or misfeasance, Ky. Const., §§ 172, 227.

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Order as to Certificate and Bond of County Tax Commissioner, Form 355.06.

132.375. Designation of qualified department employee to fill vacancy.

Whenever a vacancy occurs in the property valuation administrator’s office, the commissioner of revenue shall designate a qualified department employee to carry on the duties of the office until the vacancy is filled by appointment or by election. The department employee so designated shall be compensated from Department of Revenue funds in the same manner and at the same rate as compensated prior to his receiving the designation, plus necessary expenses, including travel. The individual shall have all the powers and be subject to all the administrative regulations applying to property valuation administrators.

History. Enact. Acts 1958, ch. 63, § 3; 1960, ch. 186, Art. I, § 10; 1990, ch. 411, § 2, effective July 13, 1990; 1992, ch. 338, § 23, effective July 14, 1992; 2005, ch. 85, § 194, effective June 20, 2005.

Opinions of Attorney General.

Where upon a vacancy occurring in the position of county tax commissioner (now property valuation administrator) five (5) persons held certificates of eligibility for the office of county tax commissioner (now property valuation administrator), the Department of Revenue could not legally give a special examination in the county for the vacant office. OAG 65-166 .

Where upon a vacancy occurring in the position of county tax commissioner (now property valuation administrator) five (5) persons holding certificates were eligible for appointment, the Department of Revenue could not make an interim appointment. OAG 65-166 .

If no one other than the incumbent is qualified in a county after the second examination and the incumbent does not seek re-election, a vacancy would occur in the office and the provisions of this section would be applicable. OAG 65-216 .

The Revenue Cabinet can require a non-qualified PVA-elect to successfully complete the qualifying examination subsequent to election; and, if the PVA-elect fails the examination, the Revenue Cabinet can declare the office vacant and initiate proceedings to fill the office under this section. OAG 93-56 .

Where one (1) or more persons were running as write-in candidates in an upcoming election for county PVA even though they had not passed the examination required of PVA candidates, and where neither of the eligible persons filed to run for PVA, it was necessary for the Revenue Cabinet to wait until the expiration of the current term to give an examination. If an unqualified candidate won the election, then there would be absolutely no question that a vacancy in office would occur; in such circumstances a delay in the giving of the examination would serve only to delay the filing of the office for no reason. OAG 93-56 .

132.380. Examination of candidates for property valuation administrator — Certificate.

    1. Before any person’s name shall appear before the voters on election day as a candidate for the office of property valuation administrator in any primary or general election, except a current property valuation administrator already qualified as a candidate to succeed himself or herself in office, or before that person may be appointed property valuation administrator, except as an interim appointee as provided by KRS 132.375 , that person shall hold a certificate issued by the department, showing that he or she has been examined by the department and is qualified for the office. (1) (a) Before any person’s name shall appear before the voters on election day as a candidate for the office of property valuation administrator in any primary or general election, except a current property valuation administrator already qualified as a candidate to succeed himself or herself in office, or before that person may be appointed property valuation administrator, except as an interim appointee as provided by KRS 132.375 , that person shall hold a certificate issued by the department, showing that he or she has been examined by the department and is qualified for the office.
    2. All certificates issued shall expire one (1) year from the date of issuance.
    3. The examinations shall be written and formulated so as to test fairly the ability and fitness of the applicant to serve as property valuation administrator.
    4. The department shall hold the examination at a central location during the month of November of each year immediately preceding each year in which property valuation administrators are to be elected.
    5. The department shall, at least thirty (30) days prior to the examination, issue a statewide press release announcing the examination and post the announcement on the department’s Web site.
    6. Any person desiring to take an examination shall appear at the time and place designated.
    1. If, after the giving of the examination, as provided in subsection (1) of this section, there is no person qualified to be a candidate in the county, the department shall hold a second examination. (2) (a) If, after the giving of the examination, as provided in subsection (1) of this section, there is no person qualified to be a candidate in the county, the department shall hold a second examination.
    2. Applicants from only those counties having no person qualified shall be eligible to take the examination.
    3. Notice of the second examination shall be made by issuing a press release in those counties and posting an announcement for the examination on the department’s Web site at least fourteen (14) days prior to the second examination.
    1. If no qualified candidate files for the office, a special examination shall be given at a time determined by the department. (3) (a) If no qualified candidate files for the office, a special examination shall be given at a time determined by the department.
    2. Notice of and registration for the special examination shall be provided in the same manner as provided in subsection (2) of this section.
    1. Whenever there is a vacancy in the office of property valuation administrator to be filled by appointment or by election, and there is not more than one (1) person holding a valid certificate and eligible for appointment or election, the department shall hold a special examination for applicants seeking a certificate for the office. (4) (a) Whenever there is a vacancy in the office of property valuation administrator to be filled by appointment or by election, and there is not more than one (1) person holding a valid certificate and eligible for appointment or election, the department shall hold a special examination for applicants seeking a certificate for the office.
    2. If, after the giving of a special examination, only one (1) person is qualified, the county judge/executive may request a second examination.
    3. Notice of and registration for the special examination shall be provided in the same manner as provided by subsection (2) of this section.
    1. Examinations shall be given and graded in accordance with rules of the department published at the time of the examination. (5) (a) Examinations shall be given and graded in accordance with rules of the department published at the time of the examination.
    2. Within ten (10) days after the examination, a certificate of fitness and qualification to fill the office of property valuation administrator shall be issued by the department to each person passing the examination.
  1. Examination records shall be preserved by the department for twelve (12) months after the examination, and the record of any person who took the examination may be seen by him or her at the office of the department in Frankfort, Kentucky.

HISTORY: 4042a-11: amend. Acts 1942, ch. 131, §§ 1, 32; 1944, ch. 146; 1949 (Ex. Sess.), ch. 3, § 2; 1960, ch. 186, Art. I, § 11; 1982, ch. 360, § 44, effective July 15, 1982; 1990, ch. 34, § 1, effective July 13, 1990; 1992, ch. 235, § 2, effective July 14, 1992; 1992, ch. 338, § 24, effective July 14, 1992; 1998, ch. 495, § 2, effective July 15, 1998; 2005, ch. 85, § 195, effective June 20, 2005; 2008, ch. 143, § 4, effective August 1, 2008; 2015 ch. 67, § 1, effective June 24, 2015.

Compiler’s Notes.

Section 9 of Acts 1992, ch. 235, provided:

“The terms of current members on the boards, commissions, and councils treated by statutes amended by this Act shall continue in force. When a vacancy occurs for a member appointed to be the representatives of one of the former seven congressional districts, whether by resignation, death, expiration of term, or otherwise, the vacancy shall be filled as follows:

“(1) A vacancy from the former First Congressional District shall be filled by an appointee from the current First Supreme Court District.

“(2) A vacancy from the former Second Congressional District shall be filled by an appointee from the current Second Supreme Court District.

“(3) A vacancy from the former Third Congressional District shall be filled by an appointee from the current Fourth Supreme Court District.

“(4) A vacancy from the former Fourth Congressional District shall be filled by an appointee from the current Sixth Supreme Court District.

“(5) A vacancy from the former Fifth Congressional District shall be filled by an appointee from the current Third Supreme Court District.

“(6) A vacancy from the former Sixth Congressional District shall be filled by an appointee from the current Fifth Supreme Court District.

“(7) A vacancy from the former Seventh Congressional District shall be filled by an appointee from the current Seventh Supreme Court District.”

NOTES TO DECISIONS

  1. Constitutionality.
  2. Qualification.
  3. Special Examination.
1. Constitutionality.

This section does not confer arbitrary power on the Department of Revenue in violation of Ky. Const., § 2, although the department is given discretion as to the character of questions and the standards of grading. Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ).

The title of Acts 1942, ch. 131, “an act relating to revenue and taxation,” was sufficient to embrace this section. Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ).

Provision exempting incumbent county tax commissioners from examination was not unconstitutional under Ky. Const., §§ 3 and 59 as being discriminatory against all other persons seeking nomination and election to the office. Department of Revenue ex rel. Allphin v. Turner, 260 S.W.2d 658, 1953 Ky. LEXIS 983 ( Ky. 1953 ).

Failure to incorporate standard of grading for examination did not make this section unconstitutional under Ky. Const., § 2. Department of Revenue ex rel. Allphin v. Turner, 260 S.W.2d 658, 1953 Ky. LEXIS 983 ( Ky. 1953 ).

2. Qualification.

A candidate who had once passed the examination is eligible to run in any subsequent election, and is not required to pass the examination in the year in which the election is held. Nash v. Marshall, 209 Ky. 379 , 272 S.W. 907, 1925 Ky. LEXIS 506 ( Ky. 1925 ) (decision prior to 1942 amendment).

3. Special Examination.

A special examination may be held when necessary in order to fill a vacancy occurring between regular examination dates. Noffsinger v. Parham, 276 Ky. 460 , 124 S.W.2d 472, 1939 Ky. LEXIS 528 ( Ky. 1939 ).

Cited in:

Little v. Bogie, 300 Ky. 668 , 190 S.W.2d 26, 1945 Ky. LEXIS 625 ( Ky. 1945 ).

Opinions of Attorney General.

The incumbent tax commissioner (now property valuation administrator) who was disqualified for conviction for violating the corrupt practices act would be eligible to hold office if he received a sufficient number of “write-in” votes to elect him. OAG 61-627 .

The incumbent tax commissioner (now property valuation administrator) who was disqualified for conviction for violating the corrupt practices act could become an active “write-in” candidate. OAG 61-627 .

A candidate’s conviction for violation of the corrupt practices act would have no effect on the candidate’s certificate of qualification. OAG 61-627 .

Where upon a vacancy occurring in the position of county tax commissioner (now property valuation administrator) five (5) persons held certificates of eligibility for the office of county tax commissioner (now property valuation administrator), the Department of Revenue could not legally give a special examination in the county for the vacant office. OAG 65-166 .

Where upon a vacancy occurring in the position of county tax commissioner (now property valuation administrator) five (5) persons holding certificates were eligible for appointment, the Department of Revenue could not make an interim appointment. OAG 65-166 .

Where upon a vacancy occurring in the position of county tax commissioner (now property valuation administrator) five (5) persons holding certificates were eligible for appointment, the county judge had the authority to appoint one of the persons to fill the vacancy. OAG 65-166 .

Until the time for filing for the office of county tax commissioner (now property valuation administrator) has passed the incumbent tax commissioner (now property valuation administrator) must be considered as eligible for the office and if there was one successful candidate in the first examination, there are two eligible candidates and no new examination may be given. OAG 65-195 .

Under this section, if no one other than the incumbent is qualified in the county after the second examination and the incumbent announces his intention not to seek re-election, the announcement does not eliminate him as “one qualified” for the office of county tax commissioner (now property valuation administrator) and he is still an eligible candidate until the filing date has passed. OAG 65-216 .

Under this section, if no one other than the incumbent is qualified in a county after the second examination and the incumbent announces his intention to run for another office, the announcement does not eliminate him as “one qualified” for the office of county tax commissioner (now property valuation administrator) and he is still an eligible candidate until the filing date has passed. OAG 65-216 .

Under this section, if no one other than the incumbent is qualified in a county after the second examination, the department cannot be required to give another examination. OAG 65-216 .

Where a few days before the primary election the unopposed Republican candidate for Property Valuation Administrator (PVA), who was the incumbent PVA in the county, died, and where the only other person having a qualified certificate issued pursuant to this section qualifying him to run for PVA was the unopposed Democratic candidate, the giving of a special examination was mandatory in light of the provisions of KRS 118.105 and this section, with the takers limited to registered Republicans, since the Democratic Party had a qualified nominee, and it was too late for an independent candidate to file for the office under the terms of KRS 118.365 . OAG 85-101 .

Candidates for the office of property valuation administrator must hold a valid certificate issued by the Revenue Cabinet on the date of the primary for candidates running in the primary, and on the day of the regular election for all candidates. OAG 93-15 .

As a general rule, the county clerk has no duty to determine the qualifications of candidates; however, because the county clerk is responsible for the printing of the ballots for public valuation administrator (PVA) races, it is the clerk’s responsibility, before he authorizes the printing of the ballots, to ascertain whether each PVA candidate holds a valid certificate. If a candidate does not hold a certificate that will be valid on the date of the primary or regular election, the clerk may not authorize the candidate’s name to be printed on the ballots. OAG 93-15 .

Where one (1) or more persons were running as write-in candidates in an upcoming election for county PVA even though they had not passed the examination required of PVA candidates, and where neither of the eligible persons filed to run for PVA, it was necessary for the Revenue Cabinet to wait until the expiration of the current term to give an examination. The cabinet could do nothing until after the election, then if an unqualified candidate won the election, there would be absolutely no question that a vacancy in office would occur; in such circumstances a delay in the giving of the examination at that time would serve only to delay the filing of the office for no reason. OAG 93-56 .

The Revenue Cabinet can require a non-qualified PVA-elect to successfully complete the qualifying examination subsequent to election; and, if the PVA-elect fails the examination, the Revenue Cabinet can declare the office vacant and initiate proceedings to fill the office under KRS 132.375 . OAG 93-56 .

Research References and Practice Aids

Cross-References.

Annual conference of property valuation administrators, KRS 131.140 .

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Order Showing Qualification of County Tax Commissioner, Form 355.07.

132.385. Education program by department — Certification program for administrators and others.

  1. The department shall develop and administer a program for the purpose of providing education and training in the technical, legal, and administrative aspects of property tax administration for property valuation administrators, deputy property valuation administrators, and department employees. Courses may be created and taught by department personnel or the department may adopt specific courses offered by appropriate professional organizations.
  2. The department shall develop and administer, in cooperation with the property valuation administrators, a certification program for property valuation administrators, deputy property valuation administrators, and department employees. A professional designation, “certified Kentucky assessor” (CKA), shall be awarded to those individuals successfully meeting the standards established by this program. Minimum requirements shall include one hundred twenty (120) hours of classroom instruction, passage of subject matter examinations, and three (3) years of experience in Kentucky property tax administration. An advanced designation, “senior Kentucky assessor” (SKA), shall be awarded to those individuals successfully completing an additional ninety (90) hours of classroom instruction, passage of subject matter examinations, and an additional two (2) years of experience in Kentucky property tax administration. Correspondence course credit administered by the department may be substituted for no more than thirty (30) hours of the one hundred twenty (120) hours required for the “certified Kentucky assessor” (CKA) designation, and for no more than fifteen (15) hours of the additional ninety (90) hours required for the “senior Kentucky assessor” (SKA) designation.

History. Enact. Acts 1988, ch. 418, § 8, effective July 15, 1988; 1994, ch. 65, § 3, effective July 15, 1994; 1994, ch. 423, § 1, effective July 15, 1994; 1998, ch. 495, § 3, effective July 15, 1998; 2000, ch. 479, § 2, effective July 14, 2000; 2005, ch. 85, § 196, effective June 20, 2005.

132.390. Appointment and removal of deputies. [Repealed.]

Compiler’s Notes.

This section (4042a-3: amend. Acts 1942, ch. 131, §§ 2, 32) was repealed by Acts 1960, ch. 186, Art. I, § 39.

132.400. Bond of property valuation administrator.

Before entering upon the duties of office, the property valuation administrator shall execute a bond conditioned upon the faithful performance of the duties of the office with a surety to be approved by the Department of Revenue. In counties containing a city of the first class or consolidated local government, the bond shall be in the sum of one hundred thousand dollars ($100,000); in counties containing a city with a population equal to or greater than twenty thousand (20,000) based upon the most recent federal decennial census, fifty thousand dollars ($50,000); in all other counties, twenty thousand dollars ($20,000).

History. 4042a-4: amend. Acts 1942, ch. 131, §§ 3, 32; 1949 (Ex. Sess.), ch. 3, § 3; 1982, ch. 388, § 1, effective July 15, 1982; 2002, ch. 346, § 166, effective July 15, 2002; 2005, ch. 85, § 197, effective June 20, 2005; 2014, ch. 92, § 215, effective January 1, 2015; 4042a-4: amend. Acts 1942, ch. 131, §§ 3, 32; 1949 (Ex. Sess.), ch. 3, § 3; 1982, ch. 388, § 1, effective July 15, 1982; 2002, ch. 346, § 166, effective July 15, 2002; 2005, ch. 85, § 197, effective June 20, 2005; 2014, ch. 92, § 215, effective January 1, 2015.

NOTES TO DECISIONS

1. In General.

Fire protection district’s suit against tax collection officials, including a county court clerk, a sheriff, and a county assessor or property valuation administrator, based on the officials’ failure to collect personal property tax pursuant to KRS 75.015 , was properly dismissed because sovereign immunity shielded the officials from liability; contrary to the district’s claim, the fact that the officials posted performance bonds did not amount to a waiver of sovereign immunity. Such waiver was found only where it was established by express language or by overwhelming implications. St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Cited in:

Revenue Cabinet v. Picklesimer, 879 S.W.2d 482, 1994 Ky. LEXIS 77 ( Ky. 1994 ).

Research References and Practice Aids

Cross-References.

Bonds of public officers, amount, conditions, actions on, KRS 62.060 to 62.080 .

Jefferson County to pay premiums on bonds of officers, KRS 62.150 .

Oath of public officers, KRS 62.030 .

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Order as to Certificate and Bond of County Tax Commissioner, Form 355.06.

132.410. Office facilities for property valuation administrator — Records — Working hours.

  1. The fiscal court of each county shall provide for the property valuation administrator a suitable office room or rooms in the county courthouse, or when that is not practicable, in some other building at the county seat, together with suitable furniture. In that office shall be safely kept the books, maps, taxpayers’ lists, papers and all other records pertaining to the assessment of property within the county, except when such records are required by law to be placed in the custody of other officers.
  2. The property valuation administrator shall engage in official duties at least five (5) days a week during regular working hours and shall keep scheduled office hours at least five (5) days each week.

History. 4042a-12, 4042a-14; amend. Acts 1942, ch. 131, §§ 4, 32; 1949 (Ex. Sess.), ch. 3, § 4; 1974, ch. 406, § 305, effective January 1, 1975.

NOTES TO DECISIONS

  1. County Seat.
  2. Lighting Fixtures.
1. County Seat.

The fiscal court is required to provide a suitable office for the tax commissioner (now property valuation administrator) only at the county seat. Where office was set up in city of second class not the county seat, in which city terms of circuit court were held pursuant to statute, neither the city nor the county was required to equip such office. Craig v. Kenton County, 182 Ky. 403 , 206 S.W. 603, 1918 Ky. LEXIS 371 ( Ky. 1918 ).

2. Lighting Fixtures.

The county must furnish suitable lighting fixtures for the tax commissioner’s (now property valuation administrator’s) office. Burke v. Oates, 293 Ky. 563 , 169 S.W.2d 608, 1943 Ky. LEXIS 662 ( Ky. 1943 ).

Cited in:

Jefferson County Fiscal Court v. Gregg, 265 Ky. 61 , 95 S.W.2d 1130, 1936 Ky. LEXIS 449 ( Ky. 1936 ); Miniard v. Jones, 300 Ky. 544 , 189 S.W.2d 862, 1945 Ky. LEXIS 604 ( Ky. 1945 ).

Opinions of Attorney General.

Since it would be physically impossible for a county tax commissioner (now property valuation administrator) to fulfill the duties of the office established by subsection (2) of this section and also discharge the duties required of a school teacher, the office of county tax commissioner (now property valuation administrator) is incompatible with the position of school teacher. OAG 60-1235 .

The county clerk is the proper custodian of the tax assessment books. OAG 61-724 .

A county tax commissioner (now property valuation administrator) must devote full time to his work, and he may not engage in part-time teaching in the common schools of the Commonwealth. OAG 61-1056 .

Real estate records kept in the tax commissioner’s (now property valuation administrator’s) office are public records and should be generally open to inspection by any interested person, subject to reasonable rules, such that the inspection would not interfere with the proper conduct of the tax commissioner’s (now property valuation administrator’s) office. OAG 69-372 .

This section requires the office of the Property Valuation Administrator to be located at the county seat; there are no statutory provisions for a branch office for the Property Valuation Administrator. OAG 82-528 .

Even though the Property Valuation Administrator does work for the state and works under the instruction and supervision of the Department of Revenue (KRS 132.420 ), the General Assembly under this section has clearly placed the responsibility on each county government to provide the PVA with suitable office space, necessary fixtures and telephone. OAG 82-634 .

The legislative intent behind this section was to cover the office as an effective functional unit of government. OAG 85-57 .

The necessary and official telephone calls made by the property valuation administrator and his staff are required to be paid by the county, as the telephone has become a necessary utility for the orderly and functional operation of any government office. OAG 85-57 .

County must pay for the utilities, including the telephone bills for official calls, of the property valuation administrator’s office, in order to make it functional. The claim filed by the property valuation administrator for such bills must be paid out of the county’s formula contribution appropriation, as covered in KRS 132.590(7), as a nonpersonnel expense payable from county funds, as explicitly mentioned in KRS 132.590(9). OAG 85-57 .

Research References and Practice Aids

Cross-References.

Public offices may be closed one work day each week in certain counties, KRS 61.160 .

132.420. Duties and powers of property valuation administrator.

The property valuation administrator shall, subject to the direction, instruction, and supervision of the Department of Revenue, make the assessment of all property in his county except as otherwise provided, prepare property assessment records, and have other powers and duties relating to assessment as may be prescribed by law or by the department.

History. 4042a-1, 4042a-5, 4042a-7: amend. Acts 1949 (Ex. Sess.), ch. 3, § 5; 2000, ch. 151, § 3, effective July 14, 2000; 2005, ch. 85, § 198, effective June 20, 2005.

NOTES TO DECISIONS

  1. Duty of Administrator.
  2. Assessments Not Binding.
1. Duty of Administrator.

The duty of a property valuation administrator to assess the taxable property of his county at full fair cash value is clear and, in performing that duty, the administrator is subject to the direction, instruction and supervision of the Department of Revenue. Commonwealth by Luckett v. Monson, 465 S.W.2d 719, 1971 Ky. LEXIS 466 ( Ky. 1971 ).

2. Assessments Not Binding.

Property valuation administrators (PVA) who make ad valorem assessments are under the direction, instruction and supervision of the Revenue Cabinet; therefore, the PVA does not act independently of the Revenue Cabinet, and the cabinet is not bound by his or her assessments. Revenue Cabinet Commonwealth v. Estate of Young, 748 S.W.2d 167, 1988 Ky. App. LEXIS 61 (Ky. Ct. App. 1988).

Cited in:

Shannon v. Wheeler, 268 Ky. 25 , 103 S.W.2d 718, 1937 Ky. LEXIS 422 ( Ky. 1937 ); Oates v. Simpson, 295 Ky. 433 , 174 S.W.2d 505, 1943 Ky. LEXIS 234 ( Ky. 1943 ); Cook v. Citizens State Bank, 304 S.W.2d 931, 1957 Ky. LEXIS 292 ( Ky. 1957 ); Russman v. Luckett, 391 S.W.2d 694, 1965 Ky. LEXIS 322 ( Ky. 1965 ); Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ); Barrett v. Reynolds, 817 S.W.2d 439, 1991 Ky. LEXIS 146 ( Ky. 1991 ); St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Opinions of Attorney General.

Since the county tax commissioner (now property valuation administrator) is only present to protect the Commonwealth’s tax revenues at the opening of a decedent’s lock box which should be opened in the presence of the custodian of the box as well as representatives of the estate, the commissioner (now property valuation administrator): 1. Is not responsible for the safe transportation of the will from the lock box to the county judge/executive for probate. 2. Has no authority to remove the will from the box or to give possession of it to someone else. 3. Would not be responsible if a will was lost or tampered with between the opening of the box and probate since he has no authority to remove anything from the box. OAG 68-247 .

Since the property valuation administrator has no duty to assess public utility property in the county, there is no statutory basis for requiring that the value of such property be included in the base upon which the property valuation administrator’s compensation is computed. OAG 71-249 .

The property valuation administrator has no responsibilities or duties in connection with the assessment of the property of public utility corporations and is not even advised of the value placed upon the property by the state. OAG 71-249 .

The property valuation administrator may, under the direction and supervision of the Department of Revenue, keep a record of the property of public utility corporations, but this does not constitute an assessment. OAG 71-249 .

A county may, pursuant to KRS 132.605 , legally hire and pay the salary of a person whose work involves searching for property in the county which has been omitted from the tax lists if such work is reasonably necessary for a complete and accurate assessment of property in the county. OAG 80-359 .

Grain that is in the possession of the farmer who grew it, or in the possession of an agent of the farmer for the purpose of sale, is subject to ad valorem taxation for state purposes only. However, notwithstanding the fact that such grain is not subject to ad valorem taxation by the city or county, it must be listed with the county property valuation administrator for taxation by the state. OAG 82-496 .

There is no legal authority for the payment of property taxes to a county other than the county in which the property is located. OAG 84-70 .

Where the only road by which one could gain access to property located in a county which had a utility gross receipts tax was through the adjacent county, which did not have such tax, and where the Property Valuation Administrators of the two counties agreed to allow residents of such property to pay their property taxes in adjacent county in exchange for the county magistrate in that area caring for the roads and providing other services to these people, such arrangement had no valid legal basis and residents of the property were not entitled to exemption from utility gross receipts tax if their property was within the boundaries of the county school district, even though their children attended school in the adjacent county. OAG 84-70 .

Research References and Practice Aids

Cross-References.

Assessor of first-class city may take property lists jointly with property valuation administrator, KRS 91.320 .

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.425. Net assessment growth. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1965 (1st Ex. Sess.), ch. 2, § 7; 1970, ch. 260, § 1; 1972, ch. 285, § 5) was repealed by Acts 1979 (Ex. Sess.), ch. 25, § 12, effective February 13, 1979.

132.430. Assessment methods. [Repealed.]

Compiler’s Notes.

This section (4042a-12, 4065) was repealed by Acts 1942, ch. 131, § 32.

132.440. Oath of taxpayer on listing property.

The property valuation administrator or his deputies shall read and administer to every person listing property the following oath: “You swear that the list of taxable property given by you contains a full and complete list of all of your property and of all the property in your possession which is not otherwise listed as of the assessment date, and that a fair cash value has been placed on all such property required to be valued.”

History. 4042a-3, 4047: amend. Acts 1942, ch. 131, §§ 8, 32; 1949 (Ex. Sess.), ch. 3, § 6.

NOTES TO DECISIONS

Cited in:

Rogers v. Pike County Bd. of Sup’rs., 288 Ky. 742 , 157 S.W.2d 346, 1941 Ky. LEXIS 199 ( Ky. 1941 ); West Kentucky Coal Co. v. Commownealth, Dep’t of Highways, 368 S.W.2d 738, 1963 Ky. LEXIS 52 ( Ky. 1963 ); Russman v. Luckett, 391 S.W.2d 694, 1965 Ky. LEXIS 322 ( Ky. 1965 ).

Opinions of Attorney General.

The city assessor has ample authority in his job of assessing property at fair cash value in the city of Highland Heights, but it is only after the board of equalization has met and examined and rectified the assessment list that such list is a valid assessment roll to be certified by the city clerk upon which the tax can be levied. OAG 73-632 .

Research References and Practice Aids

Cross-References.

Assessor of first-class city may administer oath to city taxpayers in office of property valuation administrator, KRS 91.320 .

Penalty for false swearing, KRS 523.040 .

132.450. Assessment — Special procedure and provision for assessing real property at agricultural or horticultural value — Election by owner.

  1. Each property valuation administrator shall assess at its fair cash value all property which it is his duty to assess except as provided in paragraph (c) of subsection (2) of this section. The property of one (1) person shall not be assessed willfully or intentionally at a lower or higher relative value than the same class of property of another, and any grossly discriminatory valuation shall be construed as an intentional discrimination. The property valuation administrator shall make every effort, through visits with the taxpayer, personal inspection of the property, from records, from his own knowledge, from information in property schedules, and from such other evidence as he may be able to obtain, to locate, identify, and assess property.
    1. In determining the total area of land devoted to agricultural or horticultural use, there shall be included the area of all land under farm buildings, greenhouses and like structures, lakes, ponds, streams, irrigation ditches and similar facilities, and garden plots devoted to growth of products for on-farm personal consumption but there shall be excluded, land used in connection with dwelling houses including, but not limited to, lawns, drives, flower gardens, swimming pools, or other areas devoted to family recreation. Where contiguous land in agricultural or horticultural use in one (1) ownership is located in more than one (1) county or taxing district, compliance with the minimum requirements shall be determined on the basis of the total area of such land and not the area of land which is located in the particular county or taxing district. (2) (a) In determining the total area of land devoted to agricultural or horticultural use, there shall be included the area of all land under farm buildings, greenhouses and like structures, lakes, ponds, streams, irrigation ditches and similar facilities, and garden plots devoted to growth of products for on-farm personal consumption but there shall be excluded, land used in connection with dwelling houses including, but not limited to, lawns, drives, flower gardens, swimming pools, or other areas devoted to family recreation. Where contiguous land in agricultural or horticultural use in one (1) ownership is located in more than one (1) county or taxing district, compliance with the minimum requirements shall be determined on the basis of the total area of such land and not the area of land which is located in the particular county or taxing district.
    2. Land devoted to agricultural or horticultural use, where the owner or owners have petitioned for, and been granted, a zoning classification other than for agricultural or horticultural purposes qualifies for the agricultural or horticultural assessment until such time as the land changes from agricultural or horticultural use to the use granted by the zoning classification.
    3. When the use of a part of a tract of land which is assessed as agricultural or horticultural land is changed either by conveyance or other action of the owner, the right of the remaining land to be retained in the agricultural or horticultural assessment shall not be impaired provided it meets the minimum requirements, except the minimum ten (10) contiguous acre requirement shall not be applicable if any portion of the agricultural or horticultural land has been acquired for a public purpose as long as the remaining land continues to meet the other requirements of this section.
    4. When in the opinion of the property valuation administrator any land has a value in excess of that for agricultural or horticultural use the property valuation administrator shall enter into the tax records the value of the property according to its fair cash value. When the property valuation administrator determines that the land meets the requirements for valuation as agricultural or horticultural land, the valuation for tax purposes shall be its agricultural or horticultural value.
  2. When land which has been valued and taxed as agricultural land for five (5) or more consecutive years under the same ownership fails to qualify for the classification through no other action on the part of the owner or owners other than ceasing to farm the land, the land shall retain its agricultural classification for assessment and taxation purposes. Classification as agricultural land shall expire upon change of use by the owner or owners or upon conveyance of the property to a person other than a surviving spouse.
  3. If the property valuation administrator assesses any property at a greater value than that listed by the taxpayer or assesses unlisted property, the property valuation administrator shall serve notice on the taxpayer of such action. The notice shall be given by first-class mail or as provided in the Kentucky Rules of Civil Procedure.
  4. Any taxpayer may designate on the property schedule any property which he does not consider to be subject to taxation, and it shall be the duty of the property valuation administrator to obtain and follow advice from the department relative to the taxability of such property.

History. 4047, 4053: amend. Acts 1942, ch. 131, §§ 6, 32; 1949 (Ex. Sess.), ch. 3, § 7; 1960, ch. 186, Art. I, § 12; 1970, ch. 249, § 2; 1976, ch. 260, § 2; 1980, ch. 317, § 2, effective July 15, 1980; 1982, ch. 264, § 18, effective July 15, 1982; 1992, ch. 397, § 2, effective July 14, 1992; 1998, ch. 495, § 1, effective July 15, 1998; 2005, ch. 85, § 199, effective June 20, 2005; 2005, ch. 168, § 64, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Notice.
  3. Final Assessment.
  4. Fair Cash Value.
  5. Application for Valuation.
  6. Exemption.
  7. Powers and Duties of Property Valuation Administrator.
  8. —Assessment Plan.
  9. Criminal Liability.
  10. Civil Liability.
  11. Procedure When Assessments Invalid.
  12. Uniform Evaluation.
  13. Agricultural Land.
1. Constitutionality.

KRS 132.010(9), (10) and subdivision (2)(a) of this section do not violate the Constitution of Kentucky; dwelling houses are to be assessed at fair cash value, and the income and acreage standards to qualify for “agricultural land” or “horticultural land” are not unreasonable. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ).

Provisions of this section and KRS 132.690 , which authorize assessments of property at “fair cash value,” are not unconstitutional; the tax assessor need not be instructed as to specific valuation methods, as long as he provides assessments that are fair and equitable. Dean v. Commonwealth ex rel. Revenue Cabinet, 967 S.W.2d 594, 1998 Ky. App. LEXIS 34 (Ky. Ct. App. 1998).

2. Notice.

Raise of assessment without formal notice to the taxpayer is void, except where the taxpayer receives actual notice from another source and appears before the board of supervisors in opposition to the increase. Fordson Coal Co. v. Maggard, 22 F.2d 973, 1927 U.S. App. LEXIS 3524 (6th Cir. Ky. 1927 ). See McFarland v. Georgetown Nat'l Bank, 208 Ky. 7 , 270 S.W. 995, 1925 Ky. LEXIS 201 ( Ky. 1925 ), aff'd, 273 U.S. 568, 47 S. Ct. 467, 71 L. Ed. 779, 1927 U.S. LEXIS 712 (U.S. 1927); Thomas Forman Co. v. Owsley County Board of Sup'Rs., 267 Ky. 224 , 101 S.W.2d 939, 1937 Ky. LEXIS 302 ( Ky. 1937 ).

If the tax commissioner (now property valuation administrator) assesses unlisted property, he must give notice of such assessment to the taxpayer. Boske v. Louis Marx & Bros., 161 Ky. 460 , 170 S.W. 1175, 1914 Ky. LEXIS 91 ( Ky. 1914 ). See Ball v. P. V. & K. Coal Co., 235 Ky. 445 , 31 S.W.2d 707, 1930 Ky. LEXIS 386 ( Ky. 1930 ). But see Lowther v. Moore, 191 Ky. 284 , 229 S.W. 705, 1921 Ky. LEXIS 291 ( Ky. 1921 ).

Where tax commissioner (now property valuation administrator) increased assessment, and gave notice of increase to taxpayer, board of supervisors was not required to give notice to taxpayer that it had accepted tax commissioner’s (now property valuation administrator’s) valuation, in order to restrict taxpayer’s remedy to appeal from board. Ball v. P. V. & K. Coal Co., 235 Ky. 445 , 31 S.W.2d 707, 1930 Ky. LEXIS 386 ( Ky. 1930 ).

No notice to the owner of the listing by the tax commissioner (now property valuation administrator) is required. It is only where the valuation by the owner is increased by the tax commissioner (now property valuation administrator) that notice must be given. Breathitt County Board of Sup'rs v. Ware Cannel Coal Co., 297 Ky. 117 , 179 S.W.2d 225, 1944 Ky. LEXIS 691 ( Ky. 1944 ).

The purpose of the notice required by this section is to give the taxpayer an opportunity to be heard and when he appears before the board for the purpose of contesting the raise in his assessment, there can be no need for the notice prescribed by this section since the rights of the taxpayer which the notice was intended to protect have been preserved. Commonwealth ex rel. Reeves v. Elkhorn & Jellico Coal Co., 313 Ky. 764 , 233 S.W.2d 508, 1950 Ky. LEXIS 971 ( Ky. 1950 ).

A proper notice under this section may be served in the manner provided by CR 5.02, with the qualification that mailed notice must be by registered mail. Pond Creek Pocahontas Co. v. Breathitt County, 290 S.W.2d 34, 1956 Ky. LEXIS 305 ( Ky. 1956 ).

This section requires notification to a taxpayer for any increase in assessment. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

3. Final Assessment.

The testimony of the officer who makes an assessment cannot be received after his term has expired to show that he did not consider his assessment a valid or final act. Illinois C. R. Co. v. Commonwealth, 128 Ky. 268 , 108 S.W. 245, 32 Ky. L. Rptr. 1112 , 1908 Ky. LEXIS 52 ( Ky. 1908 ), aff'd, 218 U.S. 551, 31 S. Ct. 95, 54 L. Ed. 1147, 1910 U.S. LEXIS 2049 (U.S. 1910).

If the tax commissioner’s (now property valuation administrator’s) assessment is not changed by the board of supervisors it constitutes the final assessment. Fordson Coal Co. v. Maggard, 22 F.2d 973, 1927 U.S. App. LEXIS 3524 (6th Cir. Ky. 1927 ).

4. Fair Cash Value.

A tax commissioner (now property valuation administrator) is not restricted to a particular method in making an assessment, he is only required to assess property at its fair cash value. Borders v. Cain, 252 S.W.2d 903, 1952 Ky. LEXIS 1042 ( Ky. 1952 ).

Assessment of property at a percentage of its fair cash value is unlawful and fact that it had been ignored for 75 years does not justify nullification of the requirement of assessment at fair cash value. Russman v. Luckett, 391 S.W.2d 694, 1965 Ky. LEXIS 322 ( Ky. 1965 ). See McDevitt v. Luckett, 391 S.W.2d 700, 1965 Ky. LEXIS 323 ( Ky. 1965 ).

5. Application for Valuation.

Even accepting that the agricultural or horticultural value of their farm was less than its fair market value, where the record did not indicate that taxpayers complied with the requirements of subdivision (2)(a) of this section by filing the necessary application for agricultural or horticultural valuation with the administrator on or before April 1, the Board of Tax Appeals correctly concluded that there was no showing of the filing of a timely application for agricultural valuation. Walters v. Kentucky Board of Tax Appeals, 569 S.W.2d 170, 1977 Ky. App. LEXIS 926 (Ky. Ct. App. 1977).

6. Exemption.

Neither this section nor KRS 133.120 indicate a clear intention of the Legislature that the statutory procedure for review of tax assessments shall be the exclusive method for determining whether property is exempt from taxation. Iroquois Post, A. L. v. Louisville, 279 S.W.2d 13, 1955 Ky. LEXIS 502 ( Ky. 1955 ).

7. Powers and Duties of Property Valuation Administrator.

The tax commissioner (now property valuation administrator) has authority to increase assessments, and to assess unlisted property. Fordson Coal Co. v. Maggard, 22 F.2d 973, 1927 U.S. App. LEXIS 3524 (6th Cir. Ky. 1927 ).

8. —Assessment Plan.

Property Valuation Administrator’s (PVA) quadrennial plan, which divided the county into four (4) sections and undertook to physically examine the properties in one (1) section each year, complied with all relevant statutory requirements, and did not violate Ky. Const., §§ 2, 171 or 172. Revenue Cabinet v. Leary, 880 S.W.2d 878, 1994 Ky. App. LEXIS 8 (Ky. Ct. App. 1994).

9. Criminal Liability.

There is no criminal penalty imposed on the tax commissioner (now property valuation administrator) for failure to assess the property of a particular taxpayer, other than the general penalty in KRS 132.990 . Commonwealth v. Huff, 141 Ky. 459 , 132 S.W. 1023, 1911 Ky. LEXIS 2 ( Ky. 1911 ).

10. Civil Liability.

A taxpayer who did not list his property for taxation cannot recover damages (such as expense of getting assessment corrected by board of supervisors) from tax commissioner (now property valuation administrator) for erroneously assessing the taxpayer’s property at an excessive valuation, in the absence of allegation and proof that the commissioner (now administrator) acted corruptly or maliciously. Daugherty v. Bazell, 123 Ky. 424 , 96 S.W. 576, 29 Ky. L. Rptr. 884 , 1906 Ky. LEXIS 165 ( Ky. 1906 ).

11. Procedure When Assessments Invalid.

Where assessments of agricultural land for one year were unconstitutional, the correct remedy was the use of the previous year’s assessments for the subject property for the later tax year; the property valuation administrator was not entitled to belatedly assess the subject property for the later year’s taxes since KRS 132.220(1) clearly states that property shall be evaluated as of January 1. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ).

12. Uniform Evaluation.

The use of mathematical formula to arrive at a result may be proper as long as the procedure adopted does not produce an unfair or unequal valuation. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ).

Method used by property valuation administrator which resulted in farm property being assigned a value based on general averages rather than an individual and specific value related to the agricultural purpose for which it was used was constitutionally unsound since the method, even though it was the same method used for all agricultural land in the county, failed to value the property on the basis of uniform standards and did not result in an effective tax which was equally burdensome on all farm taxpayers. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ).

13. Agricultural Land.

Housing located on farm property occupied by a nonowner and used in income-producing activity of the farm as dwellings for tenant farmers and farm workers is not a “residential unit”; such dwellings are “income-producing improvements” and a part of the agricultural land for ad valorem assessment purposes. Dolan v. Land, 667 S.W.2d 684, 1984 Ky. LEXIS 211 ( Ky. 1984 ).

Cited in:

Rogers v. Pike County Bd. of Sup’rs., 288 Ky. 742 , 157 S.W.2d 346, 1941 Ky. LEXIS 199 ( Ky. 1941 ); Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ); Oates v. Simpson, 295 Ky. 433 , 174 S.W.2d 505, 1943 Ky. LEXIS 234 ( Ky. 1943 ); Todd County v. Bond Bros., 300 Ky. 224 , 188 S.W.2d 325, 1945 Ky. LEXIS 521 ( Ky. 1945 ); St. Matthews v. Stallings, 298 S.W.2d 676, 1957 Ky. LEXIS 378 ( Ky. 1957 ); Kentucky Tax Com. v. Jefferson Motel, Inc., 387 S.W.2d 293, 1965 Ky. LEXIS 465 ( Ky. 1965 ); Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ); Barrett v. Reynolds, 817 S.W.2d 439, 1991 Ky. LEXIS 146 ( Ky. 1991 ).

Opinions of Attorney General.

This section provides the methods by which the county tax commissioner (now property valuation administrator) may make assessments and he is not required to actually see the property owner and view the property. OAG 66-323 .

If a taxpayer fails to list his real property, he is charged with knowledge that the tax commissioner (now property valuation administrator) will assess the property. Notice to the taxpayer of the assessment of land is not necessary since the taxpayer is charged by law with notice that the property will be assessed. OAG 69-503 .

In determining the fair cash value of real estate for ad valorem property taxes, the property valuation administrator should take into consideration auction sales where free and open bidding was permitted, evidence that might have been elicited in any hearings held before any boards or courts and any other evidence at his disposal which would help him to determine the fair cash value of the property in question. OAG 72-69 .

The city assessor has ample authority in his job of assessing property at fair cash value in the city of Highland Heights, but it is only after the board of equalization has met and examined and rectified the assessment list that such list is a valid assessment roll to be certified by the city clerk upon which the tax can be levied. OAG 73-632 .

A major portion of a corporation’s assets must be devoted to and its income derived from agricultural or horticultural activities in order for its real property to qualify for consideration as property to be assessed for agricultural or horticultural use. OAG 74-486 .

The raising of cattle or horses is an agricultural use of the land. OAG 74-486 .

Where a property valuation administrator sent to a property owner a notice of tax increase in April of 1980, but where subsequently the tax bills came out and the individual’s tax bill was based on a higher assessment than in his April notice, and no notice of the higher increase was given, the increase in the tax bill resulting from the higher assessment was not valid. OAG 80-603 .

Subsection (2)(b) of this section which provides for an exclusion for land under “a zoning classification other than for agricultural or horticultural purposes,” is constitutionally consistent with Ky. Const., § 172A, since such zoning classification is a change in the use of property as provided for under Ky. Const., § 172A. OAG 81-58 .

The Property Valuation Administrator has authority to inspect real property in the county. OAG 83-11 .

Since the Property Valuation Administrator is authorized to inspect property and is required to assess property, entry onto the property in order to measure it from the exterior is authorized, such entry being required to be reasonable; thus, such authorized entry does not constitute trespass. OAG 83-11 .

Entry by the Property Valuation Administrator to the interior of a home in order to value the property is authorized; if, however, the property owner is not at home or refuses entry, the PVA must resort to an administrative search warrant. OAG 83-11 .

Research References and Practice Aids

Cross-References.

Assessor of first-class city may take property lists jointly with property valuation administrator, KRS 91.320 .

Property to be assessed at fair cash value, Ky. Const., § 172.

Journal of Mineral Law & Policy.

Comments, Preservation of Kentucky's Diminishing Farmland: A Statutory Analysis, 5 J.M.L. & P. 305 (1989-90).

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Revenue Assessment Levels and Taxing Rate: The Kentucky Rollback Law, 60 Ky. L.J. 105 (1971).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

Public Schools: Serrano v. Priest — A Challenge to Kentucky, 60 Ky. L.J. 156 (1971).

The Property Tax — A Withering Vine, 60 Ky. L.J. 174 (1971).

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.452. Declaring moratorium by government units.

A county, municipal or urban-county government may declare property assessment or reassessment moratoriums for qualifying units of real property subject to the provisions of KRS Chapter 99, KRS 132.010 and 132.190 .

History. Enact. Acts 1982, ch. 327, § 4, effective July 15, 1982.

Opinions of Attorney General.

Property assessment or reassessment moratorium program established by a particular local taxing authority will be applicable only to the assessments or reassessments of qualified property for the taxing authority establishing the program and it cannot limit the assessments or reassessments of property for state ad valorem tax purposes. OAG 82-381 .

The assessments of qualified property for the ad valorem tax levied by the state and those local governments which have not established moratorium programs pursuant to Acts 1982, ch. 327 must be made in accordance with the provisions of Const., §§ 172 and 174, requiring assessment at fair cash value, and consequently, qualified property will have one assessment for those local governments which have established a moratorium program and another assessment for the state and those local taxing authorities which have not established such moratorium programs. OAG 82-381 .

132.454. Tax liability when real property taxed as agricultural or horticultural is converted to another use.

When land which is valued and taxed as agricultural or horticultural land under paragraph (c) of subsection (2) of KRS 132.450 is converted to any other use after January 1 of the tax year, that portion of the land upon which the use is changed shall be subject to tax for the succeeding tax year at its fair cash value. The owner of the property at the time the land use change is initiated shall, within ninety (90) days, report the change to the property valuation administrator. The owner shall also provide to the property valuation administrator information concerning the most recent sale or lease of the property, copies of any appraisal or feasibility reports made, and any other information useful in determining the fair cash value of the property.

History. Enact. Acts 1970, ch. 249, § 3; 1990, ch. 27, § 2, effective July 13, 1990; 1992, ch. 397, § 4, effective July 14, 1992; 1994, ch. 60, § 1, effective July 15, 1994.

Legislative Research Commission Notes.

(7/15/94). The changes in this statute made by 1994 Ky. Acts ch. 60, sec. 1 are “effective for tax years beginning on or after January 1, 1994.” See 1994 Ky. Acts ch. 60, sec. 2.

Research References and Practice Aids

Northern Kentucky Law Review.

Brandt, Kentucky Real Estate Law Survey: 1990 Through 1993, 21 N. Ky. L. Rev. 435 (1994).

132.460. Property valuation administrator, or deputy, to attend hearing on appealed assessments — Expenses.

The property valuation administrator, or an authorized deputy, shall attend all hearings before the county board of assessment appeals and before the Kentucky Claims Commission pursuant to KRS 49.200 to 49.250 relative to his assessment and submit to examination and fully disclose to them such information as he may have and any other matters pertinent to the inquiry being made. He shall be entitled to reimbursement from the county for expenses incurred in official business outside his county. If the Department of Revenue directs him to perform official duties outside of his county, the expenses shall be paid from the appropriation for the payment of the salaries of the property valuation administrators. Such reimbursement shall be paid on the same basis as employees of the Commonwealth are paid for travel expenses.

HISTORY: 4042a-15: amend. Acts 1942, ch. 131, §§ 21, 32; 1949 (Ex. Sess.), ch. 3, § 8; 1964, ch. 141, § 14; 1974, ch. 326; 1978, ch. 233, § 2, effective June 17, 1978; 2005, ch. 85, § 200, effective June 20, 2005; 2017 ch. 74, § 70, effective June 29, 2017.

Opinions of Attorney General.

If the property valuation administrator is not an attorney, either the county attorney or a substitute attorney must present the Commonwealth’s side of the case. OAG 78-100 .

The purpose of requiring the property valuation administrator to attend all hearings is to have him testify and be examined on the nature of his assessment and the requirement was not meant to make him eligible to act as an attorney in which he asks himself questions and conducts the case for the Commonwealth, although, if he is an attorney, he could do so. OAG 78-100 .

Research References and Practice Aids

Cross-References.

County board of assessment appeals, compensation, KRS 133.030 .

132.470. Assessment of property of property valuation administrator and his deputies.

The property valuation administrator shall assess his own property and that of his deputies, and shall be governed by the laws applicable to the assessment of the property of other taxpayers. The county board of assessment appeals shall review the assessment of the property of the property valuation administrator and his deputies.

History. 4069: amend. Acts 1949 (Ex. Sess.), ch. 3, § 9; 1984, ch. 111, § 176, effective July 13, 1984.

132.480. Monthly report of real estate conveyances by county clerk to property valuation administrator — Compensation of clerk — Inclusion of in-care-of address in records.

  1. Each county clerk shall, on or before the fifteenth day of each month, provide to the property valuation administrator a copy of all deeds and other conveyances transferring real property made during the preceding month. For this service the clerk shall be allowed reasonable compensation by the fiscal court.
    1. The property valuation administrator shall review the deeds to ascertain the in-care-of address to which the property tax bill shall be sent, as reflected in the deed and as required by KRS 382.135(1), and shall update his or her records to reflect the in-care-of address. (2) (a) The property valuation administrator shall review the deeds to ascertain the in-care-of address to which the property tax bill shall be sent, as reflected in the deed and as required by KRS 382.135(1), and shall update his or her records to reflect the in-care-of address.
    2. Inclusion of the in-care-of address in the records of the property valuation administrator, if the in-care-of address is other than that of the owner of the property on January 1, shall in no way impact the legal responsibility of the owner of the property as of January 1 for the payment of the tax.
  2. Information provided by the property valuation administrator to the county clerk for preparation of the tax bills shall include all in-care-of addresses reflected in all deeds reviewed by the property valuation administrator during that year prior to the transfer of information to the county clerk.

History. 4048, 4240: amend. Acts 1942, ch. 131, §§ 11, 32; 1949 (Ex. Sess.), ch. 4, § 10; 1992, ch. 263, § 4, effective July 14, 1992; 2008, ch. 143, § 1, effective August 1, 2008.

Opinions of Attorney General.

While the county must pay the clerk for making up and delivering the monthly lists of conveyances, the amount of the compensation is not set out in the statutes, but rather is to be determined by the fiscal court. OAG 80-85 .

Research References and Practice Aids

Kentucky Law Journal.

Vanlandingham, The Fee System in Kentucky Counties, 40 Ky. L.J. 277 (1952).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

132.485. Motor vehicle registration as consent to assess — Exceptions — Assessment of vehicle twenty years old or older — Ownership — Assessment of vehicle purchased and registered in different years — Exemptions.

    1. Except as otherwise provided in paragraph (b) of this subsection, the registration of a motor vehicle with a county clerk in order to operate it or permit it to be operated upon the highways of the state shall be deemed consent by the registrant for the motor vehicle to be assessed by the property valuation administrator from a standard manual prescribed by the department for valuing motor vehicles for assessment unless: (1) (a) Except as otherwise provided in paragraph (b) of this subsection, the registration of a motor vehicle with a county clerk in order to operate it or permit it to be operated upon the highways of the state shall be deemed consent by the registrant for the motor vehicle to be assessed by the property valuation administrator from a standard manual prescribed by the department for valuing motor vehicles for assessment unless:
      1. The registrant appears before the property valuation administrator to assess the vehicle; or
      2. The motor vehicle is twenty (20) years old or older, in which case paragraph (b) of this subsection applies regarding its valuation.
    2. In the case of motor vehicles that are twenty (20) years old or older:
      1. It shall not be presumed that a vehicle has been maintained in, or restored to, the original factory or otherwise classic condition or that its value has increased over the previous year;
      2. In assessing motor vehicles under this paragraph and calculating the taxes due thereon, through the AVIS or otherwise, if the registrant does not appear before the property valuation administrator to assess the vehicle, the standard value shall be as follows:
        1. The actual valuation of the vehicle as was assessed in the vehicle’s nineteenth year, if the vehicle was assessed for taxation in the Commonwealth in that year; or
        2. The average trade-in value prescribed by the applicable edition of the valuation manual for the vehicle in its nineteenth year, if the vehicle was not assessed for taxation in the Commonwealth in that year;
      3. In the case of any motor vehicle for which the assessment procedure provided in subparagraph 2.b. of this paragraph would apply but cannot be carried out because the applicable edition of the valuation manual is unavailable, the property valuation administrator shall conduct an assessment of the vehicle to determine the value thereof for the given taxable year. The assessment under this subparagraph may be done in person if the vehicle’s owner presents the vehicle at the property valuation administrator’s office, or the assessment may be done through a review of photographs and other documentary evidence. In subsequent years, that valuation shall be reduced by ten percent (10%) annually.
  1. The registration of a recreational vehicle with the county clerk in order to operate it or permit it to be operated upon the highways shall be deemed consent by the registrant thereof for the recreational vehicle to be assessed by the property valuation administrator at a valuation determined from a standard manual prescribed by the department for valuing recreational vehicles for assessment unless the registrant appears in person before the property valuation administrator to assess the vehicle.
  2. The registration of a motor vehicle on or before the date that the registration of the vehicle is required is prima facie evidence of ownership on January 1.
  3. When a motor vehicle is purchased in one (1) year, but registration takes place after January 1 of the following year through no fault of the owner, the department shall assess the motor vehicle and shall send notice of the assessment to the January 1 owner in accordance with KRS 186A.035 . If the month of registration has passed for the current year, the assessment shall be due and payable if not protested to the department within sixty (60) days from the date of the notice. Payments made after the due date shall carry the normal penalty and interest for motor vehicles.
  4. This section does not apply to motor vehicles or recreational vehicles owned and operated by public service companies, common carriers, or agencies of the state and federal governments.

The standard value of motor vehicles shall be the average trade-in value prescribed by the valuation manual unless information is available that warrants any deviation from the standard value.

reduced by ten percent (10%) annually for each year beyond nineteen (19) years; and

HISTORY: Enact. Acts 1952, ch. 159, § 1; 1960, ch. 186, Art. I, § 13; 1962, ch. 29, § 3; 1980, ch. 240, § 1, effective January 1, 1981; 1982, ch. 264, § 2, effective January 1, 1984; 1982, ch. 395, § 3, effective July 15, 1982; 1998, ch. 600, § 1, effective April 14, 1998; 2005, ch. 85, § 201, effective June 20, 2005; 2009, ch. 56, § 1, effective June 25, 2009; 2015 ch. 22, § 1, effective June 24, 2015; 2018 ch. 171, § 109, effective April 14, 2018; 2018 ch. 207, § 109, effective April 27, 2018.

Compiler's Notes.

Former KRS 132.485 (Acts 1952, ch. 159, § 1; 1960, ch. 186, Art. I, § 13; 1962, ch. 29, § 3) was repealed by Acts 1978, ch. 371, § 11, effective January 1, 1981 but was reenacted by Acts 1980, ch. 240, § 1, effective January 1, 1981.

Section 10 of Acts 1998, ch. 600, provided that the 1998 amendments to this section “apply retroactively to motor vehicles assessed on or after January 1, 1998.”

Legislative Research Commission Notes.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

This section was amended by 1982 Acts Ch. 395, Section 3 and 1982 Acts Ch. 264, Section 2, which are partially in conflict. Effect has been given to the substantive provisions made by the General Assembly.

(6/24/2015). 2015 Ky. Acts ch. 22, sec. 2 provides that the amendments to this statute made in 2015 Ky. Acts ch. 22, sec. 1, shall apply to motor vehicles assessed on or after January 1, 2016.

Opinions of Attorney General.

Unless a motor vehicle owner appears before the county tax commissioner (now property valuation administrator) to list his motor vehicle, the tax commissioner (now property valuation administrator) must use the valuation set out in the manual furnished him by the Department of Revenue. OAG 61-299 .

Where a motor vehicle is sold in one year, but the transfer is not registered until the next year, the registration certificate constitutes prima facie evidence of ownership as of the assessment date and the motor vehicle must be assessed to the registered owner as of that date. OAG 79-185 .

A bank may title a repossessed car in its name and, if the car is not registered and not operated on the highways, the current year’s property tax will not be collected in the current year. OAG 84-135 .

Research References and Practice Aids

Cross-References.

Motor carriers, KRS ch. 281.

132.486. Assessment system for tangible personal property — Administrative regulations — Appeals — Effect of appeal on payment of taxes.

  1. The Department of Revenue shall develop and administer a centralized ad valorem assessment system for tangible personal property. This system shall be designed to provide on-line computer terminals and accessory equipment in every property valuation administrator’s office in the state in order to create and maintain a centralized personal property tax roll database.
  2. Appeals of personal property assessments shall not be made to the county board of assessment appeals. Personal property taxpayers shall be served notice under the provisions of KRS 132.450(4) and shall have the protest and appeal rights granted under the provision of KRS 131.110 .
  3. No appeal shall delay the collection or payment of taxes based upon the assessment in controversy. The taxpayer shall pay all state, county, and district taxes due on the valuation which the taxpayer claims as the true value as stated in a protest filed under KRS 131.110 . When the valuation is finally determined upon appeal, the taxpayer shall be billed for any additional tax and interest at the tax interest rate as defined in KRS 131.010(6), from the date the tax would have become due if no appeal had been taken. The provisions of KRS 134.015(6) shall apply to the tax bill.

History. Enact. Acts 1986, ch. 371, § 1, effective July 15, 1986; 1988, ch. 303, § 6, effective July 15, 1988; 1998, ch. 391, § 2, effective July 15, 1998; 2005, ch. 85, § 202, effective June 20, 2005; 2005, ch. 168, § 65, effective January 1, 2006; 2009, ch. 10, § 39, effective January 1, 2010.

Legislative Research Commission Notes.

(1/1/2006). Under 2005 Ky. Acts ch. 184, § 18, changes in the names of agencies and officers that are made in bills confirming a reorganization of the executive branch are to be codified only to the extent those changes do not conflict with other 2005 amendments. Accordingly, an amendment to this section in Acts ch. 168 prevails over a name change made in Acts ch. 85.

NOTES TO DECISIONS

1. Applicability.

No specific administrative protest procedures are required for a tax refund claim involving a classification issue, which may be brought within two years after payment; thus, by filing for a refund of tangible personal property tax and appealing its denial before seeking judicial review, a taxpayer properly challenged the classification and tax rate applied to manufacturing machinery without going through the expedited assessment protest procedure. Dep't of Revenue, Fin. & Admin. Cabinet v. Cox Interior, Inc., 400 S.W.3d 240, 2013 Ky. LEXIS 288 ( Ky. 2013 ).

Cited in:

Paducah v. T.C.B., Inc., 817 S.W.2d 234, 1991 Ky. App. LEXIS 119 (Ky. Ct. App. 1991).

132.487. Centralized ad valorem tax system for all motor vehicles — General and compensating tax rates — Access to records — Property valuation administrator to assess motor vehicles.

  1. The department shall develop and administer a centralized ad valorem tax system for all motor vehicles as defined in KRS 186.010 . This system shall be designed to allow the collection of state, county, city, urban-county government, school, and special taxing district ad valorem taxes due on each motor vehicle at the time of registration of the motor vehicle by the party charged with issuing the registration. The department shall supervise and instruct the property valuation administrators and other officials with respect to their duties in relation to this system.
  2. Except as otherwise provided by law, the tax rate levied by the state, counties, schools, cities, and special tax districts on motor vehicles shall not exceed the rate that could have been levied on motor vehicles by the district on the January 1, 1983 assessments. All counties, schools, cities, and special taxing districts proposing to levy an ad valorem tax on motor vehicles shall submit to the department on or before October 1 of the year preceding the assessment date, the tax rate to be levied against valuations as of that assessment date. Any district that fails to timely submit the tax rate shall receive the rate in effect for the prior year.
  3. The compensating tax rate and maximum possible tax rate allowable for counties, schools, cities, and special taxing districts on property other than motor vehicles for the 1984 and subsequent tax periods shall be calculated excluding all valuations of and tax revenues from motor vehicles from the base amounts used in arriving at these general rates.
  4. The Transportation Cabinet shall provide access to all records of motor vehicle registrations to the department and the property valuation administrators as necessary to prepare and maintain a complete tax roll of motor vehicles throughout each year.
  5. The property valuation administrator shall, subject to the direction, instruction, and supervision of the department, have responsibility for assessing all motor vehicles other than those assessed under KRS Chapter 136 as part of public service companies. The department may provide standard valuation guidelines for use in valuation of motor vehicles.
  6. The property valuation administrator shall provide to the department by December 1 of each year a recapitulation of motor vehicles to be assessed as of January 1 of the next year.
  7. Procedures for protest, appeal, and correction of erroneous assessments shall be the same for motor vehicles as for other properties subject to ad valorem taxes.

History. Enact. Acts 1982, ch. 264, § 4, effective January 1, 1984; 1984, ch. 54, § 7, effective January 1, 1985; 1994, ch. 9, § 1, effective July 15, 1994; 2005, ch. 85, § 203, effective June 20, 2005.

Legislative Research Commission Notes.

(7/15/94). The 1994 changes to this statute are “effective for property assessed on or after January 1, 1995.” See 1994 Ky. Acts ch. 9, sec. 4.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Legislative Intent.
  3. State Tax Rate.
1. Constitutionality.

Act 264 of 1982, governing motor vehicle taxation was not special legislation for failure to provide for a two percent (2%) discount which is granted to real property and other personal property under former KRS 134.020 since motor vehicles are a classification based upon distinctive and natural reasons, and under this act no motor vehicles are subjected to a discount within the classification; the mere fact that all taxes are not paid in a short period of time, as envisioned in former KRS 134.020 , et seq., does not render the legislation unconstitutional. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

Since subsection (3) of this section, which excludes motor vehicles from the calculation of the compensating and maximum possible tax rates, applies equally to all vehicles which are to be operated on the highways of the state and since there are distinctive and natural reasons inducing and supporting the classification of motor vehicles because of their mobility, rapid depreciation and frequency of transfer and because they stand virtually alone in licensing requirements, the classification of motor vehicles was valid and did not contravene Ky. Const., § 59 prohibiting special legislation. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

Since motor vehicles are a separate, distinct and reasonable classification, the mere fact that the dates of assessment and collecting vary from real property or other personalty does not offend the provisions of Ky. Const., § 59 prohibiting special legislation. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

2. Legislative Intent.

The legislative intent is clear on the face of the statute in that no tax is to be levied on the vehicles until they are registered and, if this resulted in eliminating the taxation of those that are in inventory as of the assessment date, then so be it, because the General Assembly has provided an alternative time of assessment. Paducah v. T.C.B., Inc., 817 S.W.2d 234, 1991 Ky. App. LEXIS 119 (Ky. Ct. App. 1991).

3. State Tax Rate.

KRS 133.185 , which relates to the imposition of a tax rate for a taxing district, such as a city, county or school, has no relationship to Ky. Const., § 171 which requires that the General Assembly shall provide an annual tax sufficient to defray the estimated expenses of the Commonwealth; the state tax rate on all personal property, including motor vehicles, is not fixed by the processes outlined in KRS 133.185 , or in subsections (2) or (6) of this section which provide for submission of a proposal, recapitulation of motor vehicles by the property valuation administrator, and certification by the Department of Revenue, but rather, the state tax rate is fixed by the General Assembly and is currently embodied in KRS 132.020 . There is no conflict between subsections (2) and (6) of this section with the constitutional provision that the taxes shall be sufficient to defray the expenses of the state. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

The language of former subsection (3) of this section, governing a centralized ad valorem tax system for motor vehicles, clearly and unequivocally removes all valuations of and tax revenues from motor vehicles from the base amount used in determining the compensating tax rate and maximum possible tax rate envisioned under the provisions of KRS 68.245 , 132.023 , 132.027 , and 160.470 . Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

Opinions of Attorney General.

The property valuation administrator (PVA) is responsible for assessing motor vehicles subject to a fire district tax, and part of the responsibility for assessing the property includes listing the property on the tax roll. OAG 84-132 .

The county clerk, even where a vehicle has been junked, destroyed, or is rendered inoperable on the highways, is still responsible for collecting the ad valorem taxes on the vehicle where the motor vehicle did not become junked, destroyed or rendered inoperable on the highways, until after January 1 of the tax year in question. OAG 84-309 .

The state Department of Education is required to certify tax rates on motor vehicles for school districts pursuant to subsection (2) of this section. OAG 86-71 .

A city is not required to pay the property valuation administrator for the use of motor vehicle assessments. OAG 88-75 .

A city does not have to pay for motor vehicle assessments furnished by the Property Valuation Administrator under KRS 132.487 . OAG 92-69 .

The docks of a marina are considered land and not buildings for the purposes of KRS 132.220(3) and are subject to administrative search in the absence of the owner, unless they are sufficiently structurally analogous to buildings. OAG 12-008 , 2012 Ky. AG LEXIS 95.

132.488. Centralized ad valorem tax system for motorboats — Access to records.

  1. The assessment of all motorboats as defined in KRS 235.010 shall be administered in the same manner and according to the same procedures provided for motor vehicles in KRS 132.487 .
  2. The Energy and Environment Cabinet shall provide access to all records of motorboat registrations as necessary to prepare and maintain a complete tax roll of motorboats throughout each year.

History. Enact. Acts 1988, ch. 163, § 1, effective January 1, 1990; 2010, ch. 24, § 99, effective July 15, 2010.

NOTES TO DECISIONS

Cited in:

Paducah v. T.C.B., Inc., 817 S.W.2d 234, 1991 Ky. App. LEXIS 119 (Ky. Ct. App. 1991).

Opinions of Attorney General.

The docks of a marina are considered land and not buildings for the purposes of KRS 132.220(3) and are subject to administrative search in the absence of the owner, unless they are sufficiently structurally analogous to buildings. OAG 12-008 , 2012 Ky. AG LEXIS 95.

132.490. Annual reports of recorded evidences of indebtedness, by county clerk to property valuation administrators — Compensation of clerk. [Repealed.]

Compiler’s Notes.

This section (4051a: amend. Acts 1948, ch. 95, § 6; 1949 (Ex. Sess.), ch. 4, § 11; 2005, ch. 85, § 204, effective June 20, 2005) was repealed by Act 2005, ch. 168, § 158, effective January 1, 2006.

132.500. Valuation of evidences of indebtedness.

Each property valuation administrator, upon receiving from the county clerk the statement of purchase money notes, mortgage notes, and other obligations, shall fix the value upon each, estimated at the price it would bring at a fair voluntary sale, and enter the same in his tax book against the owner or beneficial holder thereof in the same manner as other property is entered. The statement shall be returned by the property valuation administrator, with his tax books, schedules, and list of conveyances, to the county clerk of his county for the use of the board of assessment appeals.

History. 4051b.

Legislative Research Commission Notes.

(12/31/97). “Board of assessment appeals” was substituted for “board of supervisors” in this statute in accordance with 1974 Ky. Acts ch. 326, sec. 12.

NOTES TO DECISIONS

1. Notice.

Assessment, pursuant to this section, of evidences of indebtedness which were not listed by taxpayer, is void unless notice of the assessment is given to the taxpayer as provided in KRS 132.450 . Boske v. Louis Marx & Bros., 161 Ky. 460 , 170 S.W. 1175, 1914 Ky. LEXIS 91 ( Ky. 1914 ).

132.510. Fiduciary’s report of personal property held.

Every executor, administrator, guardian, conservator, trustee, trustee in bankruptcy, receiver or other person acting in a fiduciary capacity shall, when required, file with the Department of Revenue a sworn inventory showing in detail the amount and character of personal property in his hands, unless the inventory has been filed as a public record in the court in which the fiduciary qualifies. The department may examine the books and accounts of any person acting in a fiduciary capacity. No fiduciary shall receive a final discharge until he has satisfied the court settling his accounts that all taxes against the estate have been paid.

History. 4019a-14: amend. Acts 1982, ch. 141, § 59, effective July 1, 1982; 2005, ch. 85, § 205, effective June 20, 2005.

Compiler’s Notes.

This section was amended by § 64 of Acts 1980, ch. 396, which would have taken effect July 1, 1982; however, Acts 1982, ch. 141, § 146, effective July 1, 1982, repealed Acts 1980, ch. 396.

NOTES TO DECISIONS

1. Decedent’s Estate.

Curators of a decedent’s estate who were in possession of the estate on the assessment date but did not list it for taxation were liable for the taxes in an action to assess the estate as omitted property, notwithstanding they had meanwhile distributed the estate and received their discharge. Commonwealth v. Riley's Curators, 115 Ky. 140 , 72 S.W. 809, 24 Ky. L. Rptr. 2005 , 1903 Ky. LEXIS 85 ( Ky. 1903 ) (decided under prior law).

When a decedent’s estate was in the hands of a personal representative for settlement and distribution, and before the estate had been or should have been settled or distributed, the personal representative should have listed the estate for taxation and paid the taxes thereon, and the heirs and devisees were not required to do so. Commonwealth v. Camden, 142 Ky. 365 , 134 S.W. 914, 1911 Ky. LEXIS 242 ( Ky. 1911 ) (decided under prior law).

132.520. Mortgage assignments to be reported by banks and other companies. [Repealed.]

Compiler’s Notes.

This section (4019a-11: amend. Acts 1948, ch. 95, § 7; 1949 (Ex. Sess.), ch. 4, § 12; 1968, ch. 152, § 105; 2000, ch. 327, § 7, effective July 14, 2000; 2005, ch. 85, § 206, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

132.530. Preparation of tax rolls.

The property valuation administrator shall prepare the property tax rolls in legible form, according to taxing districts therein. He shall make additions to each column, to show the aggregate amount, value and number of each column in the tax rolls, and prove the accuracy before he returns the same.

History. 4050, 4054, 4055: amend. Acts 1950, ch. 74, § 1; 1988, ch. 303, § 7, effective July 15, 1988.

NOTES TO DECISIONS

1. Miscellany.

Assessment of railroad ties owned by a foreign corporation under the heading “Miscellany” was not improper, where the company knew what was being assessed and had a hearing before the board of supervisors on the amount of the assessment. Ayer & Lord Tie Co. v. Keown, 89 S.W. 116, 28 Ky. L. Rptr. 201 (1905) (decided under prior law).

Opinions of Attorney General.

Compliance with this section, which requires in part, that a Property Valuation Administrator make additions to each column of the tax rolls so that accuracy of calculations may be verified, is a matter not addressed by the Open Records provisions contained in KRS 61.870 to 61.884 . OAG 89-66 .

Where a county agency allowed inspection of the entire tax roll of the county, the fact that certain information called for by statute or other provision was not contained upon such roll, did not constitute denial of inspection of the roll. OAG 89-66 .

Research References and Practice Aids

Cross-References.

Revenue Cabinet to prescribe forms for tax records, KRS 131.030 , 131.130 , 131.140 .

Recapitulation of county assessment, KRS 133.040 , 133.125 .

132.540. Assessment when lists and tax rolls destroyed or not returned. [Repealed.]

Compiler’s Notes.

This section (4050a, 4060) was repealed by Acts 1949 (Ex. Sess.), ch. 5, § 6.

132.550. County clerk to compute amount due from each taxpayer — Compensation of clerk. [Repealed]

History. 4076a-1, 4076a-2; Acts 1952, ch. 203, § 1; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 329, effective July 13, 1990; 2005, ch. 85, § 207, effective June 20, 2005; repealed by 2020 ch. 91, § 75, effective April 15, 2020.

132.560. Family exemptions; allowance of; how applied; not transferred to tax roll. [Repealed.]

Compiler’s Notes.

This section (4239j: amend. Acts 1944, ch. 170) was repealed by Acts 1966, ch. 255, § 283.

132.570. Attempts to evade taxation — Penalty.

No person shall willfully make a false statement or resort to any device to evade taxation. Any person doing so shall be subject to three (3) times the amount of tax upon his property, to be recovered by the sheriff by action in the name of the Commonwealth in the county in which the property is liable for taxation, or by the Department of Revenue, when the taxes are payable to it, in the Franklin Circuit Court.

History. 4019a-11, 4051, 4061, 4065: amend. Acts 1942, ch. 131, §§ 6 and 32; 1949 (1st Ex. Sess.), ch. 2, § 5; 1976 (1st Ex. Sess.), ch. 14, § 146, effective January 2, 1978; 2005, ch. 85, § 208, effective June 20, 2005; 2005, ch. 168, § 66, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

  1. Device to Avoid Taxation.
  2. Investment in Nontaxable Property.
  3. Burden of Proof.
  4. Reassessment.
1. Device to Avoid Taxation.

If a nonresident doing business in Kentucky made a profit from his Kentucky operations, he could not avoid taxation on the money received from such operations by the device of sending such money to his home office outside of Kentucky and then sending back to Kentucky money with which to pay operating expenses. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ).

Where reports made by utility to tax commission fully showed nature of corporate set-up, total gross earnings and facts and figures from which net earnings could be computed, facts upon which depreciation could be computed, and facts from which could be determined the amount and nature of dividends paid, it was not fraud or concealment for the company to report a different net earning than shown on its books, a different depreciation reserve than actually set up, or that no cash dividends were paid. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

Plan pursuant to which utility company divided itself into several corporate units, consisting of operating companies supervised by a holding company, and so managed its affairs that one industrial unit, whose franchise was nontaxable, was only unit to make a profit, was not invalid as fraudulent in the absence of proof of actual fraud or concealment. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

A taxpayer may reduce his taxes, or may avoid them altogether, if the method be legal. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

2. Investment in Nontaxable Property.

A sale of taxable property and investment of the proceeds in nontaxable property, shortly before the assessment date, does not constitute a violation of this section if such transaction was made in good faith and with the intention to make a permanent investment in the nontaxable property. Commonwealth v. Harris, 118 S.W. 294 ( Ky. 1909 ).

3. Burden of Proof.

Where the tax commission or other taxing authority claims fraud on the part of the taxpayer in evading taxes, it has the burden of proving that charge. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

4. Reassessment.

Subsection (1) of this section could not be used as a basis for a proceeding in the county court for a reassessment of the franchise value of a utility because of alleged misrepresentation and concealment by the utility. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

Research References and Practice Aids

Cross-References.

Jeopardy assessments by Department of Revenue, KRS 131.150 .

Penalty for false swearing, KRS 523.040 .

132.580. County court shall try owner refusing to list property, and shall assess the property; discharge if not wilfully delinquent. [Repealed.]

Compiler’s Notes.

This section (4061, 4062, 4063) was repealed by Acts 1949 (Ex. Sess.), ch. 2, § 13.

132.585. State local finance officer to provide tax rate calculation assistance.

In the event that a special taxing district desires assistance in the area of property tax rate calculation, the state local finance officer may provide such assistance.

History. Enact. Acts 1980, ch. 319, § 5, effective July 15, 1980.

132.590. Compensation of administrator — Salary schedule — Salary adjustments — Advancement in grade — Biennial budget — Allowances for deputies — Payments by fiscal court.

  1. The compensation of the property valuation administrator shall be based on the schedule contained in subsection (2) of this section as modified by subsection (3) of this section. The compensation of the property valuation administrator shall be calculated by the Department of Revenue annually. Should a property valuation administrator for any reason vacate the office in any year during his term of office, he shall be paid only for the calendar days actually served during the year.
  2. The salary schedule for property valuation administrators provides for nine (9) levels of salary based upon the population of the county in the prior year as determined by the United States Department of Commerce, Bureau of the Census annual estimates. To implement the salary schedule, the department shall, by November 1 of each year, certify for each county the population group applicable to each county based on the most recent estimates of the United States Department of Commerce, Bureau of the Census. The salary schedule provides four (4) steps for yearly increments within each population group. Property valuation administrators shall be paid according to the first step within their population group for the first year or portion thereof they serve in office. Thereafter, each property valuation administrator, on January 1 of each subsequent year, shall be advanced automatically to the next step in the salary schedule until the maximum salary figure for the population group is reached. If the county population as certified by the department increases to a new group level, the property valuation administrator’s salary shall be computed from the new group level at the beginning of the next year. A change in group level shall have no affect on the annual change in step. Prior to assuming office, any person who has previously served as a property valuation administrator must certify to the Department of Revenue the total number of years, not to exceed four (4) years, that the person has previously served in the office. The department shall place the person in the proper step based upon a formula of one (1) incremental step per full calendar year of service:
    1. For calendar year 2000, the salary schedule in subsection (2) of this section shall be increased by the amount of increase in the annual consumer price index as published by the United States Department of Commerce for the year ended December 31, 1999. This salary adjustment shall take effect on July 14, 2000, and shall not be retroactive to the preceding January 1. (3) (a) For calendar year 2000, the salary schedule in subsection (2) of this section shall be increased by the amount of increase in the annual consumer price index as published by the United States Department of Commerce for the year ended December 31, 1999. This salary adjustment shall take effect on July 14, 2000, and shall not be retroactive to the preceding January 1.
    2. For each calendar year beginning after December 31, 2000, upon publication of the annual consumer price index by the United States Department of Commerce, the annual rate of salary for the property valuation administrator shall be determined by applying the increase in the consumer price index to the salary in effect for the previous year. This salary determination shall be retroactive to the preceding January 1.
    3. In addition to the step increases based on service in office, each property valuation administrator shall be paid an annual incentive of six hundred eighty-seven dollars and sixty-seven cents ($687.67) per calendar year for each forty (40) hour training unit successfully completed based on continuing service in that office and, except as provided in this subsection, completion of at least forty (40) hours of approved training in each subsequent calendar year. If a property valuation administrator fails without good cause, as determined by the commissioner of the Kentucky Department of Revenue, to obtain the minimum amount of approved training in any year, the officer shall lose all training incentives previously accumulated. No property valuation administrator shall receive more than one (1) training unit per calendar year nor more than four (4) incentive payments per calendar year. Each property valuation administrator shall be allowed to carry forward up to forty (40) hours of training credit into the following calendar year for the purpose of satisfying the minimum amount of training for that year. This amount shall be increased by the consumer price index adjustments prescribed in paragraphs (a) and (b) of this subsection. Each training unit shall be approved and certified by the Kentucky Department of Revenue. Each unit shall be available to property valuation administrators in each office based on continuing service in that office. The Kentucky Department of Revenue shall promulgate administrative regulations in accordance with KRS Chapter 13A to establish guidelines for the approval and certification of training units.
  3. Notwithstanding any provision contained in this section, no property valuation administrator holding office on July 14, 2000, shall receive any reduction in salary or reduction in adjustment to salary otherwise allowable by the statutes in force on July 14, 2000.
  4. Deputy property valuation administrators and other authorized personnel may be advanced one (1) step in grade upon completion of twelve (12) months’ continuous service. The Department of Revenue may make grade classification changes corresponding to any approved for department employees in comparable positions, so long as the changes do not violate the integrity of the classification system. Subject to availability of funds, the department may extend cost-of-living increases approved for department employees to deputy property valuation administrators and other authorized personnel, by advancement in grade.
  5. Beginning with the 1990-1992 biennium, the Department of Revenue shall prepare a biennial budget request for the staffing of property valuation administrators’ offices. An equitable allocation of employee positions to each property valuation administrator’s office in the state shall be made on the basis of comparative assessment work units. Assessment work units shall be determined from the most current objective information available from the United States Bureau of the Census and other similar sources of unbiased information. Beginning with the 1996-1998 biennium, assessment work units shall be based on parcel count per employee. The total sum allowed by the state to any property valuation administrator’s office as compensation for deputies, other authorized personnel, and for other authorized expenditures shall not exceed the amount fixed by the Department of Revenue. However, each property valuation administrator’s office shall be allowed as a minimum such funds that are required to meet the federal minimum wage requirements for two (2) full-time deputies.
  6. Beginning with the 1990-1992 biennium each property valuation administrator shall submit by June 1 of each year for the following fiscal year to the Department of Revenue a budget request for his office which shall be based upon the number of employee positions allocated to his office under subsection (6) of this section and upon the county and city funds available to his office and show the amount to be expended for deputy and other authorized personnel including employer’s share of FICA and state retirement, and other authorized expenses of the office. The Department of Revenue shall return to each property valuation administrator, no later than July 1, an approved budget for the fiscal year.
  7. Each property valuation administrator may appoint any persons approved by the Department of Revenue to assist him in the discharge of his duties. Each deputy shall be more than twenty-one (21) years of age and may be removed at the pleasure of the property valuation administrator. The salaries of deputies and other authorized personnel shall be fixed by the property valuation administrator in accordance with the grade classification system established by the Department of Revenue and shall be subject to the approval of the Department of Revenue. The Personnel Cabinet shall provide advice and technical assistance to the Department of Revenue in the revision and updating of the personnel classification system, which shall be equitable in all respects to the personnel classification systems maintained for other state employees. Any deputy property valuation administrator employed or promoted to a higher position may be examined by the Department of Revenue in accordance with standards of the Personnel Cabinet, for the position to which he is being appointed or promoted. No state funds available to any property valuation administrator’s office as compensation for deputies and other authorized personnel or for other authorized expenditures shall be paid without authorization of the Department of Revenue prior to the employment by the property valuation administrator of deputies or other authorized personnel or the incurring of other authorized expenditures.
  8. Each county fiscal court shall annually appropriate and pay each fiscal year to the office of the property valuation administrator as its cost for use of the assessment, as required by KRS 132.280 , an amount determined as follows:
  9. The total sum to be paid by the fiscal court to any property valuation administrator’s office under the provisions of subsection (9) of this section shall not exceed the limits set forth in the following table:
  10. Annually, after appropriation by the county of funds required of it by subsection (9) of this section, and no later than August 1, the property valuation administrator shall file a claim with the county for that amount of the appropriation specified in his approved budget for compensation of deputies and assistants, including employer’s shares of FICA and state retirement, for the fiscal year. The amount so requested shall be paid by the county into the State Treasury by September 1, or paid to the property valuation administrator and be submitted to the State Treasury by September 1. These funds shall be expended by the Department of Revenue only for compensation of approved deputies and assistants and the employer’s share of FICA and state retirement in the appropriating county. Any funds paid into the State Treasury in accordance with this provision but unexpended by the close of the fiscal year for which they were appropriated shall be returned to the county from which they were received.
  11. After submission to the State Treasury or to the property valuation administrator of the county funds budgeted for personnel compensation under subsection (11) of this section, the fiscal court shall pay the remainder of the county appropriation to the office of the property valuation administrator on a quarterly basis. Four (4) equal payments shall be made on or before September 1, December 1, March 1, and June 1 respectively. Any unexpended county funds at the close of each fiscal year shall be retained by the property valuation administrator, except as provided in KRS 132.601(2). During county election years the property valuation administrator shall not expend in excess of forty percent (40%) of the allowances available to his office from county funds during the first five (5) months of the fiscal year in which the general election is held.
  12. The provisions of this section shall apply to urban-county governments and consolidated local governments. In an urban-county government and a consolidated local government, all the rights and obligations conferred on fiscal courts or consolidated local governments by the provisions of this section shall be exercised by the urban-county government or consolidated local government.
  13. When an urban-county form of government is established through merger of existing city and county governments as provided in KRS Chapter 67A or when a consolidated local government is established through merger of existing city and county governments as provided by KRS Chapter 67C, the annual county assessment shall be presumed to have been adopted as if the city had exercised the option to adopt as provided in KRS 132.285 .For purposes of this subsection, the amount to be considered as the assessment for purposes of KRS 132.285 shall be the amount subject to taxation for full urban services.
  14. Notwithstanding the provisions of subsection (9) of this section, the amount appropriated and paid by each county fiscal court to the office of the property valuation administrator for 1996 and subsequent years shall be equal to the amount paid to the office of the property valuation administrator for 1995, or the amount required by the provisions of subsections (9) and (10) of this section, whichever is greater.

SALARY SCHEDULE County Populationby Group Steps and Salary for Property ValuationAdministrators Step 1 Step 2 Step 3 Step 4 Group I0-4,999 $45,387 $46,762 $48,137 $49,513 Group II5,000-9,999 49,513 50,888 52,263 53,639 Group III10,000-19,999 53,639 55,014 56,389 57,765 Group IV20,000-29,999 55,702 57,765 59,828 61,891 Group V30,000-44,999 59,828 61,891 63,954 66,017 Group VI45,000-59,999 61,891 64,641 67,392 70,143 Group VII60,000-89,999 66,017 68,768 71,518 74,269 Group VIII90,000-499,999 68,080 71,518 74,957 78,395 Group IX500,000 and up 72,206 75,644 79,083 82,521

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Assessment Subject toCounty Tax of: At Least But Less Than Amount — $100,000,000 $0.005 for each $100 of the first $50,000,000 and $0.002 for each $100 over $50,000,000. $100,000,000 150,000,000 $0.004 for each $100 of the first $100,000,000 and $0.002 for each $100 over $100,000,000. 150,000,000 300,000,000 $0.004 for each $100 of the first $150,000,000 and $0.003 for each $100 over $150,000,000. 300,000,000 — $0.004 for each $100.

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Assessed Value of Property Subject toCounty Tax of: At Least But Less Than Limit — $700,000,000 $25,000 $700,000,000 1,000,000,000 35,000 1,000,000,000 2,000,000,000 50,000 2,000,000,000 2,500,000,000 75,000 2,500,000,000 5,000,000,000 100,000 5,000,000,000 7,500,000,000 175,000 7,500,000,000 15,000,000,000 250,000 15,000,000,000 — 400,000

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This allowance shall be based on the assessment as of the previous January 1 and shall be used for deputy and other personnel allowance, supplies, maps and equipment, travel allowance for the property valuation administrator and his deputies and other authorized personnel, and other authorized expenses of the office.

HISTORY: 4037, 4042a-8: amend. Acts 1944, ch. 140; 1948, ch. 92; 1949 (Ex. Sess.), ch. 3, § 10; 1950, ch. 202, § 1; 1952, ch. 129; 1954, ch. 216; 1958, ch. 63, § 1; 1960, ch. 186, Art. I, § 14; 1962, ch. 272, § 1; 1966, ch. 43, § 1, 2; 1968, ch. 212, § 2; 1970, ch. 175, § 1; 1972, ch. 245, § 1; 1974, ch. 334, § 1; 1976, ch. 288, § 1; 1978, ch. 253, § 1, effective June 17, 1978; 1982, ch. 388, § 2, effective July 15, 1982; 1984, ch. 138, § 1, effective July 13, 1984; 1988, ch. 418, § 3, effective July 15, 1988; 1996, ch. 254, § 21, effective July 15, 1996; 1996, ch. 361, § 2, effective July 15, 1996; 1998, ch. 154, § 76, effective July 15, 1998; 2000, ch. 479, § 1, effective July 14, 2000; 2002, ch. 38, § 1, effective July 15, 2002; 2002, ch. 346, § 167, effective July 15, 2002; 2005, ch. 85, § 209, effective June 20, 2005; 2018 ch. 171, § 12, effective July 14, 2018; 2018 ch. 207, § 12, effective April 27, 2018; 2020 ch. 91, § 45, effective April 15, 2020.

Legislative Research Commission Notes.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Legislature's Duty.
  3. Entitlement to Commission.
1. Constitutionality.

Law changing basis of tax commissioner’s (now property valuation administrator’s) compensation from final assessment as equalized by state tax commission to assessment as equalized by county board of supervisors, before equalization by tax commission, was not unconstitutional as a changing of the compensation of the commissioners (now administrators) then in office. Shanks v. Johnson, 220 Ky. 160 , 294 S.W. 1054, 1927 Ky. LEXIS 498 ( Ky. 1927 ) (present law makes no provision for equalization).

Law that provided that counties assessing more than $100,000,000 in taxable property contribute $3,000 per annum to the office of the county tax commissioner (now property valuation administrator), to help defray the expenses of the taxing district which is coterminous with such counties’ boundaries, and requiring counties assessing less than $100,000,000, but more than $35,000,000, in taxable property to pay to the county tax commissioner (now property valuation administrator) for such purposes the sum of $1,500 per annum was unconstitutional as being local and special legislation. Jefferson County Fiscal Court v. Trager, 302 Ky. 361 , 194 S.W.2d 851, 1946 Ky. LEXIS 686 ( Ky. 1946 ).

2. Legislature's Duty.

It is Legislature’s duty to provide sufficient funds to pay expenses of operation of office of tax commissioners (now property valuation administrators), including compensation based on total assessments, so long as law remains in statutes and services are rendered, and failure of Legislature to provide sufficient funds in budget act did not impliedly repeal statutes. Talbott v. Burke, 287 Ky. 187 , 152 S.W.2d 586, 1941 Ky. LEXIS 515 ( Ky. 1941 ).

3. Entitlement to Commission.

The tax commissioner (now property valuation administrator) was entitled to a commission only upon property assessed by him that was actually liable to taxation, and not upon property exempt from taxation, notwithstanding that he was required to list exempt property for statistical purposes. Powers v. Osbon, 118 Ky. 810 , 82 S.W. 419, 26 Ky. L. Rptr. 744 , 1904 Ky. LEXIS 105 ( Ky. 1904 ) (decided under prior law).

The Legislature in speaking of property to be assessed did not intend to embrace any nontaxable property upon which the assessor’s compensation might be calculated and the county tax commissioners (now property valuation administrators) are not entitled to a commission on the $250 household exemption allowed each taxpayer with a family. Oates v. Simpson, 295 Ky. 433 , 174 S.W.2d 505, 1943 Ky. LEXIS 234 ( Ky. 1943 ).

Cited in:

Draughn v. Martin, 350 S.W.2d 161, 1961 Ky. LEXIS 88 ( Ky. 1961 ); Bennett v. Jones, 851 S.W.2d 494, 1993 Ky. App. LEXIS 53 (Ky. Ct. App. 1993).

Opinions of Attorney General.

The person appointed as deputy county tax commissioner (now property valuation administrator) under this section would be a state officer and the provisions of Ky. Const., § 165 and KRS 61.080 would be applicable to prohibit the appointment of the county treasurer as deputy county tax commissioner (now property valuation administrator). OAG 66-759 .

A fiscal court of a county may not authorize and pay to a tax commissioner (now property valuation administrator) a predetermined amount per month for travel expense. OAG 69-272 .

Since the property valuation administrator has no duty to assess public utility property in the county, there is no statutory basis for requiring that the value of such property be included in the base upon which the property valuation administrator’s compensation is computed. OAG 71-249 .

The Commonwealth and the counties are bound to budget the full and complete amount payable for compensation of the deputies of the property valuation administrator and other authorized expenditures. OAG 71-396 .

The compensation of the property valuation administrator is based upon the assessment of the property which he has a duty to assess in the county. OAG 72-249 .

The amounts set forth in subsection (6) of this section are maximum amounts that cannot be exceeded in appropriations to specific counties; they are not amounts which the Legislature is required to appropriate because of the provisions in the statute stating that the property valuation administrator’s budget must be based upon State, county and city funds available and that expenditures of such funds must be based upon the Department of Revenue’s approval. OAG 78-654 .

The amounts authorized by subsection (6) of this section for authorized deputies, other authorized personnel and other expenses are firm; House Bill 44, 1979 Ky. Acts (Ex. Sess.) provides no additional appropriation for hiring of additional personnel to aid in assessment of property, nor to pay for the mailing of notices to property owners whose property assessments have been increased. OAG 79-219 .

In order for the property valuation administrator to be reimbursed by the county for valid expenses, he need only submit a claim to the fiscal court showing the amount of expense and the item purchased; this section requires the fiscal court to pay all expenses and all claims unless the property valuation administrator has exhausted the amount of funds appropriated by the county to his office and the fiscal court cannot refuse payment of such claims. OAG 80-89 .

The Department of Revenue’s regular employees cannot get a ten percent, across-the-board, cost-of-living raise except through reclassification, promotion, merit increases or by adoption of new salary scales, and since subsections (4) and (5) of this section limit the property valuation administrator and his deputies to only those cost-of-living increases approved for departmental employees, the property valuation administrator and his deputies cannot get ten percent increases for cost-of-living advances. OAG 80-149 .

When subsections (1) and (4) of this section are considered together, initially the maximum grade for property valuation administrators with at least 5,000 points would be 22, however, subsection (4) of this section shows that it was contemplated by the Legislature that there would need to be grade changes if comparable departmental positions were changed or there were given cost-of-living increases, therefore, the Department of Revenue could determine what comparable positions exist in the department to the property valuation administrators, and make grade changes based upon such comparable positions, but keeping the ratio of one grade variances based upon the formula set out in subsection (1) of this section in order to maintain the integrity of the classification system set out in this section. OAG 80-350 .

City and county funds appropriated for the property valuation administrator’s office, because of their purpose and continuing nature, should be properly treated as trust and agency funds, subject to the general directions of KRS 45.140 (now repealed) and the trust and agency funds section of the biennial budget. OAG 80-351 .

Since the property valuation administrator’s functions are regulated and supervised by the Department of Revenue, it follows in reading KRS 132.285 , former 132.635 and this section together, that the funding of that office is likewise under the regulation and supervision of the Department of Revenue, and therefore, all of the funds allocated by cities and fiscal courts for that office are subject to the applicable provisions of KRS Chapters 44 and 45 relating to the handling and disbursing of state funds. OAG 80-351 .

The Department of Revenue, as the budget unit and supervising agency, as concerns the property valuation administrator in Kentucky, has the authority to apply applicable financial controls in KRS Chapter 45 to the funding for that office, as normally assumed by a budget unit. OAG 80-351 .

A county may, pursuant to KRS 132.605 , legally hire and pay the salary of a person whose work involves searching for property in the county which has been omitted from the tax lists if such work is reasonably necessary for a complete and accurate assessment of property in the county. OAG 80-359 .

Relating to the county money that a county is required to annually appropriate and pay each fiscal year to the office of the Property Valuation Administrator (PVA), subsection (9) of this section is specific as to how this money is to be handled; however, this money is subject to appropriate fiscal controls, which must take into consideration the necessary time scheme in paying the PVA expenses as they normally accrue; the Department of Revenue can issue guidelines to the PVA as to allowable and unallowable expenditures under this section, and the department may require the county to submit monthly reports reflecting the appropriations, balances and expenditures made from the amount budgeted for the PVA in the county’s budget. OAG 80-491 .

Deputy property valuation administrators are deputy state officers and state employees under the direct administrative control of the Department of Revenue. OAG 82-360 .

The Department of Revenue has the authority to set specifications for deputy property valuation administrators (PVAs) if it does so in a reasonable manner. The Department is not required to adhere to the rules and regulations of the personnel system when applied to the PVA deputies, but is required to establish an administrative organizational structure and to operate within standard personnel policies pursuant to the statutory guidelines contained in KRS Chapter 132; a system that is comparable to that utilized by the Department of Personnel for the classified service or in the regulations governing the unclassified service is reasonable for this purpose. OAG 82-360 .

Where a Property Valuation Administrator (PVA), acting in a purely private function, assists a city in preparing proper tax bills, and the PVA does the work alone after regular work hours, and does not make use of PVA office facilities, the PVA may perform this private work and may retain the income therefrom as nonstatutory personal income. OAG 83-449 .

The homestead exemption of KRS 132.810 , is just that, an exemption of a portion of an assessment for qualifying taxpayers; as such, it is not part of the assessment of property subject to state tax and may not be used in computing a PVA’s salary. OAG 84-35 .

Moneys recovered by the Cabinet from an outgoing property valuation administrator (PVA) are state funds and thus belong in the state treasury; moreover, since the Revenue Cabinet has approval authority over PVA expenditures and has the discretion to increase or decrease the state appropriation to each PVA as the budgetary needs of each PVA’s office may require, the ultimate discretion as to disposition of nearly all of the PVA’s funds lies with the Revenue Cabinet. OAG 84-338 .

There is nothing in the statutes which would require the Revenue Cabinet to allocate precisely the same percentage of the maximum allowable state appropriation to each county; the Legislature gave the Revenue Cabinet the discretion to allocate state funds as needed to make up the difference between the PVA’s total needs and the funds available on the local level. OAG 84-338 .

County must pay for the utilities, including the telephone bills for official calls, of the property valuation administrator’s office, in order to make it functional. The claim filed by the property valuation administrator for such bills must be paid out of the county’s formula contribution appropriation, as covered in subsection (7) of this section, as a nonpersonnel expense payable from county funds, as explicitly mentioned in subsection (9). OAG 85-57 .

This section bases the Property Valuation Administrator’s compensation on the county’s assessment, not on the county’s valuation; therefore, this section requires that the compensation be based on the taxable assessment rather than on the fair cash value of the property in the county. OAG 92-69 .

Research References and Practice Aids

2020-2022 Budget Reference.

See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, F, 9, (1) at 879.See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, F, 9, (3) at 879.

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

132.591. Alternative compensation scheme for administrator, contingent on state funding. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1996, ch. 361, § 1, effective July 15, 1996) was repealed by Acts 2000, ch. 479, § 3, effective July 14, 2000.

132.595. Adjustment of compensation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 253, § 2, effective June 17, 1978; 1978, ch. 354, § 1, effective June 17, 1978) was repealed by Acts 2000, ch. 479, § 3, effective July 14, 2000.

132.597. Expense allowance for property valuation administrators who meet stipulated requirements — Annual professional instruction.

  1. The property valuation administrator of each county shall receive an annual expense allowance of three thousand six hundred dollars ($3,600) to be paid from the State Treasury in monthly installments of three hundred dollars ($300). Property valuation administrators shall not be required to keep records verifying expenditures from this expense allowance.
  2. The expense allowance provided in subsection (1) of this section shall be used by the property valuation administrator for expenses incurred in the performance of his duties. The allowance is to provide the necessary funds for payment of all expenditures of the property valuation administrator not directly associated with the assessment of property in his particular county.
  3. Each property valuation administrator shall annually, within each calendar year, participate in a minimum of thirty (30) classroom hours of professional instruction conducted or approved by the Department of Revenue. Any property valuation administrator failing to meet the department’s requirements for any calendar year shall not receive the three thousand six hundred dollar ($3,600) annual expense allowance provided in subsection (1) of this section for the subsequent calendar year.
  4. The annual requirement for participation in classroom instruction shall be reduced to fifteen (15) hours for any property valuation administrator awarded the “senior Kentucky assessor” (SKA) professional designation under the provisions of KRS 132.385 .

History. Enact. Acts 1986, ch. 145, § 1, effective July 15, 1986; 1992, ch. 263, § 5, effective July 14, 1992; 2005, ch. 85, § 210, effective June 20, 2005.

Research References and Practice Aids

2020-2022 Budget Reference.

See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, F, 9, (1) at 879.See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, F, 9, (2) at 879.

132.600. Use of excess compensation of property valuation administrator for purchase of maps, charts, supplies, equipment and other expenses, and for costs of reappraisal project. [Repealed.]

Compiler’s Notes.

This section (4042a-8: amend. Acts 1949 (Ex. Sess.), ch. 5, § 31/2) was repealed by Acts 1974, ch. 334, § 4.

132.601. Administrator’s use of local funds accruing to office — Bank account — Expenditures — Supervision.

  1. The property valuation administrator of any county may, after receiving an approved budget from the Department of Revenue under the provisions of KRS 132.590 , obligate and spend any of the local funds accruing to his office under the provisions of KRS 132.590 or KRS 132.285 , over and above that actually used in compensating his deputies and assistants, for the purchase of any maps, lists, charts, materials, supplies or equipment, or for other expenses necessary to the proper assessment of property or preparation and maintenance of assessment rolls and records.
  2. The property valuation administrator shall maintain a bank account for the management of local funds received by his office under the provisions of KRS 132.590 and 132.285 . Beginning with the 1990-1992 biennium, at the end of each fiscal year a cumulative carryover of local funds equivalent to the total annual local appropriation for the ending fiscal year or five thousand dollars ($5,000), whichever is greater, shall be retained. Any funds in excess of this amount shall be refunded by the property valuation administrator no later than August 1 to the appropriating local governments in direct proportion to their respective appropriations.
  3. Expenditures made by the office of the property valuation administrator under the provisions of subsection (1) of this section shall be governed by procurement procedures adopted by the fiscal court in the county administrative code required by KRS 68.005 . However, after approval of the annual budget for the office of the property valuation administrator provided in KRS 132.590 by the Department of Revenue, the necessity of the expenditure shall not be questioned by the fiscal court. The Department of Revenue shall have neither authority nor responsibility in the auditing of expenditures made by the property valuation administrator from locally appropriated funds. The Auditor of Public Accounts shall assume the responsibility.

History. Enact. Acts 1978, ch. 253, § 3, effective June 17, 1978; 1988, ch. 418, § 4, effective July 15, 1988; 2005, ch. 85, § 211, effective June 20, 2005.

132.605. Purchase of assessment supplies and equipment by county — Purchase and loan by Department of Revenue — Maintenance.

  1. The fiscal court of each county shall have jurisdiction and the power to purchase and supply to the property valuation administrator any maps, lists, charts, materials, supplies, equipment or instruments which are reasonably necessary for a complete and accurate assessment of property in the county. The Department of Revenue is authorized to purchase and loan any property valuation administrator such maps, lists, charts, materials, supplies, equipment or instruments as are urgently needed by any property valuation administrator, provided that the Department of Revenue keeps a record thereof.
  2. The fiscal court of any county shall provide for the maintenance of all maps, lists, charts, materials, supplies, equipment or instruments owned by a county or supplied to it by the Department of Revenue or by any source in cooperation with the Department of Revenue for the purpose of facilitating the assessment of property.

History. Enact. Acts 1942, ch. 131, §§ 5, 32; 2005, ch. 85, § 212, effective June 20, 2005.

NOTES TO DECISIONS

1. Employment.

Jefferson County fiscal court was authorized to employ seven (7) persons as clerks, in view of the urgent necessity to compile material and information for assessment of large amount of property that had been omitted from assessment and fact that persons employed were given titles is of no consequence since it is the nature of the service they perform and not their title that is controlling. Veith v. Dunlap, 308 Ky. 386 , 214 S.W.2d 608, 1948 Ky. LEXIS 949 ( Ky. 1948 ).

Opinions of Attorney General.

A county may, pursuant to this section, legally hire and pay the salary of a person whose work involves searching for property in the county which has been omitted from the tax lists if such work is reasonably necessary for a complete and accurate assessment of property in the county. OAG 80-359 .

132.610. Verification of property valuation administrator’s claim for services — Affidavit.

Before the county judge/executive shall grant a certificate or order of allowance under KRS 132.590 , the property valuation administrator and his deputies shall in open court make and file the following affidavit, subscribed and sworn to by them before the county clerk:

“I do swear that I have not received from any person a list of taxable property and returned the same until the person rendering the list has made oath to the truth of the same; and I do further swear that I have in no instance assessed any property at a greater or less sum than I deemed a fair cash value, estimated at the price it would bring at a fair voluntary sale.”

History. 4042a-9: amend. Acts 1978, ch. 384, § 261, effective June 17, 1978.

Research References and Practice Aids

Cross-References.

Penalty for false swearing, KRS 523.040 .

132.620. Recovery of compensation or costs from property valuation administrator for unauthorized assessment or neglect of duty — Procedure — Appeal.

  1. The Department of Revenue shall recover from any property valuation administrator all compensation paid to him for assessments that were unauthorized or excessive when and to the extent it is determined by a final order of the board of assessment appeals, Kentucky Claims Commission pursuant to KRS 49.200 to 49.250 , or a court of competent jurisdiction that such assessments were unauthorized or excessive. Whenever the property valuation administrator fails to render the services required of him or he performs any of his duties in such a manner as to fail to comply substantially with the requirements of the law, he shall be required to pay a sum that will reasonably compensate the Commonwealth of Kentucky for its costs in rendering the duties required to be performed by the property valuation administrator. The Department of Revenue shall notify the property valuation administrator by certified mail, return receipt requested, of any amount charged to be due under this section and a statement of the reasons therefor. The property valuation administrator shall be entitled to a hearing before the Kentucky Claims Commission, and an appeal may be taken from the final action of the Kentucky Claims Commission to the courts as provided by law.
  2. Any sum that may become due from any property valuation administrator by reason of this section may be deducted from any amount that the Commonwealth of Kentucky may become obliged to pay such property valuation administrator, or it may be collected from the bondsman of the property valuation administrator.

HISTORY: 4042a-10: amend. Acts 1942, ch. 131, §§ 12, 32; 1964, ch. 141, § 15; 1974, ch. 315, § 12; 1978, ch. 384, § 563, effective June 17, 1978; 1980, ch. 114, § 18, effective July 15, 1980; 2005, ch. 85, § 213, effective June 20, 2005; 2017 ch. 74, § 71, effective June 29, 2017.

Opinions of Attorney General.

Where a property valuation administrator fails to perform his duties by working only 40% of the workweek, his salary can be reduced pursuant to this section and KRS 61.120 for the period of time for which he is being paid but is not working. OAG 81-197 .

Research References and Practice Aids

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

132.630. Compensation of property valuation administrator’s office. [Repealed.]

Compiler’s Notes.

This section (1777: amend. Acts 1944, ch. 117; 1946, ch. 97; 1948, ch. 135; 1949 (Ex. Sess.), ch. 3, § 11; 1950, ch. 201, § 1; 1954, ch. 117; 1958, ch. 63, § 2; 1968, ch. 212, § 3; 1972, ch. 245, § 2; 1974, ch. 334, § 2) was repealed by Acts 1976, ch. 288, § 2.

132.635. Application of KRS 132.590 and 132.630 to urban-county governments and consolidated local governments. [Repealed]

History. Enact. Acts 1974, ch. 334, § 3; 2002, ch. 346, § 168, effective July 15, 2002; repealed by 2020 ch. 91, § 75, effective April 15, 2020.

132.640. Advancement against compensation to county tax commissioner in county containing city of first or second class. [Repealed.]

Compiler’s Notes.

This section (4042a-8, 4072: amend. Acts 1946 ch. 35; 1948, ch. 136) was repealed by Acts 1949 (Ex. Sess.), ch. 3, § 14.

132.645. Payment of compensation to property valuation administrator.

  1. The property valuation administrator of each county shall be paid from the State Treasury each month as provided in KRS 132.590 .
  2. Deputies, other authorized personnel, and other authorized expenditures of the property valuation administrator’s office shall be paid from the State Treasury monthly as approved by the Department of Revenue as provided in KRS 132.590(2).

History. Enact. Acts 1948, ch. 39; 1949 (Ex. Sess.), ch. 3, § 12; 1960, ch. 186, Art. I, § 37; 1972, ch. 245, § 3; 2005, ch. 85, §§ 214 and 215, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005).This section was amended by 2005 Ky. Acts ch. 85, §§ 214 and 215, which are identical and have been codified together.

Opinions of Attorney General.

Employees of the property valuation administrator’s office who are paid with state funds appropriated by the city are required to be employed in the same manner and receive the same benefits as employees of the property valuation administrator’s office paid with state funds appropriated by the state and fiscal court since the statutes do not differentiate such employees. OAG 80-351 .

Research References and Practice Aids

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

132.650. Informality or irregularity does not vitiate assessment or tax bills — Failure of property valuation administrator to call on taxpayer or perform duties on time does not make assessment void.

Any informality or irregularity in the making of an assessment or the tax bills shall not vitiate the same, and the failure of the property valuation administrator, or of anyone required to perform services relative to the assessment, to call on each taxpayer for an assessment list, to notify the taxpayer to list or of an increase of assessment, to finish the assessments or other duties within the times provided by law shall not make the assessment void. Provided, however, that nothing in this section shall be construed to release the property valuation administrator or anyone else from performing his duties in accordance with the requirements of the law. Even though the assessing officer may not have complied literally with all the provisions of the statutes no taxpayer shall be entitled to a final abatement of the taxes by injunction or otherwise on any part of a final assessment unless the taxpayer shows that the assessment was excessive or discriminatory or that the property was not taxable.

History. Enact. Acts 1942, ch. 131, §§ 9 and 32.

NOTES TO DECISIONS

  1. Increase Void.
  2. Notice.
  3. Corrections.
1. Increase Void.

The only part of an assessment which may be voided for lack of notice is the amount of the increase. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

2. Notice.

A property owner who is not properly notified of an increased assessment, but who has actual notice and appeals to the proper review board may not find relief for lack of notice, since the purpose of notice is to allow the taxpayer to be heard, and when he appears and is heard, the rights, which notice is to protect, are preserved. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

3. Corrections.

Where county clerk, in making out tax bills, inadvertently failed to include the county taxes on the bills of a certain taxpayer, corrected bills issued by the clerk in the following year were valid. McFarland v. Georgetown Nat’l Bank, 208 Ky. 7 , 270 S.W. 995, 1925 Ky. LEXIS 201 ( Ky. 1925 ), aff’d, 273 U.S. 568, 47 S. Ct. 467, 71 L. Ed. 779, 1927 U.S. LEXIS 712 (1927) (decided under prior law).

Opinions of Attorney General.

A taxpayer in a city of the third class was liable for penalty and interest on his city taxes even though the amount of tax due was omitted from the tax notice. OAG 61-521 .

Research References and Practice Aids

Cross-References.

Correction of clerical errors, KRS 133.110 .

132.660. Emergency assessments.

  1. The Department of Revenue shall have authority to order an emergency assessment of all or any part of the taxable property in any taxing district to be made by one (1) or more persons appointed for that purpose by the department, whenever: there has been no regular assessment; the records of an assessment have been destroyed, mutilated or lost; complaint is made by the owners of not less than ten percent (10%) in value of the taxable property in the taxing district; or investigation of the department discloses that the assessment of property in such taxing district is so grossly inequitable or fiscally infeasible that an emergency exists. The order directing such emergency assessments shall state the reasons therefor and a copy shall be filed in the office of the county clerk where the property lies. Such order, when filed, shall void any assessment for the assessment year for which the emergency assessment is made. Any person appointed to make such an emergency assessment shall have the same powers and duties as the property valuation administrator. Whenever the tax roll has been completed under an emergency assessment and the tentative valuations have been determined, the department shall cause to be published pursuant to KRS Chapter 424, a notice as to the date when the tax roll will be ready for inspection and the time available for such purpose; also a copy of the notice shall be posted at the courthouse door. If any property is assessed at a greater value than that listed by the taxpayer or unlisted property is assessed, the taxpayer shall be charged with notice of such action by reason of the inspection period, and no further notice need be given of such action taken before the beginning of the inspection period. At the close of the inspection period, the tax roll shall be delivered to the county clerk and the county judge/executive shall immediately convene the board of assessment appeals to hear and determine any appeals from such emergency assessment. The board shall remain in session for the time and shall receive the compensation as provided in KRS 133.030(3). Appeals shall be taken and heard from such emergency assessments in the same manner as appeals from regular assessments.
  2. The department may appoint the property valuation administrator to make an emergency assessment provided he was not at fault, and if the property valuation administrator is so appointed he shall receive reasonable compensation for his services in making this assessment, which shall not affect in any manner the payment to him of any compensation that he has received for himself or on behalf of a deputy or that may be due him, for services in making the regular assessment. Whenever through the property valuation administrator’s fault an emergency assessment is ordered, the property valuation administrator shall become liable for the cost thereof as provided in KRS 132.620 , such cost to be limited to the amount due or paid him in accordance with the provisions of KRS 132.590 .

History. Enact. Acts 1942, ch. 131, §§ 10, 32; 1949 (Ex. Sess.), ch. 5, § 2; 1966, ch. 239, § 134; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1978, ch. 384, § 262, effective June 17, 1978; 2005, ch. 85, § 216, effective June 20, 2005.

Legislative Research Commission Notes.

(1988). A technical correction has been made in this section by the Reviser of Statutes pursuant to KRS 7.136 .

NOTES TO DECISIONS

  1. Constitutionality.
  2. Order Erroneous.
1. Constitutionality.

This section does not violate Ky. Const., § 2, since a sufficient standard is provided to govern the exercise of the power of the Department of Revenue to determine when a reassessment shall be made. Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ).

2. Order Erroneous.

Where the record did not indicate (1) that there had been a failure to make a regular assessment, (2) that assessment records had been mutilated or lost, (3) that a complaint had been made by owners of not less than 10 percent of the taxable property in the taxing district, or (4) that an investigation by the cabinet had disclosed the assessment of property as so grossly inequitable or fiscally infeasible that an emergency existed, it was clear error for the trial court to order the Department of Revenue to provide an emergency assessment. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

Cited in:

Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

Research References and Practice Aids

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

132.670. Mapping of property — Biennial review by Department of Revenue.

  1. The Department of Revenue shall prepare detailed maps identifying every parcel of real property within each county of the state. Each county shall furnish to the department adequate facilities in the county courthouse in which to work. The Department of Revenue shall prescribe methods and specifications for the mapping of property. Personnel authorized to assist in making property identification maps under this section may be given the same authority as a deputy property valuation administrator. Locally employed mapping project personnel shall be compensated in the same manner as deputies or assistants in the property valuation administrator’s office.
  2. The Department of Revenue shall conduct a biennial review of the quality of maps and ownership records in each county. If, in the first review conducted under these provisions, the maps and records in any county fail to meet the minimum standards established by the department, the department shall assume responsibility for remapping, revision, and updating under the provisions of subsection (1) of this section. Minimum maintenance standards to be followed by each property valuation administrator shall be established by the department.

History. Enact. Acts 1949 (Ex. Sess.), ch. 5, § 3; 1956, ch. 5; 1960, ch. 186, Art. I, § 15; 1972, ch. 364, § 1; 1974, ch. 308, § 29; 1980, ch. 261, § 1, effective July 15, 1980; 1982, ch. 388, § 3, effective July 15, 1982; 1988, ch. 418, § 5, effective July 15, 1988; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 330, effective July 13, 1990; 2005, ch. 85, § 217, effective June 20, 2005.

Compiler’s Notes.

Former KRS 132.670 (Enact. Acts 1949 (Ex. Sess.), ch. 5, § 3; 1956, ch. 5; 1960, ch. 186, Art. I, § 15; 1972, ch. 364, § 1; 1974, ch. 308, § 29; 1980, ch. 261, § 1, effective July 15, 1980; 1982, ch. 388, § 3, effective July 15, 1982; 1988, ch. 418, § 5, effective July 15, 1988) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 330, effective July 13, 1990.

NOTES TO DECISIONS

1. Constitutionality.

This section is complete and in full force and effect and not unconstitutional on ground that it was designed to take effect on affirmative action of fiscal court. Borders v. Cain, 252 S.W.2d 903, 1952 Ky. LEXIS 1042 ( Ky. 1952 ) (decision prior to 1960 amendment).

132.672. Mapping project account — Transfer of funds.

  1. The Department of Revenue is authorized to establish an account entitled the “mapping project account” which is a fund created within the restricted fund group set forth in KRS 45.305 . The purpose of this account is to provide funds for the mapping project as set forth in KRS 132.670 . This account shall not lapse.
  2. There is hereby authorized to be deposited into this account the balance of the money heretofore deposited in the “Kentucky Wastewater Revolving Fund” created pursuant to KRS 107.600 , now repealed.
  3. The commissioner of revenue or any person duly authorized by him shall have the authority to withdraw from this account for the purpose set forth in subsection (1) of this section.

History. Enact. Acts 1982, ch. 388, § 5, effective July 15, 1982; 1984, ch. 111, § 74, effective July 13, 1984; 2005, ch. 85, § 218, effective June 20, 2005.

Research References and Practice Aids

2020-2022 Budget Reference.

See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, F, 8, (1) at 878.

132.680. Public policy of state with respect to 1949 changes in ad valorem tax laws. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1949 (Ex. Sess.), ch. 5, § 5) was repealed by Acts 1968, ch. 152, § 168.

132.690. Annual revaluation of real property — Quadrennial examination of real property — Methods of examination — Emergency revaluation.

    1. Each parcel of taxable real property or interest therein subject to assessment by the property valuation administrator shall be revalued during each year of each term of office by the property valuation administrator at its fair cash value in accordance with standards and procedures prescribed by the department and shall be examined no less than once every four (4) years by the property valuation administrator. (1) (a) Each parcel of taxable real property or interest therein subject to assessment by the property valuation administrator shall be revalued during each year of each term of office by the property valuation administrator at its fair cash value in accordance with standards and procedures prescribed by the department and shall be examined no less than once every four (4) years by the property valuation administrator.
    2. For any real property upon which any improvements have been made since the prior examination, the property valuation administrator or his or her deputy shall perform an on-site, in-person visual examination of the real property and the improvements. The examination shall be conducted in a manner approved by the department and for the purpose of gathering any necessary information related to the characteristics of the real property and the improvements for purposes of assessing their value. Any subsequent examination of the real property for purposes of assessing its value by the property valuation administrator or his or her deputy shall be performed by:
      1. On-site, in-person visual examination;
      2. Use of digital imaging technology as defined by the International Association of Assessing Officers Standard on Mass Appraisal of Real Property; or
      3. Any other examination method approved by the department.
    3. In accordance with standards and procedures prescribed by the department, the property valuation administrator shall submit an assessment schedule to the department and shall maintain a record of the examination and revaluation for each parcel of real property which shall include the inspection dates and any other relevant information.
  1. The right of any individual to appeal the assessment on his property in any year as provided in KRS 133.120 shall in no way be affected by this section.
  2. If the property valuation administrator fails to revalue property as required by this section, the department shall have the authority to order an emergency revaluation in the same manner as provided for emergency assessments by KRS 132.660 . Any property valuation administrator willfully violating the provisions of subsection (1) of this section or who refuses to comply with the directions of the department to correct the assessment shall have his compensation suspended by the department and shall be subject to removal from office as provided by KRS 132.370(4) and shall be subject to the provisions of KRS 132.620 and 61.120 .
  3. Nothing in this section shall prohibit action by the department under the provisions of KRS 133.150 or 132.660 in any year in which the department determines such action to be necessary.

History. Enact. Acts 1960, ch. 186, Art. I, § 16; 1979 (Ex. Sess.), ch. 25, § 9, effective February 13, 1979; 1980, ch. 319, § 4, effective July 15, 1980; 1988, ch. 418, § 6, effective July 15, 1988; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 331, effective July 13, 1990; 2005, ch. 85, § 219, effective June 20, 2005; 2017 ch. 81, § 1, effective March 21, 2017.

Compiler’s Notes.

Former KRS 132.690 (Enact. Acts 1960, ch. 186, Art. I, § 16; 1979 (Ex. Sess.), ch. 25, § 9, effective February 13, 1979; 1980, ch. 319, § 4, effective July 15, 1980; 1988, ch. 418, § 6, effective July 15, 1988) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 331, effective July 13, 1990.

The catchline for KRS 132.690 appears here to reflect a change to the catchline by the revisor, removing “physical” after “Quadrennial”.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Suspension of Compensation.
  3. Assessments Not Binding.
  4. Quadrennial Plan.
  5. Assessments.
  6. —Annual.
1. Constitutionality.

Provisions of this section and KRS 132.450 , which authorize assessments of property at “fair cash value,” are not unconstitutional; the tax assessor need not be instructed as to specific valuation methods, as long as he provides assessments that are fair and equitable. Dean v. Commonwealth ex rel. Revenue Cabinet, 967 S.W.2d 594, 1998 Ky. App. LEXIS 34 (Ky. Ct. App. 1998).

2. Suspension of Compensation.

Where a majority of the state’s property valuation administrators submitted recapitulations of the aggregate value of real property by class in their counties to the Department of Revenue pursuant to KRS 133.040 and upon being informed by the department that the assessments were not in compliance with the full fair market value requirements of Ky. Const., § 172, refused the department’s directives, sent pursuant to subsection (1) of KRS 133.040 , to raise the aggregate assessed values by minimum increases to make them satisfy the requirement of fair cash value, the department properly ordered the administrators’ paychecks withheld pursuant to subsection (3) of this section until they complied; the department has an explicit mandate to order the administrators to correct valuations which are different, and this mandate is not superseded by the department’s ability to assess property itself under KRS 133.150 , since this is only one of several powers given the department to assure compliance with Ky. Const., § 172. Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

3. Assessments Not Binding.

Property valuation administrators (PVA) who make ad valorem assessments are under the “direction, instruction and supervision” of the Revenue Cabinet; therefore, the PVA does not act independently of the Revenue Cabinet, and the Cabinet is not bound by his or her assessments. Revenue Cabinet Commonwealth v. Estate of Young, 748 S.W.2d 167, 1988 Ky. App. LEXIS 61 (Ky. Ct. App. 1988).

4. Quadrennial Plan.

Property Valuation Administrator’s (PVA) quadrennial plan, which divided the county into four (4) sections and undertook to physically examine the properties in one (1) section each year, complied with all relevant statutory requirements, and did not violate Ky. Const., §§ 2, 171 or 172. Revenue Cabinet v. Leary, 880 S.W.2d 878, 1994 Ky. App. LEXIS 8 (Ky. Ct. App. 1994).

5. Assessments.

Property valuation administrator’s (PVA) assessments of a property were reduced as the PVA had to show a material change in the value of property determined in a contested proceeding to increase the value of the property in succeeding years. Carr v. Cont'l Gen. Tire, Inc., 168 S.W.3d 411, 2004 Ky. App. LEXIS 347 (Ky. Ct. App. 2004).

If the value for taxation purposes of a parcel of real property was determined in a contested proceeding, the local taxing authority has to show a material change in the value of that property in order to justify a higher assessment in the following year. Carr v. Cont'l Gen. Tire, Inc., 2004 Ky. App. LEXIS 340 (Ky. Ct. App. Nov. 24, 2004), modified, 168 S.W.3d 411, 2004 Ky. App. LEXIS 347 (Ky. Ct. App. 2004).

6. —Annual.

Where the assessment of the taxpayer’s property in 1999 was lowered significantly, before the valuation for succeeding years were changed from the 1999 valuation it had to be shown that property or conditions in those succeeding years had materially changed, as Ky. Const., § 172 and KRS 132.690(1) required that property be assessed annually at its fair cash value. Carr v. Cont'l Gen. Tire, Inc., 168 S.W.3d 411, 2004 Ky. App. LEXIS 347 (Ky. Ct. App. 2004).

Cited in:

Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

NOTES TO UNPUBLISHED DECISIONS

1. Assessments.

Unpublished decision: Property Valuation Administrator did not err in its valuation of commercial real property under Ky. Const. § 172 and Ky. Rev. Stat. Ann. § 132.690 where the payments under the leasehold were indisputably benefits that arose out of the ownership of the property, and thus, it was not error to consider those payments in determining the property's fair cash value under the income generation approach of Ky. Rev. Stat. Ann. § 132.191(2)(b). Wilgreens, LLC v. O'Neill, 2016 Ky. App. Unpub. LEXIS 893 (Ky. Ct. App. Sept. 23, 2016), review denied, ordered not published, 2017 Ky. LEXIS 101 (Ky. Mar. 15, 2017).

Opinions of Attorney General.

Assessments must mandatorily conform to the strict requirement of Ky. Const., § 172, that is, the standard of “fair cash value.” OAG 80-500 .

In view of the fact that the major events relating to the “assessment” process of 1980, as pertained to the property valuation administrator, that is, the PVA’s making up the assessments for tax rolls for 1980, providing the inspection period, giving notices of increases, and filing the recapitulation of all property assessed on the tax rolls, had already taken place prior to the amendment to this section which required assessment of all, rather than one-half of (1/2) real property in county, the tax roll, as concerned such PVA, was closed for the tax year of 1980. OAG 80-500 .

In 1980 amendment of this section, which increased the amount of real property to be evaluated yearly from one-half (1/2) to all of the property in the county, was not intended by the Legislature to be meshed or integrated with the 1980 tax assessment process, and the property valuation administrator could not, for the 1980 tax year, revalue the other half of the properties. OAG 80-500 .

Entry by the Property Valuation Administrator to the interior of a home in order to value the property is authorized; if, however, the property owner is not at home or refuses entry, the PVA must resort to an administrative search warrant. OAG 83-11 .

Since the Property Valuation Administrator is authorized to inspect property and is required to assess property, entry onto the property in order to measure it from the exterior is authorized, such entry being required to be reasonable; thus, such authorized entry does not constitute trespass. OAG 83-11 .

The Property Valuation Administrator has authority to inspect real property in the county. OAG 83-11 .

Research References and Practice Aids

Kentucky Bench & Bar.

Keating, You Get What You Pay For: Financing Public Schools in Kentucky, Vol. 57, No. 1, Winter 1993, Ky. Bench & Bar 6.

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.700. Appraisal manual revision. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 186, Art. I, § 17) was repealed by Acts 1980, ch. 261, § 3, effective July 15, 1980.

132.710. Contract with sheriff to collect tax on motor vehicles; notice of lien. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 186, Art. I, § 20) was repealed by Acts 1962, ch. 29, § 8.

132.720. Definitions for KRS 132.260 and 132.751.

As used in KRS 132.260 and 132.751 , unless the context otherwise requires:

  1. “Manufactured home” has the same meaning as in KRS 186.650 .
  2. “Mobile home,” “recreational vehicle,” “mobile home park,” and “recreational vehicle park” have the same meanings as in KRS 219.320 .
  3. “Unit” means any single mobile home, manufactured home, or recreational vehicle.
  4. “Permanent, fixed foundation” means a foundation permanent in nature which is so constructed as to be fixed upon the surface of the land.

History. Enact. Acts 1962, ch. 262, § 1; 1982, ch. 395, § 4, effective July 15, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 332, effective July 13, 1990; 1992, ch. 338, § 12, effective July 14, 1992; 2000, ch. 166, § 2, effective July 14, 2000.

Compiler’s Notes.

Former KRS 132.720 (Enact. Acts 1962, ch. 262, § 1; 1982, ch. 395, § 4, effective July 15, 1982) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 332, effective July 13, 1990.

Opinions of Attorney General.

Cities have the right under their police power to levy taxes on vehicles, including housetrailers as defined in this section and the fact that certain mobile homes or trailers were located within the city prior to adoption of an ordinance taxing such vehicles would in no way prohibit or inhibit the application of said ordinance to such mobile homes and trailers. OAG 70-264 .

A regulation adopted by a city or county legislative body which includes modular homes in the definition of “housetrailer” is invalid, since a modular home is not a housetrailer under this section. OAG 75-249 .

132.730. Mobile homes and recreational vehicles subject to ad valorem taxation — Exception.

All mobile homes and recreational vehicles which are within this state on January 1 each year shall be subject to all ad valorem tax levies applicable to other property subject to full state and local rates, except that any mobile home and recreational vehicle not licensed in this state and not remaining within this state for a period of more than ninety (90) days in any twelve (12) month period shall not have a taxable situs in this state unless an occupant is employed in this state.

History. Enact. Acts 1962, ch. 262, § 2; 1982, ch. 395, § 5, effective July 15, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 333, effective July 13, 1990; 1992, ch. 338, § 13, effective July 14, 1992.

Compiler’s Notes.

Former KRS 132.730 (Enact. Acts 1962, ch. 262, § 2; 1982, ch. 395, § 5, effective July 15, 1982) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 333, effective July 13, 1990.

Research References and Practice Aids

Cross-References.

Mobile home and recreational vehicle park operators to keep register and furnish reports on mobile homes and recreational vehicles, KRS 132.260 .

132.740. Notification of assessment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 262, § 4) was repealed by Acts 1978, ch. 371, § 11, effective January 1, 1981.

132.750. When mobile home classified as real estate. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 262, § 5; 1982, ch. 395, § 25) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 334, effective July 13, 1990, and was repealed by Acts 1992, ch. 338 § 28, effective July 14, 1992.

The version of this section (Enact. Acts 1962, ch. 262, § 5) as amended by 1982, ch. 395, § 6, was repealed by Acts 1990, ch. 476, Pt. VI, § 616. The catchline at repeal for the section was “When mobile home or recreational vehicle classified as real estate.”

132.751. Classification of certain mobile or manufactured homes and certain recreational vehicles as real property.

  1. Mobile homes or manufactured homes not held for resale by a dealer shall be classified as real property for the purpose of the levy and assessment of ad valorem taxes, regardless of whether or not the wheels or mobile parts have been removed and whether or not the unit rests on a permanent, fixed foundation.
  2. Recreational vehicles shall be classified as real property if the wheels or mobile parts have been removed and the unit rests on a permanent, fixed foundation.

History. Enact. Acts 1992, ch. 338, § 11, effective July 14, 1992; 2000, ch. 166, § 3, effective July 14, 2000.

132.760. Exemption from ad valorem taxes for trucks, tractors, buses, and trailers used both in and outside Kentucky and subject to KRS 136.188 fee.

  1. There shall be exempt from ad valorem tax for state and local purposes trucks, tractors, and buses used on routes or in systems that are partly within and partly outside Kentucky, and that are subject to the fee imposed by KRS 136.188 .
  2. There shall be exempt from ad valorem tax for state and local purposes semitrailers as defined in KRS 189.010(12) and trailers as defined in KRS 189.010(17) that are used on a route or in a system that is partly within and partly outside Kentucky. Semitrailers or trailers required to be registered under KRS 186.655 that are used only in Kentucky shall be subject to the ad valorem tax imposed by KRS 132.487 .

History. Enact. 2006, ch. 252, Pt. XV, § 1, effective January 1, 2007.

132.810. Homestead exemption — Application — Qualification.

  1. To qualify under the homestead exemption provision of the Constitution, each person claiming the exemption shall file an application with the property valuation administrator of the county in which the applicant resides, on forms prescribed by the department. The assessed value of property on which homestead exemption is claimed shall not be increased because of valuation expressed on the application form filed with the property valuation administrator, and whenever it becomes known that the valuation of property subject to the homestead tax exemption has been increased because of valuation expressed on the application form, adjustment shall be made the following year so that the total tax paid by the taxpayer is the same as if the increase had not been made.
    1. Every person filing an application for exemption under the homestead exemption provision must be sixty-five (65) years of age or older during the year for which application is made or must have been classified as totally disabled under a program authorized or administered by an agency of the United States government or by any retirement system either within or without the Commonwealth of Kentucky on January 1 of the year in which application is made. (2) (a) Every person filing an application for exemption under the homestead exemption provision must be sixty-five (65) years of age or older during the year for which application is made or must have been classified as totally disabled under a program authorized or administered by an agency of the United States government or by any retirement system either within or without the Commonwealth of Kentucky on January 1 of the year in which application is made.
    2. Every person filing an application for exemption under the homestead exemption provision must own and maintain the property for which the exemption is sought as his personal residence.
    3. Every person filing an application for exemption under the disability provision of the homestead exemption must have received disability payments pursuant to the disability and must maintain the disability classification for the entirety of the particular taxation period.
      1. Every person filing for the homestead exemption who is totally disabled and is less than sixty-five (65) years of age must apply for the homestead exemption on an annual basis, except as provided by subparagraph 2. of this paragraph. (d) 1. Every person filing for the homestead exemption who is totally disabled and is less than sixty-five (65) years of age must apply for the homestead exemption on an annual basis, except as provided by subparagraph 2. of this paragraph.
        1. A service-connected totally disabled veteran of the United States Armed Forces; or 2. a. A service-connected totally disabled veteran of the United States Armed Forces; or
        2. A totally and permanently disabled individual found disabled under:
          1. The applicable rules of the Social Security Administration;
          2. The applicable rules of the Kentucky Retirement Systems; or
          3. Any other provision of the Kentucky Revised Statutes;
      1. Only one (1) exemption per residential unit shall be allowed even though the resident may be sixty-five (65) years of age and also totally disabled, and regardless of the number of residents sixty-five (65) years of age or older occupying the unit. (e) 1. Only one (1) exemption per residential unit shall be allowed even though the resident may be sixty-five (65) years of age and also totally disabled, and regardless of the number of residents sixty-five (65) years of age or older occupying the unit.
      2. The sixty-five hundred dollars ($6,500) exemption provided in Section 170 of the Constitution of Kentucky shall be construed to mean sixty-five hundred dollars ($6,500) in terms of the purchasing power of the dollar in 1972.
      3. Every two (2) years thereafter, if the cost of living index of the United States Department of Labor has changed as much as one percent (1%), the maximum exemption shall be adjusted accordingly.
    4. The real property may be held by legal or equitable title, by the entireties, jointly, in common, as a condominium, or indirectly by the stock ownership or membership representing the owner’s or member’s proprietary interest in a corporation owning a fee or a leasehold initially in excess of ninety-eight (98) years. The exemption shall apply only to the value of the real property assessable to the owner or, in case of ownership through stock or membership in a corporation, the value of the proportion which his interest in the corporation bears to the assessed value of the property.
    5. A mobile home, recreational vehicle, when classified as real property as provided for in KRS 132.751 , or a manufactured house shall qualify as a residential unit for purposes of the homestead exemption provision.
    6. When title to property which is exempted, either in whole or in part, under the homestead exemption is transferred, the owner, administrator, executor, trustee, guardian, conservator, curator, or agent shall report such transfer to the property valuation administrator.
  2. Notwithstanding any statutory provisions to the contrary, the provisions of this section shall apply to the assessment and taxation of property under the homestead exemption provision for state, county, city, or special district purposes.
    1. The homestead exemption for disabled persons shall terminate whenever those persons no longer meet the total disability classification at the end of the taxation period for which the homestead exemption has been granted. In no case shall the exemption be prorated for persons who maintained the total disability classification at the end of the taxation period. (4) (a) The homestead exemption for disabled persons shall terminate whenever those persons no longer meet the total disability classification at the end of the taxation period for which the homestead exemption has been granted. In no case shall the exemption be prorated for persons who maintained the total disability classification at the end of the taxation period.
    2. Any totally disabled person granted the homestead exemption under the disability provision shall report any change in disability classification to the property valuation administrator in the county in which the homestead exemption is authorized.
    3. Any person making application and qualifying for the homestead exemption before payment of his property tax bills for the year in question shall be entitled to a full or partial exoneration, as the case may be, of the property tax due to reflect the taxable assessment after allowance for the homestead exemption.
    4. Any person making application and qualifying for the homestead exemption after property tax bills have been paid shall be entitled to a refund of the property taxes applicable to the value of the homestead exemption.
  3. In this section, “taxation period” means the period from January 1 through December 31 of the year in which application is made, unless the person maintaining the classification dies before December 31, in which case “taxation period” means the period from January 1 to the date of death.

shall document the disability at the time of application for the homestead exemption and shall not be required to apply for the homestead exemption on an annual basis.

History. Enact. Acts 1972, ch. 285, § 4; 1974, ch. 140, § 1; ch. 314, § 1; 1976, ch. 315, § 2; 1982, ch. 42, § 1, effective July 15, 1982; ch. 141, § 60, effective July 1, 1982; ch. 395, § 7, effective July 15, 1982; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 335, effective July 13, 1990; 1992, ch. 338, § 14, effective July 14, 1992; 2000, ch. 149, § 1, effective July 14, 2000; 2005, ch. 85, § 220, effective June 20, 2005; 2008, ch. 4, § 1, effective July 15, 2008; 2011, ch. 22, § 2, effective June 8, 2011.

Compiler’s Notes.

Former KRS 132.810 (Enact. Acts 1972, ch. 285, § 4; 1974, ch. 140, § 1; 1974, ch. 314, § 1; 1976, ch. 315, § 2; 1982, ch. 42, § 1, effective July 15, 1982; 1982, ch. 141, § 60, effective July 1, 1982; 1982, ch. 395, § 7, effective July 15, 1982.) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 335.

Section 2 of Acts 2000, ch. 149, effective July 14, 2000, read: “This Act shall apply for tax assessments made on or after January 1, 2001.”

Legislative Research Commission Notes.

(6/8/2011). 2011 Ky. Acts ch. 22, sec. 2, provides that the changes made to this statute in that Act apply to property assessed on or after January 1, 2012.

1980 Ky. Acts ch. 396, sec. 65 would have amended this section effective July 1, 1982. However, 1980 Ky. Acts ch. 396 was repealed by 1982 Ky. Acts ch. 141, sec. 146, also effective July 1, 1982.

NOTES TO DECISIONS

1. Amount of Exemption.

The dollar-value principle applies to the $6,500 limit of the homestead exemption; thus the 1974 amendments which provided that the $6,500 exemption would be construed in terms of the purchasing power of the dollar in 1972 were valid. Lester v. Ft. Thomas, 531 S.W.2d 490, 1975 Ky. LEXIS 35 ( Ky. 1975 ).

Opinions of Attorney General.

The homestead exemption applies for state, county, city or special district purposes. OAG 72-726 .

An administratively imposed deadline on applications for the homestead exemption provided for in § 170 of the Kentucky Constitution would not be valid. OAG 72-740 .

The incidental renting of rooms in a residence that otherwise qualifies for the homestead exemption does not, under this section and Ky. Const., § 170, violate the single unit restriction. OAG 73-550 .

If a homeowner in the city of Mayfield was 65 years of age prior to the September 1972 assessment date, the city of Mayfield should have permitted him to file a homestead exemption application for exemption from 1973 city ad valorem property tax and the city legislative body should authorize a refund to the taxpayer who asserts a proper and qualified application for the exemption. OAG 73-780 .

Life tenant of single-unit residential property who is 65 years of age and who maintains the property as a personal residence is an “owner” of the property and may apply for the homestead exemption. OAG 75-110 .

The 65-year-old or older owner-occupant of a mobile home, which is a single-unit residence, placed on a rented lot is entitled to the homestead exemption if the mobile home qualifies as a real property by resting on a permanent fixed foundation and having the wheels or mobile parts removed. OAG 75-264 .

Since the rates charged by a municipally owned utility must be fair, reasonable, just, uniform and nondiscriminatory, a proposed lower water rate for resident users who qualify for the homestead exemption would be of doubtful legal validity. OAG 75-720 .

The current amendment to Ky. Const., § 170 provides for an exemption for jointly owned property with no provisions requiring that property jointly owned must be surveyed and separate deeds be prepared showing the nature of the jointly owned interests and this section provides that such exemption applies to persons 65 years of age or older jointly owning a duplex in which they are residing, so that any person 65 years of age or older is entitled to the $7,700 exemption for the year 1976 upon application to the property valuation administrator for such exemption without the necessity of having a deed prepared showing such person’s interest in the property. OAG 76-95 .

A person who is otherwise entitled to the homestead exemption granted by Ky. Const., § 170 cannot be denied the exemption merely because he holds equitable title. OAG 80-179 .

It is not necessary for a legislative enactment to establish the homestead exemption from ad valorem taxation since Ky. Const., § 170 is self-executing; however, in order to claim the exemption, the owner of the qualified property must present his qualifications to the appropriate taxing authority and comply with the procedures contained in Ky. Const., § 170 and this section. OAG 82-21 .

The homestead exemption of this section is just that, an exemption of a portion of an assessment for qualifying taxpayers; as such, it is not part of the assessment of property subject to state tax and may not be used in computing a PVA’s salary. OAG 84-35 .

Research References and Practice Aids

Cross-References.

Property exempt from taxation, Ky. Const., § 170.

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

132.815. Monthly reports from certified electrical inspectors — Use of information.

  1. Each electrical inspector certified under KRS 227.489 shall submit a monthly report to the Department of Revenue showing the names and addresses of all persons, firms, or corporations for which inspections were conducted for new buildings, new or relocated mobile homes, and other new or relocated structures during the preceding month. Each building, mobile home, or other structure shall be identified by county and property address, or property location in those instances where the address is insufficient to reveal the physical location of the property.
  2. The information provided shall be used for the purpose of making and maintaining accurate assessment records. The Department of Revenue shall provide to each electrical inspector the necessary forms and instructions for filing the report required under subsection (1).

History. Enact. Acts 1992, ch. 263, § 1, effective July 14, 1992; 2005, ch. 85, § 221, effective June 20, 2005.

132.820. Assessment of unmined coal, oil, and gas reserves held separately from surface real property — Exceptions — Effect of appeal on payment of taxes.

  1. The department shall value and assess unmined coal, oil, and gas reserves, and any other mineral or energy resources which are owned, leased, or otherwise controlled separately from the surface real property at no more than fair market value in place, considering all relevant circumstances. Unmined coal, oil, and gas reserves and other mineral or energy resources shall in all cases be valued and assessed by the Department of Revenue as a distinct interest in real property, separate and apart from the surface real estate unless:
    1. The unmined coal, oil, and gas reserves, and other mineral or energy resources are owned in their entirety by the surface owner;
    2. The surface owner is neither engaged in the severance, extraction, processing, or leasing of mineral or other energy resources nor is he an affiliate of a person who engages in those activities; and
    3. The surface is being used by the surface owner primarily for the purpose of raising for sale agricultural crops, including planted and managed timberland, or livestock or poultry.
  2. Each owner or lessee of property assessed under subsection (1) of this section shall annually, between January 1 and April 15, file a return with the department in a form as the department may prescribe. Other individuals or corporations having knowledge of the property defined in subsection (1) of this section gained through contracting, extracting, or similar means may also be required by the department to file a return.
  3. Any property subject to assessment by the department under subsection (1) of this section which has not been listed for taxation, for any year in which it is taxable, by April 15 of that year shall be omitted property.
  4. After the valuation of unmined minerals or other energy sources has been finally fixed by the department, the department shall certify to the county clerk of each county the amount liable for county, city, or district taxation. The report shall be filed by the county clerk in his office, and shall be certified by the county clerk to the proper collecting officer of the county, city, or taxing district for collection.
  5. The notification, protest, and appeal of assessments under subsection (1) of this section shall be made pursuant to the provisions of KRS Chapter 131.
  6. No appeal shall delay the collection or payment of taxes based upon the assessment in controversy. The taxpayer shall pay all state, county, and district taxes due on the valuation which the taxpayer claims as the true value as stated in the protest filed under KRS 131.110 . When the valuation is finally determined upon appeal, the taxpayer shall be billed for any additional tax and interest at the tax interest rate as defined in KRS 131.010(6), from the date the tax would have become due if no appeal had been taken. The provisions of KRS 134.015(6) shall apply to the tax bill.
  7. The collection of tax bills generated from the assessments made under subsection (1) of this section shall be made pursuant to the provisions of KRS Chapter 134.

For purposes of this section, “affiliate” means a person who directly or indirectly owns or controls, is owned or controlled by, or is under common ownership or control with, another individual, partnership, committee, association, corporation, or any other organization or group of persons.

History. Enact. Acts 1994, ch. 263, § 1, effective July 15, 1994; 1998, ch. 391, § 3, effective July 15, 1998; 2002, ch. 234, § 1, effective July 15, 2002; 2005, ch. 85, § 222, effective June 20, 2005; 2009, ch. 10, § 40, effective January 1, 2010.

Legislative Research Commission Notes.

(7/15/2002). The amendments made to subsection (1) of this statute in 2002 Ky. Acts ch. 234, sec. 1, “shall apply to tax assessments made on or after January 1, 2003.” 2002 Ky. Acts ch. 234, sec. 3.

(7/14/2000). 2000 Ky. Acts ch. 446 (Senate Bill 323), sec. 1, purports to amend this statute, and the General Assembly version of that bill was signed by both presiding officers and by the Governor. The Journals of the House of Representatives and Senate will reflect, however, that House Floor Amendment 1 was adopted by the House on March 27, 2000, but was not transmitted to the Senate for its concurrence when the bill was returned to that body. Thus, the bill signed did not pass both chambers of the General Assembly in the same form and did not become law. Ky. Const. secs. 46 and 88; see also Mason’s Manual of Legislative Procedure sec. 737, at 508-509 (1989 ed.). Because the General Assembly’s own official records establish this constitutional deficiency, the provisions of 2000 Ky. Acts ch. 446 have not been codified into the Kentucky Revised Statutes. See KRS 7.131(2).

132.825. Listing of property required.

  1. It shall be the duty of all persons providing communications services or multichannel video programming services defined under KRS 136.602 owning or having any interest in tangible personal property in this state to list or have listed the property with the department between January 1 and May 15 in each year reporting the full details, a correct description of the property and its value.
  2. The department shall have sole power to value and assess all tangible personal property of multichannel video programming service providers and communications service providers. Such property shall be valued and assessed in accordance with procedures established for locally assessed tangible property. The department shall develop forms for reporting.
  3. Providers of multichannel video programming services or communications services shall not be required to list, and the department shall not assess intangible property as defined in KRS 132.010 .
  4. It is the intent of KRS 136.600 to 136.660 to relieve communications service providers and multichannel video programming service providers from the tax liability imposed under KRS 136.120 by:
    1. Requiring real, tangible, and intangible property owned by communications service providers and multichannel video programming service providers to be assessed and taxed in the same manner as real, tangible, and intangible property of all other taxpayers under KRS Chapter 132 excluding KRS 132.030 ; and
    2. Replacing revenues received from communications service providers and multichannel video programming service providers under KRS 136.120 , attributable to the franchise portion of operating property as defined in KRS 136.115 , with the levy imposed under KRS 136.616 .
  5. It is also the intent of KRS 136.600 to 136.660 that for communications service providers and multichannel video programming service providers the following items, to the extent these items are intangible property, shall be exempt from taxation under KRS Chapter 132 and shall not be listed, valued, or assessed by the department or local jurisdictions. The items include but shall not be limited to:
    1. Franchises;
    2. Certificates of public convenience and necessity;
    3. Licenses;
    4. Authorizations issued by the Federal Communications Commission or any state public service commission;
    5. Customer lists;
    6. Assembled labor force;
    7. Goodwill;
    8. Managerial skills;
    9. Business enterprise value;
    10. Speculative value; and
    11. Any other type of personal property that is not tangible personal property.
  6. Any person dissatisfied with or aggrieved by the finding or ruling of the department may appeal the finding or ruling in the manners provided in KRS 131.110 .
  7. All persons in whose name property is assessed shall remain bound for the tax, notwithstanding that they may have sold or parted with it.
  8. The department shall allocate the assessed value of property described in subsection (1) of this section among the counties, cities, and taxing districts. The assessed value shall be allocated to the county, city, or taxing district where the property is situated.
  9. The department shall certify, unless otherwise specified, to the county clerk of each county in which any of the property assessment listed by the corporation is liable to local taxation, the amount of tangible personal property liable for county, city, or district tax.
  10. No appeal shall delay the collection or payment of taxes based upon the assessment in controversy. The taxpayer shall pay all state, county, and district taxes due on the valuation that the taxpayer claims as the true value as stated in the protest filed under KRS 131.110 . When the valuation is finally determined upon appeal, the taxpayer shall be billed for any additional tax and interest at the tax interest rate as defined in KRS 131.010(6), from the date the tax would have become due if no appeal had been taken. The provisions of KRS 134.015(6) shall apply to the tax bill.
  11. The certification of valuation shall be filed by each county clerk in the clerk’s office and shall be certified by the county clerk to the proper collecting officer of the county, city, or taxing district for collection. Any district that has the value certified by the department shall pay an annual fee to the department that represents an allocation of the department’s operating and overhead expenses incurred in generating the valuations. This fee shall be determined by the department and shall apply to valuations for tax periods beginning on or after January 1, 2005.

To the extent that any tangible or intangible property was considered a part of the franchise portion of operating property under KRS 136.115 and 136.120 for tax periods ending prior to January 1, 2006, for a communications service provider or a multichannel video programming service provider, such property shall be exempt from taxation under KRS Chapter 132 and shall not be listed, valued or assessed under this section for tax periods beginning on or after December 31, 2005.

History. Enact. Acts 2005, ch. 168, § 119, effective January 1, 2006; 2009, ch. 10, § 41, effective January 1, 2010.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

Penalties

132.990. Penalties.

  1. Any person who willfully fails to supply the property valuation administrator or the Department of Revenue with a complete list of his property and such facts with regard thereto as may be required or who violates any of the provisions of KRS 132.570 shall be fined not more than five hundred dollars ($500).
  2. Any property valuation administrator who willfully fails or neglects to perform any duty legally imposed upon him shall be fined not more than five hundred dollars ($500) for each offense.
  3. Any county clerk who willfully fails or neglects to perform any duty required of him by KRS 132.480 shall be fined not more than fifty dollars ($50) for each offense.
  4. Any person who willfully falsifies application for exemption or who fails to notify the property valuation administrator of any changes in qualifying requirements under the provision of KRS 132.810 shall be fined not more than five hundred dollars ($500).

History. 1777, 1778, 4019a-10c, 4019a-11, 4029, 4037, 4039, 4042-2, 4042a-3, 4042a-11, 4042a-12, 4051, 4051a, 4066, 4076a, 4114, 4248, 4777a-4, 4777a-5: amend. Acts 1942, ch. 131, § 32; 1949 (Ex. Sess.), ch. 2, § 6; 1982, ch. 42, § 2, effective July 15, 1982; 1990, ch. 411, § 3, effective July 13, 1990; 1990, ch. 476, Pt. V, § 336, effective July 13, 1990; 2005, ch. 85, § 223, effective June 20, 2005; 2005, ch. 168, § 79, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

(7/13/90) The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

Cited in:

Walker v. Dowling, 68 S.W. 135, 24 Ky. L. Rptr. 179 (1902); Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1939 ).

Opinions of Attorney General.

Where a property valuation administrator fails to attend a hearing of the board of tax appeals in Frankfort, KRS 452.540 would permit prosecution of the offense to be brought in either Franklin County or the home county of the property valuation administrator. OAG 77-366 .

Research References and Practice Aids

Cross-References.

Penalties, civil and criminal, for failure to make tax report or return, or pay tax, where no specific penalty provided, KRS 131.180 , 131.990 .

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

CHAPTER 133 Supervision, Equalization, and Review of Assessments

133.010. Definitions.

As used in this chapter, unless the context requires otherwise:

  1. “Board” means the county board of assessment appeals;
  2. “Department” means the Department of Revenue;
  3. “Taxpayer” means any person made liable by law to file a return or pay a tax;
  4. “Real property” includes all lands within this state and improvements thereon;
  5. “Personal property” includes every species and character of property, tangible and intangible, other than real property; and
    1. “County” shall also mean a charter county government; (6) (a) “County” shall also mean a charter county government;
    2. “Fiscal court” shall also mean the legislative body of a charter county government; and
    3. “County judge/executive” shall also mean the chief executive officer of a charter county government.

History. 4022, 4114h-1: 1974, ch. 326, § 1; repealed and reenact. Acts 1990, ch. 476, Pt. V, § 337, effective July 13, 1990; 2005, ch. 85, § 224, effective June 20, 2005; 2010, ch. 95, § 4, effective July 15, 2010.

Compiler’s Notes.

Former KRS 133.010 (4022, 4114h-1: amend. Acts 1974, ch. 326, § 1) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 337.

Legislative Research Commission Notes.

(7/15/2010). Under the authority of KRS 7.136 , the Reviser of Statutes has corrected manifest clerical or typographical errors by inserting “a” before the first occurrence of “charter county government” and “the” before “legislative body” and “chief executive officer” in subsection (6) of this section.

NOTES TO DECISIONS

Cited in:

Breathitt County Board of Sup’rs v. Ware Cannel Coal Co., 297 Ky. 117 , 179 S.W.2d 225, 1944 Ky. LEXIS 691 ( Ky. 1944 ); Jefferson County Fiscal Court v. Trager, 302 Ky. 361 , 194 S.W.2d 851, 1946 Ky. LEXIS 686 ( Ky. 1946 ).

Research References and Practice Aids

Cross-References.

Collection of public claims by action, KRS ch. 135.

Corporation and utility taxes, KRS ch. 136.

Department of Revenue, KRS ch. 131.

Excise taxes, KRS ch. 138.

Finance and revenue of cities of the first class, KRS ch. 91.

Finance and revenue of cities other than the first class, KRS ch. 92.

Income taxes, KRS ch. 141.

Inheritance and estate taxes, KRS ch. 140.

Levy and assessment of property tax, KRS ch. 132.

License taxes, KRS ch. 137.

Miscellaneous taxes, KRS ch. 142.

Payment, collection and refund of taxes, KRS ch. 134.

133.015. Temporary continuation of former laws. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 131, § 31) was repealed by Acts 1966, ch. 255, § 283.

133.020. County board of assessment appeals — Membership — Appointment — Temporary panels — Oath — Training — Replacement of member — Conflict of interest.

    1. The county board of assessment appeals shall be composed of reputable real property owners residing in the county at least five (5) years. (1) (a) The county board of assessment appeals shall be composed of reputable real property owners residing in the county at least five (5) years.
    2. The appointing authorities may appoint qualified property owners residing in adjacent counties when qualified members cannot be secured within the county.
      1. The board shall consist of three (3) members, one (1) to be appointed by the county judge/executive, one (1) to be appointed by the fiscal court, and one (1) to be appointed by the mayor of the city with the largest assessment using the county tax roll or appointed as otherwise provided by the comprehensive plan of an urban-county government. (c) 1. The board shall consist of three (3) members, one (1) to be appointed by the county judge/executive, one (1) to be appointed by the fiscal court, and one (1) to be appointed by the mayor of the city with the largest assessment using the county tax roll or appointed as otherwise provided by the comprehensive plan of an urban-county government.
      2. The mayor’s appointment shall serve for four (4) years, the county judge/executive’s appointment shall serve for three (3) years, and the fiscal court’s appointment shall serve for two (2) years. Each person appointed thereafter shall serve for three (3) years.
      3. If no city in the county uses the county assessment, the county judge/executive shall appoint two (2) members.
    3. A board member who has served for a full term shall not be eligible for reappointment. However, he or she shall be eligible for appointment after a hiatus of three (3) years.
      1. If the number of appeals to the board of assessment appeals filed with the county clerk exceeds one hundred (100), temporary panels of the board may be appointed with approval of the department. (e) 1. If the number of appeals to the board of assessment appeals filed with the county clerk exceeds one hundred (100), temporary panels of the board may be appointed with approval of the department.
      2. Each temporary panel shall consist of three (3) members having the same qualifications and appointed in the same manner as the board members.
      3. The number of additional panels shall not exceed one (1) for each one hundred (100) appeals in excess of the first one hundred (100).
      4. The county judge/executive shall designate one (1) of the members of the board of assessment appeals to serve as chairman of the board.
      5. If additional panels are appointed, as provided in this paragraph, the chairman of the board of assessment appeals shall designate one (1) member of each additional panel as chairman of the panel.
      1. A majority of the board or of any panel may determine the action of the board or panel respectively and make decisions. (f) 1. A majority of the board or of any panel may determine the action of the board or panel respectively and make decisions.
      2. Each panel of the board shall have the same powers and duties given the board by KRS 133.120 , except the action of any panel shall be subject to review and final approval by the board.
  1. Each member of the board shall have extensive knowledge of real estate values, preferably in real estate appraisal, sales, management, financing, or construction.
  2. The board shall be subject to call by the county judge/executive at any time prescribed by law.
  3. The members of the county board of assessment appeals, and any panel of the board, before undertaking their duties, shall take the following oath, to be administered by the county judge/executive or other person authorized by KRS 62.020 to administer official oaths: “You swear (affirm) that you will, to the best of your ability, discharge the duties required of you as a member of the county board of assessment appeals, and that you will fix at fair cash value all property assessments brought before you for review as prescribed by law.”
  4. The department shall prepare and furnish to each property valuation administrator guidelines and materials for an orientation and training program to be presented to the board by the property valuation administrator or his deputy each year.
    1. A board member shall produce evidence of his qualifications upon request of the department. (6) (a) A board member shall produce evidence of his qualifications upon request of the department.
    2. A board member shall be replaced by the appointing authority upon proof of the member’s failure to meet the qualifications of the position.
    3. Any vacancy on the board shall be filled by the appointing authority that appointed the member to be replaced.
    4. The appointee shall have the qualifications required by statute for the board member appointed by the particular appointing authority and shall hold office only to the end of the unexpired term of the member replaced.
  5. Members of the county board of assessment appeals, and any temporary panel, shall abstain from hearing or ruling on an appeal for any property in which they have any personal or private interests.

History. 4115, 4116, 4117, 4118: amend. Acts 1942, ch. 131, §§ 17(1), (2), 32; 1946, ch. 12; 1949 (Ex. Sess.), ch. 5, § 4; 1960, ch. 186, Art. I, § 21; 1968, ch. 179, § 1; 1974, ch. 326, § 2; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1992, ch. 449, § 4, effective April 13, 1992; 1994, ch. 85, § 3, effective July 15, 1994; 2005, ch. 85, § 225, effective June 20, 2005; 2014, ch. 92, § 216, effective January 1, 2015; 2015 ch. 67, § 2, effective June 24, 2015.

NOTES TO DECISIONS

1. Appointment.

Appointment of board of supervisors at term of court held in city other than county seat was valid. Mossett v. Newport & C. Bridge Co., 106 Ky. 518 , 50 S.W. 63, 20 Ky. L. Rptr. 1969 , 1899 Ky. LEXIS 35 ( Ky. 1899 ) (decided under prior law).

Cited in:

Rogers v. Pike County Bd. of Sup’rs., 288 Ky. 742 , 157 S.W.2d 346, 1941 Ky. LEXIS 199 ( Ky. 1941 ).

Opinions of Attorney General.

A nontaxpayer may not serve on the board of supervisors. OAG 62-636 .

While there are no specific constitutional or statutory provisions declaring the offices of magistrate and member of the board of supervisors to be incompatible offices, the occupancy of those offices by the same person would be detrimental to the public interest since the board of supervisors executes a quasi-judicial function in the review of property tax assessments. OAG 62-636 .

While this section provides that one of the three members appointed to the county board of supervisors must have extensive knowledge of real estate values, the county court cannot remove one (1) of the three (3) members because none of the members possess such qualifications and appoint an individual who does qualify because the qualification applies to all three (3) of the members, but the section fails to pinpoint which one of the three it applies to and the qualifications of an office must be stated so as to apply to specific holders before they can be held to be usurpers. OAG 70-305 .

A member of a county’s board of assessment appeals, appointed under this section, who is ill may not be replaced unless the illness is for such an extended period that it would constitute a clear abandonment of the position. OAG 79-507 .

Since subsection (1) of this section vests the county judge/executive with an unrestricted power to appoint the regular board of assessment appeals, and since, under the ruling of Fiscal Court v. Jefferson, 614 S.W.2d 954, 1981 Ky. App. LEXIS 234 (Ky. Ct. App. 1981), KRS 67.710(8) amended subsection (1) of this section by implication and thus governs such appointments, the county judge/executive’s appointments to such board are subject to the approval of the fiscal court. OAG 84-198 .

Although this section provides that the county judge/executive may appoint the members of the county board of assessment appeals (there is no mention of fiscal court consent), KRS 67.710(7), which requires the fiscal court’s consent to appointments to boards by the county judge/executive, controls such appointments. OAG 84-206 .

Research References and Practice Aids

Cross-References.

Cities of first class, board of equalization, KRS 91.390 , 91.410 .

Cities of second class, board of equalization, KRS 92.240 , 92.440 .

Cities of third class, board of tax supervisors, KRS 92.250 , 92.470 , 92.480 .

Cities of fourth class, supervisors of taxes, KRS 92.260 , 92.510 .

Cities of fifth class, board of equalization, KRS 92.270 , 92.530 .

Cities of sixth class, board of equalization, KRS 92.270 , 92.530 .

Kentucky Law Journal.

Martin, Practice Before the Kentucky Department of Revenue, 28 Ky. L.J. 4 (1939).

Muehlenkamp, Remedies for Disproportionate Tax Assessment in Kentucky, 36 Ky. L.J. 401 (1948).

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

133.030. Meetings of board of assessment appeals — Records of property valuation administrator to be available — Compensation of board members.

  1. The county board of assessment appeals shall convene each year at the county seat no earlier than twenty-five (25) days and no later than thirty-five (35) days following the conclusion of the tax roll inspection period provided for in KRS 133.045 . When a property valuation administrator has received permission to extend the appeal filing deadline as set out in  KRS 133.120(2)(d), the county board of assessment appeals shall convene no earlier than twenty-five (25) days and no later than thirty-five (35) days after the approved filing deadline. No meeting shall be held until the tax roll has been completed and the inspection period has been held as provided by law, or until revaluation of the property has been completed by the property valuation administrator at the direction of the Department of Revenue as provided by KRS 132.690 or by the department itself as provided by KRS 133.150 . All records of the property valuation administrator, including all data concerning property sales within the preceding year, shall be available to the board while meeting.
  2. The first regular meeting day of the board shall be devoted to the orientation and training program provided for in KRS 133.020(5), to a review of the assessment of the property valuation administrator and his deputies, and to a review of the appeals filed with the county clerk as clerk of the board, including a review of recent sales of comparable properties provided in accordance with the provisions of subsection (1) of this section, and an inspection of the properties involved in the appeals when in the opinion of the board such inspection will assist in the proper determination of fair cash value.
  3. The board of assessment appeals shall continue in session only such time as is necessary to hear appeals. The board shall not continue in session more than one (1) day, if there are no appeals to be heard, nor more than five (5) days after it convenes in each year, unless an extension of time is authorized by the Department of Revenue upon request of the county judge/executive. Each board member shall be paid one hundred dollars ($100) for each day he serves. This compensation shall be paid one-half (1/2) out of the county levy and the other half out of the State Treasury.
  4. Members of temporary panels of the board shall serve the time necessary for hearing appeals but in no case more than five (5) days except upon approval of an extension of time by the Department of Revenue. Compensation of panel members shall be in the same manner and at the same rate as provided for members of the board.

History. 4118, 4119, 4121-1, 4121-2, 4127: amend. Acts 1942, ch. 131, §§ 18, 32; 1949 (Ex. Sess.), ch. 4, § 13; 1954, ch. 150, § 1; 1968, ch. 152, § 106; 1968, ch. 179, § 2; 1974, ch. 326, § 3; 1976, ch. 20, § 6, effective January 2, 1978; 1980, ch. 261, § 2, effective July 15, 1980; 1988, ch. 303, § 8, effective July 15, 1988; 1992, ch. 449, § 5, effective April 13, 1992; 2005, ch. 85, § 226, effective June 20, 2005; 2017 ch. 81, § 3, effective March 21, 2017.

NOTES TO DECISIONS

  1. Refusal to Correct Assessments.
  2. Place of Meeting.
1. Refusal to Correct Assessments.

Where the majority of Kentucky’s property valuation administrators refused to comply with a Department of Revenue directive to correct their assessments of real property after they had submitted their recapitulations to the department, their compliance would not have adversely affected the taxpayers’ ability to protest the increases in assessments, even though the statutory schedule for assessment and protest set forth in KRS 133.040 , 133.130 , 133.045 and this section could hypothetically start the period for inspection of the open tax rolls before the administrators could make the necessary increases and notify the taxpayers, since the legislature has provided for an extension of the inspection period pursuant to subsection (1) of KRS 133.045 . Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

2. Place of Meeting.

The provision that the board should have met at the county seat was merely directory. Convening of board at another place will not render its action void. Mossett v. Newport & C. Bridge Co., 106 Ky. 518 , 50 S.W. 63, 20 Ky. L. Rptr. 1969 , 1899 Ky. LEXIS 35 ( Ky. 1899 ) (decided under prior law).

Cited in:

Goodlett v. Anderson County, 267 Ky. 166 , 101 S.W.2d 421, 1936 Ky. LEXIS 761 ( Ky. 1936 ); Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ).

Opinions of Attorney General.

Compensation of the county assessment appeals board must be fixed by the fiscal court in an appropriate order or resolution, and such fiscal court order should be filed in the fiscal court order book in the county clerk’s office. OAG 78-454 .

Research References and Practice Aids

Cross-References.

Property valuation administrator to meet with board, KRS 132.460 .

133.040. Completion of tax roll — Recapitulation, filing, preservation, distribution — Correction of assessment — Failure to submit an acceptable recapitulation.

  1. The property valuation administrator shall complete the tax roll of all real property in his county before the first Monday in April of each year in accordance with law, and on or before that date he shall file with the department, on forms provided by the department, a recapitulation of all property assessed on the tax roll with his official certificate attached. The recapitulation shall show the assessment of property by type of property and by taxing district. Within fifteen (15) calendar days after receiving the recapitulation, the department shall direct the property valuation administrator to make any changes that are necessary to correct the assessment. The department shall preserve all recapitulations and schedules or a photographic facsimile for a period of seven (7) years from the assessment date.
  2. At the time the property valuation administrator submits his property recapitulations to the department, he shall submit a copy of the recapitulations to the county judge/executive, the treasurer or chief officer of each special district in the county, the chief executive officer of an urban-county, charter county, unified local government, or consolidated local government, the mayor of each city electing to use the annual county assessment pursuant to KRS 132.285 , and the superintendent of each local school district in his county.
  3. Beginning with the 1995 assessment year, if the property valuation administrator has not submitted an acceptable recapitulation to the department by the first Monday in August, the department shall, within fifteen (15) days, conduct an investigation into the reasons for the failure. The department shall notify the property valuation administrator in writing of his right to appear before the commissioner or his designee during the investigation to provide an explanation for the failure to submit an acceptable recapitulation. At any time after the completion of an investigation resulting in a finding that the failure to submit an acceptable recapitulation was not reasonably justified, the department may declare an emergency assessment under the provisions of KRS 132.660 .
  4. If the commissioner determines upon the conclusion of the investigation that the failure to submit an acceptable recapitulation was not reasonably justified, the commissioner shall notify the property valuation administrator in writing of the department’s findings, and of the department’s intent to suspend the property valuation administrator’s compensation as of the date of the notification and until the date an acceptable recapitulation is submitted. The notification shall inform the property valuation administrator that the amount of compensation suspended under this subsection is subject to forfeiture as provided in subsection (5) of this section.
  5. The property valuation administrator may, within ten (10) days of the date of notice provided for in subsection (4) of this section, request in writing a formal administrative hearing before a department hearing officer appointed by the commissioner. All hearings shall be conducted in accordance with KRS Chapter 13B. If in the recommended order:
    1. The hearing officer determines, and the commissioner agrees, that the failure to submit an acceptable recapitulation was not reasonably justified, the commissioner shall reaffirm the notice of forfeiture provided for in subsection (4) of this section and issue a final order in writing to the property valuation administrator.
    2. The hearing officer determines, and the commissioner agrees, that the failure to submit an acceptable recapitulation was reasonably justified, the commissioner shall notify the property valuation administrator in a final order, and compensation suspended under subsection (4) of this section shall be paid with interest at the tax interest rate defined in KRS 131.010(6).
  6. If the property valuation administrator does not request in writing a formal administrative hearing within the time prescribed in subsection (5) of this section, the commissioner shall reaffirm the notice of forfeiture provided for in subsection (4) of this section and issue a final order in writing to the property valuation administrator.
  7. The property valuation administrator may appeal the commissioner’s final order in the same manner, and subject to the same provisions as set forth in KRS 132.370(7).
  8. A property valuation administrator who fails to submit an acceptable recapitulation, within the times prescribed in subsection (3) of this section and after a previous finding that a prior year’s failure to submit an acceptable recapitulation was determined to not be reasonably justified, shall be subject to removal from office as provided by KRS 132.370(4).

History. 4114i-15, 4126: amend. Acts 1942, ch. 131, §§ 13 and 32; 1949 (Ex. Sess.), ch. 3, § 13; 1958, ch. 65, § 3; 1974, ch. 326, § 4; 1980, ch. 317, § 3, effective July 15, 1980; 1986, ch. 371, § 3, effective July 15, 1986; 1986, ch. 459, § 2, effective July 15, 1986; 1988, ch. 303, § 9, effective July 15, 1988; 1994, ch. 423, § 2, effective July 15, 1994; 1996, ch. 318, § 38, effective July 15, 1996; 2005, ch. 85, § 227, effective June 20, 2005; 2009, ch. 69, § 3, effective June 25, 2009.

NOTES TO DECISIONS

  1. Refusal to Reassess.
  2. Assessments not Binding.
1. Refusal to Reassess.

Where a majority of the state’s property valuation administrators submitted recapitulations of the aggregate value of real property by class in their counties to the Department of Revenue pursuant to this section, but upon being informed by the department that the assessments were not in compliance with the full fair market value requirements of Ky. Const., § 172, refused the department’s directives, sent pursuant to subsection (1) of this section, to raise the aggregate assessed values by minimum increases to make them satisfy the requirement of fair cash value, the department properly ordered the administrator’s paychecks withheld pursuant to subsection (3) of KRS 132.690 until they complied; the department has an explicit mandate to order the administrators to correct valuations which are different, and this mandate is not superseded by the department’s ability to assess property itself under KRS 133.150 , since this is only one of several powers given the Department to assure compliance with Ky. Const., § 172. Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

Where the majority of Kentucky’s property valuation administrators refused to comply with a Department of Revenue directive to correct their assessments of real property after they had submitted their recapitulations to the department, their compliance would not have adversely affected the taxpayers’ ability to protest the increases in assessments, even though the statutory schedule for assessment and protest set forth in this section, KRS 133.130 , 133.045 and 133.030 could hypothetically start the period for inspection of the open tax rolls before the administrators could make the necessary increases and notify the taxpayers, since the Legislature has provided for an extension of the inspection period pursuant to subsection (1) of KRS 133.045 . Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

2. Assessments not Binding.

Property valuation administrators (PVA) who make ad valorem assessments are under the “direction, instruction and supervision” of the Revenue Cabinet; therefore, the PVA does not act independently of the Revenue Cabinet, and the Cabinet is not bound by his or her assessments. Revenue Cabinet Commonwealth v. Estate of Young, 748 S.W.2d 167, 1988 Ky. App. LEXIS 61 (Ky. Ct. App. 1988).

Cited in:

St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Opinions of Attorney General.

The Department of Revenue is the certifying authority with respect to county assessments and such certification shall include any equalization factor required to bring the assessment of the property in the county to fair cash value. OAG 68-352 .

In view of the fact that the major events relating to the “assessment” process of 1980, as pertained to the property valuation administrator, that is, the PVA’s making up the assessments for tax rolls for 1980, providing the inspection period, giving notices of increases, and filing the recapitulation of all property assessed on the tax rolls, had already taken place prior to the amendment to KRS 132.690 which required assessment of all, rather than one-half (1/2) of real property in county, the tax roll, as concerned such PVA, was closed for the tax year of 1980. OAG 80-500 .

133.045. Inspection period for tax rolls — Publication and posting.

  1. The real property tax roll being prepared by the property valuation administrator for the current year, shall be open for inspection in the property valuation administrator’s office for thirteen (13) days beginning on the first Monday in May of each year and shall be open for inspection for six (6) days each week, one (1) of which shall be Saturday. In case of necessity, the department may order a reasonable extension of time for the inspection period of the tax roll or it may order that the inspection period be at a different time than that provided in this section. However, the final day of the inspection period shall not be Saturday, Sunday, or a legal holiday.
  2. The property valuation administrator shall cause to be published once during the week before the beginning of the inspection period, as provided in subsection (1) of this section, in a display type advertisement, the following information:
    1. The fact that the real property tax roll is open for public inspection;
    2. The dates of the inspection period;
    3. The times available for public review of the real property tax roll;
    4. The fact that any taxpayer desiring to appeal an assessment shall first request a conference with the property valuation administrator to be held prior to or during the inspection period or completed during an extension granted under KRS 133.120 ; and
    5. Instructions which provide details on the manner in which a taxpayer who has had a conference with the property valuation administrator may file an appeal, if he is aggrieved by an assessment made by the property valuation administrator.

The cost of the notice shall be paid by the fiscal court of the county. The notice shall also be posted at the courthouse door. Failure to publish or post notices when the inspection period is at the regular time as provided in this section shall not invalidate assessments made by the property valuation administrator and recorded on the tax roll prior to the inspection period.

History. Enact. Acts 1942, ch. 131, § 14, 32; 1949 (Ex. Sess.), ch. 4, § 14; 1954, ch. 150, § 2; 1966, ch. 239, § 239, § 135; 1974, ch. 326, § 5; 1976, ch. 155, § 24; 1980, ch. 317, § 4, effective July 15, 1980; 1988, ch. 303, § 10, effective July 15, 1988; 1992, ch. 449, § 3, effective April 13, 1992; 1994, ch. 85, § 4, effective July 15, 1994; 2005, ch. 85, § 228, effective June 20, 2005; 2017 ch. 81, § 6, effective March 21, 2017.

NOTES TO DECISIONS

  1. Applicability.
  2. Extension of Inspection Period.
1. Applicability.

KRS 133.045(1) unequivocally limited its applicability to the real property tax roll being prepared by a property valuation administrator for the current year. Accordingly, the time frame for the administrative procedures set forth in KRS 133.120 was to be similarly limited to “the current year.” Commonwealth v. Cromwell Louisville Assocs., 2008 Ky. App. LEXIS 250 (Ky. Ct. App. Aug. 8, 2008), aff'd, 323 S.W.3d 1, 2010 Ky. LEXIS 230 ( Ky. 2010 ).

2. Extension of Inspection Period.

Where the majority of Kentucky’s property valuation administrators refused to comply with a Department of Revenue directive to correct their assessments of real property after they had submitted their recapitulations to the department, their compliance would not have adversely affected the taxpayers’ ability to protest the increases in assessments, even though the statutory schedule for assessment and protest set forth in KRS 133.040 , 133.130 , this section and KRS 133.030 could hypothetically start the period for inspection of the open tax rolls before the administrators could make the necessary increases and notify the taxpayers, since the Legislature has provided for an extension of the inspection period pursuant to subsection (1) of this section. Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

Cited in:

Breathitt County Board of Sup’rs v. Ware Cannel Coal Co., 297 Ky. 117 , 179 S.W.2d 225, 1944 Ky. LEXIS 691 ( Ky. 1944 ); Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ).

Opinions of Attorney General.

Under this section the tax rolls are public record, and may be inspected and copied by hand or photographically, even by a newspaper for publication, not only during the period of time specified in this section, but at any reasonable time throughout the year, but the rolls may not be removed from the office of the county tax commissioner (now property valuation administrator). OAG 66-696 .

Although records in the property valuation administrator’s office are public records open to inspection by any interested person, only tax rolls can be inspected, for the working papers consisting of property record cards in individual file folders from which the tax rolls are made are not a part of the material that is open to public inspection. OAG 76-182 .

A completed revenue form which contains only a description of certain property, the name and address of the owner, and the assessed valuation for several years should be made available for public inspection. OAG 77-166 .

Subsection (2) of this section is probably unconstitutional inasmuch as it gives the property valuation administrator discretion as to the question of the purposes for which the records may be used. OAG 78-473 .

The wording of this section indicates that the purpose of opening the tax rolls to public inspection is for the taxpayers to be able to compare the tax assessments on different parcels of real estate and not for business or commercial purposes. OAG 79-220 .

A title insurance company was not entitled to reproduce by microfilm, computer tape, or any other reproduction device copies of tax records to be sold to private business interests engaged in the searching and reporting of real estate titles and where the facts indicated that such company’s intended use of tax records and maps was for a business purpose, the request to copy such records was properly denied. OAG 80-88 .

In view of the fact that the major events relating to the “assessment” process of 1980, as pertained to the property valuation administrator, that is, the PVA’s making up the assessments for tax rolls for 1980, providing the inspection period, giving notices of increases, and filing the recapitulation of all property assessed on the tax rolls, had already taken place prior to the amendment of KRS 132.690 which required assessment of all, rather than one-half (1/2) of real property in county, the tax roll, as concerned such PVA, was closed for the tax year of 1980. OAG 80-500 .

A county fiscal court may proceed to fix the tax rate for the 1981 ad valorem taxes before the end of any inspection period for final recapitulations of both real and tangible personal property. OAG 80-617 .

Denial of the request to inspect the Commercial and Industrial Property Record Card was supported by the provisions of subdivisions (1)(g) and (h) (now (1)(i) and (j)) of KRS 61.878 and this section, as such a document was a preliminary working paper pertaining to the tax rolls as finally prepared by the Property Valuation Administrator. OAG 87-55 .

Denial of the request to inspect the property tax rolls was proper under subdivision (1)(j) (now (1)( l )) of KRS 61.878 and subsection (2) of KRS 133.047 if the information obtained from the inspection was to be used for commercial or business purposes; however, the request could not be denied solely because it was not made during the specific time period set forth in subsection (1) of this section. OAG 88-12 .

133.046. Final recapitulation of tax rolls; certification of approval. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 131, §§ 15, 32), which was formerly compiled as subsection (1) of KRS 133.190 , was repealed by Acts 1949 (Ex. Sess.), ch. 4, § 20.

133.047. Property tax roll as open public record in office of property valuation administrator for five years — Confidentiality of tax returns — Reasonable fee schedule for information used for commercial or business purposes — Access to information.

  1. Notwithstanding the provisions of KRS 61.870 to 61.884 , when the Department of Revenue has completed action on the assessment of property in any county and has certified the assessment to the county clerk of that county, as provided for in KRS 133.180 , the property tax roll, or a copy of the property tax roll, shall be retained in the office of the property valuation administrator for maintenance as an open public record for five (5) years. The property tax roll shall be available for public inspection during the regular working hours of the office of the property valuation administrator as provided for in KRS 132.410(2).
  2. Any person inspecting a property tax roll shall do so in a manner not unduly interfering with the proper operation of the custodian’s office.
  3. Personal property tax returns, accompanying documents, and assessment records, with the exception of the certified personal property tax roll, shall be considered confidential under the provisions of KRS 131.190 .
    1. Real property tax returns and accompanying documents submitted by a taxpayer shall be considered confidential under the provisions of KRS 131.190 . Other real property records in the office of the property valuation administrator shall be subject to the provisions of KRS 61.870 to KRS 61.884 . (4) (a) Real property tax returns and accompanying documents submitted by a taxpayer shall be considered confidential under the provisions of KRS 131.190 . Other real property records in the office of the property valuation administrator shall be subject to the provisions of KRS 61.870 to KRS 61.884 .
    2. However, in addition to the provisions of KRS 61.874 , the Department of Revenue shall develop and provide to each property valuation administrator a reasonable fee schedule to be used in compensating for the cost of personnel time expended in providing information and assistance to persons seeking information to be used for commercial or business purposes. As used in this paragraph:
      1. “Reasonable fee” has the same meaning as the fee described in KRS 61.874 (4)(c); and
      2. “Personnel time” means the cost to the agency to create any mechanical processing, data collection, or data creation; the staff required to process, produce, collect, or create data or information; or the cost to the agency for the creation, purchase, or other acquisition of information.
    3. Any person seeking information on his own property, or any other person, including the press, seeking information directly related to property tax assessment, appeals, equalization, requests for refunds, or similar matters shall not be subject to fees for personnel time.
  4. The Department of Revenue shall provide advice, guidelines, and assistance to each property valuation administrator in implementing the provisions of KRS 61.870 to 61.884 .

History. Enact. Acts 1980, ch. 317, § 10, effective July 15, 1980; 1992, ch. 263, § 3, effective July 14, 1992; 1994, ch. 262, § 8, effective July 15, 1994; 2005, ch. 85, § 229, effective June 20, 2005; 2016 ch. 34, § 1, effective July 15, 2016.

Opinions of Attorney General.

Denial of the request to inspect the property tax rolls was proper under subdivision (1)(j) (now (1)( l )) of KRS 61.878 and subsection (2) of this section if the information obtained from the inspection was to be used for commercial or business purposes; however, the request could not be denied solely because it was not made during the specific time period set forth in subsection (1) of KRS 133.045 . OAG 88-12 .

It is clear from this section that in accordance with the terms of that section, a certified tax roll is to be maintained as an open public record available for public inspection for five (5) years, irrespective of any exception or provision of KRS 61.870 to 61.884 that might otherwise preclude public inspection except by court order. OAG 89-12 .

Pursuant to this section, the tax rolls are an open public record for five (5) years, and if information is subject to routine public scrutiny under one statute, that same information, in general, cannot be properly termed confidential pursuant to KRS 61.878(1)(a). OAG 89-50 .

Where a property valuation administrator denied inspection of the tax rolls because the request involved the perceived use of information obtained or to be obtained from such rolls for commercial purposes, in contravention of subsection (2) of this section, the proper course was to make such denial in writing, citing KRS 61.878(1)(j) (now (1)( l )), and subsection (2) of this section; a brief explanation of how 61.878(1)(j) (now (1)( l )) applied to denying inspection of the tax rolls should have been set forth in the written denial, and a copy of the denial should have been promptly forwarded to the Office of the Attorney General. OAG 89-77 .

Subsection (2) of this section prohibits the use, for commercial or business purposes unrelated to property valuation and assessment, of information obtained from property tax rolls; this ban does not apply to other types of records in the office of the property valuation administrator. OAG 92-30 .

The reasonable fee schedule the Cabinet is empowered to develop for property valuation administrators is to be used in compensating for the cost of personnel time expended in providing information and assistance to persons seeking information to be used for commercial or business purposes, and not for noncommercial purposes. OAG 02-ORD-89.

The Property Valuation Office’s charge for records requested for a commercial purpose were reasonable. The Revenue Cabinet indicated that the amount charged was $32.00, an amount calculated by reference to the PVA Open Records Commercial Fee Guidelines issued by the Cabinet in accordance with the Open Records Act and KRS 133.047 . OAG 03-ORD-25.

133.050. County clerk as clerk to supervisors — Filing records of proceedings of supervisors. [Renumbered.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 131, §§ 19, 32) was renumbered as KRS 133.125(1).

133.060. Supervisors to assess omitted intangibles; listing; clerk to report to department; clerk’s fee. [Repealed.]

Compiler’s Notes.

This section (4121-3) was repealed by Acts 1942, ch. 131, § 32.

133.070. Assessment where property is annexed by another civil division.

Property in territory annexed by another civil division shall not be subject to ad valorem taxation in the annexing civil division until the assessment date next following the date of annexation.

History. 4128-1, 4128-2; Acts 1962, ch. 28 § 1; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 338, effective July 13, 1990.

Compiler’s Notes.

Former KRS 133.070 (4128-1, 4128-2: amend. Acts 1962, ch. 28) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 338, effective July 13, 1990.

Research References and Practice Aids

Cross-References.

Annexation of territory by cities, KRS ch. 81.

133.080. County clerk to serve as clerk of supervisors. [Repealed.]

Compiler’s Notes.

This section (4121-2, 4125) was repealed by Acts 1942, ch. 131, § 32.

133.090. Notice to taxpayer when increase or assessment is made by supervisors; preparation; service; fees. [Repealed.]

Compiler’s Notes.

This section (4121-2, 4122) was repealed by Acts 1942, ch. 131, § 32.

133.100. Supervisors to reassemble to hear complaints and reconsider assessments; length of session. [Repealed.]

Compiler’s Notes.

This section (4123) was repealed by Acts 1942, ch. 131, § 32.

133.110. Correction of clerical errors in assessment.

  1. After submission of the final real property recapitulation or certification of the personal property assessment, the property valuation administrator may correct clerical, mathematical, or procedural errors in an assessment or any duplication of assessment. Changes in assessed value based on appraisal methodology or opinion of value shall not be valid. All corrections shall be reviewed by the Department of Revenue and those changes determined by the department to be invalid shall be rescinded. Any taxpayer affected by this rescission shall not be subject to additional penalties.
  2. Notwithstanding other statutory provisions, for property subject to a tax rate that is set each year based on the certified assessment, any loss of property tax revenue incurred by a taxing district due to corrections made after the tax rate has been set may be recovered by making an adjustment in the tax rate to be set for the next tax year.

History. 4250: repealed in part Acts 1942, ch. 131, § 32; 1978, ch. 384, § 263, effective June 17, 1978; 1992, ch. 263, § 6, effective July 14, 1992; 2005, ch. 85, § 230, effective June 20, 2005.

NOTES TO DECISIONS

  1. Clerical Errors.
  2. Estoppel.
1. Clerical Errors.

Action of tax commissioner (now property valuation administrator) in listing certain fixtures as personal property rather than real property, with the resulting application of a higher tax rate, was not a “clerical error” that could be corrected under this section, and judgment of county court attempting to correct such listing was void for want of jurisdiction. Buchanan v. West Kentucky Coal Co., 218 Ky. 259 , 291 S.W. 32, 1927 Ky. LEXIS 127 ( Ky. 1927 ) (decided under prior law).

If, following blanket raise of assessment by state tax commission, an error is made by the county clerk in determining how the raise is to affect the deduction of exempt property, such error may be corrected under this section, and if not so corrected, the sheriff cannot raise the question in connection with his settlement. Commonwealth use of Phillips v. Tate, 247 Ky. 516 , 57 S.W.2d 491, 1933 Ky. LEXIS 425 ( Ky. 1933 ) (decided under prior law).

2. Estoppel.

Where tract of land was assessed as containing more acres than there actually were, but owner did not apply for correction of assessment, he could not later complain of amount of assessment. Fish v. Genett, 56 S.W. 813, 22 Ky. L. Rptr. 177 , 1900 Ky. LEXIS 442 ( Ky. 1900 ) (decided under prior law).

Cited in:

Southern Holding & Sec. Corp. v. Kentucky River Coal Corp., 21 F. Supp. 757, 1938 U.S. Dist. LEXIS 2461 (D. Ky. 1938 ), aff’d, Southern Holdings & Sec. Corp. v. Kentucky River Coal Corp., 112 F.2d 1008, 1940 U.S. App. LEXIS 4470 (6th Cir. Ky. 1940 ); Board of Aldermen v. Hunt, 284 Ky. 720 , 145 S.W.2d 814, 1940 Ky. LEXIS 551 ( Ky. 1940 ); Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ).

Opinions of Attorney General.

There is no basis for a county fiscal court paying any compensation to a county clerk for exonerating tax bills. OAG 80-7 .

The preparation of the tax bills is not part of the Property Valuation Administrator’s (PVA) duties; this is the county clerk’s province. Similarly, the PVA is not responsible for the correction of clerical errors in the tax bills; this is the county judge/executive’s province. In short, the PVA’s duty and authority with respect to property taxation end with the preparation of the tax rolls and the powers and duties concerning tax bills are the responsibility of others. OAG 83-200 .

The county judge/executive has no authority to exonerate the tax bills on church-owned vehicles. OAG 84-254 .

133.120. Appeal procedure.

    1. Any taxpayer desiring to appeal an assessment on real property made by the property valuation administrator shall first request a conference with the property valuation administrator or his or her designated deputy. The conference shall be held prior to or during the inspection period provided for in  KRS 133.045 , or during an extension granted under subsection (2)(d) of this section. (1) (a) Any taxpayer desiring to appeal an assessment on real property made by the property valuation administrator shall first request a conference with the property valuation administrator or his or her designated deputy. The conference shall be held prior to or during the inspection period provided for in  KRS 133.045 , or during an extension granted under subsection (2)(d) of this section.
      1. Any person receiving compensation to represent a property owner at a conference with the property valuation administrator for a real property assessment shall be: (b) 1. Any person receiving compensation to represent a property owner at a conference with the property valuation administrator for a real property assessment shall be:
        1. An attorney;
        2. A certified public accountant;
        3. A certified real estate broker;
        4. A Kentucky licensed real estate broker;
        5. An employee of the property owner;
        6. A licensed or certified Kentucky real estate appraiser;
        7. An appraiser who possesses a temporary practice permit or reciprocal license or certification in Kentucky to perform appraisals and whose license or certification requires him or her to conform to the Uniform Standards of Professional Appraisal Practice; or
        8. Any other individual possessing a professional appraisal designation recognized by the department.
      2. A person representing a property owner before the property valuation administrator shall present written authorization from the property owner which sets forth his or her professional capacity and shall disclose to the property valuation administrator any personal or private interests he or she may have in the matter, including any contingency fee arrangements, except that attorneys shall not be required to disclose the terms and conditions of any contingency fee arrangement.
    2. During this conference, the property valuation administrator or his or her deputy shall provide an explanation to the taxpayer of the constitutional and statutory provisions governing property tax administration, including the appeal process, as well as an explanation of the procedures followed in deriving the assessed value for the taxpayer’s property.
    3. The property valuation administrator or his or her deputy shall keep a record of each conference which shall include but not be limited to the initial assessed value, the value claimed by the taxpayer, an explanation of any changes offered or agreed to by each party, and a brief account of the outcome of the conference.
    4. At the request of the taxpayer, the conference may be held by telephone.
    1. Any taxpayer still aggrieved by an assessment on real property made by the  property valuation administrator after complying with the provisions of subsection (1) of this section may appeal to the board of assessment appeals. (2) (a) Any taxpayer still aggrieved by an assessment on real property made by the  property valuation administrator after complying with the provisions of subsection (1) of this section may appeal to the board of assessment appeals.
    2. The taxpayer shall appeal his or her assessment by filing in person or sending a letter or other written petition to the county clerk stating the reasons for appeal, identifying the property for which the appeal is filed, and stating the taxpayer’s opinion of the fair cash value of the property.
    3. The appeal shall be filed no later than one (1) workday following the conclusion of the inspection period provided for in KRS 133.045 or no later than the last day of an extension granted under paragraph (d) of this subsection.
    4. A property valuation administrator may make a written request to the department to extend the deadline in his or her county of jurisdiction to allow the completion of the conferences requested during the inspection period required by subsection (1)(a) of this section and to extend the filing deadline for appeals to the board of assessment appeals. If approved by the department, the deadline for the completion of the conferences requested during the inspection period and filing appeals shall be extended for a period not to exceed twenty-five (25) days from the date of the original filing deadline.
    5. The county clerk shall notify the department of all assessment appeals and of the date and times of the hearings.
    6. The board of assessment appeals may review and change any assessment made by the property valuation administrator upon recommendation of the county judge/executive, mayor of any city using the county assessment, or the superintendent of any school district in which the property is located, if the recommendation is made to the board in writing specifying the individual properties recommended for review and is made no later than one (1) work day following the conclusion of the inspection period provided for in KRS 133.045 , or no later than the last day of an extension granted under paragraph (d) of this subsection, or upon the written recommendation of the department. If the board of assessment appeals determines that the assessment should be increased, it shall give the taxpayer notice in the manner required by subsection (4) of KRS 132.450 , specifying a date when the board will hear the taxpayer, if he or she so desires, in protest of an increase.
    7. Any real property owner who has listed his or her property with the property valuation administrator at its fair cash value may ask the county board of assessment appeals to review the assessments of real properties he or she believes to be assessed at less than fair cash value, if he or she specifies in writing the individual properties for which the review is sought and factual information upon which his or her request is based, such as comparable sales or cost data and if the request is made no later than one (1) work day following the conclusion of the inspection period provided for in KRS 133.045, or no later than the last day of an extension granted under paragraph (d) of this subsection.
    8. Nothing in this section shall be construed as granting any property owner the  right to request a blanket review of properties or the board the power to conduct such a review.
    1. The board of assessment appeals shall hold a public hearing for each individual taxpayer appeal in protest of the assessment by the property valuation administrator filed in accordance with the provisions of subsection (2) of this section, and after hearing all the evidence, shall fix the assessment of the property at its fair cash value. (3) (a) The board of assessment appeals shall hold a public hearing for each individual taxpayer appeal in protest of the assessment by the property valuation administrator filed in accordance with the provisions of subsection (2) of this section, and after hearing all the evidence, shall fix the assessment of the property at its fair cash value.
    2. The department may be present at the hearing and present any pertinent evidence as it pertains to the appeal.
    3. The taxpayer shall provide factual evidence to support his or her appeal. If the taxpayer fails to provide reasonable information pertaining to the value of the property requested by the property valuation administrator, the department, or any member of the board, his or her appeal shall be denied.
    4. This information shall include but not be limited to the physical characteristics of land and improvements, insurance policies, cost of construction, real estate sales listings and contracts, income and expense statements for commercial property, and loans or mortgages.
    5. The board of assessment appeals shall only hear and consider evidence which has been submitted to it in the presence of both the property valuation administrator or his or her designated deputy and the taxpayer or his or her authorized representative.
    1. Any person receiving compensation to represent a property owner in an appeal before the board shall be: (4) (a) Any person receiving compensation to represent a property owner in an appeal before the board shall be:
      1. An attorney;
      2. A certified public accountant;
      3. A certified real estate broker;
      4. A Kentucky licensed real estate broker;
      5. An employee of the taxpayer;
      6. A licensed or certified Kentucky real estate appraiser;
      7. An appraiser who possesses a temporary practice permit or reciprocal license or certification in Kentucky to perform appraisals and whose license or certification requires him or her to conform to the Uniform Standards of Professional Appraisal Practice; or
      8. Any other individual possessing a professional appraisal designation recognized by the department.
    2. A person representing a property owner before the county board of assessment appeals shall present a written authorization from the property owner which sets forth his or her professional capacity and shall disclose to the county board of assessment appeals any personal or private interests he or she may have in the matter, including any contingency fee arrangements, except that attorneys shall not be required to disclose the terms and conditions of any contingency fee arrangement.
  1. The board shall provide a written opinion justifying its action for each assessment either decreased or increased in the record of its proceedings and orders required in KRS 133.125 on forms or in a format provided or approved by the department.
  2. The board shall report to the property valuation administrator any real property omitted from the tax roll. The property valuation administrator shall assess the property and immediately give notice to the taxpayer in the manner required by KRS 132.450(4), specifying a date when the board of assessment appeals will hear the taxpayer, if he or she so desires, in protest of the action of the property valuation administrator.
  3. The board of assessment appeals shall have power to issue subpoenas, compel the attendance of witnesses, and adopt rules and regulations concerning the conduct of its business. Any member of the board shall have power to administer oaths to any witness in proceedings before the board.
  4. The powers of the board of assessment appeals shall be limited to those specifically granted by this section.
  5. No appeal shall delay the collection or payment of any taxes based upon the assessment in controversy. The taxpayer shall pay all state, county, and district taxes due on the valuation which he or she claims as true value and stated in the petition of appeal filed in accordance with the provisions of subsection (1) of this section. When the valuation is finally determined upon appeal, the taxpayer shall be billed for any additional tax and interest at the tax interest rate as defined in KRS 131.010(6) from the date when the tax would have become due if no appeal had been taken. The provisions of KRS 134.015(6) shall apply to the tax bill.
  6. Any member of the county board of assessment appeals may be required to give evidence in support of the board’s findings in any appeal from its actions to the Kentucky Claims Commission pursuant to KRS 49.220 . Any persons aggrieved by a decision of the board, including the property valuation administrator, taxpayer, and department, may appeal the decision to the Kentucky Claims Commission pursuant to KRS 49.220 . Any taxpayer failing to appeal to the county board of assessment appeals, or failing to appear before the board, either in person or by designated representative, shall not be eligible to appeal directly to the Kentucky Claims Commission.
  7. The county attorney shall represent the interest of the state and county in all hearings before the board of assessment appeals and on all appeals prosecuted from its decision. If the county attorney is unable to represent the state and county, the fiscal court shall arrange for substitute representation.
  8. Taxpayers shall have the right to make audio recordings of the hearing before the county board of assessment appeals. The property valuation administrator may make similar audio recordings only if prior written notice is given to the taxpayer. The taxpayer shall be entitled to a copy of the department’s recording as provided in KRS 61.874 .
  9. The county board of assessment appeals shall physically inspect a property upon the request of the property owner or property valuation administrator.

HISTORY: Enact. Acts 1942, ch. 131, § 16, 32; 1944, ch. 99; 1949 (Ex. Sess.), ch. 2, § 7; 1950, ch. 18, § 1; 1964, ch. 141, § 34; 1974, ch. 326, § 6; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1978, ch. 384, § 264, effective June 17, 1978; 1980, ch. 317, § 5, effective July 15, 1980; 1982, ch. 452, § 7, effective July 1, 1982; 1988, ch. 303, § 11, effective July 15, 1988; 1990, ch. 411, § 11, effective July 13, 1990; 1990, ch. 476, Pt. V, § 339, effective July 13, 1990; 1992, ch. 397, § 3, effective July 14, 1992; 1992, ch. 449, § 6, effective April 13, 1992; 1994, ch. 85, § 5, effective July 15, 1994; 2005, ch. 85, § 231, effective June 20, 2005; 2009, ch. 10, § 42, effective January 1, 2010; 2015 ch. 67, § 3, effective June 24, 2015; 2017 ch. 81, § 2, effective March 21, 2017; 2017 ch. 74, § 72, effective June 29, 2017.

Legislative Research Commission Notes.

(6/29/2017). This statute was amended by 2017 Ky. Acts chs. 74 and 81, which do not appear to be in conflict and have been codified together.

(7/14/92). Pursuant to KRS 7.136(1), in codifying this section the Reviser of Statutes has corrected an erroneous cross-reference that resulted from the amendment process in the enactment of 1992 Ky. Acts ch. 397, sec. 3. That Act and Acts ch. 449 both amend this statute and not otherwise being in conflict have been compiled together.

(7/13/90). The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

  1. In General.
  2. Jurisdiction.
  3. Notice.
  4. Timeliness.
  5. Party to Proceedings.
  6. Exhaustion of Administrative Remedies.
  7. Assessment.
  8. —Full Cash Value.
  9. —Increase.
  10. —Reduction.
  11. —Undervalued Property.
  12. —Unlisted Property.
  13. Enjoining Collections.
  14. Exemptions.
  15. Interest.
  16. Taxpayer’s Valuation.
  17. Burden of Proof.
  18. Evidence.
  19. Judgment.
  20. Penalty.
1. In General.

On appeal from the board of supervisors, it was up to the Commonwealth to secure prompt disposal of the appeal by the courts if it so desired and the taxpayer had no duty to see that the appeal was promptly heard. Commonwealth v. Southern Pac. Co., 169 Ky. 296 , 183 S.W. 925, 1916 Ky. LEXIS 697 ( Ky. 1916 ) (decided under prior law).

Appeal to board of supervisors is only remedy available to taxpayer aggrieved by assessment made by tax commissioner (now property valuation administrator). Kentucky Heating Co. v. Louisville, 174 Ky. 142 , 192 S.W. 4, 1917 Ky. LEXIS 165 ( Ky. 1917 ), dismissed, 250 U.S. 653, 40 S. Ct. 53, 63 L. Ed. 1191, 1919 U.S. LEXIS 1804 (1919) (decided under prior law).

When a taxpayer has appealed to the board of supervisors, and the board has taken action on the appeal, any mistake made by the tax commissioner (now property valuation administrator) in making the assessment appealed from is no longer material. Kentucky Heating Co. v. Louisville, 174 Ky. 142 , 192 S.W. 4, 1917 Ky. LEXIS 165 ( Ky. 1917 ), writ of error dismissed, 250 U.S. 653, 40 S. Ct. 53, 63 L. Ed. 1191, 1919 U.S. LEXIS 1804 (U.S. 1919).

An attested copy of the notice of increase of assessment served upon the taxpayer by the board of supervisors was not “a certified copy of the action” of the board, and an attempt to take an appeal from the board by filing such paper was ineffectual. Cain v. Magoffin County, 198 Ky. 598 , 249 S.W. 766, 1923 Ky. LEXIS 501 ( Ky. 1923 ) (decided under prior law).

A taxpayer who is aggrieved by the assessment made by the tax commissioner (now property valuation administrator) must first appeal to the board of supervisors, and then may appeal from the board to the courts. He cannot appeal directly to the courts from the tax commissioner’s (now property valuation administrator’s) assessment, or attack such assessment as excessive in a court action. Farmers' Nat'l Bank v. Board of Sup'rs, 225 Ky. 246 , 8 S.W.2d 401, 1928 Ky. LEXIS 769 ( Ky. 1928 ) (decided under prior law).

One taxpayer may not appeal to or from the board of supervisors on behalf of other taxpayers similarly situated or owning similar property; he may appeal only for himself. Cossar v. Klein, 227 Ky. 768 , 14 S.W.2d 160, 1928 Ky. LEXIS 515 ( Ky. 1928 ) (decided under prior law).

Pending an appeal from the board of supervisors, the county clerk has no right to make out a tax bill on the assessment appealed from. Cossar v. Klein, 227 Ky. 768 , 14 S.W.2d 160, 1928 Ky. LEXIS 515 ( Ky. 1928 ) (decided under prior law).

Where taxpayer has been notified by tax commissioner (now property valuation administrator) of increase of assessment made by latter, taxpayer’s sole remedy was by appeal from board, although he had appeared before board and was unable to get definite information as to what action it had taken. Ball v. P. V. & K. Coal Co., 235 Ky. 445 , 31 S.W.2d 707, 1930 Ky. LEXIS 386 ( Ky. 1930 ) (decided under prior law).

The right of a taxpayer to appeal from the board of supervisors does not depend upon whether the board gave him notice of its action, or whether he appeared before the board, and those matters are immaterial on appeal. Letcher County v. Kentucky River Coal Corp., 250 Ky. 7 , 61 S.W.2d 891, 1933 Ky. LEXIS 620 ( Ky. 1933 ) (decided under prior law).

On appeal from the board of supervisors to the Circuit Court the matter is tried de novo; the appellee may relitigate any issue without taking a cross appeal, and the appellant need not specify what particular items of property he claims have not been assessed properly. Carr's Fork Coal Co. v. Perry County Board of Supervisors, 263 Ky. 642 , 93 S.W.2d 359, 1936 Ky. LEXIS 232 ( Ky. 1936 ) (decided under prior law).

An appeal to the Circuit Court should be tried by that court without a jury. Thomas Forman Co. v. Owsley County Board of Sup'Rs., 267 Ky. 224 , 101 S.W.2d 939, 1937 Ky. LEXIS 302 ( Ky. 1937 ) (decided under prior law).

Appeal by county attorney from quarterly court to Circuit Court, in the name of board of supervisors, was proper, where taxpayer had appealed from board to quarterly court naming board as appellees. Prestonsburg Water Co. v. Prestonsburg Board of Sup’rs, 279 Ky. 551 , 131 S.W.2d 451, 1939 Ky. LEXIS 305 ( Ky. 1939 ), overruled, Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ), overruled in part, Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ), overruled on other grounds, Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 (Ky. 1978) (decided under prior law).

The provisions of this section mean that there shall be a de novo hearing in the quarterly and Circuit Courts as independent, graduated fact-finding tribunals, although the practice is denominated on appeal and the procedure is the same as in cases of other appeals from inferior to superior courts. Board of Supervisors v. Pinnell, 292 Ky. 364 , 166 S.W.2d 882, 1942 Ky. LEXIS 108 ( Ky. 1942 ) (decided under prior law).

This section provides that a taxpayer may appeal to the board of supervisors from an assessment made by the tax commissioner (now property valuation administrator). Breathitt County Board of Sup'rs v. Ware Cannel Coal Co., 297 Ky. 117 , 179 S.W.2d 225, 1944 Ky. LEXIS 691 ( Ky. 1944 ) (decided under prior law).

Failure of defendant county, in declaratory judgment action by taxpayers seeking to enjoin collection of county taxes on certain property claimed to be exempt from local taxation, to file a special demurrer, waived jurisdictional objection that taxpayer’s sole remedy was by appeal to board of supervisors. Todd County v. Bond Bros., 300 Ky. 224 , 188 S.W.2d 325, 1945 Ky. LEXIS 521 ( Ky. 1945 ).

Where taxpayer, in listing his property for taxation, designated certain of the listed property as raw material on hand for the purpose of manufacture, subject only to state tax, but tax commissioner (now property valuation administrator) changed the classification and assessed the property for local taxes on the theory that it was manufactured, taxpayer was not required to appeal to board of supervisors as provided in this section, but could maintain declaratory judgment action in Circuit Court to enjoin collection of local taxes. Todd County v. Bond Bros., 300 Ky. 224 , 188 S.W.2d 325, 1945 Ky. LEXIS 521 ( Ky. 1945 ).

An appeal to the Circuit Court from a decision of the state tax commission (now Kentucky Board of Tax Appeals) is a trial de novo and the commission should be made a party to enable it to defend its evaluation. Cook v. Citizens State Bank, 304 S.W.2d 931, 1957 Ky. LEXIS 292 ( Ky. 1957 ).

2. Jurisdiction.

On appeal from the board of supervisors, the courts had jurisdiction only to determine the assessability of the property and to fix the assessable value; they had no power to enter judgment for the taxes due on the assessment or require the taxpayer to pay any sum into court towards the taxes that may have been found due. Commonwealth v. Southern Pac. Co., 169 Ky. 296 , 183 S.W. 925, 1916 Ky. LEXIS 697 ( Ky. 1916 ) (decided under prior law).

Circuit Court had authority to raise assessment on particular item of property, although neither taxpayer nor taxing authorities had made any complaint as to that item. Carr's Fork Coal Co. v. Perry County Board of Supervisors, 263 Ky. 642 , 93 S.W.2d 359, 1936 Ky. LEXIS 232 ( Ky. 1936 ) (decided under prior law).

The board of supervisors, in fixing the values of property for taxation and making assessments, is an administrative body, not a “judicial tribunal,” though it may also exercise quasi-judicial powers. McCracken Fiscal Court v. McFadden, 275 Ky. 819 , 122 S.W.2d 761, 1938 Ky. LEXIS 499 ( Ky. 1938 ) (decided under prior law).

The fiscal court possesses only limited jurisdiction or power and has no right to create an office not provided by statute to pay for services which the statute provides shall be performed by a public officer. Veith v. Dunlap, 308 Ky. 386 , 214 S.W.2d 608, 1948 Ky. LEXIS 949 ( Ky. 1948 ) (decided under prior law).

3. Notice.

In an action to enjoin the collection of taxes based on a raise made by the board of supervisors without proper notice, it was incumbent upon the party seeking the injunction to prove the absence of the required notice, but where such party exhibited the notice that he received, and such notice on its face did not comply with the statute, the burden then passed to the opposing party to show that proper notice was served. Ward v. Wentz, 130 Ky. 705 , 113 S.W. 892, 1908 Ky. LEXIS 313 ( Ky. 1908 ) (decided under prior law).

Where taxpayer listed in his schedule certain raw material, under a heading in the schedule provided for listing property exempt from local taxation, and the schedule was accepted as correct by the tax commissioner (now property valuation administrator), the board of supervisors could not take such property out of the exempt column and assess it for local taxation without giving notice to the taxpayer. P. Lorrilard Co. v. Ross, 183 Ky. 217 , 209 S.W. 39, 1919 Ky. LEXIS 475 ( Ky. 1919 ) (decided under prior law).

An increase of an assessment by the board of supervisors without formal notice to the taxpayer is void, unless the taxpayer has received actual notice of the increase and has appeared before the board in opposition thereto. Ward v. Wentz, 130 Ky. 7 05 , 113 S.W. 892, 1908 Ky. LEXIS 313 ( Ky. 1908 ) (decided under prior law). See McFarland v. Georgetown Nat'l Bank, 208 Ky. 7 , 270 S.W. 995, 1925 Ky. LEXIS 201 ( Ky. 1925 ), aff'd, 273 U.S. 568, 47 S. Ct. 467, 71 L. Ed. 779, 1927 U.S. LEXIS 712 (U.S. 1927); Kentucky Nat'l Park Ass'n v. Reed, 250 Ky. 525 , 63 S.W.2d 614, 1933 Ky. LEXIS 735 ( Ky. 1933 ); Burnside Supply Co. v. Burnside Graded Common School, 260 Ky. 482 , 86 S.W.2d 160, 1935 Ky. LEXIS 502 ( Ky. 1935 ) (decided under prior law).

Where taxpayer has been notified by tax commissioner (now property valuation administrator) of increase of assessment made by latter, board of supervisors is not required to give notice to taxpayer that it has approved such increase. Ball v. P. V. & K. Coal Co., 235 Ky. 445 , 31 S.W.2d 707, 1930 Ky. LEXIS 386 ( Ky. 1930 ) (decided under prior law).

Where owner of property was a corporation, return showing service of notice on an individual was insufficient, in the absence of anything to indicate that the individual was a process agent of the corporation. Kentucky Nat'l Park Ass'n v. Reed, 250 Ky. 525 , 63 S.W.2d 614, 1933 Ky. LEXIS 735 ( Ky. 1933 ) (decided under prior law).

Service of notice of increase of assessment on person who owned property on assessment date is sufficient, notice need not be served on an intervening purchaser of the property. Kentucky Nat'l Park Ass'n v. Reed, 250 Ky. 525 , 63 S.W.2d 614, 1933 Ky. LEXIS 735 ( Ky. 1933 ) (decided under prior law).

Where notice of increase of assessment was served on taxpayer’s wife at taxpayer’s place of business, and she wrote county clerk asking him to go before the board and protest against the increase, but there was no evidence that the taxpayer knew of the notice or of his wife’s letter to the clerk, the increase was void. Burnside Supply Co. v. Burnside Graded Common School, 260 Ky. 482 , 86 S.W.2d 160, 1935 Ky. LEXIS 502 ( Ky. 1935 ) (decided under prior law).

Failure of tax commissioner (now property valuation administrator) to give notice to taxpayer of increase of assessment made by commissioner (now administrator) was not prejudicial where board of supervisors gave taxpayer notice that it proposed to raise assessment “in addition to the raise made by the tax commissioner,” and the taxpayer appeared before the board and was heard in objection to any increase. Thomas Forman Co. v. Owsley County Board of Sup'Rs., 267 Ky. 224 , 101 S.W.2d 939, 1937 Ky. LEXIS 302 ( Ky. 1937 ) (decided under prior law).

The notice of proposed increase of assessment must be served in the manner provided for serving a summons, except that where the taxpayer is absent from the county or so conceals himself as to prevent personal service, the notice may then be served in the manner provided in the Civil Code (now Rules of Civil Procedure) for the service of notices. Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ).

The purpose of the notice required by this section is to give the taxpayer an opportunity to be heard and when he appears before the board for the purpose of contesting the raise in his assessment, there can be no need for the notice prescribed by this section since the rights of the taxpayer, which the notice was intended to protect, have been preserved. Commonwealth ex rel. Reeves v. Elkhorn & Jellico Coal Co., 313 Ky. 764 , 233 S.W.2d 508, 1950 Ky. LEXIS 971 ( Ky. 1950 ).

4. Timeliness.

Taxpayers’ challenge to a real property tax assessment was dismissed because the taxpayer failed to comply with the requirement of KRS 133.120 that the taxpayer file the protest during “the current year” as specified by KRS 133.045(1). Instead, the taxpayer did not request a conference or a review of the assessment until the following year. Commonwealth v. Cromwell Louisville Assocs., 2008 Ky. App. LEXIS 250 (Ky. Ct. App. Aug. 8, 2008), aff'd, 323 S.W.3d 1, 2010 Ky. LEXIS 230 ( Ky. 2010 ).

5. Party to Proceedings.

The city, never being a party to the proceedings, or attempting to intervene, could not appeal. Louisville v. Christian Business Women's Club, Inc., 306 S.W.2d 274, 1957 Ky. LEXIS 32 ( Ky. 1957 ).

“Likewise,” as formerly used in subsection (1) of this section, means property owners “in addition” to any aggrieved taxpayer mentioned firstly in the statute. Kentucky Bd. of Tax Appeals v. Simpson, 691 S.W.2d 221, 1985 Ky. App. LEXIS 528 (Ky. Ct. App. 1985).

6. Exhaustion of Administrative Remedies.

Where the record did not indicate a prima facie constitutional violation due to reassessments of real property ranging from 1% to 400%, the case involved nothing but factual questions, and property owners were given sufficient time to appeal to the board of assessment appeals by filing a letter or petition protesting the increases in assessments and for the board to adjudicate the claims, the court erred in allowing the property owners to bypass the administrative remedies provided under this section and KRS 131.340 (renumbered as KRS 49.220 ). Parrent v. Fannin, 616 S.W.2d 501, 1981 Ky. LEXIS 250 ( Ky. 1981 ).

7. Assessment.

Assessment of unlisted property without notice to taxpayer was void. Mt. Sterling Oil & Gas Co. v. Ratliff, 127 Ky. 1 , 104 S.W. 993, 31 Ky. L. Rptr. 1229 , 1907 Ky. LEXIS 109 ( Ky. 1 907 ). See Durbin v. Ohio Valley Tie Co., 151 Ky. 74 , 151 S.W. 12, 1912 Ky. LEXIS 738 ( Ky. 1912 ); Boske v. Louis Marx & Bros., 161 Ky. 460 , 170 S.W. 1175, 1914 Ky. LEXIS 91 ( Ky. 1914 ).

Where corporation had gone out of business and had been succeeded by another corporation, service of notice on former corporation of assessment of unlisted property of successor corporation was not sufficient to validate the assessment, although the notice was subsequently delivered to the successor corporation after the board of supervisors had adjourned. Durbin v. Ohio Valley Tie Co., 151 Ky. 74 , 151 S.W. 12, 1912 Ky. LEXIS 738 ( Ky. 1912 ) (decided under prior law).

Where a bank did not make the report required by law, but the cashier appeared before the board of supervisors and submitted information upon which an assessment of the stock of the bank could be made, the action of the board in assessing the stock on such information was valid. Caldwell County v. First Nat'l Bank, 151 Ky. 720 , 152 S.W. 757, 1913 Ky. LEXIS 541 ( Ky. 1913 ) (decided under prior law).

The assessment of one piece of property at its fair cash value, while other property is assessed at only a percentage of its value, violates the constitutional requirement of uniformity. Eminence Distillery Co. v. Henry County Board of Sup'rs, 178 Ky. 811 , 200 S.W. 347, 1918 Ky. LEXIS 473 ( Ky. 1918 ) (decided under prior law).

Absolute equality between assessments is not required; a practical equality as near as may be is sufficient. Eminence Distillery Co. v. Henry County Board of Sup'rs, 178 Ky. 811 , 200 S.W. 347, 1918 Ky. LEXIS 473 ( Ky. 1918 ) (decided under prior law).

Where board of supervisors refused to assess property listed by taxpayer under protest, such property could be assessed in an action under KRS 132.330 , as against contention that sole remedy of taxing authorities was appeal from board. Commonwealth v. Bingham's Adm'r, 188 Ky. 616 , 223 S.W. 999, 1920 Ky. LEXIS 331 ( Ky. 1920 ) (decided under prior law).

Court, in action by taxpayer to enjoin collection of taxes on ground that increase of assessment by board of supervisors was void, had no power to make its own assessment, but could only enjoin collection of so much of the tax as was based on the invalid increase. Lowther v. Moore, 191 Ky. 284 , 229 S.W. 705, 1921 Ky. LEXIS 291 ( Ky. 1921 ) (decided under prior law).

In order to obtain relief from an assessment of his property at its full value, the taxpayer must show that there has been an intentional assessment of other property in the same class at only a percentage of its value. Siler v. Board of Sup'rs, 221 Ky. 100 , 298 S.W. 189, 1927 Ky. LEXIS 669 ( Ky. 1927 ) (decided under prior law).

Taxpayer could not obtain relief from assessment of his intangible property at its full value without showing that other intangible property was being uniformly and knowingly assessed throughout the state at only a percentage of its actual value. It was not enough to show that tangible property, or other intangibles in the same county, was being assessed at a percentage of its value. Siler v. Board of Sup'rs, 221 Ky. 100 , 298 S.W. 189, 1927 Ky. LEXIS 669 ( Ky. 1927 ) (decided under prior law).

The value fixed by the court, on appeal from an assessment made by the board of supervisors for a particular year, should be accepted by the board as the value of the same property in a following year, in the absence of evidence of a material change in the property or conditions affecting its value. Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ) (decided under prior law).

8. —Full Cash Value.

A taxpayer whose property has been assessed at its fair cash value has no right under this section to compel the board of supervisors to raise the assessment of other property in the county which has been assessed at only a percentage of its fair cash value. Greene v. Louisville & I. R. Co., 244 U.S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, 1917 U.S. LEXIS 1660 (1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (1984) (decided under prior law).

Evidence consisting of federal census reports, reports of state board of equalization and state tax commission (now Kentucky Board of Tax Appeals), and affidavits of individuals from different counties, was sufficient to support finding that property was being intentionally, systematically and notoriously assessed at only a percentage of its value, and to overcome presumption that assessing officers did their duty. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (1984) (decided under prior law).

Collection of state taxes based upon an assessment at full value may be enjoined in a suit in federal court against the state assessing and collecting officers, where other property is being uniformly assessed at only a percentage of its value. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (1984) (decided under prior law).

In taking evidence as to the value of property, witnesses should have been asked their opinion as to the fair cash value of the property estimated at the price it would bring at a fair voluntary sale, but it was proper to ask other questions for the purpose of showing how the witness arrived at the value given, or to show what knowledge he has of the value. Hillman Land & Iron Co. v. Commonwealth, 148 Ky. 331 , 146 S.W. 776, 1912 Ky. LEXIS 453 ( Ky. 1912 ) ( Ky. 1912 ) (decided under prior law).

The value placed upon the property by the taxpayer in his schedule constitutes a strong admission on the issue of value, and the presumption exists that it is a fair value. Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ) (decided under prior law).

9. —Increase.

The fact that the resident agent of a nonresident taxpayer had actual notice of increase of assessment by board did not dispense with requirement of formal notice to taxpayer, at least where agent did not appear before board in opposition to increase. Ward v. Wentz, 130 Ky. 705 , 113 S.W. 892, 1908 Ky. LEXIS 313 ( Ky. 1908 ) (decided under prior law).

An increase of an assessment by the board of supervisors without formal notice to the taxpayer was void, unless the taxpayer had received actual notice of the increase and had appeared before the board in opposition thereto. Ward v. Wentz, 130 Ky. 705 , 113 S.W. 892, 1908 Ky. LEXIS 313 ( Ky. 1908 ) (decided under prior law).

Action of board of supervisors in increasing assessment in larger amount than proposed in notice served on taxpayer was not invalid, where taxpayer had appeared before board and been heard in opposition to increase. Castle Craig Coal Co. v. Laurel County Board of Sup'rs, 197 Ky. 292 , 246 S.W. 833, 1923 Ky. LEXIS 627 ( Ky. 1923 ) (decided under prior law).

The board is not required, before increasing an assessment, to produce evidence to support its action, or produce witnesses whom the taxpayer may cross-examine. The taxpayer may offer evidence before the board to convince them that no increase should be made, and if he fails in this he has an opportunity, by appeal, to require the introduction of evidence by the board to justify its valuation. Hyden v. Breathitt County Board of Sup'rs, 244 Ky. 505 , 51 S.W.2d 441, 1932 Ky. LEXIS 448 ( Ky. 1932 ) (decided under prior law).

10. —Reduction.

Under ordinary circumstances the board of supervisors would have no power to reduce the assessment below the value fixed by the taxpayer in his schedule. Kentucky River Coal Corp. v. Knott County, 245 Ky. 822 , 54 S.W.2d 377, 1932 Ky. LEXIS 687 ( Ky. 1932 ) (decided under prior law).

A taxpayer who, by mistake, lists land as containing more acreage than it actually contains is not precluded by his list, and may have the acreage reduced to the correct amount on appeal from the board of supervisors. Letcher County v. Kentucky River Coal Corp., 250 Ky. 7 , 61 S.W.2d 891, 1933 Ky. LEXIS 620 ( Ky. 1933 ) (decided under prior law).

11. —Undervalued Property.

If the state or any taxing district felt that property had been assessed at too low a value, its remedy was by appeal to or from the board of supervisors, and it could not later attempt to assess the amount of the undervaluation as omitted property. Commonwealth v. J. M. Robinson, Norton & Co., 146 Ky. 218 , 142 S.W. 406, 1912 Ky. LEXIS 58 ( Ky. 1912 ) (decided under prior law). See Commonwealth v. American Tobacco Co., 96 S.W. 466, 29 Ky. L. Rptr. 745 (1906); Caldwell County v. First Nat'l Bank, 151 Ky. 720 , 152 S.W. 757, 1913 Ky. LEXIS 541 ( Ky. 1913 ) (decided under prior law).

12. —Unlisted Property.

County board of supervisors had power to assess intangible property not listed by the taxpayer or tax commissioner (now property valuation administrator), as against contention that such property could only be assessed as provided in KRS 132.320 . Commonwealth v. Bingham's Adm'r, 188 Ky. 616 , 223 S.W. 999, 1920 Ky. LEXIS 331 ( Ky. 1920 ) (decided under prior law).

13. Enjoining Collections.

Taxpayer had right to injunction restraining county from attempting to collect a tax on unmanufactured products in excess of the rate allowed by law, as against contention that his sole remedy was through application to the board of supervisors and appeal from the board. Gray v. R. J. Reynolds Tobacco Co., 200 Ky. 47 , 252 S.W. 134, 1923 Ky. LEXIS 16 ( Ky. 1923 ) (decided under prior law).

Collection of tax based on assessment of exempt property, either by itself or along with other property subject to taxation, may be enjoined in a suit by the taxpayer, he not being limited to the remedy of appeal to or from the board of supervisors. Kentucky & West Virginia Power Co. v. Holliday, 216 Ky. 78 , 287 S.W. 212, 1926 Ky. LEXIS 832 ( Ky. 1926 ) (decided under prior law). See Ryan v. Louisville, 133 Ky. 714 , 118 S.W. 992, 1909 Ky. LEXIS 226 ( Ky. 1909 ); Covington v. Lovell & Buffington Tobacco Co., 204 Ky. 40 , 263 S.W. 676, 1924 Ky. LEXIS 396 ( Ky. 1924 ).

Where action of board of supervisors in raising assessment was void because no notice of increase was served, a person who purchased the property after the assessment date could, by joining the original owner of the property as a party, maintain an action to enjoin enforcement of the tax to the extent of the increased assessment. Kentucky Nat'l Park Ass'n v. Reed, 250 Ky. 525 , 63 S.W.2d 614, 1933 Ky. LEXIS 735 ( Ky. 1933 ) (decided under prior law).

Collection of tax on assessment made or increased by board of supervisors without notice to taxpayer may be enjoined. Burnside Supply Co. v. Burnside Graded Common School, 260 Ky. 482 , 86 S.W.2d 160, 1935 Ky. LEXIS 502 ( Ky. 1935 ).

14. Exemptions.

Neither this section nor KRS 132.450 indicate a clear intention of the legislature that the statutory procedure for review of tax assessments shall be the exclusive method for determining whether property is exempt from taxation. Iroquois Post, A. L. v. Louisville, 279 S.W.2d 13, 1955 Ky. LEXIS 502 ( Ky. 1955 ).

15. Interest.

Interest on taxes provided by this statute does not apply where the county had no lawful right to assess the property during certain years. Commonwealth v. Thomas, 298 S.W.2d 302, 1957 Ky. LEXIS 369 ( Ky. 1957 ).

16. Taxpayer’s Valuation.

Except when the taxpayer’s valuation under this section is low as to impress the chancellor as being an act of bad faith, the taxpayer’s valuation and the payment thereon shall be considered full and complete for discount purposes. Meyers v. Parkway Professional Center, Inc., 344 S.W.2d 389, 1961 Ky. LEXIS 224 ( Ky. 1961 ).

The property owner was not required to provide factual evidence to support his appeal at the property valuation administrator conferencing stage of the assessment appeal; since KRS 133.120(3) related to the procedures before the board of assessment appeals (BAA), the provisions concerning the taxpayer’s obligation to provide reasonable information pertaining to the value of the property only applied to the proceedings occurring in front of the BAA. Dunaway v. DLX, Inc., 113 S.W.3d 632, 2002 Ky. App. LEXIS 401 (Ky. Ct. App. 2002).

17. Burden of Proof.

A taxpayer who appeals from the board of supervisors has the burden of proving that the assessment made by the board was excessive or improper. Marion County v. Wilson, 105 Ky. 302 , 49 S.W. 8, 20 Ky. L. Rptr. 1193 , 1899 Ky. LEXIS 206 ( Ky. 1899 ) (decided under prior law).

Taxpayer appealing to board of supervisors from assessment made by tax commissioner (now property valuation administrator) has burden of showing in what particulars the assessment is erroneous or excessive. Kentucky Heating Co. v. Louisville, 174 Ky. 142 , 192 S.W. 4, 1917 Ky. LEXIS 165 ( Ky. 1917 ), dismissed, 250 U.S. 653, 40 S. Ct. 53, 63 L. Ed. 1191, 1919 U.S. LEXIS 1804 (1919) (decided under prior law).

18. Evidence.

Paper which on its face did not purport to be statement of final action of board of supervisors could not be proved to be such by oral evidence. Cain v. Magoffin County, 198 Ky. 598 , 249 S.W. 766, 1923 Ky. LEXIS 501 ( Ky. 1923 ) (decided under prior law).

19. Judgment.

Decision of court on appeal from assessment for one year is not the law of the case on an appeal from the assessment for a following year. Board of Sup'rs v. Swift Coal & Timber Co., 238 Ky. 21 , 36 S.W.2d 664, 1931 Ky. LEXIS 176 ( Ky. 1931 ) (decided under prior law).

The action of the board of supervisors is binding on the person who owned the land on the assessment date, and on subsequent purchasers, until set aside in a proper proceeding to which both owners are parties. Kentucky Nat'l Park Ass'n v. Reed, 250 Ky. 525 , 63 S.W.2d 614, 1933 Ky. LEXIS 735 ( Ky. 1933 ) (decided under prior law).

20. Penalty.

Where taxpayer appealed from board of supervisors to quarterly court, then to Circuit Court, Court of Appeals, and United States Supreme Court, and appeal was not finally disposed of until after date on which taxes for year in question became delinquent, taxpayer was liable for delinquent tax penalty imposed by law, on tax finally found to be due. Klein v. Jefferson County Board of Tax Comm'rs, 242 Ky. 328 , 46 S.W.2d 480, 1932 Ky. LEXIS 270 ( Ky. 1932 ); Klein v. Commonwealth, 271 Ky. 756 , 113 S.W.2d 20, 1938 Ky. LEXIS 41 ( Ky. 1938 ) (decided under prior law).

Where appeal of taxpayer from board of supervisors was pending in court at time taxes for year in question became delinquent, and during time sheriff was collecting taxes for such year, and when appeal was finally disposed of and tax bill issued on final assessment sheriff was unable to locate property out of which to collect the taxes, taxpayer was liable to penalty imposed by KRS 135.040 in action against him under that section. Klein v. Commonwealth, 271 Ky. 756 , 113 S.W.2d 20, 1938 Ky. LEXIS 41 ( Ky. 1938 ) (decided under prior law).

Cited in:

Thomas v. Parsley, 283 Ky. 393 , 141 S.W.2d 302, 1940 Ky. LEXIS 337 ( Ky. 194 0); Blue Diamond Coal Co. v. Cornett, 300 Ky. 647 , 189 S.W.2d 963, 1945 Ky. LEXIS 618 ( Ky. 194 5); Buckner v. Clay, 306 Ky. 194, 206 S.W.2d 827, 1947 Ky. LEXIS 978 ( Ky. 1947 ); Goodwin v. Louisville, 309 Ky. 11 , 215 S.W.2d 557, 1948 Ky. LEXIS 1013 ( Ky. 1948 ); Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ); Fayette County Board of Supervisors v. O’Rear, 275 S.W.2d 577, 1954 Ky. LEXIS 1252 ( Ky. 1954 ); Commonwealth ex rel. Allphin v. Heaven Hill Distilleries, Inc., 279 S.W.2d 11, 1955 Ky. LEXIS 501 ( Ky. 1955 ); Jefferson Post, A. L. Dep’t v. Louisville, 280 S.W.2d 706, 1955 Ky. LEXIS 189 , 54 A.L.R.2d 992 ( Ky. 1955 ); Pond Creek Pocahontas Co. v. Breathitt County, 290 S.W.2d 34, 1956 Ky. LEXIS 305 ( Ky. 1956 ); Jones v. Records, 307 S.W.2d 205, 1957 Ky. LEXIS 87 ( Ky. 1957 ); Harlan County Board of Supervisors v. Hill, 382 S.W.2d 859, 1964 Ky. LEXIS 359 ( Ky. 1964 ); Kentucky Tax Com. v. Jefferson Motel, Inc., 387 S.W.2d 293, 1965 Ky. LEXIS 465 ( Ky. 1965 ); Harlan County Board of Supervisors v. Black Star Land Co., 392 S.W.2d 40, 1965 Ky. LEXIS 254 ( Ky. 1965 ); Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

Opinions of Attorney General.

The board of supervisors is not the proper judicial body to decide questions of exemption from ad valorem taxes. OAG 61-866 .

Where the taxpayer only raised the question of exemption before the board of supervisors after a proper assessment by the tax commissioner (now property valuation administrator), no proper protest was made and the tax bill became final. OAG 61-866 .

This section does not authorize the county board of supervisors to make blanket increases in the assessment of property in a county. OAG 64-378 .

A member of the board of supervisors may seek a review of his own property assessment. OAG 67-217 .

Where a group of taxpayers joined together in a petition to protest assessments it was not necessary that each taxpayer file a separate letter. OAG 67-217 .

Requests for review of assessments by the Department of Revenue or local officials named in this section may be presented to the board any time while the board of supervisors is in session. OAG 71-220 .

Although the Board of Assessment Appeals may review and change any assessment made by the property valuation administrator, the board has no authority to make a blanket review of property for equalization purposes. OAG 77-185 .

Where the county attorney has a conflict and cannot represent the Commonwealth before the board, then the fiscal court or the county attorney pursuant to subsection (7) (now (11)) of this section should appoint a substitute attorney to do so. OAG 78-100 .

Reduced assessments rendered by the members of the Tax Assessment Appeals Board on their own property were void where no petition for appeal was filed with the county clerk, but this did not mean that the members of the Tax Assessment Appeals Board could not have the assessments of their properties reviewed by the board, if they abided by the requirements of this chapter and if they disqualified themselves from consideration of the assessment of their own property. OAG 78-578 .

The appeal procedure of this section, and in which the county attorney represents the state and county, involves only the legal question of what is the proper assessment; the county attorney is collecting no tax. OAG 79-453 .

The General Assembly, in providing in subsection (7) (now (11)) of this section that the county attorney must represent the interest of the state and county in the assessment appeals, made no provisions for special compensation of the county attorney for such work. OAG 79-453 .

A county fiscal court may proceed to fix the tax rate for the 1981 ad valorem taxes before the end of any inspection period for final recapitulations of both real and tangible personal property. OAG 80-617 .

Where county taxpayers neither appealed the assessments of their property made by the property valuation administrator as provided in KRS 131.340 (renumbered as KRS 49.220 ) and this section nor attacked the constitutional or statutory authority of the public library district to levy the tax, the amount of the tax was final at the time the tax bills were mailed. No other avenues are available to the taxpayer for disputing the factual determination of the amount owed. OAG 82-265 .

Neither KRS 132.350 nor subsection (7) (now (11)) of this section requires the county attorney to defend the property valuation administrator in a legal action brought against him. OAG 91-231 .

The county attorney may represent the property valuation administrator if the fiscal court determines that the county has a definite interest in defending the action and directs the county attorney to undertake representation; but without such direction from the fiscal court, the county attorney has no duty to represent the property valuation administrator. OAG 91-231 .

Conference records containing the information required to be kept by KRS 133.120(1) and other information of a confidential nature that is information about property that constitutes the “affairs of any person” and “affairs of a person’s business,” as set forth in KRS 131.190(1) and is not of general recordation or routine observation may properly be withheld from disclosure under KRS 131.190(1) and KRS 61.878(1)( l ). However, information contained in the records that is either publicly recorded in records recognized as being subject to routine public scrutiny, or that may be relatively readily observed from a public street, should be made available for inspection. OAG 04-ORD-38.

The following information is exempt from public inspection under KRS 131.190(1): information provided at the conference from the taxpayer or authorized representative, property owner’s opinion of value, Deputy PVA comments, and property owner comments. Such information relates to one’s affairs or affairs of one’s business. OAG 04-ORD-38.

The following information is not exempt from public inspection under KRS 131.190(1): conference date/time, neighborhood/class, property address, PVA assessment, parcel ID#, property owner name, owner or representative with whom the conference is held, checklist of information reviewed at conference by Deputy PVA, date by which property owner had to file with the County Clerk, his appeal of the assessment to local board, taxpayer certification that information he submitted was true and accurate, and signature and date lines for the taxpayer or his representative and the Deputy PVA. OAG 04-ORD-38.

Research References and Practice Aids

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Underwood, Part-Time Prosecutors and Conflicts of Interest: A Survey and Some Proposals, 81 Ky. L.J. 1 (1993).

133.123. Department advice — Responsibility for determination of fair cash value.

When an appeal is taken from an assessment by the property valuation administrator, of property which the owner does not consider to be subject to taxation, it shall be the duty of the county board of assessment appeals to obtain and follow advice from the Department of Revenue relative to the taxability of such property; however, the board shall have full power and responsibility to make a determination of the fair cash value of such property.

History. Enact. Acts 1974, ch. 326, § 14; 2005, ch. 85, § 232, effective June 20, 2005.

133.125. Summary of appeals — Final recapitulation — Clerk of board of assessment appeals — Duties — Compensation.

  1. No later than three (3) working days after the expiration of the inspection period provided for in KRS 133.045 , or three (3) working days after any extension of a filing deadline for appeals as set out in KRS 133.120(2)(d), the county clerk shall provide a copy to the property valuation administrator of each appeal petition and a summary of the appeals filed with the county board of assessment appeals. The summary shall be in a format, or on a form, provided or approved by the Department of Revenue. The property valuation administrator shall, within three (3) working days of receipt of the summary, prepare and submit to the Department of Revenue a final recapitulation of the real property tax roll incorporating all changes made since the submission of the first recapitulation. Those properties under appeal shall be listed for recapitulation and certification purposes at the value claimed by the taxpayer. After submission of the final recapitulation to the Department of Revenue, assessments shall not be amended except for adjustments ordered by the board and for corrections made under the provisions of KRS 133.110 and KRS 133.130 .
  2. The county clerk, or an authorized deputy, shall act as clerk of the board of assessment appeals; and where additional board panels are appointed, as provided by law, one (1) authorized deputy shall act as clerk for each panel. An accurate record of the proceedings and orders of the board and of each of its authorized panels shall be kept and shall show the name of the owner of the property, the description, the type of property, the amount of the assessment the property valuation administrator placed on the property, and the amount of change made in the assessment by the board. A copy certified by the chairman of the board and attested by the county clerk shall be filed by the clerk with the property valuation administrator and with the Department of Revenue within five (5) days after the adjournment of the board.
  3. The county clerk shall certify to the county judge/executive the number of days during which the board was in session, and the court shall enter this fact of record along with the amount due the board members for their services. On a presentation of a copy of the order, the Finance and Administration Cabinet shall draw a warrant on the State Treasurer in favor of the board members and clerk for the amount due for their services.
  4. The county clerk and any authorized deputies serving as clerk of the board or a panel thereof shall be allowed the same compensation per day for their services as is allowed to members of the board of their county, and they shall be paid in the same manner as members of the board are paid. The county clerk and his authorized deputies shall be allowed compensation for completing and filing the record of the board in the same manner as allowed for their services while acting as clerk of the board or clerk of a panel of the board.

History. 4126: amend. Acts 1942, ch. 131, § 19, 32; 1949 (Ex. Sess.), ch. 2, § 8; 1960, ch. 186, Art. I, § 22; 1974, ch. 74, Art. II, § 9(1); 1974, ch. 326, § 7; 1978, ch. 384, § 265, effective June 17, 1978; 1980, ch. 317, § 6, effective July 15, 1980; 1988, ch. 303, § 12, effective July 15, 1988; 1992, ch. 449, § 7, effective April 13, 1992; 2005, ch. 85, § 233, effective June 20, 2005; 2017 ch. 81, § 4, effective March 21, 2017.

Compiler’s Notes.

This section was formerly compiled as KRS 133.050 (Acts 1942, ch. 131, §§ 19, 32) and subsection (2) of 133.190 .

NOTES TO DECISIONS

  1. Clerk’s Fees.
  2. Per Diem.
  3. Postage.
  4. Assessment.
1. Clerk’s Fees.

County clerk is entitled to no fee, other than his per diem, for making corrections in tax books made necessary by changes of valuation made by board of supervisors, or for certifying the approved assessments to the Department of Revenue, Goodlett v. Anderson County, 267 Ky. 166 , 101 S.W.2d 421, 1936 Ky. LEXIS 761 ( Ky. 1936 ); or for completing the assessment books before and after their revision by the board of supervisors, Taylor v. Jones, 253 Ky. 285 , 69 S.W.2d 372, 1934 Ky. LEXIS 648 ( Ky. 1934 ).

2. Per Diem.

One-half (1/2) of the clerk’s per diem under this section is payable out of the state treasury. Goodlett v. Anderson County, 267 Ky. 166 , 101 S.W.2d 421, 1936 Ky. LEXIS 761 ( Ky. 1936 ).

3. Postage.

Fiscal court had no authority to make allowance to county clerk for postage furnished by him to board of supervisors. Ray v. Woodruff, 168 Ky. 563 , 182 S.W. 662, 1906 Ky. LEXIS 277 ( Ky. 1906 ).

4. Assessment.

The failure of the board of supervisors to make a record of its action in assessing unlisted property did not invalidate the assessment. Caldwell County v. First Nat'l Bank, 151 Ky. 720 , 152 S.W. 757, 1913 Ky. LEXIS 541 ( Ky. 1913 ) (decided under prior law).

Cited in:

Veith v. Dunlap, 308 Ky. 386 , 214 S.W.2d 608, 1948 Ky. LEXIS 949 ( Ky. 1948 ).

Opinions of Attorney General.

Deputies serving as clerk to the board of supervisors should be paid directly, but the per diem would ultimately be considered as compensation to the clerk’s office. OAG 70-737 .

Where certain authorized deputies of the county clerk serve as clerk to the board of supervisors, the deputies are allowed the same compensation per day as is allowed to members of that board. OAG 70-737 .

Research References and Practice Aids

Cross-References.

Information relating to tax returns, supervisors shall not divulge, KRS 131.190 .

Property subject to state tax only, equalization of assessment of, KRS 132.200 .

Property valuation administrator’s and deputy’s property, assessment to be reviewed by supervisors, KRS 132.470 .

Valuation by property valuation administrator of property listed by taxpayer, KRS 132.450 .

133.130. Claims that property erroneously assessed against person other than owner — Submission of evidence — Protest to department.

  1. Any person claiming to be erroneously charged with any tax upon property not owned by the person may, after the person has received notice of the same by demand made upon the person to pay the tax, offer evidence in support of the complaint to the property valuation administrator of the county in which the assessment was made, or to the department if the assessment was made by the department. If the property valuation administrator or the department finds that the person was not the owner of the property assessed, the property valuation administrator or the department may correct the same by releasing the person from the payment of the tax, and shall assess the property immediately against the rightful owner.
  2. A protest may be made to the department under the provisions of KRS 131.110 from any action of the property valuation administrator or the department made under this section or under KRS 133.110 .

History. 4250: amend. Acts 1974, ch. 326, § 8; 1976 (Ex. Sess.), ch. 14, § 147, effective January 2, 1978; 1978, ch. 384, § 266, effective June 17, 1978; 1992, ch. 263, § 7, effective July 14, 1992; 2005, ch. 85, § 234, effective June 20, 2005; 2012, ch. 161, § 10, effective April 23, 2012.

NOTES TO DECISIONS

  1. Fiscal Court.
  2. Sale for Taxes Void.
  3. Effect of Reassessment.
  4. Assessment.
  5. Purchaser.
  6. Appeal.
1. Fiscal Court.

The fiscal court may not exonerate erroneous assessments as the county court is given exclusive authority to do so. Fannin v. Davis, 385 S.W.2d 321, 1964 Ky. LEXIS 158 ( Ky. 1964 ), overruled in part, Scalise v. Sewell-Scheuermann, 566 S.W.3d 539, 2018 Ky. LEXIS 451 ( Ky. 2018 ).

2. Sale for Taxes Void.

Where county court, on application of taxpayer, adjudged that taxpayer was liable for taxes only on 1,700 acres, instead of 57,000 acres assessed against him by board of supervisors, and no appeal was taken from such judgment, sale of land for taxes due on assessment made by board of supervisors, instead of corrected assessment made by court, was void. Southern Holding & Sec. Corp. v. Kentucky River Coal Corp., 21 F. Supp. 757, 1938 U.S. Dist. LEXIS 2461 (D. Ky. 1938 ), aff'd, Southern Holdings & Sec. Corp. v. Kentucky River Coal Corp., 112 F.2d 1008, 1940 U.S. App. LEXIS 4470 (6th Cir. Ky. 1940 ).

3. Effect of Reassessment.

Where the majority of Kentucky’s property valuation administrators refused to comply with a Department of Revenue directive to correct their assessments of real property after they had submitted their recapitulations to the department, their compliance would not have adversely affected the taxpayers’ ability to protest the increases in assessments, even though the statutory schedule for assessment and protest set forth in this section and KRS 133.030 to 133.045 could hypothetically start the period for inspection of the open tax rolls before the administrators could make the necessary increases and notify the taxpayers, since the Legislature has provided for an extension of the inspection period pursuant to subsection (1) of KRS 133.045 . Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

4. Assessment.

The court may not have assessed property against the rightful owner, in a proceeding for relief from assessment, unless such owner had been given notice and an opportunity to be heard. Garrett v. Creekmore, 121 Ky. 250 , 89 S.W. 166, 28 Ky. L. Rptr. 211 , 1905 Ky. LEXIS 200 ( Ky. 1905 ) (decided under prior law).

5. Purchaser.

Where purchaser of land had agreed with seller to pay taxes assessed for current year, he was not prejudiced by assessment of land in his name, and was not entitled to release from such assessment. Garrett v. Creekmore, 121 Ky. 250 , 89 S.W. 166, 28 Ky. L. Rptr. 211 , 1905 Ky. LEXIS 200 ( Ky. 1905 ) (decided under prior law).

6. Appeal.

An appeal may be taken to the Court of Appeals under this section regardless of the amount involved. Garrett v. Creekmore, 121 Ky. 250 , 89 S.W. 166, 28 Ky. L. Rptr. 211 , 1905 Ky. LEXIS 200 ( Ky. 1905 ).

Cited in:

Board of Aldermen v. Hunt, 284 Ky. 720 , 145 S.W.2d 814, 1940 Ky. LEXIS 551 ( Ky. 1940 ); Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ); Commonwealth ex rel. Allphin v. Heaven Hill Distilleries, Inc., 279 S.W.2d 11, 1955 Ky. LEXIS 501 ( Ky. 1955 ).

Opinions of Attorney General.

Department of Revenue form 62A366 is a paraphrase of this section so that if the form is properly signed and attested by the county clerk and entered in the county records, it is a valid court order and will support the action of the county court in correcting an erroneous assessment. OAG 74-903 .

After the county board of assessment appeals has performed its work and the tax bills have been made up, a person who claims to be erroneously charged with any tax upon property not owned by him must follow the procedure set forth in this section to have the tax bill exonerated. OAG 76-280 .

The county judge/executive signs tax exonerations as this function is administrative in character. OAG 78-73 .

Tax exoneration order should be filed and recorded in the county judge/executive’s “Executive Order Book.” OAG 80-56 .

The filing and recording of each tax exoneration by the county clerk entitles the clerk to a fee of $5.00 from the fiscal court, for the first three pages. OAG 80-56 .

Under the fee provisions of KRS 64.012 and under this section, the $5.00 fee to the county clerk for recording the exoneration order will have to be borne by the taxpayer complainant and not by the county fiscal court since the statutes make no provisions for payment by someone other than the complainant. OAG 80-140 .

While this section contains no express provision as to the recording of an order of tax exoneration, if these executive or administrative orders are to be properly preserved for the use of the petitioning parties, the courts and the public generally, such orders must necessarily be recorded as an executive or administrative order of the county government’s chief executive officer; the implied requirement of filing and recording such executive orders in the county judge/executive’s “Executive Order Book,” to be maintained by the county clerk, emerges from this section and by virtue of the nature of the county judge/executive’s function, and if the clerk refuses to accept the exonerations for recording, the county judge/executive can file a mandamus suit against the clerk to require the clerk to record such documents. OAG 80-214 .

133.140. Filing, examination and correction of intangible personal property schedules. [Repealed.]

Compiler’s Notes.

This section (4114i-15) was repealed by Acts 1942, ch. 131, § 32.

133.150. Equalization of county or district assessments by Department of Revenue.

The Department of Revenue shall equalize each year the assessments of the property among the counties. It shall compare the recapitulation of the property valuation administrator’s books from each county with the records of sales of land in such county or with such other information that it may obtain from any source and shall determine the ratio of the assessed valuation of the property to the fair cash value. The Department of Revenue shall have power to increase or decrease the aggregate assessed valuation of the property of any county or taxing district thereof or any class of property or any item in any class of property. The Department of Revenue shall fix the assessment of all property at its fair cash value. When the property in any county, or any class of property in any county, is not assessed at its fair cash value, such assessment shall be increased or decreased to its fair cash value by fixing the percentage of increase or decrease necessary to effect the equalization.

History. 4114i-16, 4114i-18: amend. Acts 1942, ch. 131, §§ 23, 32; 1964, ch. 141, § 16; 2005, ch. 85, § 235, effective June 20, 2005.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Construction.
  3. Jurisdiction.
  4. Assessment at Percentage.
  5. Power to Order Reassessment.
  6. Increased Assessment.
  7. Equalization.
  8. Lack of Information.
  9. Hearing and Review.
  10. Evidence.
  11. Correction of Errors.
  12. Appeal.
1. Constitutionality.

Provision for determining fair cash value of personal property according to ratio of assessed value of real estate to its fair cash value as shown by reports of real estate sales, was not unconstitutional. Ray v. Armstrong, 140 Ky. 800 , 131 S.W. 1039, 1910 Ky. LEXIS 382 ( Ky. 1910 ) (decided under prior law).

Law that provided for appeal by county from decision of state tax commission raising valuation of property in such county did not violate Ky. Const., § 181. Fayette County v. Wells, 195 Ky. 608 , 243 S.W. 4, 1922 Ky. LEXIS 367 ( Ky. 1922 ) (decided under prior law).

Law that provided for equalization of assessments of property among the counties and among different classes of property did not violate any constitutional provision guaranteeing the right of local self-government. Johnson v. Fordson Coal Co., 213 Ky. 445 , 281 S.W. 472, 1926 Ky. LEXIS 535 ( Ky. 1926 ), writ of error dismissed, 275 U.S. 494, 48 S. Ct. 82, 72 L. Ed. 391, 1927 U.S. LEXIS 310 (U.S. 1927).

Law that provided for equalization of assessments of property among the counties and among different classes of property did not violate the due process clause of the federal Constitution, or Ky. Const., §§ 2 or 59. Johnson v. Fordson Coal Co., 213 Ky. 445 , 281 S.W. 472, 1926 Ky. LEXIS 535 ( Ky. 1926 ), writ of error dismissed, 275 U.S. 494, 48 S. Ct. 82, 72 L. Ed. 391, 1927 U.S. LEXIS 310 (U.S. 1927).

2. Construction.

This section authorizes the Department of Revenue to equalize the assessment of classes of property by comparing the aggregate assessments of such classes of property with the individual assessment made by the county tax commissioner (now property valuation administrator). Department of Revenue v. Oldham County, 415 S.W.2d 386, 1967 Ky. LEXIS 318 ( Ky. 1967 ).

3. Jurisdiction.

The state board of equalization has no power to review the valuation of a particular piece of property. McCracken Fiscal Court v. McFadden, 275 Ky. 819 , 122 S.W.2d 761, 1938 Ky. LEXIS 499 ( Ky. 1938 ) (decided under prior law).

4. Assessment at Percentage.

Assessment of property at a percentage of its fair cash value is unlawful and fact that it has been ignored for 75 years does not justify nullification of the requirement of assessment at fair cash value. Russman v. Luckett, 391 S.W.2d 694, 1965 Ky. LEXIS 322 ( Ky. 1965 ). See McDevitt v. Luckett, 391 S.W.2d 700, 1965 Ky. LEXIS 323 ( Ky. 1965 ).

5. Power to Order Reassessment.

Where a majority of the state’s property valuation administrators submitted recapitulations of the aggregate value of real property by class in their counties to the Department of Revenue pursuant to KRS 133.040 , but upon being informed by the department that the assessments were not in compliance with the full fair market value requirements of Ky. Const., § 172, refused the department’s directives, sent pursuant to subsection (1) of KRS 133.040 , to raise the aggregate assessed values by minimum increases to make them satisfy the requirement of fair cash value, the Department properly ordered the administrator’s paychecks withheld pursuant to subsection (3) of KRS 132.690 until they complied; the department has an explicit mandate to order the administrators to correct valuations which are different, and this mandate is not superseded by the department’s ability to assess property itself under this section, since this is only one of several powers given the department to assure compliance with Ky. Const., § 172. Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

6. Increased Assessment.

The fact that a blanket increase of the assessment of tangible personal property had the effect of increasing the assessment of household furniture beyond its actual value did not invalidate the increase, where total value of household furniture as so increased was less than total of personal exemptions and in practically every case the taxpayer’s personal exemption was more than the assessed value of his furniture. Letcher County Fiscal Court v. State Tax Com., 211 Ky. 609 , 277 S.W. 988, 1925 Ky. LEXIS 933 ( Ky. 1925 ) (decided under prior law).

Increase of assessment of coal lands owned in fee, without increasing assessment of coal rights owned by persons other than surface owners, was proper. Letcher County Fiscal Court v. State Tax Com., 211 Ky. 609 , 277 S.W. 988, 1925 Ky. LEXIS 933 ( Ky. 1925 ) (decided under prior law).

Law that provided for equalization of assessments of property among the counties and among different classes of property did not authorize an increase of the assessment of an individual taxpayer except for the purpose of procuring equalization. Johnson v. Fordson Coal Co., 213 Ky. 445 , 281 S.W. 472, 1926 Ky. LEXIS 535 ( Ky. 1926 ), writ of error dismissed, 275 U.S. 494, 48 S. Ct. 82, 72 L. Ed. 391, 1927 U.S. LEXIS 310 (U.S. 1927).

7. Equalization.

The fact that an increase of the aggregate assessments of a county may result in assessing the property of an individual taxpayer at more than its fair cash value does not render the increase unconstitutional. Ray v. Armstrong, 140 Ky. 800 , 131 S.W. 1039, 1910 Ky. LEXIS 382 ( Ky. 1910 ) (decided under prior law).

It was not necessary that the average percentage of assessed value to actual value throughout the state be taken and used as the standard of comparison in equalizing assessments between counties. Ray v. Armstrong, 140 Ky. 800 , 131 S.W. 1039, 1910 Ky. LEXIS 382 ( Ky. 1910 ) (decided under prior law).

The fact that the assessments of a large number of counties were admittedly not raised to the fair cash value would not invalidate an increase of the assessments of a particular county, where the assessments of all counties were equalized according to a reasonable standard of comparison. Ray v. Armstrong, 140 Ky. 800 , 131 S.W. 1039, 1910 Ky. LEXIS 382 ( Ky. 1910 ) (decided under prior law).

In determining whether assessment of a particular county has been properly equalized with assessments of other counties in the state, it is proper to give most consideration to other counties whose property is similar in character and use to the county in question. Letcher County Fiscal Court v. State Tax Com., 211 Ky. 609 , 277 S.W. 988, 1925 Ky. LEXIS 933 ( Ky. 1925 ) (decided under prior law).

8. Lack of Information.

The fact that reports of real estate transfers, were not received from several counties, would not invalidate the increase of the assessments of other counties. Ray v. Armstrong, 140 Ky. 800 , 131 S.W. 1039, 1910 Ky. LEXIS 382 ( Ky. 1910 ) (decided under prior law).

9. Hearing and Review.

This section and KRS 133.160 , 133.170 must be construed as necessarily contemplating, to avoid unconstitutional action and to accomplish the overall objective of equalization, that the individual taxpayer be afforded an opportunity for a hearing and appellate review. Fitzpatrick v. Patrick, 410 S.W.2d 143, 1966 Ky. LEXIS 31 ( Ky. 1966 ).

10. Evidence.

State board of equalization and assessment had right to take and consider evidence other than county clerks’ reports of real estate transfers, including evidence as to omitted personalty, as against contention that such evidence influenced board to raise assessments in order to compensate for omitted property. Ray v. Armstrong, 140 Ky. 800 , 131 S.W. 1039, 1910 Ky. LEXIS 382 ( Ky. 1910 ) (decided under prior law).

11. Correction of Errors.

If, following blanket raise of assessment by state tax commission, an error is made by the county clerk in determining how the raise is to affect the deduction of exempt property, the error may be corrected under law providing for correction of error in assessment and if not so corrected the sheriff cannot raise the question in connection with his settlement. Commonwealth use of Phillips v. Tate, 247 Ky. 516 , 57 S.W.2d 491, 1933 Ky. LEXIS 425 ( Ky. 1933 ) (decided under prior law).

12. Appeal.

Unless the fiscal court applies for a court review, the action of the tax commission is final and conclusive, and the local authorities must correct the tax books to conform. Fayette County v. Wells, 195 Ky. 608 , 243 S.W. 4, 1922 Ky. LEXIS 367 ( Ky. 1922 ).

Where taxpayer, on appeal to quarterly court, obtained an assessment of his property at fair cash value, the state board of equalization and assessment could not increase such taxpayer’s valuation by a general increase of the valuation of all property in the county, since the judgment of the quarterly court was judicial and not administrative action, the proceeding was one of valuation and not of equalization, and being the only statutory method of reviewing the valuation of a particular piece of property, was conclusive on all persons. McCracken Fiscal Court v. McFadden, 275 Ky. 819 , 122 S.W.2d 761, 1938 Ky. LEXIS 499 ( Ky. 1938 ) (decided under prior law).

The fact that an order of the state board of equalization increasing the value of the entire county was void as to a taxpayer who had appealed to the quarterly court and obtained a judgment fixing the value of his property would not render the order void as to other taxpayers who had not appealed. McCracken Fiscal Court v. McFadden, 275 Ky. 819 , 122 S.W.2d 761, 1938 Ky. LEXIS 499 ( Ky. 1938 ) (decided under prior law).

An appeal cannot be taken by a taxpayer under this section from the action of the board of supervisors. The jurisdiction exercised by the state tax commission is original and may be initiated by itself alone and not at the request of either a taxpayer, a subordinate taxing district, or any other state authority. Perry County v. Kentucky River Coal Corp., 274 Ky. 235 , 118 S.W.2d 550, 1938 Ky. LEXIS 254 ( Ky. 1938 ) (decided under prior law).

Cited in:

Blue Diamond Coal Co. v. Cornett, 300 Ky. 647 , 189 S.W.2d 963, 1945 Ky. LEXIS 618 ( Ky. 1945 ); Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ); Pond Creek Pocahontas Co. v. Breathitt County, 290 S.W.2d 34, 1956 Ky. LEXIS 305 ( Ky. 1956 ); Barrett v. Reynolds, 817 S.W.2d 439, 1991 Ky. LEXIS 146 ( Ky. 1991 ); St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Opinions of Attorney General.

Any individual property owner whose property is increased above fair cash value by a blanket increase may petition the county clerk to have such increase passed upon by the county board of supervisors and may appeal from their decision to the board of tax appeals. OAG 68-351 .

The county fiscal court may have blanket increases reviewed by the Kentucky board of tax appeals. OAG 68-351 .

The Department of Revenue has authority to apply a blanket increase to a class of property in a county where their studies have determined that the aggregate assessed value of such property is below fair cash value. OAG 68-351 .

The Department of Revenue is the certifying authority with respect to county assessments and such certification shall include any equalization factor required to bring the assessment of the property in the county to fair cash value. OAG 68-352 .

Research References and Practice Aids

Cross-References.

Crude petroleum, review and equalization of assessment of, KRS 137.160 .

Department of Revenue, supervision, equalization and review of assessments by, KRS 131.030 , 131.130 , 131.140 .

Distilled spirits in warehouses, review and equalization of assessment of, KRS 132.140 .

Jeopardy assessments, review and equalization, KRS 131.150 .

Kentucky Board of Tax Appeals, supervision, equalization and review of assessments by, KRS 131.110 .

Omitted property assessments, review by department of revenue, KRS 132.320 , 132.330 .

Property valuation administrators to attend hearings before Kentucky board of tax appeals, KRS 132.460 .

Kentucky Law Journal.

Martin, Practice Before the Kentucky Department of Revenue, 28 Ky. L.J. 4 (1939).

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Revenue Assessment Levels and Taxing Rate: The Kentucky Rollback Law, 60 Ky. L.J. 105 (1971).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

Public Schools: Serrano v. Priest — A Challenge to Kentucky, 60 Ky. L.J. 156 (1971).

133.160. Notice of assessment raised by Department of Revenue — To whom given — Contents.

When it is contemplated by the Department of Revenue that it will be necessary to raise the assessed valuation of property in any county, it shall give notice of the contemplated action to the county judge/executive, the superintendent of any school district affected by such action, the mayor of any city which is affected and which has adopted the assessment, and to the taxpayers of that county through the county judge/executive, who shall post the notice sent him on the courthouse door and certify to the Department of Revenue that this has been done, and it shall fix a time and place for a hearing which may be in Frankfort or any convenient place in or nearer the county seat.

History. 4114i-16, 4114i-17; Acts 1942, ch. 131, §§ 24, 32; 1946, ch. 233, § 3; 1964, ch. 141, § 17; 1968, ch. 179, § 3; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1978, ch. 384, § 267, effective June 17, 1978; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 340, effective July 13, 1990; 2005, ch. 85, § 236, effective June 20, 2005.

Compiler’s Notes.

Former KRS 133.160 (4114i-16, 4114i-17: amend. Acts 1942, ch. 131, §§ 24, 32; 1946, ch. 233, § 3; 1964, ch. 141, § 17; 1968, ch. 179, § 3; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1978, ch. 384, § 267, effective June 17, 1978) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 340, effective July 13, 1990.

NOTES TO DECISIONS

  1. Notice.
  2. Hearing and Review.
1. Notice.

Notice to individual taxpayers was not a constitutional prerequisite to increase of aggregate county assessments. The notice the individual taxpayers receive by virtue of the statutory provisions as to the time of meeting of the state board, and the notice to the county judge (now county judge/executive) as representative of the taxpayers, was sufficient. Ray v. Armstrong, 140 Ky. 800 , 131 S.W. 1039, 1910 Ky. LEXIS 382 ( Ky. 1910 ) (decided under prior law).

Where the Department of Revenue failed to notify two (2) mayors of increased assessments affecting eight parcels of farmland within the limits of their cities, the Court of Appeals held the increased assessment for city taxes on these parcels unenforceable because of failure to give notice, but allowed the increased assessment on 743 parcels of farmland in the county to stand. Department of Revenue v. Oldham County, 415 S.W.2d 386, 1967 Ky. LEXIS 318 ( Ky. 1967 ).

Where the new property valuation administrator had attempted to reassess property valuations upward, but had only sent notices to about 40 percent of the affected property owners, and where some owners had actual notice and had appealed their valuations, the proper remedy would be to allow the increase as to those owners who had received a notice or had actual notice and who had appealed, subject to the outcome of those appeals, and to void the increases as to those property owners who had not received notice and who had not appealed their reassessments. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

2. Hearing and Review.

This section and KRS 133.150 , 133.170 must be construed as necessarily contemplating, to avoid unconstitutional action and to accomplish the overall objective of equalization, that the individual taxpayer be afforded an opportunity for a hearing and appellate review. Fitzpatrick v. Patrick, 410 S.W.2d 143, 1966 Ky. LEXIS 31 ( Ky. 1966 ).

Cited in:

Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ); Allphin v. Daviess County Fiscal Court, 273 S.W.2d 359, 1954 Ky. LEXIS 1158 ( Ky. 1954 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

133.170. Certification of equalization — Appeal by fiscal court — Exoneration from increase in value — Application — Procedure — Appeal.

  1. When the Department of Revenue has completed its equalization of the assessment of the property in any county, it shall certify its action to the county judge/executive, with a copy of the certification for the county clerk, to be laid before the fiscal court of the county.
  2. If the fiscal court deems it proper to ask for a review of the aggregate equalization of any class or subclass of property, it shall direct the county attorney to prosecute an appeal of the aggregate increase to the Kentucky Claims Commission pursuant to KRS 49.220 within ten (10) days from the date of the certification.
  3. Within ten (10) days from the date that the department’s aggregate equalization of any or all classes or subclasses of property becomes final by failure of the fiscal court to prosecute an appeal or by order of the Kentucky Claims Commission pursuant to KRS 49.200 to 49.250 or the courts, the fiscal court shall cause to be published, at least one (1) time, in the newspaper having the largest circulation within the county, a public notice of the department’s action.
  4. Within ten (10) days from the date of the publication of the notice required in subsection (3) of this section, any individual taxpayer whose property assessment is increased above its fair cash value by the equalization action may file with the county clerk an application for exoneration of his property assessment from the increase. The application shall be filed in duplicate and shall include the name and address of the person in whose name the property is assessed; the assessment of the property before the increase; the description and location of the property including the description shown on the tax roll; the property owner’s reason for appeal; and all other pertinent facts having a bearing upon its value. The county clerk shall forward one (1) copy, of each application for exoneration to the Department of Revenue and shall exclude the amount of the equalization increase from the assessment in the preparation of the property tax bill for each property for which an application for exoneration has been filed.
  5. The county judge/executive shall reconvene the board of supervisors immediately following the close of the period for filing applications for exoneration from the increase. The board shall schedule and conduct hearings on all applications in the manner prescribed for hearing appeals by KRS 133.120 ; however, the board shall not have authority to reduce any assessment to an amount less than that listed for the property at the time of adjournment of the regular board session.
  6. The county clerk shall act as clerk of the reconvened board and shall keep an accurate record of the proceedings in the same manner as provided by KRS 133.125 . Within five (5) days of the adjournment of the reconvened board, he shall notify each property owner in writing of the final action of the board with relation to the equalization increase and shall forward a copy of the proceedings certified by the chairman of the board and attested by him to the Department of Revenue and to the other taxing districts participating in the tax.
  7. Any taxpayer whose application has been denied, in whole or in part, may appeal to the Kentucky Claims Commission as provided in KRS 49.220 , and appeals thereafter may be taken to the courts as provided in KRS 49.250 .
  8. The provisions of KRS 133.120(9) shall apply to the payment of taxes upon any property assessment for which an application for exoneration has been filed.
  9. The provisions of subsections (4), (5), (6), (7), and (8) of this section shall only apply to appeals growing out of equalization action by the Department of Revenue under the provisions of KRS 133.150 .

HISTORY: 4118i-18; Acts 1964, ch. 141, § 18; 1968, ch. 179, § 4; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 341, effective July 13, 1990; 1992, ch. 449, § 8, effective April 13, 1992; 2005, ch. 85, § 237, effective June 20, 2005; 2017 ch. 74, § 73, effective June 29, 2017.

Compiler’s Notes.

Former KRS 133.170 (4118i-18: Acts 1964, ch. 141, § 18; 1968, ch. 179, § 4) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 341, effective July 13, 1990.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Final and Conclusive Assessment.
  3. Hearing and Review.
  4. Injunction.
  5. Reversal.
  6. Appeal.
1. Constitutionality.

The provision of this section limiting the right of appeal to the Franklin Circuit Court is not unconstitutional. Johnson v. Fordson Coal Co., 213 Ky. 445 , 281 S.W. 472, 1926 Ky. LEXIS 535 ( Ky. 1926 ), writ dismissed, Fordson Coal Co. v. Moore, 275 U.S. 494, 48 S. Ct. 82, 72 L. Ed. 391, 1927 U.S. LEXIS 310 (1927) (decision prior to 1964 amendment).

2. Final and Conclusive Assessment.

If the county does not proceed under this section for court review of the action of the tax commission, the assessment as equalized by the tax commission is final and conclusive. Fayette County v. Wells, 195 Ky. 608 , 243 S.W. 4, 1922 Ky. LEXIS 367 ( Ky. 1922 ) (decision prior to 1964 amendment).

3. Hearing and Review.

This section and KRS 133.150 , 133.160 must be construed as necessarily contemplating, to avoid unconstitutional action and to accomplish the overall objective of equalization, that the individual taxpayer be afforded an opportunity for a hearing and appellate review. Fitzpatrick v. Patrick, 410 S.W.2d 143, 1966 Ky. LEXIS 31 ( Ky. 1966 ).

4. Injunction.

Where no action was taken by the fiscal court under this section, the taxpayers of the county had no right to maintain a suit to enjoin the county clerk from issuing tax bills based on the increased assessment made by the tax commission. Farm Bureau of Calloway County v. Pool, 205 Ky. 365 , 265 S.W. 809, 1924 Ky. LEXIS 109 ( Ky. 1924 ) (decision prior to 1964 amendment).

5. Reversal.

The courts cannot reverse or correct a finding or ruling of the tax commission for an error of judgment or discretion alone. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ) (decision prior to 1964 amendment).

6. Appeal.

Where notice of appeal was filed within 10 days after entry of judgment but appeal was not docketed with Court of Appeals until 16 days after entry of judgment the appeal was not docketed within the time required by this section and the appeal must fail. Allphin v. Daviess County Fiscal Court, 273 S.W.2d 359, 1954 Ky. LEXIS 1158 ( Ky. 1954 ).

Cited in:

Perry County v. Kentucky River Coal Corp., 274 Ky. 235 , 118 S.W.2d 550, 1938 Ky. LEXIS 254 ( Ky. 1938 ); McCracken Fiscal Court v. McFadden, 275 Ky. 819 , 122 S.W.2d 761, 1938 Ky. LEXIS 499 ( Ky. 1938 ); Middleton’s Adm’x v. Middleton, 297 Ky. 109 , 179 S.W.2d 227, 1944 Ky. LEXIS 692 ( Ky. 1944 ); Belk-Simpson Co. v. Hill, 288 S.W.2d 369, 1956 Ky. LEXIS 262 ( Ky. 1956 ); Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ); Barrett v. Reynolds, 817 S.W.2d 439, 1991 Ky. LEXIS 146 ( Ky. 1991 ).

Opinions of Attorney General.

The county fiscal court may have blanket increases reviewed by the Kentucky board of tax appeals. OAG 68-351 .

The Department of Revenue has authority to apply a blanket increase to a class of property in a county where their studies have determined that the aggregate assessed value of such property is below fair cash value. OAG 68-351 .

Any individual property owner whose property is increased above fair cash value by a blanket increase may petition the county clerk to have such increase passed upon by the county board of supervisors and may appeal from their decision to the board of tax appeals. OAG 68-351 .

The Department of Revenue is the certifying authority with respect to county assessments and such certification shall include any equalization factor required to bring the assessment of the property in the county to fair cash value. OAG 68-352 .

Research References and Practice Aids

Kentucky Law Journal.

Martin, Social Implications of Some Recent Kentucky Property Tax Cases, 29 Ky. L.J. 255 (1941).

133.180. Certification by department to county clerk — Certification of tax books — Effect.

  1. When the department has completed its action on the assessment of property in any county, it shall immediately certify to the county clerk the assessment and the amount of taxes due. The department shall charge the amount of taxes due from the county to the sheriff of the county. When any item of property is in process of appeal and the valuation has not been finally determined, the certification of such property shall be based on the valuation claimed by the taxpayer as the true value. The county clerk shall affix the certification to the tax books and enter it of record in the order book, and it shall be the sheriff’s or collector’s warrant for the collection of taxes.
  2. Where provision is not otherwise made for the collection of taxes, the assessment or proportion thereof allocable to a local taxing district shall be certified to the county clerk in which the taxing district is located, for collection as provided by law.

History. 4128a-2; Acts 1949 (Ex. Sess.), ch. 2, § 9; 1960, ch. 186, Art. I, § 38; 1964, ch. 141, § 19; 1974, ch. 326, § 9; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 342, effective July 13, 1990; 2005, ch. 85, § 238, effective June 20, 2005; 2009, ch. 10, § 43, effective January 1, 2010.

Compiler’s Notes.

Former KRS 133.180 (4128a-2: amend. Acts 1949 (Ex. Sess.), ch. 2, § 9; 1960, ch. 186, Art. I, § 38; 1964, ch. 141, § 19; 1974, ch. 326, § 9) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 342, effective July 13, 1990.

NOTES TO DECISIONS

  1. Certification Date Directory.
  2. Change of Tax Rate.
  3. Relation Back.
  4. Error Correction.
  5. Effect on Other Laws.
1. Certification Date Directory.

The former provision of this section that the amount of taxes due according to the equalization made by the tax commission shall be certified to the county clerk and charged to the sheriff not later than June 1 is merely directory, and a certification after that date will not be invalid in the absence of prejudice to the taxpayer arising from the delay. Johnson v. Fordson Coal Co., 213 Ky. 445 , 281 S.W. 472, 1926 Ky. LEXIS 535 ( Ky. 1926 ), writ of error dismissed, 275 U.S. 494, 48 S. Ct. 82, 72 L. Ed. 391, 1927 U.S. LEXIS 310 (U.S. 1927).

Former requirement of certification of assessment by department by June 20 held directory only and where assessment was certified on July 29, 1966, and no prejudice was shown it was valid. Department of Revenue v. Oldham County, 415 S.W.2d 386, 1967 Ky. LEXIS 318 ( Ky. 1967 ).

2. Change of Tax Rate.

Where act changing local tax rate on certain property did not take effect until July 18, 1924, taxes based on assessments as of June 1, 1923, were governed by old rate, although certification of final equalization of such assessment was not made until November 1, 1924, such certification relating back to June 1, 1924 (see now KRS 133.185 ). Ross v. First Nat'l Bank, 213 Ky. 453 , 281 S.W. 517, 1926 Ky. LEXIS 536 ( Ky. 1926 ).

3. Relation Back.

A certification made by the tax commission under this section after June 1 (now June 20) will relate back to June 1, preserving, however, all existing review remedies. Ross v. First Nat'l Bank, 213 Ky. 453 , 281 S.W. 517, 1926 Ky. LEXIS 536 ( Ky. 1926 ).

4. Error Correction.

If, following blanket raise of assessment by state tax commission, an error is made by the county clerk in determining how the raise is to affect the deduction of exempt property, the error may be corrected under law providing for correction of errors in assessment and if not so corrected the sheriff cannot raise the question in connection with his settlement. Commonwealth use of Phillips v. Tate, 247 Ky. 516 , 57 S.W.2d 491, 1933 Ky. LEXIS 425 ( Ky. 1933 ).

5. Effect on Other Laws.

The Department of Revenue was not bound to use the figure it had certified under this section as the fair cash value of property under subsection (1) of KRS 157.380 (repealed) for purposes of the minimum foundation program. Board of Education v. Commonwealth, Dep't of Revenue, 515 S.W.2d 231, 1974 Ky. LEXIS 230 ( Ky. 1974 ).

Cited in:

National Distillers Products Corp. v. Board of Education, 256 S.W.2d 481, 1952 Ky. LEXIS 1151 ( Ky. 1952 ); St. Matthews v. Trueheart, 274 S.W.2d 52, 1954 Ky. LEXIS 1221 ( Ky. 1954 ); St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Opinions of Attorney General.

Under this section the state tax commission may make an assessment in July which is retroactive to the preceding January. OAG 60-790 .

Where a city adopted essentially the same assessment, levy and collection dates provided for county and state taxes under which the collection of city taxes would begin in September or October, a city tax levy in June would have been made at the proper time. OAG 68-57 .

The Department of Revenue is the certifying authority with respect to county assessments and such certification shall include any equalization factor required to bring the assessment of the property in the county to fair cash value. OAG 68-352 .

Where the Department of Revenue certified the county assessment to the county clerk on August 21, 1980, the tax rates were fixed by such certification. OAG 80-503 .

The limitations on the ad valorem tax rate which a city can levy are determined, in part, by applying the proposed rate levied by the city to the assessments certified by the Department of Revenue as provided in this section; subsequent corrections in valuations made by the department as the result of adjustments to certain properties which were in the appeal process at the time the certification was made are not relevant in computing the limitations. OAG 82-186 .

133.181. Compensation of county clerk for correcting tax books following equalization.

If the Department of Revenue, in making its equalization of the property in any county in accordance with the provisions of KRS 133.150 , causes any increase or decrease to be made in the value of any property, the county clerk shall correct the tax books to comply with the final certification of the assessment by the department. As compensation for his services, the clerk shall receive the same compensation per day that he receives for serving as clerk of the board of assessment appeals for as many days as are necessary to make the corrections but not to exceed a total of ten (10) days. One-half (1/2) of such amounts shall be paid out of the county levy and one-half (1/2) out of the State Treasury. Such sums shall be paid at the same time and in the same manner as is the clerk’s compensation for preparing the tax bills under KRS 133.240(2).

History. Enact. Acts 1946, ch. 56; 1964, ch. 141, § 20; 1974, ch. 326, § 10; 1978, ch. 384, § 268, effective June 17, 1978; 2005, ch. 85, § 239, effective June 20, 2005.

133.185. Tax rate not to be fixed until assessment is certified under KRS 133.180 — Exception.

Except as provided in KRS 132.487 , no tax rate for any taxing district imposing a levy upon the county assessment shall be determined before the assessment is certified by the Department of Revenue to the county clerk as provided in KRS 133.180 .

History. Enact. Acts 1942, ch. 131, §§ 26, 32; 1949 (Ex. Sess.), ch. 2, § 10; 1964, ch. 141, § 21; 1978, ch. 384, § 269, effective June 17, 1978; 1984, ch. 54, § 9, effective January 1, 1985; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 343, effective July 13, 1990; 2005, ch. 85, § 240, effective June 20, 2005.

Compiler’s Notes.

Former KRS 133.185 (Enact. Acts 1942, ch. 131, §§ 26, 32; 1949 (Ex. Sess.), ch. 2, § 10; 1964, ch. 141, § 21; 1978, ch. 384, § 269, effective June 17, 1978; 1984, ch. 54, § 9, effective January 1, 1985) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 343, effective July 13, 1990.

NOTES TO DECISIONS

  1. Assessment Precedes Levy.
  2. State Tax Rate.
  3. Applicable Tax Rate.
1. Assessment Precedes Levy.

This section definitely states that the assessment must precede the levy of the tax rate. National Distillers Products Corp. v. Board of Education, 256 S.W.2d 481, 1952 Ky. LEXIS 1151 ( Ky. 1952 ).

2. State Tax Rate.

This section, which relates to the imposition of a tax rate for a taxing district, such as a city, county or school, has no relationship to Ky. Const., § 171 which requires that the General Assembly shall provide an annual tax sufficient to defray the estimated expenses of the Commonwealth; the state tax rate on all personal property, including motor vehicles, is not fixed by the processes outlined in this section, KRS 132.487(2), or 132.487(6) which provide for submission of a proposal, recapitulation of motor vehicles by the property valuation administrator, and certification by the Department of Revenue, but rather, the state tax rate is fixed by the General Assembly and is currently embodied in KRS 132.020 . There is no conflict between KRS 132.487(2) and 132.487(6) with the constitutional provision that the taxes shall be sufficient to defray the expenses of the state. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

3. Applicable Tax Rate.

Where statute changing local tax rate on certain property did not take effect until after March 1, old rate applied to taxes that became due and payable on March 1. Ross v. First Nat'l Bank, 213 Ky. 453 , 281 S.W. 517, 1926 Ky. LEXIS 536 ( Ky. 1926 ) (decided under prior law).

The tax rate that prevailed at the time the taxes for a particular year became due and payable was the rate to be applied to the taxes for such year, regardless of when the assessment was made or completed. Ross v. First Nat'l Bank, 213 Ky. 453 , 281 S.W. 517, 1926 Ky. LEXIS 536 ( Ky. 1926 ) (decided under prior law).

Opinions of Attorney General.

Where sixth-class city generally used county property assessments as the basis for its city tax bills that were usually sent out on July 1, but the county property tax assessments were not going to be certified in time for the city to issue bills on July 1, the city had two (2) alternatives available to it: either, delay issuance of the tax bills until the county property tax assessments were certified by the Department of Revenue, or, appoint its own assessor and issue its own property assessments in accordance with former KRS 92.520 . OAG 80-182 .

Where the Department of Revenue certified the county assessment to the county clerk, pursuant to KRS 133.180 , on August 21, 1980, the tax rates were fixed by such certification. OAG 80-503 .

Where an area planning commission adopted a special fiscal year beginning on January 1, 1981, and ending on June 30, 1981, it improperly used the estimated valuation for property as of the January 1, 1981 assessment date, since it is absolutely necessary that an assessment be made before the levy can be imposed and since this section requires that the assessment be certified to the county clerk before the tax rate can be imposed; accordingly, the ad valorem tax in question must be based on the assessment made on January 1, 1980. OAG 81-355 .

Where a city chose to adopt the county assessment, its assessment date was January 1 preceding the city’s fiscal year; the city’s levy date, however, must be subsequent to the certification of the county assessments by the Department of Revenue. OAG 82-186 .

A public health taxing district cannot establish its health tax rate for a particular year until the county assessments for that year have been certified by the Revenue Cabinet as provided in KRS 133.180 . The district must, however, establish its tax rate prior to the levy of the county ad valorem tax by the county fiscal court. OAG 82-382 .

133.190. Final recapitulation of tax rolls — Certification of approval — Payment of officials. [Renumbered.]

Compiler’s Notes.

This section formerly contained two subsections. Subsection (1) (Acts 1942, ch. 131, §§ 15, 32) was renumbered as KRS 133.046 and was repealed by Acts 1949 (Ex. Sess.), ch. 4, § 2. Subsection (2) (4126) was renumbered as KRS 133.125(3) and (4).

133.200. Payment of costs in action by state to increase assessment — When refunded.

  1. In proceedings brought by the state, or by the state on relation of some officer authorized to bring the proceeding, to set aside any order or judgment of a court assessing for taxes for state, county, school or other taxing district purposes any property or omitted property, on the ground of inadequacy of valuation, mistake, fraud, or on any other ground, and to cause a larger assessment to be adjudged, the commissioner of revenue may direct the drawing of warrants on the State Treasurer to pay from time to time such court costs and reasonable expenses as may be incurred on behalf of the state, including the cost of taking and filing depositions and witnesses’ fees, and the payment of official court reporters for services and for a copy of the testimony or depositions.
  2. If the state is successful in the proceedings, and the costs of the action are collected, the costs advanced by the state shall be repaid into the State Treasury.

History. 4260d-1, 4260d-2: amend. Acts 2005, ch. 85, § 241, effective June 20, 2005.

133.210. Tax commissioner’s report of real property sales to Department of Revenue; compensation; penalty. [Repealed.]

Compiler’s Notes.

This section (4114i-14: amend. Acts 1942, ch. 131, §§ 22, 32; 1944, ch. 168) was repealed by Acts 1949 (Ex. Sess.), ch. 3, § 14.

133.215. Fees of sheriff for serving process in tax assessment proceeding.

The sheriff shall be entitled to the fee prescribed by KRS 64.090 for serving a subpoena for the board of assessment appeals. He shall also have a like fee for serving a subpoena or notice for the Kentucky Claims Commission regarding any proceeding for the assessment of property subject to local taxation. Said fees shall be paid out of the county levy.

HISTORY: Enact. Acts 1942, ch. 131, § 20; 1964, ch. 141, § 22; 1974, ch. 326, § 11; 2017 ch. 74, § 74, effective June 29, 2017.

133.220. Tax bill forms — Attestation of bills — Duties of sheriff or collector — Treatment of undeliverable notices.

  1. The department annually shall furnish to each county clerk tax bill forms designed for adequate accounting control sufficient to cover the taxable property on the rolls.
  2. After receiving the forms, the county clerk shall prepare for the use of the sheriff or collector a correct tax bill for each taxpayer in the county whose property has been assessed and whose valuation is included in the certification provided in KRS 133.180 . If the bills are bound, the cost of binding shall be paid out of the county levy. Each tax bill shall show the rate of tax upon each one hundred dollars ($100) worth of property for state, county, and school purposes; the name of the taxpayer and his or her mailing address; the number of acres of farm land and its value; the number of lots and their value; the amount and value of notes and money; the value of mixed personal property; the total amount of taxes due the state, county, school district, and any other taxing district for which the sheriff collects taxes; and shall include a statement that notifies the taxpayer that costs and fees increase substantially if the taxes become delinquent. Provision shall be made for the sheriff to have a stub, duplicate, or other proper evidence of receipt of payment of each tax bill.
  3. Tax bills prepared in accordance with the certification of the department shall be delivered to the sheriff or collector by the county clerk before September 15 of each year. The clerk shall take a receipt showing the number of tax bills and the total amount of tax due each taxing district as shown upon the tax bills. The receipt shall be signed and acknowledged by the sheriff or collector before the county clerk, filed with the county judge/executive, and recorded in the order book of the county judge/executive in the manner required by law for recording the official bond of the sheriff.
  4. Upon delivery to him or her of the tax bills, the sheriff or collector shall mail a notice to each taxpayer, showing the total amount of taxes due the state, county, school district, and any other taxing district for which the sheriff collects taxes, the date on which the taxes are due, and any discount to which the taxpayer may be entitled upon payment of the taxes prior to a designated date. The sheriff shall not mail tax notices prior to September 15.
  5. All notices returned as undeliverable shall be submitted no later than the following work day to the property valuation administrator. The property valuation administrator shall correct inadequate or erroneous addresses if the information to do so is available and, if property has been transferred, shall determine the new owner and the current mailing address, or the in-care-of address reflected in the deed as required by KRS 382.135 . The property valuation administrator shall return the corrected notices to the sheriff or collector on a daily basis as corrections are made, but no later than fifteen (15) days after receipt. Uncorrected notices shall be submitted to the department by the property valuation administrator.

History. 4128a-2, 4239a, 4239h, 4239i-1, 4239ii: amend. Acts 1944, ch. 2; 1949 (Ex. Sess.), ch. 2, § 11; 1954, ch. 92; 1960, ch. 186, Art. I, § 23; 1962, ch. 29, § 4; 1964, ch. 141, § 23; 1978, ch. 384, § 270, effective June 17, 1978; 1990, ch. 27, § 3, effective July 13, 1990; 1998, ch. 209, § 2, effective March 30, 1998; 2005, ch. 85, § 242, effective June 20, 2005; 2008, ch. 143, § 2, effective August 1, 2008; 2009, ch. 10, § 44, effective January 1, 2010.

Compiler’s Notes.

Section 21 of Acts 1998, ch. 209, provided that the 1998 amendments to this section “shall apply for assessments made on or after January 1, 1998.”

NOTES TO DECISIONS

  1. Tax Bill.
  2. —Delayed.
  3. —Corrected.
  4. Taxes Chargeable to Sheriff.
  5. —Best Evidence.
  6. Sheriff’s Settlement.
1. Tax Bill.
2. —Delayed.

When the taxpayer has appealed from the board of supervisors with regard to the assessment of his property, no tax bill may be made out on such assessment pending the appeal, and the clerk may be enjoined from making out and delivering the tax bill to the sheriff. Cossar v. Klein, 227 Ky. 768 , 14 S.W.2d 160, 1928 Ky. LEXIS 515 ( Ky. 1928 ). See Klein v. Jefferson County Board of Tax Comm'rs, 242 Ky. 328 , 46 S.W.2d 480, 1932 Ky. LEXIS 270 ( Ky. 1932 ).

3. —Corrected.

Where county clerk, in making out tax bills, inadvertently failed to include the county taxes on the bills of a certain taxpayer, and upon the mistake being called to his attention the following year issued corrected bills, such corrected bills were valid. McFarland v. Georgetown Nat'l Bank, 208 Ky. 7 , 270 S.W. 995, 1925 Ky. LEXIS 201 ( Ky. 1925 ), aff'd, 273 U.S. 568, 47 S. Ct. 467, 71 L. Ed. 779, 1927 U.S. LEXIS 712 (U.S. 1927).

4. Taxes Chargeable to Sheriff.

The amount of taxes shown to be due by the final recapitulation of the tax commissioner’s (now property valuation administrator’s) books, and by the receipt for the tax bills executed by the sheriff under this section, is conclusive as to the sheriff’s liability in making settlements, unless such amount has been shown to be erroneous in an action brought for the purpose of correcting the books and receipt. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ).

The sheriff’s receipt for the tax bill is conclusive as to the amount with which the sheriff is chargeable in making settlements, in the absence of a showing of fraud or mistake. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ).

5. —Best Evidence.

The best evidence of the amount of taxes with which the sheriff is chargeable is the receipt for the tax bills executed by the sheriff under this section. If the receipt was never executed, or has been lost or destroyed, the next best evidence is the book containing the tax bills, the undetached bills being evidence as to uncollected taxes, and the stubs of the detached bills, to the extent they are legible, being evidence as to collected taxes. If the tax books have been lost or destroyed, the next best evidence is the tax rolls of the tax commissioner, as finally revised by the county clerk, from which the tax bills were made out. Any expense necessary to cause a reproduction of the tax bills from the tax rolls may be charged to the sheriff. In the absence of the sheriff’s receipt for the tax bills, and the complete books of tax bills and stubs, an audit report based on the intelligible portion of the tax books, together with the revised tax rolls, is competent evidence as to the sheriff’s liability. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ).

6. Sheriff’s Settlement.

In making settlements the sheriff is to be charged with the amount shown to be due by the clerk’s books and the sheriff’s receipts under KRS 133.180 and this section. Such amount is conclusive as to the sheriff’s liability unless he can establish fraud, or unless there was a clerical error which has been corrected under KRS 133.110 . Commonwealth use of Phillips v. Tate, 247 Ky. 516 , 57 S.W.2d 491, 1933 Ky. LEXIS 425 ( Ky. 1933 ).

Cited in:

McCracken Fiscal Court v. McFadden, 275 Ky. 819 , 122 S.W.2d 761, 1938 Ky. LEXIS 499 ( Ky. 1938 ); Whitley County Fiscal Court v. Whitley County, 283 Ky. 498 , 142 S.W.2d 126, 1940 Ky. LEXIS 368 (1940); Shelton v. Smith, 284 Ky. 236 , 144 S.W.2d 500, 1940 Ky. LEXIS 480 ( Ky. 1940 ); St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Opinions of Attorney General.

A city of the fourth class may by local ordinance adopt an assessment, valuation, assessment date, fiscal year, tax levy date, and due and delinquency dates of the county in which the city is situated, provided the requirements of KRS 132.285 are met. OAG 60-1243 .

A city of the fourth class may, by local ordinance, adopt the assessment, valuation, assessment date, fiscal year, tax levy date, and due and delinquency dates of the county in which the city is situated, provided the requirements of KRS 132.285 are met. OAG 60-1243 .

Regardless of whether or not a county budget has been made or tax levy set, the tax bills must be turned over to the sheriff by September 15 of each year. OAG 61-766 .

There is not a complete tax bill until the fiscal court has made a levy and determined the rate. OAG 61-840 .

Under this section it is the mandatory duty of the clerk to prepare tax bills and to facilitate the preparation thereof and he has the implied power to make reasonable expenditures to secure equipment, materials or services, including the payment of a reasonable rental to the county tax commissioner (now property valuation administrator) for the use of machinery or equipment. OAG 62-587 .

Where a proper contest to a sheriff’s annual settlement of his accounts for county and district taxes is made, the actual tax that is to be collected as evidenced by a proper audit (addition of the individual tax bills) of all the tax bills, is the amount that is finally charged to the sheriff (assuming that each tax bill is correctly prepared). OAG 69-346 .

If a petition for dissolution is filed prior to the time the tax bills containing the first library levy are sent out, the tax must still be imposed if the library district has outstanding contractual obligations. OAG 71-210 .

Where no notice was given to taxpayers of a five cent special voted building fund tax and it did not appear on the tax bills, the bills were not delinquent until notice was received of the tax due, and as a matter of equity the taxpayers should have a period of 30 days from the date of mailing the corrected notice in which they could pay such bills without the delinquency penalty. OAG 74-117 .

Taxes may not be paid until the proper officer has the tax bills prepared for collection. OAG 77-753 .

Computer billing services may be procured by a county clerk for preparing tax bills by applying the noncompetitive negotiation provisions of KRS 45A.380(1), if the county clerk makes a written determination that competition is not feasible, and that an emergency exists which will cause public harm as a result of the delay in competitive procedures, and the fiscal court enters an order confirming the county clerk’s written determinations. OAG 80-299 .

Under the literal language of this section, when read together with KRS 132.017 (3), (4) and (5), a county clerk was not required to wait until the library board established a final tax rate in order to get out the tax bills in the regular way envisioned by this section but should make up the tax bills, based upon the already established tax rates relating to the state, county, school and other taxing districts, and place the bills with the sheriff; in connection with the library district tax levy, which had not been established because of the recall provisions of KRS 132.017 , a second set of bills must be prepared in the regular manner upon the establishment of the final tax rate by any remaining districts and all costs associated with the second billing must be paid by the taxing district or districts requiring the second billing. OAG 80-503 .

The county clerk should include special districts, such as ambulance service districts taxes on tax bills prepared by the county clerk. OAG 81-376 .

The requirement under subsection (3) of this section that the county clerk deliver tax bills to the sheriff before September 15 of each year and take a receipt applies to the ambulance service district tax. OAG 81-376 .

The sheriff is responsible for mailing the tax bills for an ambulance service district tax since subsection (4) of KRS 108.100 requires that the collection of a district tax be made in conformity with the general tax collection scheme for state and county taxes, and subsection (4) of this section includes “other levies” among the state and county taxes which the sheriff must collect. OAG 81-376 .

The sheriff, who is responsible for collecting the ambulance service district tax under subsection (4) of this section as applied to the district tax through subsection (4) of KRS 108.100 , is also responsible for the costs of postage, envelopes, and clerical personnel necessary to prepare the envelopes and accept payment of the tax but such expenses may be paid out of the excess fees of the sheriff. OAG 81-376 .

The preparation of the tax bills is not part of the Property Valuation Administrator’s (PVA) duties; this is the county clerk’s province. Similarly, the PVA is not responsible for the correction of clerical errors in the tax bills; this is the county judge/executive’s province. In short, the PVA’s duty and authority with respect to property taxation end with the preparation of the tax rolls and the powers and duties concerning tax bills are the responsibility of others. OAG 83-200 .

Under KRS 109.056(3) a solid waste commission cannot place the past due solid waste charges on the property tax bills of persons who refuse to pay their garbage bills, identifying the charge as a garbage charge, and have the sheriff collect the past due charges when he makes his normal yearly property tax collection since KRS 134.140 provides in part that the sheriff is collector of all state, county and district taxes and this involves only taxes in the strict legal sense, not “charges” for a governmental service and since this section deals with the county clerk’s preparation of tax bills and makes no mention of governmental charges. OAG 83-253 .

Research References and Practice Aids

Cross-References.

Department of Revenue to prescribe style, layout, use and manner of keeping tax forms and records, KRS 131.130 .

Informality or irregularity in making tax bills does not vitiate them, KRS 132.650 .

133.225. Information pertaining to property taxes to be available on Web site accessible to the public — Explanation of process for assessing property values — Explanation of process for setting tax rates — Explanation of process for property tax collection — Information on accessing Web sites of local offices — Web site address to be included on every notice of assessment and property tax bill sent to taxpayer.

  1. The department shall provide the following information pertaining to property taxes on a Web site that is accessible to the public:
    1. An explanation of the process for assessing property values, which shall include but not be limited to:
      1. The duties and function of each state and local official involved in the property assessment process;
      2. The methods most commonly used to compute fair cash value;
      3. The types of property exempt from taxation;
      4. The types of property assessed at a lower value as required by Sections 170 and 172A of the Kentucky Constitution, including property with a homestead exemption, agricultural property, and horticultural property;
      5. The property tax calendar;
      6. How and when to report property to the property valuation administrator;
      7. The process for examining real property for valuation purposes;
      8. How and when a taxpayer is notified of the assessed value of property;
      9. When and where the public can inspect the tax roll; and
      10. The process for appealing the assessed values of real and personal property, including motor vehicles;
    2. An explanation of the process for setting the state tax rate and the county, city, school, and special taxing district tax rates, including but not limited to:
      1. The duties and function of each state and local official involved in the process for setting tax rates;
      2. The definitions of compensating tax rate and net assessment growth;
      3. The requirements set forth in KRS 68.245 , 132.023 , 132.027 , and 160.470 ; and
      4. The recall provisions set forth in KRS 132.017 ;
    3. An explanation of the process for property tax collection, including but not limited to:
      1. The duties and function of each state and local official involved in the tax collection process;
      2. How and when to remit payment of the tax;
      3. The due date for the tax;
      4. The early payment discount;
      5. The penalties assessed on delinquent taxes; and
      6. The delinquent tax collection process; and
    4. Direct links to the Web sites or guidance on how to access the Web sites of the local offices, such as the property valuation administrator’s office, the county clerk’s office, and the sheriff’s office, that provide taxpayers additional information on the property taxes within its jurisdiction.
  2. The Web site address that provides the information required by subsection (1) of this section shall be included on every notice of assessment and property tax bill sent to the taxpayer.

History. Enact. Acts 1979 (Ex. Sess.), ch. 25, § 11, effective February 13, 1979; 2005, ch. 85, § 243, effective June 20, 2005; 2020 ch. 91, § 3, effective April 15, 2020.

133.230. Preparation of omitted tax bills — Delivery to sheriff.

Upon receipt of a certification of omitted property by the property valuation administrator or by the Department of Revenue, the county clerk shall make out for the use of the sheriff or collector a tax bill for each taxpayer who owes omitted taxes. The omitted tax bills shall be attested by the clerk in the same manner as the tax bills described in KRS 133.220 . The clerk shall deliver the omitted tax bill to the sheriff or collector as soon as the omitted property has been finally assessed.

History. 4239b: amend. Acts 1949 (Ex. Sess.), ch. 2, § 12; 1992, ch. 338, § 15, effective July 14, 1992; 2005, ch. 85, § 244, effective June 20, 2005.

NOTES TO DECISIONS

1. Application.

This section refers only to situations where the valuation of omitted property is certified to the county clerk and the Department of Revenue makes such a certification only where the property is liable for local taxes. Commonwealth v. Interstate Grocery Co., 283 S.W.2d 708, 1955 Ky. LEXIS 321 ( Ky. 1955 ).

133.240. Compensation of county clerk for making tax bills — Payment.

  1. The county clerk shall be allowed thirty cents ($0.30) for calculating the state, county, and school tax and preparing a tax bill for each individual taxpayer for the sheriff or collector under the provisions of KRS 133.220 , and one dollar ($1) for each tax bill made in case of an omitted assessment.
  2. The county clerk shall present his account to the fiscal court, verified by his affidavit, together with his receipt from the sheriff for the tax bills and his receipt from the Department of Revenue for the recapitulation sheets. If found correct, the court shall allow the account, and order one-half (1/2) of it paid out of the levy and the other one-half (1/2) out of the State Treasury. The county clerk shall certify the allowance to the Finance and Administration Cabinet, which shall draw a warrant on the State Treasurer in favor of the county clerk for the state’s one-half (1/2).
  3. The above county allowance shall likewise be paid to the county clerk for calculation of the state, county, city, consolidated local government, urban-county government, school, and special district tax for each individual motor vehicle taxpayer, based upon certification from the Department of Revenue of the number of accounts as of January 1 each year.

History. 4216, 4239e: amend. Acts 1952, ch. 203, § 2; 1974, ch. 74, Art. II, § 9(1); 1978, ch. 84, § 24, effective June 17, 1978; 1982, ch. 264, § 15, effective July 15, 1982; 1984, ch. 54, § 6, effective January 1, 1985; 1988, ch. 113, § 9, effective December 31, 1988; 2002, ch. 346, § 169, effective July 15, 2002; 2005, ch. 85, § 245, effective June 20, 2005.

NOTES TO DECISIONS

1. Compensation Not Changed.

The allowance to the county clerk for making out the tax bills is compensation of the office which cannot be changed during the term. Neutzel v. Fiscal Court of Jefferson County, 183 Ky. 1 , 208 S.W. 11, 1919 Ky. LEXIS 433 ( Ky. 1 919 ).

Cited in:

Scott v. Montgomery County, 300 Ky. 300 , 188 S.W.2d 455, 1945 Ky. LEXIS 537 ( Ky. 1945 ).

Opinions of Attorney General.

Regardless of whether or not a county budget has been made or tax levy set, the tax bills must be turned over to the sheriff by September 15 of each year. OAG 61-766 .

While the fiscal court can appropriately provide for part-time deputies for the purpose of making tax bills, their compensation cannot exceed the statutory rate established by this section. OAG 65-847 .

If the tax assessment for the county is late and the tax bills are not made out until the next year, in order for the county clerk to be paid her fees in a manner contemplated by the normal statutory time scheme of collection and in order for her not to be penalized for the emergency in the tax assessment and collection program, which emergency the clerk did not create, the fees for making the 1970 tax bills should be applied to the 1970 accounting year. OAG 73-657 .

Subsection (1) of this section provides that the county clerk shall be compensated only once for preparing a tax bill for each individual taxpayer. OAG 79-536 .

Research References and Practice Aids

Kentucky Law Journal.

Vanlandingham, The Fee System in Kentucky Counties, 40 Ky. L.J. 275 (1952).

133.250. Sales-assessment ratio studies — Revaluation of property — Publication in each county of the percentage of fair cash value attainment — Underassessment audit.

  1. The department shall conduct sales-assessment ratio studies for each county and shall submit the ratio to each property valuation administrator by September 1 of each year or within thirty (30) days of submission of the property valuation administrator’s final recapitulation to the department as provided for in KRS 133.125 , whichever date is later. Randomly selected sample appraisals shall be conducted by the department for each class of real property in each county no less than once every two (2) years to supplement sales data used in the assessment ratio study and to verify and enhance the statistical validity of the ratio study in determining measures of central tendency and variation.
  2. The property valuation administrator shall begin revaluation of property in his or her county, in preparation for the following year’s property assessment, immediately following submission of the final recapitulation to the department as provided for in KRS 133.125 .
  3. By January 30 of each year, the department shall cause to be published in the newspaper of largest circulation in each county, a listing of the percentage of fair cash value attainment of real property assessments as calculated by assessment ratio studies which shall be conducted by the Department of Revenue.
  4. The department shall conduct a special audit to determine the presence or absence of chronic underassessment, as defined in KRS 132.486 , in any county for which the sales-assessment ratio studies conducted under the provisions of this section indicate a ratio below eighty percent (80%) for two (2) consecutive calendar years. The audit may be conducted through the use of randomly selected sample appraisals or other means reasonably calculated to present an accurate determination of assessment practices in the county.

History. Enact. Acts 1979 (Ex. Sess.), ch. 25, § 10, effective February 13, 1979; 1980, ch. 317, § 9, effective July 15, 1980; 1988, ch. 418, § 7, effective July 15, 1988; 2005, ch. 85, § 246, effective June 20, 2005; 2009, ch. 10, § 45, effective January 1, 2010.

NOTES TO DECISIONS

Cited in:

Allphin v. Butler, 619 S.W.2d 483, 1981 Ky. LEXIS 259 ( Ky. 1981 ).

Penalties

133.990. Penalties.

  1. The failure of any member to be in attendance promptly on the days fixed for the sessions of the county board of assessment appeals without reasonable excuse shall subject him to a fine of not exceeding twenty-five dollars ($25).
  2. Any county clerk who fails to make out, for the use of the sheriff or collector, the book or books of tax bills and stubs provided in KRS 133.220 , and deliver same to the sheriff or collector on or before September 15 of each year, shall pay a penalty of ten dollars ($10) for each day’s delay which must be deducted by the Department of Revenue from such sum, or sums, as may be due, or become due from the Commonwealth for official duties, and the date of the receipt required to be signed by the sheriff or collector by the provisions of KRS 133.220 shall be prima facie evidence of the delivery of same.
  3. Any county clerk who, without reasonable excuse, fails to return to the Department of Revenue copies of any books, papers, or records required by it in the manner and at the time prescribed by law, shall, upon conviction, be fined not less than ten dollars ($10) nor more than one hundred dollars ($100) for each offense.

History. 4114i-14, 4118, 4122, 4122a, 4123, 4128: amend. Acts 1942, ch. 131, §§ 17, 32; 1944, ch. 3, § 1; 2005, ch. 85, § 247, effective June 20, 2005.

Legislative Research Commission Notes.

(12/31/97). “County board of assessment appeals” was substituted for “board of supervisors” in subsection (1) of this statute in accordance with 1974 Ky. Acts ch. 326, sec. 12.

Research References and Practice Aids

Cross-References.

Penalties, civil and criminal, for failure to make tax report or return, or pay tax, where no specific penalty provided, KRS 131.180 , 131.990 .

CHAPTER 134 Payment, Collection, and Refund of Taxes

134.010. Definitions for chapter.

As used in this chapter, unless the context requires otherwise:

  1. “Certificate of delinquency” means a tax claim on real property for taxes that:
    1. Remains unpaid on April 15 under the regular collection schedule, or three (3) full months and fifteen (15) days from the date the taxes were due under an alternative collection schedule as determined under KRS 134.015 ; and
    2. Has been filed with the county clerk pursuant to KRS 134.122 ;
  2. “Chief executive” means the elected head of the executive branch of government in a city or county;
  3. “Commissioner” means the commissioner of the department;
  4. “County” includes counties, urban-county governments, charter county governments, consolidated local governments, and unified local governments;
  5. “Department” means the Department of Revenue;
  6. “Governing body of a county” means the elected legislative body of a county;
  7. “Omitted property” means property described in KRS 132.290 ;
  8. “Personal property” includes every species and character of property, tangible and intangible, other than real property;
  9. “Personal property certificate of delinquency” means a personal property tax claim that:
    1. Remains unpaid as of April 15 under the regular collection schedule or three (3) full months and fifteen (15) days from the date the taxes were due under an alternative collection schedule as determined under KRS 134.015 ; and
    2. Has been filed with the county clerk pursuant to KRS 134.122 ;
  10. “Priority certificate of delinquency” means a certificate of delinquency available for sale that relates to a parcel of property against which a third-party purchaser already holds a certificate of delinquency from a prior tax year;
  11. “Protected list” means the list submitted to the county clerk by the county attorney of certificates of delinquency not eligible for sale pursuant to KRS 134.504(10);
    1. “Property taxes” means the ad valorem taxes due the state, a county, a county school district, or other taxing district; (12) (a) “Property taxes” means the ad valorem taxes due the state, a county, a county school district, or other taxing district;
    2. “Property taxes” also includes any other ad valorem taxes imposed by a governmental entity that are included on the same property tax bill as the levies listed in paragraph (a) of this subsection and that the sheriff is responsible for collecting either through a statutory requirement or agreement with a taxing district;
  12. “Real property” includes all lands within the state and improvements thereon;
  13. “Taxpayer” means the owner of property on the assessment date, or any person otherwise made liable by law for ad valorem taxes attributable to that assessment date;
  14. “Tax claim” includes the taxes due on a tax bill, the penalties, costs, fees, interest, commissions, the lien provided in KRS 134.420 and any other expenses that have become or are by reason of the delinquent tax bill proper legal charges imposed by this chapter against the delinquent taxpayer at any given time; and
  15. “Third-party purchaser” means a purchaser of a certificate of delinquency.

History. 4022, 4114h-1, 4149b-1; 2000, ch. 357, § 1, effective July 14, 2000; 2005, ch. 85, § 248, effective June 20, 2005; 2009, ch. 10, § 1, effective January 1, 2010; 2010, ch. 75, § 1, effective April 7, 2010; 2012, ch. 161, § 1, effective April 23, 2012.

NOTES TO DECISIONS

  1. Absolution of Surety.
  2. Limiting Surety’s Liability.
  3. Void Increases.
  4. Taxpayer.
  5. —Liability of Corporate Officer.
  6. Third Party Purchaser.
1. Absolution of Surety.

A bond provision that the surety would be absolved from liability if the county discovered a dishonest act or omission of the sheriff was ineffective and failed to absolve the surety from liability. National Surety Corp. v. Morgan County, 440 S.W.2d 791, 1969 Ky. LEXIS 349 ( Ky. 1969 ).

2. Limiting Surety’s Liability.

A statutorily-required fidelity bond may not contain clauses limiting liability in derogation of the statutory requirements for the bond. National Surety Corp. v. Morgan County, 440 S.W.2d 791, 1969 Ky. LEXIS 349 ( Ky. 1969 ).

3. Void Increases.

Where the new property valuation administrator had attempted to reassess, upward, property valuations, but had only sent notices to about 40 percent of the affected property owners, but where some owners had actual notice and had appealed their valuations, the proper remedy would be to allow the increase as to those owners who had notice or had actual notice and appealed, subject to the outcome of those appeals, and to void the increases as to those property owners without notice and who had not appealed their reassessments. Layson v. Brady, 576 S.W.2d 223, 1978 Ky. App. LEXIS 651 (Ky. Ct. App. 1978).

4. Taxpayer.

The term “taxpayer” as used in chapter 141 must follow the definition in KRS 131.010 and KRS 134.010 . Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

5. —Liability of Corporate Officer.

A corporate officer acting as the taxpayer for withholding tax purposes, was personally liable for penalties and interest due for the late payment of taxes. Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

6. Third Party Purchaser.

Bank was authorized to pay a certificate of delinquency because the payment came from the delinquent taxpayers, and the bank, as mortgage holder, had a legal or equitable interest in the property and could utilize the statute; the bank’s attorney was working with the authorization and assistance of the taxpayers to obtain a payoff amount, and the subsequent payment to the county clerk came from the taxpayers’ accountant. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

Cited in:

Jones v. Travis, 302 Ky. 367 , 194 S.W.2d 841, 1946 Ky. LEXIS 682 ( Ky. 1946 ).

Research References and Practice Aids

Cross-References.

Collection of taxes other than state and county ad valorem taxes:

Alcoholic beverage taxes, KRS Chapter 243.

City taxes:

First-class, KRS 91.270 , 91.420 , 91.430 , 91.660 .

Second-class, KRS 92.590 .

Third-class, KRS 92.570 , 92.590 .

Fourth-class, KRS 92.580 , 92.590 .

Corporation taxes, KRS 136.050 , 136.180 .

Crude petroleum tax, KRS 137.140 , 137.160 .

Department of Revenue, powers and duties in payment and collection of taxes, KRS 131.030 , 131.130 , 131.140 .

Excise taxes, KRS Chapter 138.

Gasoline tax, KRS 138.220 , 138.226 , 138.655 to 138.725 .

Income tax, KRS 141.220 .

Inheritance tax, KRS 140.190 , 140.210 .

Licenses taxes, KRS Chapter 136.

Omitted property tax, collection of, KRS 132.320 .

Pari-mutuel tax, KRS 138.530 .

Special fuel tax, KRS 138.220 .

Special or local legislation on collection of taxes forbidden, Ky. Const., § 59.

Taxes to be paid into state treasury, KRS 41.070 , 47.010 .

Kentucky Law Journal.

Vanlandingham, The Fee System in Kentucky Counties, 40 Ky. L.J. 275 (1952).

134.015. Due dates — Person responsible for payment — Regular and alternative collection schedules — Discounts.

  1. All property taxes are due and payable on or before December 31 of the assessment year except as otherwise provided by law. Payment shall be made to the sheriff as provided in KRS 134.119 unless otherwise provided by law.
    1. Any taxpayer who pays the property taxes in full by November 1 of the assessment year shall receive a two percent (2%) discount on the amount otherwise due. (2) (a) Any taxpayer who pays the property taxes in full by November 1 of the assessment year shall receive a two percent (2%) discount on the amount otherwise due.
    2. Taxes paid in full between November 2 and December 31 of the assessment year shall be paid at the amount reflected on the tax bill without discount or penalty.
    3. Taxes paid in full between January 1 and January 31 of the year following the assessment year shall be subject to a penalty of five percent (5%) of the taxes due and unpaid.
    4. Taxes paid after January 31 of the year following the assessment year shall be subject to a penalty of ten percent (10%) of the taxes due and unpaid.
  2. If the regular collection schedule established by subsections (1) and (2) of this section is delayed, the department may establish an alternative collection schedule. Taxes shall be due two (2) full months from the date the tax bills are mailed. The alternative collection schedule shall allow a two percent (2%) discount for all tax bills paid in full within one (1) full month of the date the tax bills were mailed. Upon expiration of the discount period, the face amount reflected on the tax bill without discount or penalty shall be due for the next full month. Payments made within one (1) month following the face amount period shall be subject to a penalty of five percent (5%) of the taxes due and unpaid. Payments made after the five percent (5%) penalty period shall be subject to a penalty of ten percent (10%) of the taxes due and unpaid.
  3. All taxes due under this section and all fees, penalties, and interest thereon are a personal debt of the taxpayer on the assessment date, from the time the tax becomes due until paid.
  4. The lien that attaches to property on which taxes have become delinquent under KRS 134.420 shall continue as provided in KRS 134.420 , from the time the taxes become delinquent until the taxes are paid or the eleven (11) year period established by KRS 134.420 expires, regardless of who owns the property.
  5. A tax bill issued against omitted property, or an increase in valuation over that claimed by the taxpayer, as finally determined upon appeal as provided for in KRS 133.120 , shall be due the day the bill is prepared and shall be considered delinquent on that date. If the tax bill is not paid within one (1) full month of the due date, an additional penalty of ten percent (10%) of the tax, fees, penalties, and interest due shall be added to the tax bill. The laws relating to delinquent taxes on the same class of property or taxpayers involved shall apply to delinquent omitted tax bills unless otherwise provided by law.

History. Enact. Acts 2009, ch. 10, § 2, effective January 1, 2010.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Application.
  3. Applicable Tax Rate.
  4. Delinquent Tax Penalty.
  5. —Sheriff’s Liability.
  6. Payment.
  7. Interest.
  8. Date of Delinquency.
  9. Motor Vehicles.
1. Constitutionality.

Law changing the date of delinquency from December 1 to December 31, was not unconstitutional as to sheriffs then in office, although it may have had the effect of reducing the amount of taxes and penalties which the sheriff could collect during the last year of his term and thereby reduced his compensation for that year. Carl v. Thiel, 211 Ky. 328 , 277 S.W. 485, 1925 Ky. LEXIS 875 ( Ky. 1925 ) (decided under former KRS 134.020 ).

The provision of this section for a two percent (2%) discount for prompt payment is constitutional. Buchanan v. West Kentucky Coal Co., 218 Ky. 259 , 291 S.W. 32, 1927 Ky. LEXIS 127 ( Ky. 1927 ) (decided under former KRS 134.020 ).

2. Application.

The ten percent (10%) penalty and interest provided by KRS 136.050 for delinquency in payment of franchise taxes applied only to state taxes, and county franchise taxes bore only the six percent (6%) penalty provided by this section. Henderson Bridge Co. v. Commonwealth, 120 Ky. 690 , 87 S.W. 1088, 27 Ky. L. Rptr. 1104 , 27 Ky. L. Rptr. 1177 , 1905 Ky. LEXIS 154 ( Ky. 1905 ). See Illinois Cent. R.R. v. Commonwealth, 98 S.W. 1008, 30 Ky. L. Rptr. 190 (1906) (decided under former KRS 134.020 ).

School taxes levied by fiscal court for school district which embraced property of fourth-class city, but whose limits were not coterminous with city limits, were governed by this section and not by the laws relating to city taxes. Farmers' Nat'l Bank v. Board of Education, 238 Ky. 433 , 38 S.W.2d 263, 1931 Ky. LEXIS 270 ( Ky. 1931 ) (decided under former KRS 134.020 ).

School taxes are governed by this section. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ). (decided under former KRS 134.020 )

This section applied to whiskey where the tax payments were not deferred, and under this section, prior to its 1949 amendment, all current taxes, except as were otherwise provided by law, became due on March 1 after the assessment. National Distillers Products Corp. v. Board of Education, 256 S.W.2d 481, 1952 Ky. LEXIS 1151 ( Ky. 1952 ) (decided under former KRS 134.020 ).

3. Applicable Tax Rate.

The tax rate prevailing at the time the taxes for a particular year became due and payable is the rate to be applied to the taxes for such year, regardless of when the assessment was made or completed. Ross v. First Nat'l Bank, 213 Ky. 453 , 281 S.W. 517, 1926 Ky. LEXIS 536 ( Ky. 1926 ) (decided under former KRS 134.020 ).

Where statute changing local tax rate on certain property did not take effect until after March 1, old rate applied to taxes that became due and payable on March 1. Ross v. First Nat'l Bank, 213 Ky. 453 , 281 S.W. 517, 1926 Ky. LEXIS 536 ( Ky. 1926 ) (decided under former KRS 134.020 ).

4. Delinquent Tax Penalty.

Circuit courts erred in concluding that the third-party purchasers of delinquent tax bills were eligible for refunds where it was erroneous to state that the transfer of the taxed property subject to the Commonwealth satisfied the tax liability of all of the various governmental entities, but rather the property owners remained liable for the tax under Ky. Rev. Stat. Ann. § 132.220 . Fayette Cty. Clerk v. Kings Right, LLC, 536 S.W.3d 201, 2017 Ky. App. LEXIS 634 (Ky. Ct. App. 2017).

The fact that the sheriff has settled in full with the state and county for all taxes chargeable to him, before the date of delinquency, by advancing money out of his own pocket will not relieve delinquent taxpayers of the penalty. Ellison v. Langdon, 135 Ky. 607 , 123 S.W. 252, 1909 Ky. LEXIS 324 ( Ky. 1909 ) (decided under former KRS 134.020 ).

The penalty on delinquent county taxes belongs to the county. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under former KRS 134.020 ).

Where taxpayer’s appeal to courts from board of supervisors was not finally disposed of until after date taxes for year in question became delinquent, taxpayer who promptly paid tax on assessment as fixed by final judgment was not liable for penalty imposed by this section on delinquent taxes. Commonwealth v. Southern Pac. Co., 169 Ky. 296 , 183 S.W. 925, 1916 Ky. LEXIS 697 ( Ky. 1916 ) (decided under former KRS 134.020 ).

Where taxpayer appealed from board of supervisors to quarterly court, then to circuit court, Court of Appeals, and United States Supreme Court, and appeal was not finally disposed of until after date on which taxes for year in question became delinquent, taxpayer was liable for delinquent tax penalty imposed by this section, on tax finally found to be due. Klein v. Jefferson County Board of Tax Comm'rs, 242 Ky. 328 , 46 S.W.2d 480, 1932 Ky. LEXIS 270 ( Ky. 1932 ).See Klein v. Commonwealth, 271 Ky. 756 , 113 S.W.2d 20, 1938 Ky. LEXIS 41 ( Ky. 1938 ) (decided under former KRS 134.020 ).

Penalty on delinquent taxes provided by this section does not apply where the county had no lawful right to assess the property during certain years. Commonwealth v. Thomas, 298 S.W.2d 302, 1957 Ky. LEXIS 369 ( Ky. 1957 ) (decided under former KRS 134.020 ).

5. —Sheriff’s Liability.

Fiscal court had no authority to make agreement with sheriff to waive sheriff’s liability to account for penalties on delinquent taxes in return for sheriff paying claims against the county out of his own funds, in advance of tax collections, to avoid interest on such claims. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under former KRS 134.020 ).

The sheriff is chargeable with the delinquent penalty on all collectible delinquent taxes, whether or not he has collected the tax and penalty. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ). See Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ); Davis v. Commonwealth, 139 Ky. 334 , 107 S.W. 306, 32 Ky. L. Rptr. 811 , 1908 Ky. LEXIS 5 ( Ky. 1908 ); Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 5 00 ( Ky. 1910 ); Clarke v. Commonwealth, 233 Ky. 728 , 26 S.W.2d 1041, 1930 Ky. LEXIS 655 ( Ky. 1930 ); Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under former KRS 134.020 ).

6. Payment.

Payment of taxes to county clerk does not constitute a valid payment. Heath v. Hazelip, 159 Ky. 555 , 167 S.W. 905, 1914 Ky. LEXIS 851 ( Ky. 1914 ) (decided under former KRS 134.020 ).

Sheriff was compelled by mandamus to accept advance payment of tax less two percent (2%) discount, as against contention that he could not accept taxes because tax bills had not been delivered to him by county clerk. Buchanan v. West Kentucky Coal Co., 218 Ky. 259 , 291 S.W. 32, 1927 Ky. LEXIS 127 ( Ky. 1927 ) (see now KRS 134.140 ) (decided under former KRS 134.020 ).

7. Interest.

Taxes do not bear interest unless so provided by statute. Henderson Bridge Co. v. Commonwealth, 120 Ky. 690 , 87 S.W. 1088, 27 Ky. L. Rptr. 1104 , 27 Ky. L. Rptr. 1177 , 1905 Ky. LEXIS 154 ( Ky. 1905 ). See Commonwealth v. Louisville & N. R. Co., 104 S.W. 267, 31 Ky. L. Rptr. 819 , 1907 Ky. LEXIS 357 (Ky. Ct. App. 1907); Commonwealth use of McCreary County Board of Education v. Walker, 246 Ky. 679 , 55 S.W.2d 914, 1932 Ky. LEXIS 821 ( Ky. 1932 ) (decided under former KRS 134.020 ).

Where taxpayer, before date taxes became delinquent, paid part of his tax bill and filed suit for injunction against collection of balance of bill, which suit was finally determined against him, taxpayer was liable for interest at six percent (6%) on the entire amount of the tax bill from the date the taxes should have been paid, the partial payment being credited as of the date it was made. Commonwealth v. Louisville & N. R. Co., 104 S.W. 267, 31 Ky. L. Rptr. 819 , 1907 Ky. LEXIS 357 (Ky. Ct. App. 1907) (decided under former KRS 134.020 ).

Unless specifically authorized by statute, interest is not collectible on taxes, but where the taxpayer obstructs or delays the assessment or collection of taxes interest is chargeable against him. Commonwealth use of McCreary County Board of Education v. Walker, 246 Ky. 679 , 55 S.W.2d 914, 1932 Ky. LEXIS 821 ( Ky. 1932 ) (decided under former KRS 134.020 ).

Where the taxpayer of his own volition militantly obstructs or prevents the collection of his taxes by resorting to preventative and obstructive processes, in the inauguration of litigation (or defense of litigation to collect the tax) followed by unsuccessful efforts to be relieved of the tax, interest is chargeable from the date the taxes under the law became due and distrainable. On the contrary, if the delay in the assessment, or in any step looking to its finality, is attributable to any dereliction on the part of the assessing authority, or of any governmental agency charged with such duties, interest may not be collected until the assessment becomes final. Klein v. Jefferson County Board of Tax Comm'rs, 242 Ky. 328 , 46 S.W.2d 480, 1932 Ky. LEXIS 270 ( Ky. 1932 ) (decided under former KRS 134.020 ).

8. Date of Delinquency.

There is no delinquency in the payment of taxes until the specified date. Green v. Moore, 281 Ky. 305 , 135 S.W.2d 682, 1939 Ky. LEXIS 33 ( Ky. 1939 ) (decided under former KRS 134.020 ).

9. Motor Vehicles.

The fact that ad valorem taxes on motor vehicles are collected by the county clerk rather than the sheriff does not render the legislation unconstitutional; as long as the taxes are uniform, within a valid classification, it is not a “local or special” act. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ) (decided under former KRS 134.020 ).

Act 264 of 1982, governing motor vehicle taxation was not special legislation for failure to provide for a two percent (2%) discount which is granted to real property and other personal property under this section since motor vehicles are a classification based upon distinctive and natural reasons, and under this act no motor vehicles are subjected to a discount within the classification; the mere fact that all taxes are not paid in a short period of time, as envisioned in former KRS 134.020 , et seq., does not render the legislation unconstitutional. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ) (decided under former KRS 134.020 ).

134.020. Due date of taxes — Discount — Partial payment — Delinquent taxes — Penalty — Revised collection schedule — Collection efforts. [Repealed.]

Compiler’s Notes.

This section (1885, 4148: amend. Acts 1949 (Ex. Sess.), ch. 4, § 15; 1960, ch. 186, Art. I, § 24; 1962, ch. 29, § 5; 1976, ch. 36, § 1; 1990, ch. 27, § 4, effective July 13, 1990; 1998, ch. 209, § 3, effective March 30, 1998; 2005, ch. 85, § 249, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.030. Extension by Governor of time for payment of taxes — Relief of sheriff. [Repealed.]

Compiler’s Notes.

This section (4148-1, 4148-2) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.035. Definitions for KRS 134.036, 134.037 and 141.225. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 170, § 1) was repealed by Acts 1950, ch. 176, § 1.

134.036. Extension of time for payment of ad valorem taxes by persons in military service. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 170, § 2) was repealed by Acts 1950, ch. 176, § 1.

134.037. Penalties, interest and limitations do not apply during extension. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 170, § 4) was repealed by Acts 1950, ch. 176, § 1.

134.040. Effect of payment of taxes before due. [Repealed.]

Compiler’s Notes.

This section (4114h-8: amend. Acts 2005, ch. 85, § 250, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.050. Tax is personal debt of person liable for payment — Collection — Penalties — Personal checks. [Repealed.]

Compiler’s Notes.

This section (4114h-11, 4114h-14; 2005, ch. 85, § 251, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.060. Liability for tax as between holders of various interests in property. [Repealed.]

Compiler’s Notes.

This section (4023: amend. Acts 1949 (Ex. Sess.), ch. 4, § 16; 1960, ch. 186, Art. I, § 25; 1990, ch. 27, § 5, effective July 13, 1990; 2005, ch. 168, § 77, effective January 1, 2006) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.070. Lien of joint owner paying entire tax. [Repealed.]

Compiler’s Notes.

This section (4034, 4035) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010. See now KRS 134.421 . See now KRS 134.421 .

134.080. Payment of tax by holder of lien or person in possession — Rights on payment — Lien. [Repealed.]

Compiler’s Notes.

This section (4032, 4033) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.090. Certificate of transfer issued to person paying tax for person liable — Form — Rights of transferee. [Repealed.]

Compiler’s Notes.

This section (4168a) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.100. Recording of certificate of transfer — Clerk’s fee for record or release. [Repealed.]

Compiler’s Notes.

This section (4168b, 4168k: amend. 2006, ch. 255, § 16, effective January 1, 2007) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.110. Duplicate certificate of transfer, where original is lost or destroyed. [Repealed.]

134.119. Sheriff is collector of taxes — Means of payment — Penalties — Sale of personal property — Compensation of sheriff.

    1. The sheriff shall be the collector of all state, county, county school district, and other taxing district property taxes unless the payment is directed by law to be made to some other person. The sheriff may contract to collect taxes on behalf of cities, independent school districts, or any other governmental unit with the authority to levy a property tax, if the enabling legislation authorizing imposition of the tax permits the governmental unit to contract for the performance of tax collection duties. (1) (a) The sheriff shall be the collector of all state, county, county school district, and other taxing district property taxes unless the payment is directed by law to be made to some other person. The sheriff may contract to collect taxes on behalf of cities, independent school districts, or any other governmental unit with the authority to levy a property tax, if the enabling legislation authorizing imposition of the tax permits the governmental unit to contract for the performance of tax collection duties.
    2. The provisions of this chapter relating to the collection of property taxes shall apply to other property tax collectors to the extent that the governing body of the city, school district, or taxing district appointing the tax collector has not adopted alternative tax collection processes and procedures.
  1. Payment to the sheriff may be provided by any commercially acceptable means. The sheriff may limit the acceptable methods of payment to those that ensure that payment cannot be reversed or nullified due to insufficient funds.
      1. The sheriff shall accept payment from the day on which the tax bills are mailed by the sheriff to the taxpayer as provided in KRS 133.220 and 133.230 , through the day on which the sheriff files the uncollected tax claims with the county clerk pursuant to KRS 134.122 . During this time period, the sheriff may accept full or partial payment for any outstanding taxes or tax claims. (3) (a) 1. The sheriff shall accept payment from the day on which the tax bills are mailed by the sheriff to the taxpayer as provided in KRS 133.220 and 133.230 , through the day on which the sheriff files the uncollected tax claims with the county clerk pursuant to KRS 134.122 . During this time period, the sheriff may accept full or partial payment for any outstanding taxes or tax claims.
        1. Any payments received by the sheriff by mail that: 2. a. Any payments received by the sheriff by mail that:
          1. Are received after the day on which uncollected tax claims are filed with the county clerk pursuant to KRS 134.122; and
          2. Have a postmark that reflects a date on or before the day the uncollected tax claims are filed with the county clerk;
        2. Payments described in this subparagraph may be processed as agreed by the sheriff and county clerk.
        3. Absent an agreement between the sheriff and the county clerk, the payment shall be accepted and processed by the sheriff.
        4. If the sheriff accepts and processes the payment, the sheriff shall notify the county clerk, and the county clerk shall update his or her records to reflect payment of the certificate of delinquency.
        5. The sheriff and the county clerk shall reconcile all transactions addressed by this subparagraph by preparation of an addendum to the original reconciliation provided by the sheriff to the county clerk at the time of transfer. The addendum shall be prepared thirty (30) days after the original transfer, and shall be filed by the county clerk in the clerk’s order book.
    1. All payments received by the sheriff shall be entered immediately by the sheriff on his or her books. Partial payments shall be credited against the total amount due and shall be apportioned by the sheriff among the entities included on the tax bill in the same proportion the amount due to each bears to the amount paid.
    2. The acceptance of any payment before the taxpayer’s tax liability has been finally determined shall not imply that the payment was the correct amount due and shall not preclude the assessment and collection of additional taxes due or the refund of any part of the amount paid that is in excess of the amount determined to be due.
    3. The sheriff may accept payment of any tax or tax claim from any other person on behalf of the taxpayer. Any person making a payment on behalf of a taxpayer may, upon the written notarized request of the taxpayer, be treated as a transferee as provided in KRS 134.121 .
    4. The sheriff may accept payment of any amount due on a delinquent tax claim from any of the persons described in subparagraphs 1., 2., and 3. of this paragraph without permission of the taxpayer. The person seeking to make the payment shall provide sufficient proof to the sheriff that he or she meets the requirements to pay under this paragraph. The sheriff shall be held harmless if he or she relies upon information provided and accepts payment from a person not qualified to pay under this paragraph. Any person listed in subparagraph 1., 2., or 3. of this paragraph who makes full payment, may, upon written request to the sheriff, be treated as a transferee under KRS 134.121 :
      1. Any person holding a legal or equitable estate in the real or personal property upon which the delinquent taxes are due, other than a person whose only interest in the property is a lien resulting from ownership of a prior year certificate of delinquency;
      2. A tenant or lawful occupant of real property, or a bailee or person in possession of any personal property upon which the delinquent taxes are due; or
      3. Any person having a mortgage on real property or a security interest in real or personal property upon which the delinquent taxes are due.
  2. If, upon expiration of the five percent (5%) penalty period established by KRS 134.015(2)(c), the real property tax delinquencies of a sheriff exceed fifteen percent (15%) of the amount charged to the sheriff for collection, the department may require the sheriff to make additional reasonable collection efforts. If the sheriff fails to initiate additional reasonable collection efforts within fifteen (15) business days following notification from the department that such efforts shall be made, the department may assume responsibility for collecting the delinquent taxes. If the department assumes the responsibility for collecting delinquent taxes, the department shall receive the amounts that would otherwise be paid to the sheriff as fees or commissions for the collection of tax bills.
  3. In collecting delinquent taxes, the sheriff:
    1. May distrain and sell personal property owned by a delinquent taxpayer in the amount necessary to satisfy the delinquent tax claim. The sale shall be made under execution for cash. If the personal property of the delinquent taxpayer within the county is not sufficient to satisfy the delinquent tax claim, the sheriff may sell so much of the personal property as is available; and
    2. Shall retain any amounts that come into his or her possession payable to a delinquent taxpayer, other than claims allowed for attendance as a witness, and shall apply such amounts to the amount due on the delinquent tax claim.
    1. As compensation for collecting property taxes the sheriff shall be paid the following amounts, regardless of whether the amounts are collected by the sheriff prior to filing the tax claims with the county clerk, or by the county clerk after the tax claims become certificates of delinquency or personal property certificates of delinquency: (6) (a) As compensation for collecting property taxes the sheriff shall be paid the following amounts, regardless of whether the amounts are collected by the sheriff prior to filing the tax claims with the county clerk, or by the county clerk after the tax claims become certificates of delinquency or personal property certificates of delinquency:
      1. From the Commonwealth the sheriff shall be paid four and one-quarter percent (4.25%) of the amount collected on behalf of the Commonwealth;
      2. From counties the sheriff shall be paid four and one-quarter percent (4.25%) of the amount collected on behalf of the counties;
      3. The sheriff shall be compensated as provided by law or as negotiated if negotiation is permitted by law, for collecting taxes on behalf of any taxing district;
      4. The sheriff shall be compensated as provided in KRS 160.500 for collecting school district taxes; and
      5. The sheriff shall be compensated as provided in KRS 91A.070 for collecting taxes on behalf of any city.
    2. The sheriff shall include the amounts he or she is entitled to under the provisions of paragraph (a) of this subsection as part of the delinquent tax claims filed with the county clerk. The amount so included shall become a part of the certificate of delinquency, and shall be paid by the person paying the certificate of delinquency rather than the taxing jurisdiction for which the taxes were collected.
  4. As additional compensation for the collection of delinquent taxes, the sheriff shall be entitled to an amount equal to ten percent (10%) of the total taxes due plus ten percent (10%) of the ten percent (10%) penalty for all delinquent taxes. This fee shall be added to the total amount due, and shall be paid by the person paying the tax claim if payment is made to the sheriff, or the certificate of delinquency or personal property certificate of delinquency if payment is made after the tax claim has been filed with the county clerk.
  5. If, in the process of collecting property taxes, the sheriff becomes aware of a new address for a taxpayer, the sheriff shall provide, on a form provided by the department, the information relating to the new address to the property valuation administrator, who shall update his or her records to reflect the new address.

shall be accepted and processed, and the amount due shall be the amount due immediately before the transfer of the uncollected tax claims by the sheriff to the county clerk.

History. Enact. Acts 2009, ch. 10, § 3, effective January 1, 2010; 2010, ch. 75, § 2, effective April 7, 2010.

Legislative Research Commission Notes.

(4/7/2010). 2010 Ky. Acts ch. 75 provides that, notwithstanding any other provision of the Kentucky Revised Statutes or the effective date provisions of 2009 House Bill 262, the sheriff’s fee calculation established by this statute applies to tax collections made by sheriffs in calendar year 2009.

134.120. Person for whom tax is paid is estopped from tax protest — Reimbursement of transferee if certificate is invalid. [Repealed.]

Compiler’s Notes.

This section (4168h, 4168j) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.121. Transferees — Rights and obligations.

    1. Upon receipt of a written request by a person who pays taxes on behalf of another to be treated as a transferee and verification that the request meets the requirements of KRS 134.119(3)(d) or (e), the sheriff shall issue a certificate of transfer in accordance with the provisions of this section. (1) (a) Upon receipt of a written request by a person who pays taxes on behalf of another to be treated as a transferee and verification that the request meets the requirements of KRS 134.119(3)(d) or (e), the sheriff shall issue a certificate of transfer in accordance with the provisions of this section.
      1. Any person making a request and having taxes paid on his or her behalf under this section; and (b) 1. Any person making a request and having taxes paid on his or her behalf under this section; and
      2. The heirs and assigns of the person;
  1. The sheriff shall give a certificate of transfer to the person making the payment. The certificate of transfer shall specify the:
    1. Sheriff’s name;
    2. County where the property is located;
    3. Address of the property;
    4. Amount paid;
    5. Name of the person making the payment;
    6. Account the payment was credited to; and
    7. Person in whose name the property is listed as of January 1.
  2. A transferee shall be subrogated to the lien provided for in KRS 134.420 , and shall have the same rights and powers of enforcing collection as provided in KRS 134.546(2).
  3. The holder of a certificate of transfer shall have the certificate of transfer required by subsection (2) of this section entered on the record of encumbrances on real estate of the county in which the certificate was issued. Failure to enter the certificate of transfer shall result in a loss of the lien upon the property, if the property is transferred in good faith and for valuable consideration before recording and without notice of the existence of the certificate of transfer. The county clerk shall charge a fee pursuant to KRS 64.012 for the recording and release of a certificate of transfer.
  4. When a transferee has acquired a certificate of transfer that is for any reason invalid, the state, county, city, or taxing district that received payment shall reimburse the transferee by paying to him or her the amount of principal, interest, penalties, and costs expended by him or her in the purchase.
    1. Any person holding a lien upon property covered by a certificate of transfer may, at any time during the life of the certificate if there has been no sale of property for taxes, cancel the certificate by paying to the last recorded owner of the certificate of transfer, or to his or her order, the amount of the certificate and interest, at the tax interest rate established by KRS 131.183 from the date of the certificate. (6) (a) Any person holding a lien upon property covered by a certificate of transfer may, at any time during the life of the certificate if there has been no sale of property for taxes, cancel the certificate by paying to the last recorded owner of the certificate of transfer, or to his or her order, the amount of the certificate and interest, at the tax interest rate established by KRS 131.183 from the date of the certificate.
    2. If both real and personal property are covered by one (1) certificate of transfer, the holder of a lien on any item of the property may obtain a cancellation of the lien on the certificate of transfer against the property on which he or she has a lien by paying to the last recorded owner of the certificate of transfer, before a tax sale under a certificate of delinquency, the amount applicable to the personal property included in the tax referred to by the certificate of transfer, plus the pro rata part of the face value of the certificate of transfer applicable to the property on which release is desired, plus interest on the amount of the certificate of transfer at the tax interest rate established by KRS 131.183.
    3. If two (2) or more items of property are included in one (1) certificate of transfer, the transferee may release any item or items. The release shall not affect the lien of the certificate of transfer on the remaining items, but shall be a release only to the extent of the amount of taxes applying to the parcel or parcels released.
    4. The provisions of law that apply to the rights of the owner of land sold for taxes by the state, county, city, or taxing district shall also apply to the owner’s rights under sales of land made to satisfy a certificate of transfer, and the owner of the land or his or her heirs or assigns may redeem the property within the same length of time, and upon the same terms, as are provided by law for redeeming property sold for taxes.

shall be estopped from claiming any irregularity in the tax or any proceedings related to the tax prior to the time of transfer.

History. Enact. Acts 2009, ch. 10, § 5, effective January 1, 2010; 2010, ch. 75, § 3, effective April 7, 2010.

134.122. Transfer of certificates of delinquency by sheriff to clerk.

    1. The sheriff shall, on April 15 or three (3) months and fifteen (15) days from the date the taxes were due under an alternative collection schedule, file all tax claims on real and personal property remaining in his or her possession with the county clerk, except that in a consolidated local government the sheriff shall have fourteen (14) working days from the required filing date to file the delinquent tax claims with the county clerk. (1) (a) The sheriff shall, on April 15 or three (3) months and fifteen (15) days from the date the taxes were due under an alternative collection schedule, file all tax claims on real and personal property remaining in his or her possession with the county clerk, except that in a consolidated local government the sheriff shall have fourteen (14) working days from the required filing date to file the delinquent tax claims with the county clerk.
    2. The content of the information provided by the sheriff to the county clerk shall be determined by the department through the promulgation of an administrative regulation.
    3. The county clerk shall acknowledge receipt of the tax claims by providing the sheriff with a receipt in the format required by the department.
    4. If the sheriff fails to file the tax claims as required by this subsection, the sheriff shall be liable on his or her bond for the aggregate amount of the tax claims not filed with the clerk.
    1. Upon filing with the county clerk, a real property tax claim shall become a certificate of delinquency and a personal property tax claim shall become a personal property certificate of delinquency, and the department, rather than the sheriff, shall be responsible for the collection of all amounts due in accordance with KRS 134.504 . (2) (a) Upon filing with the county clerk, a real property tax claim shall become a certificate of delinquency and a personal property tax claim shall become a personal property certificate of delinquency, and the department, rather than the sheriff, shall be responsible for the collection of all amounts due in accordance with KRS 134.504 .
    2. Certificates of delinquency and personal property certificates of delinquency filed with the county clerk are owned by the taxing jurisdictions whose taxes are included as part of the certificate of delinquency or personal property certificate of delinquency.
    3. The clerk shall accept payment for certificates of delinquency as provided in KRS 134.126 and 134.127 .
    4. A certificate of delinquency or personal property certificate of delinquency shall include:
      1. The face amount of the tax due;
      2. The ten percent (10%) penalty as provided in KRS 134.015 ; and
      3. The sheriff’s commission and the ten percent (10%) sheriff’s add-on as provided in KRS 134.119 .
    5. The certificate of delinquency or personal property certificate of delinquency shall be prima facie evidence that:
      1. The property represented by the certificate of delinquency or personal property certificate of delinquency was subject to the taxes levied thereon, and that the property was assessed as required by law;
      2. The tax claim was valid and correct in all respects; and
      3. The taxes were not paid any time before the establishment of the certificate of delinquency or personal property certificate of delinquency.
  1. If, in the process of collecting property taxes, the county clerk becomes aware of a new address for a taxpayer, the county clerk shall provide, using a form provided by the department, the information relating to the new address to the property valuation administrator, who shall update his or her records to reflect the new address.

History. Enact. Acts 2009, ch. 10, § 6, effective January 1, 2010; 2010, ch. 75, § 4, effective April 7, 2010; 2012, ch. 161, § 2, effective April 23, 2012.

NOTES TO DECISIONS

Cited in:

M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

134.125. Interest on certificates of delinquency.

  1. A certificate of delinquency or personal property certificate of delinquency shall bear simple interest at twelve percent (12%) per annum. Interest shall initially be calculated based on the base amount established by KRS 134.122(2)(d). Interest shall be calculated in subsequent months on the outstanding balance of the base amount until paid. A fraction of a month shall be counted as an entire month.
  2. If a certificate of delinquency is paid by a third-party purchaser, the amount paid by the third-party purchaser shall become the base amount upon which simple interest is initially calculated. Interest shall be calculated in subsequent months on the outstanding balance of the base amount until paid.

History. Enact. Acts 2009, ch. 10, § 7, effective January 1, 2010; 2010, ch. 75, § 5, effective April 7, 2010.

NOTES TO DECISIONS

1. Interest.

Debtors were denied confirmation of a Chapter 13 plan that did not provide for full payment, including interest per 11 U.S.C.S. § 511 at the rate of 12% as provided by KRS 134.452 and KRS 134.125 , and including all attorneys fees sought by the creditor who was seeking to enforce a certificate of delinquency for real estate taxes, because all of the elements of the claim as prosecuted by the creditor were properly included per 11 U.S.C.S. § 502(b)(2) and 11 U.S.C.S. § 506(b) and because the legal fees were precipitated by the untenable positions taken by debtors. In re Crigler, 2011 Bankr. LEXIS 1321 (Bankr. E.D. Ky. Apr. 8, 2011).

Circuit court properly awarded a certificate of delinquency holder interest on the certificate and attorney fees because the judgment and order of sale did not resolve the issue of interest, the costs and attorney fees could not be adjudicated at the time the final judgment and order of sale was entered, even if post-judgment interest were properly denied, the holder was entitled to simple interest on the underlying certificate of delinquency until the date of the order of distribution, and the holder was awarded fees well in excess of the $2,000 statutory limit without any finding that those fees were warranted by the complexity of the case. Ky. Tax Bill Servicing, Inc. v. Fultz, 567 S.W.3d 148, 2018 Ky. App. LEXIS 304 (Ky. Ct. App. 2018).

134.126. Duties of the clerk regarding certificates of delinquency — Fees.

    1. The county clerk shall receive and record payments for all certificates of delinquency and personal property certificates of delinquency filed by the sheriff pursuant to KRS 134.122 . (1) (a) The county clerk shall receive and record payments for all certificates of delinquency and personal property certificates of delinquency filed by the sheriff pursuant to KRS 134.122 .
    2. The county clerk may accept payment by any commercially acceptable means. The county clerk may limit the acceptable methods of payment to those that ensure that the payment cannot be reversed or nullified due to insufficient funds.
  1. The county clerk shall give a receipt to the person making payment.
  2. The county clerk shall report by the tenth day of each month to the department, the county treasurer, the sheriff, and the proper officials of the taxing districts. The governing body of a county may require the county clerk to report and pay on a more frequent basis if necessary for bonding requirements; however, the county clerk shall not be required to report and pay more frequently than weekly.
  3. The county clerk shall allocate payments among the various entities entitled to a portion of the payment. The county clerk shall, at the time he or she makes the reports required by subsection (3) of this section:
    1. Pay to the department for deposit in the State Treasury all moneys received due the state;
    2. Pay to the county treasurer all moneys received due the county;
    3. Pay to the authorized officers of the taxing districts the amount due each taxing district; and
    4. Pay the amount of fees, costs, commissions, and penalties to the persons, agencies, or parties entitled thereto.
    1. Upon full payment of a certificate of delinquency or personal property certificate of delinquency owned by the state, county, and taxing districts, the county clerk shall note on the certificate the name and address of the person making the payment, the amount paid, and any other information the department may require. The clerk shall mark the certificate of delinquency or personal property certificate of delinquency paid in full. (5) (a) Upon full payment of a certificate of delinquency or personal property certificate of delinquency owned by the state, county, and taxing districts, the county clerk shall note on the certificate the name and address of the person making the payment, the amount paid, and any other information the department may require. The clerk shall mark the certificate of delinquency or personal property certificate of delinquency paid in full.
    2. If payment in full is made by a person other than the person primarily liable on the certificate, the person making the payment may request that the payment be treated as an assignment. Upon such request, the county clerk shall:
      1. Note the assignment on the certificate of delinquency or personal property certificate of delinquency;
      2. Record the encumbrance represented by the certificate of delinquency in the same manner as a notice of lis pendens; and
      3. Include as part of the encumbrance recording the information required by KRS 134.490(3)(e).
    3. If a person other than the person primarily liable on the certificate does not request the payment to be treated as an assignment, he or she shall be treated in the same manner as the person primarily liable on the certificate, and any payment made pursuant to this subsection shall not constitute an assignment of the certificate. The payor shall not be subrogated to the lien of the state, county, and taxing districts as provided in subsection (8) of this section, and shall not be considered a third-party purchaser under the provisions of this chapter, or a transferee under KRS 134.121 .
  4. After the initial recording of an assignment of a certificate of delinquency or personal property certificate of delinquency as provided in subsection (5)(b) of this section, all subsequent actions relating to that certificate of delinquency or personal property certificate of delinquency, including assignments and releases shall be made in accordance with the general laws and procedures governing land records, except the additional information required by KRS 134.490(3)(e) shall be included. The applicable fees established by KRS 64.012 shall apply.
  5. A certificate of delinquency or personal property certificate of delinquency shall be assignable. Failure of an assignee to record the assignment shall render the claim of such person to any real estate represented thereby inferior to the rights of other bona fide purchasers, payors, or creditors.
  6. Any person other than the person primarily liable on a certificate who:
    1. Pays the certificate of delinquency in full, and who requests to the county clerk that the payment be treated as an assignment pursuant to subsection (5)(b) of this section; or
    2. Is the assignee of such a person, if the assignment has been recorded as required by this section or KRS 134.127 ;
  7. As compensation for collection of payments on certificates of delinquency, personal property certificates of delinquency, and other delinquent taxes, and the processing of delinquent property tax payments, the county clerk shall be paid ten percent (10%) of the amount due each taxing unit for each certificate of delinquency, personal property certificate of delinquency, or other delinquent tax claim. The fee shall be added to the amount of the tax claim and shall be paid by the person paying the tax claim.

For recording the assignment and encumbrance, the county clerk shall receive the fee provided in KRS 64.012 .

shall be subrogated to the lien priority of the state, county, and taxing districts as provided in KRS 134.420 , and the amount due may be collectible as provided in KRS 134.546(2).

History. Enact. Acts 2009, ch. 10, § 8, effective January 1, 2010; 2010, ch. 75, § 15, effective April 7, 2010; 2012, ch. 161, § 11, effective April 23, 2012.

NOTES TO DECISIONS

Cited in:

M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

Opinions of Attorney General.

The proper fee of the county clerk for recording a reassignment of a certificate of delinquency from a third-party purchaser to a subsequent purchaser is the general fee of $12.00 provided in KRS 64.012(1)(a). OAG 12-002 , 2012, Ky. AG LEXIS 46.

134.127. Payment of amount due on certificate of delinquency to the clerk.

    1. The following persons may pay to the county clerk at any time the total amount due on a certificate of delinquency or personal property certificate of delinquency that is owned by the taxing jurisdictions and in the possession of the county clerk. It shall be the responsibility of the person seeking to pay the county clerk to provide sufficient proof to the county clerk that he or she meets the requirements to pay under this paragraph. The county clerk shall be held harmless if he or she relies upon information provided and accepts payment from a person not qualified to pay under this paragraph. The county clerk may also accept partial payments from these persons: (1) (a) The following persons may pay to the county clerk at any time the total amount due on a certificate of delinquency or personal property certificate of delinquency that is owned by the taxing jurisdictions and in the possession of the county clerk. It shall be the responsibility of the person seeking to pay the county clerk to provide sufficient proof to the county clerk that he or she meets the requirements to pay under this paragraph. The county clerk shall be held harmless if he or she relies upon information provided and accepts payment from a person not qualified to pay under this paragraph. The county clerk may also accept partial payments from these persons:
      1. The person primarily liable on the certificate of delinquency or personal property certificate of delinquency, or a person paying on behalf of the person primarily liable on the certificate, provided that a person paying on behalf of the person primarily liable on the certificate under this paragraph shall, notwithstanding the provisions of KRS 134.126(5), be treated in the same manner as the person primarily liable on the certificate and shall not be treated as an assignee or a transferee under the provisions of this chapter; and
      2. The following persons may pay a certificate of delinquency or personal property certificate of delinquency that relates to the specific property in which he or she has an interest, other than a person whose only interest in the property is an interest resulting from a prior year certificate of delinquency:
        1. Any person having a legal or equitable estate in real property subject to a certificate of delinquency;
        2. A tenant or lawful occupant of real property, or a bailee or person in possession of any personal property; or
        3. Any person having a mortgage on real property or a security interest in real or personal property.
    2. Any other person may pay the total amount due on a certificate of delinquency that is owned by the taxing jurisdictions and in the possession of the county clerk to the county clerk after ninety (90) days have passed from the filing of the tax claims with the county clerk in accordance with KRS 134.128 .
      1. Only the persons listed in paragraph (a) of this subsection may pay a personal property certificate of delinquency. Personal property certificates of delinquency shall not be included in any sale conducted under KRS 134.128 , and may not be purchased by any third party not specifically listed in paragraph (a) of this subsection. (c) 1. Only the persons listed in paragraph (a) of this subsection may pay a personal property certificate of delinquency. Personal property certificates of delinquency shall not be included in any sale conducted under KRS 134.128, and may not be purchased by any third party not specifically listed in paragraph (a) of this subsection.
      2. A certificate of delinquency on property of a public service company that is centrally assessed, and that includes personal property and real property on the same certificate of delinquency, shall be treated for all purposes as a certificate of delinquency on real property.
  1. The duties of the county clerk with regard to payment of a certificate of delinquency or personal property certificate of delinquency by a person other than the person primarily liable on the certificate, are set forth in KRS 134.126(5) and (6).
    1. The delinquent taxpayer or any person having a legal or equitable estate in the property covered by a certificate of delinquency may, at any time, pay the total amount due to a third-party purchaser of a certificate of delinquency. The third-party purchaser may also accept payment from any other person at any time. (3) (a) The delinquent taxpayer or any person having a legal or equitable estate in the property covered by a certificate of delinquency may, at any time, pay the total amount due to a third-party purchaser of a certificate of delinquency. The third-party purchaser may also accept payment from any other person at any time.
    2. When full payment for a certificate of delinquency is made to a third-party purchaser, the third-party purchaser shall execute a release of the lien in accordance with the provisions of KRS 382.365 . The remedies included in KRS 382.365 shall apply if the third-party purchaser fails to release the lien as provided in KRS 382.365.
    3. Any person other than the person primarily liable on a certificate of delinquency who pays a certificate of delinquency to a third-party purchaser may, by paying a fee pursuant to KRS 64.012 , have the county clerk record the payment, and the recordation shall constitute an assignment thereof, and KRS 134.126(6) and (8) shall apply. Failure of an assignee to record the assignment shall render the claim of such person to any real estate represented thereby inferior to the rights of other bona fide purchasers, payors, or creditors.
    4. If the third-party purchaser fails to release the lien in accordance with the provisions of KRS 382.365, or to surrender the certified copy of the certificate of delinquency to the person making full payment within thirty (30) days after payment has been tendered at the mailing address designated in the notice required by KRS 134.490 or the mailing address of record in the county clerk’s office if no notice has been provided as required by KRS 134.490 , the person making the payment shall have all of the remedies provided in KRS 382.365.
      1. A person entitled to make payment under this section who is having difficulty locating the third-party purchaser of the certificate of delinquency to make payment may send a registered letter addressed to the third-party purchaser of record at the address reflected in the most recent notice received from the third-party purchaser pursuant to KRS 134.490, or if no notice has been received, at the address reflected in the records of the county clerk, indicating a desire to make payment. If the letter is returned by mail unclaimed, or if the third-party purchaser fails to respond in writing within thirty (30) days, the sender may take to the county clerk as proof of mailing the certified mail receipts stamped by the post office showing that the certified letter was mailed to the correct address and the date it was mailed. If the letter was returned, the sender shall also provide the returned letter to the clerk. The sender shall attest under oath that the letter was mailed to the correct address, and if the letter was not returned, the attestation shall also provide that the third-party purchaser did not respond in writing within thirty (30) days of the date the letter was mailed. The department shall develop attestation forms for distribution to the county clerks that include a notice that any false statement made in the attestation shall be punishable by law. The form shall be a public record under KRS 519.010(2), subject to KRS 519.060(1)(a). The clerks’ taking of such testimony shall be an official proceeding under KRS 523.010(3). (e) 1. A person entitled to make payment under this section who is having difficulty locating the third-party purchaser of the certificate of delinquency to make payment may send a registered letter addressed to the third-party purchaser of record at the address reflected in the most recent notice received from the third-party purchaser pursuant to KRS 134.490, or if no notice has been received, at the address reflected in the records of the county clerk, indicating a desire to make payment. If the letter is returned by mail unclaimed, or if the third-party purchaser fails to respond in writing within thirty (30) days, the sender may take to the county clerk as proof of mailing the certified mail receipts stamped by the post office showing that the certified letter was mailed to the correct address and the date it was mailed. If the letter was returned, the sender shall also provide the returned letter to the clerk. The sender shall attest under oath that the letter was mailed to the correct address, and if the letter was not returned, the attestation shall also provide that the third-party purchaser did not respond in writing within thirty (30) days of the date the letter was mailed. The department shall develop attestation forms for distribution to the county clerks that include a notice that any false statement made in the attestation shall be punishable by law. The form shall be a public record under KRS 519.010(2), subject to KRS 519.060(1)(a). The clerks’ taking of such testimony shall be an official proceeding under KRS 523.010(3).
      2. Upon the acceptance of proof and attestation by the county clerk that the person has failed in his or her attempt to contact the third-party purchaser about making payment, the person may pay the full amount due as reflected in the records maintained by the county clerk plus applicable interest, and the county clerk shall make the necessary assignment or release of the certificate of delinquency. The county clerk shall also discharge any notice filed pursuant to KRS 382.440 or 382.450 as provided in KRS 382.470 , except the county clerk shall prepare and record an in-house release executed by the county clerk along with the proof of payment, rather than requiring the signature or writing as required by KRS 382.470 . The clerk shall receive a fee pursuant to KRS 64.012 for recording the release.
      3. The county clerk shall deposit the money paid in an escrow account for this specific purpose in a bank having its deposits insured with the Federal Deposit Insurance Corporation. The name of the bank in which the money is deposited shall be noted on the certificate of delinquency. The county clerk may maintain one (1) escrow account for all deposits made pursuant to this subparagraph and shall maintain a record reflecting the amount due each owner of a certificate of delinquency.
      4. The county clerk may deduct the sum of twenty dollars ($20) as a fee for such service.
      5. The county clerk shall mail a copy of the certificate of delinquency by regular mail to the third-party purchaser of record at the address on the certificate of delinquency.
      6. If any county clerk fails to pay to the person entitled thereto, upon written demand clearly identified as a demand for payment, the money received in payment of a certificate of delinquency, the county clerk and the county clerk’s sureties shall be liable for the amount of the payment and twenty percent (20%) interest thereon annually from the fifteenth day after the time the county clerk received the written demand until paid.
  2. Copies of the records provided for in this section and KRS 134.126 , when certified by the county clerk, shall be evidence of the facts stated in them in all the courts of this state.

Upon full payment of a certificate of delinquency under this subparagraph, KRS 134.126(5), (6), (7), and (8) shall apply regarding the rights and interests of the person making the payment.

History. Enact. Acts 2009, ch. 10, § 9, effective January 1, 2010; 2010, ch. 75, § 6, effective April 7, 2010; 2012, ch. 161, § 3, effective April 23, 2012.

NOTES TO DECISIONS

  1. Payoff Request.
  2. Intervention.
  3. Attestation.
  4. Certificate of Delinquency.
  5. Construction.
1. Payoff Request.

Payoff request letter complied with subsection (3)(e)(1) because the request for a payoff amount within three days was wholly irrelevant to the validity of the statutory process; the attestation form was presented to the county clerk thirty-one days after the payoff request letter was sent. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

2. Intervention.

Trial court did not err in denying a tax lien purchaser’s motion to intervene because it properly found that the purchaser failed to demonstrate how his omission from the case would impair or impede his ability to protect his interest and that the matter was moot since the purchaser’s certificate of delinquency had been paid to the county clerk and released of record. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

3. Attestation.

Attestation was properly notarized and presented to the county clerk in compliance with the statute because the signature of a bank’s attorney’s was notarized by a Kentucky Notary Public whose seal is on the form. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

4. Certificate of Delinquency.

Bank was authorized to pay a certificate of delinquency because the payment came from the delinquent taxpayers, and the bank, as mortgage holder, had a legal or equitable interest in the property and could utilize the statute; the bank’s attorney was working with the authorization and assistance of the taxpayers to obtain a payoff amount, and the subsequent payment to the county clerk came from the taxpayers’ accountant. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

5. Construction.

Subsection (1) refers to payment of a certificate owned by the taxing jurisdiction and in the possession of the county clerk; accordingly, there would be no instance where a person entitled to make payment would be having difficulty locating the third-party purchaser, and viewing the statute as a whole, it is unclear whether the use of the word “section” in subsection (3)(e)(1) expresses the intent of the legislature or is merely an ambiguous reference. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

134.128. Process for sale of certificate of delinquency by clerks to persons not listed in KRS 134.127(1)(a).

  1. The sale of certificates of delinquency by county clerks to persons other than those listed in KRS 134.127(1)(a) shall be conducted in accordance with the provisions of this section.
  2. The department shall promulgate administrative regulations to establish a process for the purchase and sale of certificates of delinquency to third parties. The process developed by the department shall:
      1. Establish an annual statewide schedule for the sale of certificates of delinquency in each county. The schedule shall be published on the department’s Web site at least ten (10) days prior to the first sale. The sale in each county shall be administered by the county clerk. (a) 1. Establish an annual statewide schedule for the sale of certificates of delinquency in each county. The schedule shall be published on the department’s Web site at least ten (10) days prior to the first sale. The sale in each county shall be administered by the county clerk.
      2. The sale in each county shall be scheduled at least ninety (90) days but not more than one hundred thirty-five (135) days after the unpaid tax claims are filed by the sheriff with the county clerk, unless the provisions of subparagraph 3. of this paragraph apply. The department may stagger the schedule so that sales are conducted on different dates and times in different counties.
      3. A county clerk who:
        1. Due to the assessment schedule established by the department, anticipates receiving certificates of delinquency relating to unmined coal, oil or gas reserves, or any other mineral or energy resources assessed separately from the surface real property pursuant to KRS 132.820 too late to be included in the annual sale scheduled during the timeframes established by subparagraph 2. of this paragraph; and
        2. Wants to include those certificates in the annual sale for the year in which the certificates of delinquency are created;
    1. Except as provided in KRS 134.127(1)(a), prohibit the payment of any newly filed certificates of delinquency by a third party prior to the scheduled annual sale of certificates of delinquency for that year for that county;
    2. Prohibit the payment of any certificates of delinquency:
      1. Involved in bankruptcy litigation in which the county attorney or department has filed a claim;
      2. Involved in other litigation initiated by the county attorney or the department, or in which the county attorney or department responds or files a claim;
      3. Under a payment plan that has been agreed to by the taxpayer and the county attorney or the department, and on which the payment agreement is in good standing; or
      4. Related to property included in a tax delinquency diversion program established pursuant to KRS 99.727 ;
    3. Establish a process to be used by county clerks in determining the order in which interested third-party purchasers may select and pay available certificates of delinquency at the annual sale. The process shall, at a minimum:
      1. Be uniform in all counties to the extent practicable;
      2. Establish a process, if there is more than one (1) purchaser registered to purchase certificates of delinquency at the sale, that allows all interested purchasers an opportunity to purchase certificates of delinquency on an equitable basis. The sale shall not be structured in such a manner to allow one (1) third party to purchase all of the certificates of delinquency if there are other properly registered third parties that are also interested in purchasing certificates of delinquency;
      3. Establish fairness for all participants by prohibiting the participation of multiple related entities, or multiple individuals representing related interests as separate entities in the selection process at an annual sale. The department shall define “related entities” and “related interests” as part of the regulatory process; and
      4. Establish a process to be used by county clerks in identifying, verifying, and selling priority certificates of delinquency. The process shall:
        1. Require third-party purchasers to submit a list of priority certificates of delinquency to the county clerk up to ten (10) days before the annual sale so that the clerk may identify and allocate priority certificates of delinquency to third-party purchasers prior to the annual sale;
        2. Require that all priority certificates of delinquency allocated to a third-party purchaser prior to the annual sale be removed from the annual sale;
        3. Allow any third-party purchaser holding a certificate of delinquency on a parcel of property from a prior year to submit a priority list and purchase any priority certificates of delinquency to which the third-party purchaser is entitled, notwithstanding that the third-party purchaser may be related to another third-party purchaser participating in the sale; and
        4. Give priority to the third-party purchaser holding a certificate of delinquency from the most recent tax year if more than one (1) third party holds an outstanding certificate of delinquency on a parcel of property;
    4. Require all potential participants in the sale to register at least one (1) week in advance with the county clerk;
    5. Require a review of the list of registered participants, either by the county clerk or the department, prior to the sale to ensure that:
      1. All registered participants seeking to pay multiple certificates of delinquency are properly registered with the department as required by KRS 134.129 ; and
      2. No registered participants or related entities or related interests prohibited from separate participation in the annual sale pursuant to the provisions of paragraph (d)3. of this subsection and the administrative regulations promulgated thereunder have separately registered to participate in the annual sale;
    6. Establish advance deposit requirements for registered participants based upon the maximum amount the registered participant may pay for desired certificates of delinquency;
    7. Establish a registration fee to be paid to the clerk. The registration fee paid to each county shall not exceed two hundred fifty dollars ($250) annually and may be tiered;
    8. Establish payment requirements, which may include nullification of the payment and forfeiture of the advance deposit if a third-party purchaser fails to produce full payment within the specified time; and
    9. Establish payment methods.
  3. Any person who, in any calendar year:
    1. Pays or plans to pay more than five (5) certificates of delinquency statewide;
    2. Pays or plans to pay more than three (3) certificates of delinquency in any county; or
    3. Invests or plans to invest more than ten thousand dollars ($10,000) in the payment of certificates of delinquency on a statewide basis in any calendar year;
  4. The department shall be responsible for monitoring the sale of certificates of delinquency.
    1. At least thirty (30) but not more than forty-five (45) days before the scheduled sale date, the county clerk shall cause a notice to be published in accordance with the provisions of KRS Chapter 424. The notice shall list by property owner, property address, and if available, parcel number or lot number, all certificates of delinquency available for sale. The notice shall provide the date, time, and location of the sale. In addition, the notice shall list, in a separate section, all personal property certificates of delinquency held by the county clerk. (5) (a) At least thirty (30) but not more than forty-five (45) days before the scheduled sale date, the county clerk shall cause a notice to be published in accordance with the provisions of KRS Chapter 424. The notice shall list by property owner, property address, and if available, parcel number or lot number, all certificates of delinquency available for sale. The notice shall provide the date, time, and location of the sale. In addition, the notice shall list, in a separate section, all personal property certificates of delinquency held by the county clerk.
    2. As compensation for advertising the sale, the county clerk shall receive five dollars ($5) for each certificate of delinquency and personal property certificate of delinquency advertised. The fee shall be added to the amount of the certificate of delinquency or personal property certificate of delinquency and shall be paid by the person paying the certificate of delinquency or personal property certificate of delinquency.
    3. The cost of placing the advertisement shall be paid by the county. The cost shall be added to the amount of the certificate of delinquency or personal property certificate of delinquency and shall be paid by the person paying the certificate of delinquency or personal property certificate of delinquency. The department shall establish a formula that may be used by counties in allocating the advertising costs among the delinquent tax claims. The formula shall take into account that a percentage of delinquent tax claims remains unpaid.
  5. Any certificate of delinquency not paid at the annual sale, not subject to a payment plan with the department or county attorney, and not known to be in litigation may be paid to the county clerk at any time by any person after the sale, provided that:
    1. Any person required by KRS 134.129 to register with the department shall hold a current certificate of registration at the time of purchase;
    2. Any person not previously registered with the county clerk during the calendar year shall register with the county clerk and shall pay the registration fee established by administrative regulation pursuant to subsection (2)(h) of this section; and
    3. Any person previously registered with the county clerk during the calendar year who has not paid the maximum registration fee for that year shall pay the appropriate amount for each certificate of delinquency paid, as established by administrative regulation pursuant to subsection (2)(h) of this section, until the maximum registration has been paid.
  6. Any certificate of delinquency received by the county clerk too late to be included in the annual sale in any year shall be retained by the clerk until the next scheduled annual sale. During that time period, the clerk may accept payment on the certificate of delinquency only from those individuals and entities listed in KRS 134.127(1)(a).

may submit a request to the department to hold the annual sale for that county up to one hundred ninety-five (195) days after the bulk of the unpaid tax claims are filed by the sheriff with the county clerk in accordance with KRS 134.122 ;

shall register with the department annually as provided in KRS 134.129 .

History. Enact. Acts 2009, ch. 10, § 10, effective January 1, 2010; 2010, ch. 75, § 7, effective April 7, 2010; 2012, ch. 161, § 4, effective April 23, 2012; 2016 ch. 127, § 11, effective July 15, 2016.

Legislative Research Commission Notes.

(4/23/2012). The internal numbering of subsection (2)(a) of this statute has been modified by the Reviser of Statutes from the way it appeared in 2012 Ky. Acts ch. 161, sec. 4, under the authority of KRS 7.136(1). The words in the text were not changed.

(1/1/2010). A reference to “paragraph (d)2.” in subsection (2)(f)2. of this statute has been changed in codification to “paragraph (d)3.” to correct a manifest oversight during the amendment process. House Committee Amendment 2 to House Bill 262, which became 2009 Ky. Acts ch. 10, inserted a new subparagraph 2. in subsection (2)(d) of this statute and renumbered the subsequent subparagraphs, but did not make the conforming change to the reference in subsection (2)(f)2. This manifest clerical or typographical error has been corrected by the Reviser of Statutes under the authority of KRS 7.136(1).

NOTES TO DECISIONS

1. Constitutionality.

Ky. Const. §§ 181 and 175 did not explicitly prohibit the sale of tax certificates as the sale of such certificates to third-party purchasers was neither a delegation nor surrender of the Commonwealth's authority to impose or collect taxes. Farmers Nat'l Bank v. Commonwealth, 486 S.W.3d 872, 2015 Ky. App. LEXIS 76 (Ky. Ct. App. 2015).

Variability of the collections fees that third-party purchasers were allowed to collect did not make the collection of taxes non-uniform under Ky. Const. § 171 as the collection fees were not taxes. Farmers Nat'l Bank v. Commonwealth, 486 S.W.3d 872, 2015 Ky. App. LEXIS 76 (Ky. Ct. App. 2015).

Court of Appeals holds that the statutory provisions set forth in Ky. Rev. Stat. Ann. ch. 134 do not constitute a taking under either the United States Constitution or the Kentucky Constitution. Farmers Nat'l Bank v. Commonwealth, 486 S.W.3d 872, 2015 Ky. App. LEXIS 76 (Ky. Ct. App. 2015).

2. Certificate of Delinquency.

Trial court presiding over an action to distribute real estate property sales proceeds after the sale of a parcel of land due to unpaid ad valorem taxes should not have distributed the full amount of the city and county’s liens to them and then divided the remaining proceeds pro rata among the other parties. Liens that resulted from unpaid ad valorem taxes were not made inferior by the sale of KRS 134.128 certificates of delinquency from government entities to third-party purchasers such as the bank, especially since KRS 134.420 gave priority to liens resulting from such unpaid taxes irrespective of whether government entities or third parties held those liens. United States Bank Nat'l Ass'n v. Tax Ease Lien Invs. 1, LLC, 356 S.W.3d 770, 2011 Ky. App. LEXIS 227 (Ky. Ct. App. 2011).

Bank was authorized to pay a certificate of delinquency because the payment came from the delinquent taxpayers, and the bank, as mortgage holder, had a legal or equitable interest in the property and could utilize the statute; the bank’s attorney was working with the authorization and assistance of the taxpayers to obtain a payoff amount, and the subsequent payment to the county clerk came from the taxpayers’ accountant. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

134.129. Registration for sale of certificates of delinquency with Department of Revenue.

  1. Any person who, in any calendar year:
    1. Pays or plans to pay directly, indirectly, or through another or others, more than five (5) certificates of delinquency statewide;
    2. Pays or plans to pay directly, indirectly, or through another or others, more than three (3) certificates of delinquency in any county; or
    3. Invests or plans to invest directly, indirectly, or through another or others, more than ten thousand dollars ($10,000) in the payment of certificates of delinquency on a statewide basis in any calendar year;
  2. The person shall hold a certificate of registration from the department prior to the payment of any certificate of delinquency that results in the person owning more than five (5) certificates of delinquency statewide, more than three (3) certificates of delinquency in any county, or investing more than ten thousand dollars ($10,000) in the payment of certificates of delinquency statewide in a calendar year.
  3. The department shall promulgate administrative regulations to establish registration requirements and an application process, which may include the imposition of an administrative fee to offset the cost of processing and reviewing the application.
  4. As part of the application process, the department may require that the applicant and any of its directors, officers, members, and managers:
    1. Are current and in good standing on all taxes owed to the Commonwealth;
    2. Are in good standing with regard to operations under a previously issued certificate of registration;
    3. Have not previously operated without obtaining a certificate of registration under this section under circumstances where he or she should have registered; and
    4. Have a satisfactory record with the Office of Consumer Protection within the Office of the Attorney General. What constitutes a satisfactory record shall be determined by the department through the promulgation of an administrative regulation.
    1. The department may decline to issue a certificate of registration to any applicant who does not meet the requirements established by this chapter and the administrative regulations promulgated thereunder. (5) (a) The department may decline to issue a certificate of registration to any applicant who does not meet the requirements established by this chapter and the administrative regulations promulgated thereunder.
    2. The department may suspend or revoke a certificate of registration if the person holding the certificate violates the provisions of this chapter or the administrative regulations promulgated thereunder.

shall register with the department annually.

Any applicant failing to meet one (1) or more of these requirements may be denied a certificate of registration.

History. Enact. Acts 2009, ch. 10, § 11, effective January 1, 2010; 2012, ch. 161, § 5, effective April 23, 2012.

134.130. Release of property from certificate of transfer — Redemption. [Repealed.]

Compiler’s Notes.

This section (4168c to 4168e, 4168i) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.131. County clerk to annually provide department with list of certificates of delinquency received from sheriff — Publication on department’s Web site.

  1. On or before May 15, 2013, and each May 15 thereafter, each county clerk shall provide or shall arrange to provide to the department a list of all certificates of delinquency received by the county clerk from the sheriff for that year, and that are in the possession of the clerk on the day the information is provided. The list shall include, at a minimum, the property owner name, property address, and parcel number or lot number if available. To the extent possible, the list shall be provided to the department in an electronic format.
  2. On or before June 1, 2013, and on or before each June 1 thereafter, the department shall publish on its Internet Web site a consolidated list of certificates of delinquency by county. To the extent possible, within each county, the list shall be in alphabetical order by property owner name, and shall include at a minimum the property owner name, property address, and parcel number or lot number if available.
  3. The information required by this section shall be provided by the county clerks and department as a public service. The department, the county clerk, and the employees thereof shall be held harmless regarding the content or any omission relating to information provided.
  4. If the tax collection schedule is delayed in any county, that county shall provide the information required by subsection (1) of this section to the department within thirty (30) days of receipt from the sheriff, and the department shall publish the information on its Web site within fifteen (15) days of receipt from the county clerk.

History. Enact. Acts 2012, ch. 161, § 14, effective April 23, 2012.

134.140. Investment of tax revenues until time of distribution — Disposition of investment earnings.

  1. The sheriff may invest any tax revenues held in his or her possession from the time of collection until the time of distribution to the proper taxing authorities. Investments by the sheriff shall be restricted to those permitted by KRS 66.480 .
  2. As part of the monthly distribution of taxes to a district board of education as required by KRS 134.191 , the sheriff shall pay to the board of education that part of the investment earnings for the month which are attributable to the investment of school taxes, less an amount not to exceed four percent (4%) of the earned monthly investment income to reimburse the sheriff for the costs of administering the investment.
  3. In counties where the sheriff pays fees and commissions collected to the county and the salaries and expenses of the sheriff’s office are paid by the county, the sheriff shall pay to the county treasurer the investment earnings, other than those paid to the board of education in compliance with subsection (2) of this section, at the time of his or her monthly distribution of taxes to the county required by KRS 134.191 .
  4. In those counties where the office of sheriff is funded in whole or in part by fees and commissions, the sheriff may use investment earnings, other than those which must be paid to the board of education in compliance with subsection (2) of this section, to pay lawful expenses of his or her office.

History. 4067, 4114h-2, 4129: amend. Acts 1982, ch. 57, § 2, effective March 9, 1982; 2002, ch. 346, § 170, effective July 15, 2002; 2009, ch. 10, § 19, effective January 1, 2010.

NOTES TO DECISIONS

  1. Collection.
  2. —Prior to Certification of Assessment.
  3. —Nonassessed Property.
  4. —Taxes on Omitted Property.
  5. —County Clerk.
  6. —Vacancy in Sheriff’s Office.
  7. —Delinquent Taxes.
  8. Sheriff’s Liability.
  9. Settlement.
  10. Franchise Taxes.
  11. Taxes on Distilled Spirits.
  12. Appointment of Collector.
  13. Recovery of Taxes Wrongfully Collected.
  14. Investment Earnings.
1. Collection.

The Legislature has full power to designate who shall be collector of state and county taxes. Collection of taxes is not a constitutional function of the sheriff’s office. Madison County v. Hamilton, 243 Ky. 29 , 47 S.W.2d 938, 1932 Ky. LEXIS 33 ( Ky. 1932 ).

Creditor of county may compel sheriff by mandatory injunction to perform his duty to collect taxes. Breathitt County v. Cockrell, 250 Ky. 743 , 63 S.W.2d 920, 1933 Ky. LEXIS 764 ( Ky. 1933 ).

2. —Prior to Certification of Assessment.

Sheriff who misappropriated franchise taxes due county from railroad company could not be convicted of embezzling county funds where he had collected the taxes before they were certified to him for collection under KRS 136.180 . Commonwealth v. Brand, 166 Ky. 753 , 179 S.W. 844, 1915 Ky. LEXIS 772 ( Ky. 1915 ).

Sheriff was accountable for railroad company franchise taxes which company had paid to him before certification of assessment as provided by KRS 136.180 , as against sheriff’s contention that he had no authority to receive such taxes before certification. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ).

3. —Nonassessed Property.

The sheriff has no authority to collect taxes on property that has not been assessed for taxation, and if he collects such taxes and misappropriates the money he cannot be convicted of embezzling state or county funds. Commonwealth v. Alexander, 129 Ky. 429 , 112 S.W. 586, 33 Ky. L. Rptr. 971 , 1908 Ky. LEXIS 178 ( Ky. 1908 ).

4. —Taxes on Omitted Property.

Sheriff who, with his deputies, engaged in a plan or scheme of collecting taxes from taxpayers whose property had been omitted from taxation, and against whom no tax bills had been issued, could not, after being held accountable to the county for such taxes, recover from his deputies the amount of such taxes each had collected, although the deputies had retained such taxes and had not paid them over to the sheriff. Alexander v. Alexander, 154 Ky. 324 , 157 S.W. 377, 1913 Ky. LEXIS 65 ( Ky. 1913 ).

5. —County Clerk.

The fact that the county clerk collected certain taxes, and was paid a fee by the county for so doing, under a mistaken belief that the clerk had the duty of collection, did not deprive the sheriff of his right to a commission on such taxes, where the sheriff had protested against collection by the clerk and was ready and willing to make collection himself. Anderson County v. Collins, 142 Ky. 394 , 134 S.W. 463, 1911 Ky. LEXIS 203 ( Ky. 1911 ).

While the taxes remain in the hands of the sheriff for collection, the county clerk has no authority to collect or receive payment of the taxes, and payment to him will not relieve the taxpayer of liability for the taxes. Heath v. Hazelip, 159 Ky. 555 , 167 S.W. 905, 1914 Ky. LEXIS 851 ( Ky. 1914 ).

6. —Vacancy in Sheriff’s Office.

Where sheriff whose term would have expired at the end of 1933 died in 1931, and a person was appointed to fill the vacancy until the regular election in November, 1932, such person had the right to collect taxes for 1932 only up to the day of the November election, the person elected at that election having the right to collect the taxes for the balance of the year. McWilliams v. Madison County, 243 Ky. 498 , 49 S.W.2d 319, 1932 Ky. LEXIS 144 ( Ky. 1932 ).

7. —Delinquent Taxes.

During the period allowed to the sheriff for the collection of delinquent taxes the Department of Revenue may not maintain an action to collect such taxes under KRS 134.380 (renumbered as KRS 134.547 ) or 135.050 . Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

8. Sheriff’s Liability.

The sheriff and the surety on his bond are not liable to the county for taxes collected by the sheriff under a void levy. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ).

Fire protection district’s suit against tax collection officials, including a county court clerk, a sheriff, and a county assessor or property valuation administrator, based on the officials’ failure to collect personal property tax pursuant to KRS 75.015 , was properly dismissed because sovereign immunity shielded the officials from liability; Ky. Const. § 99 provided for the election of a County Court Clerk, a County Sheriff, and a County Assessor (or Property Valuation Administrator), and, thus, the officials, having been sued only in their official capacities, were afforded the same immunity as that to which the county was itself entitled. St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

9. Settlement.

Sheriff who had settled with county on basis of tax levy made by fiscal court was not entitled, in action to surcharge settlement, to be given credit for the amount of taxes which had been illegally collected by reason of the levy exceeding the constitutional rate, where the amount which each taxpayer would be entitled to be refunded was nominal and limitations had run against the right of the taxpayers to sue the sheriff for recovery. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ).

10. Franchise Taxes.

Sheriff cannot lawfully collect railroad franchise tax until tax has been certified to him by county clerk as provided in KRS 136.180 . Commonwealth v. Brand, 166 Ky. 753 , 179 S.W. 844, 1915 Ky. LEXIS 772 ( Ky. 1915 ).

11. Taxes on Distilled Spirits.

The sheriff is the collector of the tax on distilled spirits in bonded warehouses. Anderson County v. Collins, 142 Ky. 394 , 134 S.W. 463, 1911 Ky. LEXIS 203 ( Ky. 1911 ).

12. Appointment of Collector.

The words, “by law,” in the provision of this section that the sheriff shall be the collector of all taxes unless the payment is, by law, directed to be made to some other officer, mean a statute, and do not authorize a fiscal court, by order, to designate someone other than the sheriff to collect a county tax. Commonwealth use of Bank of Columbia v. Wade's Adm'r, 126 Ky. 791 , 104 S.W. 965, 31 Ky. L. Rptr. 1185 , 1907 Ky. LEXIS 100 ( Ky. 1907 ).

The fiscal court cannot designate someone other than the sheriff to collect a special tax levied to pay a judgment against the county. Commonwealth use of Bank of Columbia v. Wade's Adm'r, 126 Ky. 791 , 104 S.W. 965, 31 Ky. L. Rptr. 1185 , 1907 Ky. LEXIS 100 ( Ky. 1907 ).

13. Recovery of Taxes Wrongfully Collected.

Taxes wrongfully collected cannot be recovered from the sheriff unless the taxes so collected are still in his hands. Chappell v. Morris, 247 Ky. 476 , 57 S.W.2d 486, 1933 Ky. LEXIS 422 ( Ky. 1933 ).

14. Investment Earnings.

Interest earned on school tax funds placed in an interest bearing checking account (a “NOW” account) is deemed “investment earnings” under subsection (3)(b) (see now (2)); thus, such interest must be paid to the county school districts and may not be retained by the sheriff and used for the legitimate operating expenses of the sheriff’s office. Marshall v. Commonwealth, 20 S.W.3d 478, 2000 Ky. App. LEXIS 62 (Ky. Ct. App. 2000).

Cited in:

Beauchamp v. Matthews, 281 Ky. 351 , 135 S.W.2d 863, 1939 Ky. LEXIS 35 ( Ky. 1939 ); Mt. Vernon Independent Graded School Dist. v. Clark, 281 Ky. 230 , 135 S.W.2d 892, 1940 Ky. LEXIS 15 ( Ky. 1940 ); Gillis v. Preston, 746 S.W.2d 77, 1987 Ky. App. LEXIS 611 (Ky. Ct. App. 1987).

Opinions of Attorney General.

If the court order is officially made and recorded but no bill is prepared, the sheriff cannot be charged with the collection of the tax until such tax bills have been delivered to him by the county clerk. OAG 74-903 .

The collection of a tax on the gross receipts of utilities is the responsibility of the county sheriff. OAG 78-114 .

The sheriff has no authority to invest tax money in any manner, since the statutes make no express provision for investment and since the authority to invest does not exist by necessary and fair implication. OAG 78-491 (modified by OAG 82-491 ).

For guidelines as to investment of money receipts of office by sheriffs, see OAG 82-244 (modifying OAG 78-491 ).

Title to tax moneys collected pursuant to this section passes to the state, county and local taxing districts immediately upon collection by the sheriff, since case law holds that the sheriff is a bailee and all taxes collected by him constitute trust funds in his custody as bailee. OAG 83-320 .

Under KRS 109.056(3) a solid waste management commission cannot place the past due solid waste charges on the property tax bills of persons who refuse to pay their garbage bills, identifying the charge as a garbage charge, and have the sheriff collect the past due charges when he makes his normal yearly property tax collection since this section provides in part that the sheriff is collector of all state, county and district taxes and this involves only taxes in the strict legal sense, not “charges” for a governmental service and since KRS 133.220 deals with the county clerk’s preparation of tax bills and makes no mention of governmental charges. OAG 83-253 .

While a fiscal court has the responsibility for aiding a sheriff in the payment of the sheriff’s necessary expenses of his office, where the sheriff’s revenues are insufficient, and where the county has available money through a properly budgeted item, the fiscal court has no authority to merely in the abstract make up a sheriff’s loss of revenue occasioned by a statutory enactment such as KRS 134.800 providing for the collection of ad valorem taxes on motor vehicles by the county clerk. OAG 84-248 .

The county attorney was not required to represent the county sheriff in a lawsuit against delinquent taxpayers, since there is no requirement in the statutes relating to the sheriff’s responsibilities in regard to the collection of delinquent taxes that mandates the actual collection of a certain percentage of taxes, there is no authority for the sheriff to file suit for the collection of delinquent taxes, other than distraint of personal property, and even if the sheriff does not distrain personal property, there is no authority in the statutes for the Revenue Cabinet to withhold the sheriff’s quietus for failure to collect a certain percentage of delinquent taxes. OAG 86-61 .

Research References and Practice Aids

Cross-References.

Bank franchise and local deposit tax, KRS 136.500 to 136.575 .

Court judgments and executions, collection by sheriff, KRS 135.030 .

Drainage taxes, KRS 267.010 , 267.310 to 267.340 , 268.180 , 268.420 , 268.430 , 268.470 .

Error in assessment, sheriff may correct, KRS 132.230 .

Fire protection district tax, KRS 75.040 .

Levee tax, KRS 266.150 , 266.190 .

Road tax, KRS 178.230 .

Sanitary district tax, KRS 220.360 .

School taxes, KRS 160.500 .

Sheriff not to be interested in public works, or to speculate in claims against state or county, KRS 61.230 .

Tax due from county, certificate and charge to sheriff by Department of Revenue, KRS 133.180 .

Taxes collected by sheriff:

Water bond tax, KRS 74.190 , 74.210 .

Kentucky Law Journal.

Lewis, Kostas, and Carnes, Consolidation — Complete or Functional — of City and County Governments in Kentucky, 42 Ky. L.J. 295 (1954).

134.145. County clerk to collect ad valorem taxes on motor vehicles and trailers — Due date — Evidence of payment — Liability for taxes — Tax lien — Appeal of assessment — Fee for collection. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 371, § 2, effective January 1, 1981) was repealed by Acts 1980, ch. 240, § 7, effective July 15, 1980.

134.146. Report and payment over by county clerk of taxes collected by him — Penalty. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 371, § 8, effective January 1, 1981) was repealed by Acts 1980, ch. 240, § 7, effective July 15, 1980.

134.147. Final settlement by county clerk. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 371, § 9, effective January 1, 1981) was repealed by Acts 1980, ch. 240, § 7, effective July 15, 1980.

134.148. Clerk to file lien for taxes on motor vehicles or trailers — Accounting by clerk of payments received. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1980, ch. 240, § 2, effective July 15, 1980; 1982, ch. 264, § 5, effective July 15, 1982; 2005, ch. 85, § 252, effective June 20, 2005; 2006, 252, Pt. XXVIII, § 15, effective April 25, 2006) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.150. Agents of Department of Revenue not to collect taxes without written authority from commissioner. [Repealed.]

134.160. Office rooms, hours, and books of sheriff.

  1. The governing body of a county shall provide the sheriff with office space that includes a secure place to keep the records of his or her office.
    1. The sheriff shall keep an accurate account of all moneys received and all disbursements made, showing: (2) (a) The sheriff shall keep an accurate account of all moneys received and all disbursements made, showing:
      1. The amount;
      2. The date and time of payment or disbursement;
      3. The name of the person making the payment or to whom the disbursement was made; and
      4. The account the payment was credited to or the disbursement deducted from.
    2. The sheriff shall maintain records that account for separate and distinct appropriations in separate and distinct accounts.
    3. The sheriff shall balance all accounts on a monthly basis unless otherwise provided by law. The cost of maintaining records and accounts in whatever form shall be paid for as other county records.
  2. All payments received by the sheriff shall be entered immediately by the sheriff on his or her books. The sheriff may provide a receipt specifying the amount and to what account the payment was credited to the person making the payment.
  3. The sheriff shall obtain a receipt for all disbursements made by the sheriff.
  4. Other than as permitted for investment and expenditures by this chapter, the sheriff shall not apply or use any money received by him or her for any purpose other than that for which the money was paid or collected.
  5. The sheriff shall keep all books and accounts in the manner and form required by the department.
  6. The books of the sheriff shall be open at all times to the inspection of the Auditor of Public Accounts, the department, the governing body of the county or any member thereof, the governing body of any other taxing district for which the sheriff collects taxes or any member thereof, the Commonwealth’s and county attorneys, and any taxpayer or person having any interest therein.

History. 4137 to 4140; 2005, ch. 85, § 254, effective June 20, 2005; 2009, ch. 10, § 20, effective January 1, 2010.

NOTES TO DECISIONS

  1. Books.
  2. Office Expenses.
1. Books.

The fiscal court is liable for permanent record books used by sheriff in collection of state and county taxes. Barkley v. Gatewood, 285 Ky. 179 , 147 S.W.2d 373, 1941 Ky. LEXIS 356 ( Ky. 1941 ).

2. Office Expenses.

Sheriff was entitled, in settlement, to credit for office telephone expense, but not for post office box rent, bond premiums, stamps, stationery, books, automobile expense, “advertising” or “incidentals.” Commonwealth use of Scott County v. Nunnelley, 211 Ky. 409 , 277 S.W. 506, 1925 Ky. LEXIS 890 ( Ky. 1925 ).

Cited in:

Milliken v. Harrod, 275 Ky. 597 , 122 S.W.2d 148, 1938 Ky. LEXIS 471 ( Ky. 1938 ).

Opinions of Attorney General.

Where an outgoing sheriff, who had purchased office furniture and equipment from the fees of his office, attempted to sell the property in order to meet the payroll he had no authority to sell the property and the attempted sale was illegal and void ab initio and the title to the property did not pass. OAG 65-881 .

Where the sheriff purchased office furniture and equipment from the fees of his office, that property became the property of the county and the fiscal court had control of the property. OAG 65-881 .

Since this section requires the sheriff to keep his books and accounts in the manner and form required by the department of revenue (now Revenue Cabinet) and the current regulations of the department (now cabinet) require that the name of every taxpayer who pays taxes to the sheriff be listed in the cash book, the sheriff must keep his book in that manner. OAG 66-60 .

Tax books in the sheriff’s office may be inspected by any person, including the news media, having any interest therein. OAG 70-569 .

When the sheriff’s office needs certain office equipment to carry out its functions and there are insufficient fees for such purpose, the fiscal court should authorize the payment for such needed equipment out of the county treasury, subject to the availability of properly budgeted funds for such purpose. OAG 71-47 .

Where the sheriff’s office requires such equipment as an adding machine and a calculator to be adequately functional in rendering its legally required services, such equipment can be purchased out of the fees of the office and a credit against excess fees should be allowed when such purchases are properly documented. OAG 71-47 .

The sheriff’s office in Madison County must be maintained in the county seat and there is no authority for the Madison County sheriff to maintain any office location other than the one in Richmond, the county seat. OAG 73-713 .

Adequate space for a sheriff’s office is indispensable to the proper conduct of that county office, and this section requires the fiscal court to provide him with an office; accordingly, while the fiscal court is not required to furnish him an office in the courthouse, it is required that he have an office of adequate space located in the county seat. OAG 78-512 .

Research References and Practice Aids

Cross-References.

Department of Revenue to prescribe and determine style, layout, use and manner of keeping tax books and records, KRS 131.030 , 131.130 , 131.140 .

Office hours of public offices in certain counties, KRS 61.160 .

134.170. Payment of taxes to sheriff — Receipts — Deduction of taxes from claim due taxpayer — Misapplication of funds. [Repealed.]

Compiler’s Notes.

This section (4140, 4145, 4239a, 4239b: amend. Acts 1982, ch. 57, § 3, effective March 9, 1982) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.180. Sheriff or deputy to visit justices’ districts to receive tax payments. [Repealed.]

Compiler’s Notes.

This section (4142) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.190. Collection of tax from taxpayer about to remove or conceal property — Payment of delinquent taxes due on property by one holding royalties or payments derived therefrom.

  1. A sheriff who believes, on reasonable grounds, that any person from whom a tax is due is about to conceal or remove his property from the state, county or taxing district shall immediately collect the taxes in the manner provided for the collection of taxes, costs and penalties of delinquent taxpayers.
  2. Anyone holding royalties or payments derived from property shall, if requested by the Department of Revenue, sheriff, or collector, remit payment for delinquent taxes due on that property. However, the amount remitted shall not exceed the total amount being held. The delinquent tax payment may be deducted from the royalties or payments owed to the property owner. The property tax bill receipt shall be evidence of payment and authorization for deduction.

History. 4148a: amend. Acts 1992, ch. 391, § 3, effective July 14, 1992; 2005, ch. 85, § 255, effective June 20, 2005.

134.191. Monthly reporting and payment of taxes collected by sheriff.

  1. The sheriff shall provide monthly reports by the tenth day of each month to the chief executive of the county, the department, and any other district for which the sheriff collects taxes. The governing body of the county may require the sheriff to report and pay on a more frequent basis if necessary for bonding requirements; however, the sheriff shall not be required to report and pay more frequently than weekly.
  2. The report shall be broken down by governmental entity and shall include the following information for the preceding month or reporting period, if the reporting period is other than monthly:
    1. The total amount of taxes collected;
    2. The total amount of any fines, forfeitures, or other moneys collected; and
    3. The disposition of such revenue or money collected.
  3. At the time of making the report, the sheriff shall pay to the county treasurer or other officer designated by the governing body of a county, to the department, and to any other district for which the sheriff collects taxes, all funds belonging to the county, the state, or the district that were collected during the period covered by the report.
  4. Any sheriff failing to pay over taxes collected as required by law shall be subject to a penalty of one percent (1%) for each thirty (30) day period or fraction thereof that the payment is not made, plus interest at the tax interest rate provided in KRS 131.183 on such amounts. The governing body of a county, the department, or the other district for which the sheriff collects taxes, in its settlement with the sheriff, shall charge him or her with such penalties and interest.
  5. The chief executive of a county, or the commissioner of the department may grant an extension of time, not to exceed fifteen (15) days, for filing the report required by subsection (1) of this section with that entity when good cause exists. The extension shall be in writing and shall be recorded in the office of the county clerk. The extension when granted shall suspend the penalty and interest for the duration of the extension. The penalty and interest shall apply at the expiration of the extension.

History. Enact. Acts 2009, ch. 10, § 21, effective January 1, 2010.

NOTES TO DECISIONS

  1. Application.
  2. Payment.
  3. —Cash.
  4. —Setoff.
  5. Sheriff’s Liability.
  6. Duty to Comply.
  7. Report.
  8. Penalty and Interest.
  9. —Computation.
  10. County Warrants.
  11. Insolvent Bank.
  12. Trust Fund.
  13. Embezzlement.
  14. Declaratory Judgment.
  15. —Levy of Doubtful Legality.
  16. Procedure.
1. Application.

This section does not apply to school taxes. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ). See Commonwealth use of McCreary County Board of Education v. Walker, 246 Ky. 679 , 55 S.W.2d 914, 1932 Ky. LEXIS 821 ( Ky. 1932 ) (decided under prior law).

2. Payment.

The giving of a check, by the sheriff to the treasurer, does not of itself constitute payment, unless it is expressly accepted as payment and as a discharge of the sheriff’s liability. Breckinridge County v. Gannaway, 243 Ky. 49 , 47 S.W.2d 934, 1932 Ky. LEXIS 32 ( Ky. 1932 ) (decided under prior law).

The provisions of this section as to monthly payment of collections are mandatory. Fulton County v. Thompson, 265 Ky. 510 , 97 S.W.2d 40, 1936 Ky. LEXIS 524 ( Ky. 1936 ) (decided under prior law).

3. —Cash.

It is the duty of the sheriff to collect and pay over taxes in cash, and creditor of county may compel performance of this duty by mandatory injunction. Breathitt County v. Cockrell, 250 Ky. 743 , 63 S.W.2d 920, 1933 Ky. LEXIS 764 ( Ky. 1933 ) (decided under prior law). See Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

4. —Setoff.

Sheriff could not set off claims for building voting houses and for coupons on county bonds held by him against his liability for taxes collected. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

5. Sheriff’s Liability.

The general rule that interest on taxes is not collectible from the taxpayer in the absence of express statute does not apply to the liability of the sheriff for interest on taxes collected and not paid over by him at the required time. Commonwealth use of McCreary County Board of Education v. Walker, 246 Ky. 679 , 55 S.W.2d 914, 1932 Ky. LEXIS 821 ( Ky. 1932 ) (decided under prior law).

The sheriff is not liable for tax money which has been lost by reason of failure of the bank in which the money was deposited, unless he was negligent in selecting the depository, or unless the failure occurred after the time when the sheriff should have paid over the money. In the case of a depository designated by the fiscal court as an official depository, the sheriff is not liable unless he had knowledge of facts which would lead him to question the soundness of the depository. Jordon v. Baker, 252 Ky. 40 , 66 S.W.2d 84, 1933 Ky. LEXIS 1007 ( Ky. 1933 ) (decided under prior law).

Where sheriff retains tax funds in his hands after the date he is required by this section to pay such funds over to the county treasurer, he becomes an insurer of such funds and is liable for them in case of failure of the bank in which they have been deposited by him. Fulton County v. Thompson, 265 Ky. 510 , 97 S.W.2d 40, 1936 Ky. LEXIS 524 ( Ky. 1936 ). See Breckinridge County v. Gannaway, 243 Ky. 49 , 47 S.W.2d 934, 1932 Ky. LEXIS 32 ( Ky. 1932 ) (decided under prior law).

6. Duty to Comply.

Statement by county judge (now county judge/executive), to sheriff, that sheriff need not pay over taxes at time required by this section, but might wait until time of meeting of fiscal court to make settlement, did not relieve sheriff of duty to comply with this section. Breckinridge County v. Gannaway, 243 Ky. 49 , 47 S.W.2d 934, 1932 Ky. LEXIS 32 ( Ky. 1932 ) (decided under prior law).

7. Report.

This section does not require the sheriff to report, at the stated intervals, whether or not he has collected any taxes, but only to report the taxes he has actually collected. Commonwealth v. Kennon, 143 Ky. 214 , 136 S.W. 198, 1911 Ky. LEXIS 367 ( Ky. 1911 ) (decided under prior law).

8. Penalty and Interest.

If there is no county treasurer in office at the time the sheriff is required to pay over taxes collected by him, and the fiscal court has not designated some other person to receive the taxes, the sheriff cannot be charged with penalty and interest under subsection (3) of this section. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) See Pence's Adm'r v. Nelson County, 107 Ky. 66 , 53 S.W. 25, 21 Ky. L. Rptr. 724 , 1899 Ky. LEXIS 146 ( Ky. 1899 ); Bates v. Knott County Court, 67 S.W. 1006, 24 Ky. L. Rptr. 73 , 1902 Ky. LEXIS 361 (Ky. Ct. App. 1902) (decided under prior law).

When a sheriff has been charged with penalty and interest under subsection (3) of this section, subsequent payments by the sheriff will be first credited to the taxes and interest, then to the penalty. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) (decided under prior law).

There is no penalty upon the sheriff for failing to pay over school taxes at the time required by KRS 160.510 , but the sheriff is liable for interest at the legal rate on all such taxes not paid over at the time required by that section. Commonwealth use of McCreary County Board of Education v. Walker, 246 Ky. 679 , 55 S.W.2d 914, 1932 Ky. LEXIS 821 ( Ky. 1932 ) (decided under prior law).

The sheriff is chargeable with the delinquent penalty imposed by former KRS 134.020 on all taxes collected by him after the date of delinquency, whether or not he has collected the penalty from the taxpayer, and if he fails to pay the taxes over as required by this section he is liable in addition for the penalty and interest imposed by subsection (3) of this section. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

No order of the fiscal court demanding payment of the taxes which the sheriff has collected is necessary or required to entitle the county to the six percent penalty imposed by subsection (3) of this section. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

9. —Computation.

The penalty and interest imposed by subsection (3) of this section are to be computed on the total amount which the sheriff has collected and not paid over, including delinquent penalties collected by the sheriff. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) (decided under prior law).

10. County Warrants.

Sheriff who purchased county warrants at a discount was not entitled to credit for the face amount of the warrants, or for interest on the warrants. Breathitt County v. Cockrell, 250 Ky. 743 , 63 S.W.2d 920, 1933 Ky. LEXIS 764 ( Ky. 1933 ) (decided under prior law). See Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

11. Insolvent Bank.

A sheriff who has deposited tax collections in a bank that subsequently becomes insolvent may make claim for the funds in his own name in the liquidation proceedings. Denny v. Thompson, 236 Ky. 714 , 33 S.W.2d 670, 1930 Ky. LEXIS 819 ( Ky. 1930 ) (decided under prior law).

Sheriff who has deposited tax money in a bank is not entitled to a preference over other creditors in case the bank becomes insolvent. Denny v. Thompson, 236 Ky. 714 , 33 S.W.2d 670, 1930 Ky. LEXIS 819 ( Ky. 1930 ) (decided under prior law).

Where sheriff gave county treasurer a check for $18,000, for taxes due the county, drawn on a bank in which the sheriff had that sum on deposit, and the treasurer changed the amount of the check to $10,000 and cashed it for that amount, and gave the sheriff a receipt for that amount, the sheriff could not maintain, after failure of bank causing loss of remaining $8,000, that he was entitled to credit for amount of original check, since he knew of change by treasurer and had opportunity to pay over balance before bank failed. Breathitt County Board of Education v. Cockrell, 238 Ky. 694 , 38 S.W.2d 660, 1931 Ky. LEXIS 293 ( Ky. 1931 ) (decided under prior law).

Where sheriff gave check for amount of taxes due from him, after the date when he should have paid over the taxes, and the bank on which the the check was drawn failed on the day after the check was given, the sheriff remained liable for the amount of such taxes. Breckinridge County v. Gannaway, 243 Ky. 49 , 47 S.W.2d 934, 1932 Ky. LEXIS 32 ( Ky. 1932 ) (decided under prior law).

12. Trust Fund.

The sheriff is a bailee of the taxes collected by him, and such taxes constitute a trust fund in his possession. Maryland Casualty Co. v. Walker, 257 Ky. 397 , 78 S.W.2d 34, 1934 Ky. LEXIS 559 ( Ky. 1934 ). See Denny v. Thompson, 236 Ky. 714 , 33 S.W.2d 670, 1930 Ky. LEXIS 819 ( Ky. 1930 ) (decided under prior law).

13. Embezzlement.

In prosecution of sheriff for embezzling franchise tax money, proof that sheriff had not reported franchise tax collections in his reports to the county court was admissible as tending to establish intent to embezzle. Commonwealth v. Brand, 166 Ky. 753 , 179 S.W. 844, 1915 Ky. LEXIS 772 ( Ky. 1915 ) (decided under prior law).

14. Declaratory Judgment.
15. —Levy of Doubtful Legality.

If the sheriff is in doubt as to the legality of the levy under which he has collected taxes, he should not hold the taxes in his hands, but should commence an action for a declaratory judgment and pay the money into court; otherwise he will be liable for the penalty and interest imposed by this section. Commonwealth use of McCreary County Board of Education v. Walker, 246 Ky. 679 , 55 S.W.2d 914, 1932 Ky. LEXIS 821 ( Ky. 1932 ) (decided under prior law).

16. Procedure.

Indictment of sheriff for failure to report as required by this section was fatally defective where it did not allege that the sheriff had actually collected any taxes that he failed to report. Commonwealth v. Kennon, 143 Ky. 214 , 136 S.W. 198, 1911 Ky. LEXIS 367 ( Ky. 1911 ) (decided under prior law).

134.192. Annual settlement of tax collections by sheriff.

  1. Each sheriff shall annually settle his or her accounts with the department, the county, and any district for which the sheriff collects taxes on or before September 1 of each year. If any sheriff resigns, dies, or otherwise vacates his or her office, the books and records shall be made available to the department, the county, and any other district for which the sheriff collects taxes within thirty (30) days from the date that the office is vacated. The annual settlement of the sheriff shall be audited in accordance with KRS 43.070 and 64.810 .
    1. The department shall conduct the settlement relating to taxes collected for the state. (2) (a) The department shall conduct the settlement relating to taxes collected for the state.
    2. The sheriff shall settle his or her accounts with the county, the school district, and any other taxing district for which he or she collects taxes. On request of the governing body of the county or any other district for which the sheriff collects taxes, the department may conduct the local settlement. If no local settlement has been initiated by July 1 of any year, the department may initiate the local settlement on behalf of the county, the school district, and the taxing districts. Upon completion of the local settlement, the department may receive reasonable reimbursement for expenses incurred.
  2. In making his or her settlement with the local governments and the department, the sheriff shall be allowed credit for the uncollected tax claims properly filed with the county clerk’s office as required by KRS 134.122 .
  3. All tax bills on omitted property that were not turned over to the sheriff in time to be collected shall be carried over as a charge against the sheriff as part of the annual settlement.
  4. The report of the state and local settlement shall be filed in the county clerk’s office and approved by the governing body of the county no later than September 1 of each year. The settlement shall show the amount of ad valorem tax collected for the county, the school district, and all taxing districts, and an itemized statement of the money disbursed to or on behalf of the county, the school district, and all taxing districts.
  5. The settlement shall be published pursuant to KRS Chapter 424.
  6. On the final settlement, the sheriff shall pay to the county treasurer all money that remains in his or her hands attributable to amounts charged against the sheriff relating to the collection of property taxes, and shall take receipts as provided in KRS 134.160 . The sheriff shall pay any additional amounts charged against him or her as a result of the settlements.
    1. If the sheriff fails to remit amounts charged against him or her to the appropriate taxing district, the department may issue bills for the subsequent year and may assume all collection duties in the name of and on behalf of the cities, counties, school districts, and other taxing districts. (8) (a) If the sheriff fails to remit amounts charged against him or her to the appropriate taxing district, the department may issue bills for the subsequent year and may assume all collection duties in the name of and on behalf of the cities, counties, school districts, and other taxing districts.
    2. The fees and commissions which the sheriff would have been entitled to receive from the taxing districts shall be paid to the department.
  7. No tax bills or tax books shall be delivered to the sheriff during the second or any subsequent calendar year of the sheriff’s regular term until the settlement is submitted and approved by the department and the governing body of a county, and until the sheriff’s bond is in place, should a bond be required by the fiscal court.
  8. If the tax records of a county are destroyed by fire, flood, tornado, or other act of nature, or are lost, stolen, or mutilated so as to require a reassessment of the property in the county or a recertification of the tax bills, the sheriff shall have five (5) months from the time he or she receives the recertified tax bills to make settlement pursuant to this section.
  9. In counties containing a population of less than seventy thousand (70,000), the sheriff shall file annually with his or her settlement:
    1. A complete statement of all funds received by his or her office for official services, showing separately the total income received by his or her office for services rendered, exclusive of his or her commissions for collecting taxes, and the total funds received as commissions for collecting state, county, and school taxes; and
    2. A complete statement of all expenditures of his or her office, including his or her salary, compensation of deputies and assistants, and reasonable expenses.
  10. At the time he or she files the statements required by subsection (11) of this section, the sheriff shall pay to the governing body of the county any fees, commissions, and other income of his or her office, including income from investments, which exceed the sum of his or her maximum salary as permitted by the Constitution and other reasonable expenses, including compensation of deputies and assistants. The settlement for excess fees and commissions and other income shall be subject to correction by audit conducted pursuant to KRS 43.070 or 64.810 . The provisions of this subsection shall not be construed to amend KRS 64.820 or 64.830 .
  11. If a county’s population that equaled or exceeded seventy thousand (70,000) is less than seventy thousand (70,000) after the most recent federal decennial census, then the provisions of KRS 64.368 shall apply.

History. Enact. Acts 2009, ch. 10, § 22, effective January 1, 2010.

NOTES TO DECISIONS

  1. Sheriff’s Liability.
  2. —Fiscal Court.
  3. —Void Levy.
  4. —Errors in Tax Bills.
  5. Settlement.
  6. —Notice.
  7. —Failure to File.
  8. —Failure to Require.
  9. —Refusal.
  10. —Publication.
  11. —Commissioner.
  12. —Ex Parte.
  13. —Fiscal Court.
  14. —Amounts Charged Against Sheriff.
  15. —Amounts Credited to Sheriff.
  16. —Overpayment.
  17. —Error in Raise of Assessment.
  18. —Accounts Other Than Taxes.
  19. —Approval.
  20. —None Made.
  21. —Exceptions.
  22. —Embezzlement.
  23. —Conclusiveness.
  24. —Surcharge.
  25. Commissions.
  26. County Warrants.
  27. Penalty and Interest.
  28. Estoppel.
  29. Statute of Limitations.
  30. Procedure.
  31. Res Judicata.
1. Sheriff’s Liability.

The fact that members of fiscal court, after making levy of special tax to pay bond issue, publicly expressed doubt as to legality of levy, and talked of enjoining the sheriff from collecting the tax, was not a defense to a proceeding seeking to compel the sheriff to account for the taxes he had collected under such levy. Lyons v. Breckinridge County Court, 101 Ky. 715 , 42 S.W. 748, 19 Ky. L. Rptr. 951 , 1897 Ky. LEXIS 240 ( Ky. 1897 ) (decided under prior law).

The sheriff is not chargeable with the amount of uncollected taxes due on tax bills that have never been certified to him for collection. Montgomery County Court v. Chenault, 47 S.W. 457, 20 Ky. L. Rptr. 704 (1898) (decided under prior law).

Sheriff is not chargeable with taxes that have been remitted by the fiscal court, whether or not the remission was proper. Montgomery County Court v. Chenault, 47 S.W. 457, 20 Ky. L. Rptr. 704 (1898) (decided under prior law).

The sheriff is liable for the delinquent penalty imposed by former KRS 134.020 on all taxes that were collected after the date of delinquency and all taxes that he could have, but did not, collect. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) See Davis v. Commonwealth, 139 Ky. 334 , 107 S.W. 306, 32 Ky. L. Rptr. 811 , 1908 Ky. LEXIS 5 ( Ky. 1908 ); Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 5 00 ( Ky. 1910 ); Clarke v. Commonwealth, 233 Ky. 728 , 26 S.W.2d 1041, 1930 Ky. LEXIS 655 ( Ky. 1930 ); Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ); Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

In proceeding to charge sheriff with amount of taxes collected by him from taxpayers against whom he held no tax bills, auditor’s report was competent evidence as to amount for which sheriff was accountable. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

Sheriff was chargeable with taxes collected by him, and not accounted for, from taxpayers whose property was not assessed, as against contention that such taxes were not legally in the hands of the sheriff. Failure of the taxing authorities to cause retrospective assessment of such property as omitted did not affect sheriff’s liability. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ) (decided under prior law).

Proof that the sheriff has collected a larger amount than he has accounted for does not establish that he owes such additional amount to the taxing units, in the absence of proof that the amount for which he has accounted is less than the amount of the tax bills for which he executed receipt under KRS 133.220 . Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ) (decided under prior law).

Sheriff was chargeable with railroad franchise taxes paid to him by company before certification of assessment as provided by KRS 136.180 , as against contention that sheriff had no authority to receive such taxes before certification. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ) (decided under prior law).

The sheriff is a bailee of the taxes collected by him, and such taxes constitute a trust fund in his possession. Maryland Casualty Co. v. Walker, 257 Ky. 397 , 78 S.W.2d 34, 1934 Ky. LEXIS 559 ( Ky. 1934 ) See Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ); Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

Sheriff is not liable for amount collected under an unconstitutional tax. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

Where omitted tax book for certain year had been lost, sheriff’s liability for omitted tax collections could not be fixed by averaging the amounts of omitted tax collections for three previous years. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

2. —Fiscal Court.

Fiscal court had no authority to make agreement with sheriff to waive sheriff’s liability to account for penalties on delinquent taxes in return for sheriff paying claims against county out of his own funds, in advance of tax collections, to avoid interest on such claims. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

After commencement of taxpayer’s action to recover from sheriff commissions retained by him in excess of constitutional limit, fiscal court and sheriff had right to make a good faith compromise of sheriff’s liability, and such compromise was a bar to further prosecution of the action. Shipp use of Fayette County v. Rodes, 219 Ky. 349 , 293 S.W. 543, 1927 Ky. LEXIS 348 ( Ky. 1927 ) (decided under prior law).

Where settlements of sheriff had been approved by county court, but fiscal court was of opinion that settlements were not correct and therefore proposed to bring an action to surcharge the settlements, a compromise settlement between the sheriff and the fiscal court, disposing of the disputed items, was not required to be approved by the county court in order to be valid and binding on the parties. Roberts v. Fiscal Court of McLean County, 244 Ky. 596 , 51 S.W.2d 897, 1932 Ky. LEXIS 472 ( Ky. 1932 ) (decided under prior law).

3. —Void Levy.

The sheriff and the surety on his bond are not liable to the county for taxes collected by the sheriff under a void levy. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

4. —Errors in Tax Bills.

If any errors were made by the county clerk in computing the tax bills, they must be corrected by application to the court before the sheriff accepts and receipts for the bills, and if not so corrected they are conclusive as to the sheriff’s liability. A correction cannot be made in an action to surcharge the sheriff’s settlement. Livingston County v. Dunn, 244 Ky. 460 , 51 S.W.2d 450, 1932 Ky. LEXIS 453 ( Ky. 1932 ) (decided under prior law).

5. Settlement.

Where settlements had been approved by county court, but fiscal court sought to surcharge them, compromise of disputed items with the sheriff did not violate Ky. Const., § 52. Roberts v. Fiscal Court of McLean County, 244 Ky. 596 , 51 S.W.2d 897, 1932 Ky. LEXIS 472 ( Ky. 1932 ) (decided under prior law).

Entry of order by fiscal court, approving sheriff’s settlement, and subsequent filing of settlement with county court, did not obviate necessity of order or judgment of confirmation by county court. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

Since a Circuit Court has no authority to make a settlement with the sheriff in the first instance, there should be a judgment of the county court before jurisdiction of the Circuit Court is invoked. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

Where settlement had been properly made, it could not be collaterally attacked by an action at common law based merely and wholly upon alleged express promise by sheriff to pay a certain amount in addition to that found due by the settlement. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

Where settlement was incomplete because it had never been confirmed by county court, action could not be maintained in Circuit Court, against sheriff, to recover at common law on alleged promise by sheriff to pay certain sum for year for which the incomplete settlement was made. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

6. —Notice.

Ordinarily the sheriff is not entitled to any notice when a settlement takes its usual course, but where a report of settlement has gone unapproved for several years the sheriff should be given notice before an order of approval is entered, so that he may have an opportunity to file exceptions. Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

Where order approving settlement was not entered until several years after the report of settlement was filed, and no notice of the order was given to the sheriff, the settlement was not binding. Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

7. —Failure to File.

County was not estopped from suing surety on sheriff’s bond for accounting and settlement by fact that sheriff’s purported settlements were not filed and recorded in the county court, since sheriff had equal duty to see that settlements were filed. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

Where sheriff failed to comply with this section, he did not make and file a valid settlement for taxes collected and could be sued for an accounting of his taxes due the county in a direct proceeding. Thomas v. McCreary County, 239 S.W.2d 942, 1951 Ky. LEXIS 913 ( Ky. 1951 ) (decided under prior law).

8. —Failure to Require.

Members of fiscal court are not individually liable in damages for failing to require sheriff to make settlements, or for allowing him excessive commissions in his settlements. Shipp v. Bradley, 210 Ky. 51 , 275 S.W. 1, 1925 Ky. LEXIS 627 ( Ky. 1925 ) (decided under prior law).

9. —Refusal.

Where the sheriff refuses to settle, or absconds and fails to settle, an action may be brought against the surety on his bond to determine and recover the amount due from the sheriff, a settlement not being a prerequisite to action on the bond under such circumstances. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) (decided under prior law).

If the sheriff is notified of the time and place at which the commissioner proposes to make settlement, and fails or refuses to appear, the commissioner may proceed to make a settlement from the tax bills and such other information as is available, and such settlement will be valid. Gay v. Jackson County Board of Education, 205 Ky. 277 , 265 S.W. 772, 1924 Ky. LEXIS 89 ( Ky. 1924 ) (decided under prior law).

If the sheriff fails or refuses to make settlement, a suit may be instituted to compel him to do so, and in the same suit a recovery may be had from the sheriff for the amount found due from him. Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

Where fiscal court had failed and refused to make settlement with sheriff, taxpayer of county had right to bring action to determine and recover for the county the amount due from the sheriff, and a settlement made after the institution of such action could not defeat the action. Hoskins v. Helton, 252 Ky. 616 , 67 S.W.2d 975, 1934 Ky. LEXIS 829 ( Ky. 1934 ) (decided under prior law).

Where fiscal court had failed and refused to make settlement with sheriff, taxpayer had right to bring action to recover money due and he must allege facts showing that no settlement had been made. Hoskins v. Helton, 252 Ky. 616 , 67 S.W.2d 975, 1934 Ky. LEXIS 829 ( Ky. 1934 ) (decided under prior law).

10. —Publication.

The provision of this section for publication of the settlement is mandatory. Shelby County Fiscal Court v. Cosine, 174 Ky. 504 , 192 S.W. 626, 1917 Ky. LEXIS 211 ( Ky. 1917 ) (decided under prior law).

11. —Commissioner.

The commissioner appointed to settle with the sheriff has no power to allow the sheriff credit for uncollectible taxes, duplicate lists, or errors in assessments, unless the fiscal court has certified such items as allowable under former KRS 134.360 . Reams v. McHargue, 111 Ky. 163 , 23 Ky. L. Rptr. 540 , 63 S.W. 437, 1901 Ky. LEXIS 184 ( Ky. 1901 ), aff’d, 71 S.W. 526 (1903), aff’d sub nom. James v. Webb, 24 Ky. L. Rptr. 1385 , 71 S.W. 526 (1903) (decided under prior law).

The Circuit Court has no authority to appoint a commissioner to settle with the sheriff. Rice v. Bradley, 203 Ky. 775 , 263 S.W. 336, 1924 Ky. LEXIS 1007 ( Ky. 1924 ) (decided under prior law).

The fiscal court has no authority to employ or pay the county judge (now county judge/executive) as a commissioner to settle with the sheriff, and any sum paid to the judge for such services may be recovered in an independent action. Breathitt County v. Hagins, 211 Ky. 391 , 277 S.W. 469, 1925 Ky. LEXIS 885 ( Ky. 1925 ) (decided under prior law).

If no commissioner is appointed to settle with the sheriff, the sheriff must appear before the fiscal court and there make settlement. Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

12. —Ex Parte.

Ex parte settlement made without notice to sheriff was not binding on him. Commonwealth v. Moren, 78 S.W. 432, 25 Ky. L. Rptr. 1635 (1904). (decided under prior law).

Attempted ex parte settlement of sheriff’s accounts, made by commissioners appointed by fiscal court in absence of sheriff who had absconded, was not binding upon sheriff and his sureties in an action on his bond, although the settlement was entered and approved by the county court. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) (decided under prior law).

13. —Fiscal Court.

Settlement made directly with fiscal court, rather than with commissioner appointed by fiscal court, is valid if properly approved by the county court. Shipp v. Bradley, 210 Ky. 51 , 275 S.W. 1, 1925 Ky. LEXIS 627 ( Ky. 1925 ) (decided under prior law).

14. —Amounts Charged Against Sheriff.

In making settlements the sheriff is to be charged with the amount shown to be due by the clerk’s books and the sheriff’s receipts under KRS 133.180 and 133.220 . Such amount is conclusive as to the sheriff’s liability unless the sheriff can establish fraud, or unless there was a clerical error which has been corrected under KRS 133.110 . Livingston County v. Dunn, 244 Ky. 460 , 51 S.W.2d 450, 1932 Ky. LEXIS 453 ( Ky. 1932 ) See Commonwealth use of Phillips v. Tate, 247 Ky. 516 , 57 S.W.2d 491, 1933 Ky. LEXIS 425 ( Ky. 1933 ) (decided under prior law).

The amount with which the sheriff is chargeable, in making settlement, is the amount shown by the final recapitulation of the tax books made by the county clerk and the sheriff’s receipt for the tax bills given pursuant to KRS 133.220 , plus omitted tax bills and franchise assessments separately delivered to the sheriff for collection. The tax bill stub cannot be used to contradict the recapitulation and receipt, or be used at all unless the recapitulation and receipt are not available. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ) (decided under prior law).

The sheriff’s receipt for the tax bills, given under KRS 133.220 , is conclusive as to the amount with which the sheriff is chargeable in making settlement, in the absence of a showing of fraud or mistake. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ) (decided under prior law).

The best evidence of the amount of taxes with which the sheriff is chargeable is the receipt for the tax bills executed by the sheriff under KRS 133.220 If the receipt was never executed, or has been lost or destroyed, the next best evidence is the book containing the tax bills, the undetached bills being evidence as to uncollected taxes, and the stubs of the detached bills, to the extent they are legible, being evidence as to collected taxes. If the tax books have been lost or destroyed, the next best evidence is the tax rolls of the tax commissioner (now property valuation administrator), as finally revised by the county clerk, from which the tax bills were made out. Any expense necessary to cause a reproduction of the tax bills from the tax rolls may be charged to the sheriff. In the absence of the sheriff’s receipt for the tax bills, and the complete books of tax bills and stubs, an audit report based on the intelligible portion of the tax books, together with the revised tax rolls, is competent evidence as to the sheriff’s liability. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

15. —Amounts Credited to Sheriff.

Sheriff was entitled, in settlement, to credit for office telephone expense, but not for post office box rent, bond premiums, stamps, stationery, books, automobile expense, “advertising” or “incidentals.” Commonwealth use of Scott County v. Nunnelley, 211 Ky. 409 , 277 S.W. 506, 1925 Ky. LEXIS 890 ( Ky. 1925 ) (decided under prior law).

Where the state, county and taxing districts became the purchasers at a tax sale, the sheriff is entitled to credit in his settlement only for the amount of the tax claim, and not for the selling fee and percentage allowed him by former KRS 134.440 , the latter items being collectible only from the taxpayer. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

16. —Overpayment.

Mistake of sheriff in paying over more money than was due could be corrected by order of fiscal court. Taylor v. Scoville, 252 Ky. 809 , 68 S.W.2d 423, 1934 Ky. LEXIS 868 ( Ky. 1934 ) (decided under prior law).

17. —Error in Raise of Assessment.

If, following blanket raise of assessment by state tax commission (now board of tax appeals), an error is made by the county clerk in determining how the raise is to affect the deduction of exempt property, the error may be corrected under KRS 133.110 , but if not so corrected the sheriff cannot raise the question in connection with his settlement. Commonwealth use of Phillips v. Tate, 247 Ky. 516 , 57 S.W.2d 491, 1933 Ky. LEXIS 425 ( Ky. 1933 ) (decided under prior law).

18. —Accounts Other Than Taxes.

Where sheriff has also acted as special commissioner, he should make a separate settlement of his accounts as commissioner, and not confuse those accounts with his accounts as sheriff. Livingston County v. Dunn, 244 Ky. 460 , 51 S.W.2d 450, 1932 Ky. LEXIS 453 ( Ky. 1932 ) (decided under prior law).

19. —Approval.

A settlement that has not been approved and recorded by the county court in the manner required by this section is no settlement at all, and it may be collaterally attacked, or in an independent action may be maintained to obtain a settlement. Bates v. Knott County Court, 67 S.W. 1006, 24 Ky. L. Rptr. 73 , 1902 Ky. LEXIS 361 (Ky. Ct. App. 1902) See Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ); Commonwealth use of Board of Education v. Mackey, 168 Ky. 58 , 181 S.W. 621, 1916 Ky. LEXIS 498 ( Ky. 1916 ); Shipp v. Bradley, 210 Ky. 51 , 275 S.W. 1, 1925 Ky. LEXIS 627 ( Ky. 1925 ); Commonwealth use of Scott County v. Nunnelley, 211 Ky. 409 , 277 S.W. 506, 1925 Ky. LEXIS 890 ( Ky. 1925 ); Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ); Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ); Maryland Casualty Co. v. Holt's Adm'x, 285 Ky. 66 , 146 S.W.2d 940, 1940 Ky. LEXIS 602 ( Ky. 1940 ) (decided under prior law).

Filing settlement with fiscal court does not take the place of approval by the county court. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) (decided under prior law).

20. —None Made.

Where no valid settlement has been made, it is not necessary that an action be first brought to compel the sheriff to make a settlement under the procedure prescribed by this section, before suing the sheriff for the amount due from him, but an independent action may be brought by the county to obtain a settlement and at the same time recover the amount found due. Shipp v. Bradley, 210 Ky. 51 , 275 S.W. 1, 1925 Ky. LEXIS 627 ( Ky. 1925 ) See Commonwealth use of Board of Education v. Mackey, 168 Ky. 58 , 181 S.W. 621, 1916 Ky. LEXIS 498 ( Ky. 1916 ); Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ); Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

21. —Exceptions.

No one may file exceptions to the sheriff’s settlement, or appeal from the judgment of the county court on the settlement, except the sheriff or county attorney. Little v. Strow, 112 Ky. 527 , 66 S.W. 282, 23 Ky. L. Rptr. 1829 , 1902 Ky. LEXIS 189 ( Ky. 1902 ) (decided under prior law).

22. —Embezzlement.

In prosecution of sheriff for embezzlement, under KRS 434.020 (repealed), indictment alleging that sheriff had wrongfully converted to his own use a specified sum, representing the amount of taxes collected by him less exonerations and commission, was sufficient without alleging that there had been a settlement with the sheriff finding such amount due, or that there had been any demand or order upon the sheriff to pay over the money. Commonwealth v. Fisher, 113 Ky. 491 , 68 S.W. 855, 24 Ky. L. Rptr. 300 , 1902 Ky. LEXIS 91 ( Ky. 1902 ) (decided under prior law).

23. —Conclusiveness.

A settlement cannot be opened on general allegation of fraud or mistake; the specific errors or frauds relied upon must be alleged. Lyons v. Breckinridge County Court, 101 Ky. 715 , 42 S.W. 748, 19 Ky. L. Rptr. 951 , 1897 Ky. LEXIS 240 ( Ky. 1897 ) (decided under prior law).

When a settlement has been made and approved as provided in this section, it is conclusive as to all parties except that it may be attacked upon the ground of fraud or mistake in an action to surcharge the settlement. It cannot be collaterally attacked in a suit on the sheriff’s bond. Pulaski County v. Watson, 106 Ky. 500 , 50 S.W. 861, 21 Ky. L. Rptr. 61 , 1899 Ky. LEXIS 69 ( Ky. 1899 ) (decided under prior law). See Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ); Green County v. Howard, 127 Ky. 379 , 105 S.W. 897, 32 Ky. L. Rptr. 243 , 1907 Ky. LEXIS 145 ( Ky. 1907 ); American Surety Co. v. Bales, 228 Ky. 543 , 15 S.W.2d 481, 1929 Ky. LEXIS 620 ( Ky. 1929 ); Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ); Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 69 3 ( Ky. 1934 ) (decided under prior law).

If exceptions are filed to a settlement, the settlement does not become final until the exceptions have been finally disposed of. If a settlement is confirmed without exceptions having been filed it becomes final upon the confirmation. When a settlement has become final by either of such methods, it cannot be attacked except upon the grounds of fraud and mistake, in an action to surcharge the settlement. Green County v. Howard, 127 Ky. 379 , 105 S.W. 897, 32 Ky. L. Rptr. 243 , 1907 Ky. LEXIS 145 ( Ky. 1907 ) See Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

When a settlement becomes final, either by limitation or by judicial pronouncement, it is final as an entirety. But when it is opened for fraud or mistake it stands as if it had never been closed. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

When a settlement has been opened on account of a mutual mistake with respect to one item, it will be open for the correction of all other errors and frauds, although such other errors and frauds might not have been sufficient, standing alone, to justify opening the settlement in the first instance. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

Where sheriff, under mistake of law, was allowed in settlement a higher commission than that fixed by former KRS 134.290 , the settlement could be opened. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

A settlement may be opened for correction when it was based upon a mutual mistake of the parties, whether of law or fact. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

The granting of a quietus to the sheriff, following a settlement, will not estop the county from opening the settlement on the ground of fraud or mistake. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ) (decided under prior law).

While a settlement for taxes may bar an independent action, not seeking to surcharge the settlement, to recover from the sheriff commissions allowed to him in the settlement in excess of the constitutional salary limit, it will not bar such an action to recover such excess compensation of the sheriff as was composed of fees for services other than tax collection. Shipp v. Bradley, 210 Ky. 51 , 275 S.W. 1, 1925 Ky. LEXIS 627 ( Ky. 1925 ) (decided under prior law).

A settlement properly made may be opened up by an appeal from the county court to the Circuit Court, or by an independent action instituted to correct the settlement. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

24. —Surcharge.

A taxpayer may bring an action to surcharge the sheriff’s settlement. Little v. Strow, 112 Ky. 527 , 66 S.W. 282, 23 Ky. L. Rptr. 1829 , 1902 Ky. LEXIS 189 ( Ky. 1902 ) (decided under prior law).

An action to surcharge a settlement for fraud or mistake must be brought within five years after the mistake was discovered or could have been discovered by the exercise of ordinary diligence, and in any event within ten years after the date the settlement was confirmed. Green County v. Howard, 127 Ky. 379 , 105 S.W. 897, 32 Ky. L. Rptr. 243 , 1907 Ky. LEXIS 145 ( Ky. 1907 ) See Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ); Blackwell v. Fidelity & Deposit Co., 163 Ky. 76 , 173 S.W. 321, 1915 Ky. LEXIS 183 ( Ky. 1915 ), overruled, American Surety Co. v. Bales, 228 Ky. 543 , 15 S.W.2d 481, 1929 Ky. LEXIS 620 ( Ky. 1929 ); Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ); Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

A demand upon the sheriff for the amount alleged to be due from him is not a condition precedent to the bringing of an action to surcharge the sheriff’s settlement. Davis v. Commonwealth, 139 Ky. 334 , 107 S.W. 306, 32 Ky. L. Rptr. 811 , 1908 Ky. LEXIS 5 ( Ky. 1908 ) (decided under prior law).

An action to surcharge a settlement may be brought after the settlement has been confirmed and recorded, and need not be brought before that time. Davis v. Commonwealth, 139 Ky. 334 , 107 S.W. 306, 32 Ky. L. Rptr. 811 , 1908 Ky. LEXIS 5 ( Ky. 1908 ) (decided under prior law).

The failure of the county attorney to file exceptions to the report of settlement will not bar an action by the county to surcharge the settlement. Davis v. Commonwealth, 139 Ky. 334 , 107 S.W. 306, 32 Ky. L. Rptr. 811 , 1908 Ky. LEXIS 5 ( Ky. 1908 ) (decided under prior law).

A settlement may be surcharged for a mistake of law as well as a mistake of fact. Davis v. Commonwealth, 139 Ky. 334 , 107 S.W. 306, 32 Ky. L. Rptr. 811 , 1908 Ky. LEXIS 5 ( Ky. 1908 ) (decided under prior law).

In action to surcharge settlement, sheriff was held chargeable with interest at six percent per annum, from the end of each year, on the sum found due for that year. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

Failure to charge sheriff in settlement, with penalties collected by him on delinquent taxes could be corrected in action to surcharge settlement, where failure was result of misinterpretation of law. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

In action to surcharge sheriff’s settlement, court had jurisdiction to adjudge sheriff’s liability for taxes collected by sheriff from taxpayers against whom he held no tax bills, as against contention that jurisdiction was restricted to correction of settlement. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

In action to surcharge settlement for one year, improper charges or credits made in a settlement for a previous year could not be attacked. Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

In action by county board of education to surcharge sheriff’s settlement, proof by the board that the sheriff had collected more money than he had accounted for, according to the tax bill stubs, did not pass the burden to the sheriff of proving by the final recapitulation of the tax books and the sheriff’s receipt for the tax bills that he had accounted for all with which he was chargeable; the board had the burden of proving by such latter items that the sheriff had not accounted for the full amount with which he was chargeable. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ) (decided under prior law).

A taxing unit seeking to surcharge the sheriff’s settlement has the burden of proving that the sheriff has collected funds belonging to the unit for which he did not account. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ) (decided under prior law).

In action to surcharge sheriff’s settlements for all years of his term, judgment may be entered for any sum found due from the sheriff because of the allowance of an erroneous credit, without regard to which year the allowance was made. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ) (decided under prior law). But see Steele v. Commonwealth, 233 Ky. 719 , 26 S.W.2d 747, 1929 Ky. LEXIS 465 ( Ky. 1929 ) (decided under prior law).

A settlement, although properly and validly made and approved, may be surcharged on the ground of fraud or mistake. Maryland Casualty Co. v. Holt's Adm'x, 285 Ky. 66 , 146 S.W.2d 940, 1940 Ky. LEXIS 602 ( Ky. 1940 ) (decided under prior law).

Where a settlement has been validly and properly made, it may be surcharged, but where it has not been completed in accordance with the statute, what was done may be attacked collaterally. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

25. Commissions.

In the case of a mistake of law as to the amount of commission to which the sheriff was entitled, the statute did not begin to run until the mistake was called to the attention of the fiscal court by an auditor employed to examine the county’s fiscal records. Alexander v. Owen County, 136 Ky. 420 , 124 S.W. 386, 1910 Ky. LEXIS 500 ( Ky. 1910 ) (decided under prior law).

An action to recover from the sheriff excess commissions retained by him, above the constitutional limit of $5,000, which he had not accounted for in his settlement, was in effect an action to surcharge the settlement and was governed by the five-year statute of limitations on such actions. American Surety Co. v. Bales, 228 Ky. 543 , 15 S.W.2d 481, 1929 Ky. LEXIS 620 ( Ky. 1929 ) (decided under prior law).

26. County Warrants.

Where fiscal court gave sheriff credit in purported settlement for county warrants in which he was illegally trafficking and there was an overpayment on the settlement, sheriff’s sureties would be allowed credit for the overpayment in later action for accounting and settlement, but such practice is condemned and fiscal court should not have accepted warrants. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

Sheriff who used tax money to purchase county warrants at a discount, and tendered warrants in settlement of his accounts, was not entitled to collect interest on the warrants and was liable to the county for any profit made by him. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

27. Penalty and Interest.

The general rule that interest on taxes is not collectible from the taxpayer in the absence of express statute does not apply to the liability of the sheriff for interest on taxes collected and not paid over by him at the required time. Commonwealth use of McCreary County Board of Education v. Walker, 246 Ky. 679 , 55 S.W.2d 914, 1932 Ky. LEXIS 821 ( Ky. 1932 ) (decided under prior law).

In action by county against sheriff and sureties to collect sums found due on settlement, county could not recover penalties, since it was presumed that penalties were included in settlement. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

28. Estoppel.

The fact that fiscal court had accepted payment of sum found due from sheriff on purported settlement which was invalid because not recorded in county court in full satisfaction of sheriff’s liability, did not estop county from suing surety on sheriff’s bond for an accounting and settlement. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

29. Statute of Limitations.

Where mistakes relied upon as grounds for surcharging settlement were apparent from records in the office of the county clerk, the statute of limitations on the cause of action to surcharge the settlement commenced to run from the time the settlement was confirmed, and not from the time the mistakes were actually discovered, since by the exercise of ordinary diligence the county clerk’s records could have been examined and the mistakes discovered at the time of settlement. Green County v. Howard, 127 Ky. 379 , 105 S.W. 897, 32 Ky. L. Rptr. 243 , 1907 Ky. LEXIS 145 ( Ky. 1907 ) (decided under prior law).

Until such time as a settlement has been made according to this section, or the statute of limitations has run, a taxing district may maintain an action against the sheriff to ascertain and recover any taxes due to it from the sheriff. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ) (decided under prior law).

The statute of limitations does not begin to run against the right to surcharge the sheriff’s settlement until the date of entry of the order of the county court approving the settlement. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law). See Green County v. Howard, 127 Ky. 379 , 105 S.W. 897, 32 Ky. L. Rptr. 243 , 1907 Ky. LEXIS 145 ( Ky. 1907 ) (decided under prior law).

30. Procedure.

In action on sheriff’s county levy bond, seeking to recover amount found due from sheriff on settlement, answer merely alleging that defendants had no knowledge or information on which to found a belief as to whether settlement was correct or as to what sums sheriff had collected and was accountable for, did not state a good defense. Lyons v. Breckinridge County Court, 101 Ky. 715 , 42 S.W. 748, 19 Ky. L. Rptr. 951 , 1897 Ky. LEXIS 240 ( Ky. 1897 ) (decided under prior law).

Where no valid settlement has been made, it is not necessary, in an action to obtain a settlement and to recover the amount found to be due from the sheriff, to allege that a commissioner had been appointed with whom the sheriff could have made settlement. Shipp v. Bradley, 210 Ky. 51 , 275 S.W. 1, 1925 Ky. LEXIS 627 ( Ky. 1925 ) (decided under prior law).

Where, in action against sheriff, the only recovery sought was with regard to taxes which the sheriff admitted to have actually collected, plaintiff was not required to produce evidence as to total amount of taxes with which sheriff had originally been charged. Shipp v. Bradley, 210 Ky. 51 , 275 S.W. 1, 1925 Ky. LEXIS 627 ( Ky. 1925 ) (decided under prior law).

An accountant was a competent witness, as to facts found by him in audit of books on which sheriff’s settlement was made, although firm by which accountant was employed had made contract with county under which firm would receive 50 percent of anything recovered from sheriff. Bush v. Board of Education, 238 Ky. 297 , 37 S.W.2d 849, 1931 Ky. LEXIS 230 ( Ky. 1931 ) (decided under prior law).

County board of education, county treasurer and county itself could properly join as parties plaintiff in action to surcharge sheriff’s settlement. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

In an action to surcharge the sheriff’s settlement, the sheriff may not, in the absence of allegations on his part sufficient to surcharge the settlement, introduce evidence as to credits to which he is entitled other than those allowed him in the settlement or in exonerations by the fiscal court under former KRS 134.360 , except that he may show payments made subsequent to the time the settlement was approved. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

In action by county against sheriff and sureties to collect sums found due on settlement, it was not necessary to allege that fiscal court had directed county attorney or some other attorney to bring action. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

Testimony that sheriff had promised to pay sum shown to be due under a proposed settlement was competent as an admission against interest in action against sheriff to recover such sum. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

County officials and taxpayers were not disqualified, by reason of interest, to testify as to conversations with deceased sheriff concerning sheriff’s settlement. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

In action against sheriff based on alleged promise to pay sum shown to be due under an incomplete settlement, testimony of person appointed by fiscal court to make the settlement, that sheriff owed certain amount, was incompetent where the original documents and records were not produced. Hogg's Adm'r v. Commonwealth, 301 Ky. 557 , 192 S.W.2d 487, 1946 Ky. LEXIS 519 ( Ky. 1946 ) (decided under prior law).

31. Res Judicata.

Judgment against sheriff and surety on his bond for amount due from sheriff on settlement for taxes due on regular tax bills was not a bar to a subsequent action to recover sums due for railroad taxes collected on assessments certified pursuant to KRS 136.180 , and which were collected after time of settlement. Combs v. Breathitt County, 46 S.W. 505, 20 Ky. L. Rptr. 529 (1898) (decided under prior law).

Where Circuit Court, on appeal from judgment of county court on settlement, held that sheriff was not liable for penalties on taxes not collected, and no appeal was taken from Circuit Court judgment, such judgment was final and conclusive as to year involved, but was not binding as to liability of sheriff for penalties on taxes for subsequent years. Fidelity & Deposit Co. v. Logan County, 119 Ky. 428 , 84 S.W. 341, 27 Ky. L. Rptr. 66 , 1905 Ky. LEXIS 15 ( Ky. 1905 ) (decided under prior law).

134.200. Appointment of deputy sheriffs — Bond — Removal — Retention of deputies’ compensation by sheriff. [Repealed.]

Compiler’s Notes.

This section (4037, 4141: amend. Acts 1978, ch. 384, § 272, effective June 17, 1978) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.210. Duties of outgoing sheriff — Special tax collector — Duties — Compensation — Delivery of records to successor. [Repealed.]

Compiler’s Notes.

This section (4135) was repealed by Acts 1950, ch. 92, § 2.

134.215. Outgoing sheriff — Delivery of records and unpaid tax bills to successor — Receipt for unpaid and partially paid tax bills, contents, filing, recording — Responsibility for collecting and accounting for accounts — Settlement — Notice of temporary refusal to accept payment of taxes — Expense allowance to outgoing sheriff for preparation of receipt.

  1. An outgoing sheriff, as soon as his or her successor has been qualified and inducted into office and his or her official bond approved, shall:
    1. Immediately vacate his or her office;
    2. Deliver to his or her successor all books, papers, records, and other property held by virtue of his or her office; and
    3. Make a complete settlement of his or her accounts as sheriff, as provided in KRS 134.192 , except as otherwise provided in this section.
    1. All unpaid tax claims and tax claims upon which partial payments have been accepted in the possession of the sheriff upon the date of expiration of his or her term shall be turned over to the incoming sheriff, who shall collect and account for them as provided by law. (2) (a) All unpaid tax claims and tax claims upon which partial payments have been accepted in the possession of the sheriff upon the date of expiration of his or her term shall be turned over to the incoming sheriff, who shall collect and account for them as provided by law.
    2. The outgoing sheriff shall take a receipt from the incoming sheriff for the unpaid and partially paid tax claims. This receipt shall show in detail for each unpaid and for each partially paid tax claim the total amount due each taxing district as reflected on the tax claims. The receipt shall be signed and acknowledged by the incoming sheriff before the county clerk, filed with the county clerk, and recorded in the order book of the county clerk in the manner required by law for recording the official bond of the sheriff. A certified copy of the receipt as recorded in the order book of the county clerk shall be filed with the department.
    3. The outgoing sheriff and his or her bondsmen or sureties shall be relieved in the final settlement of his or her accounts of all responsibility for collecting and accounting for the amounts covered by the receipt, and the incoming sheriff shall be charged with full responsibility for collecting and accounting for these amounts as otherwise provided by law for the collection and accounting for taxes.
  2. Each outgoing sheriff shall make a final settlement with the department, the fiscal court, and all districts for which his or her office collected taxes by March 15 immediately following the expiration of his or her term of office. The settlement shall address all charges of taxes made against the sheriff and all money received by him or her as sheriff, and shall include all of the information required for the annual settlement pursuant to KRS 134.192 . Upon approval of the final settlement, the outgoing sheriff shall deliver these records to the incumbent sheriff. The final settlement of the outgoing sheriff shall be audited as provided in KRS 43.070 and 64.810 .
    1. For the purpose of establishing an accurate accounting for unpaid and partially paid tax claims, either the outgoing sheriff, the incoming sheriff, or both, may, by giving advance notice by publication pursuant to KRS Chapter 424, refuse to accept payment of ad valorem taxes during any or all of the period from January 1 through January 15. (4) (a) For the purpose of establishing an accurate accounting for unpaid and partially paid tax claims, either the outgoing sheriff, the incoming sheriff, or both, may, by giving advance notice by publication pursuant to KRS Chapter 424, refuse to accept payment of ad valorem taxes during any or all of the period from January 1 through January 15.
    2. During the transition period from January 1 through January 15, both the incoming and outgoing sheriffs shall have working access to the office facilities and to the records and mail of the sheriff’s office relating to the payment, collection, and refund of ad valorem taxes on property.
    3. Interest shall not be assessed or collected for the period during which payment of taxes is prohibited under the terms of this section.
  3. The outgoing sheriff shall be paid in accordance with KRS 64.140 and 64.530 the reasonable expenses actually incurred in preparing the receipt required under this section. Reasonable expenses actually incurred may include office expenses and salaries of himself or herself, deputies, and employees paid in accordance with the schedule of the previous year or the amount paid an auditor necessary in determining, verifying, and recording the unpaid and partially paid tax claims turned over to the incoming sheriff.

History. Enact. Acts 1950, ch. 92, § 1; 1952, ch. 220; 1966, ch. 239, § 136; 1978, ch. 384, § 273, effective June 17, 1978; 1992, ch. 220, § 10, effective January 1, 1994; 2002, ch. 71, § 7, effective July 15, 2002; 2005, ch. 85, § 256, effective June 20, 2005; 2009, ch. 10, § 23, effective January 1, 2010.

NOTES TO DECISIONS

  1. Delinquent Tax Collections.
  2. Filling Vacancy.
1. Delinquent Tax Collections.

What compensation the sheriff earned during his term had no bearing on his right to compensation as delinquent tax collector. Madison County v. Hamilton, 243 Ky. 29 , 47 S.W.2d 938, 1932 Ky. LEXIS 33 ( Ky. 1932 ) (decided under prior law).

2. Filling Vacancy.

Where sheriff whose term would have expired at end of 1933, died in 1931, and a person was appointed to fill the vacancy until the regular election in November, 1932, such person had the right to collect taxes for 1932 only up to the day of the November election, the person elected at that election having the right to collect the taxes for the balance of the year. McWilliams v. Madison County, 243 Ky. 498 , 49 S.W.2d 319, 1932 Ky. LEXIS 144 ( Ky. 1932 ) (decided under prior law).

Opinions of Attorney General.

Where an outgoing sheriff, who had purchased office furniture and equipment from the fees of his office, attempted to sell the property in order to meet the payroll he had no authority to sell the property and the attempted sale was illegal and void ab initio and the title to the property did not pass. OAG 65-881 .

Where the sheriff purchased office furniture and equipment from the fees of his office, that property became the property of the county and the fiscal court had control of the property. OAG 65-881 .

A sheriff is entitled, under KRS 134.290 (now repealed), to the commission of ten percent (10%) upon the first $10,000 or $5,000, whichever is applicable, of taxes collected in each year, regardless of the year the taxes are due. OAG 67-31 .

The incoming sheriff is charged with the full responsibility for collection and accounting for unpaid tax bill and bills upon which partial payments have been accepted and is entitled to the fees provided for such collections. The outgoing sheriff is not entitled to the collection fees for such taxes collected after the expiration of his term. OAG 67-240 .

The incoming sheriff has no right to scrutinize the payroll of the outgoing sheriff used by the outgoing sheriff in the preparation of the tax receipt. OAG 70-60 .

After January 15, the outgoing sheriff and his supporting staff on the taxes receipt project are required to vacate the sheriff’s office. OAG 70-60 .

Where an incoming sheriff and an outgoing sheriff both hold office between January 1 and January 15, the maintaining of the tax collection operation during this period, and prior to the execution of the receipt, was the primary responsibility of the outgoing sheriff. OAG 70-60 .

The outgoing sheriff and his assistants may be paid salaries and other reasonable expenses incurred for work done in making final settlement with the Department of Revenue, the fiscal court and the taxing district under this section in accordance with the schedule of salaries of the previous year. Funding of the operations of the outgoing sheriff is effectuated from excess receipts of the outgoing sheriff which have accumulated by the end of his term in the 75 percent account under KRS 64.345 . OAG 70-112 .

An outgoing sheriff after his term expires, and under this section is not a sheriff at all. He is merely an ex-sheriff working to procure his receipt and settlement. OAG 70-112 .

The operations of the outgoing sheriff concerning duties, personnel, payrolls and financing have no relationship to the operations of the incoming sheriff. OAG 70-112 .

An incumbent sheriff cannot legally be reimbursed from the fees of his office for a sum paid out of his personal funds to appropriate tax authorities to cover taxes collected by his predecessor but represented by his predecessor as unpaid tax bills on the tax receipt signed by the incumbent sheriff. OAG 74-682 .

Since each outgoing sheriff must make a final settlement with the Department of Revenue, the fiscal court and the taxing district of his county by March 15 immediately following the expiration of his term of office for all charges of taxes made against him and for all money received by him as sheriff, the successor of a sheriff who takes office as the elected property valuation administrator on the first Monday in December 1977 would not be legally responsible for the debts incurred in connection with taxes for 1977. OAG 76-330 .

By the statement of OAG 70-112 that the finding of the outgoing sheriff’s expenses is effected from the excess receipts of the outgoing sheriff which have accumulated by the end of his term as relates to his 75 percent account it was meant that the county could ultimately utilize the 75 percent account after it received the excess, in the funding of the transitional expenses required by KRS 64.830(4). OAG 82-83 .

Where the outgoing sheriff was unable to collect the tax bills for the fourth year of his term, the incoming sheriff must repay the advancements made to the outgoing sheriff from the fees and commissions received from the tax bills; however, if the fees and commissions from the fourth year tax bills were insufficient to repay the advancements, the incoming sheriff was not obligated to make payments over and above receipts from those tax bills since the outgoing sheriff and his sureties were liable for the balance. OAG 82-89 .

KRS 134.020 (repealed; see now KRS 134.015 ) and this section must be read in pari materia; accordingly, where tax bills had been timely mailed, the discount period had expired and the two percent (2%) penalty imposed by KRS 134.020 was in effect when a newly elected sheriff took office in January and where both the incoming and outgoing sheriffs refused to accept payments of ad valorem taxes from January 1 through January 15, pursuant to subsection (4) of this section, the taxpayers should be charged only the two percent (2%) penalty for a period of 30 days following the date the sheriff began accepting payments rather than the ten percent (10%) penalty which normally attaches February 1. OAG 82-100 .

134.220. Death, resignation or removal of sheriff — Sureties may nominate collector. [Repealed.]

Compiler’s Notes.

This section (4136: amend. Acts 1978, ch. 384, § 274, effective June 17, 1978) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.230. Bond to be executed by sheriff — Liability of sheriff and sureties.

    1. The sheriff shall execute a bond annually to the Commonwealth with one (1) or more sufficient sureties in the minimum sum of ten thousand dollars ($10,000), conditioned on the faithful performance of his or her duties and to pay over to the proper person and at the proper time all money collected. The bond shall be executed prior to the sheriff collecting taxes for the year in which the bond is executed. The bond shall be approved by order of the governing body of the county, and shall be filed by the governing body of the county with the county clerk and with the department. (1) (a) The sheriff shall execute a bond annually to the Commonwealth with one (1) or more sufficient sureties in the minimum sum of ten thousand dollars ($10,000), conditioned on the faithful performance of his or her duties and to pay over to the proper person and at the proper time all money collected. The bond shall be executed prior to the sheriff collecting taxes for the year in which the bond is executed. The bond shall be approved by order of the governing body of the county, and shall be filed by the governing body of the county with the county clerk and with the department.
    2. The governing body of the county may require the sheriff to enter into an additional bond, with good surety to be approved by the governing body of the county.
    1. Subject to the provisions of paragraph (b) of this subsection, the sureties on all bonds executed by the sheriff pursuant to this section shall be jointly and severally liable for any default of the sheriff during the calendar year in which the bond was executed, whether the liability accrues before or after the execution of the bond. (2) (a) Subject to the provisions of paragraph (b) of this subsection, the sureties on all bonds executed by the sheriff pursuant to this section shall be jointly and severally liable for any default of the sheriff during the calendar year in which the bond was executed, whether the liability accrues before or after the execution of the bond.
    2. Neither the sheriff nor a surety shall be liable for any act or default of the sheriff relating to the sheriff’s revenue duties unless notice of the act or default of the sheriff giving rise to a claim upon the bond has been given to the surety by the department, the chief executive of the county, the county attorney, or other person asserting the claim within ninety (90) days after discovery or at the latest within one (1) year after the end of the year within which the bond was executed.
    1. Any sheriff who fails to execute a bond as required by this section shall forfeit his or her office. The vacancy shall be filled as provided in KRS 63.220 . (3) (a) Any sheriff who fails to execute a bond as required by this section shall forfeit his or her office. The vacancy shall be filled as provided in KRS 63.220 .
    2. If the chief executive of the county does not appoint a sheriff as provided in KRS 63.220 within thirty (30) days, the department may appoint a tax collector to collect the moneys due the state. An appointed collector shall execute a bond within ten (10) days of being appointed, in the same manner and under the same conditions as provided in this section for a sheriff. A sheriff who forfeits his or her office under this subsection or who resigns his or her office shall not be appointed as collector under this section.

History. 4130, 4134: amend. Acts 1954, ch. 145; 1964, ch. 131, § 1; 1976 (Ex. Sess.), ch. 20, § 6, effective January 2, 1978; 1978, ch. 384, § 275, effective June 17, 1978; 1982, ch. 112, § 1, effective July 15, 1982; 1990, ch. 27, § 6, effective July 13, 1990; 1990, ch. 183, § 1, effective July 13, 1990; 1994, ch. 9, § 2, effective July 15, 1994; 2009, ch. 10, § 24, effective January 1, 2010.

NOTES TO DECISIONS

  1. Construction.
  2. Bonds.
  3. —Agreement in Lieu of.
  4. —Conditions.
  5. —Liability for Tax Collections.
  6. —Failure to File.
  7. —Additional.
  8. —Law Applicable.
  9. —Beneficiaries.
  10. —General Revenue.
  11. —Order Approving.
  12. —Execution.
  13. —Premiums.
  14. —Penal Sum.
  15. —Quietus.
  16. Sureties.
  17. —Signatures.
  18. —Excess Fees and Commissions.
  19. —Settlement Surcharged.
  20. —Release or Indemnity.
  21. —Subrogation.
  22. —Taxes.
  23. —Failure of Depository.
  24. Lien.
  25. —Priorities.
  26. —Subrogation.
  27. —Settlement and Quietus.
  28. —Purchaser’s Rights.
  29. —Mortgage on Sheriff’s Real Estate.
  30. Sovereign Immunity.
1. Construction.

The provision of subsection (1) of this section requiring sheriff to execute revenue bond “before or as of” June 1, does not mean that the sheriff might postpone execution of bond until he saw fit, but the proper interpretation would be that the bond might be executed before the first day of June but would not become effective until June 1. Clark v. Anderson, 300 Ky. 727 , 190 S.W.2d 342, 1945 Ky. LEXIS 643 ( Ky. 1945 ) (decided under prior law).

2. Bonds.

Both the official and the tax levying bonds of a sheriff executed before the enactment of this section covered his whole term and the bonds executed annually thereafter were merely additional security. Cotton v. Walton-Verona Independent Graded School Dist., 295 Ky. 478 , 174 S.W.2d 712, 1943 Ky. LEXIS 262 ( Ky. 1943 ) (decided under prior law).

3. —Agreement in Lieu of.

A sheriff or collector cannot satisfy the requirements of this section by agreeing with the department of revenue (now Revenue Cabinet) to make remittances of taxes more often than he is required to do, so that he will never have on hand more than a certain maximum balance, and giving bond in the amount of that balance. Beauchamp v. Matthews, 281 Ky. 351 , 135 S.W.2d 863, 1939 Ky. LEXIS 35 ( Ky. 1939 ) (decided under prior law).

4. —Conditions.

A bond provision that the surety would be absolved from liability if the county discovered a dishonest act or omission of the sheriff was ineffective and failed to absolve the surety from liability. National Surety Corp. v. Morgan County, 440 S.W.2d 791, 1969 Ky. LEXIS 349 ( Ky. 1969 ) (decided under prior law).

A statutorily-required fidelity bond may not contain clauses limiting liability in derogation of the statutory requirements for the bond. National Surety Corp. v. Morgan County, 440 S.W.2d 791, 1969 Ky. LEXIS 349 ( Ky. 1969 ) (decided under prior law).

Neither this section nor any other section in chapter 134 authorizes a “self-terminating” or “escape clause” provision in the sheriff’s bond. National Surety Corp. v. Morgan County, 440 S.W.2d 791, 1969 Ky. LEXIS 349 ( Ky. 1969 ) (decided under prior law).

5. —Liability for Tax Collections.

Liability for failing to account for tax collections is primarily under the bonds secured under this section, however, should these prove insufficient resort may be had to the general fidelity bonds executed under KRS 70.020 . Maryland Casualty Co. v. Magoffin County Bd. of Education, 358 S.W.2d 353, 1961 Ky. LEXIS 450 ( Ky. 1961 ) (decided under prior law).

6. —Failure to File.

When the sheriff failed to file bond by June 1, it was the duty of the county court to declare the office vacant and appoint a new sheriff. Clark v. Anderson, 300 Ky. 727 , 190 S.W.2d 342, 1945 Ky. LEXIS 643 ( Ky. 1945 ) (decided under prior law).

Where sheriff failed to file bond required by this section due to absence of county judge (now county judge/executive) who was required to receive it, it was sufficient compliance with this section that he tendered the bond to the county judge (now county judge/executive) upon the first day of the judge’s return. Moore v. Fields, 535 S.W.2d 67, 1975 Ky. LEXIS 3 ( Ky. 1975 ) (decided under prior law).

7. —Additional.

The county court may require a collector to give an additional bond in the same manner as the sheriff, but the judge, having approved the collector’s original bond, cannot arbitrarily remove him from office on ground of insufficiency of additional bond tendered by him pursuant to notice from judge. Baker v. McIntosh, 272 Ky. 763 , 115 S.W.2d 384, 1938 Ky. LEXIS 211 ( Ky. 1938 ) (decided under prior law).

8. —Law Applicable.

A sheriff’s bond is a contract between the parties thereto, and must be performed under the law in force at the time of the execution of the bond. Mt. Vernon Independent Graded School Dist. v. Clark, 281 Ky. 230 , 135 S.W.2d 892, 1940 Ky. LEXIS 15 ( Ky. 1940 ) (decided under prior law).

9. —Beneficiaries.

Subsection (3) of this section shows an intention that the bond shall be for the benefit of any taxing district, and the bonds cover county levies no less than state revenues. Maryland Casualty Co. v. Magoffin County Bd. of Education, 358 S.W.2d 353, 1961 Ky. LEXIS 450 ( Ky. 1961 ) (decided under prior law).

10. —General Revenue.

Although sheriff’s bond runs to the Commonwealth, action on the bond for liability with regard to school taxes may be brought by the board of education in its own name, and need not be brought by the Commonwealth for the use and benefit of the board. Gay v. Jackson County Board of Education, 205 Ky. 277 , 265 S.W. 772, 1924 Ky. LEXIS 89 ( Ky. 1924 ) (decided under prior law).

11. —Order Approving.

When order approving sheriff’s bond was entered at the time of approval, but was not signed by the judge, it could be signed later, pursuant to KRS 25.160 (repealed), and such signing would validate the order as of the date of original entry. Leslie County v. Eversole, 222 Ky. 793 , 2 S.W.2d 644, 1928 Ky. LEXIS 250 ( Ky. 1928 ) (decided under prior law). See United States Fidelity & Guaranty Co. v. Salyer, 131 Ky. 527 , 115 S.W. 767, 1909 Ky. LEXIS 53 ( Ky. 1909 ) (decided under prior law).

12. —Execution.

The provision of subsection (1) of this section that the county judge (now county judge/executive) shall “hold court at any time the sheriff may request” to execute bond, makes it incumbent on the sheriff to request the county judge (now county judge/executive) to do this. Clark v. Anderson, 300 Ky. 727 , 190 S.W.2d 342, 1945 Ky. LEXIS 643 ( Ky. 1945 ) (decided under prior law).

13. —Premiums.

The sheriff must pay the premiums on his bonds, and cannot recover the same from the state or county, or be allowed credit therefor in his settlement. Land v. Fayette County, 269 Ky. 543 , 108 S.W.2d 429, 1937 Ky. LEXIS 637 ( Ky. 1937 ) (decided under prior law). See Commonwealth use of Scott County v. Nunnelley, 211 Ky. 409 , 277 S.W. 506, 1925 Ky. LEXIS 890 ( Ky. 1925 ) (decided under prior law). (See KRS 62.140 and 62.150 ).

14. —Penal Sum.

Neither the amount of the sheriff’s individual net assets, nor the lien imposed on the sheriff’s property by this section, nor the provision that the sheriff may be required to give additional bond, can be considered for the purpose of permitting a smaller penal sum than that required by this section. Cornett v. Duff, 282 Ky. 332 , 138 S.W.2d 478, 1940 Ky. LEXIS 165 ( Ky. 1940 ) (decided under prior law).

If the sheriff’s revenue bond does not name a penal sum, but the joint net worth of the sureties is sufficient to comply with this section, the county judge (now county judge/executive) must insert a proper penal sum, with the consent of the sureties, and then approve the bond. Cornett v. Duff, 282 Ky. 332 , 138 S.W.2d 478, 1940 Ky. LEXIS 165 ( Ky. 1940 ) (decided under prior law).

15. —Quietus.

The obtaining of a quietus for the taxes of the previous year is not a condition precedent to the execution of the annual bond required by this section, and the sheriff must execute such bond at the time required by this section whether or not he has obtained the quietus. Renshaw v. Cook, 129 Ky. 347 , 111 S.W. 377, 33 Ky. L. Rptr. 860 , 33 Ky. L. Rptr. 895 , 1908 Ky. LEXIS 165 (Ky. Ct. App. 1908) (decided under prior law).

16. Sureties.

The sheriff and the surety on his bond are not liable to the county for taxes collected by the sheriff under a void levy. Knox County v. Lewis' Adm'r, 253 Ky. 652 , 69 S.W.2d 1000, 1934 Ky. LEXIS 693 ( Ky. 1934 ) (decided under prior law).

The sureties on the sheriff’s official bond, given pursuant to KRS 70.020 , are not liable for revenue collections where the sheriff has executed the statutory revenue bonds. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ), distinguished in Maryland Casualty Co. v. Magoffin County Bd. of Education, 358 S.W.2d 353, 1961 Ky. LEXIS 450 ( Ky. 1961 ) (decided under prior law).

This section does not mean that sureties on the official bond of the sheriff shall be jointly and severally liable for any default of the sheriff with the surety on the revenue bonds. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

Sureties on sheriff’s revenue bond would be subrogated to sheriff’s claims against county for building voting houses and for coupons on county bonds held by him, but could not set off these claims against sheriff’s liability for taxes collected. Fidelity & Casualty Co. v. Breathitt County, 276 Ky. 173 , 123 S.W.2d 250, 1938 Ky. LEXIS 538 ( Ky. 1938 ) (decided under prior law).

Sheriff’s surety, subrogated to rights of county after paying shortage in sheriff’s accounts, could enforce lien against purchaser of real property from sheriff, regardless of settlement of sheriff or quietus granted by fiscal court. Maryland Casualty Co. v. Holt's Adm'x, 285 Ky. 66 , 146 S.W.2d 940, 1940 Ky. LEXIS 602 ( Ky. 1940 ) (decided under prior law).

Liability for failing to account for tax collections is primarily under bonds executed under this section, however, in case the liability stipulated in such bonds proves insufficient to cover the aggregate default of the obligee in tax collections, resort may be had to the general fidelity bonds executed under KRS 70.020Maryland Casualty Co. v. Magoffin County Bd. of Education, 358 S.W.2d 353, 1961 Ky. LEXIS 450 ( Ky. 1961 ) (decided under prior law).

17. —Signatures.

It is immaterial whether the several sureties sign the bond on the same or different dates, or whether the date stated in the bond is the date on which the bond was actually signed. Gay v. Jackson County Board of Education, 205 Ky. 277 , 265 S.W. 772, 1924 Ky. LEXIS 89 ( Ky. 1924 ) (decided under prior law).

18. —Excess Fees and Commissions.

The sureties on the sheriff’s bond are liable for excess commissions retained by the sheriff over and above the maximum compensation allowed him by the Constitution. American Surety Co. v. Bales, 228 Ky. 543 , 15 S.W.2d 481, 1929 Ky. LEXIS 620 ( Ky. 1929 ) (decided under prior law).

19. —Settlement Surcharged.

Where sheriff, in his settlement, has erroneously been given credit for fees and commissions not legally due him, the sureties on his bond are liable for the amount thereof found to be due in an action to surcharge the settlement, as against contention that such amount represents an ordinary debt due the county which the bond does not cover. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ) (decided under prior law).

20. —Release or Indemnity.

Where sheriff borrowed money from bank in order to make settlement for amount due from him for taxes of 1930, and executed note to bank for that amount, and then paid note out of tax money collected in 1931, surety on sheriff’s bond compelled to make good sheriff’s default with regard to 1931 taxes was not entitled to recover from the bank the amount paid to it, since the loan by the bank had saved the surety from being held liable for a 1930 default. Maryland Casualty Co. v. Walker, 257 Ky. 397 , 78 S.W.2d 34, 1934 Ky. LEXIS 559 ( Ky. 1934 ) (decided under prior law).

21. —Subrogation.

A surety who pays to the state, county and taxing districts the amount for which the sheriff is liable is subrogated to the lien on the sheriff’s real estate. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ).

Surety who paid amount of sheriff’s liability was entitled to sums on deposit in bank to credit of sheriff in his official capacity, surety’s right to such sums being superior to right of bank to apply deposit to individual debt owed bank by sheriff. Golden v. Blakeman, 223 Ky. 517 , 3 S.W.2d 1095, 1928 Ky. LEXIS 371 ( Ky. 1928 ), overruled, Warfield Natural Gas Co. v. Ward, 286 Ky. 73 , 149 S.W.2d 705, 1940 Ky. LEXIS 1 ( Ky. 1940 ) (decided under prior law).

22. —Taxes.

Sureties on sheriff’s bond are liable for amount of taxes collected by sheriff, and not accounted for, from taxpayers whose property was not assessed, as against contention that state and county are not entitled to such taxes. Failure of the state and county to cause retrospective assessment of such property as omitted does not affect such liability. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ) (decided under prior law) (at the time this case was decided, sheriff had duty to report omitted property; however, the law that gave sheriff this duty has been repealed).

Sureties on sheriff’s bond were liable for railroad franchise taxes which had been paid to sheriff before they were due, as against contention that sheriff could not lawfully receive taxes until assessment had been certified as provided by KRS 136.180Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ) (decided under prior law).

23. —Failure of Depository.

The sheriff is not liable on his bond for tax moneys which have been lost by reason of failure of bank in which moneys were deposited, unless he was negligent in selecting the depository, or unless the failure occurred after the time when the sheriff should have paid over the money. In case of deposits in a bank designated by the fiscal court as official depository of county funds, the sheriff is not liable unless he had knowledge of facts which would lead him to question the soundness of the bank. Jordon v. Baker, 252 Ky. 40 , 66 S.W.2d 84, 1933 Ky. LEXIS 1007 ( Ky. 1933 ) (decided under prior law).

24. Lien.

The lien given by this section secured the sheriff’s liability for taxes collected from taxpayers whose property was not assessed for taxation. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ) (decided under prior law).

There is no lien on real estate acquired by the sheriff after the expiration of his term. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ) (decided under prior law).

The lien provided in this section is not superior to the dower right. Maryland Casualty Co. v. Lewis, 276 Ky. 263 , 124 S.W.2d 48, 1939 Ky. LEXIS 509 ( Ky. 1939 ) (decided under prior law).

The lien provided in this section attaches at the time the sheriff begins to act as tax collector, insofar as property owned by him at that time is concerned, and at the time of acquisition of property subsequently acquired by him, and the lien given by KRS 135.100 is effective against the legal or equitable estate of the sheriff from the commencement of the action. Owens v. Maryland Casualty Co., 283 Ky. 162 , 283 Ky. 462 , 141 S.W.2d 867, 1940 Ky. LEXIS 353 ( Ky. 1940 ) (decided under prior law).

25. —Priorities.

Bank which furnished money to pay off vendor’s lien on land purchased by sheriff, and took mortgage from sheriff to secure it for amount advanced, was entitled to the same priority over the lien given by this section as the purchase-money lien had, under the doctrine of subrogation. Commonwealth ex rel. Board of Education v. Federal Land Bank, 226 Ky. 628 , 11 S.W.2d 698, 1928 Ky. LEXIS 147 ( Ky. 1928 ) (decided under prior law).

The wife of a deceased former sheriff is estopped from asserting a deed from the sheriff to her which was unrecorded until after his term expired, where the sheriff’s surety is asserting a lien on the sheriff’s property for his defalcation of tax funds. Maryland Casualty Co. v. Lewis, 276 Ky. 263 , 124 S.W.2d 48, 1939 Ky. LEXIS 509 ( Ky. 1939 ) (decided under prior law).

26. —Subrogation.

If, at the time the sheriff took office, certain of his real estate was subject to a contractual lien, and a person who purchased such real estate after the expiration of the sheriff’s term paid off the lien, relying upon a quietus given to the sheriff, such person would be entitled to subrogation to such lien as against the lien asserted under this section for sums found due from the sheriff in an action to surcharge his settlements. American Surety Co. v. Bales, 228 Ky. 543 , 15 S.W.2d 481, 1929 Ky. LEXIS 620 ( Ky. 1929 ) (decided under prior law).

27. —Settlement and Quietus.

The granting of a quietus to the sheriff, following a settlement, does not operate to free the sheriff’s real estate of the lien given by this section, and if the settlement is subsequently opened for fraud or mistake the lien may be enforced, even as against persons who purchased the real estate from the sheriff in reliance on the quietus. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ) (decided under prior law).

Settlements made by sheriff and quietus granted by fiscal court do not discharge lien on his real property, as long as there is any money due from sheriff to county and period of limitation has not expired. Maryland Casualty Co. v. Holt's Adm'x, 285 Ky. 66 , 146 S.W.2d 940, 1940 Ky. LEXIS 602 ( Ky. 1940 ) (decided under prior law).

28. —Purchaser’s Rights.

Persons who have purchased real estate from the sheriff are not precluded, as to the amount of the lien against such real estate, by the sheriff’s settlements, and they may show that the sheriff was not liable for the sum found due by the settlement, or for any sum. American Surety Co. v. Bales, 228 Ky. 543 , 15 S.W.2d 481, 1929 Ky. LEXIS 620 ( Ky. 1929 ) (decided under prior law).

29. —Mortgage on Sheriff’s Real Estate.

Mortgage on sheriff’s real estate executed before he took office, but not recorded until after he took office, was inferior to lien of state, county and taxing districts. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ) (decided under prior law).

30. Sovereign Immunity.

Fire protection district’s suit against tax collection officials, including a county court clerk, a sheriff, and a county assessor or property valuation administrator, based on the officials’ failure to collect personal property tax pursuant to KRS 75.015 , was properly dismissed because sovereign immunity shielded the officials from liability; contrary to the district’s claim, the fact that the officials posted performance bonds did not amount to a waiver of sovereign immunity. Such waiver was found only where it was established by express language or by overwhelming implications. St. Matthews Fire Prot. Dist. v. Aubrey, 304 S.W.3d 56, 2009 Ky. App. LEXIS 47 (Ky. Ct. App. 2009).

Cited in:

Land v. Fayette County, 269 Ky. 543 , 108 S.W.2d 429, 1937 Ky. LEXIS 637 ( Ky. 1937 ); Cornett v. Duff, 283 Ky. 466 , 141 S.W.2d 870, 1940 Ky. LEXIS 356 ( Ky. 1940 ); Board of Aldermen v. Hunt, 284 Ky. 720 , 145 S.W.2d 814, 1940 Ky. LEXIS 551 ( Ky. 1940 ); Russell County Board of Education v. Leach, 288 Ky. 769 , 157 S.W.2d 70, 1941 Ky. LEXIS 160 ( Ky. 1941 ); Burke v. Department of Revenue, 293 Ky. 281 , 168 S.W.2d 997, 1943 Ky. LEXIS 607 ( Ky. 1943 ); Laurel County v. Lucas, 299 Ky. 237 , 185 S.W.2d 259, 1945 Ky. LEXIS 407 ( Ky. 1945 ).

Opinions of Attorney General.

The amount of the state revenue bond required of the sheriff at the beginning of his term could be based on the aggregate amount of taxes remaining unpaid at the first of the year. OAG 61-1086 .

The bond required by this section can be paid out of the 75% fund pursuant to KRS 62.155 and 64.345 . OAG 74-413 .

This section creates no lien against personal property of a sheriff until such time as an action is instituted to subject such property to liability for any defalcation of the sheriff in remitting taxes. OAG 75-647 .

Since the sheriff’s county revenue bond must cover liability to account for all charges of taxes made against the sheriff and for all money received by him as a revenue collector, the officer fixing the bond should set it for no less than the aggregate amount of state, county, and special district tax receipts for each year the bond is in force. OAG 76-224 .

Where the county judge/executive requires the sheriff to make his tax collections report more often than on the monthly basis, KRS 134.300 (now repealed) and this section, clearly require the sheriff to turn over taxes collected, after any previous report, to the appropriate taxing authority or special taxing district but in connection with usual monthly report, the sheriff is required at the time of the report to turn over taxes collected to the appropriate taxing authorities or special taxing districts. OAG 81-378 .

The 1982 amendment of this section deleted the statutory lien provision and, consequently, there will be no statutory lien on the real property of sheriffs taking office subsequent to July 15, 1982, the date on which the amendment became effective. OAG 82-369 .

The statutory lien provisions of former subsections (4) and (5) of this section, which subsections were deleted by the 1982 amendment to this section, remain in effect for sheriffs currently in office, as the amending act does not expressly state that its provisions are to be retroactive so as to be applicable to sheriffs who have taken office prior to its effective date. OAG 82-371 .

Under KRS 70.040 , the sheriff is liable for the acts or omissions of his deputies. Thus, the sheriff may require his deputies to execute bonds, in connection with the sheriff’s tax collection function, to cover their responsibility for indemnifying the sheriff or the sheriff’s office. OAG 82-460 .

Concerning the general revenue bond of the sheriff as tax collector, pursuant to this section, there appears to be no statutory authority for the county’s paying the premium. KRS 62.156 , however, requires the county to pay the premium on the county levy bond treated in KRS 134.250 (now repealed). OAG 83-293 .

A county hospital district, through its board, is responsible for paying that portion of the premium on the general revenue bond, pursuant to this section, which is practicably applicable to that portion of the bond coverage reflecting taxes collected by the sheriff for the hospital district. Also, the hospital district board has the duty of indicating to the county judge/executive the approximate amount of hospital district taxes which will be in the possession of the sheriff under the sheriff’s reporting scheme for a particular tax year, in order that the general revenue bond may adequately reflect coverage embracing such hospital district taxes collected. OAG 82-609 .

Research References and Practice Aids

Kentucky Law Journal.

Wilson, Sale of Land for Taxes in Kentucky, 28 Ky. L.J. 105 (1940).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Practice Context for Sheriffs and Deputy Sheriffs, § 18.00.

134.240. Form of general revenue bond of sheriff — Filing and recording. [Repealed.]

Compiler’s Notes.

This section (4133: amend. Acts 2005, ch. 85, § 257, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.250. Special bond of sheriff for county levy — Minimum — Record. [Repealed.]

Compiler’s Notes.

This section (1884: amend. Acts 1978, ch. 384, § 276, effective June 17, 1978; 1996, ch. 86, § 4, effective July 15, 1996) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.260. Liability of sureties on sheriff’s revenue bonds. [Repealed.]

Compiler’s Notes.

This section (4134) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.270. Limitation of action against sheriff and sureties. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact. Acts 1990, ch. 476, Pt. V, § 344, effective July 13, 1990; 2005, ch. 85, § 258, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.280. Failure of sheriff to execute bond. [Repealed.]

Compiler’s Notes.

This section (4131, 4132: amend. Acts 1978, ch. 384, § 277, effective June 17, 1978; 2005, ch. 85, § 259, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.290. Compensation of sheriff for collecting state and county taxes. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact. Acts 1990, ch. 476, Pt. V, § 345, effective July 13, 1990; 1996, ch. 254, § 20, effective July 15, 1996; 2005, ch. 85, § 260, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.295. Supplementation of sheriff’s commission. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 93, § 18, effective January 1, 1977) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.300. Reports, payments by sheriff. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact. Acts 1990, ch. 476, Pt. V, § 346, effective July 13, 1990) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.310. Sheriff’s annual settlement with county — Objections — Action in Circuit Court — Statement of funds and expenditures — Settlement for excess fees — Applicability of KRS 64.368 if population decreases below 70,000. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact. Acts 1990, ch. 476, Pt. V, § 347, effective July 13, 1990; 1992, ch. 220, § 11, effective January 1, 1994; 1998, ch. 209, § 4, effective March 30, 1998; 2002, ch. 71, § 8, effective July 15, 2002; 2005, ch. 85, § 261, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010. For current comparable provisions, see KRS 134.192 .

134.320. Report and payment to Department of Revenue — Penalty. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact. Acts 1990, ch. 476, Pt. V, § 348, effective July 13, 1990; 2005, ch. 85, § 262, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.325. Sheriff’s settlement for taxes collected. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 131, § 27; 1952, ch. 220; 1990, ch. 183, § 2, effective July 13, 1990; 1998, ch. 209, § 5, effective March 30, 1998; 2005, ch. 85, § 263, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.330. Quietus and bond of sheriff — Settlement on recertified tax bills. [Repealed.]

Compiler’s Notes.

This section (4130: amend. Acts 1990, ch. 183, § 3, effective July 13, 1990; 1998, ch. 209, § 6, effective March 30, 1998; 2005, ch. 85, § 264, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.340. Sheriff to record delinquent tax collections — Penalty for failure to record or collect — Prosecution by county attorney — Compensation. [Repealed.]

Compiler’s Notes.

This section (4151-3, 4151-4: amend. Acts 1976 (Ex. Sess.), ch. 14, § 150, effective January 2, 1978; 1976 (Ex. Sess.), ch. 17, § 37, effective January 1, 1978; 1978, ch. 400, § 2, effective June 17, 1978; 2005, ch. 85, § 265, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.350. Apportionment of partial collection of tax. [Repealed.]

Compiler’s Notes.

This section (44167) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.360. Credit to sheriff for uncollectible delinquent taxes and certificates of delinquency. [Repealed.]

Compiler’s Notes.

This section (4251; 1998, ch. 209, § 7, effective March 30, 1998; 2005, ch. 85, § 266, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.370. Collection of delinquent and omitted tax bills — Percentage to county attorney for collections. [Repealed.]

Compiler’s Notes.

This section (4239f: amend. Acts 1990, ch. 183, § 4, effective July 13, 1990) was repealed by Acts 1994, ch. 73, § 4, effective July 15, 1994.

134.380. Collection of delinquent taxes and assessment of omitted property. [Renumbered.]

Compiler’s Notes.

This section (4149b-12, 4257a-1, 4257a-2, 4267: amend. Acts 1968, ch. 152, § 107; 1984, ch. 405, § 3, effective July 13, 1984; 1990, ch. 27, § 7, effective July 13, 1990; 1990, ch. 411, § 7, effective July 13, 1990; 1996, ch. 254, § 28, effective July 15, 1996; 1998, ch. 209, § 8, effective March 30, 1998; 2002, ch. 346, § 171, effective July 15, 2002; 2005, ch. 85, § 267, effective June 20, 2005) was renumbered as KRS 134.547 effective January 1, 2010.

134.382. Reduction of commission. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1990, ch. 411, § 8) was repealed by Acts 1998, ch. 209, § 20, effective March 30, 1998.

134.385. Special audit by department. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1990, ch. 411, § 9, effective July 13, 1990; 2005, ch. 85, § 268, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.390. Omitted tax bills, when due and when deemed delinquent — Penalty — Laws applicable to delinquency. [Repealed.]

Compiler’s Notes.

This section (4149b-6: amend. Acts 1949 (Ex. Sess.), ch. 4, § 17; 1990, ch. 27, § 8, effective July 13, 1990; 2005, ch. 85, § 269, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.400. Disposition of penalties collected on delinquent taxes and omitted assessments — Use for administration. [Renumbered.]

Compiler’s Notes.

This section (4257a-2, 4257a-5: amend. Acts 1976 (Ex. Sess.), ch. 17, § 38, effective January 1, 1978; 1978, ch. 400, § 3, effective June 17, 1978; 1982, ch. 450, § 65, effective July 1, 1983; 1990, ch. 507, § 20, effective July 13, 1990; 2005, ch. 85, § 270, effective June 20, 2005) was renumbered as KRS 134.552 effective January 1, 2010.

134.410. Investigation by commissioner of revenue of records of delinquent insurance companies. [Repealed.]

Compiler’s Notes.

This section (4267: amend. Acts 2005, ch. 85, § 271, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.415. Lien on motor vehicle; notice; fees; release. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 186, Art. I, § 28) was repealed by Acts 1962, ch. 29, § 8.

134.420. Lien for taxes.

  1. The state and each county, city, or other taxing district shall have a lien on the property assessed for taxes due them respectively for eleven (11) years following the date when the taxes become delinquent.
  2. This lien shall not be defeated by gift, devise, sale, alienation, or any means except by sale to a bona fide purchaser, but no purchase of property made before final settlement for taxes for a particular assessment date has been made by the sheriff shall preclude the lien covering the taxes.
  3. The lien shall include all interest, penalties, fees, commissions, charges, costs, attorney fees, and other expenses as provided by this chapter that have been incurred by reason of delinquency in payment of the tax claim certificate of delinquency, personal property certificate of delinquency, or in the process of collecting any of them, and shall have priority over any other obligation or liability for which the property is liable.
  4. The lien of any city, county, or other taxing district shall be of equal rank with that of the state.
  5. When any proceeding is instituted to enforce the lien provided in this subsection, it shall continue in force until the matter is judicially terminated.
  6. Every city with a population of less than twenty thousand (20,000) based upon the most recent federal decennial census shall file notice of the delinquent tax liens with the county clerk of any county or counties in which the taxpayer’s business or residence is located, or in any county in which the taxpayer has an interest in property. The notice shall be recorded in the same manner as notices of lis pendens are filed, and the file shall be designated miscellaneous state and city delinquent and unpaid tax liens.

History. 4021, 4257a-7; Acts 1962, ch. 210, § 22; 1974, ch. 319, § 1; 1978, ch. 84, § 3, effective June 17, 1978; 1982, ch. 238, § 6, effective July 15, 1982; 1990, ch. 164, § 2, effective July 13, 1990; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 349, effective July 13, 1990; 1996, ch. 344, § 9, effective July 15, 1996; 1998, ch. 209, § 9, effective March 30, 1998; 2004, ch. 104, § 3, effective July 13, 2004; 2005, ch. 85, § 272, effective June 20, 2005; 2007, ch. 14, § 2, effective June 26, 2007; 2009, ch. 10, § 18, effective January 1, 2010; 2014, ch. 92, § 217, effective January 1, 2015.

Legislative Research Commission Notes.

(7/13/90) The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

  1. Application.
  2. Notice.
  3. Lien.
  4. —Property to Which Attached.
  5. —Personalty and Realty.
  6. —Period of.
  7. —Ad Valorem Taxes.
  8. —Taxpayer’s Interest.
  9. —Timber.
  10. —Assessment in Wrong Name.
  11. —Attachment.
  12. —Perfection.
  13. City Taxes.
  14. Inheritance Taxes.
  15. School Taxes.
  16. Priorities.
  17. Purchaser at Tax Sale.
  18. Life Tenant.
  19. Rentals.
  20. Payment to Safeguard Security Interest.

2.5. Standing.

7. Ad Valorem Taxes.

1. Application.

This section was plainly intended to give a lien for any taxes then or thereafter provided by the statutes. In re Auto Electric Repair & Parts Co., 41 F. Supp. 3, 1941 U.S. Dist. LEXIS 2592 (D. Ky. 1941 ).

The provisions of this section, relating to liens for taxes generally, do not apply to unemployment compensation contributions. Louisville Title Mortg. Co. v. Commonwealth, 299 Ky. 224 , 184 S.W.2d 963, 1944 Ky. LEXIS 1041 ( Ky. 1944 ).

Delinquency certificate purchaser was entitled to an award of attorney fees on its action to redeem two (2) certificates of delinquency that it purchased regarding claims against the Kentucky corporation for delinquent taxes, as statutory authority gave it the right, as a private purchaser of the delinquent taxes, to enforce the lien that state, county, city, or taxing district would have had a right to enforce had the delinquent taxes not been purchased by the private purchase, and the lien included the right to a reasonable amount of attorney fees. Flag Drilling Co. v. Erco, Inc., 156 S.W.3d 762, 2005 Ky. App. LEXIS 20 (Ky. Ct. App. 2005).

Since tax liens were superior to judgment liens, consistent with KRS 134.420(3), the purchaser who made a winning bid at a foreclosure sale could not use its judgment-lien credit to reduce the amount available to priority lienholders who had tax claims waiting to be paid. Rather, the priority lienholders were entitled to have the full amount of the winning bid available to pay their claims and the purchaser was entitled to recover any amount left over after the priority lienholders’ claims were extinguished. United States Nat'l Bank Ass'n v. Am. Gen. Home Equity, Inc., 387 S.W.3d 345, 2012 Ky. App. LEXIS 198 (Ky. Ct. App. 2012).

2. Notice.

A person who purchased property subject to a tax lien during the five (5) year (now 11-year) period during which the lien continued was charged with notice of the lien. Carter v. Louisville, 147 Ky. 791 , 145 S.W. 739, 1912 Ky. LEXIS 334 ( Ky. 1912 ).

Under this section, any time a person fails to pay any tax, a lien immediately arises and is attached to all property owned or subsequently acquired by the taxpayer, but until notice thereof is filed, a bona fide purchaser, etc. is given priority, once notice is filed, however, the Revenue Cabinet has priority. Liberty Nat'l Bank & Trust Co. v. Vanderkraats, 899 S.W.2d 511, 1995 Ky. App. LEXIS 114 (Ky. Ct. App. 1995).

2.5. Standing.

Mortgagee had first-party standing to contest an agreed judgment between a mortgagor and a purchaser of the mortgagor’s delinquent property tax liens because the mortgagee was a lienholder under KRS 426.006 and would suffer direct financial injury as the tax lien was superior under KRS 134.420(3); the amount of the tax lien was increased by the included attorney’s fees under KRS 134.452 , which the mortgagee contended were unreasonable. Tax Ease Lien Invs. 1 v. Commonwealth Bank & Trust, 384 S.W.3d 141, 2012 Ky. LEXIS 142 ( Ky. 2012 ).

3. Lien.

Where the taxpayer did not own the property in question when the taxes accrued, the commission has no lien against the property for such taxes. Unemployment Compensation Com. v. Louisville Title Ins. Co., 293 Ky. 214 , 168 S.W.2d 377, 1943 Ky. LEXIS 566 ( Ky. 1943 ).

Pursuant to the language of former subsection (2) of this section a tax lien cannot arise until a person is liable to pay such tax. Commonwealth Revenue Cabinet v. Hall, 941 S.W.2d 481, 1997 Ky. App. LEXIS 5 (Ky. Ct. App. 1997).

4. —Property to Which Attached.

When there is a tax lien on assessed real property which is subject to sale by the sheriff under the provisions of the applicable statutes, so much of the lien as remains after the sale of personalty as provided in KRS 134.430 (now repealed) shall constitute a first lien against the assessed real estate, but in no event can this be construed to give the taxing authority a lien against real estate for taxes assessed against property other than the particular real estate. Midland-Guardian Co. v. McElroy, 563 S.W.2d 752, 1978 Ky. App. LEXIS 490 (Ky. Ct. App. 1978).

Blanket lien did not exist against property sold by vendor to purchaser, concerning all the unpaid taxes which vendor owed regarding certificates of tax delinquency covering other tracts of real estate vendor owned, and purchaser could not be required to pay and satisfy such liens of vendor, especially as property sold had no assessment for delinquent liens. United Cos. Lending Corp. v. Calvert, 899 S.W.2d 514, 1995 Ky. App. LEXIS 116 (Ky. Ct. App. 1995).

5. —Personalty and Realty.

Where taxpayer who owned personal property and real estate sold the personal property after the assessment date, the lien on such personal property for taxes could not be enforced until after the real estate had been exhausted. Hicks v. Kimbro, 225 Ky. 778 , 10 S.W.2d 290, 1928 Ky. LEXIS 879 ( Ky. 1928 ).

6. —Period of.

Where an action to enforce the lien for taxes is brought within the five (5) year (now 11-year) period for which the lien continues, no lis pendens notice need be filed at the commencement of the action, in order to preserve the lien as to third persons, but if the action remains on the docket without being brought to trial until after the five (5) year period has expired, a lis pendens notice must be filed. Carter v. Louisville, 147 Ky. 791 , 145 S.W. 739, 1912 Ky. LEXIS 334 ( Ky. 1912 ).

7. —Ad Valorem Taxes.

The lien for ad valorem taxes is on the property assessed. Commonwealth v. J. B. Jellico Coal Co., 227 Ky. 273 , 12 S.W.2d 698, 1928 Ky. LEXIS 502 ( Ky. 1928 ).

8. —Taxpayer’s Interest.

The tax lien is a lien only against such interest as the taxpayer owns in the property, and not against the property itself. Hall v. Hall, 174 Ky. 356 , 192 S.W. 76, 1917 Ky. LEXIS 189 ( Ky. 1917 ).

Where coal mining lease was terminated by lessor on lessee becoming bankrupt, such power of termination being reserved in the lease, all property rights of the lessee ceased to exist, and there was nothing remaining against which the state could enforce a lien for taxes previously assessed against the lessee’s interest in the lease. Commonwealth v. J. B. Jellico Coal Co., 227 Ky. 273 , 12 S.W.2d 698, 1928 Ky. LEXIS 502 ( Ky. 1928 ).

9. —Timber.

Tax lien extended to proceeds of sale of timber from land subject to lien. Board of Drainage Comm'rs v. Alexander, 235 Ky. 689 , 32 S.W.2d 22, 1930 Ky. LEXIS 438 ( Ky. 1930 ).

10. —Assessment in Wrong Name.

Where property is correctly described in the assessment lists, the tax constitutes a lien on the property, even though the assessment is in the name of the wrong person. Louisville v. Louisville Courier-Journal Co., 140 Ky. 664 , 131 S.W. 509, 1910 Ky. LEXIS 341 ( Ky. 1910 ).

11. —Attachment.

The lien attaches as of the assessment date, so the assessment date constitutes the lien date. Jefferson Post, A. L. Dep't v. Louisville, 280 S.W.2d 706, 1955 Ky. LEXIS 189 ( Ky. 1955 ).

KRS 134.060 (now repealed) makes an owner of real property liable for the related property taxes and the tax is the personal debt of the person liable for payment, pursuant to KRS 134.050 (now repealed), and the lien imposed by KRS 134.420 secures the payment of taxes, as does KRS 91A.070 . Radcliffe v. LPP Mortg., 2003 U.S. Dist. LEXIS 5286 (W.D. Ky. Apr. 1, 2003), aff'd, 2005 U.S. App. LEXIS 5198 (6th Cir. Ky. Mar. 30, 2005).

12. —Perfection.

The Commonwealth’s lien for the 1951 tax became perfected on the day taxpayer filed his return showing he owed the state this sum. United States v. Commonwealth, 288 S.W.2d 664, 1956 Ky. LEXIS 277 (Ky. Ct. App. 1956).

7. Ad Valorem Taxes.

Trial court presiding over an action to distribute real estate property sales proceeds after the sale of a parcel of land due to unpaid ad valorem taxes should not have distributed the full amount of the city and county’s liens to them and then divided the remaining proceeds pro rata among the other parties. Liens that resulted from unpaid ad valorem taxes were not made inferior by the sale of KRS 134.128 certificates of delinquency from government entities to third-party purchasers such as the bank, especially since KRS 134.420 gave priority to liens resulting from such unpaid taxes irrespective of whether government entities or third parties held those liens. United States Bank Nat'l Ass'n v. Tax Ease Lien Invs. 1, LLC, 356 S.W.3d 770, 2011 Ky. App. LEXIS 227 (Ky. Ct. App. 2011).

13. City Taxes.

Sale of property for state and county taxes did not free such property of lien for city taxes. Allin v. Harrodsburg, 247 Ky. 360 , 57 S.W.2d 45, 1933 Ky. LEXIS 406 ( Ky. 1933 ). See Kentucky Lands Inv. Co. v. Fitch, 144 Ky. 273 , 137 S.W. 1040, 1911 Ky. LEXIS 574 ( Ky. 1911 ).

The lien imposed for taxes due a city has equal priority with the lien imposed for state taxes. Allin v. Harrodsburg, 247 Ky. 360 , 57 S.W.2d 45, 1933 Ky. LEXIS 406 ( Ky. 1933 ).

14. Inheritance Taxes.

With respect to inheritance taxes, this section is considered to apply only to property other than the property transferred. Commonwealth by Marcum v. Smith, 375 S.W.2d 386, 1964 Ky. LEXIS 411 ( Ky. 1964 ).

15. School Taxes.

A board of education has authority to maintain an action in its own name, against delinquent taxpayers, to recover judgment for delinquent school taxes and to enforce the tax lien, and is not required to await the ordinary process of distraint and sale by the tax collector as the statutes make the tax a debt of the delinquent taxpayer in favor of the particular taxing authority. Board of Education v. Ballard, 299 Ky. 370 , 185 S.W.2d 538, 1945 Ky. LEXIS 426 ( Ky. 1945 ).

16. Priorities.

Under Kentucky statutes, the lien of a judgment creditor, based on wage assignments of employees of bankrupt manufacturing corporation, is inferior to lien of city for taxes. Freeman Furniture Factories, Inc. v. Bowlds, 136 F.2d 136, 1943 U.S. App. LEXIS 2982 (6th Cir. Ky. 1943 ).

State’s lien for taxes is inferior to federal lien for unpaid federal taxes. Kentucky, Dep't of Revenue v. United States, 383 F.2d 13, 1967 U.S. App. LEXIS 5000 (6th Cir. Ky. 1967 ).

In bankruptcy proceeding, landlord’s lien for rent was inferior to lien of Kentucky unemployment compensation commission for contributions due from bankrupt, the latter lien being a tax lien within the meaning of the bankruptcy act. In re Auto Electric Repair & Parts Co., 41 F. Supp. 3, 1941 U.S. Dist. LEXIS 2592 (D. Ky. 1941 ).

Unrecorded chattel mortgage did not take precedence over tax lien. Allin v. Harrodsburg, 247 Ky. 360 , 57 S.W.2d 45, 1933 Ky. LEXIS 406 ( Ky. 1933 ).

The lien for taxes is superior to the inchoate right of dower. Maryland Casualty Co. v. Lewis, 276 Ky. 263 , 124 S.W.2d 48, 1939 Ky. LEXIS 509 ( Ky. 1939 ). See Stokes v. Commonwealth, 286 Ky. 391 , 150 S.W.2d 892, 1941 Ky. LEXIS 257 ( Ky. 1941 ); Chalk v. Chalk, 291 Ky. 702 , 165 S.W.2d 534, 1942 Ky. LEXIS 310 ( Ky. 1942 ).

The preference or priority of lien of classes of taxes other than ad valorem taxes is a question of legislative intent. It should be specially clear that such was the intent where the tax is of a special character to raise funds which do not go into the treasury for the general purposes of government. The state has power to confer priority of tax liens over other rights, but no act should be construed to do so unless the language used compels it. If the provision is in general terms, priority will not be given a retroactive effect so as to make the lien superior to liens existing at the time of enactment or to bona fide conveyances or transfers. Louisville Title Mortg. Co. v. Commonwealth, 299 Ky. 224 , 184 S.W.2d 963, 1944 Ky. LEXIS 1041 ( Ky. 1944 ).

Any taxes by a city or by a county assessed against particular real estate which was sold pursuant to foreclosure would have a priority over a recorded mortgage. Midland-Guardian Co. v. McElroy, 563 S.W.2d 752, 1978 Ky. App. LEXIS 490 (Ky. Ct. App. 1978).

Inasmuch as lienholders could have neither actual nor constructive notice of personal property taxes accruing two (2), three (3) and four (4) years after the lien, any portion of the tax bills of a city or a county on real or personal property other than the property assessed would be subject to the general principle of “first in time, first in right.” Midland-Guardian Co. v. McElroy, 563 S.W.2d 752, 1978 Ky. App. LEXIS 490 (Ky. Ct. App. 1978).

Judgment lien would be given priority over Revenue Cabinet’s tax lien, resulting from a jeopardy assessment pursuant to KRS 131.150 , notwithstanding the priority ruled enacted in this section where the Revenue Cabinet failed to present any evidence regarding the validity or amount of its lien. Commonwealth, Revenue Cabinet v. Liberty Nat'l Bank, 858 S.W.2d 199, 1993 Ky. App. LEXIS 40 (Ky. Ct. App. 1993).

Under this section, the recording of a tax lien before the mortgage put mortgagee on notice of all prior and future assessments against the taxpayers, resulting in priority to the Revenue Cabinet for tax liens ahead of mortgagee. Liberty Nat'l Bank & Trust Co. v. Vanderkraats, 899 S.W.2d 511, 1995 Ky. App. LEXIS 114 (Ky. Ct. App. 1995).

Unpublished decision: In foreclosure actions brought by a third-party purchaser of tax liens, the trial court erred in refusing to order pro rata distribution of the sale proceeds to all parties with valid tax liens. The purchaser was entitled to exercise the priority given liens resulting from unpaid ad valorem taxes in KRS 134.420(3). Tax Ease Lien Invs. 1, LLC v. Hinkle, 2012 Ky. App. Unpub. LEXIS 1037 (Ky. Ct. App. Oct. 19, 2012), review denied, ordered not published, 2013 Ky. LEXIS 519 (Ky. Aug. 21, 2013).

17. Purchaser at Tax Sale.

Where land was assessed in the name of a person who was merely an agent for a life tenant, a sale of the land for taxes passed no title, but the purchaser at the sale had a lien on the land for the amount paid by him. Rogers v. McAlister, 151 Ky. 488 , 152 S.W. 571, 1913 Ky. LEXIS 530 ( Ky. 1913 ).

Where land owned by married woman was assessed in the name of her husband “for wife,” sale of land for taxes was invalid as against purchaser who bought land from married woman without notice of tax lien, but purchaser at tax sale had lien for amount paid by him. Wash v. Noel, 160 Ky. 847 , 170 S.W. 197, 1914 Ky. LEXIS 550 ( Ky. 1914 ).

The tax lien is a lien on the property itself, but in case of a sale for taxes the purchaser acquires only such title as was possessed by the person in whose name the tax was assessed, plus a lien for the amount of the purchase money. Smith v. Young, 178 Ky. 376 , 198 S.W. 1166, 1917 Ky. LEXIS 742 ( Ky. 1917 ).

18. Life Tenant.

Where land is in the possession of a life tenant, it is the duty of the life tenant to pay the taxes assessed during his term, but the lien for such taxes is against the land itself and not merely against the life estate, and if the life tenant dies without paying the taxes the land passes to the remainderman subject to the lien. Bradley v. Sears, 138 Ky. 230 , 127 S.W. 782, 1910 Ky. LEXIS 63 ( Ky. 1910 ).

Where land was assessed in name of life tenant, purchaser at tax sale acquired title only to the life estate, and a lien on the remainder interests, and he was entitled to enforce this lien against the remaindermen even though they did not bring action to recover possession of the land from him until more than five (5) years after the sale. Smith v. Young, 178 Ky. 376 , 198 S.W. 1166, 1917 Ky. LEXIS 742 ( Ky. 1917 ).

19. Rentals.

The fact that a mortgagee has the right to pay taxes on mortgaged property out of rentals pledged to secure indebtedness does not operate to extend lien of taxing authority to rentals. Anderson v. Bush, 290 Ky. 51 , 160 S.W.2d 395, 1942 Ky. LEXIS 363 ( Ky. 1942 ).

20. Payment to Safeguard Security Interest.

Although some of the proceeds from the foreclosure sale of a mortgaged property were used to extinguish the tax liability on the property thereby reducing the amount that the mortgagee would have obtained from the foreclosure sale, the mortgagee could not recover from the nonassuming grantee of the mortgagor the amount of delinquent taxes paid out of the proceeds of the sale of the mortgaged property, because although the mortgagee was aware of the risk of possible displacement of its security interest by a tax lien on the mortgaged premises, it did not safeguard its interest by actually paying the delinquent taxes on the property. Lincoln Sav. Bank v. Hayes, 671 F.2d 198, 1982 U.S. App. LEXIS 21732 (6th Cir. Ky. 1982 ).

Cited in:

Freeman Furniture Factories, Inc. v. Bowlds, 136 F.2d 136, 1943 U.S. App. LEXIS 2982 (6th Cir. 1943); Commonwealth v. Randolph, 277 Ky. 724 , 127 S.W.2d 398, 1939 Ky. LEXIS 722 (1939); Forwood v. Louisville, 283 Ky. 208 , 140 S.W.2d 1048, 1940 Ky. LEXIS 315 ( Ky. 1940 ); Richmond v. Goodloe, 287 Ky. 379 , 153 S.W.2d 921, 1941 Ky. LEXIS 558 ( Ky. 1941 ); Commonwealth v. Anderson, 694 S.W.2d 465, 1985 Ky. App. LEXIS 491 (Ky. Ct. App. 1985); Louisville v. Miller, 697 S.W.2d 164, 1985 Ky. App. LEXIS 646 (Ky. Ct. App. 1985); Gillis v. Preston, 746 S.W.2d 77, 1987 Ky. App. LEXIS 611 (Ky. Ct. App. 1987).

NOTES TO UNPUBLISHED DECISIONS

  1. Priorities.
  2. Lien.
1. Priorities.

Unpublished decision: In foreclosure actions brought by a third-party purchaser of tax liens, the trial court erred in refusing to order pro rata distribution of the sale proceeds to all parties with valid tax liens. The purchaser was entitled to exercise the priority given liens resulting from unpaid ad valorem taxes in KRS 134.420(3). Tax Ease Lien Invs. 1, LLC v. Hinkle, 2012 Ky. App. Unpub. LEXIS 1037 (Ky. Ct. App. Oct. 19, 2012), review denied, ordered not published, 2013 Ky. LEXIS 519 (Ky. Aug. 21, 2013).

2. Lien.

Unpublished decision: Because creditor’s statutory lien arose by operation of law when debtor failed to pay real estate taxes under KRS 134.420 , and tax debt could be collected against debtor personally, 11 U.S.C.S. § 522(f)(2)(A) required the lien to be included in the impairment-exemption calculation, so debtor could avoid lien in its entirety. LPP Mortg., LTD v. Radcliffe, 2005 U.S. App. LEXIS 5198 (6th Cir. Ky. Mar. 30, 2005).

Opinions of Attorney General.

A list of delinquent taxes need only cover five (5) back years. OAG 61-133 .

The state of Kentucky has a continuing lien on all moneys due from the state to any veteran for the veterans’ bonus. OAG 61-445 .

A city of the sixth class that has adopted the county assessment and uses the calendar year as its fiscal year could adopt an ordinance under which city real estate taxes become delinquent on November 1 and a penalty of ten percent (10%) and interest of six percent (6%) are added subsequent to that date. OAG 67-61 .

After five (5) years there is a statutory bar to the collection of the city tax due, either by foreclosure on the property or a personal suit against the taxpayer himself. OAG 67-478 .

Where there has been a prior recorded lien, such lien would be superior to a subsequent tax lien that might arise and of necessity must be satisfied before the tax bill is satisfied. OAG 67-478 .

In light of this section, there is no necessity for filing any kind of lien with the county court clerk to evidence the lien for delinquent taxes. OAG 71-244 .

Where a real estate company whose charter had expired owned a number of lots that could not be improved because of zoning laws and had no value except to the owner of an adjacent lot and which lots would not bring enough to cover court costs and delinquent taxes, the statute of limitations, if affirmatively pleaded, would bar the collection of any delinquent taxes more than five (5) years prior to the current certificates of delinquency on file in the county clerk’s office but there is no authority in the statutes to waive in whole or in part certificates of delinquency which constitute valid liens against the property. OAG 73-365 .

The tax lien under this section includes a lien on automobiles. OAG 74-685 .

Under KRS 92.590(2), 92.650 (now repealed) and former subsection (2) of this section delinquent tax bills of third class cities are liens against the person’s property located within such city and may be collected by the city as provided for in the statutes for the collection of such bills; however, there is no authority that would permit the city clerk to refuse to accept payment for current taxes unless all delinquent taxes not barred by limitations are paid in full. OAG 76-634 .

A car with a personal property tax lien on it may be sold or otherwise alienated, subject to the tax lien as described in this section. OAG 78-134 .

The tax lien, to be effective, does not require any notice of or filing of the lien with the county clerk. OAG 78-134 .

The filing fee is to be added to the cost to the delinquent taxpayer to be paid by the taxpayer when he obtains a release of the lien. OAG 78-547 .

This section uses the mandatory word “shall” for liens filed by third through sixth-class cities, and, therefore, a fourth-class city is required to file such lien. OAG 78-547 .

Since delinquent taxes are a debt to the state, under KRS 44.030 , a lien for taxes, under this section, which has accrued is superior to a materialman’s lien, under KRS 376.230 , thereafter filed and perfected. OAG 80-15 .

The legislative intent is that a tax lien becomes perfected automatically without notice at the time the liability becomes fixed. OAG 80-15 .

Administrative action to enforce a tax lien created by this section on soil and water conservation district taxes is the responsibility of the board of directors of the watershed conservancy district under KRS 262.745 . OAG 81-112 .

The lien provided for in subsection (1) of this section is not in conflict with KRS 91.481 to 91.527 and that lien is of equal rank for the state, county and city; KRS 91.481 to 91.527 provide a method for the city to enforce its lien, but all other taxing districts must be made parties. OAG 82-191 .

So much of the lien granted by subsection (1) of this section as remains after the sale of the delinquent taxpayer’s personalty, as provided in KRS 134.430 (now repealed), shall constitute a first lien against the assessed real estate subject to the tax lien. OAG 82-380 .

When KRS 134.470 (now repealed) and subsection (1) of this section are read in conjunction with the wording of KRS 134.500(1) (now repealed), it is apparent that the state, county and other taxing districts have a lien against the taxpayer’s land as soon as the taxes become delinquent, and when the certificate of delinquency is issued at the sale of the tax bill by the sheriff, it becomes the evidence of the lien against the taxpayer’s property. Therefore, the certificate of delinquency should be filed in the county clerk’s office in the same manner as all other tax liens against property are filed in county clerk’s office, immediately after the sheriff settles with the state pursuant to KRS 134.450(3) (now repealed), and the county clerk must maintain an index of all certificates of delinquency so filed. OAG 82-380 .

The lien established under subsection (1) of this section is superior to all other liens including a prior recorded first mortgage; subsection (2) of this section creates a general tax lien which is inferior to a prior recorded mortgage or security interest. OAG 83-477 .

A tax lien on an automobile, once perfected by the filing required under KRS 134.148(2) (now repealed) must be paid off by one who seeks to repossess and retransfer an automobile pursuant to a prior recorded security interest; the clerk is prohibited by KRS 186.193 and 186.232 from transferring title until the lien is paid and released. OAG 83-477 .

A bona fide purchaser is one who has purchased property for value without any notice of any defects in the title of the seller; if the purchaser of the property has no notice of the city’s lien and thus qualifies as a bona fide purchaser, that purchaser may defeat the city’s lien against the property. OAG 84-222 .

The owner of a certificate of delinquency is legally entitled to enforce his lien against the delinquent property at any time after three years from the date of the issuance of the certificate of delinquency up to eight (8) years from the date of the issuance of the certificate of delinquency. OAG 84-334 .

Research References and Practice Aids

Cross-References.

Department of vehicle regulation may file lien notice for certain taxes, KRS 281.602 .

Lien on retrospective assessment of omitted property, KRS 132.290 .

Notice of lien of federal tax, filing, KRS 382.480 , 382.500 .

Kentucky Bench & Bar.

Baker and Baker, Title Examination in Kentucky, 48 Ky. Bench & B. 12 (1984).

Kentucky Law Journal.

Wilson, Sale of Land for Taxes in Kentucky, 28 Ky. L.J. 105 (1940).

Blair, Interests in Land Subject to Dower — In Kentucky, 39 Ky. L.J. 120 (1950).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

134.421. Apportionment of taxes on real property when one owner does not pay taxes due.

  1. When real property is owned by two (2) or more persons and had been assessed as one (1) tract, and one (1) owner does not pay his or her share of the taxes due, the taxes owed by the owner failing to pay may be paid by any other owner. Any owner who pays the amount due by another owner under this section shall have a lien on the delinquent taxpayer’s portion of the real property for the amount paid and may file suit to recover the amount paid.
    1. Whenever one (1) tax claim or certificate of delinquency exists on land which is divided both as to ownership and area into two (2) or more tracts, any person or persons owning any of the tracts may, upon ten (10) days’ notice given to the owners of the other tracts, make application to the county attorney and to the property valuation administrator of the county for an apportionment of the assessment. (2) (a) Whenever one (1) tax claim or certificate of delinquency exists on land which is divided both as to ownership and area into two (2) or more tracts, any person or persons owning any of the tracts may, upon ten (10) days’ notice given to the owners of the other tracts, make application to the county attorney and to the property valuation administrator of the county for an apportionment of the assessment.
    2. The property valuation administrator of the county may make an apportionment of the amount of the encumbrance among the owners of each tract according to the value of their respective interests as shown by the proof introduced by them.
    3. Any owner of a tract for which the tax claim or certificate of delinquency was apportioned may have the encumbrance on his or her property released by paying to the sheriff his or her pro rata share of the tax claim or to the county clerk his or her pro rata share of the certificate of delinquency as ascertained by the decision of apportionment.
    4. The determination of the property valuation administrator of the county shall be final unless an appeal therefrom to the Circuit Court is prosecuted within sixty (60) days from the issuance of the decision.

History. Enact. Acts 2009, ch. 10, § 17, effective January 1, 2010.

NOTES TO DECISIONS

1. Set-off.

Holder of legal title to parcel of land who had paid taxes on the parcel was entitled to recover, from another person who held a title bond covering a portion of the land, the amount of the tax apportionable to such portion, but recovery could not be had by way of setoff in an action on contract brought against the holder of the legal title by the holder of the title bond. Montgomery v. Montgomery, 119 Ky. 761 , 78 S.W. 465, 25 Ky. L. Rptr. 1682 , 1904 Ky. LEXIS 127 ( Ky. 1904 ) (decided under prior law).

134.430. Sale of personal property and delinquent tax claims against real property — Compensation for services. [Repealed.]

Compiler’s Notes.

This section (4149b-2, 4149b-3, 4166: amend. Acts 1952, ch. 220; 1994, ch. 65, § 4, effective July 15, 1994; 1998, ch. 209, § 10, effective March 30, 1998; 2005, ch. 85, § 273, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.440. Advertisement of sale of tax claims — Compensation of sheriff. [Repealed.]

Compiler’s Notes.

This section (4149b-3: amend. Acts 1966, ch. 239, § 138; 1990, ch. 27, § 9, effective July 13, 1990; 1998, ch. 209, § 11, effective March 30, 1998) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.450. Sale of tax claims — Offers of purchase — Certificate of delinquency. [Repealed.]

Compiler’s Notes.

This section (4149b-4, 4163: amend. Acts 1990, ch. 183, § 5, effective July 13, 1990; 1992, ch. 391, § 4, effective July 14, 1992; 1998, ch. 209, § 12, effective March 30, 1998; 2000, ch. 357, § 2, effective July 14, 2000; 2002, ch. 248, § 1, effective April 8, 2002; 2005, ch. 85, § 274, effective June 20, 2005; 2009, ch. 10, § 4, effective March 17, 2009) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.452. Third-party purchaser of certificate of delinquency — Fees — Reasonable attorneys’ litigation fees — Collection limitations — Notice to proper owner — Legislative findings.

  1. Notwithstanding any other provisions of this chapter, a third-party purchaser of a certificate of delinquency shall be entitled to collect only the following prelitigation fees:
    1. The amount actually paid for the certificate of delinquency;
    2. Interest as provided in KRS 134.125 , calculated on the amount actually paid to the county clerk from the date the certificate of delinquency was purchased until paid; and
      1. Prelitigation attorneys’ fees, which may include amounts incurred for collection efforts and costs related to notification, processing, research, communication, compliance, legal costs, documentation, and similar expenses, from the date the third-party purchaser purchases the certificate of delinquency from the county clerk, to the date on which the notice required by KRS 134.490(2) is mailed by the third-party purchaser. (c) 1. Prelitigation attorneys’ fees, which may include amounts incurred for collection efforts and costs related to notification, processing, research, communication, compliance, legal costs, documentation, and similar expenses, from the date the third-party purchaser purchases the certificate of delinquency from the county clerk, to the date on which the notice required by KRS 134.490(2) is mailed by the third-party purchaser.
      2. The amount that may be collected by the third-party purchaser as prelitigation attorneys’ fees shall be subject to the following limitations:
          1. If the amount paid for a certificate of delinquency is between five dollars ($5) and three hundred fifty dollars ($350), actual reasonable fees incurred up to one hundred percent (100%) of the amount of the certificate of delinquency, not to exceed three hundred fifty dollars ($350); a. i. If the amount paid for a certificate of delinquency is between five dollars ($5) and three hundred fifty dollars ($350), actual reasonable fees incurred up to one hundred percent (100%) of the amount of the certificate of delinquency, not to exceed three hundred fifty dollars ($350);
          2. If the amount paid for a certificate of delinquency is between three hundred fifty-one dollars ($351) and seven hundred dollars ($700), actual reasonable fees incurred up to eighty percent (80%) of the amount of the certificate of delinquency, not to exceed five hundred sixty dollars ($560); and
          3. If the amount paid for a certificate of delinquency is above seven hundred one dollars ($701), actual reasonable fees incurred up to seventy percent (70%) of the amount of the certificate of delinquency, not to exceed seven hundred dollars ($700); and
        1. If a third-party purchaser is the owner of more than one (1) certificate of delinquency against the same taxpayer, actual and reasonable prelitigation attorneys’ fees for all certificates of delinquency against the same taxpayer shall not exceed one and one-half (1.5) times the maximum amount permitted in subdivision a. of this subparagraph for the largest tax bill owed by the taxpayer.
      3. The amounts allowed by subparagraph 2. of this paragraph shall not accrue to the account of the delinquent taxpayer, nor be charged by the third-party purchaser against the delinquent taxpayer all at one (1) time unless the amount of certificate of delinquency is one hundred seventy- five dollars ($175) or less. The third-party purchaser may accrue to the account of the delinquent taxpayer, and charge the delinquent taxpayer an amount equal to the lesser of prelitigation attorney’s fees incurred by the third-party purchaser since the prior notice was sent or one hundred seventy-five dollars ($175), for each notice sent to the delinquent taxpayer, provided that:
        1. The total aggregate amount of prelitigation attorneys’ fees that may accrue to the account of the delinquent taxpayer and be charged by the third-party purchaser against the delinquent taxpayer shall not exceed the limitations established by subparagraph 2.a. of this paragraph; and
        2. Additional fees shall not accrue to the account of the delinquent taxpayer or be charged by the third-party purchaser against the delinquent taxpayer more frequently than every ninety (90) days, regardless of how many notices the third-party purchaser may send.
  2. If the delinquent taxpayer and the third-party purchaser enter into a payment agreement, the third-party purchaser may collect the installment payment processing fee authorized by KRS 134.490(5).
    1. In addition to the fees established by subsections (1), (2), and (4) of this section, a third-party purchaser may collect actual, reasonable attorneys’ fees and costs that arise due to the prosecution of collection remedies or the protection of a certificate of delinquency that is involved in litigation. Fees and costs permitted under this subsection include fees and costs incurred from the first day after the notice required by KRS 134.490(2) is sent through the day any litigation is finally concluded. (3) (a) In addition to the fees established by subsections (1), (2), and (4) of this section, a third-party purchaser may collect actual, reasonable attorneys’ fees and costs that arise due to the prosecution of collection remedies or the protection of a certificate of delinquency that is involved in litigation. Fees and costs permitted under this subsection include fees and costs incurred from the first day after the notice required by KRS 134.490(2) is sent through the day any litigation is finally concluded.
    2. For purposes of this subsection:
      1. Actual attorneys’ litigation fees up to two thousand dollars ($2,000) may be reasonable if the fees are based upon documented work performed at a rate commensurate with hourly rates customarily charged by private attorneys in that jurisdiction for similar services. A flat rate, without hours documented for work performed, may be reasonable if the flat fee is determined to be discounted from the usual and customary rates for comparable work; and
      2. Any attorneys’ litigation fee in excess of two thousand dollars ($2,000) shall be allowed if authorized by the court upon a finding that the third-party purchaser incurred actual attorneys’ litigation fees in excess of two thousand dollars ($2,000) and that those attorneys’ litigation fees were warranted based upon the complexity of the issues presented in the litigation.
  3. The third-party purchaser may collect administrative fees incurred for preparing, recording, and releasing an assignment of the certificate of delinquency in the county clerk’s office, not to exceed one hundred fifteen dollars ($115).
  4. The General Assembly recognizes that third-party purchasers play an important role in the delinquent tax collection system, allowing taxing districts to receive needed funds on a timely basis. The General Assembly has carefully considered the fees and charges authorized by this section, and has determined that the amounts established are reasonable based on the costs of collection and fees and charges incurred in litigation.
  5. A certificate of delinquency owned by a third-party purchaser shall be deemed a general intangible for the purposes of Article 9 of KRS Chapter 355.

HISTORY: Enact. Acts 2007, ch. 14, § 1, effective June 26, 2007; 2009, ch. 10, § 14, effective January 1, 2010; 2012, ch. 161, § 13, effective April 23, 2012; 2013, ch. 103, § 4, effective June 25, 2013; 2014, ch. 71, § 6, effective July 15, 2014; 2017 ch. 177, § 4, effective June 29, 2017.

Legislative Research Commission Notes.

(4/23/2012). 2012 Ky. Acts ch. 161, sec. 15, provides that this statute, as amended by 2012 Ky. Acts ch. 161, sec. 13, shall apply to certificates of delinquency purchased on or after the effective date of the Act, April 23, 2012.

(4/23/2012). The internal numbering of subsection (1)(c) of this statute has been modified by the Reviser of Statutes from the way it appeared in 2012 Ky. Acts ch. 161, sec. 13, under the authority of KRS 7.136(1). The words in the text were not changed.

NOTES TO DECISIONS

  1. Bankruptcy.
  2. Standing.
  3. Construction.
  4. Postjudgment Interest.
  5. Attorneys’ Fees.
1. Bankruptcy.

Debtors were denied confirmation of a Chapter 13 plan that did not provide for full payment, including interest per 11 U.S.C.S. § 511 at the rate of 12% as provided by KRS 134.452 and KRS 134.125 , and including all attorneys fees sought by the creditor who was seeking to enforce a certificate of delinquency for real estate taxes, because all of the elements of the claim as prosecuted by the creditor were properly included per 11 U.S.C.S. § 502(b)(2) and 11 U.S.C.S. § 506(b) and because the legal fees were precipitated by the untenable positions taken by debtors. In re Crigler, 2011 Bankr. LEXIS 1321 (Bankr. E.D. Ky. Apr. 8, 2011).

2. Standing.

Mortgagee had first-party standing to contest an agreed judgment between a mortgagor and a purchaser of the mortgagor’s delinquent property tax liens because the mortgagee was a lienholder under KRS 426.006 and would suffer direct financial injury as the tax lien was superior under KRS 134.420(3); the amount of the tax lien was increased by the included attorney’s fees under KRS 134.452 , which the mortgagee contended were unreasonable. Tax Ease Lien Invs. 1 v. Commonwealth Bank & Trust, 384 S.W.3d 141, 2012 Ky. LEXIS 142 ( Ky. 2012 ).

3. Construction.

There is no indication that it was the legislature’s intent to allow a third-party purchaser to essentially hold property hostage for the sole purpose of increasing the interest and charges on the lien; such is an untenable and unconscionable position, and contrary to the public policy of the Commonwealth. M.D. Wood v. Tax Ease Lien Invs. 1, LLC, 425 S.W.3d 897, 2014 Ky. App. LEXIS 36 (Ky. Ct. App. 2014).

4. Postjudgment Interest.

Trial court erred when it concluded as a matter of law that a third-party tax bill purchaser was not entitled to 12 percent statutory interest where the mandatory language of Ky. Rev. Stat. Ann. § 134.452 compelled the award of interest, accruing from the date the purchaser acquired the certificate of delinquency through the date of the trial court's order, and the statute did not permit the trial court to reduce or deny such an award. Hazel Enters., Llc v. Mitchuson, 524 S.W.3d 495, 2017 Ky. App. LEXIS 304 (Ky. Ct. App. 2017).

5. Attorneys’ Fees.

Trial court did not err in refusing to award the purchaser litigation fees and costs where it was difficult, if not impossible, to discern from the purchaser's affidavit and other items in the record precisely what fees included in its initial demand it attributed to work performed as of the date of the demand. Hazel Enters., Llc v. Mitchuson, 524 S.W.3d 495, 2017 Ky. App. LEXIS 304 (Ky. Ct. App. 2017).

Circuit court properly awarded a certificate of delinquency holder interest on the certificate and attorney fees because the judgment and order of sale did not resolve the issue of interest, the costs and attorney fees could not be adjudicated at the time the final judgment and order of sale was entered, even if post-judgment interest were properly denied, the holder was entitled to simple interest on the underlying certificate of delinquency until the date of the order of distribution, and the holder was awarded fees well in excess of the $2,000 statutory limit without any finding that those fees were warranted by the complexity of the case. Ky. Tax Bill Servicing, Inc. v. Fultz, 567 S.W.3d 148, 2018 Ky. App. LEXIS 304 (Ky. Ct. App. 2018).

Property owners’ did not prevail in a class suit alleging that a collector of delinquent property tax bills committed fraud by assessing fabricated an unreasonable attorney’s fees and costs because the charged title report fees and costs were actual fees and the pre-litigation legal fees were necessary and reasonable. Brown v. Tax Ease Lien Servicing, Inc., 776 Fed. Appx. 291, 2019 FED App. 287N, 2019 U.S. App. LEXIS 16778 (6th Cir. Ky. 2019 ).

Ky. Rev. Stat. Ann. § 134.452(3) indicates an award of attorney’s fees is permitted if the amount is reasonable and warranted; it does not create a presumption of reasonableness of charges for attorney’s fees up to $ 2,000. Mid South Capital Partners, LP v. Adkins, 2020 Ky. App. LEXIS 132 (Ky. Ct. App. Dec. 18, 2020).

It appears from the text of Ky. Rev. Stat. Ann. § 134.452(5) that its purpose is to declare that the legislature found its own calculated amounts detailed in this statute to be reasonable ceilings for recovery of attorney fees. Mid South Capital Partners, LP v. Adkins, 2020 Ky. App. LEXIS 132 (Ky. Ct. App. Dec. 18, 2020).

Proper method for determining actual and reasonable attorney’s fees pursuant to the statute is as follows: a fee should consist of the product of counsel’s reasonable hours, multiplied by a reasonable hourly rate, which provides a lodestar figure, which may be adjusted to account for various factors in the litigation. Using the lodestar method, a court may consider the complexity or simplicity of a proceeding to collect or protect the certificate of delinquency, the skill required, and the fee customarily charged in the locality for similar proceedings. Mid South Capital Partners, LP v. Adkins, 2020 Ky. App. LEXIS 132 (Ky. Ct. App. Dec. 18, 2020).

It is the trial court’s role to follow the statutory language to provide a third-party purchaser of a certificate of delinquency with the means to recover and protect its tax lien, as well as to safeguard the public against possible abuses of the judicial process by not allowing excessive attorney’s fees and costs to be imposed upon economically burdened citizens. Mid South Capital Partners, LP v. Adkins, 2020 Ky. App. LEXIS 132 (Ky. Ct. App. Dec. 18, 2020).

Applying the lodestar method, the trial court did not abuse its discretion in awarding reduced attorney’s fees and costs to appellant; the final judgment and order of sale was entered on appellant’s dispositive motions with no answer having been filed by appellee. The trial court was hesitant to award the full amount of the claimed fees and costs when they so greatly exceeded the face value of the certificate of delinquencies at issue. Mid South Capital Partners, LP v. Adkins, 2020 Ky. App. LEXIS 132 (Ky. Ct. App. Dec. 18, 2020).

134.460. Evidence of validity of tax proceedings. [Repealed.]

Compiler’s Notes.

This section (4149b-10; 2000, ch. 357, § 3, effective July 14, 2000; 2004, ch. 104, § 5, effective July 13, 2004; 2007, ch. 14, § 3, effective June 26, 2007) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.470. Liability of taxpayer on uncollectible tax bill or certificate of delinquency — Action to enforce — Operation of statute of limitations. [Repealed.]

Compiler’s Notes.

This section (4149b-5: amend. Acts 1990, ch. 27, § 10, effective July 13, 1990; 1998, ch. 209, § 13, effective March 30, 1998) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.480. Who may pay certificates of delinquency — Remedies for failure to release lien or surrender certified copy after payment — Assignment — Clerk to receive and record payments — Records as evidence. [Repealed.]

Compiler’s Notes.

This section (4149b-4, 4161, 4164, 4165; 1998, ch. 209, § 14, effective March 30, 1998; 2000, ch. 357, § 4, effective July 14, 2000; 2005, ch. 85, § 275, effective June 20, 2005; 2006, ch. 255, § 17, effective January 1, 2007; 2007, ch. 14, § 4, effective June 26, 2007; 2009, ch. 10, § 70, effective March 17, 2009) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.485. Apportionment of tax encumbrance where land is divided as to ownership and area. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 131, § 28; 1976 (Ex. Sess.), ch. 14, § 151, effective January 1, 1978; 1978, ch. 384, § 280, effective June 17, 1978) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.490. Actions by owner of certificate of delinquency to collect or foreclose certificate — Notice by third-party purchaser to taxpayer — Installment payment plans.

  1. The following notices shall be sent by a third-party purchaser to the delinquent taxpayer by first-class mail with proof of mailing, and shall include the information required by subsection (3)(d) of this section:
    1. Within fifty (50) days after the delivery of a certificate of delinquency by the clerk to a third-party purchaser, the third-party purchaser shall send a notice to the delinquent taxpayer informing the delinquent taxpayer that the certificate of delinquency has been purchased by the third-party purchaser; and
    2. At least annually thereafter, until the notice required by subsection (2) of this section is sent, the third-party purchaser shall send a notice to the delinquent taxpayer.
  2. Anytime after the expiration of the one (1) year tolling period established by KRS 134.546 , the third-party purchaser may institute an action to collect the amount due on a certificate of delinquency. At least forty-five (45) days before instituting a legal action, the third-party purchaser shall send to the taxpayer by first-class mail with proof of mailing, a notice informing the taxpayer that enforcement action will be taken. This notice shall also include the information required by subsection (3) of this section, and shall be in addition to any notice sent under subsection (1) of this section.
      1. For certificates of delinquency for all property except property described in paragraph (b) of this subsection, third-party purchasers or their designees shall obtain from the office of the property valuation administrator of the county in which the real property is located the most recent address for the property owner. (3) (a) 1. For certificates of delinquency for all property except property described in paragraph (b) of this subsection, third-party purchasers or their designees shall obtain from the office of the property valuation administrator of the county in which the real property is located the most recent address for the property owner.
      2. To obtain information from the office of the property valuation administrator, the third-party purchaser shall, at the option of the property valuation administrator, either:
        1. Obtain information from an up-to-date public access list or Web site offered by the property valuation administrator; or
        2. Submit a list of addresses, map identification numbers, or parcel numbers for which updated information is requested to the property valuation administrator, who shall update his or her records with regard to the properties for which information is requested and provide the updated information to the third-party purchaser within ten (10) days.
      3. For this service, the property valuation administrator may charge a fee not to exceed two dollars ($2) for each address provided or obtained.
      4. Except as provided in paragraph (b) of this subsection, the third-party purchaser shall send the notices required by subsections (1) and (2) of this section to the address provided by the property valuation administrator. Unless the provisions of subparagraph 7. of this paragraph apply, the third-party purchaser shall not be required to send a notice to any party other than the owner of record as provided by the property valuation administrator at the time the notice is sent.
      5. If, due to insufficient staffing, the property valuation administrator is unable to provide the requested information to the third-party purchaser within ten (10) days of submission, the property valuation administrator shall immediately notify the third-party purchaser, and the third-party purchaser may send the notices required by subsections (1) and (2) of this section to the address reflected in the public records of the property valuation administrator.
      6. Any notices sent pursuant to information obtained under this paragraph that are returned as undeliverable shall be re-sent by first-class mail with proof of mailing addressed to the “Occupant” at the address of the property that is the subject of the certificate of delinquency. These notices shall be sent within twenty (20) days of receipt of the returned notice.
      7. If a third-party purchaser becomes aware of a more recent or more accurate address for a delinquent taxpayer that is different from the address reflected in the records of the property valuation administrator, the third-party purchaser shall send notices to the updated address in the manner required by this subsection, and shall notify the property valuation administrator of the updated address.
      8. If a third-party purchaser receives an address from the property valuation administrator during an address check after a first notice is sent and returned as undeliverable, and the address is the same as was originally provided, the third-party purchaser shall send the notice addressed to “Occupant” at the address of the property that is the subject of the certificate of delinquency.
      1. For certificates of delinquency relating to unmined coal, oil or gas reserves, or any other mineral or energy resources assessed separately from the surface real property pursuant to KRS 132.820 , third-party purchasers or their designees shall obtain from the department the most recent address for the property owner. (b) 1. For certificates of delinquency relating to unmined coal, oil or gas reserves, or any other mineral or energy resources assessed separately from the surface real property pursuant to KRS 132.820 , third-party purchasers or their designees shall obtain from the department the most recent address for the property owner.
      2. To obtain information about a particular property, the third-party purchaser shall submit to the department a list of addresses, map identification numbers, parcel numbers, and any other information the department may require. The department shall:
        1. Update its records with regard to the properties for which information is requested; and
        2. Provide the updated information to the third-party purchaser within ten (10) business days.
      3. For this service, the department may charge a fee not to exceed two dollars ($2) for each address provided.
      4. The third-party purchaser shall send the notices required by subsections (1) and (2) of this section relating to unmined coal, oil or gas reserves, or any other mineral or energy resources assessed separately from the surface real property pursuant to KRS 132.820 to the address provided by the department. Unless the provisions of subparagraph 5.f. of this paragraph apply, the third-party purchaser shall not be required to send a notice to any party other than the owner of record as provided by the department at the time the notice is sent.
        1. Any notice sent pursuant to subsections (1) and (2) of this section based on information obtained pursuant to this paragraph and returned as undeliverable shall be submitted to the department within ten (10) days of receipt of the returned notice. 5. a. Any notice sent pursuant to subsections (1) and (2) of this section based on information obtained pursuant to this paragraph and returned as undeliverable shall be submitted to the department within ten (10) days of receipt of the returned notice.
        2. The department shall attempt to obtain an updated address for the owner of the property subject to the certificate of delinquency from the individual or entity filing the property tax return for the property.
        3. The individual or entity filing the property tax return shall provide an address of the property owner upon request of the department.
        4. The department shall provide any updated address information to the third-party purchaser.
        5. If updated information is provided, the notices shall be re-sent by first-class mail with proof of mailing to the updated address of the owner within ten (10) days of the receipt of the updated information from the department.
        6. If a third-party purchaser becomes aware of a more recent or more accurate address for a delinquent taxpayer that is different from the address reflected in the records of the department, the third-party purchaser shall send notices to the updated address in the manner required by this subsection, and shall notify the department of the updated address.
    1. The third-party purchaser shall maintain complete and accurate records of all notices sent pursuant to this section.
    2. The notices required by this section shall include the following information:
      1. A statement that the certificate of delinquency is a lien of record against the property for which delinquent taxes are owed;
      2. A statement that the certificate bears interest at the rate provided in KRS 134.125 ;
      3. A statement that if the certificate is not paid, it will be subject to collection as provided by law, and that collection actions may include foreclosure. The notice required by subsection (2) of this section shall also include a statement of the intent to institute legal action to collect the amount due;
      4. A complete listing of the amount due, as of the date of the notice, broken down as follows:
        1. The purchase price of the certificate of delinquency;
        2. Interest accrued subsequent to the purchase of the certificate of delinquency; and
        3. Fees imposed by the third-party purchaser;
      5. If the third-party purchaser is required to register with the department as provided in KRS 134.128(3), for certificates of delinquency purchased after June 1, 2012, a statement informing the taxpayer that upon written request and the payment of a processing fee, the third-party purchaser will offer a payment plan; and
      6. Information, in a format and with content as determined by the department, detailing the provisions of the law relating to third-party purchaser fees and charges.
    3. In addition, the notice shall provide the following information to the taxpayer:
      1. The legal name of the third-party purchaser;
      2. The third-party purchaser’s physical address;
      3. The third-party purchaser’s mailing address for payments, if different from the physical address; and
      4. The third-party purchaser’s telephone number.
  3. If a person entitled to pay a certificate of delinquency to a third-party purchaser makes payment on the certificate of delinquency to the county clerk under the conditions described in KRS 134.127(3)(d), the payment shall constitute payment in full, and no other amounts may be collected by the third-party purchaser from the person.
    1. For certificates of delinquency purchased after June 1, 2012, at the written request of a delinquent taxpayer, a third-party purchaser required to register with the department as provided in KRS 134.128(3) shall provide a monthly installment payment plan to a taxpayer. (5) (a) For certificates of delinquency purchased after June 1, 2012, at the written request of a delinquent taxpayer, a third-party purchaser required to register with the department as provided in KRS 134.128(3) shall provide a monthly installment payment plan to a taxpayer.
    2. The taxpayer and third-party purchaser shall sign an agreement detailing the terms of the installment payment plan.
    3. The third-party purchaser may impose a processing fee, not to exceed eight dollars ($8) per month to offset the administrative cost of providing the payment plan. No other fees, charges, interest, or other amounts not expressly authorized by this chapter shall be charged, assessed, or collected by the third-party purchaser.
    4. The existence of an agreement to provide a payment plan shall not impact the right of the third-party purchaser to pursue legal action if the delinquent taxpayer fails to follow the terms of the installment payment agreement.
    5. Upon default of a delinquent taxpayer:
      1. The third-party purchaser shall retain all amounts paid, which shall be applied to the outstanding balance due; and
      2. The third-party purchaser shall not be required to offer the delinquent taxpayer another opportunity for an installment payment plan.
    6. If a third-party purchaser who was required to offer payment plans pursuant to paragraph (a) of this subsection, subsequently does not purchase a sufficient number of certificates of delinquency to require registration with the department, the third-party purchaser shall continue to offer payment plans under the conditions established by this subsection for all delinquent taxpayers whose certificates of delinquency were purchased during a period in which the third-party purchaser was required to register with the department.
    7. A third-party purchaser who is not required to register with the department as provided in KRS 134.128(3), or who holds certificates of delinquency purchased prior to June 1, 2012, may voluntarily offer installment payment plans to delinquent taxpayers in accordance with the provisions of this subsection.
    8. The department may establish additional terms and conditions for installment payment plans in an administrative regulation.
  4. Any person to whom a third-party purchaser transfers or assigns a certificate of delinquency shall be considered a third-party purchaser under this chapter.

If the information required by this paragraph changes, the third-party purchaser shall, within thirty (30) days of the change becoming effective, send a notice to each taxpayer by first-class mail with proof of mailing with the corrected information. The third-party purchaser shall also update contact information included in the records of the county clerk within ten (10) days of the change becoming effective. Failure to send the original notice or any correction notices shall result in the suspension of the accrual of all interest and any fees incurred by the third-party purchaser after that date until proper notice is given as required by this subsection.

History. 4149b-7: amend. Acts 1990, ch. 27, § 11, effective July 13, 1990; 1994, ch. 65, § 5, effective July 15, 1994; 1998, ch. 209, § 15, effective March 30, 1998; 2007, ch. 14, § 5, effective June 26, 2007; 2009, ch. 10, § 15, effective January 1, 2010; 2010, ch. 75, § 8, effective April 7, 2010; 2012, ch. 161, § 6, effective April 23, 2012.

Compiler’s Notes.

Section 21 of Acts 1998, ch. 209, provided that the 1998 amendments to subsection (1) of this section “shall apply for sales of delinquent tax bills made on or after March 1, 1998” and that the remainder of the 1998 amendments to this section “shall apply for assessments made on or after January 1, 1998.”

NOTES TO DECISIONS

  1. Right of Redemption.
  2. Right to Enforce Lien.
1. Right of Redemption.

The General Assembly has stated in unambiguous language that no right of redemption shall exist unless the property is acquired at the sale by the State, county, and taxing districts and then only so long as the Commissioner of Revenue has not sold the property to another purchaser and given a deed therefor. Barnett v. Commonwealth, 566 S.W.2d 794, 1978 Ky. App. LEXIS 532 (Ky. Ct. App. 1978).

2. Right to Enforce Lien.

Delinquency certificate purchaser was entitled to an award of attorney fees on its action to redeem two (2) certificates of delinquency that it purchased regarding claims against the Kentucky corporation for delinquent taxes, as statutory authority gave it the right, as a private purchaser of the delinquent taxes, to enforce the lien that state, county, city, or taxing district would have had a right to enforce had the delinquent taxes not been purchased by the private purchase, and the lien included the right to a reasonable amount of attorney fees. Flag Drilling Co. v. Erco, Inc., 156 S.W.3d 762, 2005 Ky. App. LEXIS 20 (Ky. Ct. App. 2005).

Third-party purchaser, such as the bank, could file suit pursuant to KRS 134.546(2)(b) to enforce the lien it had for unpaid ad valorem taxes represented by the certificate of delinquency it held. Since the liens that resulted from such unpaid taxes were not rendered inferior by the sale of certificates of delinquency from government entities to the third-party purchasers and, indeed, because the private owner of the lien was given a certificate of delinquency to “stand in the shoes” of the government entity trying to impose the lien, as recognized under KRS 134.490(2)(b), priority was given to liens resulting from such taxes irrespective of whether government entities or third parties held those liens, which also meant that proceeds regarding those liens had to be disbursed equally. United States Bank Nat'l Ass'n v. Tax Ease Lien Invs. 1, LLC, 356 S.W.3d 770, 2011 Ky. App. LEXIS 227 (Ky. Ct. App. 2011).

Cited in:

Commonwealth v. Anderson, 694 S.W.2d 465, 1985 Ky. App. LEXIS 491 (Ky. Ct. App. 1985); Flag Drilling Co. v. Erco, Inc., 156 S.W.3d 762, 2005 Ky. App. LEXIS 20 (Ky. Ct. App. 2005).

Opinions of Attorney General.

This disposal of certificates of delinquency over three (3) years of age and less than eight (8) years of age by a sheriff’s sale where the sheriff records the certificate and tax deed and makes full settlement with the county clerk would violate this section. OAG 77-557 .

Where there has been a foreclosure sale it is a public sale, any and all persons in the sale being permitted to bid on the property and the property therefore being awarded to the highest bidder, and if a bidder higher than the one who holds the certificate of delinquency comes forward, then after satisfaction of the certificate of delinquency costs and all other penalties and interest the highest bidder at the sale is awarded the property. OAG 78-720 .

County attorney’s proposed action of collecting tax bills of high dollar value first was a reasonable classification based upon necessity in order that he not deplete his operating budget; after collecting the larger bills, however, if funds remained with which to continue to collect delinquent tax bills, he must do so. OAG 82-380 .

If county attorney believes that a second notice sent to the delinquent taxpayer at the expiration of the redemption period may prove effective, he has the authority to prepare such a notice and mail it to the taxpayer. OAG 82-380 .

Research References and Practice Aids

Kentucky Bench & Bar.

Baker and Baker, Title Examination in Kentucky, 48 Ky. Bench & B. 12 (1984).

Kentucky Bench & Bar. Herrick, Beware! Did your Client Recently Buy Land at a Tax Sale?, Vol. 60, No. 2, Spring 1966, Ky. Bench & Bar 14.

134.495. Assessment of omitted property in action to enforce certificate of delinquency or to invalidate land tax sale. [Renumbered.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 131, §§ 29, 32) was renumbered as KRS 134.548 effective January 1, 2010.

134.500. Interest on certificates of delinquency — Collection of amount due on certificate of delinquency and delinquent personal property tax bills — Technical resources from department — Installment payments. [Repealed.]

Compiler’s Notes.

This section (4149b-8: amend. Acts 1976 (Ex. Sess.), ch. 17, § 39, effective January 1, 1978; 1978, ch. 400, § 4, effective June 17, 1978; 1986, ch. 329, § 1, effective July 15, 1986; 1990, ch. 27, § 12, effective July 13, 1990; 1990, ch. 183, § 6, effective July 13, 1990; 1992, ch. 81, § 1, effective July 14, 1992; 1994, ch. 73, § 1, effective July 15, 1994; 1998, ch. 209, § 16, effective March 30, 1998; 2000, ch. 155, § 1, effective July 14, 2000; 2000, ch. 281, § 1, effective July 14, 2000; 2000, ch. 357, § 5, effective July 14, 2000; 2002, ch. 248, § 2, effective April 8, 2002; 2004, ch. 104, §§ 4, 6, effective July 13, 2004; 2005, ch. 51, § 1, effective June 20, 2005; 2005, ch. 85, § 276, effective June 20, 2005; 2007, ch. 14, § 6, effective June 26, 2007) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.504. Department to collect or contract with county attorney for collection of certificates of delinquency.

  1. The department shall be responsible for the collection of certificates of delinquency and personal property certificates of delinquency. The provisions of this section relating to certificates of delinquency shall also apply to personal property certificates of delinquency unless otherwise specifically noted. The department shall offer the collection duties related to certificates of delinquency and personal property certificates of delinquency to the county attorney in each county, unless the department determines that a county attorney has previously failed to perform collection duties in a reasonable and acceptable manner.
  2. Any county attorney desiring to perform the collection duties shall enter into a contract with the department on an annual basis.
  3. The terms of the contract shall specify the duties to be undertaken by the county attorney, which shall include, at a minimum, the duties set forth in subsection (4) of this section. The terms of the contract shall also provide that, if the county attorney fails to perform the duties required by the contract during the contract period, the department may assume all collection responsibilities.
  4. The following duties shall be performed by the department or the county attorney, as the case may be, with regard to each certificate of delinquency:
    1. Within thirty (30) days after the establishment of a certificate of delinquency, the county attorney or the department shall mail a notice by regular mail to the owner of record on the assessment date at the address on the records of the property valuation administrator, or to the in-care-of address if an in-care-of address is provided as required by subsection (5) of this section. The notice shall:
      1. Include the name, address, and telephone number of a contact person in the county attorney’s office or the department, as the case may be;
      2. Advise that:
        1. The certificate of delinquency is a lien of record against the property on which the taxes are due;
        2. The amounts due are a personal obligation of the taxpayer on the assessment date; and
        3. The certificate bears interest at the rate of twelve percent (12%) and, if not paid, will be subject to collection by the county attorney or the department as provided by law;
      3. Include the total amount due as of the date of the notice;
      4. Advise that anytime after ninety (90) days from the creation of the certificate of delinquency, the certificate of delinquency may be paid by a third-party purchaser and, that if so paid, the certificate of delinquency will be subject to collection by the third-party purchaser as provided by law. The notice shall also advise that a third-party purchaser may impose substantial additional administrative costs and fees associated with collection in addition to the amount due on the certificate of delinquency, and that collection actions may include foreclosure. This provision shall not be included in notices sent for personal property certificates of delinquency; and
      5. Advise that the taxpayer may qualify for a payment plan with the county attorney or the department, if the taxpayer meets the requirements established by the county attorney or the department, and if terms are agreed to prior to the date of the sale;
    2. The county attorney or the department shall file in the office of the county clerk a list of the names and addresses to which the thirty (30) day notice was mailed along with a certificate attesting that the notices were mailed in accordance with the requirements of this section;
      1. All thirty (30) day notices returned as undeliverable shall be submitted by the county attorney or department to the property valuation administrator, and a list of the returned notices shall be filed with the county clerk, who shall record the list in the order book of the county. (c) 1. All thirty (30) day notices returned as undeliverable shall be submitted by the county attorney or department to the property valuation administrator, and a list of the returned notices shall be filed with the county clerk, who shall record the list in the order book of the county.
      2. The property valuation administrator shall attempt to correct inadequate or erroneous addresses and, if property has been transferred, shall determine the new owner, current mailing address, and in-care-of address, if any, as provided in KRS 382.135 .
      3. The property valuation administrator shall return the notices with the corrected information to the county attorney or the department within twenty (20) days of receipt.
      4. Upon receipt of the new information from the property valuation administrator, the county attorney or the department shall resend the notice required by paragraph (a) of this subsection using the updated information;
      1. At least twenty (20) days after the mailing of the thirty (30) day notice required by paragraph (a) of this subsection, but within sixty (60) days of the establishment of a certificate of delinquency, the county attorney or department shall send a second notice, by regular mail, to owners of record whose tax bills remain delinquent, or to the in-care-of addresses or corrected address, if information regarding a new property owner has been received by the county attorney or the department under the provisions of paragraph (c) of this subsection. The notice shall include, at a minimum, the following information: (d) 1. At least twenty (20) days after the mailing of the thirty (30) day notice required by paragraph (a) of this subsection, but within sixty (60) days of the establishment of a certificate of delinquency, the county attorney or department shall send a second notice, by regular mail, to owners of record whose tax bills remain delinquent, or to the in-care-of addresses or corrected address, if information regarding a new property owner has been received by the county attorney or the department under the provisions of paragraph (c) of this subsection. The notice shall include, at a minimum, the following information:
        1. The name, address, and telephone number of a contact person in the county attorney’s office or the department, as the case may be;
        2. A statement that a sale of tax claims will be held by the county clerk on the date established by the department for the sale. The text of the statement shall include the actual sale date, as well as a statement noting that the certificate of delinquency may be paid by a third-party purchaser at the sale, and if the certificate of delinquency is paid by a third-party purchaser, it will be subject to collection by the third-party purchaser as provided by law, that significant additional collection fees will be imposed by the third-party purchaser, and that collection actions may include foreclosure. This statement shall not be included in notices sent to owners of property subject to a personal property certificate of delinquency; and
        3. A statement that the taxpayer may qualify for a payment plan with the county attorney or the department, if the taxpayer meets the requirements established by the county attorney or the department and if terms are agreed to prior to the date of the sale.
      2. The county attorney or the department shall file in the office of the county clerk a list of the names and addresses to which the sixty (60) day notice was mailed, along with a certificate attesting that the notices were mailed in accordance with the requirements of this section.
      3. If the notice required by paragraph (c) of this subsection is returned as undeliverable, and the property valuation administrator is not able to provide a corrected or updated address, the county attorney or the department shall address the sixty (60) day notice to “Occupant” and shall mail the notice to the address of the property to which the certificate of delinquency applies;
    3. The county attorney or the department shall deliver to the property valuation administrator, at the same time the notice required by paragraph (d) of this subsection is sent, a list of the owners whose tax bills remain delinquent. The property valuation administrator shall review this list in accordance with KRS 132.220 to establish that the properties on the list can be identified and physically located; and
    4. Anytime after the expiration of the one (1) year tolling period established by KRS 134.546 , the county attorney or department may institute an action to collect the amount due on a certificate of delinquency owned by the taxing jurisdictions and in the possession of the county clerk. At least forty-five (45) days before instituting a legal action, the county attorney or department shall send, by regular mail, a notice of intent to initiate legal action to enforce the lien. The notice shall be sent to the owner of record of the property or to the in-care-of address or corrected address if either has been provided pursuant to this section.
  5. If property subject to a certificate of delinquency has been transferred in any year after the assessment date, the property valuation administrator shall determine the in-care-of address supplied in the deed pursuant to KRS 382.135 and shall provide that information to the county attorney or the department.
    1. Failure of the county attorney or the department to mail the notices required in subsection (4) of this section shall not affect the validity of the claim of the state, county, school district, and taxing district. However, the county attorney or the department shall not receive any compensation, commission, or payment related to any certificate of delinquency for which the notices required by the provisions of subsection (4) of this section are not sent. (6) (a) Failure of the county attorney or the department to mail the notices required in subsection (4) of this section shall not affect the validity of the claim of the state, county, school district, and taxing district. However, the county attorney or the department shall not receive any compensation, commission, or payment related to any certificate of delinquency for which the notices required by the provisions of subsection (4) of this section are not sent.
    2. For each notice mailed, one dollar ($1) shall be added to the amount of the certificate of delinquency, to offset the cost of mailing, and, upon collection, the county attorney or the department shall be paid such amounts as reimbursement for mailing costs.
    1. As compensation for the collection duties performed pursuant to a contract with the department, a county attorney shall be paid twenty percent (20%) of the amount due each taxing unit during the contract period, whether the amount is paid voluntarily, through sale, or under court order, and whether the amount is paid to the county clerk or the county attorney. The fee for the county attorney shall be added to the amount of the certificate of delinquency and shall be paid by the person paying the certificate of delinquency. (7) (a) As compensation for the collection duties performed pursuant to a contract with the department, a county attorney shall be paid twenty percent (20%) of the amount due each taxing unit during the contract period, whether the amount is paid voluntarily, through sale, or under court order, and whether the amount is paid to the county clerk or the county attorney. The fee for the county attorney shall be added to the amount of the certificate of delinquency and shall be paid by the person paying the certificate of delinquency.
    2. If payment in full is voluntarily made by the taxpayer to the county attorney or county clerk within five (5) days of the filing of the tax claim with the county clerk, the county attorney fee shall be waived.
    3. If a county attorney files a court action or files a cross-claim, the county attorney shall be paid an additional fee of thirteen percent (13%) of the amount of the certificate of delinquency and shall be reimbursed for costs incident to the court action. The additional fee and costs incident to the litigation shall be added to the certificate of delinquency and shall be paid by the person paying the certificate of delinquency.
    4. If more than one (1) county attorney renders necessary services to collect on a certificate of delinquency, the county attorney serving the last notice or rendering the last substantial service preceding collection shall be entitled to the fee.
    1. The county attorney shall establish a system to accept installment payments from delinquent taxpayers. The county attorney may, during the contract period, enter into an agreement with a delinquent taxpayer to accept installment payments on the certificates of delinquency. The agreement shall not waive the county attorney’s right to initiate court action or other authorized collection activities if the taxpayer does not make payments in accordance with the agreement. (8) (a) The county attorney shall establish a system to accept installment payments from delinquent taxpayers. The county attorney may, during the contract period, enter into an agreement with a delinquent taxpayer to accept installment payments on the certificates of delinquency. The agreement shall not waive the county attorney’s right to initiate court action or other authorized collection activities if the taxpayer does not make payments in accordance with the agreement.
    2. The county attorney may, upon written request of the taxpayer for good cause and with agreement of the affected taxing jurisdiction or fee recipient, waive or reduce fees and penalties that are part of a certificate of delinquency during settlement or negotiation with a taxpayer in accordance with guidance provided by the department.
  6. Any action by the county attorney authorized by this chapter shall be filed on relation of the commissioner. A copy of any judgment obtained by the county attorney shall be sent to the department.
    1. The county attorney shall notify the county clerk and the department of the filing of a suit at the time the suit is filed and of payment agreements at the time such agreements are entered into. The county clerk shall note on the certificate of delinquency the filing of the lawsuit or the existence of the payment agreement, and these certificates of delinquency shall not be available for purchase or payment by a third-party purchaser. (10) (a) The county attorney shall notify the county clerk and the department of the filing of a suit at the time the suit is filed and of payment agreements at the time such agreements are entered into. The county clerk shall note on the certificate of delinquency the filing of the lawsuit or the existence of the payment agreement, and these certificates of delinquency shall not be available for purchase or payment by a third-party purchaser.
    2. The county attorney shall provide to the county clerk at least ten (10) days but not more than twenty (20) days prior to the annual sale date for the county established pursuant to KRS 134.128 , a protected list of current year certificates of delinquency that are:
      1. Under a payment plan with the county attorney on which payments are current;
      2. Involved in litigation initiated by the county attorney or in which the county attorney responds or files an answer;
      3. Involved in bankruptcy litigation in which the county attorney has filed a claim; or
      4. Included on a list of protected properties submitted to the county attorney by a vacant property review commission or an alternative government entity as provided in KRS 99.727 .
    3. The county attorney shall notify the county clerk of the failure of any payment agreement and, upon notification to the clerk, the certificate of delinquency shall be available for purchase.
  7. The department may make its delinquent tax collection databases and other technical resources, including but not limited to tax refund offsetting, available to the county attorney upon request from the county attorney. The county attorney seeking assistance shall enter into any agreements required by the department to protect taxpayer confidentiality, to ensure database integrity, or to address the concerns of the department.
    1. If a county attorney chooses not to contract for collection duties, or if a county attorney fails to perform the duties required by the contract, the department shall assume responsibility for all uncollected certificates of delinquency and personal property certificates of delinquency, including, at the option of the department, those with pending court action or for which the county attorney has entered into an installment payment agreement. (12) (a) If a county attorney chooses not to contract for collection duties, or if a county attorney fails to perform the duties required by the contract, the department shall assume responsibility for all uncollected certificates of delinquency and personal property certificates of delinquency, including, at the option of the department, those with pending court action or for which the county attorney has entered into an installment payment agreement.
    2. If the department assumes or retains responsibility for the collection of certificates of delinquency and personal property certificates of delinquency, the twenty percent (20%) fee that would have been paid to the county attorney under subsection (7) of this section, and any other fees or costs established by this section for the county attorney shall be paid to the department for deposit in the delinquent tax fund provided for under KRS 134.552 .

The list shall include sufficient detail for the county clerk to accurately identify the property.

History. Enact. Acts 2009, ch. 10, § 12, effective January 1, 2010; 2010, ch. 75, § 9, effective April 7, 2010; 2012, ch. 161, § 7, effective April 23, 2012; 2016 ch. 127, § 12, effective July 15, 2016.

Legislative Research Commission Notes.

(4/7/2010). 2010 Ky. Acts ch. 75, sec. 7, subparagraphs 1., 2., and 3. of subsection (2)(c), codified as KRS 134.128(2)(c)1., 2., and 3., describe the types of certificates of delinquency for which payment is to be prohibited by third-party purchasers and are joined by the conjunction “or.” 2010 Ky. Acts ch. 75, sec. 9, creating subparagraphs (b)1., 2., and 3. of subsection (10) of this section, uses very similar language to describe the certificates of delinquency to be included on the protected list provided by the county attorney to the county clerk prior to the annual sale, however, these subparagraphs are joined by the conjunction “and.” The drafter advises and the context indicates that the conjunction joining subparagraphs 1., 2., and 3. of subsection (10)(b) of 2010 Ky. Acts ch. 75, sec. 9, should be “or”; however, it could not be corrected as a manifest clerical or typographical error under the authority of KRS 7.136(1)(h), therefore subsection (10) of this statute retains the language as it appeared in 2010 Ky. Acts ch. 75.

(1/1/2010). A reference to “subsection (8)” in subsection (12)(b) of this statute has been changed in codification to “subsection (7)” to correct a manifest oversight during the drafting of 09 RS BR 4, which became House Bill 262 and 2009 Ky. Acts ch. 10. Materials in the bill folder reveal that a subsection was deleted and subsequent subsections renumbered, but a conforming change was not made to the reference in subsection (12)(b). This manifest clerical or typographical error has been corrected by the Reviser of Statutes under the authority of KRS 7.136(1).

NOTES TO DECISIONS

1. Generally.

Circuit courts erred in concluding that the third-party purchasers of delinquent tax bills were eligible for refunds where it was erroneous to state that the transfer of the taxed property subject to the Commonwealth satisfied the tax liability of all of the various governmental entities, but rather the property owners remained liable for the tax under Ky. Rev. Stat. Ann. § 132.220 . Fayette Cty. Clerk v. Kings Right, LLC, 536 S.W.3d 201, 2017 Ky. App. LEXIS 634 (Ky. Ct. App. 2017).

134.505. No compensation to county attorney who fails to perform duties as to tax claims.

Any person while serving as county attorney who was required by law by reason of his office to prosecute an action or to assist the commissioner of revenue in prosecuting an action to enforce a claim of the state, county, school district and any other taxing district to any land which was purchased by such districts at a sheriff’s sale or sales for delinquent taxes and who did not institute such action before he relinquished his office or otherwise failed to perform substantially all the duties of his office relative to the claim, shall not be entitled to receive any commission or compensation for any such sale or sales when the redemption costs are paid. Any county clerk or other person authorized to collect funds to satisfy unredeemed land sales shall be liable for any such money distributed as a commission to any former county attorney who is not entitled to it.

History. Enact. Acts 1942, ch. 131, § 30; 1978, ch. 384, § 281, effective June 17, 1978; 2005, ch. 85, § 277, effective June 20, 2005.

134.510. Sale and conveyance of land obtained by taxing unit through action on certificate of delinquency — Redemption by taxpayer. [Renumbered.]

Compiler’s Notes.

This section (4149b-9: amend. Acts 1966, ch. 239, § 139; 1990, ch. 27, § 13, effective July 13, 1990; 2005, ch. 85, § 278, effective June 20, 2005) was renumbered as KRS 134.549 effective January 1, 2010.

134.520. Refund to purchaser of certificate of delinquency declared void — Reassessment of property. [Renumbered.]

Compiler’s Notes.

This section (4149b-11: amend. Acts 1982, ch. 452, § 8, effective July 1, 1982) was renumbered as KRS 134.551 effective January 1, 2010.

134.530. Prior laws continued in effect as to delinquent tax bills or land sales before June 12, 1940. [Repealed.]

Compiler’s Notes.

This section (4031, 4036, 4073 to 4075, 4154, 4156, 4157, 4159 to 4161) was repealed by Acts 1966, ch. 255, § 283.

134.540. Action to declare tax sale invalid and establish lien of state on sales made prior to June 12, 1940 — County attorney to assist department — Compensation. [Repealed.]

Compiler’s Notes.

This section (4154-1: amend. Acts 1976 (Ex. Sess.), ch. 17, § 40, effective January 1, 1978; 1978, ch. 400, § 5, effective June 17, 1978; 2005, ch. 85, § 279, effective June 20, 2005) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.545. Use of funds by county attorney.

Moneys paid to the county attorney under an agreement entered into pursuant to KRS 134.504 shall be used only for payment of county attorney office operating expenses.

History. Enact. Acts 1978, ch. 400, § 7, effective June 17, 1978; 2009, ch. 10, § 13, effective January 1, 2010.

Opinions of Attorney General.

“County attorney office operating expenses” clearly refers to all actual and necessary expenses incident to the proper conduct of the total duties of the office of county attorney. OAG 78-349 .

The county attorney’s operating expenses were not intended to be restrictively and narrowly integrated only with the expenses inherent in tax collection work of the county attorney. OAG 78-349 .

While this section establishes no explicit guidelines, the expenses incurred by a county attorney for continuing legal education may be funded out of the commissions earned under subsection (3) of KRS 134.500 (now repealed), provided that such courses substantially relate to the county attorney’s statutory functions involving either his civil legal work for the county or his prosecutorial work for the state, or both, and are reasonably calculated to improve the efficiency of his statutory functions. OAG 80-257 .

Fees derived from the collection of certain taxes and received by the county attorney from the county clerk may not be used by the county attorney to pay premiums on professional liability insurance to cover the county attorney and his assistants, since such liability insurance is not a county attorney office “operating expense” under this section and Const., § 106 because it insures the personal liability of the county attorney and his assistants. OAG 81-96 .

The county attorney’s 20% fee for prosecuting actions on certificates of delinquency under KRS 134.500 (now repealed) and 134.540 (now repealed) is not compensation, and under this section, such fee money could be used only for the payment of county attorney office operating expenses. The county attorney may engage in a short term investment of such fees, as permitted by KRS Chapter 386, to the extent practicable; such earned interest would, however, have to be turned over to the county, since no statute deals specifically with interest on such moneys. OAG 83-409 .

Moneys paid to a county attorney for collection of delinquent taxes may be spent for any official expense of the county attorney’s office arising out of the proper conduct of that office, including both his criminal and civil duties; the term “proper conduct of office” includes activities or services which are practical necessities in conducting that office. A more definitive description of such expenses would be expenses that are reasonable in amount, beneficial to the public and not predominantly personal to the county attorney. OAG 85-17 .

Where a county attorney receives commissions for the collection of delinquent taxes after he left the office of county attorney, such commissions should be delivered to the incumbent county attorney for expenditures in the manner and for the purposes set forth in this section. OAG 85-17 .

Salary of the county attorney is an expense that is obviously “predominately personal” to the county attorney and therefore, moneys restricted by statute to use for “operating expenses” of the county attorney’s office cannot be used to pay or supplement the salary of the county attorney. OAG 94-64 .

A county attorney may use proceeds from the county attorney’s delinquent real estate tax collection account to pay for travel to board meetings and other events sponsored by the Kentucky County Attorneys’ Association because these constitute county attorney office operating expenses pursuant to KRS 134.545 . OAG 2005-02 .

134.546. Cause of action on certificates of delinquency — Sale and deed on foreclosure — No redemption — Additional rights if owner is a taxing unit.

  1. Any action to collect any amount due on a certificate of delinquency or personal property certificate of delinquency may be brought at any time after the passage of one (1) year from the date the taxes became delinquent, and shall be brought within eleven (11) years of the date when the taxes became delinquent.
  2. A third-party purchaser may:
    1. Institute an action against the delinquent taxpayer to collect the amount of the certificate of delinquency and any other certificates of delinquency subsequently issued to the same third-party purchaser against the same delinquent, and shall have all the remedies available for the enforcement of a debt;
    2. Institute an action to enforce the lien provided in KRS 134.420 , represented by the certificate of delinquency and those certificates subsequently held by the same third-party purchaser against the same delinquent or property; or
    3. Institute one (1) action including both types of actions mentioned in paragraphs (a) and (b) of this subsection, and the joinder of actions shall not be defeated if the delinquent taxpayer has disposed of any property covered by the lien, but the purchaser of the property shall be made a defendant if the judgment is to affect his or her interest in the property, and as between them the delinquent taxpayer shall be responsible.
  3. If the state, county, or a taxing district is the owner of a certificate of delinquency or personal property certificate of delinquency, it shall have, in addition to the remedies provided in subsection (1) of this section, the right to distrain and sell any property owned by the delinquent taxpayer, including that on which the lien provided in KRS 134.420 has attached. Any property sold under distraint proceedings shall be sold in the same manner as provided in KRS 131.500 , except that the exercise of the power shall be vested in the county attorney.
  4. Any property while owned by a delinquent taxpayer shall be subject to foreclosure or execution in satisfaction of a judgment pursuant to an action in rem or an action in personam, or both, to enforce the obligation.
  5. If property is sold pursuant to a judgment of foreclosure, it shall be appraised pursuant to the provisions of KRS 426.520 , and there shall be a right of redemption as provided in KRS 426.530 . If there is no purchaser at a foreclosure sale, the master commissioner shall make a deed to the person or persons shown by record to be the owner of the certificate or certificates of delinquency, and that person or persons shall have a pro rata interest in accordance with the amount of their respective certificates.
  6. The department may provide to a third-party purchaser factual information related to the owner or lessee of the coal, oil, gas reserves, or any other mineral resources assessed under KRS 132.820(1) pursuant to an order entered in a foreclosure action involving a certificate of delinquency for unmined coal, oil, gas, or any other mineral resources. The department may promulgate an administrative regulation establishing a fee schedule for the provision of the information described in this subsection. Any fee imposed shall not exceed the greater of the actual cost of providing the information or ten dollars ($10).

History. Enact. Acts 2009, ch. 10, § 16, effective January 1, 2010; 2010, ch. 75, § 10, effective April 7, 2010.

NOTES TO DECISIONS

  1. Claims.
  2. Miscellaneous.
1. Claims.

Third-party purchaser, such as the bank, could file suit pursuant to KRS 134.546(2)(b) to enforce the lien it had for unpaid ad valorem taxes represented by the certificate of delinquency it held. Since the liens that resulted from such unpaid taxes were not rendered inferior by the sale of certificates of delinquency from government entities to the third-party purchasers and, indeed, because the private owner of the lien was given a certificate of delinquency to “stand in the shoes” of the government entity trying to impose the lien, as recognized under KRS 134.490(2)(b), priority was given to liens resulting from such taxes irrespective of whether government entities or third parties held those liens, which also meant that proceeds regarding those liens had to be disbursed equally. United States Bank Nat'l Ass'n v. Tax Ease Lien Invs. 1, LLC, 356 S.W.3d 770, 2011 Ky. App. LEXIS 227 (Ky. Ct. App. 2011).

Circuit courts erred in concluding that the third-party purchasers of delinquent tax bills were eligible for refunds where it was erroneous to state that the transfer of the taxed property subject to the Commonwealth satisfied the tax liability of all of the various governmental entities, but rather the property owners remained liable for the tax under Ky. Rev. Stat. Ann. § 132.220 . Fayette Cty. Clerk v. Kings Right, LLC, 536 S.W.3d 201, 2017 Ky. App. LEXIS 634 (Ky. Ct. App. 2017).

2. Miscellaneous.

Ky. Rev. Stat. Ann. § 134.546(4) does not create a lien, nor could it be used to secure a deficiency judgment post-discharge. In re Joseph, 584 B.R. 696, 2018 Bankr. LEXIS 329 (Bankr. E.D. Ky. 2018 ).

134.547. Collection of delinquent taxes and assessment of omitted property.

  1. The department may act in the name of and in behalf of the state and in the name of and in behalf of any and all counties, school districts, and other taxing districts in the state to institute and prosecute any action or proceeding for the collection of delinquent taxes and the assessment of omitted property. If the department assumes the duties of collecting the delinquent taxes assessed under the authority of KRS Chapter 132, it shall have all the powers, rights, duties, and authority conferred generally upon the department by the Kentucky Revised Statutes, including but not limited to Chapters 131, 132, 133, 134, and 135.
  2. Nothing contained in this chapter shall prevent the department from assessing any property in accordance with the provisions of KRS 136.020 , 136.030 , 136.050 , or 136.120 to 136.180 .
  3. The department may require the use of any reports, forms, or databases necessary to administer the law in connection with the collection of delinquent taxes.

History. 4149b-12, 4257a-1, 4257a-2, 4267: amend. Acts 1968, ch. 152, § 107; 1984, ch. 405, § 3, effective July 13, 1984; 1990, ch. 27, § 7, effective July 13, 1990; 1990, ch. 411, § 7, effective July 13, 1990; 1996, ch. 254, § 28, effective July 15, 1996; 1998, ch. 209, § 8, effective March 30, 1998; 2002, ch. 346, § 171, effective July 15, 2002; 2005, ch. 85, § 267, effective June 20, 2005; amend. and renum. Acts 2009, ch. 10, § 25, effective January 1, 2010.

Compiler’s Notes.

Section 21 of Acts 1998, ch. 209, provided that the 1998 amendments to this section “shall apply for assessments made on or after January 1, 1998.”

This section was formerly compiled as KRS 134.380 and was amended and renumbered as this section effective January 1, 2010.

NOTES TO DECISIONS

  1. Revenue Commissioner.
  2. Penalty.
  3. Attorneys.
  4. Ad Valorem Taxes.
  5. Omitted Railroad Property.
  6. Inheritance Tax.
  7. Liquor Tax.
  8. Distraint Proceedings.
1. Revenue Commissioner.

Revenue commissioner having determined that certain river barge companies were subject to franchise taxes, had power to settle in good faith unliquidated tax claims against companies for such taxes, so as to require approval of settlement by circuit court. Commonwealth ex rel. Reeves v. American Barge Line Co., 253 S.W.2d 622, 1952 Ky. LEXIS 1118 ( Ky. 1952 ).

2. Penalty.

Subsection (1) of this section which transfers to and vests in the commissioner of revenue all powers and authority heretofore or now exercised by revenue agents, auditor’s agents and other authorized agents in relation to bringing actions for recovery of delinquent state taxes, and subsection (2) of KRS 134.400 (renumbered as KRS 134.552 ) providing that the 20 percent penalty collected on delinquent taxes shall be paid into the state treasury and not to the particular agents instituting the action, modify subsection (1) of KRS 135.060 , which authorizes a 20 percent overriding penalty on income taxes, interest and penalties recovered in a suit instituted by a field agent, accountant or attorney employed by the commissioner of revenue, so that the 20 percent penalty must be paid by all taxpayers against whom a judgment is recovered for delinquent taxes, regardless of whether the action is instituted by the commissioner of revenue or by an agent of his. Curd v. Commonwealth, 312 Ky. 457 , 227 S.W.2d 1003, 1950 Ky. LEXIS 677 ( Ky. 1950 ).

3. Attorneys.

Attorneys employed under this section are independent contractors, and are not subject to salary limitation imposed by Ky. Const., § 246. Talbott v. Public Service Com., 291 Ky. 109 , 163 S.W.2d 33, 1942 Ky. LEXIS 174 ( Ky. 1942 ), overruled, Pardue v. Miller, 306 Ky. 110 , 206 S.W.2d 75, 1947 Ky. LEXIS 953 ( Ky. 1947 ).

Staff attorneys of the Department of Revenue are departmental employes and, therefore, they are not independent contractors falling in the category of field agents, accountants and attorneys referred to in this section; it would naturally follow that the field agents, accountants and attorneys referred to in KRS 135.060(2) are the same ones mentioned in this section. Circle "C" Coal Co. v. Commonwealth, 628 S.W.2d 883, 1981 Ky. App. LEXIS 317 (Ky. Ct. App. 1981).

4. Ad Valorem Taxes.

Where sheriff had made levy for purpose of collecting ad valorem tax, and taxpayer had filed suit to enjoin levy, revenue agent had no authority to bring action to collect tax while such proceedings were pending, and where injunction suit was dismissed by court and taxpayer paid tax to sheriff, revenue agent was not entitled to collect 20 percent penalty. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

With respect to ad valorem taxes, the Department of Revenue has no authority to maintain an action for collection until the ordinary processes provided for collection by the sheriff have been exhausted. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

5. Omitted Railroad Property.

State tax commission (now Board of Tax Appeals) is not denied power to have omitted railroad property assessed on theory that subsection (1) of this section expressly denies that power by empowering commissioner of revenue to act in behalf of the counties, schools, and other taxing districts while expressly excluding cities, since provision in former subsection (3) that it shall not affect authority of state tax commission (now Board of Tax Appeals) to assess railroad and certain other public service corporations refers to omitted property and collection of delinquent taxes, and embraces in power lodged in Department of Revenue or state tax commission (now Board of Tax Appeals) added or supplemental assessments as well as original assessments. Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ).

6. Inheritance Tax.

Revenue agent had authority to institute proceedings necessary to collect inheritance tax, but not until tax became delinquent under terms of inheritance tax law. Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ).

7. Liquor Tax.

The proper party to bring action for collection of liquor tax was the commissioner of revenue, not the commonwealth’s attorney of the county in which criminal prosecution for violation of statute had been instituted. Kentucky ex rel. Martin v. Morris Wholesale Liquor Distributing Co., 29 F. Supp. 310, 1939 U.S. Dist. LEXIS 2306 (D. Ky. 1939 ).

8. Distraint Proceedings.

Distraint proceedings constitute a wholly independent collection procedure which may be followed without regard to whether an action to enforce a tax lien has been previously brought, where the proceedings are held upon due notice, in circuit court, with provision made for the taxpayer to present any defenses to the collection which he might have, as well as an opportunity to the person distrained. Commonwealth ex rel. Carpenter v. Collins & May, 593 S.W.2d 887, 1980 Ky. App. LEXIS 295 (Ky. Ct. App. 1980).

An original proceeding under Chapter 135, without the prior proceedings under this chapter, would not be unconstitutional as denying due process of law. Commonwealth ex rel. Carpenter v. Collins & May, 593 S.W.2d 887, 1980 Ky. App. LEXIS 295 (Ky. Ct. App. 1980).

Cited in:

Fayette County v. Martin, 279 Ky. 387 , 130 S.W.2d 838, 1939 Ky. LEXIS 299 ( Ky. 1939 ), overruled, St. Matthews v. Voice of St. Matthews, Inc., 519 S.W.2d 811, 1974 Ky. LEXIS 12 ( Ky. 1974 ), overruled in part, St. Matthews v. Voice of St. Matthews, Inc., 519 S.W.2d 811, 1974 Ky. LEXIS 12 ( Ky. 1974 ); Commonwealth ex rel. Martin v. Union Labor Temple, 279 Ky. 692 , 131 S.W.2d 843, 1939 Ky. LEXIS 329 ( Ky. 1939 ); Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ); Commonwealth ex rel. Meredith v. Reeves, 289 Ky. 73 , 157 S.W.2d 751, 1941 Ky. LEXIS 21 ( Ky. 1941 ); Commonwealth v. Interstate Grocery Co., 283 S.W.2d 708, 1955 Ky. LEXIS 321 ( Ky. 1955 ).

Research References and Practice Aids

Cross-References.

Action by commissioner of revenue to collect taxes due the state, KRS 135.050 .

Assessment of omitted property in action to enforce certificate of delinquency or to invalidate tax sale, KRS 134.548 .

Attorneys for assessment of property and collection of taxes, employment of, KRS 12.220 .

County attorney to prosecute action to assess omitted property, KRS 132.350 .

Department of Revenue to prescribe forms for tax records, KRS 131.030 , 131.130 , 131.140 .

Income taxes, assessment of excess or omitted, KRS 141.210 .

Inheritance taxes, limitation on action to collect, KRS 140.160 .

134.548. Assessment of omitted property in action to enforce certificate of delinquency or to invalidate land tax sale.

Whenever the Commonwealth prosecutes an action in a Circuit Court pursuant to KRS 134.546 , to enforce a certificate of delinquency or a personal property certificate of delinquency, the court shall have authority to assess property which has been omitted for any reason, whenever necessary to establish the total personal liability of any defendant in such action or to establish the total amount of any lien or liens against the property. Provided, however, that the twenty percent (20%) penalty provided in KRS 132.340 and 135.060 shall not apply to the amount of taxes, penalties, and interest due for any assessment made pursuant to this section for any omission which was caused through no fault of the person owning the property on the assessment date.

History. Enact. Acts 1942, ch. 131, §§ 29, 32; amend. and renum. Acts 2009, ch. 10, § 27, effective January 1, 2010.

Compiler’s Notes.

This section was formerly compiled as KRS 134.495 and was amended and renumbered as this section effective January 1, 2010.

Research References and Practice Aids

Cross-References.

Assessment of omitted property, KRS 132.290 , 132.310 to 132.360 .

134.549. Sale and conveyance of land obtained by taxing unit through action on certificate of delinquency — Redemption by taxpayer.

  1. After the state, county, and taxing districts obtain real property as authorized by KRS 134.546 , the designated agent of the commissioner may advertise and sell at public sale any of the lands, and the commissioner may convey the lands by deed to the purchaser. The commissioner shall, within thirty (30) days from receipt of payment, pay to the county and taxing district the amount of the proceeds due each. The department shall be entitled to an administration fee equal to fifteen percent (15%) of the sale price of the property, which shall be paid into the delinquent tax fund provided for in KRS 134.552 .
  2. The sales shall be advertised by a written or printed notice posted at the courthouse door for fifteen (15) days before the date of sale, and by publication pursuant to KRS Chapter 424, and may in addition be advertised by printed handbills posted for fifteen (15) days before the date of sale in three (3) or more conspicuous places in the taxing districts.
  3. Any real property acquired by the state, county, and taxing districts pursuant to KRS 134.546 may be redeemed at any time before the commissioner gives a deed to a purchaser, by paying to the county clerk the amount due at the time the property was acquired, plus subsequent costs and interest at the rate of twelve percent (12%) per annum.

History. 4149b-9: amend. Acts 1966, ch. 239, § 139; 1990, ch. 27, § 13, effective July 13, 1990; 2005, ch. 85, § 278, effective June 20, 2005; amend. and renum. Acts 2009, ch. 10, § 28, effective January 1, 2010.

Compiler’s Notes.

This section was formerly compiled as KRS 134.510 and was amended and renumbered as this section effective January 1, 2010.

NOTES TO DECISIONS

  1. Commissioner.
  2. Right of Redemption.

2. Mortgagee Purchaser.

1. Commissioner.

The commissioner referred to in subsection (3) of this section is the Commissioner of Revenue and not the master commissioner. Barnett v. Commonwealth, 566 S.W.2d 794, 1978 Ky. App. LEXIS 532 (Ky. Ct. App. 1978).

2. Right of Redemption.

The right of redemption may have been assigned. Brown's Ex'x v. Greene, 184 Ky. 300 , 211 S.W. 860, 1919 Ky. LEXIS 69 ( Ky. 1919 ) (decided under prior law).

The General Assembly has stated in unambiguous language that no right of redemption shall exist unless the property is acquired at the sale by the State, county, and taxing districts and then only so long as the Commissioner of Revenue has not sold the property to another purchaser and given a deed therefor. Barnett v. Commonwealth, 566 S.W.2d 794, 1978 Ky. App. LEXIS 532 (Ky. Ct. App. 1978).

2. Mortgagee Purchaser.

Mortgagee of real estate who purchased real estate at tax sale could not set up title as against mortgagor, but could claim only a lien for the amount paid. Eblen v. Major's Adm'r, 147 Ky. 44 , 143 S.W. 748, 1912 Ky. LEXIS 178 ( Ky. 1912 ) (decided under prior law).

Research References and Practice Aids

Kentucky Bench & Bar.

Kentucky Bench & Bar. Herrick, Beware! Did your Client Recently Buy Land at a Tax Sale?, Vol. 60, No. 2, Spring 1966, Ky. Bench & Bar 14.

134.550. Foreclosure of lien in action brought on sale made prior to June 12, 1940 — Redemption before foreclosure. [Repealed.]

Compiler’s Notes.

This section (4154-2) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.551. Refund to purchaser of certificate of delinquency that is unenforceable or declared void — Reassessment of property.

  1. If a certificate of delinquency or personal property certificate of delinquency held by an individual is declared void by a court of competent jurisdiction because of the irregularity of taxing officers, the amount for which the certificate was issued shall be refunded by the state, county, and taxing districts on a pro rata basis. If a school district or county is unable to make the refund currently when requested, it shall be given preference from the next year’s revenue. The application for refund must be made within one (1) year after the judgment. The property covered by the void certificate shall be assessed immediately as omitted property and the tax bill shall be payable as soon as prepared.
    1. If a certificate of delinquency held by a third-party purchaser who paid the certificate of delinquency to the county clerk: (2) (a) If a certificate of delinquency held by a third-party purchaser who paid the certificate of delinquency to the county clerk:
      1. Is unenforceable because:
        1. It is a duplicate certificate of delinquency;
        2. The tax liability represented by the certificate of delinquency was satisfied prior to the purchase of the certificate of delinquency;
        3. All or a portion of the certificate of delinquency is exonerated; or
        4. The property to which the certificate of delinquency applies was not subject to taxes as a matter of law as certified by the property valuation administrator; or
      2. Should not have been sold because, on the date of the annual sale, the certificate of delinquency met the requirements for inclusion on the protected list pursuant to KRS 134.504(10) and it:
        1. Was included on the protected list;
        2. Was mistakenly left off the protected list; or
        3. Became eligible for inclusion on the protected list between the date the protected list was submitted and the date of sale;
    2. The application for refund filed with the county clerk shall include written proof that one (1) of the situations described in paragraph (a) of this subsection exists with regard to the certificate of delinquency for which a refund is sought.
      1. Upon acceptance and approval of the application for refund, the county clerk shall approve a refund of the amount paid to the county clerk by the third-party purchaser in satisfaction of the certificate of delinquency. The refunded amount shall not include any filing fees paid by the third-party purchaser to the county clerk. (c) 1. Upon acceptance and approval of the application for refund, the county clerk shall approve a refund of the amount paid to the county clerk by the third-party purchaser in satisfaction of the certificate of delinquency. The refunded amount shall not include any filing fees paid by the third-party purchaser to the county clerk.
      2. Amounts refunded to the third-party purchaser shall be deducted from amounts in the hands of the county clerk due to the state, county, taxing districts, sheriff, county attorney, and the county clerk on a pro rata basis, if the county clerk has sufficient funds in his or her hands to make the refund.
      3. If the county clerk does not have sufficient funds to make the refund at the time the refund is approved, the county clerk may either:
        1. Retain the approved refund claim in his or her office and make the refund payment as soon as he or she has sufficient funds in his or her hands to make the refund payment; or
        2. Provide a signed letter to the person to whom payment is due, which includes the amount due from each taxing jurisdiction or fee office, and which directs each taxing jurisdiction or fee official to pay to the person the amount due and owing from that taxing jurisdiction or fee official as reflected in the letter.
      4. Upon the making of a refund to a third-party purchaser, the county clerk shall issue and file a release of the lien on the property assessed for taxes as provided in this subparagraph without charge to the third-party purchaser. The release shall be linked to the encumbrance in the county clerk’s indexing system.
        1. The department shall prepare a release form to be used by the county clerk when a refund is paid under this paragraph. The form shall include, at a minimum, the following:
          1. The name and address of the taxpayer;
          2. The name and address of the third-party purchaser;
          3. The book and page number of the third-party purchaser’s lis pendens filing;
          4. The property address;
          5. The applicable tax year; and
          6. The map identification number or tax bill number.
        2. The release form shall be signed by the government official responsible for making the correction.
        3. In addition to the signed release form, information filed by the county clerk shall include a copy of the documentation provided by the government official and a copy of the refund check or letter of refund authorization issued to the third-party purchaser. The county clerk shall record and file this information without a fee.
        4. The county clerk shall also make any necessary corrections to the tax records within the office of the county clerk.
        5. The county clerk shall return the release document to the taxpayer and shall provide a copy of the release document to the third-party purchaser.
    3. If the county clerk denies the application for refund, or the property valuation administrator fails to certify that property was not subject to taxes as a matter of law, the third-party purchaser may appeal the decision of the county clerk or the property valuation administrator to the Kentucky Claims Commission pursuant to KRS 49.220 .

the third-party purchaser may apply to the county clerk for a refund.

HISTORY: 4149b-11: amend. Acts 1982, ch. 452, § 8, effective July 1, 1982; amend. and renum. Acts 2009, ch. 10, § 29, effective January 1, 2010; 2010, ch. 75, § 11, effective April 7, 2010; 2012, ch. 161, § 8, effective April 23, 2012; 2017 ch. 74, § 75, effective June 29, 2017.

Compiler’s Notes.

This section was formerly compiled as KRS 134.520 and was amended and renumbered as this section effective January 1, 2010.

134.552. Disposition of penalties collected on delinquent taxes and omitted assessments — Use for administration.

  1. The twenty percent (20%) penalty established by KRS 132.290 , the administrative fee established by KRS 134.549 , the fees payable to the department for collecting delinquent taxes pursuant to KRS 134.504 , and any other fees or penalties payable to the department for collecting delinquent taxes shall be paid into the State Treasury and credited as provided in subsection (2) of this section.
  2. One-fourth (1/4) of the moneys received pursuant to the provisions of subsection (1) of this section shall be credited to the general fund. The remaining three-fourths (3/4) shall be credited to a fund to be designated and known as the delinquent tax fund, to be used for the administration and enforcement of the laws relating to the collection of delinquent taxes and the assessment of omitted property. Salaries, fees, and expenses authorized by the laws relating to the collection of delinquent taxes and the assessment of omitted property, may be paid out of the delinquent tax fund upon certifications or requisitions of the commissioner of revenue.

History. 4257a-2, 4257a-5: amend. Acts 1976 (Ex. Sess.), ch. 17, § 38, effective January 1, 1978; 1978, ch. 400, § 3, effective June 17, 1978; 1982, ch. 450, § 65, effective July 1, 1983; 1990, ch. 507, § 20, effective July 13, 1990; 2005, ch. 85, § 270, effective June 20, 2005; amend. and renum. Acts 2009, ch. 10, § 26, effective January 1, 2010.

Compiler’s Notes.

This section was formerly compiled as KRS 134.400 and was amended and renumbered as this section effective January 1, 2010.

Opinions of Attorney General.

Salary of the county attorney is an expense that is obviously “predominately personal” to the county attorney and therefore, moneys restricted by statute to use for “operating expenses” of the county attorney’s office cannot be used to pay or supplement the salary of the county attorney. OAG 94-64 .

Research References and Practice Aids

Cross-References.

Twenty percent penalty imposed on omitted property, KRS 132.340 .

2020-2022 Budget Reference.

See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, F, 8, (1) at 878.

134.560. Limitation of action to invalidate tax sale and establish lien, on sales made prior to June 12, 1940. [Repealed.]

Compiler’s Notes.

This section (4154-3) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.570. Effect of tax deed on sale made prior to June 12, 1940. [Repealed.]

Compiler’s Notes.

This section (4030) was repealed by Acts 2009, ch. 10, § 71, effective January 1, 2010.

134.580. Refund of taxes, other than ad valorem and unconstitutional taxes — Immunity of the Commonwealth from refund suits based on combined or consolidated returns.

  1. As used in this section, unless the context requires otherwise:
    1. “Agency” means the agency of state government which administers the tax to be refunded or credited; and
    2. “Overpayment” or “payment where no tax was due” means the excess of the tax payments made over the correct tax liability determined under the terms of the applicable statute without reference to the constitutionality of the statute.
  2. When money has been paid into the State Treasury in payment of any state taxes, except ad valorem taxes, whether payment was made voluntarily or involuntarily, the appropriate agency shall authorize refunds to the person who paid the tax, or to his heirs, personal representatives or assigns, of any overpayment of tax and any payment where no tax was due. When a bona fide controversy exists between the agency and the taxpayer as to the liability of the taxpayer for the payment of tax claimed to be due by the agency, the taxpayer may pay the amount claimed by the agency to be due, and if an appeal is taken by the taxpayer from the ruling of the agency within the time provided by KRS 49.220 and it is finally adjudged that the taxpayer was not liable for the payment of the tax or any part thereof, the agency shall authorize the refund or credit as the Kentucky Claims Commission or courts may direct.
  3. No refund shall be made unless each taxpayer individually files an application or claim for the refund within four (4) years from the date payment was made. Each claim or application for a refund shall be in writing and state the specific grounds upon which it is based. Denials of refund claims or applications may be protested and appealed in accordance with KRS 49.220 and 131.110 .
  4. Notwithstanding any provision of this section, when an assessment of limited liability entity tax is made under KRS 141.0401 against a pass-through entity as defined in KRS 141.206 , the corporation or individual partners, members, or shareholders of the pass-through entity shall have the greater of the time period provided by this section or one hundred eighty (180) days from the date the assessment becomes final to file amended returns requesting any refund of tax for the taxable year of the assessment and to allow for items of income, deduction, and credit to be properly reported on the returns of the partners, members, or shareholders of the pass-through entity subject to adjustment.
  5. Refunds shall be authorized with interest as provided in KRS 131.183 . The refunds authorized by this section shall be made in the same manner as other claims on the State Treasury are paid. They shall not be charged against any appropriation, but shall be deducted from tax receipts for the current fiscal year.
  6. Nothing in this section shall be construed to authorize the agency to make or cause to be made any refund except within four (4) years of the date prescribed by law for the filing of a return including any extension of time for filing the return, or the date the money was paid into the State Treasury, whichever is the later, except in any case where the assessment period has been extended by written agreement between the taxpayer and the department, the limitation contained in this subsection shall be extended accordingly. Nothing in this section shall be construed as requiring the agency to authorize any refund to a taxpayer without demand from the taxpayer, if in the opinion of the agency the cost to the state of authorizing the refund would be greater than the amount that should be refunded or credited.
  7. This section shall not apply to any case in which the statute may be held unconstitutional, either in whole or in part.
  8. In cases in which a statute has been held unconstitutional, taxes paid thereunder may be refunded to the extent provided by KRS 134.590 , and by the statute held unconstitutional.
  9. No person shall secure a refund of motor fuels tax under KRS 134.580 unless the person holds an unrevoked refund permit issued by the department before the purchase of gasoline or special fuels and that permit entitles the person to apply for a refund under KRS 138.344 to 138.355 .
  10. Notwithstanding any provision of the Kentucky Revised Statutes to the contrary:
    1. The Commonwealth hereby revokes and withdraws its consent to suit in any forum whatsoever on any claim for recovery, refund, or credit of any tax overpayment for any taxable year ending before December 31, 1995, made by an amended return or any other method after December 22, 1994, and based on a change from any initially filed separate return or returns to a combined return under the unitary business concept or to a consolidated return. No such claim shall be effective or recognized for any purpose;
    2. Any stated or implied consent for the Commonwealth of Kentucky, or any agent or officer of the Commonwealth of Kentucky, to be sued by any person for any legal, equitable, or other relief with respect to any claim for recovery, refund, or credit of any tax overpayment for any taxable year ending before December 31, 1995, made by an amended return or any other method after December 22, 1994, and based on a change from any initially filed separate return or returns to a combined return under the unitary business concept or to a consolidated return, is hereby withdrawn; and
    3. The provisions of this subsection shall apply retroactively for all taxable years ending before December 31, 1995, and shall apply to all claims for such taxable years pending in any judicial or administrative forum.
  11. Notwithstanding any provision of the Kentucky Revised Statutes to the contrary:
    1. No money shall be drawn from the State Treasury for the payment of any claim for recovery, refund, or credit of any tax overpayment for any taxable year ending before December 31, 1995, made by an amended return or any other method after December 22, 1994, and based on a change from any initially filed separate return or returns to a combined return under the unitary business concept or to a consolidated return; and
    2. No provision of the Kentucky Revised Statutes shall constitute an appropriation or mandated appropriation for the payment of any claim for recovery, refund, or credit of any tax overpayment for any taxable year ending before December 31, 1995, made by an amended return or any other method after December 22, 1994, and based on a change from any initially filed separate return or returns to a combined return under the unitary business concept or to a consolidated return.

History. 4114h-7; 1966, ch. 187, Part I, § 1; 1970, ch. 216, § 2; 1976, ch. 155, § 1; 1982, ch. 452, § 9, effective July 1, 1982; 1990, ch. 177, § 1, effective July 13, 1990; 1990, ch. 423, § 7, effective July 13, 1990; 1996, ch. 344, § 1, effective July 15, 1996; 2005, ch. 85, § 280, effective June 20, 2005; 2005, ch. 112, § 1, effective June 20, 2005; 2005, ch. 134, § 1, effective June 20, 2005; 2007, ch. 22, § 1, effective March 19, 2007; 2008, ch. 132, § 11, effective April 24, 2008; repealed and reenact., Acts 2009, ch. 86, § 10, effective March 24, 2009; 2017 ch. 74, § 76, effective June 29, 2017; 2019 ch. 196, § 2, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 12 (HB 354) and ch. 196, sec. 2 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 12, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 12, was not codified.

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 15, provides that “the provisions of Sections 7 to 10 of this Act shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that “The intent of the General Assembly in repealing and reenacting KRS 136.392 , 138.195 , 141.160 , 160.6156 , 160.6157 , 160.6158 , 131.183 , 141.044 , 141.235 , 134.580 , 393.060 , and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides “To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood.”

(4/24/2008). 2008 Ky. Acts chs. 80 and 132, sec. 15 provides that the amendments made to this statute by that Act “shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act (April 24, 2008) and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

(9/6/90) This note replaces an earlier note dated 7/13/90. This section was amended by two 1990 Acts. Where those Acts are not in conflict, they have been compiled together. Where a conflict exists, the Act which was last enacted by the General Assembly prevails, pursuant to KRS 446.250 .

NOTES TO DECISIONS

  1. Construction.
  2. Application.
  3. Exclusive Method.
  4. Tax Statute Nonapplicable.
  5. Time Limit.
  6. Unconstitutional Statutes.
  7. —Interest on Refund.
  8. Tax Not Paid into State Treasury.
  9. —Procedure.
  10. Overpayment Required for Refund.
  11. Immunity for Refund Claims.
1. Construction.

Motor vehicle registration fees are “taxes” which the taxpayer is entitled to have refunded under this section, when paid in a case where fees were not applicable. Reeves v. Kentucky Utilities Co., 291 Ky. 226 , 163 S.W.2d 482, 1942 Ky. LEXIS 211 ( Ky. 1942 ).

It is clear that KRS 131.110 and this section address entirely different matters in the process of assessing, paying and collecting taxes and have no specific connection to each other. Revenue Cabinet v. Castleton, Inc., 826 S.W.2d 334, 1992 Ky. App. LEXIS 67 (Ky. Ct. App. 1992).

Sections nine and ten of Kentucky House Bill 316, KRS 134.580(9) and (10), cannot be considered taxes under state law within the terms of the Tax Injunction Act, 28 USCS § 1341. Johnson Controls, Inc. v. Kentucky, 2008 U.S. Dist. LEXIS 15872 (E.D. Ky. Feb. 29, 2008).

Trial court erred in finding that Kentucky's refund scheme for special fuel taxes and petroleum environmental assurance fees violated the Due Process Clause where those taxes and fees were properly applied to any and all people or companies purchasing the relevant products, and the pre-purchase refund permit process was a valid procedural requirement that gave taxpayers an opportunity to challenge the taxes and fees owed on special fuels so long as they met statutory requirements. Dep't of Revenue, Fin. & Admin. Cabinet v. Revelation Energy, LLC, 544 S.W.3d 170, 2018 Ky. App. LEXIS 98 (Ky. Ct. App. 2018).

2. Application.

The application of this section is limited and concerns overpayment of taxes where no tax was due and is not extendable to apply to situations where the constitutionality of a statute or a tax scheme is at issue. Revenue Cabinet v. Gossum, 887 S.W.2d 329, 1994 Ky. LEXIS 85 ( Ky. 1994 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

Pursuant to KRS 131.365 (renumbered, see now KRS 49.240 ) and 134.580(2), the corporations were not entitled to immediate payment of any refund because the plain language of the statutes directed that any payment shall be ordered upon appeal. Revenue Cabinet v. Asworth Corp., 2009 Ky. App. LEXIS 229 (Ky. Ct. App. Nov. 20, 2009), cert. denied, 562 U.S. 1200, 131 S. Ct. 1046, 178 L. Ed. 2d 865, 2011 U.S. LEXIS 1056 (U.S. 2011).

Refund provision of Ky. Rev. Stat. Ann. § 134.580 did not apply to a commercial mobile radio service (CMRS) provider's attempt to keep CMRS service charges collected post-2006 to offset moneys unnecessarily paid pre-2006 where the provider's contribution to the CMRS fund was not money paid into the State Treasury. Virgin Mobile U.S.A., L.P. v. Commonwealth ex rel. Commerc. Mobile Radio Serv. Telecomms. Bd., 448 S.W.3d 241, 2014 Ky. LEXIS 632 ( Ky. 2014 ).

3. Exclusive Method.

This section coupled with KRS 131.110 and 131.120 (now repealed) is exclusive and provides the only method of securing a refund of taxes paid by taxpayers. Department of Conservation v. Co-De Coal Co., 388 S.W.2d 614, 1964 Ky. LEXIS 537 (Ky. Ct. App. 1964).

4. Tax Statute Nonapplicable.

All money paid as taxes, other than ad valorem taxes, must be refunded on timely demand if payment was made or exacted under the mistaken belief that the terms of a statute, nonapplicable in fact, required it. Reeves v. Kentucky Utilities Co., 291 Ky. 226 , 163 S.W.2d 482, 1942 Ky. LEXIS 211 ( Ky. 1942 ).

5. Time Limit.

The bringing of the action for a refund within the limited times specified is a condition to the exercise of the right, and if the condition is not complied with, there is neither right nor remedy. Department of Conservation v. Co-De Coal Co., 388 S.W.2d 614, 1964 Ky. LEXIS 537 (Ky. Ct. App. 1964).

Where taxpayer challenged property assessment, he was not required to pay assessment and Revenue Cabinet was not entitled to tax lien until assessment became final, due and owing. Commonwealth Revenue Cabinet v. Hall, 941 S.W.2d 481, 1997 Ky. App. LEXIS 5 (Ky. Ct. App. 1997).

Tax imposed on certain intangible property was an ad valorem property tax, and thus the two-year statute of limitations contained in KRS 134.590 applied to an insurance company’s claim for a refund rather than the four-year statute of limitations in KRS 134.580 ; neither equitable recoupment nor set-off were available to the insurance company. Am. Life & Accident Ins. Co. of Ky. v. Commonwealth, 173 S.W.3d 910, 2004 Ky. App. LEXIS 299 (Ky. Ct. App. 2004).

6. Unconstitutional Statutes.

Since the taxes were collected on special fuels and gasoline purchased in Kentucky and used on the highways of other states under a statute subsequently held unconstitutional, the appellees were entitled to a refund had they proceeded properly under the statute to claim the refund under the circumstances. Department of Revenue v. Jack Cole Co., 474 S.W.2d 70, 1971 Ky. LEXIS 83 ( Ky. 1971 ).

By this statute, the General Assembly has clearly expressed a will that tax payments made under a statute later held to be unconstitutional shall be refunded, provided application for refund is made within two (2) years from the date payment was made and regardless of whether the holding of unconstitutionality is to be applied only prospectively or retroactively. Revenue Cabinet v. Gossum, 887 S.W.2d 329, 1994 Ky. LEXIS 85 ( Ky. 1994 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

7. —Interest on Refund.

Under former subsection (2) of this section, the “error of the department” (now revenue cabinet) means clerical or mechanical “but not otherwise” and therefore interest on the refund of the tax paid under unconstitutional provision of a statute was not allowed under this section. Department of Revenue v. Jack Cole Co., 474 S.W.2d 70, 1971 Ky. LEXIS 83 ( Ky. 1971 ).

8. Tax Not Paid into State Treasury.

Since the Utility Gross Receipts License Tax is a local tax and the moneys levied by the tax are not paid into the state treasury, this section would not provide a refund to a taxpayer. Martin Marietta Aluminum, Inc. v. Hancock County Bd. of Education, 806 F.2d 678, 1986 U.S. App. LEXIS 34147 (6th Cir. Ky. 1986 ).

9. —Procedure.

Subsection (1) (now (2)) of this section refers to KRS 131.340 (renumbered, see now KRS 49.220 ), which applies to the jurisdiction of the Board of Tax Appeals to hear appeals from any final rulings affecting revenue and taxation, including those from protests of tax assessment. However, this section merely provides that when a taxpayer pays a contested tax assessment and appeals the ruling according to KRS 131.340 , he can, if successful, receive a refund of the contested tax payment; nothing contained in this section requires a taxpayer contest a tax assessment before he is entitled to seek a refund of the taxes paid. In fact, subsection (1) (now (2)) of this section permits a refund of taxes paid regardless of whether the payment of them was voluntary or involuntary. Revenue Cabinet v. Castleton, Inc., 826 S.W.2d 334, 1992 Ky. App. LEXIS 67 (Ky. Ct. App. 1992).

The remedy for filing a claim for a refund of taxes pursuant to this section is not conditioned upon satisfaction of the procedural requirements provided in KRS 131.110 for filing a protest of a tax assessment. KRS 131.110 (1) allows a taxpayer 30 days within which to file such a protest. Subsection (3) of this section and KRS 139.770(1), on the other hand, are concerned with requests for refunds of taxes already paid and provide that claims for refund must be made within four (4) years of the due date of the return or the date the money was paid into the treasury, whichever is later. Revenue Cabinet v. Castleton, Inc., 826 S.W.2d 334, 1992 Ky. App. LEXIS 67 (Ky. Ct. App. 1992).

10. Overpayment Required for Refund.

Under KRS 134.580 , an “overpayment” or “payment where no tax was due” must occur before a refund is authorized under KRS 139.770 , and, thus, a taxpayer is only entitled to a refund if he has overpaid his tax liability; therefore, although the court had held that a timely notice of assessment issued by the Commonwealth of Kentucky, Revenue Cabinet was deficient under KRS 131.081(8) and KRS 131.110(1) and that its subsequent notice was barred by the statute of limitations under KRS 139.620(1), it accepted the Cabinet’s alternative argument that the taxpayer was not entitled to a refund concerning the sales and use taxes it paid during a certain period because it did not “overpay” its taxes for that period, and it held that the Cabinet had the right to retain prior excess payments for that time period to the extent that they did not exceed the amount which might have been properly assessed and demanded. GTE South, Inc. v. Commonwealth, 2004 Ky. App. LEXIS 86 (Ky. Ct. App. 2004), rehearing denied, 2004 Ky. App. LEXIS 180 (Ky. Ct. App. 2004), rev’d, Revenue Cabinet v. GTE South, Inc., 238 S.W.3d 655, 2007 Ky. LEXIS 160 ( Ky. 2007 ) (on grounds that notice was sufficient).

11. Immunity for Refund Claims.

Court denied individual state employees’ motions to dismiss on Eleventh Amendment immunity grounds the plaintiffs’ refund claims in which a group of corporations asserted that House Bill 316, KRS 134.580(9) and (10), operated as a taking of their refund claims and tax money. Where the lawsuit in question requests equitable relief against a State official in his official capacity for ongoing violations of federal law, the suit is not barred by the Eleventh Amendment, even if some payment by the state is required to comply. Johnson Controls, Inc. v. Kentucky, 2008 U.S. Dist. LEXIS 15872 (E.D. Ky. Feb. 29, 2008).

Cited in:

Owensboro v. Department of Revenue, 314 Ky. 172 , 234 S.W.2d 664, 1950 Ky. LEXIS 1046 ( Ky. 1950 ); Department of Revenue v. Kentucky Trust Co., 313 S.W.2d 401, 1958 Ky. LEXIS 256 ( Ky. 1958 ).

Opinions of Attorney General.

Money paid for permits for auger mining that took place prior to June 16, 1960, should be refunded. OAG 61-996 .

A mistake in the licensing of a truck may be corrected and a refund made of the difference between the lower and higher license tags’ cost. OAG 72-235 .

In the situation where a husband and wife have been divorced after filing a joint income tax return and a check payable to them jointly has been cashed, by one former spouse, on the forged endorsement of the other without his or her knowledge, when the check has been mailed to the proper address of one or both payees, and is actually received by one of the payees, the refund by the state has become effective, and the state has done all it is required to do. OAG 79-223 .

Research References and Practice Aids

Cross-References.

Recovery of erroneous gasoline tax refund, KRS 138.353 .

Refunding money legally paid into state treasury, special or local legislation on forbidden, Ky. Const., § 59(14).

Refunds:

Alcoholic beverage license tax, KRS 242.190 , 242.220 .

Aviation motor fuel tax, KRS 138.341 .

Gasoline tax, KRS 138.344 to 138.355 .

Income tax, KRS 141.235 .

Inheritance tax, KRS 140.110 , 140.140 .

Motor vehicle license tax, KRS 186.120 .

Kentucky Law Journal.

Oberst, Lewis, Claims Against the State of Kentucky, 42 Ky. L.J. 65 (1953); Lockyer, History of the Kentucky Income Tax, 43 Ky. L.J. 461 (1955).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

134.590. Refund of ad valorem taxes or taxes held unconstitutional.

  1. When the appropriate state government agency determines that a taxpayer has paid ad valorem taxes into the state treasury when no taxes were due or has paid under a statute held unconstitutional, the state government agency which administers the tax shall refund the money, or cause it to be refunded, to the person who paid the tax. The state government agency shall not authorize a refund to a person who has paid the tax due on any tract of land unless the taxpayer has paid the entire tax due the state on the land.
  2. No state government agency shall authorize a refund unless each taxpayer individually applies for a refund within two (2) years from the date the taxpayer paid the tax. Each claim or application for a refund shall be in writing and state the specific grounds upon which it is based. Denials of refund claims or applications may be protested and appealed in accordance with KRS 49.220 and 131.110 . No state government agency shall refund ad valorem taxes, except those held unconstitutional, unless the taxpayer has properly followed the administrative remedy procedures established through the protest provisions of KRS 131.110 , the appeal provisions of KRS 133.120 , the correction provisions of KRS 133.110 and 133.130 , or other administrative remedy procedures.
  3. If a taxpayer pays city, urban-county, county, school district, consolidated local government, or special district ad valorem taxes to a city, urban-county, county, school district, consolidated local government, or special district when no taxes were due or the amount paid exceeded the amount finally determined to be due, the taxes shall be refunded to the person who paid the tax.
  4. Refunds of ad valorem taxes shall be authorized by the mayor or chief finance officer of any city, consolidated local government, or urban-county government for the city, consolidated local government, or urban-county government or for any special district for which the city, consolidated local government, or urban-county government is the levying authority, by the county judge/executive of any county for the county or special district for which the fiscal court is the levying authority, or by the chairman or finance officer of any district board of education.
  5. Upon proper authorization, the sheriff or collector shall refund the taxes from current tax collections he or she holds. If there are no such funds, the district’s finance officer shall make the refunds. The sheriff or collector shall receive credit on the next collection report to the district for any refunds the sheriff or collector makes.
  6. No refund shall be made unless each taxpayer individually applies within two (2) years from the date payment was made. If the amount of taxes due is in litigation, the taxpayer shall individually apply for refund within two (2) years from the date the amount due is finally determined. Each claim or application for a refund shall be in writing and state the specific grounds upon which it is based. No refund for ad valorem taxes, except those held unconstitutional, shall be made unless the taxpayer has properly followed the administrative remedy procedures established through the protest provisions of KRS 131.110 , the appeal provisions of KRS 133.120 , the correction provisions of KRS 133.110 and 133.130 , or other administrative remedy procedures.
  7. Notwithstanding other statutory provisions, for property subject to a tax rate that is set each year based on the certified assessment, a taxing district may recover any loss of ad valorem tax revenue it suffers due to the issuance of refunds by adjusting the following tax year’s tax rate.

HISTORY: 162, 163, 4114h-7: amend. Acts 1954, ch. 5, § 1; 1966, ch. 187, part I, § 2; 1980, ch. 270, § 1, effective July 15, 1980; 1990, ch. 177, § 2, effective July 13, 1990; 1992, ch. 391, § 5, effective July 14, 1992; 1996, ch. 344, § 2, effective July 15, 1996; 2002, ch. 346, § 172, effective July 15, 2002; 2005, ch. 112, § 2, effective June 20, 2005; 2017 ch. 74, § 77, effective June 29, 2017.

Compiler’s Notes.

Section 11 of Acts 1996, ch. 344 read, “The provisions of this act shall apply for taxable years beginning after December 31, 1995.”

NOTES TO DECISIONS

  1. Application.
  2. Class Suits.
  3. Interest.
  4. Review or Correction of Assessment.
  5. Application for Refund.
  6. —Time Limitation.
  7. Prospective Effect of Unconstitutionality.
  8. Unconstitutional Statutes.
1. Application.

This section applies only to taxes. Excessive costs taxed by the master commissioner of Jefferson County, and paid into the treasury, cannot be recovered under this section. Commonwealth use of Bouteiller v. Ray, 275 Ky. 758 , 122 S.W.2d 750, 1938 Ky. LEXIS 496 ( Ky. 1938 ).

This section, which authorizes reimbursements for unconstitutional taxes, as opposed to overpayments, does not provide for interest; and the tax interest rate statute, KRS 131.183 , applies only to overpayments. Commonwealth Revenue Cabinet v. St. Ledger, 955 S.W.2d 539, 1997 Ky. App. LEXIS 57 (Ky. Ct. App. 1997).

The statute is expressly limited to refunds for ad valorem taxes or unconstitutional taxes and is not applicable to an occupational tax which is voided because the ordinance implementing it was not properly enacted. Maximum Mach. Co. v. City of Shepherdsville, 17 S.W.3d 890, 2000 Ky. LEXIS 29 ( Ky. 2000 ).

Statute governing method used to obtain refunds of excessive or unconstitutional ad valorem tax payments, KRS 134.590 did not confer jurisdiction over municipal ad valorem real property taxes upon the Kentucky Board of Tax Appeals, and, thus, the trial court erred in dismissing the real property owners’ class action lawsuit filed in the trial court on the ground that it should have been filed with the Kentucky Board of Tax Appeal. Light v. City of Louisville, 93 S.W.3d 696, 2002 Ky. App. LEXIS 2343 (Ky. Ct. App. 2002).

Where a city’s flat rate tax was a specific or per unit tax and not based on value, it was invalid and unconstitutional, and the tax could not have been deemed ad valorem by judicial action and thereby come within KRS 134.590(3); it was error for an intermediate appellate court to apply that statute in holding that a taxpayer did not have standing to establish class certification for refund purposes. City of Bromley v. Smith, 149 S.W.3d 403, 2004 Ky. LEXIS 269 ( Ky. 2004 ).

Boards sued by the taxpayers over the Boards’ compliance or lack thereof with a state statute governing increases or decreases in the tax levy neither alleged that the taxpayers lacked an adequate remedy under state law. As a result, the case that the taxpayers filed in state court that was removed to the federal trial court could be remanded back to the state trial court, not only because of the jurisdictional bar of the Tax Injunction Act, but also because the Boards did not show that the taxpayers had failed to exhaust their administrative remedies, as KRS 134.590 required. Coleman v. Campbell County Library Bd. of Trs., 901 F. Supp. 2d 925, 2012 U.S. Dist. LEXIS 140859 (E.D. Ky. 2012 ).

2. Class Suits.

A taxpayer may maintain a suit for a refund only for his own taxes, and may not sue on behalf of other taxpayers similarly situated. Swiss Oil Corp. v. Shanks, 208 Ky. 64 , 270 S.W. 478, 1925 Ky. LEXIS 216 ( Ky. 1925 ), cert. denied, 273 U.S. 407, 47 S. Ct. 393, 71 L. Ed. 709, 1927 U.S. LEXIS 976 (1927), aff’d, Swiss Oil Corp. v. Shanks, 273 U.S. 407, 47 S. Ct. 393, 71 L. Ed. 709, 1927 U.S. LEXIS 976 (1927). See Corbin Brick Co. v. Somerset, 280 Ky. 208 , 132 S.W.2d 922, 1939 Ky. LEXIS 91 ( Ky. 1939 ).

Kentucky’s General Assembly omitted the phrase “in each case” from KRS 134.590 with the intent to change the law; the effect was to alter the statute to permit taxpayers requesting a refund for an ad valorem tax to bring the claim as a class action. City of Somerset v. Bell, 156 S.W.3d 321, 2005 Ky. App. LEXIS 3 (Ky. Ct. App. 2005).

3. Interest.

The taxpayer is not entitled to interest on the amount of taxes refunded to him. Coleman v. Reamer's Ex'r, 237 Ky. 603 , 36 S.W.2d 22, 1931 Ky. LEXIS 657 ( Ky. 1931 ).

It is a general rule that unless authorized by statute, interest is not collectible on taxes due the state, county, or subdivision thereof, nor on a refund thereof. Commonwealth ex rel. Allphin v. St. Matthews Gas & Electric Shop, Inc., 286 S.W.2d 911, 1956 Ky. LEXIS 435 ( Ky. 1956 ).

4. Review or Correction of Assessment.

Collection of taxes under an illegal assessment may be enjoined. Negley v. Henderson Bridge Co., 107 Ky. 414 , 54 S.W. 171, 21 Ky. L. Rptr. 1154 , 1899 Ky. LEXIS 181 ( Ky. 1899 ).

5. Application for Refund.

The property owners were not entitled to refunds automatically of the property taxes when the assessment was declared unconstitutional; subsection (6) of this section is not self-executing and application for refund must be made individually. Board of Education v. Taulbee, 706 S.W.2d 827, 1986 Ky. LEXIS 245 ( Ky. 1986 ).

Although the city argued that a taxpayer’s appeal from an administrative denial of an application for a refund of ad valorem tax payments that were improperly collected had to be taken to the Kentucky Board of Appeal rather than the trial court, the statutes cited in KRS 134.590(6) for that proposition all concerned property valuation administrator assessments and not the dispute that involved the real property owners, which was the dispute over the city’s ad valorem tax rate. Light v. City of Louisville, 93 S.W.3d 696, 2002 Ky. App. LEXIS 2343 (Ky. Ct. App. 2002).

Although various provisions of KRS chs. 131 to 143A refer to city tax rates and revenues, those references, without more, do not amount to the addressing of city revenue and taxation matters by an administrative arm of central state government for purposes of Kentucky Board of Tax Appeals jurisdiction; thus, an action by taxpayers seeking a refund of improperly assessed ad valorem taxes did not fall within the Board’s jurisdiction. City of Somerset v. Bell, 156 S.W.3d 321, 2005 Ky. App. LEXIS 3 (Ky. Ct. App. 2005).

As taxpayers’ action sought refunds of improperly assessed ad valorem taxes rather than property value administrator assessments, the administrative procedures set forth in KRS 134.590(6) were not implicated and the taxpayers exhausted their administrative remedies when they filed their requests for refunds. City of Somerset v. Bell, 156 S.W.3d 321, 2005 Ky. App. LEXIS 3 (Ky. Ct. App. 2005).

Company could receive a refund of its payment of an ad valorem tax assessment, where the company filed its refund claim within the statute of limitations provided by KRS 134.590 , protested the denial of its claim in accordance with KRS 131.110 , and exhausted the administrative remedies available. Dep't of Revenue, Fin. & Admin. Cabinet v. Cox Interior, Inc., 2010 Ky. App. Unpub. LEXIS 1008 (Ky. Ct. App. Nov. 5, 2010), aff'd, 400 S.W.3d 240, 2013 Ky. LEXIS 288 ( Ky. 2013 ).

“Or other administrative remedy procedures” language at the end of KRS 134.590(2) is an acknowledgement that a protest pursuant to KRS 131.110 is not the only administrative remedy procedure that may be applicable in a refund situation. Indeed, the disjunctive use of the word “or” which joins “other administrative remedy procedures,” evidences an intention that all prior references in the sentence are not to be treated as conjunctive, or in steps, but in the disjunctive, and this affords the taxpayer the option to use any one and maybe all of the administrative remedies available. Dep't of Revenue, Fin. & Admin. Cabinet v. Cox Interior, Inc., 2010 Ky. App. Unpub. LEXIS 1008 (Ky. Ct. App. Nov. 5, 2010), aff'd, 400 S.W.3d 240, 2013 Ky. LEXIS 288 ( Ky. 2013 ).

6. —Time Limitation.

If no litigation testing the constitutionality of a tax is filed in two (2) years, the time for administrative application will expire after two (2) years elapse from the date payment was made; thus, subsequent litigation which decides constitutionality will not benefit the taxpayer individually by extending the time for applying for a refund beyond the two (2) year limit included in subsection (6) of this section. Griggs v. Dolan, 759 S.W.2d 593, 1988 Ky. LEXIS 69 ( Ky. 1988 ).

By this statute, the General Assembly has clearly expressed a will that tax payments made under a statute later held to be unconstitutional shall be refunded, provided application for refund is made within two (2) years from the date payment was made and regardless of whether the holding of unconstitutionality is to be applied only prospectively or retroactively. Revenue Cabinet v. Gossum, 887 S.W.2d 329, 1994 Ky. LEXIS 85 ( Ky. 1994 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

The right to file for a refund under this section against the Board of Education expired two (2) years after the taxes were paid because the Board of Education was not a party to the litigation which held that taxes had been assessed by an unconstitutional method and were subject to refund; however, those taxpayers, members of the class whose taxes were collected by an unconstitutional method of assessment, had two (2) years from the finality date to apply for a refund for ad valorem taxes paid to other taxing agencies named in that law suit. Griggs v. Dolan, 759 S.W.2d 593, 1988 Ky. LEXIS 69 ( Ky. 1988 ).

The plain meaning of subsection (2) of this section makes the two (2) year period after the filing for a tax refund, not the filing of a lawsuit, the appropriate period of limitations where suit was filed challenging the constitutionality of taxation statutes. St. Ledger v. Revenue Cabinet, 942 S.W.2d 893, 1997 Ky. LEXIS 17 ( Ky. 1997 ), modified, 1997 Ky. LEXIS 45 (Ky. Apr. 24, 1997), reprinted, 942 S.W.2d 893 ( Ky. 1997 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

Subsection (6) of this section applies only to refund claims against local taxing districts and not to refunds against the State. St. Ledger v. Revenue Cabinet, 942 S.W.2d 893, 1997 Ky. LEXIS 17 ( Ky. 1997 ), modified, 1997 Ky. LEXIS 45 (Ky. Apr. 24, 1997), reprinted, 942 S.W.2d 893 ( Ky. 1997 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

Tax imposed on certain intangible property was an ad valorem property tax, and thus the two-year statute of limitations contained in KRS 134.590 applied to an insurance company’s claim for a refund rather than the four-year statute of limitations in KRS 134.580 ; neither equitable recoupment nor set-off were available to the insurance company. Am. Life & Accident Ins. Co. of Ky. v. Commonwealth, 173 S.W.3d 910, 2004 Ky. App. LEXIS 299 (Ky. Ct. App. 2004).

Taxpayer’s failure to comply fully with the timeliness requirements of KRS 133.120 prevented the taxpayer from seeking a tax refund of an overpayment under the provisions of KRS 134.590 . Commonwealth v. Cromwell Louisville Assocs., 2008 Ky. App. LEXIS 250 (Ky. Ct. App. Aug. 8, 2008), aff'd, 323 S.W.3d 1, 2010 Ky. LEXIS 230 ( Ky. 2010 ).

No specific administrative protest procedures are required for a tax refund claim involving a classification issue, which may be brought within two years after payment; thus, by filing for a refund of tangible personal property tax and appealing its denial before seeking judicial review, a taxpayer properly challenged the classification and tax rate applied to manufacturing machinery without going through the expedited assessment protest procedure. Dep't of Revenue, Fin. & Admin. Cabinet v. Cox Interior, Inc., 400 S.W.3d 240, 2013 Ky. LEXIS 288 ( Ky. 2013 ).

7. Prospective Effect of Unconstitutionality.

Where KRS 138.221 (now repealed) was declared unconstitutional effective May 31, 1988, the date upon which the New Energy Co. v. Limbach, 486 U.S. 269, 108 S. Ct. 1803, 100 L. Ed. 2d 302, 1988 U.S. LEXIS 2476 (1988) decision was rendered, taxes paid for any periods prior to that date were not paid “under a statute held unconstitutional” for purposes of this section. Revenue Cabinet, Commonwealth v. CSC Oil Co., 851 S.W.2d 497, 1993 Ky. App. LEXIS 55 (Ky. Ct. App. 1993).

8. Unconstitutional Statutes.

Where suit challenged the constitutionality of an exemption statute (former KRS 136.030(1)), a corporate shares tax statute ( KRS 132.020 ), and involved the Revenue Cabinet and such statutes were declared unconstitutional, taxpayers were required to file for a refund for taxes paid under such statutes within two (2) years of payment of such taxes as provided in KRS 134.590(1) and (2), not two (2) years from the date of filing the lawsuit challenging the constitutionality of the statutes as provided in KRS 134.590(6). St. Ledger v. Revenue Cabinet, 942 S.W.2d 893, 1997 Ky. LEXIS 17 ( Ky. 1997 ), modified, 1997 Ky. LEXIS 45 (Ky. Apr. 24, 1997), reprinted, 942 S.W.2d 893 ( Ky. 1997 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

Cited in:

Bischoff v. Newport, 733 S.W.2d 762, 1987 Ky. App. LEXIS 525 (Ky. Ct. App. 1987); Barrett v. Reynolds, 817 S.W.2d 439, 1991 Ky. LEXIS 146 ( Ky. 1991 ).

Opinions of Attorney General.

A Department of Revenue (now Revenue Cabinet) memorandum dated December 1981, which takes the administrative position that any qualified person who files for the exemption provided in the 1981 amendment to Const., § 170 by the end of 1981 is due an appropriate reduction in 1981 ad valorem taxes, is the “proper authorization” required by subsection (5) of this section to allow the sheriff to refund the taxes due to a qualified disabled person for 1981 ad valorem taxes collected and in his possession. OAG 82-12 .

Letter of electric corporation attached to payment of ad valorem taxes protesting payment and asking the sheriff to sign the letter acknowledging receipt of the protest did not constitute a valid or legal protest, since such taxes are assessed by the Revenue Cabinet and thus protests of such assessments must be made to the Revenue Cabinet; therefore, the sheriff should not sign such protest. OAG 83-202 .

Research References and Practice Aids

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Ad Valorem Taxes on Motor Vehicles and Motorboats

134.800. County clerk to collect ad valorem taxes on motor vehicles registered by him — Acceptable means of payment.

The county clerk shall be collector of all state, county, city, urban-county government, school, and special taxing district ad valorem taxes on motor vehicles registered by him. The clerk may accept payment of taxes due by any commercially acceptable means including credit cards.

History. Enact. Acts 1982, ch. 264, § 7, effective January 1, 1984; 1986, ch. 431, § 1, effective July 15, 1986; 1998, ch. 209, § 17, effective March 30, 1998.

Compiler’s Notes.

Section 21 of Acts 1998, ch. 209, provided that the 1998 amendments to this section “shall apply for assessments made on or after January 1, 1998.”

NOTES TO DECISIONS

1. Constitutionality.

The fact that ad valorem taxes on motor vehicles are collected by the county clerk rather than the sheriff does not render the legislation unconstitutional; as long as the taxes are uniform, within a valid classification, it is not a “local or special” act. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

Opinions of Attorney General.

The term “special taxing district” as used in this section does not refer to cities, but refers to such districts as library districts, ambulance districts, etc.; therefore, this section does not provide for the collection of municipal ad valorem taxes on motor vehicles. OAG 83-400 .

While a fiscal court has the responsibility for aiding a sheriff in the payment of the sheriff’s necessary expenses of his office, where the sheriff’s revenues are insufficient, and where the county has available money through a properly budgeted item, the fiscal court has no authority to merely in the abstract make up a sheriff’s loss of revenue occasioned by a statutory enactment such as this section providing for the collection of ad valorem taxes on motor vehicles by the county clerk. OAG 84-248 .

The county clerk, even where a vehicle has been junked, destroyed, or is rendered inoperable on the highways, is still responsible for collecting the ad valorem taxes on the vehicle where the motor vehicle did not become junked, destroyed or rendered inoperable on the highways, until after January 1 of the tax year in question. OAG 84-309 .

134.805. Clerk’s commission for collecting taxes — Notices of ad valorem taxes due on motor vehicles.

  1. The county clerk shall be allowed by the Department of Revenue, for collecting state ad valorem taxes on motor vehicles, a commission of four percent (4%) on state taxes collected.
  2. The county clerk shall be allowed by the county treasurer, for collecting county and special district ad valorem taxes on motor vehicles, a commission of four percent (4%) on county and special taxes collected.
  3. The county clerk shall be allowed a commission of four percent (4%) of the school district taxes collected.
  4. Effective January 1, 1985, the county clerk shall be allowed a commission of four percent (4%) of the city or urban-county government taxes collected.
    1. For the convenience and benefit of the Commonwealth’s citizens and to maximize ad valorem tax collections, county clerks shall be responsible for causing the preparation and mailing of a notice of ad valorem taxes due to the January 1 owner, as defined in KRS 186.010(7)(a) and (c), of each motor vehicle no later than forty-five (45) days prior to the ad valorem tax and registration renewal due date in each calendar year. (5) (a) For the convenience and benefit of the Commonwealth’s citizens and to maximize ad valorem tax collections, county clerks shall be responsible for causing the preparation and mailing of a notice of ad valorem taxes due to the January 1 owner, as defined in KRS 186.010(7)(a) and (c), of each motor vehicle no later than forty-five (45) days prior to the ad valorem tax and registration renewal due date in each calendar year.
    2. When a vehicle is transferred in any year before the ad valorem taxes on that vehicle have been paid, a notice of taxes due shall be sent within ten (10) working days after the date of transfer or notice of transfer to the owner as of January 1 of that year.
    3. When ad valorem taxes on a vehicle become delinquent for sixty (60) days, as defined by KRS 134.810 , a second notice shall be sent within ten (10) working days to the January 1 owner of record. The notice shall inform the delinquent owner of the lien provisions provided by KRS 134.810 on all vehicles owned or acquired by the owner of the vehicle at the time the tax liability arose.
    4. These notices shall be calculated, prepared, and mailed first class on behalf of county clerks by the AVIS. Nonreceipt of the notices required herein shall not constitute any defense against applicable penalty, interest, lien fees, or costs recovery.

History. Enact. Acts 1982, ch. 264, § 8, effective January 1, 1984; 1984, ch. 54, § 2, effective July 13, 1984; 1988, ch. 113, § 5, effective December 31, 1988; 1996, ch. 352, § 1, effective July 15, 1996; 2002, ch. 316, § 2, effective July 15, 2002; 2005, ch. 85, § 281, effective June 20, 2005.

Legislative Research Commission Notes.

(7/15/2002). The amendments made to subsection (5) of this statute in 2002 Ky. Acts ch. 316, sec. 3, “shall apply for tax assessments made on or after January 1, 2003.” 2002 Ky. Acts ch. 316, sec. 5.

NOTES TO DECISIONS

1. Flat Fee Prohibited.

Although it may have been that the General Assembly’s intent was to create a flat four percent (4%) commission for the county clerks for collecting taxes, such interpretation would bring subsection (3) of this section into conflict with Ky. Const., §§ 180 and 184; therefore, a county clerk may not receive a fee for collecting the school tax which is in excess of his or her actual cost of collection, not exceeding four percent (4%). Benson v. Board of Education, 748 S.W.2d 156, 1988 Ky. App. LEXIS 11 (Ky. Ct. App. 1988).

Opinions of Attorney General.

The clerk’s fee for collecting school ad valorem taxes on motor vehicles is the reasonable cost of collecting such taxes, not to exceed four percent (4%). OAG 84-369 .

134.810. Date on which taxes become due or delinquent.

  1. All state, county, city, urban-county government, school, and special taxing district ad valorem taxes shall be due and payable on or before the earlier of the last day of the month in which registration renewal is required by law for a motor vehicle renewed or the last day of the month in which a vehicle is transferred.
  2. All state, county, city, urban-county government, school, and special taxing district ad valorem taxes due on motor vehicles shall become delinquent following the earlier of the end of the month in which registration renewal is required by law or the last day of the second calendar month following the month in which a vehicle was transferred.
  3. Any taxes which are paid within thirty (30) days of becoming delinquent shall be subject to a penalty of three percent (3%) on the taxes due. However, this penalty shall be waived if the tax bill is paid within five (5) days of the tax bill being declared delinquent. Any taxes which are not paid within thirty (30) days of becoming delinquent shall be subject to a penalty of ten percent (10%) on the taxes due. In addition, interest at an annual rate of fifteen percent (15%) shall accrue on said taxes and penalty from the date of delinquency. A penalty or interest shall not accrue on a motor vehicle under dealer assignment pursuant to KRS 186A.220 .
  4. When a motor vehicle has been transferred before registration renewal or before taxes due have been paid, the owner pursuant to KRS 186.010(7)(a) and (c) on January 1 of any year shall be liable for the taxes on the motor vehicle, except as hereinafter provided.
  5. If an owner obtains a certificate of registration for a motor vehicle valid through the last day of his second birth month following the month and year in which he applied for a certificate of registration, all state, county, city, urban-county government, school, and special tax district ad valorem tax liabilities arising from the assessment date following initial registration shall be due and payable on or before the last day of the first birth month following the assessment date or date of transfer, whichever is earlier. Any taxes due under the provisions of this subsection and not paid as set forth above shall be considered delinquent and subject to the same interest and penalties found in subsection (3) of this section.
  6. For purposes of the state ad valorem tax only, all motor vehicles:
    1. Held for sale by a licensed motor vehicle dealer, including licensed motor vehicle auction dealers;
    2. That are in the possession of a licensed motor vehicle dealer, including licensed motor vehicle auction dealers, for sale, although ownership has not been transferred to the dealer; and
    3. With a salvage title held by an insurance company;
  7. Any provision to the contrary notwithstanding, when any ad valorem tax on a motor vehicle becomes delinquent, the state and each county, city, urban-county government, or other taxing district shall have a lien on all motor vehicles owned or acquired by the person who owned the motor vehicle at the time the tax liability arose. A lien for delinquent ad valorem taxes shall not attach to any motor vehicle transferred while the taxes are due on that vehicle. For the purpose of delinquent ad valorem taxes on leased vehicles only, a lien on a leased vehicle shall not be attached to another vehicle owned by the lessor.
  8. The lien required by subsection (7) of this section shall be filed and released by the automatic entry of appropriate information in the AVIS database. For the filing and release of each lien or set of liens arising from motor vehicle ad valorem property tax delinquency, a fee of two dollars ($2) pursuant to this section shall be added to the delinquent tax account. The fee shall be collected and retained by the county clerk who collects the delinquent tax.
  9. The implementation of the automated lien system provided in this section shall not affect the manner in which commercial liens are recorded or released.

on January 1 of any year shall not be taxed as a motor vehicle pursuant to KRS 132.485 but shall be subject to ad valorem tax as goods held for sale in the regular course of business under the provisions of KRS 132.020(1)(e) and 132.220 .

History. Enact. Acts 1982, ch. 264, § 9, effective January 1, 1984; 1984, ch. 54, § 3, effective January 1, 1985; 1984, ch. 391, § 6, effective January 1, 1985; 1988, ch. 113, § 4, effective December 31, 1988; 1990, ch. 106, § 2, effective July 13, 1990; 1990, ch. 437, § 8, effective July 13, 1990; 1992, ch. 338, § 25, effective July 14, 1992; 1994, ch. 20, § 2, effective July 15, 1994; 1996, ch. 352, § 2, effective July 15, 1996; 1998, ch. 168, § 1, effective July 15, 1998; 1998, ch. 600, § 2, effective April 14, 1998; 2002, ch. 316, § 3, effective July 15, 2002; 2005, ch. 168, § 78, effective January 1, 2006; 2006, ch. 255, §§ 6, 18, effective January 1, 2007; 2013, ch. 94, § 4, effective June 25, 2013; 2019 ch. 151, § 13, effective June 27, 2019.

Compiler’s Notes.

Section 3 of Acts 1998, ch. 168, stated: “The amendments contained in this Act shall apply to taxable years beginning after December 31, 1998.”

Legislative Research Commission Notes.

(7/15/2002). The amendments made to subsection (4) of this statute in 2002 Ky. Acts ch. 316, sec. 3, “shall apply for tax assessments made on or after January 1, 2003.” 2002 Ky. Acts ch. 316, sec. 5.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Applicability.
1. Constitutionality.

Subsection (4) of this section, which requires that the purchaser shall become liable for the taxes on motor vehicles, does not violate the due process and equal protection clause of U.S. Const., Amend. 14; these taxes are paid only if the purchaser desires to register the motor vehicle for use upon the highway. Nor is the exclusion of dealers of motor vehicles from payment of these tax liens objectionable since the dealer is a mere conduit by and through which title is passed from one owner to another and no one—dealer or individual—is required to obtain a certificate of registration until such time as the motor vehicle is to be operated upon the highways of the state. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

Act 264 of 1982, governing motor vehicle taxation, was not special legislation for failure to provide for a two percent (2%) discount which is granted to real property and other personal property under KRS 134.020 (now repealed) since motor vehicles are a classification based upon distinctive and natural reasons, and under this act no motor vehicles are subjected to a discount within the classification; the mere fact that all taxes are not paid in a short period of time, as envisioned in former KRS 134.020 , et seq., does not render the legislation unconstitutional. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

While KRS 186A.120(3)(b), 186A.220 and 186A.230 exempt dealers who hold vehicles for resale from payment of the ad valorem tax, this is not a “halving” of a classification, but is only a method of fixing the time and the person responsible for payment of the ad valorem tax on all motor vehicles—to-wit, the purchaser of the vehicle at the time the vehicle is registered for use upon the highway, and the tax is payable by all persons, including an individual or a dealer, who intend to operate the vehicle on the highways of the state; these sections, read in conjunction with subsection (4) of this section, do not violate Ky. Const., §§ 59(15) or 171. Kling v. Geary, 667 S.W.2d 379, 1984 Ky. LEXIS 216 ( Ky. 1984 ).

2. Applicability.

Where the versions of KRS 134.810(4) and 186.021(2) in effect at the timestated that the owner of record of a motor vehicle on January 1 of any year was liable for ad valorem taxes on the vehicle, owners who purchased their vehicles near the end of a calendar year but took advantage of a statutory grace period to delay registering the vehicles until after January 1 of the following year were not liable for the taxes for such year since they did not become owners of record until the vehicles were registered. Revenue Cabinet v. O'Daniel, 153 S.W.3d 815, 2005 Ky. LEXIS 19 ( Ky. 2005 ).

Opinions of Attorney General.

Since commercial liens are referred to in KRS 186A.190(3), 186A.060(14), and 186.045 , the clerk should place these on the certificate of title, if they exist, and then after any commercial liens are listed, the clerk should place the tax liens on the certificate, where space permits, or into the computer. OAG 84-81 .

There is a conflict between KRS 134.148(2) (now repealed) and subsection (3) of this section, governing the filing of delinquent tax liens, to the extent that one is discretionary and the other is mandatory; since this section is the last in order of position and, more importantly, since this section mentions specifically the state ad valorem taxes on motor vehicles, while former KRS 134.148(2) only makes a general reference to taxes, this section controls and, therefore, the filing and recording of a lien on the face of the motor vehicle title and registration is mandatory as of January 1, 1984. OAG 84-81 .

134.815. Payment by clerk — Report of clerk.

  1. The county clerk shall, by the tenth of each month, report under oath and pay to the state, county, city, urban-county government, school, and special taxing districts all ad valorem taxes on motor vehicles collected by him for the preceding month, less the collection fee of the county clerk, which shall be deducted before payment to the depository. The county clerk shall be required to deposit state collections in a manner consistent with procedures established by the department for the prompt payment to the state of other state tax moneys collected by the county clerk.
  2. Any county clerk who fails to pay over any taxes collected by him on motor vehicles as required by subsection (1) of this section shall be required to pay a penalty of one percent (1%) for each thirty (30) day period or fraction thereof, plus interest at the legal rate per annum of such taxes.
  3. The county clerk may be granted an extension, not to exceed fifteen (15) days, for filing the monthly report to each district required by this section.
  4. In the event a motor vehicle is registered in a county other than that in which the vehicle had a taxable situs as of the most recent assessment date, the county clerk in the new county of registration shall be charged with collecting the ad valorem taxes due for the state, county, city, urban-county government, school and special tax districts in which the vehicle had situs. The county clerk making such collections shall receive commissions on collections as set out for other collections on motor vehicles.
  5. All moneys collected under this section by a county clerk on motor vehicles which had a taxable situs in another county shall be reported and deposited with the state, after he has deducted the appropriate commissions due from these collections, and such collections shall be distributed to the proper tax district.
  6. The department shall provide procedures governing receipt and disbursement of all moneys collected under subsections (4) and (5) of this section.

History. Enact. Acts 1982, ch. 264, § 10, effective January 1, 1984; 1984, ch. 54, § 4, effective January 1, 1985; 1988, ch. 355, § 1, effective July 15, 1988; 2005, ch. 85, § 282, effective June 20, 2005.

Legislative Research Commission Notes.

A technical correction has been made in subsection (5) by the Reviser of Statutes pursuant to KRS 7.136 .

134.820. Final settlement.

  1. Each county clerk shall annually, by January 31 of each year, make a settlement with the state, county, city, urban-county government, school, and special taxing districts for all ad valorem taxes on motor vehicles collected for the prior tax period. In the event that any county clerk resigns, dies or otherwise vacates his office, a settlement with all districts shall be made within thirty (30) days from the date the office is vacated.
  2. On final settlement, the clerk shall pay the state, county, city, urban-county government, school, or special taxing districts all moneys remaining in his hands to which they are entitled.

History. Enact. Acts 1982, ch. 264, § 11, effective January 1, 1984; 1984, ch. 54, § 5, effective January 1, 1985.

134.825. Data processing costs for AVIS for ad valorem collections to be paid by Department of Revenue.

The Department of Revenue shall be responsible for payment of all expenses related to the development and implementation of computer and administrative systems necessary to carry out the provisions of KRS 134.805 , 134.810 and 186A.145 and, further, shall reimburse each state agency involved for all ongoing operational costs, including the calculation, preparation, and mailing of notices of ad valorem property tax due on motor vehicles, incurred by each such agency in administering the provisions of KRS 134.805 , 134.810 and 186A.145 .

History. Enact. Acts 1988, ch. 113, § 11, effective March 28, 1988; 1990, ch. 112, § 1, effective July 13, 1990; 2005, ch. 85, § 283, effective June 20, 2005.

134.830. County clerk to collect ad valorem taxes on motorboats.

The collection of ad valorem taxes on motorboats shall be administered in the same manner and according to the same procedures provided for motor vehicles in KRS 134.800 to 134.820 .

History. Enact. Acts 1988, ch. 163, § 2, effective January 1, 1990.

Penalties

134.990. Penalties.

  1. Any sheriff who fails to make his or her annual settlement available as required by KRS 134.192 , or who fails to remit any amounts which are due to the taxing districts as required by law, shall be subject to indictment in his or her county of residence, and upon conviction shall be fined not less than five hundred dollars ($500) nor more than five thousand dollars ($5,000).
  2. Any sheriff who violates KRS 134.160(5) shall be fined not less than one hundred dollars ($100) nor more than five hundred dollars ($500) for each offense.
  3. Any sheriff who fails to maintain accurate records of ad valorem taxes collected, or who fails to collect taxes due that were collectable shall be held liable on his or her bond for the amount of the tax, penalties, interest, and costs due, plus a thirty percent (30%) penalty thereon. Action shall be brought in the Circuit Court of the county in which the tax is due, on motion of the county attorney or department on behalf of the state. All actions shall be prosecuted by the county attorney, who shall be entitled to retain the penalty recovered for services rendered if all amounts otherwise due are recovered and paid to the taxing jurisdictions entitled to receive those amounts.
  4. Any outgoing sheriff who fails for ten (10) days to comply with KRS 134.215 shall be fined not less than fifty dollars ($50) nor more than five hundred dollars ($500), and be liable on his or her bond for any default.
  5. In addition to the penalty imposed by KRS 134.191 , any sheriff who fails to report as required in KRS 134.191 shall be fined not less than one hundred dollars ($100) nor more than five hundred dollars ($500).
  6. Any person who is required to register with the department pursuant to KRS 134.129 who fails to register shall be fined not less than ten dollars ($10) or more than five hundred dollars ($500) for each certificate of delinquency purchased while the person was not registered but should have been.
  7. Any person who willfully fails to comply with any administrative regulation promulgated under KRS 134.547(3) shall be fined not less than twenty dollars ($20) nor more than one thousand dollars ($1,000).
  8. Any county attorney who contracts with the department to collect certificates of delinquency and personal property certificates of delinquency who fails to send the notices required by KRS 134.504(4) shall be fined not less than ten dollars ($10) nor more than one hundred dollars ($100) for each notice that he or she fails to send.
  9. Any sheriff who fails to keep his or her books in an intelligible manner and according to the form prescribed by the department, or to make the entries required by law, shall be fined not less than fifty dollars ($50) nor more than two hundred dollars ($200) for each offense.
  10. Any third-party purchaser who attempts to circumvent the fairness of the sale process established pursuant to KRS 134.128 by involving multiple entities or individuals in the bidding process at the annual sale:
    1. Shall be guilty of a Class A misdemeanor;
    2. May have the registration required by KRS 134.129 revoked; and
    3. May be prohibited from participating in future sales of priority certificates of delinquency.
    1. Any third-party purchaser who knowingly: (11) (a) Any third-party purchaser who knowingly:
      1. Demands costs or fees in excess of those permitted by KRS 134.452 ;
      2. Fails to send notices as required by KRS 134.490 , or to include in the notices the information required by KRS 134.490 ; or
      3. Fails to provide revised contact information as required by KRS 134.490;
    2. As used in this subsection, “knowingly” has the same meaning as in KRS 501.020 .
  11. Any person who fails to do an act required, or does an act forbidden, by any provision of this chapter for which no other penalty is provided shall be fined not less than ten dollars ($10) nor more than five hundred dollars ($500).

The county attorney and the Attorney General shall have concurrent jurisdiction for the investigation and prosecution of offenses under this section.

shall be subject to a fine of not less than one hundred dollars ($100) nor more than two hundred fifty dollars ($250) for the first offense, and for the second and any subsequent offenses, shall be fined not less than two hundred fifty dollars ($250) nor more than five hundred dollars ($500).

History. 4029, 4037, 4067, 4135, 4139, 4143, 4145, 4147, 4149b-8, 4149b-12, 4166, 4260c; Acts 1958, ch. 126, § 10; 1978, ch. 371, § 10, effective January 1, 1981; 1980, ch. 240, § 5, effective July 15, 1980; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 350, effective July 13, 1990; 1994, ch. 73, § 3, effective July 15, 1994; 1998, ch. 209, § 18, effective March 30, 1998; 2005, ch. 85, § 284, effective June 20, 2005; 2007, ch. 14, § 7, effective June 26, 2007; 2009, ch. 10, § 30, effective January 1, 2010; 2010, ch. 75, § 12, effective April 7, 2010.

Compiler’s Notes.

Former KRS 134.990 (4029, 4037, 4067, 4135, 4139, 4143, 4145, 4147, 4149b-8, 4149b-12, 4166, 4260c: amend. Acts 1958, ch. 126, § 10; 1978, ch. 371, § 10, effective January 1, 1981; 1980, ch. 240, § 5, effective July 15, 1980) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 350, effective July 13, 1990.

Section 21 of Acts 1998, ch. 209, provided that the 1998 amendments to this section “shall apply for assessments made on or after January 1, 1998.”

NOTES TO DECISIONS

Cited in:

Land v. Fayette County, 269 Ky. 543 , 108 S.W.2d 429, 1937 Ky. LEXIS 637 ( Ky. 1937 ).

Research References and Practice Aids

Kentucky Law Journal.

Moreland, Criminal Jurisdiction of Kentucky Courts: A Tentative Codification, 47 Ky. L.J. 7 (1958).

CHAPTER 135 Collection of Public Claims by Action

135.010. Attachment by sheriff to collect taxes or public dues — Notice — Parties.

  1. If the sheriff or other person having any taxes or public dues in his hands for collection believes another person to be indebted in money, property or other thing of value to the person owing the taxes or public dues, and believes he cannot otherwise collect the taxes or public dues, he shall sign and deliver or cause to be delivered to the person owing the taxes or public dues and to the person owing him, anywhere he may be found, written notice in substance as follows:
  2. All persons indebted to the person owing the taxes may be included in the same notice, though residing out of the county of the sheriff or collector. If necessary to the interest of the state, the court may cause other persons to be made parties to the proceedings.

“Mr. A B: The taxes due by C D amount to the sum of $ _________ . To that extent you are notified not to pay or deliver to him any money, property or other thing of value that you now owe or may hereafter be indebted to him, and to appear before the Circuit Court of _______________________________________ County, on the _________ day of _______________________________________ , 19 _________ , to show cause why you should not be adjudged to pay said taxes. This _________ day of _______________________________________ , nineteen _________ .”

History. 4184, 4185, 4187, 4188: amend. Acts 1976 (Ex. Sess.), ch. 14, § 152, effective January 2, 1978.

NOTES TO DECISIONS

  1. Exclusive Remedy.
  2. Distraint Proceedings.
  3. Presumption.
1. Exclusive Remedy.

The remedy provided by this section is not exclusive. Barrett v. Continental Realty Co., 130 Ky. 109 , 113 S.W. 66, 1908 Ky. LEXIS 248 ( Ky. 1908 ).

2. Distraint Proceedings.

Distraint proceedings constitute a wholly independent collection procedure which may be followed without regard to whether an action to enforce a tax lien has been previously brought, where the proceedings are held upon due notice, in circuit court, with provision made for the taxpayer to present any defenses to the collection which he might have, as well as an opportunity to the person distrained. Commonwealth ex rel. Carpenter v. Collins & May, 593 S.W.2d 887, 1980 Ky. App. LEXIS 295 (Ky. Ct. App. 1980).

An original proceeding under this chapter, without the prior proceedings under Chapter 134, would not be unconstitutional as denying due process of law. Commonwealth ex rel. Carpenter v. Collins & May, 593 S.W.2d 887, 1980 Ky. App. LEXIS 295 (Ky. Ct. App. 1980).

3. Presumption.

Where taxes were past due, and taxpayer was denying liability, there was a presumption that sheriff who brought attachment proceedings believed he could not otherwise collect the tax. Broadway Christian Church v. Com. & Trustees Broadway Christian Church, 112 Ky. 448 , 66 S.W. 32, 23 Ky. L. Rptr. 1695 , 1902 Ky. LEXIS 184 (Ky. Ct. App. 1902) (decided under prior law).

Opinions of Attorney General.

The tax collector is not required to obtain a return of “no property found” before an attachment or garnishment can be made to satisfy a judgment. OAG 64-379 .

In the case of attachment by the sheriff to collect taxes under this section, all parties having an interest in the property should be made a party to the attachment and be required to present their claims. OAG 67-478 .

It is legal to garnishee a person’s wages for unpaid city taxes. OAG 72-44 .

Research References and Practice Aids

Cross-References.

Attorney General to investigate and collect public claims, KRS 15.060 .

Commonwealth’s and county attorneys to investigate and collect public claims, KRS 69.040 , 69.240 .

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

135.020. Effect of notice of attachment — Hearing — Defense by taxpayer — Judgment — Delivery of debt to sheriff — Release of taxpayer.

  1. The notice referred to in KRS 135.010 shall operate to enjoin the person named in it from paying money, property, or any other thing of value owing at the time of the service of the notice or accruing thereafter, in the amount mentioned in the notice, until the matter is heard by the Circuit Court. The proceedings shall be docketed in the name of the state. On the hearing by the court, the court may hear evidence, and the person named in the notice shall be compelled to disclose in open court all matters of account and indebtedness, whether of money, property, or labor, owing at the date of the notice or incurred thereafter.
  2. The taxpayer may defend by showing that the property on which the tax claim is based has never been assessed, or that the property is not subject to taxation, or that the taxes have been paid, but it shall not be sufficient to show a defective assessment merely.
  3. The judgment shall provide for the payment of the taxes due, and shall direct the person named in the notice to pay or deliver to the sheriff or collector any money, property, or other thing of value due the taxpayer at that time or at the time the notice was served, to the extent of the taxes and costs, or to the extent of his liability, including such liability as accrued after notice though paid or discharged. If it is property, the sheriff or collector shall sell it, after advertising by handbill posted at the courthouse door for ten (10) days. If the person named in the notice fails to attend or to make disclosure, the court shall render judgment against him for the full amount due from the taxpayer.
  4. The person owing taxes shall not be discharged from liability for them until they are fully paid, or the amount thereof is realized under the attachment proceedings.

History. 4185, 4186, 4188, 4189: amend. Acts 1976 (Ex. Sess.), ch. 14, § 153, effective January 2, 1978.

Legislative Research Commission Notes.

(12/31/97). The phrase “of the notice” has been restored after the word “service” in subsection (1) of this statute. Although inadvertently omitted from the text of this subsection in 1976 (1st Extra. Sess.) Ky. Acts ch. 14, sec. 153, the phrase was not deleted because it was not bracketed. See KRS 446.145 .

NOTES TO DECISIONS

1. Distraint Proceedings.

Distraint proceedings constitute a wholly independent collection procedure which may be followed without regard to whether an action to enforce a tax lien has been previously brought, where the proceedings are held upon due notice, in Circuit Court, with provisions made for the taxpayer to present any defenses to the collection which he might have, as well as an opportunity to the person distrained. Commonwealth ex rel. Carpenter v. Collins & May, 593 S.W.2d 887, 1980 Ky. App. LEXIS 295 (Ky. Ct. App. 1980).

An original proceeding under this chapter, without the prior proceedings under Chapter 134, would not be unconstitutional as denying due process of law. Commonwealth ex rel. Carpenter v. Collins & May, 593 S.W.2d 887, 1980 Ky. App. LEXIS 295 (Ky. Ct. App. 1980).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

135.030. Issue of process and executions on judgments in favor of the state.

  1. Each Circuit Court clerk shall, after the expiration of ten (10) days from the rendition of judgment in favor of the state, unless otherwise ordered by the court, issue proper process and place it in the hands of the sheriff on all such judgments that have not been paid or replevied in the office or remitted or respited by the Governor, and each such clerk shall, within ten (10) days after the maturity of each replevied bond on any such judgment entered in the court of which he is clerk, issue executions and place them in the hands of the sheriff. Upon an execution so issued upon any replevied bond being returned by the sheriff without making the money, the officer who issued it shall reissue executions and place them in the hands of the sheriff from time to time at least once every ten (10) months for a period of five (5) years, and as often thereafter as demanded by the Commonwealth’s attorney, county attorney, sheriff or Circuit Court clerk. Upon all such judgments, executions or capias pro fine that are stayed or respited by the Governor, the clerk of the court in which the judgment has been entered shall issue proper process and place it in the hands of the sheriff within ten (10) days after the expiration of the stay or respite. A receipt shall be taken from the sheriff for all process placed in his hands pursuant to this section.
  2. Upon the failure of any Circuit Court clerk to discharge his duties as required in this section, he shall be held responsible on his official bond for the amount of the judgment, interest and costs to which such failure is applicable.
  3. Nothing in this section shall authorize the Governor to remit any judgment unless it is a fine imposed as a punishment.

History. 4245: amend. Acts 1976, ch. 28, § 1; 1976 (Ex. Sess.), ch. 14, § 154, effective January 2, 1978.

NOTES TO DECISIONS

  1. Avoiding Execution.
  2. Failure to Make Return.
  3. Capias Pro Fine.
1. Avoiding Execution.

Defendant in judgment for fine or forfeiture may pay amount of fine or forfeiture to judge of court in which judgment was entered, to avoid expense of execution. National Surety Co. v. Commonwealth, 253 Ky. 607 , 69 S.W.2d 1007, 1934 Ky. LEXIS 694 ( Ky. 1934 ).

2. Failure to Make Return.

Remedy against officer who fails to make return on executions placed in his hands for execution is by motion or action in the court from which the executions issued. Board of Councilmen v. Rice, 249 Ky. 771 , 61 S.W.2d 614, 1933 Ky. LEXIS 593 ( Ky. 1933 ).

3. Capias Pro Fine.

Circuit clerk could issue capias pro fine on judgment imposing fine, although verdict did not provide that defendant should be confined in jail until fine was paid. Farris v. Dozier, 82 S.W. 615, 26 Ky. L. Rptr. 892 , 1904 Ky. LEXIS 414 (Ky. Ct. App. 1904) (decided under prior law).

Opinions of Attorney General.

No liability would attach on the county judge’s official bond if the judge (now county judge/executive) had discharged his duties as required by the statute. OAG 61-754 .

While it is the duty of the city attorney under KRS 26.480 (repealed) to look after unsatisfied judgments in favor of the city or state and see that proper process is issued, there is no restriction in the statute which would prevent the police court from issuing an execution of its own violation on its unsatisfied judgments. OAG 66-151 .

A judge is required to issue an execution and place it in the hands of the sheriff within ten (10) days after the maturity of each replevin bond on such judgments. OAG 68-526 .

If a capias pro fine is not issued within ten (10) days after the end of a term of court, the judge is liable for the fine and costs. OAG 68-526 .

Upon an execution so issued upon a replevin bond being returned without the money, the judge is required to reissue executions and place them with the sheriff from time to time at least once every ten (10) months for a period of five (5) years. OAG 68-526 .

When a replevin bond is unsatisfied, the judge should require the county attorney and the Commonwealth’s Attorney to proceed against the surety since all three (3) are jointly responsible for collecting the debt. OAG 68-526 .

Where the defendant was not committed to jail and no replevin bond was executed, the county judge (now county judge/executive) must issue a capias within ten (10) days after adjournment of the term of court during which the judgment of conviction was entered. OAG 68-526 .

Under this section, if no appeal was perfected from the judgment of civil contempt within the time permitted, and the judgment imposing the fines has become final, it is the duty of the Circuit Court Clerk to issue proper process on said judgment within ten (10) days after the adjournment of the term of court during which the judgment was rendered, and place such process in the hands of the sheriff if the judgment has not been paid or replevied. OAG 69-462 .

Payment of fines and costs by a magistrate pursuant to this section ends the responsibility of the affected defendants to pay such fines and costs to the court. OAG 70-250 .

A city is not liable for the tax imposed by this section on the use of tangible personal property purchased outside of the Commonwealth for use in the city. OAG 70-259 .

Where no replevin bond is made, a writ of capias pro fine may be used to take the defendant into custody and confine him until the fine is satisfied in the manner prescribed by law. OAG 71-138 .

In order for a police judge to avoid liability for the failure to collect the unpaid fines, he must be able to show that he pursued the various procedures set out in this section and KRS 26.530 (repealed). OAG 73-689 .

Research References and Practice Aids

Cross-References.

Attorney General to investigate and collect judgments due the state, KRS 15.060 .

Commonwealth’s and county attorneys to investigate and collect unsatisfied judgments, KRS 69.040 , 69.240 .

135.040. Equitable action by Department of Revenue on unsatisfied execution or uncollectible tax bill — County attorney to assist — Limitation — Penalty.

  1. On the return of “no property found” on an execution issued upon a judgment in favor of the state, the Department of Revenue may institute equitable proceedings in the Franklin Circuit Court or any other court of competent jurisdiction, in the name of the state and on the relation of the commissioner of revenue. The choses in action or other equitable estate of the delinquent shall be subjected to the payment of the amount due on any such execution.
  2. On the return to the fiscal court or the county clerk of any tax bill as uncollectible, a like suit may be instituted in the name of the state on the relation of the commissioner of revenue in any court of competent jurisdiction, and the choses in action or other equitable estate of the delinquent may be subjected to the amount due on any such tax bill. In such proceedings attachment may issue and other proceedings may be taken as are authorized on the return of “no property found” on an execution in favor of individuals.
  3. The county attorneys of the respective counties shall assist the Department of Revenue in prosecuting the actions mentioned in this section.
  4. No action shall be maintained under the provisions of subsection (1) of this section when the last execution issued has been returned “no property found” more than ten (10) years before the institution of the action, nor shall an action be maintained on the uncollectible tax bill under the provisions of subsection (2) of this section more than five (5) years after the date of the return by the sheriff or collector.
  5. Every person against whom an execution has been returned “no property found” and upon which an equitable action is instituted, as provided in subsection (1) of this section, shall be liable for a penalty of twenty percent (20%) of the amount due on the execution. The penalty may be recovered in the action, with the amount due on the execution. The penalty shall go to the delinquent tax fund provided for under KRS 134.552 , unless the county attorney assists in the prosecution, in which case one-half (1/2) shall go to the county attorney.

History. 4169, 4170: amend. Acts 1976 (Ex. Sess.), ch. 17, § 41, effective January 1, 1978; 1978, ch. 400, § 6, effective June 17, 1978; 2005, ch. 85, § 285, effective June 20, 2005; 2009, ch. 10, § 46, effective January 1, 2010.

NOTES TO DECISIONS

  1. Application.
  2. Unsatisfied Execution.
  3. Attachment.
  4. Appropriation of Property to Own Use.
  5. Agreement as to Enforcement of Judgment.
  6. Necessary Parties.
  7. Limitations on Actions.
  8. Penalty.
1. Application.

This section has no application to the assessment of omitted property. Commonwealth v. Southern Pac. Co., 127 Ky. 358 , 105 S.W. 466, 32 Ky. L. Rptr. 259 , 32 Ky. L. Rptr. 285 , 1907 Ky. LEXIS 138 ( Ky. 1907 ).

2. Unsatisfied Execution.

An equitable action in the name of the Commonwealth to recover money due upon a judgment in its favor can generally be instituted only after execution has been issued and returned “No property found.” Claryville, Grant's Lick & Butler Turnpike Co. v. Commonwealth, 107 S.W. 327, 108 S.W. 250, 32 Ky. L. Rptr. 1157 , 32 Ky. L. Rptr. 861 .

3. Attachment.

The fact that execution and attachment were for larger sum than was due on judgment did not constitute grounds for voiding attachment, where no property was taken under execution and court released attachment to extent of excess. Dade Park Jockey Club v. Commonwealth, 253 Ky. 314 , 69 S.W.2d 363, 1933 Ky. LEXIS 979 ( Ky. 1933 ).

4. Appropriation of Property to Own Use.

Where person owning all stock of corporation appropriated all of property of corporation to his own use to avoid payment of taxes owed by corporation, personal judgment against him for amount due for taxes was proper in action under this section. Martin v. Commonwealth, 181 Ky. 212 , 204 S.W. 84, 1918 Ky. LEXIS 513 ( Ky. 1918 ).

5. Agreement as to Enforcement of Judgment.

Revenue agent had no authority to agree with judgment defendant that judgment would be collected only out of proceeds of business operations of defendant. Dade Park Jockey Club v. Commonwealth, 253 Ky. 314 , 69 S.W.2d 363, 1933 Ky. LEXIS 979 ( Ky. 1933 ).

6. Necessary Parties.

Revenue agent who had prosecuted action in which judgment in favor of state was rendered was not necessary party to equitable action to collect judgment, notwithstanding that agent was entitled to part of proceeds of judgment. Dade Park Jockey Club v. Commonwealth, 253 Ky. 314 , 69 S.W.2d 363, 1933 Ky. LEXIS 979 ( Ky. 1933 ).

7. Limitations on Actions.

Actions under this section are governed by limitations provided by this section, not by KRS 413.120 . Klein v. Commonwealth, 271 Ky. 756 , 113 S.W.2d 20, 1938 Ky. LEXIS 41 ( Ky. 1938 ).

8. Penalty.

Taxpayer who had refused to pay taxes was liable, in equitable proceeding on tax bill returned as uncollectible, for 20 percent penalty provided for by this section. Klein v. Commonwealth, 271 Ky. 756 , 113 S.W.2d 20, 1938 Ky. LEXIS 41 ( Ky. 1938 ).

Cited in:

Commonwealth v. Bowman, 267 Ky. 50 , 100 S.W.2d 801, 1936 Ky. LEXIS 751 ( Ky. 1936 ).

Research References and Practice Aids

Cross-References.

Equitable action to satisfy judgment, after return of unsatisfied execution, KRS 426.381 .

Kentucky Law Journal.

Vanlandingham, The Fee System in Kentucky Counties, 40 Ky. L.J. 275 (1952).

135.050. Action by Department of Revenue to ascertain and collect taxes — Injunction — Attachment and garnishment.

  1. The commissioner of revenue shall prosecute diligently the collection of all license fees, omitted license, inheritance, estate, income, excise or franchise taxes, judgments or other moneys, claims or demands due the state from any person.
  2. The Department of Revenue may institute legal proceedings to ascertain the amount of tax due under any statute imposing a license, excise or income tax in favor of the state, and to enforce the collection of the amount due and the penalties and interest thereon, and, in the case of a license or excise tax, to enjoin the operation of the business of the delinquent until the tax is paid.
  3. The Department of Revenue may, at or after the commencement of an action under subsection (2) of this section to collect the amount of license, excise or income tax due and the penalties and interest thereon, have an attachment against the property of the person liable for the tax or a garnishment of his debtors, without the execution of a bond.

History. 4202a-31, 4223b-10, 4224c-8, 4224c-9, 4267, 4281b-23, 4281c-20, 4281e-9, 4281f-6, 4281f-7, 4281f-28, 4281g-13, 4281h-12, 4281i-6, 4281j-4: amend. Acts 1984, ch. 405, § 4, effective July 13, 1984; 2005, ch. 85, § 286, effective June 20, 2005.

NOTES TO DECISIONS

  1. Ad Valorem Taxes.
  2. Distilled Spirits Excise Tax.
  3. Coal Severance Tax.
  4. Penalty.
  5. Combined Remedies.
  6. Delinquent License Taxes.
  7. Employee Withholding Taxes.
1. Ad Valorem Taxes.

Where sheriff had made levy for purpose of enforcing ad valorem tax, and taxpayer filed suit to enjoin levy, revenue agent had no authority to bring action to collect tax while such proceedings were pending. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

With respect to ad valorem taxes, the Department of Revenue has no authority to maintain an action for collection until the ordinary processes provided for collection by the sheriff have been exhausted. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

2. Distilled Spirits Excise Tax.

Action to collect distilled spirits excise tax was properly brought in the name of the Commonwealth by the commissioner of revenue. Kentucky ex rel. Martin v. Morris Wholesale Liquor Distributing Co., 29 F. Supp. 310, 1939 U.S. Dist. LEXIS 2306 (D. Ky. 1939 ).

Petition in action to collect distilled spirits excise tax was sufficient to authorize an attachment, where petition set forth wording of this section and the applicable provisions of KRS 425.190 (now repealed). Kentucky ex rel. Martin v. Morris Wholesale Liquor Distributing Co., 29 F. Supp. 310, 1939 U.S. Dist. LEXIS 2306 (D. Ky. 1939 ).

3. Coal Severance Tax.

The tax upon the privilege of severing and processing coal in the Commonwealth is an excise tax; therefore, the trial court had jurisdiction under this section to grant an injunction against the severing of coal until delinquent severance taxes were paid. Circle "C" Coal Co. v. Commonwealth, 628 S.W.2d 883, 1981 Ky. App. LEXIS 317 (Ky. Ct. App. 1981).

4. Penalty.

Where injunction suit was dismissed by court and taxpayer paid tax to sheriff, revenue agent was not entitled to collect 20 percent penalty. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

5. Combined Remedies.

Tax, penalty and interest may be collected in one action. Kentucky ex rel. Martin v. Morris Wholesale Liquor Distributing Co., 29 F. Supp. 310, 1939 U.S. Dist. LEXIS 2306 (D. Ky. 1939 ).

6. Delinquent License Taxes.

County court had no jurisdiction of action to collect delinquent license taxes. Commonwealth v. Central Consumers' Co., 122 Ky. 418 , 91 S.W. 711, 28 Ky. L. Rptr. 1363 , 1906 Ky. LEXIS 46 ( Ky. 1906 ) (decided under prior law).

7. Employee Withholding Taxes.

Attorney was ordered permanently disbarred where he failed to pay over $39,000 in employee withholding taxes for several tax periods and was found liable to the Commonwealth of Kentucky Finance and Administration Cabinet in a civil complaint pursuant to KRS 135.050 and KRS 141.310(14). Ky. Bar Ass'n v. McDaniel, 205 S.W.3d 201, 2006 Ky. LEXIS 288 ( Ky. 2006 ).

Research References and Practice Aids

Cross-References.

Attorney General to investigate and collect judgments and demands due the state, KRS 15.060 .

Attorneys for collection of taxes and assessment of property, employment of, KRS 12.220 .

Auditing of revenue collection, KRS 43.050 .

Bank deposits tax, KRS 132.040 .

Certificates of delinquency, collection by action, KRS 134.490 .

City taxes, KRS 91.270 , 91.570 , 91.660 , 92.560 to 92.590 .

Collection of claims due state budget units, KRS 45.260 .

Collection of particular taxes by action:

Drainage tax, KRS 269.200 .

Gasoline tax, KRS 138.290 , 138.715 .

Income taxes, assessment of excess or omitted, KRS 141.210 .

Inheritance taxes, KRS 140.160 .

Inheritance taxes, limitation on action to collect, KRS 140.160 .

Omitted personal property tax, collection by action, KRS 132.290 .

Pari-mutuel tax, KRS 138.530 .

Special fuel tax, KRS 138.290 .

135.060. Action by employees of Department of Revenue for money due state or taxing district from collecting officer or taxpayer — Penalty.

  1. Employees of the Department of Revenue shall, when directed by the commissioner, institute actions in the name of the state, and in the name of any county, school or other taxing district, on relation of the commissioner, against any delinquent state, county or district officer or any person to recover taxes or any other money due the state or any county, school or other taxing district.
  2. Employees of the Department of Revenue before instituting or causing to be instituted any action that the commissioner is authorized by law to institute, shall file a copy of same with the commissioner, with a verified statement of the facts upon which it is based. No action shall be instituted or caused to be instituted by an employee until it is approved and authorized by the commissioner.
  3. In all actions brought under subsection (1) of this section in which a judgment is recovered, the party in default shall, in addition to the amount found to be due the state or any county, school or other taxing district, be adjudged to pay a penalty of twenty percent (20%) on the amount due.

History. 4258, 4263: amend. Acts 1984, ch. 405, § 5, effective July 13, 1984; 2005, ch. 85, § 287, effective June 20, 2005.

NOTES TO DECISIONS

  1. Authority to Institute Action.
  2. Ad Valorem Taxes.
  3. Inheritance Taxes.
  4. Automobile License.
  5. Penalty.
  6. —Avoidance.
  7. —Criminal.
  8. Appeal by Revenue Agent.
  9. Staff Attorneys.
1. Authority to Institute Action.

An action in the name of the Commonwealth to collect delinquent taxes can be brought only on the relation of some person authorized by statute to act as relator. Commonwealth v. Helm, 163 Ky. 69 , 173 S.W. 389, 1915 Ky. LEXIS 207 ( Ky. 1915 ).

Revenue agent had authority to institute action to ascertain and collect inheritance tax, but in such action value of estate could not be determined by jury, the inheritance tax law requiring value to be fixed by appraisers. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ).

2. Ad Valorem Taxes.

Where sheriff had made levy for purpose of enforcing ad valorem tax, and taxpayer had filed suit to enjoin levy, revenue agent had no authority to bring action to collect tax while such proceedings were pending. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

With respect to ad valorem taxes, a revenue agent has no authority to maintain an action for collection until the ordinary processes provided for collection by the sheriff have been exhausted. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

3. Inheritance Taxes.

Revenue agent had authority under this section to maintain proceedings necessary to collect an inheritance tax, and could recover the penalties allowed by law for the collection of other delinquent taxes. However, the action could not be maintained until the tax became delinquent under the terms of the inheritance tax law. Commonwealth v. Gaulbert's Adm'r, 134 Ky. 157 , 119 S.W. 779, 1909 Ky. LEXIS 365 ( Ky. 1909 ). See Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ).

4. Automobile License.

Revenue agent could not compel persons delinquent in obtaining automobile licenses to pay 20 percent (20%) penalty before being issued license. Atterbury v. Waldeck, 207 Ky. 818 , 270 S.W. 45, 1925 Ky. LEXIS 193 ( Ky. 1925 ).

5. Penalty.

Where injunction suit was dismissed by court and taxpayer paid tax to sheriff, revenue agent was not entitled to collect 20 percent penalty. Commonwealth v. Louisville Water Co., 132 Ky. 305 , 116 S.W. 712, 1909 Ky. LEXIS 116 ( Ky. 1909 ).

Where corporation filed correct reports for purpose of corporation license tax, but state assessing board made mistake in determining amount of stock upon which tax was to be based, corporation was not liable for 20 percent penalty in action by revenue agent to collect balance of taxes. American Tobacco Co. v. Commonwealth, 162 Ky. 716 , 172 S.W. 1085, 1915 Ky. LEXIS 141 ( Ky. 1915 ).

Where warehouseman paid tax on distilled spirits based on assessment made by city assessor, but city subsequently recognized that power to assess such spirits was vested solely in state board, and sought to recover additional taxes under increased assessment made by state board, warehouseman who refused to pay additional tax was liable for 20 percent penalty under city ordinance similar to this section. Jetts Bros. Distilling Co. v. Carrollton, 178 Ky. 561 , 199 S.W. 37, 1917 Ky. LEXIS 758 ( Ky. 1917 ), writ of error dismissed, 252 U.S. 1, 40 S. Ct. 255, 64 L. Ed. 421, 1920 U.S. LEXIS 1654 (U.S. 1920).

Twenty percent (20%) penalty is collectible only in connection with action to collect tax instituted on proper authorization, the penalty being added as part of the judgment. Atterbury v. Waldeck, 207 Ky. 818 , 270 S.W. 45, 1925 Ky. LEXIS 193 ( Ky. 1925 ).

The 20 percent penalty is to be computed on the amount of taxes found to be due, not on the taxes plus interest. Gold Trading Stamp Co. v. Commonwealth, 224 Ky. 136 , 5 S.W.2d 910, 1928 Ky. LEXIS 551 ( Ky. 1928 ).

Subsection (1) of KRS 134.380 (renumbered as KRS 134.547 ) which transfers to and vests in the commissioner of revenue all powers and authority heretofore or now exercised by revenue agents, auditor’s agents and other authorized agents in relation to bringing actions for recovery of delinquent state taxes, and subsection (2) of KRS 134.400 (renumbered as KRS 134.552 ) providing that the 20 percent penalty collected on delinquent taxes shall be paid into the state treasury and not to the particular agents instituting the action, modify subsection (1) of this section which authorizes a 20 percent overriding penalty on income taxes, interest and penalties recovered in a suit instituted by a field agent, accountant or attorney employed by the commissioner of revenue, so that the 20 percent penalty must be paid by all taxpayers against whom a judgment is recovered for delinquent taxes, regardless of whether the action is instituted by the commissioner of revenue or by an agent of his. Curd v. Commonwealth, 312 Ky. 457 , 227 S.W.2d 1003, 1950 Ky. LEXIS 677 ( Ky. 1950 ).

6. —Avoidance.

Neither ignorance of the law by the taxpayer or the assessing officers, nor failure of the latter to perform their duties, will relieve the taxpayer of the 20 percent penalty. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ).

Where action to collect delinquent inheritance taxes had been instituted by revenue agent, taxpayer could not avoid penalty by paying taxes to sheriff. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ).

7. —Criminal.

This section does not authorize a revenue agent to bring a civil action to subject a taxpayer to a criminal penalty and to recover 20 percent of the amount of the criminal penalty, where the taxpayer has not been convicted in a criminal prosecution. Louisville Water Co. v. Commonwealth, 132 Ky. 311 , 116 S.W. 711, 1909 Ky. LEXIS 115 ( Ky. 1909 ).

8. Appeal by Revenue Agent.

Under law, which provided for revenue agents with definite term of office, agent whose term had expired could not prosecute appeal in action brought by him in name of Commonwealth. Commonwealth by Hopkins v. Columbia Trust Co., 162 Ky. 825 , 173 S.W. 386, 1915 Ky. LEXIS 170 ( Ky. 1915 ).

9. Staff Attorneys.

Staff or in-house attorneys of the Department of Revenue who brought an action to collect delinquent severance taxes were not field agents, accountants, attorneys or independent contractors, and were not subject to the provisions of subsection (2) of this section relating to verification and commissioner approval. Circle "C" Coal Co. v. Commonwealth, 628 S.W.2d 883, 1981 Ky. App. LEXIS 317 (Ky. Ct. App. 1981).

Cited in:

Commonwealth ex rel. Meredith v. Reeves, 289 Ky. 73 , 157 S.W.2d 751, 1941 Ky. LEXIS 21 ( Ky. 1941 ); Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ).

135.070. Compromise or agreed judgment in action by Revenue Cabinet. [Repealed.]

Compiler’s Notes.

This section (4258: amend. Acts 1984, ch. 405, § 6, effective July 13, 1984; 1986, ch. 331, § 24, effective July 15, 1986; 1992, ch. 361, § 5, effective July 14, 1992) was repealed by Acts 1994, ch. 85, § 6, effective July 15, 1994.

135.080. Action by Department of Revenue against defaulting collector — Notice — Docketing and trial — Judgment.

  1. When an action is brought in the Franklin Circuit Court against a sheriff or clerk, or against the sureties on his official bond, or against his heirs, devisees or representatives, or against any other person required to pay money into the State Treasury or to do any other act required by law to be done in connection with the payment of money into the State Treasury after it has been collected, the Department of Revenue shall, twenty (20) days before the trial, mail to the defendant in the action, directed to him at the courthouse of his county, a notice in writing stating the amount judgment will be asked for and the time the court will be held. The department shall file a copy of this notice, with the name of the person to whom sent and the time when and the place where sent, with the clerk of the court, to be filed by him and kept with the papers in the action.
  2. The court, without further notice to the parties, shall proceed with the action. The department shall file with the clerk of the court a memorandum of the names of the parties, the amount due from each defaulter against whom judgment is demanded, and a copy of the bond if any. The clerk shall docket the action in the order in which the names stand on the memorandum.
  3. Judgments, when given against the defendants in the cases referred to in this section, shall be for the principal due with interest at the rate of ten percent (10%) per annum from the time the amount was due until paid.

History. 4171 to 4174: amend. Acts 1976 (Ex. Sess.), ch. 14, § 155, effective January 2, 1978; 2005, ch. 85, § 288, effective June 20, 2005.

NOTES TO DECISIONS

  1. Tax Collection.
  2. Franchise Taxes.
  3. Jurisdiction of Franklin Circuit Court.
  4. Interest.
  5. Claim.
  6. Correction of Error.
1. Tax Collection.

This section authorized proceedings in the Franklin Circuit Court against a taxpayer to collect taxes due from him, and also to collect penalty and interest due on the taxes. Kentucky ex rel. Martin v. Morris Wholesale Liquor Distributing Co., 29 F. Supp. 310, 1939 U.S. Dist. LEXIS 2306 (D. Ky. 1939 ).

2. Franchise Taxes.

Action against taxpayer, under this section, to collect franchise taxes due state, was governed by five (5) year period of limitations prescribed by law, and action was not barred where tax was assessed less than five (5) years before suit was brought, although tax should have been assessed earlier. Illinois C. R. Co. v. Commonwealth, 128 Ky. 268 , 108 S.W. 245, 32 Ky. L. Rptr. 1112 , 1908 Ky. LEXIS 52 ( Ky. 1908 ), aff'd, 218 U.S. 551, 31 S. Ct. 95, 54 L. Ed. 1147, 1910 U.S. LEXIS 2049 (U.S. 1910).

3. Jurisdiction of Franklin Circuit Court.

The fact that the taxing statute carried a criminal penalty which would have to be enforced in the county of the taxpayer’s residence did not deprive the Franklin Circuit Court of jurisdiction of the civil action. Kentucky ex rel. Martin v. Morris Wholesale Liquor Distributing Co., 29 F. Supp. 310, 1939 U.S. Dist. LEXIS 2306 (D. Ky. 1939 ).

4. Interest.

Law that provided for interest on judgments against taxpayers for delinquent taxes referred to interest after execution was issued, and not to interest accruing before judgment, and did not authorize ten percent (10%) interest in action to collect delinquent taxes. Licking Valley Bldg. Ass'n v. Commonwealth, 89 S.W. 682, 28 Ky. L. Rptr. 543 (1905) (decided under prior law).

5. Claim.

Person who had claim payable out of county levy could not claim ten percent (10%) interest under law that provided for interest on judgments against taxpayers for delinquent taxes, in action against sheriff to compel payment of claim. Combs v. Crawford, 44 S.W. 358, 19 Ky. L. Rptr. 1704 (1898) (decided under prior law).

6. Correction of Error.

Where auditor, in settling with sheriff (at time when settlements for state taxes were made with auditor), erroneously gave sheriff credit for more money than he had paid in, error could be corrected in action brought to recover balance due, and it was not necessary to maintain suit in equity to have error corrected before suing for balance due. Commonwealth v. Webb, 42 S.W. 737, 19 Ky. L. Rptr. 944 (1897) (decided under prior law).

Research References and Practice Aids

Cross-References.

Commonwealth’s Attorney, duties and fees in action against delinquent collecting officer, KRS 69.030 .

County treasurer to institute action against delinquent sheriff, KRS 68.020 .

135.090. Jury trial if execution of bond or instrument denied — Evidence admitted.

If any of the defendants in an action brought under KRS 135.080 shall, upon oath, deny the execution of the bonds or instruments whereby they are sought to be made liable, a jury, if required, shall be impaneled to try the facts. All other facts may be tried by the court. Nothing but a receipt from the State Treasurer for the payment of the taxes or money claimed shall be admitted on the trial, except orders of the court and receipts in pursuance thereof, the records of the Department of Revenue and the State Treasurer, and the delinquent list. No tender of payment nor any offset shall be pleaded or given in evidence.

History. 4175: amend. Acts 2005, ch. 85, § 289, effective June 20, 2005.

NOTES TO DECISIONS

  1. Correction of Mistake.
  2. Receipt from Auditor.
1. Correction of Mistake.

Mistake in making settlement with sheriff could be corrected in action brought against sheriff under law to recover sums erroneously credited to sheriff on settlement. Commonwealth v. Webb, 42 S.W. 737, 19 Ky. L. Rptr. 944 (1897) (decided under prior law).

2. Receipt from Auditor.

Receipt from auditor (at time when sheriff was required to settle with auditor for state taxes) was not a defense to action against sheriff for state taxes, where auditor had erroneously credited sheriff in settlement with more money than he had paid in, and treasurer’s receipt showed true amount paid in. Commonwealth v. Webb, 42 S.W. 737, 19 Ky. L. Rptr. 944 (1897) (decided under prior law).

135.100. Lien of judgment — Replevin of execution — Officer’s return — Interference with sale.

  1. Judgments in the name of the state or county against sheriffs and other public collectors, their sureties, or their heirs, devisees or personal representatives, or any of them, shall bind the estate, legal or equitable, of all of the defendants to the judgments from the commencement of the action until satisfied. No execution thereon shall be stayed by replevin or sale on credit, but in all such cases the estate taken in execution shall be sold for money, except that the Department of Revenue may, with the consent of the Attorney General, indorse the right to replevy on the execution where the tax is payable to the department, and a like privilege is given to the sheriff, with the consent of the county attorney, when the taxes are payable to the sheriff.
  2. Any officer who makes a false return on such execution shall be subjected to the payment of the whole amount of the execution and costs, in addition to the penalty provided by subsection (3) of KRS 135.990 .
  3. No person shall attempt, by any fraudulent execution, conveyance, encumbrance or otherwise, to stop or injure the sale of the estate under the execution.

History. 4176, 4177, 4180: amend. Acts 2005, ch. 85, § 290, effective June 20, 2005.

NOTES TO DECISIONS

  1. Lien.
  2. —Real Estate.
  3. —Statutory Exemptions.
  4. —Notice.
  5. Notice of Duty to Account.
1. Lien.

The lien given in this section was in addition to that provided in KRS 134.230 . Owens v. Maryland Casualty Co., 283 Ky. 162 , 283 Ky. 462 , 141 S.W.2d 867, 1940 Ky. LEXIS 353 ( Ky. 1940 ).

2. —Real Estate.

Subsection (1) of this section gives a lien against any real estate owned by a tax collector at the time of the commencement of action against him, or acquired by him during the pendency of the action. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ).

3. —Statutory Exemptions.

Statutory exemptions from execution are not available against the lien given by subsection (1) of this section. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ).

4. —Notice.

The pendency of the action and the existence of record of the unsatisfied judgment are notice to all persons of the existence of the lien. Mason v. Cook, 187 Ky. 260 , 218 S.W. 740, 1919 Ky. LEXIS 389 ( Ky. 1919 ).

5. Notice of Duty to Account.

One dealing with a tax collector is charged with notice of the statutes designed to require him to properly account for the funds collected by him. Owens v. Maryland Casualty Co., 283 Ky. 162 , 283 Ky. 462 , 141 S.W.2d 867, 1940 Ky. LEXIS 353 ( Ky. 1940 ).

Research References and Practice Aids

Cross-References.

Failure to return execution, liability of officer for, KRS 426.350 .

Sale of property under execution, where title is equitable or encumbered, KRS 426.280 , 426.290 .

135.110. Liability of officer for failing to levy or return execution in name of state or county.

Officers and their deputies failing to levy executions in the name of the state or county, or withholding any such executions, and not making return thereof for one (1) month after the return day, or failing to pay the money when collected, shall, together with their sureties, be liable for the amount of the execution and twenty percent (20%) damages thereon, to be recovered by action in the name of the state or county by the county attorney.

History. 4178.

Research References and Practice Aids

Cross-References.

Failure to return execution, liability of officer for, KRS 426.350 .

135.120. Levy of execution on previously encumbered property — Sale and distribution of proceeds.

When the property of the defendant in execution, upon a judgment against a defaulting public officer, is encumbered by a previous bona fide mortgage, deed of trust or other encumbrance or prior lien, the officer shall, if no other property is found upon which to levy the execution, levy it upon the encumbered property and return the same. He shall make return of all the facts known to him, giving the date and consideration of the instrument creating the lien, to whom made, when recorded, the evidences of any prior lien, and the names of the parties who claim the same. Proceedings may be instituted by the sheriff or the Department of Revenue, in the name of the state, in the county where the property is located, to have the property sold, the claims and demands, if just, satisfied, all encumbrances removed, and the proceeds of the sale of the property rightfully applied.

History. 4179: amends. Acts 2005, ch. 85, § 291, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Sale of property under execution, where title is equitable or encumbered, KRS 426.280 , 426.290 .

135.130. Removal of property to other counties for sale — Multiple executions.

  1. If return is made on an execution against a sheriff or other public defaulter to the state and his sureties that there was no sale of personal property for the want of bidders, the Department of Revenue may direct the property levied upon to be removed from county to county for sale, as often as may be necessary, the cost of removal to be paid out of the sale of the estate as other costs. The officer who levied the execution may sell the property in any county to which it is so removed. If real property is levied upon, the place of sale may be changed to another county, and the officer may there sell and convey the property as in the county where the levy was made.
  2. The state may have executions in the hands of collecting officers in any number of counties at the same time.

History. 4181, 4183: amend. Acts 2005, ch. 85, § 292, effective June 20, 2005.

135.140. Prosecution of claims against the United States for illegal taxes for 1866, 1867 or 1868; net funds recovered held in trust. [Repealed.]

Compiler’s Notes.

This section (4281t-1, 4281t-2) was repealed by Acts 1962, ch. 106, Art. IV., § 1.

135.150. Notice to claimants of funds recovered; time in which claims to be filed. [Repealed.]

Compiler’s Notes.

This section (4281t-3) was repealed by Acts 1962, ch. 106, Art. IV., § 1.

135.160. Direct Tax Commission; payment of claims and interest. [Repealed.]

Compiler’s Notes.

This section (4281t-4) was repealed by Acts 1962, ch. 106, Art. IV., § 1.

135.170. Manner of filing claims; proof; notice of disposition; appeal. [Repealed.]

Compiler’s Notes.

This section (4281t-3, 4281t-5, 4281t-6) was repealed by Acts 1962, ch. 106, Art. IV., § 1.

135.180. Escheat of undisposed funds to state. [Repealed.]

Compiler’s Notes.

This section (4281t-7) was repealed by Acts 1962, ch. 106, Art. IV., § 1.

135.190. Reciprocity — Tax suits by other states and political subdivisions.

Any state of the United States of America or any political subdivision thereof shall have the right to sue in the courts of Kentucky to recover any tax which may be owing to it when the like right is accorded to the Commonwealth of Kentucky and its political subdivisions by such state, whether such right is granted by statutory authority or as a matter of comity.

History. Enact. Acts 1950, ch. 72.

NOTES TO DECISIONS

Cited in:

State of Ohio ex rel. Duffy v. Arnett, 314 Ky. 403 , 234 S.W.2d 722, 1950 Ky. LEXIS 1058 ( Ky. 1950 ).

Research References and Practice Aids

Kentucky Law Journal.

Walden, Enforcement by State Courts of Tax Claims of Sister States — Ohio v. Arnett (1951).

Penalties

135.990. Penalties.

  1. Except as provided in subsection (2) of this section, any officer who fails to perform any duty required of him by KRS 135.030 shall be fined not less than fifty dollars ($50) nor more than one hundred dollars ($100) for each offense.
  2. Any officer who makes a false return on an execution issued pursuant to subsection (1) of KRS 135.100 shall be fined twenty dollars ($20), upon notice and motion.
  3. Any person who violates subsection (3) of KRS 135.100 shall be fined not less than five hundred dollars ($500).
  4. Any person who fails to do an act required, or does an act forbidden, by any provision of this chapter for which no other penalty is provided shall be fined not less than ten dollars ($10) nor more than five hundred dollars ($500).

History. 4029, 4177, 4180, 4248: amend. Acts 1976, ch. 28, § 2.

Research References and Practice Aids

Kentucky Law Journal.

Moreland, Criminal Jurisdiction of Kentucky Courts: A Tentative Codification, 47 Ky. L.J. 7 (1958).

CHAPTER 136 Corporation and Utility Taxes

136.010. Definitions for chapter, except KRS 136.500 to 136.575.

As used in this chapter, except for KRS 136.500 to 136.575 , unless the context requires otherwise:

  1. “Real property” includes all lands within this state and improvements thereon.
  2. “Personal property” includes every species and character of property, tangible and intangible, other than real property.
  3. “Tax exempt United States obligations” shall include all obligations of the United States exempt from taxation under 31 USC Section 3124(a) or exempt under the United States Constitution or any federal statute including the obligations of any instrumentality or agency of the United States which are exempt from state or local taxation under the United States Constitution or any statute of the United States.
  4. “Out-of-state business property” means all real and personal property having a taxable situs outside this state owned by a corporation for use in the active conduct of a trade or business.

History. 4022: amend. Acts 1984, ch. 264, § 1, effective July 13, 1984; 1992, ch. 333, § 1, effective July 14, 1992; 1996, ch. 254, § 29, effective July 15, 1996.

Compiler’s Notes.

Section 4 of Acts 1984, ch. 264 read: “The provisions of this Act shall apply to taxable years beginning after December 31, 1983.”

NOTES TO DECISIONS

1. Occupations Tax.

Common carrier by motor vehicle operating under certificate of public convenience and necessity issued by Department of Motor Transportation (now Department of Vehicle Regulation) and subject to franchise and ad valorem taxes under this chapter was not required to pay occupation tax imposed by city under KRS 92.281 . Pikeville v. United Parcel Service, Inc., 417 S.W.2d 140, 1967 Ky. LEXIS 242 ( Ky. 1967 ).

Research References and Practice Aids

Cross-References.

Assessment of property of individuals, KRS Chapter 132.

Banks and trust companies, KRS Chapter 286.3.

City license taxes on insurance companies, KRS 91A.080 .

Collection of public claims by action, KRS Chapter 135.

Department of Revenue, KRS Chapter 131.

Excise taxes, KRS Chapter 138.

General provisions concerning private corporations, KRS Chapter 271B.

Income taxes, KRS Chapter 141.

Inheritance and estate taxes, KRS Chapter 140.

License taxes, KRS Chapter 137.

Miscellaneous taxes, KRS Chapter 142.

Payment, collection and refund of taxes, KRS Chapter 134.

Property subject to taxation, KRS 132.190 , 132.200 .

Public utilities, Chapters 276 to 281A.

Savings and loan associations, KRS Chapter 286.5.

Supervision, equalization and review of assessments, KRS Chapter 133.

Tax returns and reports are confidential, KRS 131.190 .

Taxation of corporations, Ky. Const., §§ 174, 181, 202.

136.012. “Production credit association” defined.

As used in this chapter and in KRS 141.040 and unless a different meaning appears from the context, the term “production credit association” means a corporation organized and chartered pursuant to the provisions of section 20 of that Act of Congress known as the “Farm Credit Act of 1933,” (Act June 16, 1933, ch. 98, sec. 20, 48 Stat. 259), as amended, engaged in business in the state of Kentucky, and not exempt by virtue of the laws of the United States from taxation by the state of Kentucky.

History. Enact. Acts 1970, ch. 14, § 1.

136.013. “Bank for cooperatives” defined.

As used in KRS 136.013 and 141.040 and unless a different meaning appears from the context, the term bank for cooperatives means a corporation organized and chartered pursuant to the provisions of Sections 2 and 3 of that Act of Congress known as the “Farm Credit Act of 1933”, as amended, engaged in business in the State of Kentucky, and not exempt by virtue of the laws of the United States from taxation by the State of Kentucky.

History. Enact. Acts 1972, ch. 121, § 1.

136.020. Assessment of property of corporations.

The property of all corporations, except where otherwise provided by law, shall be assessed in the name of the corporation in the same manner as that of a natural person, except that, when legally called on, the chief officer shall report a full statement of the property of the corporation for taxation, and, for a failure, shall be subject to the penalties provided by law for a similar failure by a natural person in listing his property.

History. 4085, 4091: amend. Acts 1986, ch. 496, § 2, effective August 1, 1986; 1992, ch. 338, § 16, effective July 14, 1992.

NOTES TO DECISIONS

  1. Equality of Corporate and Individual Property.
  2. Computation Method.
1. Equality of Corporate and Individual Property.

Sections 171 and 174 of the Kentucky Constitution require uniform taxation according to value, and an identical rate as between corporate and individual property, and the provision of Ky. Const., § 174 that “all corporate property shall pay the same rate of taxation paid by individual property” means that not only the percentage of the rate, but the basis of the valuation shall be the same. Greene v. Louisville & I. R. Co., 244 U.S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, 1917 U.S. LEXIS 1660 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

2. Computation Method.

Computation method used in computing taxes for a domestic life insurance company, which exempted rather than excluded stock belonging to the company, followed the procedures in KRS 136.020 . Moreover, stock held in accounts by the company was distinguishable from partnership interests and mutual funds because stock was specifically listed in KRS 136.020 whereas partnership interests and mutual funds were not. Monumental Life Ins. Co. v. Dep't of Revenue, 294 S.W.3d 10, 2008 Ky. App. LEXIS 207 (Ky. Ct. App. 2008), cert. denied, 559 U.S. 1037, 130 S. Ct. 2062, 176 L. Ed. 2d 414, 2010 U.S. LEXIS 2866 (U.S. 2010).

Cited in:

Marcum v. Kentucky Enterprise Federal Sav. & Loan Asso., 363 S.W.2d 118, 1962 Ky. LEXIS 277 ( Ky. 1962 ); Maxwell v. Commonwealth, Dep’t of Highways, 404 S.W.2d 9, 1966 Ky. LEXIS 278 ( Ky. 1966 ); Cooksey Bros. Disposal Co. v. Boyd County, 973 S.W.2d 64, 1997 Ky. App. LEXIS 132 (Ky. Ct. App. 1997).

Research References and Practice Aids

Kentucky Law Journal.

Roberts, What Constitutes “Doing Business”, by a Foreign Corporation in Kentucky, 31 Ky. L.J. 3 (1942).

136.030. List of resident bondholders — Information to be furnished to Department of Revenue. [Repealed.]

Compiler’s Notes.

This section (4019a-10, 4088: amend. Acts 1944, ch. 121, § 1; 1948, ch. 95, § 8; 1950, ch. 74, § 2; 1960, ch. 186, Art. I, § 34; 1986, ch. 496, § 3, effective August 1, 1986; 1990, ch. 163, § 3, effective July 13, 1990; 1990, ch. 437, § 6, effective July 13, 1990; 1992, ch. 333, § 2, effective July 14, 1992; 1996, ch. 254, § 30, effective July 15, 1996; 2000, ch. 327, § 8, effective July 14, 2000; 2005, ch. 85, § 293, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 158, effective January 1, 2006.

136.040. Valuation of shares without a nominal par value. [Repealed.]

Compiler’s Notes.

This section (5642) was repealed by Acts 1946, ch. 141, § 12.

136.050. Time of payment of corporation, property, and franchise taxes — Interest — Penalties.

  1. Except where otherwise specially provided, all corporations required to make reports to the Department of Revenue shall pay all taxes due the state from them into the State Treasury at the same time as natural persons are required to pay taxes, and when delinquent shall pay the same rate of interest and penalties as natural persons who are delinquent.
  2. All state taxes assessed against any corporation under the provisions of KRS 136.120 to 136.200 shall be due and payable as provided in KRS 131.110 . All county, city, school, and other taxes so assessed shall be due and payable thirty (30) days after notice of the amount of the tax is given by the collecting officer. The state, county, city, school, and other taxes found to be due on any protested assessment or portion thereof shall begin to bear legal interest on the sixty-first day after the Kentucky Claims Commission acknowledges receipt of a protest of any assessment or enters an order to certify the unprotested portion of any assessment until paid, except that in no event shall interest begin to accrue prior to January 1 following April 30 of the year in which the report is due. Every corporation so assessed that fails to pay its taxes when due shall be deemed delinquent, a penalty of ten percent (10%) on the amount of the tax shall attach, and thereafter the tax shall bear interest at the tax interest rate as defined in KRS 131.010(6).

HISTORY: 4086, 4091, 4103; Acts 1958, ch. 69, § 2, effective June 19, 1958; 1990, ch. 163, § 5, effective July 13, 1990; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 351, effective July 13, 1990; 1992, ch. 338, § 2, effective August 1, 1992; 2005, ch. 85, § 294, effective June 20, 2005; 2017 ch. 74, § 78, effective June 29, 2017.

Legislative Research Commission Notes.

(7/13/90). The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

  1. Franchise Taxes.
  2. —Misappropriation.
  3. Penalty.
1. Franchise Taxes.

The sheriff may not legally collect a franchise tax until the assessment has been certified to him by the county clerk. Commonwealth v. Brand, 166 Ky. 753 , 179 S.W. 844, 1915 Ky. LEXIS 772 ( Ky. 1915 ).

2. —Misappropriation.

Sheriff who misappropriated franchise tax paid to him by railroad before certification of assessment to sheriff by county clerk could not be convicted of embezzling public funds. Commonwealth v. Brand, 166 Ky. 753 , 179 S.W. 844, 1915 Ky. LEXIS 772 ( Ky. 1915 ).

3. Penalty.

Railroad company which was willing to pay franchise tax due county, but was unwilling to pay tax due school district because it believed latter tax was void, had the right to tender to sheriff amount of county tax and sheriff had duty to accept such tender. Where such tender was made and was refused by sheriff, company was not liable for penalty and interest on amount tendered, upon subsequent payment of county and school taxes. Cincinnati, N. O. & T. P. R. Co. v. Commonwealth, 253 Ky. 24 , 68 S.W.2d 774, 1934 Ky. LEXIS 605 ( Ky. 1934 ).

Cited in:

Walker v. Commonwealth, 279 Ky. 198 , 130 S.W.2d 27, 1939 Ky. LEXIS 248 ( Ky. 1939 ); Board of Education v. Louisville & N. R. Co., 280 Ky. 650 , 134 S.W.2d 219, 1939 Ky. LEXIS 184 ( Ky. 1939 ).

Opinions of Attorney General.

Since this section does not prescribe any type of notice, the taxpayer must be notified when the 30-day period begins in which he can pay without penalty, and if notification is made by mail, such period would begin to run from the date of the mailing of the notice of the tax due and a record should be maintained of the date the tax notice is mailed. OAG 74-35 .

Where a check from a public service company for payment of public utility tax was apparently lost in the mail and a replacement check was not tendered until more than three months after the due date, a ten percent (10%) penalty plus ten percent (10%) interest would apply to the tax bill and the sheriff would have no authority to accept only the tax due. OAG 76-236 .

OAG 76-236 has application to the facts as set out in that opinion. OAG 76-353 .

Research References and Practice Aids

Cross-References.

When property taxes are due, KRS 134.015 .

Withdrawal of privilege to do business on failure of insurer to pay taxes, KRS 304.4-040 .

136.060. Corporation organization tax.

  1. Every corporation incorporated under the laws of this state, having a capital stock divided into shares, shall pay into the State Treasury, at the time of incorporation, an organization tax based upon the number of shares authorized by the articles of incorporation, at the following rates: one cent ($0.01) for each share authorized up to and including twenty thousand (20,000) shares, one-half cent ($0.005) for each share in excess of twenty thousand (20,000) shares and up to and including two hundred thousand (200,000) shares, and one-fifth cent ($0.002) for each share in excess of two hundred thousand (200,000) shares.
  2. Upon the filing of an amendment to articles of incorporation changing the authorized number of shares, the tax that would be due upon the number of shares authorized by the articles of incorporation as so amended, at the rates set forth in subsection (1) of this section, shall be computed, and if the tax as so computed exceeds the amount of tax paid on the basis of the number of shares authorized by the articles prior to the amendment, the excess tax shall be paid at the time the amendment is filed.
  3. Every corporation that has not, prior to July 1, 1946, become liable for the payment of a Kentucky organization tax upon any or all of its capital stock, and that by amendment of its articles of incorporation changes its name, increases its powers, enlarges its scope, or prolongs its corporate life, shall, upon the filing of the amendment, pay the tax as provided in subsection (1) of this section upon its entire capital stock, or so much thereof as has not theretofore borne the tax.
  4. A consolidated or merged corporation formed under the laws of this state shall not be required to pay any organization tax on the number of shares of capital stock on which the organization tax has been paid by the constituent corporations prior to the consolidation or merger, but the organization tax shall be paid on any increase of the number of shares of capital stock of the consolidated corporation over the aggregate number of shares of the constituent corporations prior to the consolidation or merger. When a foreign corporation consolidates or merges with one (1) or more corporations of this state, the organization tax shall be paid on the number of shares of capital stock of the foreign corporation.
  5. No corporation subject to the tax imposed by this section shall have or exercise any corporate powers until the tax has been paid, and upon payment it shall file a statement thereof with the Secretary of State. No corporation required to pay a tax under any of the provisions of this section shall in any event pay a less sum therefor than ten dollars ($10).

History. 556, 4225: amend. Acts 1946, ch. 141, § 13; 1988, ch. 84, § 1, effective July 15, 1988; 1990, ch. 187, § 1, effective July 13, 1990.

NOTES TO DECISIONS

  1. Construction.
  2. Application.
  3. Increase of Powers.
  4. Minor Changes in Structure.
  5. Defense.
  6. Changes in Capital.
  7. Effect of Adoption of Constitution.
1. Construction.

An amendment to the articles of incorporation that “increases the powers” of a corporation is one that confers a new and additional power not theretofore possessed by the corporation and is not one that merely enlarges the operation of an existing power. Greene v. Louisville R. Co., 184 Ky. 90 , 211 S.W. 418, 1919 Ky. LEXIS 26 ( Ky. 1919 ).

2. Application.

This section applies to a building and loan association. Commonwealth v. Licking Valley Bldg. Ass'n, 118 Ky. 791 , 82 S.W. 435, 26 Ky. L. Rptr. 730 , 1904 Ky. LEXIS 109 ( Ky. 1904 ), overruled, Commonwealth v. Belknap Hardware & Mfg. Co., 182 Ky. 155 , 206 S.W. 277, 1918 Ky. LEXIS 336 ( Ky. 1918 ).

3. Increase of Powers.

An amendment to the articles of incorporation merely increasing the capital stock of the company was not such an “increase of its powers” as made it liable for the organization tax on its original capital stock. Greene v. Louisville R. Co., 184 Ky. 90 , 211 S.W. 418, 1919 Ky. LEXIS 26 ( Ky. 1919 ).

4. Minor Changes in Structure.

A corporation that has paid the organization tax upon its original capital stock, and subsequently amends its articles to make a slight change in its name and to reduce its capital stock, but without making any substantial change in its powers or rights, is not required to pay another organization tax. Bruner v. Louisville Packing Co., 144 Ky. 471 , 139 S.W. 764, 1911 Ky. LEXIS 655 ( Ky. 1911 ).

A corporation which has once paid the organization tax is not required, on amending its articles under law to extend its corporate life, to pay another organization tax. Ohio Valley Tie Co. v. Bruner, 148 Ky. 358 , 146 S.W. 749, 1912 Ky. LEXIS 442 ( Ky. 1912 ).

5. Defense.

Although a corporation could not legally do business until it paid its organization tax, it is none the less liable for the organization tax when it proceeds without paying, because it is not allowed to set up, in defense of the suit against it, its own failure to comply with this section. Commonwealth v. Licking Valley Bldg. Ass'n, 118 Ky. 791 , 82 S.W. 435, 26 Ky. L. Rptr. 730 , 1904 Ky. LEXIS 109 ( Ky. 1904 ), overruled, Commonwealth v. Belknap Hardware & Mfg. Co., 182 Ky. 155 , 206 S.W. 277, 1918 Ky. LEXIS 336 ( Ky. 1918 ).

Corporation could not claim that amendments to articles filed by directors, which had effect of subjecting corporation to organization tax, were unauthorized, where corporation had taken no steps to repudiate action of directors for seven (7) years after the amendments were filed and recorded. Licking Valley Bldg. Ass'n v. Commonwealth, 89 S.W. 682, 28 Ky. L. Rptr. 543 (1905).

6. Changes in Capital.

Where corporation with original capital of $1,750,000 reduced its capital to $200,000, then increased it to $1,000,000 and again increased it to $2,000,000 it was liable for tax only on $250,000, representing the net difference between the original and the final capital. Talbott v. Louisville Trust Co., 259 Ky. 75 , 82 S.W.2d 219, 1935 Ky. LEXIS 281 ( Ky. 1935 ).

7. Effect of Adoption of Constitution.

Adoption of the provisions of the present Kentucky Constitution, by a corporation created before the taking effect of the Constitution, did not make such corporation a new corporation within the meaning of this section. Commonwealth v. Southern Pac. Co., 164 Ky. 818 , 176 S.W. 375, 1915 Ky. LEXIS 465 ( Ky. 1915 ); Crecelius v. Carrollton Sav. & Loan Ass'n, 167 Ky. 813 , 181 S.W. 635, 1916 Ky. LEXIS 485 ( Ky. 1916 ); Louisville Gas & Electric Co. v. Bosworth, 169 Ky. 824 , 185 S.W. 125, 1916 Ky. LEXIS 770 ( Ky. 1916 ).

Cited in:

Knight v. Pennsylvania R. Co., 264 Ky. 412 , 94 S.W.2d 1013, 1936 Ky. LEXIS 341 ( Ky. 1936 ); Scott-Lees Collegiate Institute v. Charles, 283 Ky. 234 , 140 S.W.2d 1060, 1940 Ky. LEXIS 319 ( Ky. 1940 ).

Research References and Practice Aids

Cross-References.

Retaliatory provisions; domicile of alien insurer, KRS 304.3-270 .

Revocation of authority for failure to pay, KRS 304.4-040 .

Rural electric cooperative corporations exempt from certain taxes, KRS 279.200 .

Kentucky Law Journal.

Henry, Corporations; The Promoter’s Dilemma, 29 Ky. L.J. 462 (1941).

136.070. Corporation license tax — Exemptions — Apportionment — Credit. [Repealed]

History. 4189-1, 4189-2, 4189-8: amend. Acts 1962, ch. 94, § 1; 1966, ch. 187, part II, § 1; 1966, ch. 255, § 129; 1970, ch. 14, § 4; 1972, ch. 84, part II, § 1; 1974, ch. 137, § 3; 1974, ch. 161, § 1; 1976, ch. 155, § 5; 1980, ch. 181, § 1, effective July 15, 1980; 1980, ch. 210, § 5, effective July 15, 1980; Acts 1985 (1st Ex. Sess.), ch. 6, part II, § 3, effective July 29, 1985; 1986, ch. 476, § 4, effective July 15, 1986; 1996, ch. 254, § 31, effective July 15, 1996; 2005, ch. 85, § 295, effective June 20, 2005; repealed by 2018 ch. 171, § 140, effective April 14, 2018; Repealed, Acts 2018, ch. 207, § 42, effective April 27, 2018.

136.0701. Corporation license tax — Removal after December 31, 2005. [Repealed]

HISTORY: Enact. Acts 2005, ch. 168, § 1, effective December 31, 2005; Repealed, Acts 2018, ch. 171, § 140, effective April 14, 2018.

Compiler's Notes.

Acts 2018, ch. 207, § 42, purported to repeal this section, effective April 27, 2018, but the section had already been repealed by Acts 2018, ch. 171, § 140, effective April 14, 2018.

136.0704. License tax credit for economic revitalization projects — Computation — Cap. [Repealed]

HISTORY: Enact. Acts 2000, ch. 547, § 1, effective July 14, 2000; 2004, ch. 18, § 4, effective July 13, 2004; 2004, ch. 105, § 14, effective July 13, 2004; 2005, ch. 85, § 296, effective June 20, 2005; Repealed, Acts 2018, ch. 171, § 140, effective April 14, 2018.

Compiler's Notes.

Acts 2018, ch. 207, § 42, purported to repeal this section, effective April 27, 2018, but the section had already been repealed by Acts 2018, ch. 171, § 140, effective April 14, 2018.

136.071. Corporation license tax — Apportionment of capital when corporation holds stock in other corporations. [Repealed]

HISTORY: Enact. Acts 1976 (Ex. Sess.), ch. 25, § 1; 1988, ch. 214, § 1; 2004, ch. 142, § 4, effective April 21, 2004; 2005, ch. 168, § 2, effective March 18, 2005; repealed by 2018 ch. 171, § 140, effective April 14, 2018; Repealed, Acts 2018, ch. 207, § 42, effective April 27, 2018.

136.072. Value of capital stock. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 94, § 5) was repealed by Acts 1966, ch. 187, part II, § 2.

136.073. Average net capital tax on open-end registered investment companies.

  1. Every open-end registered investment company organized under the laws of this state and registered under the Investment Company Act of 1940 shall on or before the fifteenth day of the fourth month following the close of each fiscal year, if the company operates on a fiscal year basis or calendar year, file a report on forms prescribed by the Department of Revenue and pay directly to the State Treasury a tax of two dollars and ten cents ($2.10) for each one thousand dollars ($1,000) of “average net capital” as computed under subsections (2) and (3) of this section.
  2. The term “net capital” as used in this section means capital stock, surplus, borrowed moneys or any other accounts representing capital of the company less the amount of such capital which by said company is invested in Kentucky municipal securities which are obligations issued by the State of Kentucky, its political subdivisions, and the districts, authorities, agencies and instrumentalities of the state and its political subdivisions, the interest on which is exempt from federal and Kentucky income tax.
  3. The term “average net capital” as used in this section means the average of the net capital of the company as shown on financial statements of the company as of the first and last days of the fiscal or calendar year of the company, whichever is applicable.
  4. The Department of Revenue shall examine and audit each report as soon as practicable after each report is received. Failure to make reports and pay taxes as provided in this section shall subject the company to the same penalties imposed for such failure on the part of other corporations.

History. Enact. Acts 1980, ch. 181, § 2, effective July 15, 1980; 1985 (1st Ex. Sess.), ch. 6, part II, § 4, effective July 29, 1985; 2005, ch. 85, § 297, effective June 20, 2005.

Legislative Research Commission Notes.

1985 Acts Ex. Sess., ch. 6, Part II, Section 5, directs that the provisions of this section shall apply to taxable years ending after 7/31/85.

136.074. Value of property; business transacted in state. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 94, § 6) was repealed by Acts 1966, ch. 187, part II, § 2.

136.076. Auditing of returns — Assessment of additional tax.

  1. As soon as practicable after each return is received, the department shall examine and audit it. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the additional tax shall be assessed and a notice of assessment mailed to the taxpayer by the department within four (4) years from the date the return was filed, except that in the case of a failure to file a return, or of a fraudulent return, the additional tax may be assessed at any time. The time provided in this section may be extended by agreement between the taxpayer and the department.
  2. For the purpose of subsection (1) of this section, a return filed before the last day prescribed by law for filing the return thereof shall be considered as filed on the last day. For taxable years beginning after December 31, 1993, any extension of time granted for filing the return shall also be considered as extending the last day prescribed by law for filing the return.

History. Enact. Acts 1962, ch. 94, § 7; 1994, ch. 106, § 1, effective July 15, 1994; 2005, ch. 85, § 298, effective June 20, 2005.

136.078. Disposition of receipts. [Repealed]

History. Enact. Acts 1962, ch. 94, § 8; repealed by 2019 ch. 151, § 80, effective June 27, 2019.

136.080. Reports on corporations by Secretary of State to Department of Revenue; notice and forms to be given corporations. [Repealed.]

Compiler’s Notes.

This section (4189-4) was repealed by Acts 1966, ch. 187, part II, § 2.

136.090. Reports of corporations for license tax purposes — Subject matter. [Repealed]

History. 4189-3: amend. Acts 1962, ch. 94, § 2; 1986, ch. 496, § 4, effective August 1, 1986; 2005, ch. 85, § 299, effective June 20, 2005; repealed by 2019 ch. 151, § 80, effective June 27, 2019.

136.100. Time of filing reports — Period covered — Change of period. [Repealed]

History. 4189-5, 4189-7: amend. Acts 1962, ch. 94, § 3; 2005, ch. 85, § 300, effective June 20, 2005; repealed by 2019 ch. 151, § 80, effective June 27, 2019.

136.110. Assessment of capital stock for license tax; notice; payment or protest. [Repealed.]

Compiler’s Notes.

This section (4189-6, 4189-9) was repealed by Acts 1962, ch. 94, § 4.

Public Service Corporations

136.115. Definitions for KRS 136.120 to 136.180.

  1. “Corporation” as used in KRS 136.120 through 136.180 means any corporation, company, association, partnership, or person performing any public service.
  2. “Operating property” as used in KRS 136.120 through 136.180 means both the operating tangible property and the franchise, and the payment of taxes on the assessment of operating property shall be deemed the payment of taxes on the operating tangible property and the franchise.

History. Enact. Acts 1960, ch. 186, Art. II, § 1, effective March 25, 1960.

NOTES TO DECISIONS

1. Taxing Determination Upheld.

Department’s change which raised state tax obligation of public service company (PSC) and made it subject to local taxes was upheld because general assembly did not intend for franchise of PSCs to be exempt from state and local taxes and intended for it to be taxed separately. KRS 136.115(2) directed that taxes were assessed on operating tangible property and franchise; franchise was separate and nothing in the statutes indicated that franchise was included in operating tangible property. Additionally, KRS 132.208 provides a state and local tax exemption for intangible personal property except that which is assessed under KRS ch. 136. Dayton Power & Light Co. v. Dep't of Revenue, 405 S.W.3d 527, 2012 Ky. App. LEXIS 232 (Ky. Ct. App. 2012).

Cited in:

Cooksey Bros. Disposal Co. v. Boyd County, 973 S.W.2d 64, 1997 Ky. App. LEXIS 132 (Ky. Ct. App. 1997), cert. denied, 525 U.S. 930, 119 S. Ct. 338, 142 L. Ed. 2d 279, 1998 U.S. LEXIS 6495, 67 U.S.L.W. 3257 (1998).

Notes to Unpublished Decisions

1. Operating property definition.

Unpublished decision: State revenue cabinet properly determined that the tax the cable television company had to pay on its operating property included both the cable television company’s operating tangible property and franchise, as operating property consisted of those two elements; accordingly, the state tax appeals board’s decision the trial court’s ruling to the contrary was vacated. Revenue Cabinet v. Comcast Cablevision, 147 S.W.3d 743, 2003 Ky. App. LEXIS 330 (Ky. Ct. App. 2003).

136.120. Public service corporation property tax — Exemptions — Classification — Assessment — Certification.

    1. The following public service companies shall pay a tax on their operating property to the state, and to the extent the operating property is subject to local taxation, shall pay a local tax to the county, incorporated city, and taxing district where its operating property is located: (1) (a) The following public service companies shall pay a tax on their operating property to the state, and to the extent the operating property is subject to local taxation, shall pay a local tax to the county, incorporated city, and taxing district where its operating property is located:
      1. Railway companies;
      2. Sleeping car companies;
      3. Chair car companies;
      4. Dining car companies;
      5. Gas companies;
      6. Water companies;
      7. Bridge companies;
      8. Street railway companies;
      9. Interurban electric railroad companies;
      10. Express companies;
      11. Electric light companies;
      12. Electric power companies, including wind turbine and solar generating companies;
      13. Commercial air carriers;
      14. Air freight carriers;
      15. Pipeline companies;
      16. Privately owned regulated sewer companies;
      17. Railroad car line companies, which means any company, other than a railroad company, which owns, uses, furnishes, leases, rents, or operates to, from, through, in, or across this state or any part thereof, any kind of railroad car including, but not limited to, flat, tank, refrigerator, passenger, or similar type car; and
      18. Every other like company or business performing any public service.
    2. The following companies shall not be subject to the provisions of paragraph (a) of this subsection:
      1. Bus line companies;
      2. Regular and irregular route common carrier trucking companies;
      3. Taxicab companies;
      4. Providers of communications service as defined in KRS 136.602 ;
      5. Providers of multichannel video programming services as defined in KRS 136.602 ; and
      6. A qualified air freight forwarder as defined in KRS 141.121 .
    1. The property of the taxpayers shall be classified as operating property, nonoperating tangible property, and nonoperating intangible property. (2) (a) The property of the taxpayers shall be classified as operating property, nonoperating tangible property, and nonoperating intangible property.
    2. Nonoperating intangible property within the taxing jurisdiction of the Commonwealth shall be taxable for state purposes only at the same rate as the intangible property of other taxpayers not performing public services.
    3. Operating property and nonoperating tangible property shall be subject to state and local taxes at the same rate as the tangible property of other taxpayers not performing public services.
    1. The Department of Revenue shall: (3) (a) The Department of Revenue shall:
      1. Have sole power to value and assess all of the property of every corporation, company, association, partnership, or person performing any public service, including those enumerated above and all others to whom this section may apply, whether or not the operating property, nonoperating tangible property, or nonoperating intangible property has previously been assessed by the department;
      2. Allocate the assessment as provided by KRS 136.170 ; and
      3. Certify operating property subject to local taxation and nonoperating tangible property to the counties, cities, and taxing districts as provided in KRS 136.180 .
    2. All of the property assessed by the department pursuant to this section shall be assessed as of December 31 each year for the following year’s taxes, and the lien on the property shall attach as of the assessment date.
    3. In the case of a taxpayer whose business is predominantly nonpublic service and the public service business in which he is engaged is merely incidental to his principal business, the department shall in the exercise of its judgment and discretion determine, from evidence which it may have or obtain, what portion of the operating property is devoted to the public service business subject to assessment by the department under this section and shall require the remainder of the property not so engaged to be assessed by the local taxing authorities.

History. 842a-3, 4077, 4082: amend. Acts 1942, ch. 80, §§ 1, 2; 1960, ch. 186, Art. II, § 2; 1962, ch. 29, § 6; 1965 (1st Ex. Sess.), ch. 2, § 2; 1976, ch. 169, § 1; 1982, ch. 264, § 12, effective January 1, 1984; 1990, ch. 437, § 5, effective July 13, 1990; 1990, ch. 476, Pt. V, § 352, effective July 13, 1990; 1991 (1st Ex. Sess.), ch. 12, § 50, effective February 26, 1991; 2005, ch. 85, § 301, effective June 20, 2005; 2005, ch. 168, § 120, effective December 31, 2005; 2006, ch. 169, § 7, effective January 1, 2008; 2012, ch. 101, § 1, effective April 11, 2012; 2013, ch. 119, § 9, effective January 1, 2014; 2016 ch. 93, § 4, effective July 15, 2016.

Legislative Research Commission Notes.

(1/1/2014). 2013 Ky. Acts ch. 119, sec. 26, provides that the amendments to this statute in 2013 Ky. Acts ch. 119, sec. 9, shall apply to property assessed on or after January 1, 2014.

(12/31/2005). 2005 Ky. Acts ch. 168, § 169, provides that Section 123 of this Act, relating to unit valuation, takes effect on December 31, 2005. This reference to the effective date in Section 169 of the Act should have been to Section 120 of the Act (KRS 136.120 ), which relates to unit valuation, rather than to Section 123 (KRS 91.200 ), which relates to city license taxes. This error occurred when several sections of HB 272 were renumbered during the preparation of a House Committee Substitute and the corresponding changes to sections of the bill setting out the effective dates were not made. This change has been made by the Statute Reviser under the authority of KRS 7.136 .

(7/14/2000). 2000 Ky. Acts ch. 446 (Senate Bill 323), sec. 2, purports to amend this statute, and the General Assembly version of that bill was signed by both presiding officers and by the Governor. The Journals of the House of Representatives and Senate will reflect, however, that House Floor Amendment 1 was adopted by the House on March 27, 2000, but was not transmitted to the Senate for its concurrence when the bill was returned to that body. Thus, the bill signed did not pass both chambers of the General Assembly in the same form and did not become law. Ky. Const. secs. 46 and 88; see also Mason’s Manual of Legislative Procedure sec. 737, at 508-509 (1989 ed.). Because the General Assembly’s own official records establish this constitutional deficiency, the provisions of 2000 Ky. Acts ch. 446 have not been codified into the Kentucky Revised Statutes. See KRS 7.131(2).

(7/13/90). The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

Analysis

  1. Constitutionality.
  2. Application.
  3. Construction.
  4. Tangible Operating Property.
  5. Local Taxation.
  6. Corporations Subject to Tax.
  7. —Railroad.
  8. —Pipeline Company.
  9. —Tank Car Company.
  10. —Telephone Company.
  11. Corporations Not Subject to Tax.
  12. Nonprofit Corporations.
  13. Holding Company.
  14. Entity Liable for Tax.
  15. Exemption.
  16. —Other Taxes.
  17. Omitted Property.
  18. —Retrospective Assessment.
  19. Failure to Assess.
  20. Conclusiveness of Assessment.
  21. Settlement.
  22. Double Taxation.
  23. Tax Rate.
  24. Situs.
  25. Transient Property.
  26. Transportation Facilities.
  27. Property on Ohio River.
  28. State’s Jurisdiction.
  29. Estoppel.
  30. Burden of Proof.
  31. Franchise Fee.
1. Constitutionality.

This section does not provide for an unequal or undervalued assessment of intangible property in violation of Ky. Const., § 174, and the fact that such an assessment was actually made would not be grounds for holding the statute unconstitutional. Commonwealth by Anderson v. Southern Pac. Co., 150 Ky. 97 , 149 S.W. 1105, 1912 Ky. LEXIS 821 ( Ky. 1912 ), overruled, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ); Commonwealth ex rel. Auditor's Agent v. Louisville Gas Co., 135 Ky. 324 , 122 S.W. 164, 1909 Ky. LEXIS 291 ( Ky. 1909 ).

The “franchise” tax imposed by this section is not, with respect to a foreign corporation, an unreasonable burden on interstate commerce, and it is constitutional. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

The imposition of a franchise tax on a corporation engaged in operating steamboats in interstate commerce does not deprive the corporation of its property without due process of law. Bosworth v. Evansville & Bowlint Green Packet Co., 178 Ky. 716 , 199 S.W. 1059, 1918 Ky. LEXIS 450 ( Ky. 1918 ).

The tax imposed by this section is not an unconstitutional burden on interstate commerce, even as regards a corporation whose operations in this state are almost wholly in interstate commerce. Bosworth v. Evansville & Bowlint Green Packet Co., 178 Ky. 716 , 199 S.W. 1059, 1918 Ky. LEXIS 450 ( Ky. 1918 ).

Imposition of weight and tag taxes on bus companies, in addition to franchise tax, was not unconstitutional double taxation. Blue Coach Lines, Inc. v. Lewis, 220 Ky. 116 , 294 S.W. 1080, 1927 Ky. LEXIS 510 ( Ky. 1927 ).

Tax on water transportation company under this section was tax upon right of navigation of Ohio River as that was the only connection company had with Kentucky and was unconstitutional as violating provisions of the Virginia Compact. Allphin v. Ohio River Co., 306 S.W.2d 94, 1957 Ky. LEXIS 17 ( Ky. 1957 ).

Kentucky franchise tax may not be constitutionally applied to foreign motor carrier doing exclusively interstate business. Commercial Carriers, Inc. v. Kentucky Tax Com., 321 S.W.2d 42, 1959 Ky. LEXIS 256 ( Ky. 1959 ).

This section is neither vague nor does it constitute an unconstitutional delegation of legislative authority to the Executive Branch. Central Ky. Cellular Tel. Co. v. Revenue Cabinet, 897 S.W.2d 601, 1995 Ky. App. LEXIS 41 (Ky. Ct. App. 1995).

This section does not violate Ky. Const., § 51; it is not necessary under that section that the title of a statute agree with the body of the statute, only that the title of the act agree with the body of the act. Cooksey Bros. Disposal Co. v. Boyd County, 973 S.W.2d 64, 1997 Ky. App. LEXIS 132 (Ky. Ct. App. 1997), cert. denied, 525 U.S. 930, 119 S. Ct. 338, 142 L. Ed. 2d 279, 1998 U.S. LEXIS 6495 (U.S. 1998).

Although this section’s classification of municipal solid waste disposal facilities that dispose of waste by landfill singles out such facilities for disparate tax treatment and is not a perfect fit to the state’s objectives, such classification is reasonably related to the state’s goals for solid waste management and is therefore constitutional. Cooksey Bros. Disposal Co. v. Boyd County, 973 S.W.2d 64, 1997 Ky. App. LEXIS 132 (Ky. Ct. App. 1997), cert. denied, 525 U.S. 930, 119 S. Ct. 338, 142 L. Ed. 2d 279, 1998 U.S. LEXIS 6495 (U.S. 1998).

2. Application.

This section does not apply to ordinary commercial corporations. Commonwealth v. Walsh's Trustee, 133 Ky. 103 , 117 S.W. 398, 32 Ky. L. Rptr. 460 , 1909 Ky. LEXIS 172 ( Ky. 1909 ); Standard Oil Co. v. Commonwealth, 119 Ky. 75 , 82 S.W. 1020, 26 Ky. L. Rptr. 985 , 1904 Ky. LEXIS 146 ( Ky. 1904 ).

This section applies only where the corporation is incorporated in this state or is doing business in this state. Commonwealth v. Lee Line Co., 159 Ky. 476 , 167 S.W. 409, 1914 Ky. LEXIS 812 ( Ky. 1914 ).

3. Construction.

The “franchise” tax imposed by this section is nothing more than a tax upon the intangible property of the corporation engaged in a business in Kentucky. Greene v. Louisville & I. R. Co., 244 U.S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, 1917 U.S. LEXIS 1660 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984); Coulter v. Weir, 127 F. 897, 1904 U.S. App. LEXIS 3842 (6th Cir. Ky. 1904 ); Consolidation Coal Co. v. Martin, 113 F.2d 813, 1940 U.S. App. LEXIS 3465 (6th Cir. Ky. 1940 ); State Tax Com. v. Petroleum Exploration, 253 Ky. 119 , 68 S.W.2d 777, 1933 Ky. LEXIS 977 ( Ky. 1933 ).

The franchise tax is not a license or occupation tax, or a tax on the privilege of being a corporation, or of engaging in the public service business, but is simply an ad valorem tax. Commonwealth v. Chesapeake & O. R. Co., 91 S.W. 672, 28 Ky. L. Rptr. 1110 (1906). See Commonwealth v. Walsh's Trustee, 133 Ky. 103 , 117 S.W. 398, 32 Ky. L. Rptr. 460 , 1909 Ky. LEXIS 172 ( Ky. 1909 ); Commonwealth ex rel. Auditor's Agent v. Louisville Gas Co., 135 Ky. 324 , 122 S.W. 164, 1909 Ky. LEXIS 291 ( Ky. 1909 ); Cumberland Tel. & Tel. Co. v. Calhoun, 151 Ky. 241 , 151 S.W. 659, 1912 Ky. LEXIS 790 ( Ky. 1912 ); Louisville & N. R. Co. v. Henderson, 154 Ky. 575 , 157 S.W. 1105, 1913 Ky. LEXIS 120 ( Ky. 1913 ); Newport v. South C. & C. S. R. Co., 156 Ky. 403 , 161 S.W. 222, 1913 Ky. LEXIS 449 ( Ky. 1913 ); Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ); Bosworth v. Evansville & Bowlint Green Packet Co., 178 Ky. 716 , 199 S.W. 1059, 1918 Ky. LEXIS 450 ( Ky. 1918 ).

The “franchise” tax imposed by this section on a bus company is not a tax for the privilege of using the highways, but an ad valorem tax on the intangible property of the company. Blue Coach Lines, Inc. v. Lewis, 220 Ky. 116 , 294 S.W. 1080, 1927 Ky. LEXIS 510 ( Ky. 1927 ).

The “franchise” tax imposed by this section is a tax on intangible property springing from the privilege of public service, power of eminent domain, and other conceivable rights; it does not contemplate or depend upon the securing of a special license or permission from some governmental agency, usually denominated a “franchise.” State Tax Com. v. Petroleum Exploration, 253 Ky. 119 , 68 S.W.2d 777, 1933 Ky. LEXIS 977 ( Ky. 1933 ).

The “franchise” tax imposed by this section is a tax on the intangible values inhering to business and the added value given to tangible property by use in business, it being an ad valorem tax as distinguished from an excise or privilege tax. State Tax Com. v. Petroleum Exploration, 253 Ky. 119 , 68 S.W.2d 777, 1933 Ky. LEXIS 977 ( Ky. 1933 ).

4. Tangible Operating Property.

In assessing the tangible property of a railroad company, all of the property used by the company in its business will be considered, for the purposes of taxation, as owned by the company, regardless of whether the company actually owns the property or merely leases it. Commonwealth v. Ingalls, 121 Ky. 194 , 89 S.W. 156, 28 Ky. L. Rptr. 164 , 1905 Ky. LEXIS 198 (Ky. Ct. App. 1905).

The tangible property of an operating company is taxable in its name, and not in the name of the holding company. Commonwealth v. Kinniconick & F. S. R. Co., 104 S.W. 290, 31 Ky. L. Rptr. 859 (1907).

Only such rolling stock of a refrigerator car company as is actually operated in Kentucky is taxable as tangible property in Kentucky. Morrell Refrigerator Car Co. v. Commonwealth, 128 Ky. 447 , 108 S.W. 926, 32 Ky. L. Rptr. 1383 , 32 Ky. L. Rptr. 1389 , 1908 Ky. LEXIS 86 ( Ky. 1908 ).

5. Local Taxation.

Local assessing authorities have no power to assess the intangible property of a franchise-paying corporation. Commonwealth ex rel. Hopkins v. Southern Pac. Co., 144 Ky. 803 , 139 S.W. 929, 1911 Ky. LEXIS 711 ( Ky. 1911 ).

Where a city, in granting to a bridge company the right to build approaches to the bridge and other appurtenances within the city, reserved the right to tax the bridge “and all appurtenances thereto,” such right referred only to the tangible property of the company, so that when the bridge company sold all of its property and franchises to a railroad company the city had no contract right to continue to tax the franchise of the bridge company under this section, the bridge company having no intangible property left on which a franchise assessment could be made. Louisville & N. R. Co. v. Henderson, 154 Ky. 575 , 157 S.W. 1105, 1913 Ky. LEXIS 120 ( Ky. 1913 ).

A city may impose a license tax on a corporation, in addition to the franchise tax authorized by this section, only where the business in which the corporation is engaged is one for which the corporation is required to obtain a franchise from the city under Ky. Const., § 164, and the corporation has not obtained such franchise. Hardin County Kentucky Tel. Co. v. Elizabethtown, 227 Ky. 778 , 14 S.W.2d 162, 1929 Ky. LEXIS 981 ( Ky. 1929 ).

City had right to impose license tax on telephone company, where ordinance imposing tax expressly provided that license tax was in lieu of franchise tax. Hardin County Kentucky Tel. Co. v. Elizabethtown, 227 Ky. 778 , 14 S.W.2d 162, 1929 Ky. LEXIS 981 ( Ky. 1929 ).

Statutes relating to original assessment as unit by state tax commission of tangible and intangible property of public service corporations with apportionment of values and allocation among cities and other taxing units, together with exceptions established by such statutes, must be read in connection with charters of cities of second class, and when so read show that city has no right to sue railroads to have circuit court assess their properties and levy taxes thereon. Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ).

6. Corporations Subject to Tax.

This section establishes three classes of companies or corporations which are subject to the tax: (1) those whose business is expressly named in the section and those engaged in like or similar business; (2) those which have or exercise any special or exclusive privilege or franchise not allowed by law to natural persons; (3) those performing any public service. Consolidation Coal Co. v. Martin, 113 F.2d 813, 1940 U.S. App. LEXIS 3465 (6th Cir. Ky. 1940 ).

This section clearly makes the classification of enumerated companies as a separate group subject to tax without any limitation or qualification. Martin v. Producers Pipe Line Co., 113 F.2d 817, 1940 U.S. App. LEXIS 3466 (6th Cir. Ky.), cert. denied, 311 U.S. 715, 61 S. Ct. 397, 85 L. Ed. 465, 1940 U.S. LEXIS 12 (U.S. 1940).

A corporation actually engaged in a public service business is liable to franchise tax even though its engagement in such business is ultra vires. James v. Kentucky Refining Co., 132 Ky. 353 , 113 S.W. 468, 1908 Ky. LEXIS 126 ( Ky. 1908 ).

Transfer company operating within a city was not liable for franchise tax, notwithstanding its business gave it the character of a common carrier, since it exercised no privilege that was not allowed by law to natural persons. Commonwealth v. Louisville Transfer Co., 181 Ky. 305 , 204 S.W. 92, 1918 Ky. LEXIS 517 ( Ky. 1918 ), overruled, Yellow Cab Co. v. Murphy, 243 S.W.2d 42, 1951 Ky. LEXIS 1116 ( Ky. 1951 ).

A corporation that does business in Kentucky through another corporation, which the first corporation controls and directs, may be subject to franchise tax, in addition to the franchise tax paid by the subsidiary corporation. Commonwealth ex rel. Hawkins v. Southern R. Co., 193 Ky. 474 , 237 S.W. 11, 1921 Ky. LEXIS 246 ( Ky. 1921 ).

7. —Railroad.

A foreign railroad company that files its articles and thereby becomes a Kentucky corporation is required to pay only one franchise tax, as a foreign corporation, and is not required to pay another tax as a domestic corporation. Commonwealth v. Chesapeake & O. R. Co., 120 Ky. 678 , 87 S.W. 1077, 27 Ky. L. Rptr. 1084 , 1905 Ky. LEXIS 149 ( Ky. 1905 ).

A domestic corporation controlling through ownership of stock, or by lease, a system of railroads, is subject to franchise tax even though all of the lines of the railroads are outside of this state. Commonwealth by Anderson v. Southern Pac. Co., 150 Ky. 97 , 149 S.W. 1105, 1912 Ky. LEXIS 821 ( Ky. 1912 ), overruled, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ).

A foreign railroad company operating trains into this state, and owning tangible property in this state, is subject to franchise tax even though it owns no lines of track in this state but merely leases the use of the tracks of other railroads. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

8. —Pipeline Company.

Pipeline company that operated pipeline through which it transported crude petroleum through five Kentucky counties to the Ohio River where it was loaded on company’s barges and carried to refining company which purchased pipeline company’s entire output was subject to taxation under this section. Martin v. Producers Pipe Line Co., 113 F.2d 817, 1940 U.S. App. LEXIS 3466 (6th Cir. Ky.), cert. denied, 311 U.S. 715, 61 S. Ct. 397, 85 L. Ed. 465, 1940 U.S. LEXIS 12 (U.S. 1940).

A company conveying gas through a pipeline and selling it to companies who resold it to consumers was performing a public service and had the power of eminent domain, and was therefore liable for franchise tax as a “pipeline company.” State Tax Com. v. Petroleum Exploration, 253 Ky. 119 , 68 S.W.2d 777, 1933 Ky. LEXIS 977 ( Ky. 1933 ).

A pipeline company is liable for franchise tax if it performs any public service. State Tax Com. v. Petroleum Exploration, 253 Ky. 119 , 68 S.W.2d 777, 1933 Ky. LEXIS 977 ( Ky. 1933 ).

9. —Tank Car Company.

Oil refining company which owned its own tank cars, and paid railroad companies to move the cars over their lines, was subject to franchise tax. Stoll Oil Refining Co. v. State Tax Com., 221 Ky. 29 , 296 S.W. 351, 1927 Ky. LEXIS 646 ( Ky. 1927 ).

10. —Telephone Company.

Cellular telephone companies are telephone companies for purposes of this section. Central Ky. Cellular Tel. Co. v. Revenue Cabinet, 897 S.W.2d 601, 1995 Ky. App. LEXIS 41 (Ky. Ct. App. 1995).

11. Corporations Not Subject to Tax.

A title guaranty company is not subject to franchise tax. Hager v. Louisville Title Co., 85 S.W. 182, 27 Ky. L. Rptr. 345 (1905).

A city may not impose a license tax upon a public service corporation that pays a franchise tax, and which has obtained a franchise from the city under Ky. Const., § 164. Cumberland Tel. & Tel. Co. v. Hopkins, 121 Ky. 850 , 90 S.W. 594, 28 Ky. L. Rptr. 846 , 1906 Ky. LEXIS 268 ( Ky. 1906 ).

Where the state has jurisdiction of neither the person nor the property, it is without power to tax. Commonwealth v. Lee Line Co., 159 Ky. 476 , 167 S.W. 409, 1914 Ky. LEXIS 812 ( Ky. 1914 ).

If a foreign corporation owns or uses no real property or tangible personal property in the state in connection with its interstate business, it has no franchise that may be taxed. Bosworth v. Evansville & Bowlint Green Packet Co., 178 Ky. 716 , 199 S.W. 1059, 1918 Ky. LEXIS 450 ( Ky. 1918 ).

When a corporation has paid a city franchise tax under this section, and is not engaged in such a business as requires it to obtain a franchise from the city under Ky. Const., § 164, it cannot be subjected to a license tax by the city for the privilege of doing business in the city, or for exercising in the city any agency or instrumentality indispensably necessary to the conduct of its business. American Ry. Express Co. v. Commonwealth, 187 Ky. 241 , 218 S.W. 453, 1919 Ky. LEXIS 387 ( Ky. 1919 ).

Motor truck operator who operated trucks between Tennessee and Missouri, and in so doing traveled over about 75 miles of highway in Kentucky, but who did not load or unload freight in Kentucky, or make any stops in Kentucky except to buy gasoline, was not subject to Kentucky franchise tax, since he had no property with a taxable situs in Kentucky. Reeves v. Service Lines, Inc., 291 Ky. 410 , 164 S.W.2d 593, 1942 Ky. LEXIS 236 ( Ky. 1942 ).

12. Nonprofit Corporations.

For the purpose of determining whether a rural electric cooperative corporation is actually operating on a nonprofit basis, the Department of Revenue may require it to file schedules and reports showing that it has no franchise value over and above the value of its tangible property. Inter-County Rural Electric Co-operative Corp. v. Reeves, 294 Ky. 458 , 171 S.W.2d 978, 1943 Ky. LEXIS 446 ( Ky. 1943 ).

So long as a rural electric cooperative corporation operates on a nonprofit basis it will not have any franchise value subject to taxation over and above the value of its tangible property. Inter-County Rural Electric Co-operative Corp. v. Reeves, 294 Ky. 458 , 171 S.W.2d 978, 1943 Ky. LEXIS 446 ( Ky. 1943 ).

13. Holding Company.

Plan pursuant to which utility company divided itself into several corporate units, consisting of operating companies supervised by a holding company, and so managed its affairs that one industrial unit, whose franchise was nontaxable, was only unit to make a profit, was not invalid as fraudulent in the absence of proof of actual fraud or concealment. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

14. Entity Liable for Tax.

Where city, prior to adoption of present constitution, sold gas plant to private corporation under contract providing that city would pay all taxes assessed on the plant, such contract obligated city to pay franchise taxes subsequently imposed by general assembly. Bd. of Councilmen v. Capital Gas & Elec. Light Co., 96 S.W. 870, 29 Ky. L. Rptr. 1114 , 1906 Ky. LEXIS 283 (Ky. Ct. App. 1906).

The person to whom the license to operate the ferry was granted is the one who is liable for the franchise tax imposed by this section. Gates v. Commonwealth, 127 Ky. 395 , 105 S.W. 432, 32 Ky. L. Rptr. 301 , 1907 Ky. LEXIS 134 ( Ky. 1907 ).

15. Exemption.

Department’s change which raised state tax obligation of public service company (PSC) and made it subject to local taxes was upheld because general assembly did not intend for franchise of PSCs to be exempt from state and local taxes and intended for it to be taxed separately. KRS 136.115(2) directed that taxes were assessed on operating tangible property and franchise; franchise was separate and nothing in the statutes indicated that franchise was included in operating tangible property. Additionally, KRS 132.208 provides a state and local tax exemption for intangible personal property except that which is assessed under KRS ch. 136. Dayton Power & Light Co. v. Dep't of Revenue, 405 S.W.3d 527, 2012 Ky. App. LEXIS 232 (Ky. Ct. App. 2012).

16. —Other Taxes.

The fact that a corporation is required to pay a franchise tax under this section does not relieve it of paying a license or occupation tax. Greene v. National Surety Co., 186 Ky. 353 , 217 S.W. 117, 1919 Ky. LEXIS 222 ( Ky. 1919 ).

17. Omitted Property.

Where foreign corporation owned all of stock in a Kentucky corporation that was a consolidation of three former Kentucky corporations in which the foreign corporation had also owned all of the stock, and the foreign corporation for years in question had paid Kentucky taxes on its franchise and upon all of the tangible property of the Kentucky corporations (which was deducted in fixing the value of its franchise), the fact that the franchises of the Kentucky corporations had never been assessed did not constitute grounds for an action against the foreign corporation to assess the value of its holdings in the Kentucky corporations as omitted property. Commonwealth v. Chesapeake & O. R. Co., 91 S.W. 672, 28 Ky. L. Rptr. 1110 (1906).

Property which is alleged not to have been taken into consideration in fixing value of corporation’s franchise cannot be assessed in an action to assess omitted property of the corporation. Commonwealth v. Chesapeake & O. R. Co., 91 S.W. 672, 28 Ky. L. Rptr. 1110 (1906).

Where corporation had made report required by law, but Board of Valuation and Assessment had not yet acted on report or made assessment, action to assess property of corporation as omitted property could not be maintained. Commonwealth by Anderson v. Louisville & N. R. Co., 142 Ky. 663 , 135 S.W. 280, 1911 Ky. LEXIS 288 ( Ky. 1911 ).

Where corporation fails to make any report under law and no assessment of its franchise is made by the Department of Revenue, the franchise may be assessed in an action to assess omitted property. Covington v. Cincinnati, C. & R. R. Co., 144 Ky. 646 , 139 S.W. 854, 1911 Ky. LEXIS 702 ( Ky. 1911 ).

Where a corporation fails to include in its report certain of its property under the heading in the report providing for the listing of that kind of property, it cannot maintain in an action against it to assess such property as omitted, that the property was included under some other heading or was assessed by the Department of Revenue on information obtained aside from the report. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

Where railroad company did not specifically report the amount or value of its rolling stock, but reported only its trackage, depots, furniture and “other property,” and the value reported by the company was accepted by the Department of Revenue in fixing the franchise value, the rolling stock could be assessed as omitted property upon its later being discovered that the tangible property of the company that fell within its classification of “other property” far exceeded the value given in the report. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

On assessment of omitted property of a franchise-paying corporation, the court should ascertain how much the assessment made by the Department of Revenue should be increased on account of the addition of the value of the omitted property, and certify the increase to the department. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

In an action to assess alleged omitted property the state must first show the fact that the property was not reported, and its nature and value, and the corporation then has the burden of showing that notwithstanding the omission, the property was considered by the Department of Revenue in assessing the franchise, from information obtained from sources outside the report. Chesapeake & O. R. Co. v. Commonwealth, 190 Ky. 552 , 228 S.W. 15, 1920 Ky. LEXIS 557 ( Ky. 1920 ). See Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

Failure of corporation to report any item or species of property that it is called upon to report is an omission and not an undervaluation, and the omitted property may be assessed in an action brought for that purpose. Chesapeake & O. R. Co. v. Commonwealth, 190 Ky. 552 , 228 S.W. 15, 1920 Ky. LEXIS 557 ( Ky. 1920 ).

18. —Retrospective Assessment.

Second-class city may not retroactively assess property of companies covered by this section, but may call upon the Department of Revenue for relief when an omission has been made. American Refrigerator Transit Co. v. Lexington, 288 Ky. 295 , 155 S.W.2d 848, 1941 Ky. LEXIS 75 ( Ky. 1941 ).

19. Failure to Assess.

Mere failure of state assessing authorities to endeavor to assess franchise tax against a particular corporation did not amount to a contemporaneous construction that the law did not apply to such corporation. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

20. Conclusiveness of Assessment.

Where the Department of Revenue has substantially followed the provisions of the law in fixing the value of a franchise, and no appeal has been taken, its action is final. Commonwealth by Anderson v. Southern Pac. Co., 150 Ky. 97 , 149 S.W. 1105, 1912 Ky. LEXIS 821 ( Ky. 1912 ), overruled, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ).

21. Settlement.

Revenue commissioner having determined that certain river barge companies were subject to franchises taxes, had power to settle in good faith unliquidated tax claims against companies for such taxes, so as to require approval of settlement by circuit court. Commonwealth ex rel. Reeves v. American Barge Line Co., 253 S.W.2d 622, 1952 Ky. LEXIS 1118 ( Ky. 1952 ).

22. Double Taxation.

The fact that a city had levied a franchise tax on a telephone company under this section did not prevent the city from also imposing a license tax on the company, the franchise tax not being a tax for the privilege of doing business. Cumberland Tel. & Tel. Co. v. Calhoun, 151 Ky. 241 , 151 S.W. 659, 1912 Ky. LEXIS 790 ( Ky. 1912 ).

Assessment of local franchise tax under this section did not constitute double taxation when considered with the license fee authorized by KRS 68.178 ; the former is a tax on tangible property, the latter a fee based on gross receipts. Cooksey Bros. Disposal Co. v. Boyd County, 973 S.W.2d 64, 1997 Ky. App. LEXIS 132 (Ky. Ct. App. 1997), cert. denied, 525 U.S. 930, 119 S. Ct. 338, 142 L. Ed. 2d 279, 1998 U.S. LEXIS 6495 (U.S. 1998).

23. Tax Rate.

The assessment of the franchise of a corporation, on its report covering the 12-month period ending on December 31 preceding the assessment, bears the tax rate, for county purposes, levied for the fiscal year that next ensues after said December 31, and not the rate for the fiscal year covering which the report was made. Gray v. Louisville, H. & S. L. R. Co., 201 Ky. 750 , 258 S.W. 309, 1924 Ky. LEXIS 636 ( Ky. 1924 ).

The ad valorem tax rate of $1.00 per $100.00 on railroad rolling stock under subdivision (4)(a) (deleted by 1990 amendment) of this section violates § 306 of the Railroad Revitalization and Regulatory Reform Act, 49 USCS § 11503; since no identifiable existing tax rate fulfills the specific standard of the Act, the trial judge did not err in developing an appropriate rate based upon the evidence before him. General American Transp. Corp. v. Kentucky, 791 F.2d 38, 1986 U.S. App. LEXIS 25150 (6th Cir. Ky. 1986 ) (decision prior to 1990 amendment).

24. Situs.

The fact that the business of a corporation is conducted upon the navigable waters of the United States does not prevent the imposition of a franchise tax. Bosworth v. Evansville & Bowlint Green Packet Co., 178 Ky. 716 , 199 S.W. 1059, 1918 Ky. LEXIS 450 ( Ky. 1918 ).

The franchise tax is an ad valorem property tax and to be valid the property taxed must have a situs within the taxing unit. Commercial Carriers, Inc. v. Kentucky Tax Com., 321 S.W.2d 42, 1959 Ky. LEXIS 256 ( Ky. 1959 ).

25. Transient Property.

A fixed number of units of transient property constituting an average number of those continuously used in the state, may be the subject of ad valorem taxation even though none of the units involved are permanently located in Kentucky. Union Barge Line Corp. v. Marcum, 360 S.W.2d 130, 1962 Ky. LEXIS 209 ( Ky. 1962 ).

26. Transportation Facilities.

A company transporting its own goods in tank cars owned by it, or in pipelines it owns and operates, is liable for a franchise tax on such transportation facilities. Texas Co. v. Commonwealth, 303 Ky. 590 , 198 S.W.2d 316, 1946 Ky. LEXIS 906 ( Ky. 1946 ).

27. Property on Ohio River.

Neither the Virginia Compact nor the Northwest Ordinance impairs the power of Kentucky to impose taxes on property used on the Ohio River. Union Barge Line Corp. v. Marcum, 360 S.W.2d 130, 1962 Ky. LEXIS 209 ( Ky. 1962 ).

28. State’s Jurisdiction.

A state cannot tax beyond its boundary. Bosworth v. Evansville & Bowlint Green Packet Co., 178 Ky. 716 , 199 S.W. 1059, 1918 Ky. LEXIS 450 ( Ky. 1918 ).

A franchise tax may not be assessed where no property is possessed within the jurisdiction by the alleged taxpayer, nor any business transacted therein. Reeves v. Service Lines, Inc., 291 Ky. 410 , 164 S.W.2d 593, 1942 Ky. LEXIS 236 ( Ky. 1942 ).

29. Estoppel.

Where a corporation has invoked the provisions of this section in an action to assess its property, it cannot later defend against an assessment made under this section on the ground that the section is unconstitutional. Commonwealth by Anderson v. Southern Pac. Co., 150 Ky. 97 , 149 S.W. 1105, 1912 Ky. LEXIS 821 ( Ky. 1912 ), overruled, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ).

30. Burden of Proof.

There is a presumption that all companies mentioned in this section are liable for franchise tax, and the burden is on a company seeking to escape the tax to show that its business is not of the type mentioned or is not in fact a public service business. State Tax Com. v. Petroleum Exploration, 253 Ky. 119 , 68 S.W.2d 777, 1933 Ky. LEXIS 977 ( Ky. 1933 ).

31. Franchise Fee.

A franchise fee based on a percentage of gross service revenues is not a tax, but is instead a charge bargained for in exchange for a specific property right, i.e., rental or compensation for the use of public streets. Berea College Utilities v. Berea, 691 S.W.2d 235, 1985 Ky. App. LEXIS 588 (Ky. Ct. App. 1985).

Cited in:

Chesapeake & O. R. Co. v. Louisville & N. R. Co., 154 Ky. 637 , 157 S.W. 1107, 1913 Ky. LEXIS 121 ( Ky. 1913 ); State Tax Com. v. Petroleum Exploration, 253 Ky. 119 , 68 S.W.2d 777, 1933 Ky. LEXIS 977 ( Ky. 1933 ); Goodlett v. Anderson County, 267 Ky. 166 , 101 S.W.2d 421, 1936 Ky. LEXIS 761 ( Ky. 1936 ); Shelbyville v. Citizens Bank of Shelbyville, 272 Ky. 559 , 114 S.W.2d 719, 1938 Ky. LEXIS 143 ( Ky. 1938 ); Greene v. Commonwealth, 275 Ky. 637 , 122 S.W.2d 523, 1938 Ky. LEXIS 489 ( Ky. 1938 ); Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1939 ); Fayette County v. Martin, 279 Ky. 387 , 130 S.W.2d 838, 1939 Ky. LEXIS 299 ( Ky. 1939 ); Kentucky State Tax Com. v. Tube Turns, Inc., 283 Ky. 474 , 141 S.W.2d 875, 1940 Ky. LEXIS 358 ( Ky. 1940 ); Commonwealth v. Cincinnati, N. O. & T. P. R. Co., 288 Ky. 43 , 155 S.W.2d 460, 1941 Ky. LEXIS 47 , 137 A.L.R. 301 ( Ky. 1941 ); Lexington v. Lexington Tel. Co., 288 Ky. 640 , 157 S.W.2d 119, 1941 Ky. LEXIS 174 ( Ky. 1941 ); Dixie Greyhound Lines v. Paducah, 289 Ky. 196 , 158 S.W.2d 433, 1942 Ky. LEXIS 532 ( Ky. 1942 ); Reeves v. Louisville Gas & Electric Co., 290 Ky. 25 , 160 S.W.2d 391, 1942 Ky. LEXIS 362 ( Ky. 1942 ); Tomlin v. Taylor, 290 Ky. 619 , 162 S.W.2d 210, 1942 Ky. LEXIS 468 (Ky. 1942); Reeves v. Service Lines, Inc., 291 Ky. 410 , 164 S.W.2d 593, 1942 Ky. LEXIS 236 (Ky. 1942); Ashland Oil & Refining Co. v. Department of Revenue, 256 S.W.2d 359, 1953 Ky. LEXIS 721 ( Ky. 1953 ); Luckett v. Texas Eastern Transmission Corp., 336 S.W.2d 567, 1960 Ky. LEXIS 338 ( Ky. 196 0); Board of Education v. Ashland Oil & Refining Co., 350 S.W.2d 475, 1961 Ky. LEXIS 101 ( Ky. 1961 ).

Notes to Unpublished Decisions

1. Application.

Unpublished decision: State revenue cabinet properly determined that the tax the cable television company was required to pay was the tax on its operating tangible property and franchise, and, thus, the trial court erred in affirming the state tax appeal board’s decision to the contrary. Revenue Cabinet v. Comcast Cablevision, 147 S.W.3d 743, 2003 Ky. App. LEXIS 330 (Ky. Ct. App. 2003).

Unpublished decision: Operating and nonoperating tangible property, once classified, were subject to both state and local taxes, while nonoperating intangible property was subject to a different state tax rate, and, thus, the state revenue cabinet determined the proper tax assessment for the cable television company by valuing the tangible property and the franchise, while not including the nonoperating intangible property in that calculation because to do so would have given the table television company too high of an assessment for valuation and tax purposes; accordingly, the state tax appeals board erred in affirming the trial court’s decision to the contrary. Revenue Cabinet v. Comcast Cablevision, 147 S.W.3d 743, 2003 Ky. App. LEXIS 330 (Ky. Ct. App. 2003).

Unpublished decision: After cable television company created and delivered to the state revenue cabinet the report required by statutory law, the state revenue cabinet had the sole power to value and assess all of the property of the cable television company; moreover, the state revenue cabinet’s valuation and assessment enabled it to properly determine the fair cash value of the operating property of the cable television company, which was what the cable television company was taxed on, as a unit, and, thus, the state revenue cabinet properly valued, assessed, and taxed the cable television company. Revenue Cabinet v. Comcast Cablevision, 147 S.W.3d 743, 2003 Ky. App. LEXIS 330 (Ky. Ct. App. 2003).

Opinions of Attorney General.

The valuation of the property of rural electric cooperatives must be accomplished at the state level. OAG 61-355 .

Although no provision is made by the constitution or statutes for exemption of utility companies from city taxes, the statutes do provide a different method of assessment of property tax in the case of public service corporations as compared to the method used in the case of other taxpayers. OAG 62-40 .

A city is without authority to levy an occupational license tax on the operations of Southern Bell Telephone & Telegraph Company within the corporate limits of the city. OAG 62-644 .

A library district tax would be applicable to franchise assessments with a taxable situs within the library district. OAG 68-545 .

Since the property valuation administrator has no duty to assess public utility property in the county, there is no statutory basis for requiring that the value of such property be included in the base upon which the property valuation administrator’s compensation is computed. OAG 71-249 .

The Department of Revenue values and assesses property of public utility corporations. OAG 71-249 .

The property valuation administrator has no responsibilities or duties in connection with the assessment of the property of public utility corporations and is not even advised of the value placed upon the property by the state. OAG 71-249 .

The property valuation administrator may, under the direction and supervision of the Department of Revenue, keep a record of the property of public utility corporations, but this does not constitute an assessment. OAG 71-249 .

Where city chose to use the county assessment instead of a city assessment as provided in KRS 132.285 , it could provide for a six month special budget and tax period to provide for the transition from a calendar year to a fiscal year basis and could require a public service company to pay a one half year’s tax bill for such period notwithstanding the use of the word “annually” in this section. OAG 75-435 .

The Ohio-Kentucky Utilities, Inc., a paper corporation set up by Floyd county to run utility facilities acquired by bonds pursuant to KRS 58.010 et seq., was not subject to a utility tax assessment, provided for by this section, by the Town of Wayland. OAG 78-679 .

A city may not levy an occupational license tax against public service corporations, when those organizations pay ad valorem and franchise taxes levied pursuant to KRS Chapter 136. OAG 82-93 .

Letter of electric corporation attached to payment of ad valorem taxes protesting payment and asking the sheriff to sign the letter acknowledging receipt of the protest did not constitute a valid or legal protest, since such taxes are assessed by the Revenue Cabinet and thus protests of such assessments must be made to the Revenue Cabinet; therefore, the sheriff should not sign such protest. OAG 83-202 .

This section levies a property tax and not a franchise tax; consequently, a city ordinance imposing a franchise fee on a power company for the right to distribute electrical energy in the city did not amount to double taxation. OAG 83-233 , superseding OAG 68-338 , to the extent of conflict.

Research References and Practice Aids

Cross-References.

Expenses of public service commission, assessment of public utilities for, KRS 278.130 .

Railroad taxes, assessment and collection, Ky. Const., § 182.

Rural electric cooperative corporations, taxes and exemptions, KRS 279.200 .

Taxation, situs of property for, KRS 132.190 .

Kentucky Law Journal.

Martin, Practice Before the Kentucky Department of Revenue, 28 Ky. L.J. 4 (1939).

Roberts, What Constitutes “Doing Business” by a Foreign Corporation in Kentucky, 31 Ky. L.J. 3 (1942).

Allphin, 1954 Kentucky Tax Legislation, 43 Ky. L.J. 76 (1954).

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

136.130. Reports of all public service corporations — Extensions.

  1. Each corporation included in KRS 136.120(1) shall annually, between December 31, and April 30, following, make and deliver to the Department of Revenue a report in such form as the department may prescribe, showing such of the following facts as may be requested by the department: The name and principal place of business of the corporation; the kind of business engaged in; the amount of capital stock, preferred and common, and the number of shares of each; the amount of stock paid up; the par and fair cash value of the stock; the highest price at which the stock was sold at a bona fide sale within twelve (12) months next before December 31 of the year for which the report is required to be made; the amount of surplus funds and undivided profits; the total amount of indebtedness as principal; the cost and year acquired of all operating property owned, operated, or leased, including property under construction, property held for future use, and the depreciation attributable thereto as of December 31, the cost and year acquired of all nonoperating tangible property and the depreciation attributable thereto; the cost and market value as of December 31 of all intangible property; the value of all other assets; the operating and nonoperating revenues, the net utility operating income before and after depreciation and before and after income taxes, the net income from operations, the net income including income from investments, and income from all other sources for twelve (12) months next preceding December 31 of the year for which the report is required; the amount and kind of operating property in this state, and where situated in each county, city, and taxing district, assessed or liable to assessment in this state, and the fair cash value thereof, the length and description of all the lines operated, owned, or leased in this state and in each county, city, and taxing district; and such other facts as the department may require.
  2. The report shall cover the period of twelve (12) months ending December 31. The department may change the date of the reports to conform to any change in date established by federal regulations.
  3. If any corporation is in the hands or under the control of a receiver or other person, by order of a court, the receiver or other person shall make the reports required by this section and by KRS 136.140 .
  4. All public service corporations included in KRS 136.120 shall file with the report required by subsection (1) of this section a copy of all reports to their stockholders and a complete copy of their report to the Kentucky regulating authority for the year ending December 31.
  5. The Department of Revenue may grant an extension of thirty (30) days to file the public service property tax return when, in its judgment, good cause exists. The department shall keep a record of every extension and the taxpayer shall attach a copy of the approved extension to his return when filed.
  6. A taxpayer may be granted a thirty (30) day extension for filing the public service company property tax return if it requests the extension before the due date of the return and includes with the extension request a report of any increases or decreases in property of fifty thousand dollars ($50,000) or more in any taxing district.

History. 4078, 4078a, 4079, 4089, 4096, 4097: amend. Acts 1960, ch. 186, Art. II, § 3; 1986, ch. 496, § 5, effective August 1, 1986; 1990, ch. 163, § 4, effective July 13, 1990; 2005, ch. 85, § 302, effective June 20, 2005.

NOTES TO DECISIONS

Analysis

  1. Confidential Reports.
  2. —Contents.
  3. —Failure to Make.
  4. —Fraud or Concealment.
  5. —Time of Filing.
  6. Omitted Property.
  7. —Penalty.
  8. Retrospective Assessment.
  9. Applicable Tax Rate.
1. Confidential Reports.
2. —Contents.

In making the report required by this section a railroad must set forth the length of lines controlled by stock ownership, although such lines are being operated by the subsidiary corporation. Commonwealth v. Louisville & N. R. Co., 149 Ky. 829 , 150 S.W. 37, 1912 Ky. LEXIS 732 ( Ky. 1912 ).

A railroad company operating lines both in and out of the state must report all lines owned, operated, leased or controlled in the state, as well as out of the state. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

For the purpose of determining whether a rural electric cooperative corporation is actually operating on a nonprofit basis, the Department of Revenue may require it to file schedules and reports showing that it has no franchise value over and above the value of its tangible property. Inter-County Rural Electric Co-operative Corp. v. Reeves, 294 Ky. 458 , 171 S.W.2d 978, 1943 Ky. LEXIS 446 ( Ky. 1943 ).

3. —Failure to Make.

Corporation which failed to make report required by this section because it did not receive from Department of Revenue blank form which department had customarily mailed to corporations in previous years, was liable to conviction under law for “wilfully” failing to report. Nashville, C. & S. L. R. Co. v. Commonwealth, 160 Ky. 50 , 169 S.W. 511, 1914 Ky. LEXIS 394 ( Ky. 1914 ).

4. —Fraud or Concealment.

Where reports made by utility fully showed nature of corporate set-up, total gross earnings and facts and figures from which net earnings could be computed, facts upon which depreciation could be computed, and facts from which could be determined the amount and nature of dividends paid, it was not fraud or concealment for the company to report a different net earning than shown on its books, a different depreciation reserve than actually set up, or that no cash dividends were paid. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

5. —Time of Filing.

Where representative of Department of Revenue required corporation to include in its report certain information that could not be obtained before date on which report was required to be made, corporation could not be convicted of wilfully failing to report under law. United Fuel Gas Co. v. Commonwealth, 171 Ky. 525 , 188 S.W. 660, 1916 Ky. LEXIS 400 ( Ky. 1916 ).

6. Omitted Property.

If a corporation has made a fair and correct report under this section, giving an account of all of its assets, and the Department of Revenue has considered such report in making its assessment, any property that was listed in the report cannot later be assessed as omitted property. Commonwealth by Anderson v. Louisville & N. R. Co., 142 Ky. 663 , 135 S.W. 280, 1911 Ky. LEXIS 288 ( Ky. 1911 ).

Where corporation fails to make any report under this section, and no assessment of its franchise is made by the Department of Revenue, the franchise may be assessed in an action to assess omitted property. Covington v. Cincinnati, C. & R. R. Co., 144 Ky. 646 , 139 S.W. 854, 1911 Ky. LEXIS 702 ( Ky. 1911 ).

In an action to assess as omitted property certain property of railroad company, it must be affirmatively alleged that the report required by this section was not made, or if made was not in accordance with this section and did not include the property sought to be assessed. Commonwealth v. Louisville & N. R. Co., 149 Ky. 829 , 150 S.W. 37, 1912 Ky. LEXIS 732 ( Ky. 1912 ).

Where railroad company did not specifically report the amount or value of its rolling stock, but reported only its trackage, depots, furniture and “other property,” and the value reported by the company was accepted by the department in fixing the franchise value, the rolling stock could be assessed as omitted property upon its later being discovered that the tangible property of the company that fell within its classification of “other property” far exceeded the value given in the report. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

Where a corporation fails to include certain of its property under the heading in the report provided for the listing of that kind of property, it cannot maintain, in action against it to assess such property as omitted, that the property was included under some other heading or was assessed by the Department of Revenue on information obtained aside from the report. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

Failure of a corporation to report any item or species of property that it is called upon to report is an omission and not an undervaluation, and the omitted property may be assessed in an action brought for that purpose. Chesapeake & O. R. Co. v. Commonwealth, 190 Ky. 552 , 228 S.W. 15, 1920 Ky. LEXIS 557 ( Ky. 1920 ).

7. —Penalty.

Mere failure of state assessing authorities to require report from corporation would not excuse corporation from 20 percent penalty in action to assess its property as omitted, in absence of showing that such authorities advised corporation that it was not required to report. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

8. Retrospective Assessment.

In action to assess alleged omitted property the state must first show the fact that the property was not reported and its nature and value, and the corporation then has the burden of showing that notwithstanding the omission, the property was considered by the Department of Revenue in assessing the franchise from information obtained from sources outside the report. Chesapeake & O. R. Co. v. Commonwealth, 190 Ky. 552 , 228 S.W. 15, 1920 Ky. LEXIS 557 ( Ky. 1920 ). See Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

9. Applicable Tax Rate.

The assessment of the franchise of a corporation, on its report under this section covering the 12-month period ending on December 31 preceding the assessment, bears the tax rate for county purposes, levied for the fiscal year that next ensues after said December 31, and not the rate for the fiscal year covering which the report was made. Gray v. Louisville, H. & S. L. R. Co., 201 Ky. 750 , 258 S.W. 309, 1924 Ky. LEXIS 636 ( Ky. 1924 ).

Cited in:

Consolidation Coal Co. v. Martin, 113 F.2d 813, 1940 U.S. App. LEXIS 3465 (6th Cir. 1940).

Notes to Unpublished Decisions

1. Confidential Reports.

Unpublished decision: After cable television company created and delivered to the state revenue cabinet the report required by statutory law, the state revenue cabinet had the sole power to value and assess all of the property of the cable television company; moreover, the state revenue cabinet’s valuation and assessment enabled it to properly determine the fair cash value of the operating property of the cable television company, which was what the cable television company was taxed on, as a unit, and, thus, the state revenue cabinet properly valued, assessed, and taxed the cable television company. Revenue Cabinet v. Comcast Cablevision, 147 S.W.3d 743, 2003 Ky. App. LEXIS 330 (Ky. Ct. App. 2003).

Research References and Practice Aids

Cross-References.

Annual report of public utilities to Public Service Commission, KRS 278.230 .

136.132. Report of vehicles owned or operated by public service corporations — Vehicle assessment certified separately.

  1. Each corporation included in KRS 136.120(1) shall annually, when filing the report required by KRS 136.130 , provide to the Department of Revenue a listing of all motor vehicles and trailers operated, owned, or leased by it which are subject to registration in Kentucky with the latest registration or certificate number issued to such motor vehicle or trailer and the make, model and year of each vehicle.
  2. The Department of Revenue shall, when valuing the property of corporations or companies assessable by it, value the vehicles at no less than the value used by the property valuation administrator.
  3. In certifying the assessment of property of public service companies subject to local taxation, the department shall separately certify the amount of the assessment representing the valuation of motor vehicles and trailers or an apportionment thereof.

History. Enact. Acts 1978, ch. 371, § 7, effective January 1, 1981; 2005, ch. 85, § 303, effective June 20, 2005.

136.140. Reports of interstate public service corporations.

  1. If a public service corporation, foreign or domestic, operates and conducts its business in other states as well as in this state, the report required by KRS 136.130 shall show the following additional facts: the cost and year acquired of the operating property operated, owned, or leased, including property under construction, property held for future use, and depreciation attributable thereto for the property in this state as of December 31; and such other facts as the department may require.
  2. All public service corporations included in KRS 136.120 shall file with the report required by KRS 136.130 and this section a copy of all reports to their stockholders and a complete copy of their report to the federal regulating agency if their operations are interstate.

History. 4079, 4096: amend. Acts 1960, ch. 186, Art. II, § 4; 2002, ch. 89, § 8, effective July 15, 2002; 2005, ch. 85, § 304, effective June 20, 2005.

NOTES TO DECISIONS

1. Rolling Stock.

Under the law it was held that rolling stock was to be assessed according to the average number of units constantly in this state, and not on a mileage basis, notwithstanding that this section required the railroad to report only such portion of its rolling stock as the mileage of lines in this state bore the total mileage. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ) (decided under prior law).

Cited in:

Louisville v. Howard, 306 Ky. 687 , 208 S.W.2d 522, 1947 Ky. LEXIS 1024 ( Ky. 1947 ).

136.150. Ascertainment of facts on failure to report.

If any corporation fails to report as required by KRS 136.130 and 136.140 on or before April 30 of each year, or May 30 if the Department of Revenue has granted the corporation an extension, the Department of Revenue shall ascertain the required facts and values in such manner and by such means as it deems proper, at the cost of the corporation failing to make the report.

History. 4090, 4097: amend. Acts 2002, ch. 89, § 9, effective July 15, 2002; 2005, ch. 85, § 305, effective June 20, 2005.

NOTES TO DECISIONS

1. Omitted Property.

A franchise which had not been assessed pursuant to law that provided for the valuation and taxation of franchise and for the method of determining the value of the franchise could have been assessed as omitted property in an action under law that provided that sheriff or revenue agent could list omitted property for taxation. Commonwealth v. Adams Express Co., 118 Ky. 312 , 80 S.W. 1118, 26 Ky. L. Rptr. 190 , 1904 Ky. LEXIS 42 ( Ky. 1904 ) (decided under prior law).

Right to assess as omitted property particular items of property not taken into consideration by Department of Revenue in fixing franchise value. Commonwealth ex rel. Auditor's Agent v. Louisville Gas Co., 135 Ky. 324 , 122 S.W. 164, 1909 Ky. LEXIS 291 ( Ky. 1909 ).

Where certain tangible property of a railroad company was not reported or assessed under KRS 136.120 to 136.180 , it could be assessed as omitted property in an action under law that provided that sheriff or revenue agent could list omitted property for taxation. Commonwealth by Rehorn v. Chesapeake & O. R. Co., 170 Ky. 486 , 186 S.W. 164, 1916 Ky. LEXIS 85 ( Ky. 1916 ).

136.160. Valuation of property — Determination.

  1. The Department of Revenue shall determine the fair cash value of the operating property of a domestic public service corporation as a unit. The fair cash value of the operating property shall be equalized.
  2. The Department of Revenue shall determine the fair cash value of the operating property of a foreign public service corporation or a domestic public service corporation with property or routes in Kentucky and outside Kentucky as a unit according to subsection (1). The fair cash value of the operating property everywhere valued as a unit shall be apportioned to Kentucky based on the average of the property factor and the business factor. The fair cash value of the operating property in Kentucky shall be equalized.
    1. The property factor shall fairly reflect the amount of operating property operated, owned, or leased in Kentucky compared to the total amount of operating property operated, owned, or leased everywhere. An allocable portion of the rolling stock, aircraft, and watercraft of a common carrier shall be included in the operating property, operated, owned, or leased in Kentucky. This factor may be a single factor or an average of several factors.
    2. The business factor shall fairly reflect the utilization of the operating property operated, owned, or leased in Kentucky compared to the utilization of the operating property operated, owned, or leased everywhere. This factor may be a single factor or an average of several factors.
  3. The nonoperating tangible and nonoperating intangible property of public service corporations whose operating property is valued according to either subsection (1) or (2) shall be valued by the Department of Revenue in the same manner and according to the same standards as if this property were valued by the property valuation administrator in the county where the property has a taxable situs.

History. 4079 to 4081: amend. Acts 1942, ch. 164, §§ 1, 2; 1954, ch. 149, § 2; 1960, ch. 186, Art. II, § 5; 1962, ch. 29, § 7; 2005, ch. 85, § 306, effective June 20, 2005.

Compiler’s Notes.

Prior to the 1960 amendment, this section contained provision for the determination of the value of a corporate franchise. Cases construing this provision are: Southern Ry. v. Kentucky, 274 U.S. 76, 47 S. Ct. 542, 71 L. Ed. 934 (1927); Louisville N.R.R. v. Bosworth, 209 F. 380 (D.C. Ky. 1913 ); Cumberland Pipe Line Co. v. Lewis, 17 F.2d 167 (D.C. Ky. 1926 ); Consolidated Coal Co. v. Martin, 113 F.2d 813 (6th Cir. 1940); Hager v. American Sur. Co., 121 Ky. 791 , 28 K.L.R. 782, 90 S.W. 550 (1906); Commonwealth v. Ledman, 127 Ky. 603 , 32 K.L.R. 452, 106 S.W. 247 (1907); James v. American Sur. Co., 133 Ky. 313 , 117 S.W. 411 (1909). See James v. United States Fid. & Guarantee Co., 133 Ky. 299 , 117 S.W. 406 (1909); Commonwealth ex rel. Auditor’s Agent v. Louisville Gas Co., 135 Ky. 324 , 122 S.W. 164 (1909); Commonwealth v. Louisville & N.R.R., 149 Ky. 829 , 150 S.W. 37 (1912); Baltimore & O.S.W.R.R. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35 (1917); Kentucky Heating Co. v. City of Louisville, 174 Ky. 142 , 192 S.W. 4 (1917), writ dismissed, 250 U.S. 653, 40 S. Ct. 53, 63 L. Ed. 1191 (1919); Commonwealth v. Kottmyer, 183 Ky. 163 , 208 S.W. 823 (1919); Chesapeake & O. Ry. v. Commonwealth, 190 Ky. 552 , 228 S.W. 15 (1920); Southern Ry. v. Commonwealth, 238 Ky. 638 , 38 S.W.2d 696 (1931); Inter-County Rural Electric Co-operative Corp. v. Reeves, 294 Ky. 458 , 171 S.W.2d 978, 1943 Ky. LEXIS 446 ( Ky. 1943 ); Texas Co. v. Commonwealth, 303 Ky. 590 , 198 S.W.2d 316 (1946); City of Louisville v. Howard, 306 Ky. 687 , 208 S.W.2d 522 (1947); Luckett v. Tennessee Gas Transmission Co., 331 S.W.2d 879 (Ky. App. 1960).

NOTES TO DECISIONS

Analysis

  1. Constitutionality.
  2. Fair Cash Value.
  3. Capital Stock.
  4. —Railroad.
  5. Tangible Property.
  6. Intangible Property.
  7. Mileage.
  8. Conclusiveness.
1. Constitutionality.

Assessment of franchise of corporation at full value, while other property in the state was being systematically and generally assessed by other assessing authorities at only a percentage of its value, was a violation of the constitutional requirement of uniformity, and such assessment may have been enjoined by suit in federal court. Greene v. Louisville & I. R. Co., 244 U.S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, 1917 U.S. LEXIS 1660 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984); Illinois C. R. Co. v. Greene, 244 U.S. 555, 37 S. Ct. 697, 61 L. Ed. 1309, 1917 U.S. LEXIS 1662 (U.S. 1917); Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

2. Fair Cash Value.

Total assets, situated partly within and partly without the state, but organically related, may have been taken into consideration as a means of reaching the true cash value of the part within the state, and in the case of a railroad, the mileage factor may have been given its proper weight. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

3. Capital Stock.

The “capital stock” of the corporation included the entire property, tangible and intangible. Greene v. Louisville & I. R. Co., 244 U.S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, 1917 U.S. LEXIS 1660 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

In determining the percentage of capital stock apportionable to Kentucky, in the case of a railroad operating within and without the state, the whole of the controlled mileage within and without the state was to be treated as part of the aggregate capital stock, not only in fixing the mileage but also in fixing the valuation upon which the apportionment was based. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

Valuation of capital stock on capitalization-of-income plan, rather than stock-and-bond plan, was not fundamentally wrong. Illinois C. R. Co. v. Greene, 244 U.S. 555, 37 S. Ct. 697, 61 L. Ed. 1309, 1917 U.S. LEXIS 1662 (U.S. 1917).

To avoid double assessment, the value of so much of the controlled mileage of a railroad as was within Kentucky, and separately assessed in Kentucky, should have been deducted from the Kentucky apportionment of the capital stock, in addition to the deduction of the tangible property owned by the company. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

The particular method to be pursued in fixing the value of the capital stock of a public service corporation operating partly within and partly without the state was left to the sound discretion of the Department of Revenue. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

Where the value of the tangible property within the state was larger than the value reflected by apportioning the capital stock on a mileage basis, a proper apportionment could not have been reached by taking an average of the mileage proportion, the proportion of gross earnings, and the proportion of net earnings, since the last two (2) items had no relation to the value of the tangible property. Louisville & N. R. Co. v. Bosworth, 209 F. 380, 1913 U.S. Dist. LEXIS 1117 (D. Ky. 1913 ).

Capitalization of net income was not the only method of fixing the value of the capital stock of a foreign corporation. Cumberland Pipe Line Co. v. Lewis, 17 F.2d 167, 1926 U.S. Dist. LEXIS 1652 (D. Ky. 1926 ).

Valuation of pipeline company’s capital stock by capitalizing at seven percent (7%) the average net earnings for the last three (3) years, without regard to probable future earnings, was fundamentally wrong. Cumberland Pipe Line Co. v. Lewis, 17 F.2d 167, 1926 U.S. Dist. LEXIS 1652 (D. Ky. 1926 ).

The property value of the shares of stock of a corporation was not a governing factor in determining the value of the capital stock. Commonwealth v. Ledman, 127 Ky. 603 , 106 S.W. 247, 32 Ky. L. Rptr. 452 , 1907 Ky. LEXIS 165 ( Ky. 1907 ).

In determining the value of the capital stock of a corporation there may have been taken into consideration the tangible property, investments, cash, accounts, and gross and net earning. Commonwealth by Anderson v. Louisville & N. R. Co., 142 Ky. 663 , 135 S.W. 280, 1911 Ky. LEXIS 288 ( Ky. 1911 ).

In determining the value of the capital stock of a foreign railroad company operating in the state in interstate business only, there was no warrant for selecting exclusively the gross earnings or gross receipts basis, though gross earnings should have been considered. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

In determining the value of the capital stock of a foreign railroad company operating in the state in interstate business only there was no authority for ascertaining such value on an exclusively net earning basis. Baltimore & O. S. W. R. Co. v. Commonwealth, 177 Ky. 566 , 198 S.W. 35, 1917 Ky. LEXIS 655 ( Ky. 1917 ).

In apportioning the capital stock of a railroad operating lines both in and out of this state there must have been taken into consideration the mileage of all lines owned, operated, leased and controlled. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

The tax commission had the discretion to use either the stock-and-bond plan or the capitalization-of-income plan, or a combination of both, in determining the value of capital stock. Commonwealth v. Louisville Gas & Electric Co., 278 Ky. 466 , 128 S.W.2d 778, 1938 Ky. LEXIS 68 ( Ky. 1938 ).

4. —Railroad.

In the case of an interstate railroad, this section required first an apportionment of a proper share of the company’s capital stock value to Kentucky, followed by a deduction of the value of the tangible property of the company in Kentucky. Illinois C. R. Co. v. Greene, 244 U.S. 555, 37 S. Ct. 697, 61 L. Ed. 1309, 1917 U.S. LEXIS 1662 (U.S. 1917).

The value of the physical elements of a railroad, whether that value had been deemed actual cost, cost of reproduction new, cost of reproduction less depreciation, or some other figure, was not the sole measure or guide to its value in operation; much weight was to be given to present and prospective earning capacity at rates that were reasonable, having regard to available traffic and competitive and other conditions prevailing in the territory served. Southern R. Co. v. Kentucky, 274 U.S. 76, 47 S. Ct. 542, 71 L. Ed. 934, 1927 U.S. LEXIS 10 (U.S. 1927).

5. Tangible Property.

Although the fact that property was part of a system and had its uses only in connection with other parts of the system may have been considered by a state in taxing that portion of the system within her borders, yet the idea of organic unity must not have been made the means of unlawfully taxing property beyond the taxing jurisdiction of the state. Illinois C. R. Co. v. Greene, 244 U.S. 555, 37 S. Ct. 697, 61 L. Ed. 1309, 1917 U.S. LEXIS 1662 (U.S. 1917).

6. Intangible Property.

No intangible element of substantial amount over and above the value of its physical parts inhered in a railroad that could not have earned a reasonable rate of return on the amount invested in its tangible property. Southern R. Co. v. Kentucky, 274 U.S. 76, 47 S. Ct. 542, 71 L. Ed. 934, 1927 U.S. LEXIS 10 (U.S. 1927).

7. Mileage.

The provision that the ratio of intrastate mileage to total mileage “shall be considered” in fixing value of franchise of railroad operating within and without the state did not require an apportionment upon a strict mileage basis, but merely meant that relative mileage should have been considered along with other pertinent factors. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

In absence of proof to the contrary, it would have been presumed that assessing authorities, in making apportionment on mileage basis, took into consideration the excess value per mile of the out-of-state mileage arising from the existence of costly terminals in other states. Illinois C. R. Co. v. Greene, 244 U.S. 555, 37 S. Ct. 697, 61 L. Ed. 1309, 1917 U.S. LEXIS 1662 (U.S. 1917).

Mileage controlled as well as mileage operated must have been taken into consideration. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

The mileage basis of apportionment could not have been adopted where the result would have been arbitrarily excessive. Southern R. Co. v. Kentucky, 274 U.S. 76, 47 S. Ct. 542, 71 L. Ed. 934, 1927 U.S. LEXIS 10 (U.S. 1927).

While the mileage used as an integral part of a railroad system may have had elements of value that it would not otherwise have possessed and the state properly may have regarded to the whole in order to ascertain the value of the part within its borders, it was not permissible to take into account any of the outside property unless it could have been seen in some plain and fairly intelligible way that it added to the value of the road and the rights exercised in the state. Southern R. Co. v. Kentucky, 274 U.S. 76, 47 S. Ct. 542, 71 L. Ed. 934, 1927 U.S. LEXIS 10 (U.S. 1927).

In assessing the value of the franchise of an express company it was not incorrect to adopt the mileage basis as the method of apportionment, but the assessing authority was not limited to that basis and may have adopted any other statutory basis that would have enabled it to fix a fair valuation. Commonwealth v. United States Express Co., 149 Ky. 755 , 149 S.W. 1037, 1912 Ky. LEXIS 723 ( Ky. 1912 ).

Joint ownership of a line of railroad by two independent companies did not make such line a “controlled” line of either company. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

A line of railroad that was leased by a railroad company must have been considered as a “leased” line, notwithstanding that another company may also have had privileges of operation over such line. Louisville & N. R. Co. v. Commonwealth, 181 Ky. 193 , 204 S.W. 94, 1918 Ky. LEXIS 518 ( Ky. 1918 ).

8. Conclusiveness.

Findings of Department of Revenue as to value, made after a hearing and upon notice to the taxpayer, would not be set aside or disregarded by the courts unless it was made to appear that the department proceeded upon an erroneous principle, or adopted an improper mode of estimating value, or there was fraud. Louisville & N. R. Co. v. Greene, 244 U.S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, 1917 U.S. LEXIS 1661 (U.S. 1917), overruled in part, Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 104 S. Ct. 900, 79 L. Ed. 2d 67, 1984 U.S. LEXIS 4 (U.S. 1984).

Valuation fixed by Department of Revenue would not have been judicially re-examined unless the principle used in making the valuation was fundamentally wrong. Illinois C. R. Co. v. Greene, 244 U.S. 555, 37 S. Ct. 697, 61 L. Ed. 1309, 1917 U.S. LEXIS 1662 (U.S. 1917).

Cited in:

Allphin v. Ohio River Co., 306 S.W.2d 94, 1957 Ky. LEXIS 17 ( Ky. 1957 ); Luckett v. Texas Eastern Transmission Corp., 336 S.W.2d 567, 1960 Ky. LEXIS 338 ( Ky. 1960 ).

Notes to Unpublished Decisions

1. Fair Cash Value.

Unpublished decision: After cable television company created and delivered to the state revenue cabinet the report required by statutory law, the state revenue cabinet had the sole power to value and assess all of the property of the cable television company; moreover, the state revenue cabinet’s valuation and assessment enabled it to properly determine the fair cash value of the operating property of the cable television company, which was what the cable television company was taxed on, as a unit, and, thus, the state revenue cabinet properly valued, assessed, and taxed the cable television company. Revenue Cabinet v. Comcast Cablevision, 147 S.W.3d 743, 2003 Ky. App. LEXIS 330 (Ky. Ct. App. 2003).

Research References and Practice Aids

Cross-References.

Determination of book value of municipal electric plant for tax equivalent payments, KRS 96.820 .

Kentucky Law Journal.

Martin, Estill, Valuation of Property: Economic and Legal Standards, 38 Ky. L.J. 7 (1949).

Property Tax Revenue Assessment Levels and Taxing Rate: The Kentucky Rollback Law, 60 Ky. L.J. 105 (1971).

136.170. Apportionment of property valuation.

The Department of Revenue shall allocate the assessed value of the operating property in this state among the counties, cities, and other taxing districts. The location of operating property and the proportion which the length of line or route operated in such taxing district bears to the total length of lines or route operated in this state shall be considered in this allocation and such other reasonable evidence of value as the Department of Revenue may by regulations prescribe; provided, however, that the assessed value of nonoperating tangible property shall be allocated to the county, city, or other taxing district where the property is situated.

History. 4081: amend. Acts 1942, ch. 164, §§ 1, 2; 1960, ch. 186, Art. II, § 6; 2005, ch. 85, § 307, effective June 20, 2005.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Application.
  3. Double Deduction.
  4. Omitted Property.
  5. Refusal.
  6. Estoppel by Payment.
  7. City’s Challenge.
  8. Corporation with All Lines Outside State.
1. Constitutionality.

Provision for apportionment of franchises for local taxation in proportion to the length of the lines was just and reasonable. Southern Ry. in Kentucky v. Coulter, 113 Ky. 657 , 68 S.W. 873, 24 Ky. L. Rptr. 203 , 1902 Ky. LEXIS 96 ( Ky. 1902 ) (decided under prior law).

2. Application.

Law that provided for the method of fixing the value of the franchise of interstate carrier applied only to carriers and did not apply to a company such as a water company; therefore state assessing board had no authority to apportion part of franchise of city water company to territory outside of city, although pumping station, reservoirs and some of mains were located outside of the city, and some customers living outside the city were served by the company. Frankfort v. Stone, 108 Ky. 400 , 56 S.W. 679, 22 Ky. L. Rptr. 25 , 1900 Ky. LEXIS 58 ( Ky. 1900 ) (decided under prior law).

3. Double Deduction.

The fact that an erroneous double deduction of tangible property was made in certifying the value of franchise of telephone and telegraph companies for local taxation did not require that the same thing be done with regard to railroad companies. Southern Ry. in Kentucky v. Coulter, 113 Ky. 657 , 68 S.W. 873, 24 Ky. L. Rptr. 203 , 1902 Ky. LEXIS 96 ( Ky. 1902 ) (decided under prior law).

4. Omitted Property.

Where railroad did not report under law that required it to make such report, the length of its lines within that portion of the limits of a city consisting of territory annexed to the city, and such length was not ascertained under law that provided other method to obtain such information when report was not made, the court in which an action was brought on behalf of the city to recover the taxes on such portion of the railroad lines had power to ascertain the length of the lines within the annexed territory, and to assess its value on the basis of the assessment that had been made by the state assessing board on that part of the lines within the original limits of the city. Louisville & N.R.R. v. Commonwealth, 30 S.W. 624, 17 Ky. L. Rptr. 136 (1895), overruled on other grounds, Ironton & Russell Bridge Co. v. Russell, 262 Ky. 778 , 91 S.W.2d 1, 1935 Ky. LEXIS 796 ( Ky. 1935 ) (decided under prior law).

Where the Department of Revenue had assessed the franchise of a railroad company, but had not certified to the county clerk of a particular county the portion of the franchise claimed to be taxable by a taxing district in such county, such failure to certify did not furnish grounds for an action to assess the property in such district as omitted property. Commonwealth v. Maysville & B. S. R. Co., 91 S.W. 1139, 28 Ky. L. Rptr. 1332 (1906) (decided under prior law).

5. Refusal.

If the Department of Revenue had assessed the franchise, but failed or refused to apportion part of the franchise to a local taxing district which claimed that part of the franchise was taxable by the district, the only remedy of the district was to compel the department to make the apportionment, and it could not bring an action to assess such part of the franchise as omitted property. Commonwealth v. Chesapeake & O. R. Co., 122 Ky. 283 , 91 S.W. 1137, 28 Ky. L. Rptr. 1201 , 1906 Ky. LEXIS 55 ( Ky. 1906 ) (decided under prior law).

6. Estoppel by Payment.

Payment of taxes due state on franchise assessment precluded company from objecting to such assessment when it had been apportioned for local taxes. Southern Ry. in Kentucky v. Coulter, 113 Ky. 657 , 68 S.W. 873, 24 Ky. L. Rptr. 203 , 1902 Ky. LEXIS 96 ( Ky. 1902 ) (decided under prior law).

7. City’s Challenge.

City cannot question method of apportionment of the franchise adopted by the state tax commission. Its remedy is mandamus against the state tax commission. Lexington v. Lexington Tel. Co., 288 Ky. 640 , 157 S.W.2d 119, 1941 Ky. LEXIS 174 ( Ky. 1941 ) (decided under prior law).

8. Corporation with All Lines Outside State.

A domestic corporation controlling through ownership of stock, or by lease, a system of railroads, is subject to franchise tax even though all of the lines of the railroads are outside of this state. Commonwealth by Anderson v. Southern Pac. Co., 150 Ky. 97 , 149 S.W. 1105, 1912 Ky. LEXIS 821 ( Ky. 1912 ), overruled, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ), overruled on other grounds, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ) (decided under prior law).

Where, in the case of a railroad company incorporated in this state but having no lines of railroad in this state, the state assessing board lumped the value of the franchise in Kentucky at a certain sum, and there was no evidence of fraud or mistake, the action of the board was not void, and the company, after paying taxes on such assessment, could not compel the board by mandamus to reconvene and make a new assessment. Southern Pac. Co. v. Commonwealth, 134 Ky. 410 , 120 S.W. 309, 1909 Ky. LEXIS 384 ( Ky. 1909 ) (decided under prior law).

Cited in:

Newport v. Pennsylvania R. Co., 287 Ky. 613 , 154 S.W.2d 719, 1941 Ky. LEXIS 600 ( Ky. 1941 ); Ashland Oil & Refining Co. v. Department of Revenue, 256 S.W.2d 359, 1953 Ky. LEXIS 721 ( Ky. 1953 ); Board of Education v. Ashland Oil & Refining Co., 350 S.W.2d 475, 1961 Ky. LEXIS 101 ( Ky. 1961 ).

Opinions of Attorney General.

Although no provision is made by the constitution or statutes for exemption of utility companies from city taxes, the statutes do provide a different method of assessment of property tax in the case of public service corporations as compared to the method used in the case of other taxpayers. OAG 62-40 .

136.180. Notice and certification of valuation — Effect of appeal on payment of taxes — Payment of fee by any district which has value certified by department.

  1. The Department of Revenue shall, immediately after fixing the assessed value of the operating property and other property of a public service corporation for taxation, notify the corporation of the valuation and the amount of assessment for state and local purposes. When the valuation has been finally determined, the department shall immediately certify, unless otherwise specified, to the county clerk of each county in which any of the operating property or nonoperating tangible property assessment of the corporation is liable to local taxation, the amount of property liable for county, city, or district tax.
  2. No appeal shall delay the collection or payment of taxes based upon the assessment in controversy. The taxpayer shall pay all state, county, and district taxes due on the valuation which the taxpayer claims as the true value as stated in the protest filed under KRS 131.110 . When the valuation is finally determined upon appeal, the taxpayer shall be billed for any additional tax and interest at the tax interest rate as defined in KRS 131.010(6), from the date the tax would have become due if no appeal had been taken. The provisions of KRS 134.015(6) shall apply to the tax bill.
  3. The Department of Revenue shall compute annually a multiplier for use in establishing the local tax rate for the operating property of railroads or railway companies that operate solely within the Commonwealth. The applicable local tax rates on the operating property shall be adjusted by the multiplier. The multiplier shall be calculated by dividing the statewide locally taxable business tangible personal property by the total statewide business tangible personal property.
  4. The Department of Revenue shall annually calculate an aggregate local rate for each local taxing district to be used in determining local taxes to be collected for railroad carlines. The rate shall be the statewide tangible tax rate for each type of local taxing district multiplied by a fraction, the numerator of which is the commercial and industrial tangible property assessment subject to full local rates and the denominator of which is the total commercial and industrial tangible personal property assessment. Effective January 1, 1994, state and local taxes on railroad carline property shall become due sixty (60) days from the date of notice and shall be collected directly by the Department of Revenue. The local taxes collected by the Department of Revenue shall be distributed to each local taxing district levying a tax on railroad carlines based on the statewide average rate for each type of local taxing district. However, prior to distribution any fees owed to the Department of Revenue by any local taxing district under the provisions of subsection (5) of this section shall be deducted.
  5. The certification of valuation shall be filed by each county clerk in his office, and shall be certified by the county clerk to the proper collecting officer of the county, city, or taxing district for collection. Any district which has the value certified by the department shall pay an annual fee to the department which represents an allocation of department operating and overhead expenses incurred in generating the valuations. This fee shall be determined by the department and shall apply to valuations for tax periods beginning on or after December 31, 1981.

HISTORY: 4083, 4084, 4102: amend. Acts 1960, ch. 186, Art. II, § 7; 1982, ch. 388, § 6, effective July 15, 1982; 1990, ch. 345, § 2, effective July 13, 1990; 1990, ch. 437, § 7, effective July 13, 1990; 1990, ch. 476, Pt. V, § 353, effective July 13, 1990; 1994, ch. 64, § 1, effective July 15, 1994; 1998, ch. 391, § 5, effective July 15, 1998; 2005, ch. 85, § 308, effective June 20, 2005; 2005, ch. 106, § 1, effective June 20, 2005; 2009, ch. 10, § 47, effective January 1, 2010; 2015 ch. 67, § 4, effective June 24, 2015; 2018 ch. 171, § 110, effective April 14, 2018; 2018 ch. 207, § 110, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(8/17/2006). In the final sentence of subsection (4) of this statute, a reference to “subsection (4) of this section” has been changed to read “subsection (6) of this section.” Under the authority of KRS 7.136(1)(e) and (h), the Reviser of Statutes has made this change to correct an internal reference that should have been adjusted when subsections were renumbered in 1998 Ky. Acts ch. 391, sec. 5, and 2005 Ky. Acts ch. 106, sec. 1.

(11/1/90). The two Acts amending this section prevail over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476. The two amending Acts do not appear to be in conflict and have been compiled together. Under the authority of KRS 7.136(1), the Reviser of Statutes has divided the text of this section into the indicated subdivisions. The original 1990 codification of KRS 136.180 and its accompanying note dated July 13, 1990, are superseded and without effect.

NOTES TO DECISIONS

  1. Collection Before Certification.
  2. Misappropriation Before Assessment.
  3. Conclusiveness.
  4. Clerk’s Fee.
  5. Injunction.
1. Collection Before Certification.

The sheriff may not legally collect a franchise tax until the assessment has been certified to him by the county clerk. Commonwealth v. Brand, 166 Ky. 753 , 179 S.W. 844, 1915 Ky. LEXIS 772 ( Ky. 1915 ) (decided under prior law).

Sheriff who accepted railroad franchise taxes due school district was chargeable with amount there, although the assessment had not, at the time of such acceptance, been certified to the county clerk. Fidelity & Deposit Co. v. Commonwealth, 249 Ky. 170 , 60 S.W.2d 345, 1933 Ky. LEXIS 483 ( Ky. 1933 ) (decided under prior law).

2. Misappropriation Before Assessment.

Sheriff who misappropriated franchise tax paid to him by railroad before certification of assessment to sheriff by county clerk could not be convicted of embezzling public funds. Commonwealth v. Brand, 166 Ky. 753 , 179 S.W. 844, 1915 Ky. LEXIS 772 ( Ky. 1915 ) (decided under prior law).

3. Conclusiveness.

Where the Department of Revenue has substantially followed the provisions of law regarding procedure for property valuation in fixing the value of a franchise, and no appeal has been taken, the action is final. Commonwealth by Anderson v. Southern Pac. Co., 150 Ky. 97 , 149 S.W. 1105, 1912 Ky. LEXIS 821 ( Ky. 1912 ), overruled, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ), overruled on other grounds, Commonwealth v. Kentucky Heating Co., 176 Ky. 35 , 195 S.W. 459, 1917 Ky. LEXIS 40 ( Ky. 1917 ) (decided under prior law).

4. Clerk’s Fee.

The county clerk is entitled to no fee for making copies of the franchise assessment certificates for the collecting officers. Goodlett v. Anderson County, 267 Ky. 166 , 101 S.W.2d 421, 1936 Ky. LEXIS 761 ( Ky. 1936 ) (decided under prior law).

5. Injunction.

Action could be maintained in federal court to enjoin certification of assessments to county clerks, on allegation that tax was void or that assessment was not legally made. Louisville & N. R. Co. v. Bosworth, 209 F. 380, 1913 U.S. Dist. LEXIS 1117 (D. Ky. 1913 ) (decided under prior law).

Opinions of Attorney General.

Where a county fiscal court established a cooperative extension district with a district tax on assessed property valuation, the tax was applicable to franchise values certified to the county. OAG 71-295 .

Watercraft Operated for Commercial Purpose

136.1801. Definitions for KRS 136.1801 to 136.1806.

As used in KRS 136.1801 to 136.1806 :

  1. “Corporation” means any corporation, company, association, partnership, limited liability company, limited liability partnership, other business association, or person operating any watercraft for commercial purposes in the Commonwealth;
  2. “Watercraft” means any boat, towboat, pushboat, barge, or similar vessel. Watercraft shall not include:
    1. Floating equipment used in construction, including but not limited to dredges, pile drivers, and flats;
    2. Houseboats;
    3. Fishing boats;
    4. Pleasure boats; or
    5. Commercial dining boats;
  3. “Department” means the Department of Revenue;
  4. “Operating” or “operated” means owned, leased, rented, or used;
  5. “Local taxing district” means a local taxing jurisdiction or district, including a county, city, charter county, school district, consolidated local government, urban-county government, and special taxing district, which has a navigable waterway within its borders; and
  6. “Navigable waterway” means and shall include the following:
    1. All of the Mississippi River within or bordering this state;
    2. All of the Ohio River within or bordering this state;
    3. The Kentucky River beginning at Ohio River mile marker 545.8 and ending at Kentucky River mile marker 65;
    4. The Green River beginning at Ohio River mile marker 784.4 and ending at Green River mile marker 108.9;
    5. The Tennessee River beginning at Ohio River mile marker 934.5 and ending at Tennessee River mile marker 62.4;
    6. The Cumberland River beginning at Ohio River mile marker 922.5 and ending at Cumberland River mile marker 74.7;
    7. The Big Sandy River beginning at Ohio River mile marker 317.2 and ending at Big Sandy River mile marker 14.2;
    8. The Licking River beginning at Ohio River mile marker 470.2 and ending at Licking River mile marker 7; and
    9. Any other waterway in this state utilized by a corporation for the transportation of watercraft during the previous calendar year.

History. Enact. Acts 2006, ch. 169, § 1, effective January 1, 2008; 2009, ch. 52, § 1, effective June 25, 2009.

136.1802. Watercraft assessment and taxation — Allocation of tax receipts — Value determination.

  1. Notwithstanding KRS 132.486 , the watercraft of any corporation operating within this state, or partly within this state and partly within other states, shall be assessed by the department as of January 1 each year.
  2. The department shall have the sole power to value and assess all of the corporation’s watercraft.
  3. The department shall bill and collect all ad valorem taxes on watercraft and shall divide, allocate, and distribute the tax receipts as provided in KRS 136.1804 to each local taxing district within this state.
  4. The value of the corporation’s watercraft shall be apportioned to this state by multiplying the assessed value by a fraction, the numerator of which shall include:
    1. Ninety percent (90%) of the length of the corporation’s Ohio River route that borders Kentucky;
    2. Fifty percent (50%) of the length of the Mississippi River route that borders Kentucky;
    3. Fifty percent (50%) of the length of the Big Sandy River route that borders Kentucky; and
    4. One hundred percent (100%) of the length of all other navigable waterways within Kentucky;

and the denominator of which shall include the length of all waterway routes traveled in all states by the corporation during the previous calendar year.

History. Enact. Acts 2006, ch. 169, § 2, effective January 1, 2008.

136.1803. Description of watercraft operated during previous calendar year to be filed with department.

On or before May 15, 2009, and each May 15 thereafter, each corporation operating watercraft within this state during the previous calendar year shall file on forms prescribed by the department, a detailed description of all watercraft it operated as of January 1 of the current year.

History. Enact. Acts 2006, ch. 169, § 3, effective January 1, 2008; 2009, ch. 52, § 2, effective June 25, 2009.

136.1804. Notification of assessed value of watercraft — Protest — Tax rates — Distribution of tax receipts — Administrative fee.

  1. The department shall notify the corporation of the assessed value of its watercraft each year, as soon as possible after rates set by local authorities are provided to the department. The corporation shall have sixty (60) days from the date of the department’s notice of assessment to protest as provided by KRS 131.110 .
  2. No appeal shall delay the collection or payment of taxes based upon the assessment in controversy. The corporation shall pay to the department all state and local taxing district taxes due on the undisputed value of its watercraft as stated in the protest filed under KRS 131.110 . When the valuation is finally determined upon appeal, the corporation shall be billed for any additional tax and interest at the tax interest rate as defined in KRS 131.010(6) from the date the tax would have become due if the assessment had not been appealed. The provisions of KRS 134.015(6) shall apply to the tax bill.
  3. The state and local taxing district taxes on the watercraft are due sixty (60) days from the date of notice of assessment. The tangible property taxes on watercraft shall be collected in accordance with the provisions of KRS Chapter 134.
  4. The state rate of taxation on watercraft shall be forty-five cents ($0.45) upon each one hundred dollars ($100) of assessed value of the watercraft.
  5. The department shall annually calculate an aggregate local rate, which shall be imposed upon each one hundred dollars ($100) of assessed value of the watercraft.
    1. The aggregate local rate shall be the sum of each local personal property tax rate for each local taxing district multiplied by a fraction, the numerator of which shall be the length of the navigable waterways in the local taxing district and the denominator of which shall be the total of the length of all navigable waterways in this state. Both the numerator and the denominator shall be adjusted, if necessary, by paragraph (b) of this subsection.
    2. For purposes of computing the local property tax rate in paragraph (a) of this section, the length of the navigable waterways of the Green River shall be reduced by fifty percent (50%) and the length of the navigable waterways of the Kentucky River shall be reduced by seventy-five percent (75%).
  6. The watercraft taxes collected for local taxing districts by the department shall be distributed to each local taxing district based upon the local taxing district’s fractional portion of the amount calculated in subsection (5) of this section.
  7. Prior to distribution of taxes to local taxing districts, the department shall retain an administrative fee of one percent (1%) of the amount due each district. The fee imposed by this subsection shall have no effect upon the discount provided to taxpayers pursuant to KRS 134.015 .

HISTORY: Enact. Acts 2006, ch. 169, § 4, effective January 1, 2008; 2009, ch. 10, § 48, effective January 1, 2010; 2009, ch. 52, § 3, effective June 25, 2009; 2018 ch. 171, § 111, effective April 14, 2018; 2018 ch. 207, § 111, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

136.1805. Base collections.

  1. As used in this section, “base collections” means actual collections received from property taxes assessed on watercraft for the 2007 calendar year. It shall not include collections for assessments for any other year.
  2. The department shall determine for each local taxing district the amount of base collections.
  3. If a local taxing district’s base collections are greater than the taxes distributed to it under KRS 136.1804 for any year from 2008 to 2017, that local taxing district shall receive a distribution from the general fund equal to the difference.

History. Enact. Acts 2006, ch. 169, § 5, effective January 1, 2008.

136.1806. Taxes levied under KRS 136.1801 to 136.1806 not exclusive.

The taxes levied by KRS 136.1801 to 136.1806 are taxes on the watercraft only. The taxes levied by KRS 136.1801 to 136.1806 shall be in addition to any other taxes levied by state or local jurisdictions on any corporation.

History. Enact. Acts 2006, ch. 169, § 6, effective January 1, 2008.

136.181. Watercraft assessment, taxation — Allocation — Value determination. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 149, § 3; 1960, ch. 186, Art. I, § 35; 2005, ch. 85, § 309, effective June 20, 2005; 2005, ch. 106, § 2, effective June 20, 2005) was repealed by Acts 2006, ch. 169, § 8, effective January 1, 2008.

136.182. Nonresident owner or operator of watercraft to furnish description of property and of route or system traversed. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 149, § 4, effective June 17, 1954; 2005, ch. 85, § 310, effective June 20, 2005) was repealed by Acts 2006, ch. 169, § 8, effective January 1, 2008.

136.183. When taxes on watercraft are due and payable — Collection. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 149, § 5, effective June 17, 1954; 2005, ch. 85, § 311, effective June 20, 2005; ch. 106, § 3, effective June 20, 2005) was repealed by Acts 2006, ch. 169, § 8, effective January 1, 2008.

136.184. Protest against tentative assessment of watercraft. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 149, § 6, effective June 17, 1954; 2005, ch. 85, § 312, effective June 20, 2005; 2005, ch. 106, § 4, effective June 20, 2005) was repealed by Acts 2006, ch. 169, § 8, effective January 1, 2008.

136.185. Appeals to Kentucky Tax Commission. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 149, § 7) was repealed by Acts 1964, ch. 141, § 39.

136.186. Cabinet to certify valuation of watercraft to county clerks — Filing of certification. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 149, § 8, effective June 17, 1954) was repealed by Act 2005, ch. 106, § 13, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). Under KRS 446.260 , the repeal of this section in 2005 Ky. Acts ch. 106 prevails over its amendment in 2005 Ky. Acts ch. 85.

136.187. Exemption of persons or entities covered by KRS 136.120. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 149, § 9, effective June 17, 1954) was repealed by Acts 2006, ch. 169, § 8, effective January 1, 2008.

Vehicles of System Operating Route Partly Within State

136.1873. Application of section — Taxation of vehicles of system whose route or operation is partly within this state.

The provisions of this section shall apply to assessments made prior to January 1, 2007.

  1. Notwithstanding the provisions of KRS 132.487 , trucks, trailers, tractors, semitrailers, and buses of any person, corporation, partnership, or any other business association whose route or system is partly within this state and partly within another state or states, shall be assessed by the Department of Revenue for purposes of taxation as of January 1 each year.
  2. The proportion of miles operated in this state compared to the total miles operated everywhere shall be considered in fixing the value of the property for taxation. Other reasonable evidence shall be considered in fixing the value. However, pick-up and delivery vehicles operating from a terminal within this state or vehicles which do not leave this state in the normal course of business shall not be valued on an apportioned basis.

History. Enact. Acts 1990, ch. 437, § 1, effective July 13, 1990; 1992, ch. 391, § 6, effective July 14, 1992; 2005, ch. 85, § 314, effective June 20, 2005; 2006, ch. 252, Pt. XV, § 3, effective January 1, 2007.

Opinions of Attorney General.

This section, KRS 136.1875 , and 136.1877 do not subject any property to taxation because the constitution has already subjected all property in the state to taxation with a few limited exceptions. OAG 92-71 .

There is nothing in this section or KRS 136.1875 , or 136.1877 that would exempt “the occasional, transient motorcoach, charter, or tour bus operation” from the assessment procedure set out in this section, nor is there anything unconstitutional in this procedure; it is simply an attempt by the state to insure compliance with the constitutional directive that all property be taxed. OAG 92-71 .

A conclusion that one (1) tour bus is subject to tax does not imply that another bus, even one owned and operated by the same company, is also taxable. OAG 92-71 .

136.1875. Information to be furnished by fleet owner.

On or before April 15, 1991, and prior to January 1, 2007, each person, corporation, partnership, or other business association owning or operating trucks, tractors, trailers, semitrailers, and buses whose route or system is partly within this state and partly within another state or states, shall on forms provided by the Department of Revenue provide the department with a detailed description of all its vehicles operating within this state along with the necessary mileage data to be used in apportioning the value on an annual basis.

History. Enact. Acts 1990, ch. 437, § 2, effective July 13, 1990; 1992, ch. 391, § 7, effective July 14, 1992; 2005, ch. 85, § 315, effective June 20, 2005; 2006, ch. 252, Pt. XV, § 4, effective January 1, 2007.

Opinions of Attorney General.

This section and KRS 136.1873 and 136.1877 do not subject any property to taxation because the constitution has already subjected all property in the state to taxation with a few limited exceptions. OAG 92-71 .

There is nothing in this section or KRS 136.1873 or 136.1877 that would exempt “the occasional, transient motorcoach, charter, or tour bus operation” from the assessment procedure set out in KRS 136.1873 , nor is there anything unconstitutional in this procedure; it is simply an attempt by the state to insure compliance with the constitutional directive that all property be taxed. OAG 92-71 .

136.1877. Application of section — Appeal from notice of tentative assessment — Effect of appeal on payment of taxes — Collection of state taxes — Aggregate local rate to be set annually — Distribution.

The provisions of this section shall apply to assessments made prior to January 1, 2007.

  1. The Department of Revenue shall immediately, after fixing the assessed value of the trucks, tractors, trailers, semitrailers, and buses, notify the taxpayer of the valuation determined. Any taxpayer who has been assessed by the department in the manner outlined in KRS 136.1873 shall have sixty (60) days from the date of the department’s notice of the tentative assessment to protest as provided by KRS 131.110 .
  2. No appeal shall delay the collection or payment of taxes based upon the assessment in controversy. The taxpayer shall pay all state, county, and district taxes due on the valuation which the taxpayer claims as the true value as stated in the protest filed under KRS 131.110 . When the valuation is finally determined upon appeal, the taxpayer shall be billed for any additional tax and interest at the tax interest rate as defined in KRS 131.010(6), from the date the tax would have become due if no appeal had been taken. The provisions of KRS 134.015(6) shall apply to the tax bill.
  3. The state and local taxes on the property are due sixty (60) days from the date of notice and shall be collected directly by the Department of Revenue.
  4. The Department of Revenue shall annually calculate an aggregate local rate to be used in determining the local taxes to be collected. The rate shall be the statewide average motor vehicle tax rate for each type of local taxing district multiplied by a fraction, the numerator of which is the commercial and industrial tangible personal property assessment subject to full local rates and the denominator of which is the total commercial and industrial tangible personal property assessment.
  5. The local taxes collected by the Department of Revenue shall be distributed to each local taxing district levying a tax on motor vehicles based on the statewide average rate for each type of local taxing district. However, prior to distribution any fees owed to the Department of Revenue by any local taxing district under the provisions of KRS 136.180(5) shall be deducted.

HISTORY: Enact. Acts 1990, ch. 437, § 3, effective July 13, 1990; 1992, ch. 391, § 8, effective July 14, 1992; 1998, ch. 391, § 4, effective July 15, 1998; 2005, ch. 85, § 316, effective June 20, 2005; 2005, ch. 106, § 5, effective June 20, 2005; 2006, ch. 252, Pt. XV, § 5, effective January 1, 2007; 2009, ch. 10, § 49, effective January 1, 2010; 2015 ch. 67, § 5, effective June 24, 2015; 2018 ch. 171, § 112, effective April 14, 2018; 2018 ch. 207, § 112, effective April 27, 2018.

Legislative Research Commission Notes.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

Opinions of Attorney General.

KRS 136.1873 , 136.1875 , and this section do not subject any property to taxation because the constitution has already subjected all property in the state to taxation with a few limited exceptions. OAG 92-71 .

There is nothing in KRS 136.1873 , 136.1875 , or this section that would exempt “the occasional, transient motorcoach, charter, or tour bus operation” from the assessment procedure set out in KRS 136.1873 , nor is there anything unconstitutional in this procedure; it is simply an attempt by the state to insure compliance with the constitutional directive that all property be taxed. OAG 92-71 .

136.188. Annual fee on trucks, tractors, and buses operating partly within and partly outside Kentucky — Fee to replace ad valorem tax — Determination of value and fee — Collection and distribution — Protest.

  1. Notwithstanding KRS 132.487 , any truck, tractor, or bus which is operated on a route or as part of a system that is partly within and partly outside Kentucky shall be subject to an annual fee at the time the vehicle is registered with and the registration fee is paid to the Transportation Cabinet pursuant to KRS 186.020 and 186.050(3) and (13). The fee shall be imposed on the vehicle’s owner or the owner’s legal designee as of January 1 of each year. Such payment shall be made to the Transportation Cabinet either directly, in the case of a vehicle based in Kentucky, or indirectly, through the International Registration Plan, in the case of a vehicle based outside of Kentucky.
  2. The fee imposed by subsection (1) of this section replaces the state and local ad valorem property tax the Department of Revenue previously imposed and centrally collected against trucks, tractors, and buses operated on a route or as part of a system that is partly within and partly outside Kentucky. The fee imposed by subsection (1) of this section shall not be construed as a fee imposed upon the registration, operation, or use of the vehicles on public highways. The Department of Revenue shall use the following method for determining the rate for fixing the assessed value of the property and for determining the annual fee amount:
    1. The Department of Revenue shall determine the assessed value on an annual basis by multiplying the purchase price of the truck, tractor, or bus by a depreciation value expressed as a percentage of the original cost from an authoritative source that the Department of Revenue prescribes by promulgation of an administrative regulation;
    2. The Department of Revenue shall determine an aggregate state and local rate on an annual basis. The state rate shall be the weighted average commercial and industrial tangible personal property tax rate, and the local rate shall be determined using the method set forth in KRS 136.180(3) and (4);
    3. The Department of Revenue shall determine the amount subject to the annual fee by multiplying the total assessed value of all vehicles by an apportionment factor. The apportionment factor shall be determined as provided in KRS 186.050(13)(a); and
    4. The annual fee shall be determined by multiplying the amount subject to the annual fee by the rate determined in paragraph (b) of this subsection.
  3. The Transportation Cabinet shall forward the money it collects from the fee imposed by subsection (1) of this section to the Department of Revenue on a monthly basis. The Department of Revenue shall divide and distribute the money among the state, counties, cities, urban-counties, charter counties, consolidated local governments, school districts, and special taxing districts in the same manner as the Department of Revenue divided and distributed the state and local ad valorem property tax previously imposed and centrally collected.
  4. Pick-up and delivery vehicles operating from a terminal within this state and vehicles that do not leave the state in the normal course of business shall not be required to pay the fee imposed by subsection (1) of this section, but shall instead be subject to the ad valorem tax under KRS 132.487 .
  5. Any person paying the fee imposed by subsection (1) of this section shall have sixty (60) days from the date the person is notified of the fee amount to protest. The protest shall be filed with the Commonwealth of Kentucky, Department of Revenue, in accordance with the provisions of KRS 131.110 . Notification by any state’s or Canadian province’s or territory’s registration authority of the amount due shall satisfy the notification requirement of KRS 131.110 (1).
  6. No protest or appeal shall delay the collection or payment of the fee imposed by subsection (1) of this section. The fee amount due as determined in subsection (2) of this section shall be paid at the time of registration. If the fee is not paid, the Commonwealth of Kentucky, Transportation Cabinet, shall not register the vehicle for which registration is sought. Persons registering vehicles in other states or Canada shall be subject to requirements of those registration authorities.

The Department of Revenue shall provide the Transportation Cabinet with the information needed to collect the fee.

HISTORY: Enact. Acts 2006, ch. 252, Pt. XV, § 2, effective January 1, 2007; 2018 ch. 171, § 113, effective April 14, 2018; 2018 ch. 207, § 113, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

136.190. Boundary report of cities of the home rule class and taxing districts.

  1. The superintendent of schools in each district in which any individual, group of individuals or corporation, operates public utility or other franchise taxpaying property assessed under KRS 136.120 shall, on or before the first day of January, 1957, furnish to the county clerk of the county in which the district is situated, to each franchise taxpayer within the district, and to the Department of Revenue, the boundary of his school district. The superintendent of schools in each district in which any franchise-paying corporation, individual, or group of individuals operates shall, on or before the first day of January, 1958, and each year thereafter, furnish to the county clerk, to each franchise taxpayer within the district, and to the Department of Revenue, any changes made in the boundary of his school district during the immediately preceding twelve (12) months.
  2. The engineer of cities of the first class and the city clerk of cities of the home rule class shall notify the county clerk, each franchise taxpayer within the city, and the Department of Revenue of their boundaries in the same manner as required of the superintendent of schools in subsection (1) of this section.
  3. The responsible governing official or the chairman of the governing body of any taxing district other than the county, school district, or city shall notify the county clerk, each franchise taxpayer within the district, and the Department of Revenue of their boundaries in the same manner as required of the superintendent of schools in subsection (1) of this section.

History. 4009, 4339-16; Acts 1956, ch. 170; 1960, ch. 186, Art. II, § 8; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 354, effective July 13, 1990; 2005, ch. 85, § 317, effective June 20, 2005; 2014, ch. 92, § 218, effective January 1, 2015.

Opinions of Attorney General.

The superintendent’s report, which is mandatory under this section, is a report of the boundary as required for tax purposes. It does not establish the boundary, neither does it alter the boundary in the event of a possible erroneous survey or in the event of a subsequent failure of either board to object to a survey which is in fact inaccurate. The fact that the erroneous survey was unchallenged over a period of 12 years is of no consequence. OAG 70-393 .

136.200. Allocation of railroad bridge assessment.

The assessment of railroad bridges spanning any river that constitutes a boundary of the state shall be allocated to the counties in which they are located, and the local tax derived therefrom shall be applied to each city, county, or taxing district in which the bridges are located.

History. 4102; Acts 1960, ch. 186, Art. II, § 9, effective March 25, 1960; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 355, effective July 13, 1990.

Compiler’s Notes.

Former KRS 139.200 (4102: amend. Acts 1960, ch. 186, Art. II, § 9) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 355, effective July 13, 1990.

NOTES TO DECISIONS

1. Assessment.

A bridge owned and maintained by a railroad as a part of its railroad system is assessable only by the Department of Revenue, and not by the county tax commissioner (now property valuation administrator). Board of Equalization v. Louisville & N. R. Co., 139 Ky. 386 , 109 S.W. 303, 33 Ky. L. Rptr. 78 , 1908 Ky. LEXIS 9 ( Ky. 1908 ).

136.210. Actions to collect railroad or bridge company taxes. [Repealed.]

Compiler’s Notes.

This section (4104) was repealed by Acts 1960, ch. 186, Art. II, § 10.

136.220. Railroads to furnish Department of Revenue copies of income reports to stockholders and I.C.C. [Repealed.]

Compiler’s Notes.

This section (4019a-15) was repealed by Acts 1960, ch. 186, Art. II, § 10.

136.230. Definitions of terms used in KRS 136.250 and 136.260. [Repealed.]

Compiler’s Notes.

This section (4281j-1) was repealed by Acts 1966, ch. 255, § 283.

136.240. Utilities gross receipts tax; rate; collection; exemptions. [Repealed.]

Compiler’s Notes.

This section (4281j-2) was repealed by Acts 1960, ch. 5, Art. IV, § 1.

136.250. Reporting of utility receipts; payment of tax; records; civil penalties. [Repealed.]

Compiler’s Notes.

This section (4281j-3, 4281j-7: amend. Acts 1950, ch. 30, § 1) was repealed by Acts 1966, ch. 255, § 283.

136.260. Payment under protest; action to recover tax paid; refund; limitation. [Repealed.]

Compiler’s Notes.

This section (4281j-6) was repealed by Acts 1966, ch. 255, § 283.

136.270. Tax on bank and trust company shares, except banker’s bank organized under KRS 287.135. [Repealed.]

Compiler’s Notes.

This section (4092: amend. Acts 1966, ch. 159, § 1; 1976, ch. 93, § 10, effective January 1, 1977; 1984, ch. 264, § 2, effective July 13, 1984; 1990, ch. 262, § 4, effective July 13, 1990; 1990, ch. 476, Pt. V, § 365, effective July 13, 1990) was repealed by Acts 1996, ch. 254, § 39, effective July 15, 1996. For present law see KRS 136.500 to 136.575 .

136.275. Refunds per court ruling — One-time annual tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1984, ch. 264, § 3, effective July 13, 1984) was repealed by Acts 1996, ch. 254, § 39, effective July 15, 1996. For present law see KRS 136.500 to 136.575 .

136.280. Reports of banks and trust companies — Taxes on shares and tangible property. [Repealed.]

Compiler’s Notes.

This section (4019a-10: amend. Acts 1949 (Ex. Sess.), ch. 4, § 18; 1966, ch. 159, § 2; 1990, ch. 262, § 5, effective July 13, 1990; 1990, ch. 476, Pt. V, § 357, effective July 13, 1990) was repealed by Acts 1996, ch. 254, § 39, effective July 15, 1996. For present law see KRS 136.500 to 136.575 .

Savings and Loans, Savings Banks and Similar Institutions

136.290. Report of savings and loan, savings bank, and similar institutions — Value determination — Notice.

  1. Every federally or state chartered savings and loan association, savings bank, and other similar institutions operating solely in Kentucky shall, during January of each year, file with the Department of Revenue a report containing such information and in such form as the department may require.
  2. The department shall fix the total value, as of January 1 of each year, of the capital of each financial institution included in subsection (1) of this section. Capital shall include certificates of deposit, savings accounts, demand deposits, undivided profits, surplus, and general reserves, excepting the share of borrowing members where the amount borrowed equals or exceeds the amount paid in by those members. For Agricultural Credit Associations chartered by the Farm Credit Administration, capital shall be computed by deducting the book value of the association’s investment in any other wholly owned institution chartered by the Farm Credit Administration that is either subject to the tax imposed by KRS 136.300 or 136.310 or that is exempt from state taxation by federal law. The department shall immediately notify each institution of the value so fixed.

History. 4019a-6: amend. Acts 1949 (Ex. Sess.), ch. 4, § 19; 1960, ch. 186, Art. I, § 36; 1966, ch. 255, § 130; 1970, ch. 14, § 2; 1972, ch. 121, § 2; 1990, ch. 262, § 1, effective July 13, 1990; 2004, ch. 142, § 5, effective April 21, 2004; 2005, ch. 85, § 318, effective June 20, 2005.

NOTES TO DECISIONS

1. Tax on Capital Stock.

This section places the tax expressly on the capital stock of the corporation rather than upon the members. Marcum v. Kentucky Enterprise Federal Sav. & Loan Asso., 363 S.W.2d 118, 1962 Ky. LEXIS 277 ( Ky. 1962 ).

Research References and Practice Aids

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

136.291. Inapplicability of KRS 136.290, 136.300, and 136.310 after January 1, 2021 — Savings and loan associations subject to corporation income tax and limited liability entity tax after January 1, 2021 — Short-year returns.

  1. Beginning January 1, 2021, the savings and loan tax under KRS 136.290 , 136.300 , and 136.310 shall no longer apply to savings and loan associations.
  2. Beginning January 1, 2021, all savings and loan associations shall be subject to the corporation income tax under KRS 141.040 and the limited liability entity tax under KRS 141.0401 . Notwithstanding KRS 141.040 and 141.0401 , any savings and loan association operating on a fiscal year shall file a short-year corporation income and limited liability entity tax return and pay any tax due thereon for the period beginning January 1, 2021, through the end of the savings and loan association’s normal fiscal year. The department may issue guidance regarding the filing of the short-year return.

HISTORY: 2019 ch. 196, § 7, effective June 27, 2019.

136.300. Rate and payment of tax — Exemption from other taxes — Charging against dividends.

  1. By July 1 succeeding the filing of the report provided for in KRS 136.290 , each financial institution included in subsection (1) of KRS 136.290 shall pay directly into the State Treasury a tax of one dollar ($1) for each one thousand dollars ($1,000) paid in on its capital stock as fixed in KRS 136.290. The individual shareholders shall not be required to list their shares for taxation for any purpose. Any financial institution included in subsection (1) of KRS 136.290 shall not be required to pay local taxes upon its capital stock, surplus, undivided profits, notes, mortgages, or other credits, and the tax provided by this section shall be in lieu of all taxes for state purposes on intangible property of the institution. Failure to make reports and pay taxes as provided in this section and in KRS 136.290 shall subject the institution to the same penalties imposed for such failure on the part of the other corporations.
  2. If a financial institution included in subsection (1) of KRS 136.290 so elects, it may deduct the taxes imposed in subsection (1) of this section from the dividends paid or credited to a nonborrowing shareholder.

History. 4019a-7, 4019a-8: amend. Acts 1966, ch. 255, § 131; 1970, ch. 14, § 3; 1972, ch. 121, § 3; 1990, ch. 262, § 2, effective July 13, 1990.

NOTES TO DECISIONS

  1. Tax on Corporation.
  2. Exemptions.
  3. Taxing Determination Upheld.
1. Tax on Corporation.

The annual tax of $1.00 for each $1,000 paid in on the capital stock of a domestic building and loan association is a tax imposed on the corporation alone. Marcum v. Kentucky Enterprise Federal Sav. & Loan Asso., 363 S.W.2d 118, 1962 Ky. LEXIS 277 ( Ky. 1962 ).

2. Exemptions.

Production credit association was not exempt from the excise tax imposed by KRS 142.010 each time it recorded a mortgage by reason of this section insomuch as it was not the property aspect of the mortgage which was being taxed, but the transaction of the recording of the mortgage. Department of Revenue v. Cumberland Production Credit Asso., 551 S.W.2d 836, 1977 Ky. App. LEXIS 713 (Ky. Ct. App. 1977).

3. Taxing Determination Upheld.

KRS 132.030 , 132.200 , 136.300 , 136.320 are not related to public service companies or to franchise; it is clear that the general assembly considered the types of property that should be exempt from the “catch-all” rate, and it did not include franchise of a public service company-although it identified seventeen other categories of property. Dayton Power & Light Co. v. Dep't of Revenue, 405 S.W.3d 527, 2012 Ky. App. LEXIS 232 (Ky. Ct. App. 2012).

Cited in:

Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ).

Opinions of Attorney General.

This section exempts savings and loan associations from paying local taxes on their gross receipts imposed by an annual license fee. OAG 64-690 .

The 1970 amendment to this section exempts production credit associations and domestic savings and loan associations from the tax on real estate mortgages imposed by subsection (1)(d) (now subsection (1)(c)) of KRS 142.010 . OAG 70-445 .

Since this section does not exempt the business, trade or occupation of loaning money as such, it would not exempt the occupation or trade of a building and loan association from a city occupational license tax. OAG 71-288 .

The exemptions of this section apply to the tax imposed by KRS 142.010 . OAG 72-512 .

A local ad valorem property tax is not a tax for state purposes, and it is permitted to be levied on the real and tangible and personal property of savings and loan associations and production credit associations. The statute exempts, however, the intangible personal property of savings and loan associations and production credit associations; thus, the associations would be exempt from a city’s occupational license tax. OAG 84-370 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

136.310. Tax on and reports from foreign savings and loan associations, savings banks, and similar institutions.

  1. Every federally or state chartered savings and loan association, savings bank, and other similar institution authorized to transact business in this state, with property and payroll within and without this state, shall, during January of each year, file with the Department of Revenue a report containing information and in such form as the department may require.
  2. The Department of Revenue shall fix the fair cash value, as of January 1 of each year, of the capital attributable to Kentucky in each financial institution included in subsection (1) of this section. The methodology employed by the department shall be a three (3) step process as follows:
      1. The total value of deposits maintained in Kentucky less any amounts where the amount borrowed by a member equals or exceeds the amount deposited by that member shall be determined. (a) 1. The total value of deposits maintained in Kentucky less any amounts where the amount borrowed by a member equals or exceeds the amount deposited by that member shall be determined.
      2. The total value of deposits maintained in Kentucky shall be determined by the same method used for filing the summary of deposits report with the Federal Deposit Insurance Corporation;
      1. The Kentucky apportioned value of capital shall be determined by including undivided profits, surplus, general reserves, and paid-up stock. (b) 1. The Kentucky apportioned value of capital shall be determined by including undivided profits, surplus, general reserves, and paid-up stock.
      2. For Agricultural Credit Associations chartered by the Farm Credit Administration, capital shall be computed by deducting the book value of the association’s investment in any other wholly owned institution chartered by the Farm Credit Administration that is either subject to the tax imposed by KRS 136.300 or this section or that is exempt from state taxation by federal law.
      3. The Kentucky value of capital shall be determined by a fraction, the numerator of which is the receipts factor plus the outstanding loan balance factor plus the payroll factor, and the denominator of which is three (3); and
      1. The values determined in steps (a) and (b) of this subsection shall be added together to determine total Kentucky capital and then reduced by the influence of ownership in tax-exempt United States obligations to determine Kentucky taxable capital. (c) 1. The values determined in steps (a) and (b) of this subsection shall be added together to determine total Kentucky capital and then reduced by the influence of ownership in tax-exempt United States obligations to determine Kentucky taxable capital.
      2. The influence of tax-exempt United States obligations is to be determined from the reports of condition filed with the applicable supervisory agency as follows: the average amount of tax-exempt United States obligations for the calendar year, over the average amount of total assets for the calendar year multiplied by total Kentucky capital.
      3. The department shall immediately notify each institution of the value so fixed.
  3. The receipts factor specified in subsection (2)(b) of this section is a fraction, the numerator of which is all receipts derived from loans and other sources negotiated through offices or derived from customers in Kentucky, and the denominator of which is total business receipts for the preceding calendar year.
    1. The outstanding loan balance factor specified in subsection (2)(b) of this section is a fraction, the numerator of which is the average balance of outstanding loans negotiated from offices or made to customers in Kentucky, and the denominator of which is the average balance of all outstanding loans. (4) (a) The outstanding loan balance factor specified in subsection (2)(b) of this section is a fraction, the numerator of which is the average balance of outstanding loans negotiated from offices or made to customers in Kentucky, and the denominator of which is the average balance of all outstanding loans.
      1. The average outstanding loan balance is determined by adding the outstanding loan balance at the beginning of the preceding calendar year to the outstanding loan balance at the end of the preceding calendar year and dividing by two (2). (b) 1. The average outstanding loan balance is determined by adding the outstanding loan balance at the beginning of the preceding calendar year to the outstanding loan balance at the end of the preceding calendar year and dividing by two (2).
      2. If the yearly beginning balance and ending balance results in an inequitable factor, the average outstanding loan balance may be computed on a monthly average balance.
  4. The payroll factor specified in subsection (2)(b) of this section shall be determined for the preceding calendar year under KRS 141.901 and administrative regulations promulgated according to KRS Chapter 13A.
    1. By July 1 succeeding the filing of the report as provided in subsection (1) of this section, each financial institution included in subsection (1) of this section shall pay directly into the State Treasury a tax of one dollar ($1) for each one thousand dollars ($1,000) paid in on its Kentucky taxable capital as fixed in subsection (2)(c) of this section. (6) (a) By July 1 succeeding the filing of the report as provided in subsection (1) of this section, each financial institution included in subsection (1) of this section shall pay directly into the State Treasury a tax of one dollar ($1) for each one thousand dollars ($1,000) paid in on its Kentucky taxable capital as fixed in subsection (2)(c) of this section.
    2. The institution shall not be required to pay local taxes upon its capital stock, surplus, undivided profits, notes, mortgages, or other credits, and the tax provided by this section shall be in lieu of all taxes for state purposes on intangible property of the institution, nor shall any depositor of the institution be required to list his deposits for taxation under KRS 132.020 .
    3. Failure to make reports and pay taxes as provided in this section shall subject the institution to the same penalties imposed for such failure on the part of the other corporations.
  5. If a financial institution included in subsection (1) of this section selects, it may deduct taxes imposed in subsection (6) of this section from the dividends paid or credited to a nonborrowing shareholder.
    1. Every Agricultural Credit Association chartered by the Farm Credit Administration being authorized to transact business in Kentucky but having no employees located within or without the state shall be subject to the same tax imposed pursuant to either KRS 136.300 or this section as that imposed upon its wholly owned Production Credit Association subsidiary. (8) (a) Every Agricultural Credit Association chartered by the Farm Credit Administration being authorized to transact business in Kentucky but having no employees located within or without the state shall be subject to the same tax imposed pursuant to either KRS 136.300 or this section as that imposed upon its wholly owned Production Credit Association subsidiary.
    2. For purposes of computing Kentucky apportioned value of capital pursuant to subsection (2) of this section, those Agricultural Credit Associations subject to the tax imposed by this section shall utilize that Kentucky apportionment fraction computed and utilized by its wholly owned Production Credit Association subsidiary for the same report period.

HISTORY: 876d: amend. Acts 1966, ch. 255, § 132; 1986, ch. 496, § 6, effective August 1, 1986; 1990, ch. 262, § 3, effective July 13, 1990; 2004, ch. 142, § 6, effective April 21, 2004; 2005, ch. 85, § 319, effective June 20, 2005; 2015 ch. 67, § 6, effective June 24, 2015; 2018 ch. 171, § 73, effective April 14, 2018; 2018 ch. 207, § 73, effective April 27, 2018.

Legislative Research Commission Notes.

(6/29/2017). Under the authority of KRS 7.136(1), a reference to “KRS 131.990 (2)” in subsection (1)(b)5. of this statute has been changed to “KRS 131.990 (1)” by the Reviser of Statutes following the enactment of 2017 Ky. Acts ch. 74, sec. 67, which deleted subsection (1) of KRS 131.990 and renumbered the subsequent subsections, but did not amend this statute to conform.

Insurance Companies and Other Miscellaneous Taxes

136.320. Tax on taxable capital of domestic life insurance companies in lieu of other taxes — State and local rates.

  1. Each life insurance company incorporated under the laws of and doing business in Kentucky shall value as of January 1 and report to the Department of Revenue by April 1 each year, on forms prescribed by the Department of Revenue, the following:
    1. The fair cash value of the company’s intangible personal property, hereinafter referred to as “capital,” consisting of all money in hand, shares of stock, notes, bonds, accounts, and other credits, exclusive of due and deferred premiums, whether secured by mortgage, pledge, or otherwise, or unsecured.
    2. The fair cash value of the company’s intangible personal property exempt from taxation by law.
    3. The aggregate amount of the company’s reserves, reduced by the amount of due and deferred premiums, maintained in accordance with the applicable provisions of KRS 304.6-040 and 304.6-130 to 304.6-180 , on all outstanding policies and contracts supplementary thereto.
    4. Other information as may be required by the Department of Revenue to accurately determine the fair cash value of each company’s “taxable capital” and “taxable reserves.”
  2. Based on information supplied by each company and other information that may be available, the Department of Revenue shall value each company’s “taxable capital” and “taxable reserves” as follows:
    1. “Taxable capital” shall be determined by deducting “taxable reserves” from “capital,” less exempt intangible personal property.
    2. “Taxable reserves” shall be determined by multiplying the aggregate amount of reserves as computed in subsection (1)(c) of this section by the percentage determined by dividing “capital,” less exempt intangible personal property, by “capital,” including exempt intangible personal property.
    1. An annual tax for state purposes shall be imposed against the fair cash value of “taxable capital” for calendar years beginning before 2000, at a rate of seventy cents ($0.70) on each one hundred dollars ($100). (3) (a) An annual tax for state purposes shall be imposed against the fair cash value of “taxable capital” for calendar years beginning before 2000, at a rate of seventy cents ($0.70) on each one hundred dollars ($100).
    2. An annual tax for state purposes shall be imposed against every company making an election pursuant to KRS 136.335 to be taxed under this section, against the fair cash value of taxable capital for calendar years beginning in 2000 as follows:
      1. For calendar year 2000, fifty-six cents ($0.56) on each one hundred dollars ($100);
      2. For calendar year 2001, forty-two cents ($0.42) on each one hundred dollars ($100);
      3. For calendar year 2002, twenty-eight cents ($0.28) on each one hundred dollars ($100);
      4. For calendar year 2003, fourteen cents ($0.14) on each one hundred dollars ($100); and
      5. For calendar year 2004 and each calendar year thereafter, one tenth of one cent ($0.001) on each one hundred dollars ($100).
    3. An annual tax for state purposes shall be imposed at a rate of one-tenth of one cent ($0.001) on each one hundred dollars ($100) of the fair cash value of “taxable reserves”.
    4. Beginning in tax year 2004 an insurer may offset the tax liability imposed under this subsection against the tax liability imposed under subsection (4) of this section.
  3. For calendar year 2000, and each calendar year thereafter, every company subject to the tax imposed by subsection (3) of this section, and making an election pursuant to KRS 136.335 to be taxed under this section, shall pay the following rates of tax upon each one hundred dollars ($100) of premium receipts:
    1. For calendar year 2000, thirty-eight cents ($0.38);
    2. For calendar year 2001, seventy-two cents ($0.72);
    3. For calendar year 2002, one dollar and two cents ($1.02);
    4. For calendar year 2003, one dollar and twenty-eight cents ($1.28); and
    5. For calendar year 2004 and each calendar year thereafter, one dollar and fifty cents ($1.50).
  4. The taxes imposed under subsections (3) and (4) of this section shall be in lieu of all excise, license, occupational, or other taxes imposed by the state, county, city, or other taxing district, except as provided in subsections (6) and (7) of this section.
  5. The county in which the principal office of the company is located may impose a tax of fifteen cents ($0.15) on each one hundred dollars ($100) of “taxable capital.”
  6. The city in which the principal office of the company is located may impose a tax of fifteen cents ($0.15) on each one hundred dollars ($100) of “taxable capital.”
  7. The Department of Revenue shall by September 1 each year bill each company for the state taxes. It shall immediately certify to the county clerk of the county in which the principal office of the company is located the value of “taxable capital” subject to local taxation. The county clerk shall prepare and deliver a bill to the sheriff for collection of taxes collectible by the sheriff and shall certify the value to all other collecting officers of districts authorized to levy a tax.
  8. Each company’s real and tangible personal property shall be subject to taxation at fair cash value by the state, county, school, and other taxing districts in which the property is located in the same manner and at the same rates as all other property of the same class.
  9. Taxes on property subject to taxation under this section shall be subject to the same discount and penalties as provided in KRS 134.015 and shall be collected in the same manner as taxes on property locally assessed, except that the state tax on the “taxable capital” and “taxable reserves” shall be collected directly by the Department of Revenue.
  10. Any taxpayer subject to taxation under this section may protest in the manner provided in KRS 131.110 .

Every company subject to the tax imposed by this subsection shall, by March 1 of each year, return to the Department of Revenue a statement under oath of all premium receipts on business done in this state during the preceding calendar year or since the last return was made. “Premium receipts” includes single premiums, premiums received for original insurance, premiums received for renewal, revival, or reinstatement of the policies, annual and periodical premiums, dividends applied for premiums and additions, and all other premium payments received on policies that have been written in this state, or on the lives of residents of this state, or out of this state on business done in this state, less returned premiums. No deduction shall be made for dividends on life insurance but dividends on accident and health insurance policies may be deducted.

History. 4237a-1; Acts 1966, ch. 160, §§ 1, 2; 1972, ch. 203, § 8; 1976, ch. 93, § 11, effective January 1, 1977; 1978, ch. 384, § 282, effective January 17, 1978; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 358, effective July 13, 1990; 1998, ch. 233, § 1, effective July 15, 1998; 2005, ch. 85, § 320, effective June 20, 2005; 2009, ch. 10, § 50, effective January 1, 2010.

Compiler’s Notes.

Former KRS 136.320 (4237a-1: amend. Acts 1966, ch. 160, §§ 1, 2; 1972, ch. 203, § 8; 1976, ch. 93, § 11, effective January 1, 1977; 1978, ch. 384, § 282, effective January 17, 1978) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 358, effective July 1, 1990.

NOTES TO DECISIONS

  1. Statute of Limitations.
  2. Assessment.
  3. Capital.
1. Statute of Limitations.

Tax imposed on certain intangible property was an ad valorem property tax, and thus the two-year statute of limitations applied to an insurance company’s claim for a refund; neither equitable recoupment nor set-off were available to the insurance company. Am. Life & Accident Ins. Co. of Ky. v. Commonwealth, 173 S.W.3d 910, 2004 Ky. App. LEXIS 299 (Ky. Ct. App. 2004).

2. Assessment.

Domestic life insurance company was not entitled to tax refunds because: (1) the value of the taxpayer’s investment corporate stock was properly treated in the computation of the taxpayer’s tax liability under KRS 136.320 ; and (2) assets booked as separate accounts were properly subjected to taxation. Monumental Life Ins. Co. v. Dep't of Revenue, 294 S.W.3d 10, 2008 Ky. App. LEXIS 207 (Ky. Ct. App. 2008), cert. denied, 559 U.S. 1037, 130 S. Ct. 2062, 176 L. Ed. 2d 414, 2010 U.S. LEXIS 2866 (U.S. 2010).

3. Capital.

Holdings booked by a domestic life insurance company into separate accounts account fell within the statutory definition of capital in KRS 136.320 (1)(a). Moreover, KRS 136.320 provided no exception for retirement and pension assets. Monumental Life Ins. Co. v. Dep't of Revenue, 294 S.W.3d 10, 2008 Ky. App. LEXIS 207 (Ky. Ct. App. 2008), cert. denied, 559 U.S. 1037, 130 S. Ct. 2062, 176 L. Ed. 2d 414, 2010 U.S. LEXIS 2866 (U.S. 2010).

Opinions of Attorney General.

A city is prohibited from levying an occupational license tax against a domestic life insurance company for the doing of business in the city. OAG 67-209 .

The exemption from local taxation of domestic life insurance companies does not include agents of such companies. OAG 70-376 .

A city can legally levy an occupational license tax on insurance companies if the city complies with all the restrictions contained in KRS 92.285 (repealed) and former subsection (5) of this section. OAG 82-188 .

The language of the exempting clause contained in former subsection (3) of this section must be construed according to its common meaning, and therefore a city can levy a tax on a domestic life insurance company only as prescribed in former subsection (5) of this section. OAG 82-188 .

Research References and Practice Aids

Cross-References.

City license taxes, insurance companies, KRS 91A.080 .

Retaliatory provision, domicile of alien insurer, KRS 304.3-270 .

Revocation of authority, failure to pay taxes, KRS 304.3-200 .

Kentucky Law Journal.

Property Assessment Remedies for the Kentucky Taxpayer, 60 Ky. L.J. 84 (1971).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Complaint in Class Action to Declare City Occupational Tax Unconstitutional and to Enjoin Same, Form 355.08.

136.330. Tax on premium receipts life insurance company — Exception.

  1. Every life insurance company doing business in this state, other than fraternal assessment life insurance companies, shall, by March 1 of each year, return to the Department of Revenue a statement under oath of all premium receipts on business done in this state during the preceding calendar year or since the last return was made. “Premium receipts” includes single premiums, annuity premiums, premiums received for original insurance, premiums received for renewal, revival or reinstatement of the policies, annual and periodical premiums, dividends applied for premiums and additions, and all other premium payments received on policies that have been written in this state, or on the lives of residents of this state, or out of this state on business done in this state, less returned premiums. No deduction shall be made for dividends on life insurance or annuity policies, but dividends on accident and health insurance policies may be deducted. Premium receipts shall not include annuity premiums or annuity dividends beginning in calendar year 2000.
    1. An annual tax on premium receipts shall be imposed against every company making a return under this subsection for calendar years beginning before 2000 at a rate of two dollars ($2) upon each one hundred dollars ($100) of premium receipts. (2) (a) An annual tax on premium receipts shall be imposed against every company making a return under this subsection for calendar years beginning before 2000 at a rate of two dollars ($2) upon each one hundred dollars ($100) of premium receipts.
    2. An annual tax on premium receipts shall be imposed against every company making an election pursuant to KRS 136.335 to be taxed under this section, and every company making a return under this section, for calendar years beginning in 2000 as follows:
      1. For calendar year 2000, one dollar and ninety cents ($1.90) upon each one hundred dollars ($100) of premium receipts;
      2. For calendar year 2001, one dollar and eighty cents ($1.80) upon each one hundred dollars ($100) of premium receipts;
      3. For calendar year 2002, one dollar and seventy cents ($1.70) upon each one hundred dollars ($100) of premium receipts;
      4. For calendar year 2003, one dollar and sixty cents ($1.60) upon each one hundred dollars ($100) of premium receipts; and
      5. For calendar year 2004 and each calendar year thereafter, one dollar and fifty cents ($1.50) on each one hundred dollars ($100) of premium receipts.
  2. The health insurance contract or contracts for state employees as authorized by KRS 18A.225 shall not be subject to taxation under this section.

History. 4226: amend. Acts 1962, ch. 208; 1966, ch. 187, part IV, § 1; 1984, ch. 23, § 5, effective July 13, 1984; 1986, ch. 496, § 7, effective August 1, 1986; 1988, ch. 5, § 9, effective July 15, 1988; 1998, ch. 82, § 15, effective July 15, 1998; 1998, ch. 233, § 2, effective July 15, 1998; 2001, ch. 164, § 6, effective June 21, 2001; 2005, ch. 85, § 321, effective June 20, 2005.

NOTES TO DECISIONS

  1. Doing Business.
  2. Nature of Tax.
  3. Reduction of Dividends.
  4. Assessment Life Insurance Company.
1. Doing Business.

Where a foreign company has withdrawn from the state and has ceased to do any new business therein, annual premiums paid to company on policies theretofore sold in state cannot constitutionally be taxed. Provident Sav. Life Assurance Soc. v. Kentucky, 239 U.S. 103, 36 S. Ct. 34, 60 L. Ed. 167, 1915 U.S. LEXIS 1501 (U.S. 1915).

Mere continuance in force, by receipt of annual premiums, of policies previously sold in state, does not constitute doing business in state. Provident Sav. Life Assurance Soc. v. Kentucky, 239 U.S. 103, 36 S. Ct. 34, 60 L. Ed. 167, 1915 U.S. LEXIS 1501 (U.S. 1915).

A foreign life insurance company is not liable for taxes upon the amount of annual premiums collected by it, after it has ceased to do business in this state, on policies written while it was doing business in the state. Illinois Life Ins. Co. v. Commonwealth, 168 Ky. 201 , 181 S.W. 1133, 1916 Ky. LEXIS 546 ( Ky. 1916 ).

2. Nature of Tax.

The tax imposed by this section is a license tax. Northwestern Mut. Life Ins. Co. v. James, 138 Ky. 48 , 127 S.W. 505, 1910 Ky. LEXIS 39 ( Ky. 1910 ).

3. Reduction of Dividends.

A mutual insurance company which stipulates in its policy a certain premium, large enough to meet all contingent liabilities, but actually collects a smaller sum, treating the difference as a “dividend,” may not deduct such dividends. Northwestern Mut. Life Ins. Co. v. James, 138 Ky. 48 , 127 S.W. 505, 1910 Ky. LEXIS 39 ( Ky. 1910 ).

4. Assessment Life Insurance Company.

An assessment life insurance company is taxable under this section on the dues or assessments received by it. Clay v. Hartford Life Ins. Co., 167 Ky. 13 , 179 S.W. 1024, 1915 Ky. LEXIS 786 ( Ky. 1915 ).

Cited in:

Coleman v. Western & Southern Life Ins. Co., 264 Ky. 210 , 94 S.W.2d 601, 1936 Ky. LEXIS 295 ( Ky. 1936 ).

Research References and Practice Aids

Cross-References.

Retaliatory provision, domicile of alien insurer, KRS 304.3-270 .

Revocation of authority, failure to pay taxes, KRS 304.3-200 .

136.335. Irrevocable election of method of taxation for domestic life insurance companies — Time of filing.

Beginning with calendar year 2000, every life insurance company incorporated under the laws of and doing business in Kentucky shall make an irrevocable election whether to be taxed under the provisions of KRS 136.320 or 136.330 . For insurance companies incorporated under the laws of and doing business in Kentucky, prior to January 1, 2000, the election shall be filed with the commissioner of insurance and the commissioner of the Department of Revenue on or before January 1, 2000. For insurance companies applying for a certificate to do business in Kentucky as a domestic life insurance company, after January 1, 2000, the election shall be filed with the company’s initial application for certificate of authority to do business in Kentucky.

History. Enact. Acts 1998, ch. 233, § 3, effective July 15, 1998; 2005, ch. 85, § 322, effective June 20, 2005; 2010, ch. 24, § 100, effective July 15, 2010.

136.340. Tax on amounts paid to stock insurance companies, other than life.

  1. Every stock insurance company, other than life, doing business in this state shall, on or before the first day of March of each year, return to the Department of Revenue a statement under oath of all amounts paid to the company or its representative, whether designated as premiums or otherwise, for insurance or services incident thereto, on property or risks in this state during the preceding calendar year or since the last returns were made, including amounts received for reinsurance on Kentucky risks from unauthorized companies, and shall at the same time pay a tax of two dollars ($2) upon each one hundred dollars ($100) of such amounts paid to the company, less amounts returned on canceled policies and policies not taken.
  2. The health insurance contract or contracts for state employees as authorized by KRS 18A.225 shall not be subject to taxation under this section.

History. 4229: amend. Acts 1942, ch. 155, § 1, 5; 1950, ch. 126, § 1; 1966, ch. 187, part IV, § 2; 1984, ch. 23, § 3, effective July 13, 1984; 1986, ch. 496, § 8, effective August 1, 1986; 1988, ch. 5, § 10, effective July 15, 1988; 1998, ch. 82, § 16, effective July 15, 1998; 2001, ch. 164, § 7, effective June 21, 2001; 2005, ch. 85, § 323, effective June 20, 2005.

NOTES TO DECISIONS

  1. Construction.
  2. Workers’ Compensation.
1. Construction.

A surety company is an insurance company within the meaning of this section. Greene v. National Surety Co., 186 Ky. 353 , 217 S.W. 117, 1919 Ky. LEXIS 222 ( Ky. 1919 ).

2. Workers’ Compensation.

Company paying workers’ compensation tax under KRS 342.445 (now repealed) is exempt from the tax imposed by this section. Shanks v. Cornett-Lewis Coal Co., 218 Ky. 643 , 291 S.W. 1034, 1927 Ky. LEXIS 214 ( Ky. 1927 ).

Research References and Practice Aids

Cross-References.

License taxes, insurance companies, KRS 91A.080 .

Retaliatory provision, domicile of alien insurer, KRS 304.3-270 .

Revocation of authority, failure to pay taxes, KRS 304.3-200 .

Special fund tax, workers’ compensation insurance premiums, KRS 342.122 .

136.350. Tax on amounts to mutual companies, other than life and Lloyd’s insurers.

  1. All mutual companies other than life doing business under this law shall pay to the Department of Revenue on or before the first day of March in each year, a tax of two percent (2%) of all amounts paid to the company or its representative, whether designated as premiums or otherwise, for insurance or services incident thereto, including amounts paid for membership or policy dues or fees, on property or risks in this state during the preceding calendar year, including amounts received for reinsurance on Kentucky risks from unauthorized companies.
  2. In addition to the foregoing tax, mutual insurance companies and Lloyd’s insurers shall pay an annual tax as prescribed for stock insurance companies by KRS 136.360 and for like purposes.
  3. In computing premiums upon which tax is to be paid there shall be deducted, in both direct and reinsurance business, return premiums on canceled policies and policies not taken, and dividends paid or credited to policyholders.
  4. The provisions of this section shall not apply to domestic mutual companies, cooperative or assessment fire insurance companies.
  5. The health insurance contract or contracts for state employees as authorized by KRS 18A.225 and 18A.228 shall not be subject to taxation under this section.

History. 743a-23: amend. Acts 1942, ch. 155, § 3, 7; 1950, ch. 126, § 2; 1954, ch. 224, § 1; 1966, ch. 187, part IV, § 3; 1984, ch. 23, § 4, effective July 13, 1984; 1988, ch. 5, § 11, effective July 15, 1988; 1998, ch. 82, § 17, effective July 15, 1998; 2001, ch. 164, § 8, effective June 21, 2001; 2005, ch. 85, § 324, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Retaliatory provision, domicile of alien insurer, KRS 304.3-270 .

Revocation of authority, failure to pay taxes, KRS 304.3-200 .

136.360. Tax on amounts paid to stock insurance, to defray cost of administering fire prevention and insurance laws.

Every stock insurer other than life doing business in this state shall pay to the Department of Revenue on or before the first day of March of each year, for the purpose of defraying the expenses authorized by KRS Chapter 227, and KRS Chapter 304, Subtitle 24, three-fourths of one percent (0.75%) of all amounts paid to such insurance company or its representative, whether such payments are designated as premiums or otherwise, during the previous calendar year for fire insurance and that portion of the premium reasonably allocable to insurance against the hazard of fire included in other coverages other than life and disability insurances. In computing such amounts there shall be deducted amounts refunded on policies canceled or not taken, and dividends paid or credited to policyholders. All amounts so collected shall be deposited in the general expenditure fund in the State Treasury.

History. 762b-5: amend. Acts 1942, ch. 155, §§ 2, 6; 1954, ch. 224, § 2; 1966, ch. 187, part IV, § 4; 1972, ch. 203, § 9; 1974, ch. 210, § 1; 1978, ch. 384, § 26, effective June 17, 1978; 2005, ch. 85, § 325, effective June 20, 2005.

Compiler’s Notes.

Section 56 of Acts 1972, ch. 203, read: “Nothing in this act shall be construed to effect any substantive change in the statute law of Kentucky and if any substantive change appears to be effected it shall be disregarded and the law as it existed prior to the effective date of this act shall be given full force and effect.”

136.370. Tax on attorneys for exchange of reciprocal or interinsurance contracts — Additional tax on premiums of stock insurers.

Each attorney, for the exchange of reciprocal or interinsurance contracts, under KRS Chapter 304, shall pay to the Department of Revenue on or before March 1 of each year a tax of two percent (2%) of the gross premiums or deposits collected from subscribers in this state during the preceding calendar year, less all amounts returned to subscribers or accredited to their account as savings. In addition, the attorney shall pay an annual premium tax of three-fourths of one percent (0.75%) of all amounts as prescribed for every stock insurer by and for the purposes specified in KRS 136.360 .

History. 743m-11: amend. Acts 1954, ch. 224, § 3; 1966, ch. 187, part IV, § 5; 2005, ch. 85, § 326, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

License taxes, insurance companies, KRS 91A.080 .

Retaliatory provision, domicile of alien insurer, KRS 304.3-270 .

Revocation of authority, failure to pay taxes, KRS 304.3-200 .

136.373. Definitions for KRS 136.373 to 136.381. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 96, § 1) was repealed by Acts 1966, ch. 187, part IV, § 16.

136.377. Filing of declaration of estimated tax by company — Payment — Penalty. [Repealed]

History. Enact. Acts 1964, ch. 96, §§ 2, 3; 1972, ch. 203, § 10; 1978, ch. 233, § 18, effective June 17, 1978; 1982, ch. 452, § 10, effective July 1, 1982; 1998, ch. 233, § 4, effective July 15, 1998; repealed by 2019 ch. 151, § 80, effective June 27, 2019.

136.380. Tax on premiums paid to insurance companies not authorized to do business in this state. [Repealed.]

Compiler’s Notes.

This section (4237) was repealed by Acts 1944, ch. 173, § 8.

136.381. Reports and payments due notwithstanding dissolution or retirement.

In the event any insurer dissolves or retires from this state, either voluntarily or involuntarily, during any calendar year, the dissolution or retirement shall not defeat or excuse the filing of reports and assessment and collection of taxes imposed by KRS 136.330 to 136.395 , 299.530 , 304.4-030 , and 342.450 , with respect to premiums written or deposits held during that part of the calendar year prior to the dissolution or retirement from this state.

History. Enact. Acts 1964, ch. 96, § 4; 1966, ch. 187, part IV, § 6; 1968, ch. 152, § 108; reen. 1972, ch. 203, § 11; 1984, ch. 113, § 1, effective July 13, 1984.

Compiler’s Notes.

Section 56 of Acts 1972, ch. 203, read: “Nothing in this act shall be construed to effect any substantive change in the statute law of Kentucky and if any substantive change appears to be effected it shall be disregarded and the law as it existed prior to the effective date of this act shall be given full force and effect.”

KRS 342.450 , referred to in this section, has been repealed.

136.390. Tax on insurance companies other than stock or mutual.

  1. All associations of underwriters authorized under KRS 304.3-040 , 304.3-140 , 304.28-010 , 304.28-030 , 304.28-040 , and 304.28-050 , and their representatives, shall make the same reports as are required of foreign stock insurance companies and their representatives transacting the same or similar kinds of insurance business in this state, and shall pay the same taxes as are required to be paid by such companies.
  2. All foreign mutual assessment companies, associations, individual firms, underwriters or Lloyd’s, having resident members doing business in this state, who shall enter into contracts of insurance with each other or into agreements to indemnify each other against losses by fire, lightning, windstorm or other casualties for which there is no premium charged or collected at the time insurance is made, shall be deemed to be doing an insurance business in this state, and shall annually, by July 30, pay to the Department of Revenue a license tax of two dollars ($2) upon each one hundred dollars ($100) of assessments paid or collected in any one (1) year. Each resident member shall be liable to the state for the license tax and all interest and penalties.
  3. No person shall fail or refuse to make a report giving all the data and information necessary to determine the amount of revenue due under subsection (2) of this section, or fail to make the report provided for in subsection (2) of this section, or fail to pay the tax due thereon.

History. 743s-10, 4236: amend. Acts 1958, ch. 126, § 11; 1966, ch. 187, part IV, § 7; 1972, ch. 203, § 12; 2005, ch. 85, § 327, effective June 20, 2005.

Compiler’s Notes.

Section 56 of Acts 1972, ch. 203, read: “Nothing in this act shall be construed to effect any substantive change in the statute law of Kentucky and if any substantive change appears to be effected it shall be disregarded and the law as it existed prior to the effective date of this act shall be given full force and effect.”

Research References and Practice Aids

Cross-References.

Retaliatory provision, domicile of alien insurer, KRS 304.3-270 .

Revocation of authority, failure to pay taxes, KRS 304.3-200 .

136.392. Premium surcharge.

    1. Every domestic, foreign, or alien insurer, other than life and health insurers, which is either subject to or exempted from Kentucky premium taxes as levied pursuant to the provisions of either KRS 136.340 , 136.350 , 136.370 , or 136.390 , shall charge and collect a surcharge of one dollar and eighty cents ($1.80) upon each one hundred dollars ($100) of premium, assessments, or other charges, except for those municipal premium taxes, made by it for insurance coverage provided to its policyholders, on risk located in this state, whether the charges are designated as premiums, assessments, or otherwise. The premium surcharge shall be collected by the insurer from its policyholders at the same time and in the same manner that its premium or other charge for the insurance coverage is collected. The premium surcharge shall be disclosed to policyholders pursuant to administrative regulations promulgated by the commissioner of insurance. However, no insurer or its agent shall be entitled to any portion of any premium surcharge as a fee or commission for its collection. On or before the twentieth day of each month, each insurer shall report and remit to the Department of Revenue, on forms as it may require, all premium surcharge moneys collected by it during its preceding monthly accounting period less any moneys returned to policyholders as applicable to the unearned portion of the premium on policies terminated by either the insured or the insurer. Insurers with an annual liability of less than one thousand dollars ($1,000) for each of the previous two (2) calendar years may report and remit to the Department of Revenue all premium surcharge moneys collected on a calendar year basis on or before the twentieth day of January of the following calendar year. The funds derived from the premium surcharge shall be deposited in the State Treasury, and shall constitute a fund allocated for the uses and purposes of the Firefighters Foundation Program fund, KRS 95A.220 and 95A.262 , and the Law Enforcement Foundation Program fund, KRS 15.430 . (1) (a) Every domestic, foreign, or alien insurer, other than life and health insurers, which is either subject to or exempted from Kentucky premium taxes as levied pursuant to the provisions of either KRS 136.340 , 136.350 , 136.370 , or 136.390 , shall charge and collect a surcharge of one dollar and eighty cents ($1.80) upon each one hundred dollars ($100) of premium, assessments, or other charges, except for those municipal premium taxes, made by it for insurance coverage provided to its policyholders, on risk located in this state, whether the charges are designated as premiums, assessments, or otherwise. The premium surcharge shall be collected by the insurer from its policyholders at the same time and in the same manner that its premium or other charge for the insurance coverage is collected. The premium surcharge shall be disclosed to policyholders pursuant to administrative regulations promulgated by the commissioner of insurance. However, no insurer or its agent shall be entitled to any portion of any premium surcharge as a fee or commission for its collection. On or before the twentieth day of each month, each insurer shall report and remit to the Department of Revenue, on forms as it may require, all premium surcharge moneys collected by it during its preceding monthly accounting period less any moneys returned to policyholders as applicable to the unearned portion of the premium on policies terminated by either the insured or the insurer. Insurers with an annual liability of less than one thousand dollars ($1,000) for each of the previous two (2) calendar years may report and remit to the Department of Revenue all premium surcharge moneys collected on a calendar year basis on or before the twentieth day of January of the following calendar year. The funds derived from the premium surcharge shall be deposited in the State Treasury, and shall constitute a fund allocated for the uses and purposes of the Firefighters Foundation Program fund, KRS 95A.220 and 95A.262 , and the Law Enforcement Foundation Program fund, KRS 15.430 .
    2. Effective July 1, 2019, the surcharge rate in paragraph (a) of this subsection shall only be adjusted by an Act of the General Assembly, and the adjusted rate shall be applied beginning ninety (90) days after the effective date of the Act.
  1. Within five (5) days after the end of each month, all insurance premium surcharge proceeds deposited in the State Treasury as set forth in this section shall be paid by the State Treasurer into the Firefighters Foundation Program fund trust and agency account and the Law Enforcement Foundation Program fund trust and agency account. The amount paid into each account shall be proportionate to each fund’s respective share of the total deposits, pursuant to KRS 42.190 . Moneys deposited to the Law Enforcement Foundation Program fund trust and agency account shall not be disbursed, expended, encumbered, or transferred by any state official for uses and purposes other than those prescribed by KRS 15.410 to 15.500 , except that beginning with fiscal year 1994-95, through June 30, 1999, moneys remaining in the account at the end of the fiscal year in excess of three million dollars ($3,000,000) shall lapse. On and after July 1, 1999, moneys in this account shall not lapse. Money deposited to the Firefighters Foundation Program fund trust and agency account shall not be disbursed, expended, encumbered, or transferred by any state official for uses and purposes other than those prescribed by KRS 95A.200 to 95A.300 , except that beginning with fiscal year 1994-95, through June 30, 1999, moneys remaining in the account at the end of the fiscal year in excess of three million dollars ($3,000,000) shall lapse, but moneys in the revolving loan fund established in KRS 95A.262 shall not lapse. On and after July 1, 1999, moneys in this account shall not lapse.
  2. Insurance premium surcharge funds collected from the policyholders of any domestic mutual company, cooperative, or assessment fire insurance company shall be deposited in the State Treasury, and shall be paid monthly by the State Treasurer into the Firefighters Foundation Program fund trust and agency account as provided in KRS 95A.220 to 95A.262 . However, insurance premium surcharge funds collected from policyholders of any mutual company, cooperative, or assessment fire insurance company which transfers its corporate domicile to this state from another state after July 15, 1994, shall continue to be paid into the Firefighters Foundation Program fund and the Law Enforcement Foundation Program fund as prescribed.
  3. No later than July 1 of each year, the Department of Insurance shall provide the Department of Revenue with a list of all Kentucky-licensed property and casualty insurers and the amount of premium volume collected by the insurer for the preceding calendar year as set forth on the annual statement of the insurer. No later than September 1 of each year, the Department of Revenue shall calculate an estimate of the premium surcharge due from each insurer subject to the insurance premium surcharge imposed pursuant to this section, based upon the surcharge rate imposed pursuant to this section and the amount of the premium volume for each insurer as reported by the Department of Insurance. The Department of Revenue shall compare the results of this estimate with the premium surcharge paid by each insurer during the preceding year and shall provide the Legislative Research Commission, the Kentucky Fire Commission, the Kentucky Law Enforcement Council, and the Department of Insurance with a report detailing its findings on a cumulative basis. In accordance with KRS 131.190 , the Department of Revenue shall not identify or divulge the confidential tax information of any individual insurer in this report.
  4. The insurance premiums surcharge provided in this section shall not apply to premiums collected from the following:
    1. The federal government;
    2. Resident educational and charitable institutions qualifying under Section 501(c)(3) of the Internal Revenue Code;
    3. Resident nonprofit religious institutions for real, tangible, and intangible property coverage only;
    4. State government for coverage of real property; or
    5. Local governments for coverage of real property.
  5. Pursuant to the Non-Admitted and Reinsurance Reform Act of 2010, Title V, Subtitle B, of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, the insurance premium surcharge on non-admitted insurance for multistate risks shall be exempt from the provisions of this section but shall be subject to the provisions of KRS 304.10-180 .

HISTORY: Enact. Acts 1982, ch. 246, § 1, effective April 1, 1982; 1984, ch. 300, § 1, effective July 13, 1984; 1984, ch. 332, § 16, effective July 13, 1984; 1986, ch. 425, § 1, effective July 15, 1986; 1990, ch. 481, § 3, effective July 13, 1990; 1992, ch. 338, § 17, effective July 14, 1992; 1992, ch. 381, § 1, effective July 14, 1992; 1994, ch. 97, § 4, effective July 15, 1994; 1998, ch. 244, § 9, effective July 15, 1998; 1998, ch. 510, § 9, effective July 15, 1998; 2002, ch. 110, § 1, effective July 15, 2002; 2005, ch. 85, § 328, effective June 20, 2005; 2007, ch. 85, § 160, effective June 26, 2007; 2008, ch. 132, § 1, effective April 24, 2008; repealed and reenact., Acts 2009, ch. 86, § 1, effective March 24, 2009; 2010, ch. 24, § 101, effective July 15, 2010; 2011, ch. 48, § 3, effective June 8, 2011; 2012, ch. 80, § 1, effective July 12, 2012; 2019 ch. 140, § 1, effective June 27, 2019; 2020 ch. 67, § 17, effective July 15, 2020.

Compiler’s Notes.

The Non-Admitted and Reinsurance Reform Act of 2010, Title V, Subtitle B, of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 11-203 referenced in subsection (6) is compiled as 15 USCS §§ 8201 et seq.

Legislative Research Commission Notes.

(6/8/2011). A reference in subsection (6) of this statute to “Pub. L. No. 111-517,” the Non-Admitted and Reinsurance Reform Act of 2010, Title V, Subtitle B, of the Dodd-Frank Wall Street reform and Consumer Protection Act, has been changed in codification to “Pub. L. No. 111-203” to correct a manifest clerical or typographical error under the authority of KRS 7.136(1).

(6/8/2011). 2011 Ky. Acts ch. 48, sec. 5, provided that the provisions contained in Sections 2, 3, and 4 of that Act “shall take effect as provided in Article XIII of Section 1 of this Act, upon legislative enactment of the compact into law by two compacting states, provided the commission shall become effective for purposes of adopting rules, and creating the clearinghouse when there are a total of ten compacting states and contracting states or, alternatively, when there are compacting states and contracting states representing greater than 40 percent of the surplus lines insurance premium volume based on records of the percentage of surplus lines insurance.” The Reviser of Statutes has determined that, as of April 8, 2011, two states had enacted the compact, thereby triggering the initial effective date of the compact. Since 2011 Ky. Acts ch. 48, did not contain an emergency clause, this section became effective June 8, 2011, the normal effective date for 2011 legislation.

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that “The intent of the General Assembly in repealing and reenacting KRS 136.392 , 138.195 , 141.160 , 160.6156 , 160.6157 , 160.6158 , 131.183 , 141.044 , 141.235 , 134.580 , 393.060 , and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides “To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood.”

NOTES TO DECISIONS

1. Valid Emergency Clause.

The reason stated in the emergency clause of Acts 1982, ch. 246, which act deals generally with a surcharge upon certain insurance premiums collected in the state which is intended to fund a trust for the payment of incentives to the fire fighters and policemen of the various municipalities, to the effect that the general fund appropriations for fiscal year 1981-82 for the Professional Fire Fighters Foundation Program Fund as provided by KRS 95A.200 through 95A.990 , and the Law Enforcement Foundation Program Fund as provided by KRS 15.410 through 15.510 , would lapse on June 30, 1982, sufficiently supported the legislative declaration of emergency. American Ins. Asso. v. Geary, 635 S.W.2d 306, 1982 Ky. LEXIS 265 ( Ky. 1982 ).

Opinions of Attorney General.

There is no minimum surcharge regardless of the amount of the premium. The surcharge will always be 1.5 percent of the premium. OAG 82-299 .

Governmental units such as the state government and political subdivisions, and special districts, are not exempt from the state surcharge or tax levied on insurance premiums pursuant to this section; the exemption of Ky. Const., § 170, as relates to governmental units, involves only ad valorem taxes. OAG 84-5 .

As relates to nonprofit institutions of purely public charity and education, since the insurance premium surcharge tax is designed to raise revenue, Ky. Const., § 170 exempts such institutions from this tax. OAG 84-5 .

Nonprofit institutions of purely public charity and education are exempt from a city license tax on insurance premiums under Ky. Const., § 170, as an institutional exemption, provided that the tax is designed for revenue; however, the charitable institution is not exempt from payment of a city license tax when it is enacted under the police power or when it is enacted for police or regulatory purposes. Thus, the line of demarcation as to the application or nonapplication of the city license tax to nonprofit and charitable institutions is drawn around the concept of the license tax being either a revenue measure or a police measure. OAG 84-201 .

136.395. Hospital, medical or dental service companies exempt from premium tax.

No tax shall be imposed upon or measured by the premiums paid to or received by a hospital service corporation, a medical service plan corporation, a dental service plan corporation, or a domestic mutual insurer against the risk or cost of medical and/or surgical care organized under KRS 304.24-010 to 304.24-440 and KRS 304.32-010 to 304.32-270 .

History. Enact. Acts 1964, ch. 183; 1972, ch. 203, § 13.

Compiler’s Notes.

Section 56 of Acts 1972, ch. 203, read: “Nothing in this act shall be construed to effect any substantive change in the statute law of Kentucky and if any substantive change appears to be effected it shall be disregarded and the law as it existed prior to the effective date of this act shall be given full force and effect.”

136.400. Burial association license tax and organization fee. [Repealed.]

Compiler’s Notes.

This section (199a-15: amend. Acts 1966, ch. 187, part IV, § 8; 1972, ch. 203, § 14) was repealed by Acts 1984, ch. 113, § 8, effective July 13, 1984.

136.410. Tax on bail bondsmen fees.

Every bail bondsman doing business in this Commonwealth shall, on or before the first day of March of each year, return to the Department of Revenue a statement of all amounts paid to him or his representatives, as premiums for bail bonds written in the courts of this Commonwealth during the preceding calendar year, or since the last returns were made, and shall at the same time pay a tax of two dollars ($2) upon each one hundred dollars ($100) of such amounts paid to the bail bondsman or his representatives. Amounts received for reimbursement for expenses or court costs are not to be considered as premiums for the purposes of this section.

History. Enact. Acts 1974, ch. 337, § 1; 1986, ch. 496, § 9, effective August 1, 1986; 2004, ch. 24, § 45, effective July 13, 2004; 2005, ch. 85, § 329, effective June 20, 2005.

Bank Franchise and Local Deposit Tax

136.500. Definitions for KRS 136.500 to 136.575.

As used in KRS 136.500 to 136.575 , unless the context requires otherwise:

  1. “Billing address” means the location indicated in the books and records of the financial institution, on the first day of the taxable year or the date in the taxable year when the customer relationship began, as the address where any notice, statement, or bill relating to a customer’s account is mailed;
  2. “Borrower located in this state” means a borrower, other than a credit card holder, that is engaged in a trade or business that maintains its commercial domicile in this state or a borrower that is not engaged in a trade or business;
  3. “Credit card holder located in this state” means a credit card holder whose billing address is in this state;
  4. “Department” means the Department of Revenue;
  5. “Commercial domicile” means:
    1. The location from which the trade or business is principally managed and directed; or
    2. The state of the United States or the District of Columbia from which the financial institution’s trade or business in the United States is principally managed and directed, if a financial institution is organized under the laws of a foreign country, the Commonwealth of Puerto Rico, or any territory or possession of the United States.
  6. “Compensation” means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services that are included in the employee’s gross income under the Internal Revenue Code. In the case of employees not subject to the Internal Revenue Code, the determination of whether the payments would constitute gross income to the employees under the Internal Revenue Code shall be made as though the employees were subject to the Internal Revenue Code;
  7. “Credit card” means credit, travel, or entertainment card;
  8. “Credit card issuer’s reimbursement fee” means the fee a financial institution receives from a merchant’s bank because one (1) of the persons to whom the financial institution has issued a credit card has charged merchandise or services to the credit card;
  9. “Employee” means, with respect to a particular financial institution, “employee” as defined in Section 3121(d) of the Internal Revenue Code;
  10. “Financial institution” means:
    1. A national bank organized as a body corporate and existing or in the process of organizing as a national bank association pursuant to the provisions of the National Bank Act, 12 U.S.C. secs. 21 et seq., in effect on December 31, 1997, exclusive of any amendments made subsequent to that date;
    2. Any bank or trust company incorporated or organized under the laws of any state, except a banker’s bank organized under KRS 286.3-135 ;
    3. Any corporation organized under the provisions of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any corporation organized after December 31, 1997, that meets the requirements of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997; or
    4. Any agency or branch of a foreign depository as defined in 12 U.S.C. sec. 3101 , in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any agency or branch of a foreign depository established after December 31, 1997, that meets the requirements of 12 U.S.C. sec. 3101 in effect on December 31, 1997;
  11. “Gross rents” means the actual sum of money or other consideration payable for the use or possession of property.
    1. “Gross rents” includes but is not limited to:
      1. Any amount payable for the use or possession of real property or tangible property, whether designated as a fixed sum of money or as a percentage of receipts, profits, or otherwise;
      2. Any amount payable as additional rent or in lieu of rent, such as interest, taxes, insurance, repairs, or any other amount required to be paid by the terms of a lease or other arrangement; and
      3. A proportionate part of the cost of any improvement to real property made by or on behalf of the financial institution which reverts to the owner or lessor upon termination of a lease or other arrangement. The amount to be included in gross rents is the amount of amortization or depreciation allowed in computing the taxable income base for the taxable year. However, where a building is erected on leased land by or on behalf of the financial institution, the value of the land is determined by multiplying the gross rent by eight (8) and the value of the building is determined in the same manner as if owned by the financial institution;
    2. The following are not included in the term “gross rents”:
      1. Reasonable amounts payable as separate charges for water and electric service furnished by the lessor;
      2. Reasonable amounts payable as service charges for janitorial services furnished by the lessor;
      3. Reasonable amounts payable for storage, if these amounts are payable for space not designated and not under the control of the financial institution; and
      4. That portion of any rental payment which is applicable to the space subleased from the financial institution and not used by it;
  12. “Internal Revenue Code” means the Internal Revenue Code, Title 26 U.S.C., in effect on December 31, 2001, exclusive of any amendments made subsequent to that date;
  13. “Loan” means any extension of credit resulting from direct negotiations between the financial institution and its customer, and the purchase, in whole or in part, of the extension of credit from another. Loans include participations, syndications, and leases treated as loans for federal income tax purposes. Loans shall not include properties treated as loans under Section 595 of the Internal Revenue Code, futures or forward contracts, options, notional principal contracts such as swaps, credit card receivables, including purchased credit card relationships, noninterest-bearing balances due from depository institutions, cash items in the process of collection, federal funds sold, securities purchased under agreements to resell, assets held in a trading account, securities, interests in a real estate mortgage investment company, or other mortgage-backed or asset-backed security, and other similar items;
  14. “Loan secured by real property” means a loan or other obligation for which fifty percent (50%) or more of the aggregate value of the collateral used to secure the loan or other obligation, when valued at fair market value as of the time the original loan or obligation was incurred, was real property;
  15. “Merchant discount” means the fee or negotiated discount charged to a merchant by the financial institution for the privilege of participating in a program where a credit card is accepted in payment for merchandise or services sold to the card holder;
  16. “Person” means an individual, estate, trust, partnership, corporation, limited liability company, or any other business entity;
  17. “Principal base of operations” means:
    1. With respect to transportation property, the place from which the property is regularly directed or controlled; and
    2. With respect to an employee:
      1. The place the employee regularly starts work and to which the employee customarily returns in order to receive instructions from his or her employer; or
      2. If the place referred to in subparagraph 1. of this paragraph does not exist, the place the employee regularly communicates with customers or other persons; or
      3. If the place referred to in subparagraph 2. of this paragraph does not exist, the place the employee regularly performs any other functions necessary to the exercise of the employee’s trade or profession at some other point or points;
  18. “Real property owned” and “tangible personal property owned” mean real and tangible personal property, respectively, on which the financial institution may claim depreciation for federal income tax purposes, or property to which the financial institution holds legal title and on which no other person may claim depreciation for federal income tax purposes or could claim depreciation if subject to federal income tax. Real and tangible personal property do not include coin, currency, or property acquired in lieu of or pursuant to a foreclosure;
  19. “Regular place of business” means an office at which the financial institution carries on its business in a regular and systematic manner and which is continuously maintained, occupied, and used by employees of the financial institution;
  20. “State” means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or any foreign country;
  21. “Syndication” means an extension of credit in which two (2) or more persons fund and each person is at risk only up to a specified percentage of the total extension of credit or up to a specified dollar amount;
    1. “Taxable year” means calendar year 1996 through calendar year 2020 for purposes of the state bank franchise tax under KRS 136.505 ; and (22) (a) “Taxable year” means calendar year 1996 through calendar year 2020 for purposes of the state bank franchise tax under KRS 136.505 ; and
    2. “Taxable year” means calendar year 1996 and every calendar year thereafter for purposes of the local government franchise tax under KRS 136.575 ;
  22. “Transportation property” means vehicles and vessels capable of moving under their own power, such as aircraft, trains, water vessels, and motor vehicles, as well as any equipment or containers attached to the property, such as rolling stock, barges, or trailers;
  23. “United States obligations” means all obligations of the United States exempt from taxation under 31 U.S.C. sec. 3124(a) or exempt under the United States Constitution or any federal statute, including the obligations of any instrumentality or agency of the United States that are exempt from state or local taxation under the United States Constitution or any statute of the United States; and
  24. “Kentucky obligations” means all obligations of the Commonwealth of Kentucky, its counties, municipalities, taxing districts, and school districts, exempt from taxation under the Kentucky Revised Statutes and the Constitution of Kentucky.

It shall be presumed, subject to rebuttal, that the location from which the financial institution’s trade or business is principally managed and directed is the state of the United States or the District of Columbia to which the greatest number of employees are regularly connected or out of which they are working, irrespective of where the services of the employees are performed, as of the last day of the taxable year;

History. Enact. Acts 1996, ch. 254, § 2, effective July 15, 1996; 1998, ch. 402, § 1, effective April 7, 1998; 2002, ch. 255, § 1, effective July 15, 2002; 2005, ch. 85, § 330, effective June 20, 2005; 2019 ch. 196, § 9, effective June 27, 2019.

Compiler’s Notes.

Section 1 of Acts 1996, ch. 254 read: “This Act may be cited as the Bank Franchise and Local Deposit Tax Act.”

Legislative Research Commission Notes.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 15 (HB 354) and ch. 196, sec. 9 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 15, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 15, was not codified.

(7/12/2006). 2006 Ky. Acts ch. 247 instructs the Reviser of Statutes to adjust KRS references throughout the statutes to conform with the 2006 renumbering of the Financial Services Code, KRS Chapter 286. Such an adjustment has been made in this statute.

Research References and Practice Aids

Kentucky Law Journal.

Eifler, Kentucky Taxation of Banking Institutions (1802-1996): An Historical Overview, 90 Ky. L.J. 567 (2001-02).

136.505. Franchise tax for financial institutions for taxable years prior to January 1, 2021.

Every financial institution regularly engaged in business in this Commonwealth at any time during the taxable year as determined under KRS 136.520 shall pay an annual state franchise tax for each taxable year or portion of a taxable year prior to January 1, 2021, to be measured by its net capital as determined in KRS 136.515 and, for financial institutions with business activity that is taxable both within and without this Commonwealth, apportioned under KRS 136.525 .

History. Enact. Acts 1996, ch. 254, § 3, effective July 15, 1996; 2006 (1st Ex. Sess.), ch. 2, § 13, effective June 28, 2006; 2019 ch. 196, § 10, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 16 (HB 354) and ch. 196, sec. 10 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 16, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 16, was not codified.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

136.506. Inapplicability of KRS 136.505 after January 1, 2021 — Financial institutions subject to corporation income tax, limited liability entity tax, and applicable local government franchise taxes after January 1, 2021 — Short-year returns.

  1. Beginning January 1, 2021, the state bank franchise tax under KRS 136.505 shall no longer apply to financial institutions.
  2. Beginning January 1, 2021, all financial institutions shall be subject to the corporation income tax under KRS 141.040 and the limited liability entity tax under KRS 141.0401 . Notwithstanding KRS 141.040 and 141.0401 , any financial institution operating on a fiscal year basis shall file a short-year corporation income and limited liability entity tax return and pay any tax due thereon for the period beginning January 1, 2021, through the end of the financial institution’s normal fiscal year. The department may issue guidance regarding the filing of the short-year return.
  3. Financial institutions shall be subject to all applicable local government franchise taxes imposed under KRS 136.575 .

HISTORY: 2019 ch. 196, § 8, effective June 27, 2019.

136.510. Rate of franchise tax — Minimum tax.

  1. The franchise tax imposed by KRS 136.505 shall be at the rate of one and one-tenth percent (1.1%) of net capital as determined by KRS 136.515 after apportionment, if applicable, under KRS 136.525 .
  2. Each financial institution regularly engaged in business in this Commonwealth shall pay a minimum tax of three hundred dollars ($300) per year.

History. Enact. Acts 1996, ch. 254, § 4, effective July 15, 1996.

136.515. Net capital determination — Effect of changes in identity, form, or place of organization — Effect of combination of financial institutions.

  1. Net capital shall be determined by adding the value determined under subsection (2) of this section for the current taxable and preceding four (4) calendar years and dividing the resulting sum by five (5). If a financial institution has not been in existence for a period of five (5) calendar years, net capital shall be determined by adding together the values determined under subsection (2) of this section for the number of calendar years the financial institution has been in existence and dividing the resulting sum by the number of years the financial institution has been in existence. For purposes of this section, a partial year shall be treated as a full year.
    1. The value of net capital for each year for purposes of subsection (1) of this section shall be determined by: (2) (a) The value of net capital for each year for purposes of subsection (1) of this section shall be determined by:
      1. Adding together the book value of:
        1. Capital stock paid in;
        2. Surplus;
        3. Undivided profits and capital reserves;
        4. Net unrealized holding gains or losses on available for sale securities; and
        5. Cumulative foreign currency translation adjustments; and
      2. Deducting from the total determined under subparagraph 1. of this subsection an amount equal to the same percentage of the total as the book value of United States obligations and Kentucky obligations bears to the book value of the total assets of the financial institution.
    2. For purposes of this subsection, net capital shall include equity related to investment in subsidiaries.
    3. For purposes of this subsection, except as provided in paragraphs (d) and (e) of this subsection, the foregoing book values and deductions for United States obligations and Kentucky obligations for each year shall be determined by the reports of condition for each quarter filed in accordance with the requirements of the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or other applicable regulatory authority. Book values shall be calculated by averaging the quarterly book values as determined by the reports of condition.
    4. For any year in which a financial institution does not file four (4) quarterly reports of condition, book values and deductions for United States obligations and Kentucky obligations shall be determined by adding together the respective book values and deductions for United States obligations and Kentucky obligations as determined by each quarterly report of condition filed for the year and the respective book values and deductions for United States obligations and Kentucky obligations determined in accordance with generally accepted accounting principles as of the end of each of the remaining quarters and dividing the resulting sums by four (4).
    5. For any calendar year in which a financial institution ceases to be in existence for four (4) quarters, other than by combination with another financial institution, the book value for that year shall be determined by adding together the book values and deductions for United States obligations and Kentucky obligations for each quarter in which the financial institution was in existence and dividing the sums by four (4).
    6. In the case of a financial institution which does not file reports of condition, book values shall be determined in accordance with generally accepted accounting principles.
  2. For purposes of this section:
    1. A change in identity, form, or place of organization of one (1) financial institution shall be treated as if a single financial institution had been in existence prior to as well as after the change;
    2. The combination of two (2) or more financial institutions into one (1) shall be treated as if the constituent financial institutions had been a single financial institution in existence prior to as well as after the combination, and the book values and deductions for United States obligations and Kentucky obligations from the reports of condition of the constituent institutions shall be combined. A combination shall include any acquisition required to be accounted for by the surviving financial institution under the pooling of interest method in accordance with generally-accepted accounting principles or a statutory merger or consolidation; and
      1. The combination of one (1) or more financial institutions and one (1) or more savings and loan associations taxable under KRS 136.300 into a single financial institution shall be treated for the taxable year in which the combination occurred as if the single financial institution had been in existence prior to as well as after the combination, and the book values and deductions for United States obligations and Kentucky obligations from the reports of condition of the financial institution and the reports to the federal regulatory agency which are the equivalent of reports of condition for a savings and loan association shall be combined. (c) 1. The combination of one (1) or more financial institutions and one (1) or more savings and loan associations taxable under KRS 136.300 into a single financial institution shall be treated for the taxable year in which the combination occurred as if the single financial institution had been in existence prior to as well as after the combination, and the book values and deductions for United States obligations and Kentucky obligations from the reports of condition of the financial institution and the reports to the federal regulatory agency which are the equivalent of reports of condition for a savings and loan association shall be combined.
      2. The conversion of a savings and loan association taxable under KRS 136.300 into a financial institution shall be treated for the taxable year in which the conversion occurred as if the savings and loan association had been a financial institution prior to as well as after the conversion, and the book values and deductions for United States obligations and Kentucky obligations from the reports to the federal regulatory agency which are the equivalent of reports of condition for a savings and loan association shall be used.
      3. The savings and loan association shall not be relieved of the responsibilities of filing and paying tax under KRS 136.300 for taxable years prior to the year of any combination or conversion.
      4. Notwithstanding any other provision of KRS 136.500 to 136.575 , the financial institution resulting from a combination with or conversion of a saving and loan association shall receive a credit on the bank franchise tax return equal to the amount of tax paid under KRS 136.300 for the assessment date occurring within the taxable year during which the combination or conversion takes place for bank franchise tax purposes.

History. Enact. Acts 1996, ch. 254, § 5, effective July 15, 1996; 1998, ch. 402, § 2, effective April 7, 1998.

136.520. Conditions constituting regularly engaging in business in the Commonwealth by financial institutions.

  1. A financial institution is presumed to be regularly engaging in business in this Commonwealth if during any taxable year it obtains or solicits business with twenty (20) or more persons within this Commonwealth, or if receipts attributable to sources in this Commonwealth as would be determined pursuant to the provisions of KRS 136.530(2) equals or exceeds one hundred thousand dollars ($100,000). In determining whether a financial institution is regularly engaging in business in this Commonwealth, receipts from the following types of property, as well as those contacts with this Commonwealth reasonably and exclusively required to evaluate and complete the acquisition or disposition of the property, the servicing of the property or the income from it, the collection of income from the property, or the acquisition or liquidation of collateral relating to the property, shall be excluded:
    1. An interest in a real estate mortgage investment conduit, a real estate investment trust, or a regulated investment company;
    2. An interest in a loan-backed security representing ownership or participation in a pool of promissory notes or certificates of interest that provide for payments in relation to payments or reasonable projections of payments on the notes or certificates;
    3. An interest in a loan or other asset from which the interest is attributed to a consumer loan, a commercial loan, or a secured commercial loan, and in which the payment obligations were solicited and entered into by a person that is independent, and not acting on behalf of the owner;
    4. An interest in the right to service or collect income from a loan or other asset from which interest on the loan is attributed as a loan described in paragraph (c) of this subsection, and in which the payment obligations were solicited and entered into by a person that is independent and not acting on behalf of the owner; and
    5. Any amounts held in an escrow or trust account with respect to property described in paragraphs (a) to (d) of this subsection.
  2. Subsection (1) of this section shall be interpreted to reach to the limits permitted by the United States Constitution.

History. Enact. Acts 1996, ch. 254, § 6, effective July 15, 1996.

136.525. Apportionment of net capital for financial institutions with taxable business activity within and without the Commonwealth.

  1. A financial institution whose business activity is taxable both within and without this Commonwealth shall apportion its net capital pursuant to the provisions of this section.
  2. Net capital shall be apportioned to this Commonwealth by multiplying total net capital by the apportionment percentage. The apportionment percentage is determined by adding together the financial institution’s receipts factor as determined under the provisions of KRS 136.530 , property factor as determined under the provisions of KRS 136.535 , and payroll factor as determined under the provisions of KRS 136.540 and dividing the sum by three (3). If one (1) of the factors is missing, the two (2) remaining factors are added and the sum is divided by two (2). If two (2) of the factors are missing, the remaining factor is the apportionment percentage. A factor is missing if both its numerator and denominator are zero (0), but it is not missing merely because the numerator is zero (0).
  3. Each factor shall be calculated by the method of accounting used by the financial institution for the taxable year.
  4. If the apportionment provisions of KRS 136.500 to 136.575 do not fairly represent the extent of the financial institution’s business activity in this Commonwealth, the financial institution may petition for or the department may require, in respect to all or any part of the financial institution’s business activity, if reasonable:
    1. Separate accounting;
    2. The exclusion of any one (1) or more of the factors;
    3. The inclusion of one (1) or more additional factors which will fairly represent the financial institution’s business activity in this Commonwealth; or
    4. The employment of any other method to effectuate an equitable apportionment of the financial institution’s net capital.

History. Enact. Acts 1996, ch. 254, § 7, effective July 15, 1996; 2005, ch. 85, § 331, effective June 20, 2005.

136.530. Calculation of receipts factor.

  1. The receipts factor is a fraction, the numerator of which is the receipts of the financial institution in this Commonwealth during the taxable year as determined by subsection (2) of this section and the denominator of which is the receipts of the financial institution within and without this Commonwealth during the taxable year. Receipts shall include the following:
    1. Receipts from the lease or rental of real property owned by the financial institution;
    2. Receipts from the lease or rental of tangible personal property owned by the financial institution;
    3. Interest and fees or penalties in the nature of interest from loans secured by real property;
    4. Interest and fees or penalties in the nature of interest from loans not secured by real property;
    5. Net gains from the sale of loans. Net gains from the sale of loans includes income recorded under the coupon stripping  rules of Section 1286 of the Internal Revenue Code;
    6. Interest and fees or penalties in the nature of interest from credit card receivables and receipts from fees charged to card holders, such as annual fees;
    7. Net gains, but not less than zero (0), from the sale of credit card receivables;
    8. All credit card issuer’s reimbursement fees;
    9. Receipts from merchant discount. Receipts from  merchant discount shall be computed net of any cardholder charge backs,  but shall not be reduced by any interchange transaction fees or by  any issuer’s reimbursement fees paid to another for charges  made by its card holders;
    10. Loan servicing fees derived from loans secured by real property;
    11. Loan servicing fees derived from loans not secured by real property;
    12. Interest, dividends, net gains, but not less than zero (0), and other income from investment assets and activities and from trading assets and activities. Investment assets and activities and trading assets and activities include but are not limited to investment securities, trading account assets, federal funds, securities purchased and sold under agreements to resell or repurchase, options, futures contracts, forward contracts, notional principal contracts such as swaps, equities, and foreign currency transactions. The receipts factor shall include the following amounts:
      1. The amount by which interest from federal funds sold and securities purchased under resale agreements exceeds interest expense on federal funds purchased and securities sold under repurchase agreements; and
      2. The amount by which interest, dividends, gains, and other income from trading assets and activities, including but not limited to assets and activities in the matched book, in the arbitrage book, and foreign currency transactions, exceed amounts paid in lieu of interest, amounts paid in lieu of dividends, and losses from these assets and activities;
    13. All receipts derived from sales that would be included in the factor established by KRS 141.901 ; and
    14. Receipts from services not otherwise specifically listed.
  2. A determination of whether receipts should be included in the numerator of the fraction shall be made as follows:
    1. Receipts from the lease or rental of real property owned by the financial institution shall be included in the numerator if the property is located within this Commonwealth or receipts from the sublease of real property if the property is located within this Commonwealth.
      1. Except as described in subparagraph 2. of this paragraph, receipts from the lease or rental of tangible personal property owned by the financial institution shall be included in the numerator if the property is located within this Commonwealth when it is first placed in service by the lessee. (b) 1. Except as described in subparagraph 2. of this paragraph, receipts from the lease or rental of tangible personal property owned by the financial institution shall be included in the numerator if the property is located within this Commonwealth when it is first placed in service by the lessee.
      2. Receipts from the lease or rental of transportation property owned by the financial institution are included in the numerator of the receipts factor to the extent that the property is used in this Commonwealth. The extent an aircraft will be deemed to be used in this Commonwealth and the amount of receipts that is to be included in the numerator of this Commonwealth’s receipts factor is determined by multiplying all the receipts from the lease or rental of the aircraft by a fraction, the numerator of which is the number of landings of the aircraft in this Commonwealth and the denominator of which is the total number of landings of the aircraft. If the extent of the use of any transportation property within this Commonwealth cannot be determined, then the property shall be deemed to be used wholly in the state in which the property has its principal base of operations. A motor vehicle shall be deemed to be used wholly in the state in which it is registered.
      1. Interest and fees or penalties in the nature of interest from loans secured by real property shall be included in the numerator if the property is located within this Commonwealth. If the property is located both within this Commonwealth and one (1) or more other states, receipts shall be included if more than fifty percent (50%) of the fair market value of the real property is located within this Commonwealth. If more than fifty percent (50%) of the fair market value of the real property is not located within any one (1) state, then the receipts described in this subparagraph shall be included in the numerator if the borrower is located in this Commonwealth. (c) 1. Interest and fees or penalties in the nature of interest from loans secured by real property shall be included in the numerator if the property is located within this Commonwealth. If the property is located both within this Commonwealth and one (1) or more other states, receipts shall be included if more than fifty percent (50%) of the fair market value of the real property is located within this Commonwealth. If more than fifty percent (50%) of the fair market value of the real property is not located within any one (1) state, then the receipts described in this subparagraph shall be included in the numerator if the borrower is located in this Commonwealth.
      2. The determination of whether the real property securing a loan is located within this Commonwealth shall be made as of the time the original agreement was made, and any subsequent substitutions of collateral shall be disregarded.
    2. Interest and fees or penalties in the nature of interest from loans not secured by real property shall be included in the numerator if the borrower is located in this Commonwealth.
    3. Net gains from the sale of loans shall be included in the numerator as provided in subparagraphs 1. and 2. of this paragraph. Net gains from the sale of loans includes income recorded under the coupon stripping rules of Section 1286 of the Internal Revenue Code.
      1. The amount of net gains, but not less than zero (0), from the sale of loans secured by real property included in the numerator is determined by multiplying net gains by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (c) of this subsection and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property.
      2. The amount of net gains, but not less than zero (0), from the sale of loans not secured by real property included in the numerator is determined by multiplying net gains by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (d) of this subsection and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans not secured by real property.
    4. Interest and fees or penalties in the nature of interest from credit card receivables and receipts from fees charged to card holders, such as annual fees, shall be included in the numerator if the billing address of the card holder is in this Commonwealth.
    5. Net gains, but not less than zero (0), from the sale of credit card receivables to be included in the numerator shall be determined by multiplying the amount established in paragraph (g) of subsection (1) of this section by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (f) of this subsection and the denominator of which is the financial institution’s total amount of interest and fees or penalties in the nature of interest from credit card receivables and fees charged to card holders.
    6. Credit card issuer’s reimbursement fees to be included in the numerator shall be determined by multiplying the amount established in paragraph (h) of subsection (1) of this section by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (f) of this subsection and the denominator of which is the financial institution’s total amount of interest and fees or penalties in the nature of interest from credit card receivables and fees charged to card holders.
    7. Receipts from merchant discount shall be included in the numerator if the commercial domicile of the merchant is in this Commonwealth. Receipts from merchant discount shall be computed net of any cardholder charge backs but shall not be reduced by any interchange transaction fees or by any issuer’s reimbursement fees paid to another for charges made by its card holders.
      1. a. Loan servicing fees derived from loans secured by real property to be included in the numerator shall be determined by multiplying the amount determined under paragraph (j) of subsection (1) of this section by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (c) of this subsection and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property. (j) 1. a. Loan servicing fees derived from loans secured by real property to be included in the numerator shall be determined by multiplying the amount determined under paragraph (j) of subsection (1) of this section by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (c) of this subsection and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans secured by real property.
      2. In circumstances in which the financial institution receives loan servicing fees for servicing either the secured or the unsecured loans of another, the numerator of the receipts factor shall include the fees if the borrower is located in this Commonwealth.
      b. Loan servicing fees derived from loans not secured by real property to be included in the numerator shall be determined by multiplying the amount determined under paragraph (k) of subsection (1) of this section by a fraction the numerator of which is the amount included in the numerator of the receipts factor pursuant to paragraph (d) of this subsection and the denominator of which is the total amount of interest and fees or penalties in the nature of interest from loans not secured by real property.
    8. Receipts from services not otherwise apportioned under this section shall be included in the numerator if the service is performed in this Commonwealth. If the service is performed both within and without this Commonwealth, the numerator of the receipts factor includes receipts from services not otherwise apportioned under this section, if a greater proportion of the income-producing activity is performed in this Commonwealth based on cost of performance.
      1. The numerator of the receipts factor includes interest, dividends, net gains, but not less than zero (0), and other income from investment assets and activities and from trading assets and activities described in paragraph (l) of subsection (1) of this section that are attributable to this Commonwealth. (l) 1. The numerator of the receipts factor includes interest, dividends, net gains, but not less than zero (0), and other income from investment assets and activities and from trading assets and activities described in paragraph (l) of subsection (1) of this section that are attributable to this Commonwealth.
        1. The amount of interest, dividends, net gains, but not less than zero (0), and other income from investment assets and activities in the investment account to be attributed to this Commonwealth and included in the numerator is determined by multiplying all income from the assets and activities by a fraction the numerator of which is the average value of the assets that are properly assigned to a regular place of business of the financial institution within this Commonwealth and the denominator of which is the average value of all the assets.
        2. The amount of interest from federal funds sold and purchased and from securities purchased under resale agreements and securities sold under repurchase agreements attributable to this Commonwealth and included in the numerator is determined by multiplying the amount described in subparagraph 1. of paragraph (l) of subsection (1) of this section from funds and securities by a fraction the numerator of which is the average value of federal funds sold and securities purchased under agreements to resell which are properly assigned to a regular place of business of the financial institution within this Commonwealth and the denominator of which is the average value of all funds and securities.
        3. The amount of interest, dividends, gains, and other income from trading assets and activities, including but not limited to assets and activities in the matched book, in the arbitrage book, and foreign currency transactions, but excluding amounts described in subdivisions a. and b. of this subparagraph, attributable to this Commonwealth and included in the numerator is determined by multiplying the amount described in subparagraph 2. of paragraph (l) of subsection (1) of this section by a fraction the numerator of which is the average value of trading assets which are properly assigned to a regular place of business of the financial institution within this Commonwealth and the denominator of which is the average value of all assets.
        4. For purposes of this subparagraph, average value shall be determined using the rules for determining the average value of tangible personal property set forth in KRS 136.535(3) and (4).
      2. In lieu of using the method set forth in subparagraph 1. of this paragraph, the financial institution may elect, or the department may require in order to fairly represent the business activity of the financial institution in this Commonwealth, the use of the method set forth in this subparagraph.
        1. The amount of interest, dividends, net gains, but not less than zero (0), and other income from investment assets and activities in the investment account to be attributed to this Commonwealth and included in the numerator is determined by multiplying all income from assets and activities by a fraction the numerator of which is the gross income from assets and activities which are properly assigned to a regular place of business of the financial institution within this Commonwealth and the denominator of which is the gross income from all assets and activities.
        2. The amount of interest from federal funds sold and purchased and from securities purchased under resale agreements and securities sold under repurchase agreements attributable to this Commonwealth and included in the numerator is determined by multiplying the amount described in subparagraph 1. of paragraph (l) of subsection (1) of this section from funds and securities by a fraction the numerator of which is the gross income from funds and securities which are properly assigned to a regular place of business of the financial institution within this Commonwealth and the denominator of which is the gross income from all funds and securities.
        3. The amount of interest, dividends, gains, and other income from trading assets and activities, including but not limited to assets and activities in the matched book, in the arbitrage book and foreign currency transactions, but excluding amounts described in subdivisions a. and b. of this subparagraph, attributable to this Commonwealth and included in the numerator is determined by multiplying the amount described in subparagraph 2. of paragraph (l) of subsection (1) of this section by a fraction the numerator of which is the gross income from trading assets and activities which are properly assigned to a regular place of business of the financial institution within this Commonwealth and the denominator of which is the gross income from all assets and activities.
      3. If the financial institution elects or is required by the department to use the method set forth in subparagraph 2. of this paragraph, it shall use this method on all subsequent returns unless the financial institution receives prior permission from the department to use, or the department requires, a different method.
      4. The financial institution shall have the burden of proving that an investment asset or activity or trading asset or activity was properly assigned to a regular place of business outside this Commonwealth by demonstrating that the day-to-day decisions regarding the asset or activity occurred at a regular place of business outside this Commonwealth. Where the day-to-day decisions regarding an investment asset or activity or trading asset or activity occur at more than one (1) regular place of business and one (1) regular place of business is in this Commonwealth and one (1) regular place of business is outside this Commonwealth, the asset or activity shall be considered to be located at the regular place of business of the financial institution where the investment or trading policies or guidelines with respect to the asset or activity are established. Unless the financial institution demonstrates to the contrary, the policies and guidelines shall be presumed to be established at the commercial domicile of the financial institution.
    9. The numerator of the receipts factor includes all other receipts derived from sales as determined in KRS 141.901 .
      1. All receipts that would be assigned under this section to a state in which the financial institution is not taxable shall be included in the numerator of the receipts factor, if the financial institution’s commercial domicile is in this Commonwealth. (n) 1. All receipts that would be assigned under this section to a state in which the financial institution is not taxable shall be included in the numerator of the receipts factor, if the financial institution’s commercial domicile is in this Commonwealth.
      2. For purposes of subparagraph 1. of this paragraph, “taxable” means either:
        1. That a financial institution is subject in another state to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, a corporate stock tax including a bank shares tax, a single business tax, an earned surplus tax, or any tax which is imposed upon or measured by net income; or
        2. That another state has statutory authority to subject the financial institution to any of the taxes in subdivision a. of this subparagraph, whether in fact the state does or does not impose the tax.

HISTORY: Enact. Acts 1996, ch. 254, § 8, effective July 15, 1996; 2005, ch. 85, § 332, effective June 20, 2005; 2005, ch. 168, § 33, effective March 18, 2005; 2018 ch. 171, § 74, effective April 14, 2018; 2018 ch. 207, § 74, effective April 27, 2018.

Compiler’s Notes.

Section 1286 of the Internal Revenue Code referred to in subdivisions (1)(e) and (2)(e) of this section is compiled as 26 USCS § 1286.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(7/15/96). In codifying subsections (1)(m) and (2)(m) of this statute, references to Section 28 of 1996 Ky. Acts ch. 254 (KRS 134.380 ) have been shown instead as references to Section 31 of that Act (KRS 136.070 ). Without changing these references or the text of the material referred to, House Floor Amendment 1 to House Bill 416 (which became Acts ch. 254) added three new sections to the bill and changed the numbering of the original Section 28 (KRS 136.070 ) to Section 31 but did not make the necessary corresponding adjustment to these internal references. This action has been taken under KRS 7.136(1)(h).

136.535. Calculation of property factor.

  1. As used in this section:
    1. “Administration” means the process of managing an account. The process includes bookkeeping, collecting the payments, corresponding with the customer, reporting to management regarding the status of the agreement and proceeding against the borrower or the security interest if the borrower is in default. The activity is located at the regular place of business that oversees this activity;
    2. “Approval” means the procedure whereby employees or the board of directors of the financial institution make the final determination whether to enter into the agreement. The activity is located at the regular place of business which the financial institution’s employees making the final determination are regularly connected with or working out of, regardless of where the services of the employees were actually performed. If the board of directors makes the final determination, the activity is located at the commercial domicile of the financial institution;
    3. “Investigation” means the procedure whereby employees of the financial institution determine the credit worthiness of the customer as well as the degree of risk involved in making a particular agreement. The activity is located at the regular place of business which the financial institution’s employees making the investigation are regularly connected with or working out of, regardless of where the services of the employees were actually performed;
    4. “Negotiation” means the procedure whereby employees of the financial institution and its customer determine the terms of the agreement, including the amount, duration, interest rate, frequency of repayment, currency denomination, and security required. The activity is located at the regular place of business which the financial institution’s employees are regularly connected with or out of, regardless of where the services of the employees were actually performed;
    5. “Participation” means an extension of credit in which an undivided ownership interest is held on a pro rata basis in a single loan or pool of loans and related collateral. In a loan participation, the credit originator initially makes the loan and then subsequently resells all or a portion of it to other lenders. The participation may or may not be known to the borrower; and
    6. “Solicitation” occurs when:
      1. An employee of the financial institution initiates contact with the customer. The activity is located at the regular place of business which the financial institution’s employee making the contact is regularly connected with or working out of, regardless of where the services of the employee were actually performed; or
      2. The customer initiates the contact with the financial institution. If the customer’s initial contact was not at a regular place of business of the financial institution, the regular place of business, if any, where the solicitation occurred is determined by the facts in each case.
  2. The property factor is a fraction, the numerator of which is the average value of real property and tangible personal property rented to the financial institution that is located or used within this Commonwealth during the taxable year, the average value of the financial institution’s real and tangible personal property owned that is located or used within this Commonwealth during the taxable year, and the average value of the financial institution’s loans and credit card receivables that are located within this Commonwealth during the taxable year, and the denominator of which is the average value of all such property located or used within and without this Commonwealth during the taxable year. Average value of property is determined under subsection (4) of this section.
    1. The value of real property and tangible personal property owned by the financial institution is the original cost or other basis of property for federal income tax purposes without regard to depletion, depreciation, or amortization. (3) (a) The value of real property and tangible personal property owned by the financial institution is the original cost or other basis of property for federal income tax purposes without regard to depletion, depreciation, or amortization.
    2. Loans are valued at their outstanding principal balance, without regard to any reserve for bad debts. If a loan is charged off in whole or in part for federal income tax purposes, the portion of the loan charged off is not outstanding. A specifically-allocated reserve established pursuant to regulatory or financial accounting guidelines which is treated as charged off for federal income tax purposes shall be treated as charged off for purposes of this section.
    3. Credit card receivables are valued at their outstanding principal balance, without regard to any reserve for bad debts. If a credit card receivable is charged off in whole or in part for federal income tax purposes, the portion of the receivable charged off is not outstanding.
  3. The average value of property owned by the financial institution is computed on an annual basis by adding the value of the property on the first day of the taxable year and the value on the last day of the taxable year and dividing the sum by two (2). If averaging on this basis does not properly reflect average value, the department may require averaging on a more frequent basis. The financial institution may request permission from the department to average on a more frequent basis. When averaging on a more frequent basis is authorized by the department, the same method of valuation shall be used consistently by the financial institution with respect to property within and without this Commonwealth and on all subsequent returns unless the financial institution receives prior permission from the department or the department requires a different method of determining average value.
    1. The average value of real property and tangible personal property that the financial institution has rented from another and which is not treated as property owned by the financial institution for federal income tax purposes shall be determined annually by multiplying the gross rents payable during the taxable year by eight (8). (5) (a) The average value of real property and tangible personal property that the financial institution has rented from another and which is not treated as property owned by the financial institution for federal income tax purposes shall be determined annually by multiplying the gross rents payable during the taxable year by eight (8).
    2. Where the use of the general method described in this subsection results in inaccurate valuations of rented property, any other method which properly reflects the value may be adopted by the department or by the financial institution when approved in writing by the department. Once approved, the alternative method of valuation shall be used on all subsequent returns unless the financial institution receives prior approval from the department or the department requires a different method of valuation.
    1. Except as described in paragraph (b) of this subsection, real property and tangible personal property owned by or rented to the financial institution is considered to be located within this Commonwealth if it is physically located, situated, or used within this Commonwealth. (6) (a) Except as described in paragraph (b) of this subsection, real property and tangible personal property owned by or rented to the financial institution is considered to be located within this Commonwealth if it is physically located, situated, or used within this Commonwealth.
    2. Transportation property is included in the numerator of the property factor to the extent that the property is used in this Commonwealth. The extent to which an aircraft shall be deemed to be used in this Commonwealth and the amount of value that is to be included in the numerator of this Commonwealth’s property factor is determined by multiplying the average value of the aircraft by a fraction the numerator of which is the number of landings of the aircraft in this Commonwealth and the denominator of which is the total number of landings of the aircraft everywhere. If the extent of the use of any transportation property within this Commonwealth cannot be determined, then the property shall be deemed to be used wholly in the state in which the property has its principal base of operations. A motor vehicle shall be deemed to be used wholly in the state in which it is registered.
      1. A loan is considered to be located within this Commonwealth if it is properly assigned to a regular place of business of the financial institution within this Commonwealth. (7) (a) 1. A loan is considered to be located within this Commonwealth if it is properly assigned to a regular place of business of the financial institution within this Commonwealth.
      2. A loan is properly assigned to the regular place of business with which it has a preponderance of substantive contacts. A loan assigned by the financial institution to a regular place of business without the Commonwealth shall be presumed to have been properly assigned if:
        1. The financial institution has assigned, in the regular course of its business, the loan on its records to a regular place of business consistent with federal or state regulatory requirements;
        2. The assignment on its records is based upon substantive contacts of the loan to the regular place of business; and
        3. The financial institution uses the records reflecting assignment of loans for the filing of all state and local tax returns for which an assignment of loans to a regular place of business is required.
      3. The presumption of proper assignment of a loan provided in subparagraph 2. of this paragraph may be rebutted upon a showing by the department, supported by a preponderance of the evidence, that the preponderance of substantive contacts regarding the loan did not occur at the regular place of business to which it was assigned on the financial institution’s records. When the presumption has been rebutted, the loan shall then be located within this Commonwealth if the financial institution had a regular place of business within this Commonwealth at the time the loan was made and the financial institution fails to show, by a preponderance of the evidence, that the preponderance of substantive contacts regarding the loan occurred outside this Commonwealth.
    1. For financial institutions with commercial domicile in this Commonwealth as defined in KRS 136.500 , it shall be presumed, subject to rebuttal by the financial institution on a showing supported by the preponderance of evidence, that the preponderance of substantive contacts regarding the loan occurred within this Commonwealth.
    2. To determine the state in which the preponderance of substantive contacts relating to a loan have occurred, the facts and circumstances regarding the loan at issue shall be reviewed on a case-by-case basis, and consideration shall be given to activities such as the solicitation, investigation, negotiation, approval, and administration of the loan as defined in subsection (1) of this section.
  4. Credit card receivables shall be treated as loans and shall be subject to the provisions of subsection (7) of this section.
  5. A loan that has been properly assigned to a state shall, absent any change of material fact, remain assigned to that state for the length of the original term of the loan. Thereafter, the loan may be properly assigned to another state if that loan has a preponderance of substantive contacts to a regular place of business there.

History. Enact. Acts 1996, ch. 254, § 9, effective July 15, 1996; 2005, ch. 85, § 333, effective June 20, 2005.

136.540. Calculation of payroll factor.

  1. The payroll factor is a fraction the numerator of which is the total amount paid in this Commonwealth during the taxable year by the financial institution for compensation and the denominator of which is the total compensation paid both within and without this Commonwealth during the taxable year.
  2. The compensation of any employee for services or activities which are not connected with business activities and payments made to any independent contractor or any other person not properly classifiable as an employee shall be excluded from both the numerator and denominator of the factor.
  3. Compensation is paid in this Commonwealth if any one of the following tests is met:
    1. The employee’s services are performed entirely within this Commonwealth.
    2. The employee’s services are performed both within and without the Commonwealth, but the service performed without the Commonwealth is incidental to the employee’s service within the Commonwealth. The term “incidental” means any service which is temporary or transitory in nature, or which is rendered in connection with an isolated transaction.
    3. If the employee’s services are performed both within and without this Commonwealth, the employee’s compensation will be attributed to this Commonwealth if:
      1. The employee’s principal base of operations is within this Commonwealth;
      2. There is no principal base of operations in any state in which some part of the services are performed, but the place from which the services are directed or controlled is in this Commonwealth; or
      3. The principal base of operations and the place from which the services are directed or controlled are not in any state in which some part of the service is performed but the employee’s residence is in this Commonwealth.

History. Enact. Acts 1996, ch. 254, § 10, effective July 15, 1996.

136.545. Tax returns — Extension of time for filing.

  1. On or before the March 15 following each taxable year, a return for the preceding taxable year shall be filed with the department in the form and manner prescribed by the department, together with payment of any tax due.
  2. A return shall be filed by each financial institution.
  3. The return shall show the amount of taxes for the period covered by the return and other information necessary for the proper administration of KRS 136.500 to 136.575 .
  4. The department shall, upon written request received on or prior to the due date of the return and tax, grant an automatic extension of up to ninety (90) days for the filing of returns. An extension of time to file a return does not extend the payment of tax due, which shall be estimated by the financial institution and paid on or before the date specified in subsection (1) of this section.
  5. If the time for filing a return is extended, the financial institution shall pay, as part of the tax, an amount equal to the tax interest rate as defined in KRS 131.010(6) on the tax shown due on the return but not previously paid, from the time the tax was due until the return is actually filed with the department.

History. Enact. Acts 1996, ch. 254, § 11, effective July 15, 1996; 2005, ch. 85, § 334, effective June 20, 2005.

136.550. Examination and audit of tax returns — Assessment of excess.

  1. As soon as practicable after each return is received, the department shall examine and audit it. If the amount of tax computed by the department is greater than the amount returned by the financial institution, the excess shall be assessed by the department within four (4) years from the date prescribed by law for the filing of a return including an extension of time for filing, except as provided in this subsection. A notice of the assessment shall be mailed to the financial institution.
    1. In the case of a failure to file a return or of a fraudulent return, the excess may be assessed at any time.
    2. In the case of a return wherein a financial institution understates its net capital or omits from net capital an amount properly includible therein or both, which understatement or omission or both is in excess of twenty-five percent (25%) of the amount of net capital stated in the return, the excess may be assessed at any time within six (6) years after the return was filed.
  2. For the purpose of subsection (1) of this section, a return filed before the last day prescribed by law for the filing shall be considered as filed on the last day. The times provided for in subsection (1) of this section may be extended by agreement between the financial institution and the department.

History. Enact. Acts 1996, ch. 254, § 12, effective July 15, 1996; 2005, ch. 85, § 335, effective June 20, 2005.

136.555. Refunds or credits for overpayment of tax.

  1. Refunds or credits for overpayments of the tax imposed by KRS 136.505 shall be obtained in accordance with KRS 134.580 .
  2. Refund or credits for overpayments of the tax imposed by KRS 136.575 shall be obtained in accordance with KRS 134.590 .

HISTORY: Enact. Acts 1996, ch. 254, § 13, effective July 15, 1996; 2015 ch. 67, § 7, effective June 24, 2015.

136.560. Recordkeeping procedures and retention.

  1. Every financial institution shall keep records, receipts, invoices, and other pertinent papers in the form as the department may require.
  2. Every financial institution that files the returns required under KRS 136.545 shall keep records for not less than six (6) years from the making of records unless the department in writing authorizes their destruction at an earlier date.

History. Enact. Acts 1996, ch. 254, § 14, effective July 15, 1996; 2005, ch. 85, § 336, effective June 20, 2005.

136.565. Liability of corporate officers for taxes.

Notwithstanding any other provisions of KRS 136.500 to 136.575 , the president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any financial institution subject to the provisions of KRS 136.500 to 136.575 shall be personally and individually liable jointly and severally, for the taxes under KRS 136.500 to 136.575 in the event that the financial institution is unable to make payment. Neither the corporate dissolution or withdrawal of the financial institution from the Commonwealth nor the cessation of holding any corporate office shall discharge the liability imposed by this section. The personal and individual liability shall apply to each and every person holding a corporate office at the time the taxes become or became due. No person will be personally and individually liable pursuant to this section if that person did not have authority in the management of the business or financial affairs of the financial institution at the time the taxes imposed by KRS 136.500 to 136.575 become or became due. “Taxes” as used in this section includes interest accrued at the rate provided by KRS 131.010(6) and all applicable penalties and fees imposed under the provisions of KRS 136.500 to 136.575 and KRS 131.180 , 131.440 , and 131.990 .

History. Enact. Acts 1996, ch. 254, § 15, effective July 15, 1996.

136.570. Penalties — Limitation on administrative or court proceedings by delinquent financial institutions.

  1. Penalties shall be assessed in accordance with KRS 131.180 .
  2. Any financial institution subject to the annual franchise tax imposed by KRS 136.505 that fails to file a return as required by KRS 136.545 or that fails to pay the tax as listed on the return shall not maintain an action, suit, or proceeding in any court or before any agency in this Commonwealth or enforce in any way any obligation of any debts until the return is filed and the tax listed on the return is paid.

History. Enact. Acts 1996, ch. 254, § 16, effective July 15, 1996.

136.575. Local government franchise taxes — Filing of report of deposits — Tax rate.

  1. As used in this section:
    1. “Deposits” means all demand and time deposits, excluding deposits of the United States government, state and political subdivisions, other financial institutions, public libraries, educational institutions, religious institutions, charitable institutions, and certified and officers’ checks; and
    2. “Financial institution” means:
      1. A national bank organized as a body corporate and existing or in the process of organizing as a national bank association pursuant to the provisions of the National Bank Act, 12 U.S.C. secs. 21 et seq., in effect on December 31, 1997, exclusive of any amendments made subsequent to that date;
      2. Any bank or trust company incorporated or organized under the laws of any state, except a banker’s bank organized under KRS 286.3-135 ;
      3. Any corporation organized under the provisions of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any corporation organized after December 31, 1997, that meets the requirements of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997; or
      4. Any agency or branch of a foreign depository as defined in 12 U.S.C. sec. 3101 , in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any agency or branch of a foreign depository established after December 31, 1997, that meets the requirements of 12 U.S.C. sec. 3101 in effect on December 31, 1997.
  2. Counties, cities, and urban-county governments may impose a franchise tax on financial institutions measured by the deposits in the institutions located within the jurisdiction of the county, city, or urban-county government at a rate not to exceed twenty-five thousandths of one percent (0.025%) of the deposits if imposed by counties and cities and at a rate not to exceed fifty thousandths of one percent (0.050%) of the deposits if imposed by urban-county governments. The amount and location of deposits in the financial institutions shall be determined by the method used for filing the summary of deposits report with the Federal Deposit Insurance Corporation. The accounting method used to allocate deposits for completion of the summary of deposits shall be the same as has been utilized in prior periods. Any deviation from prior accounting methods may only be adopted with the permission of the department.
  3. By August 15, 1997, and annually thereafter, each financial institution shall file with the department, on a form prescribed by the department, a report of all deposits located within this Commonwealth as of the preceding June 30, along with a copy of the most recent summary of deposits filed with the Federal Deposit Insurance Corporation. The department shall review the report and certify to the local jurisdictions that have enacted the franchise tax by October 1 of each year the amount of deposits within the jurisdiction and amount of the tax due. The local taxing authority shall issue bills to the financial institution by December 1 and require payment, with a two percent (2%) discount by December 31, or without discount by January 31 of the next year.
  4. The local jurisdiction shall notify the department of the tax rate imposed upon the enactment of the tax. The local jurisdiction shall also notify the department of any subsequent rate changes.
  5. The tax allowed by this section shall be in lieu of all city, county, and local taxes, except the real estate transfer tax levied in KRS Chapter 142, real property and tangible personal property taxes levied in KRS Chapter 132, and taxes upon users of utility services.

History. Enact. Acts 1996, ch. 254, § 17, effective July 15, 1996; 2005, ch. 85, § 337, effective June 20, 2005; 2019 ch. 196, § 11, effective June 27, 2019.

Multichannel Video Programming and Communications Services Tax

136.600. Purpose of KRS 136.600 to 136.660 and 132.825.

The General Assembly hereby finds that the enactment of the tax and distribution system created by KRS 132.825 and 136.600 to 136.660 :

  1. Addresses an important state interest in providing a fair, efficient, and uniform method for taxing communications services sold in this Commonwealth;
  2. Overcomes limitations placed upon the taxation of communications service by federal legislation that has resulted in inequities and unfairness among providers and consumers of similar services in the Commonwealth;
  3. Simplifies an existing system that includes a myriad of levies, fees, and rates imposed at all levels of government, making it easier for communications providers to understand and comply with the provisions of the law;
  4. Provides enough flexibility to address future changes brought about by industry deregulation, convergence of service offerings, and continued technological advances in communications; and
  5. Enhances administrative efficiency for communications service providers, the state, and local governments by drastically reducing the number of returns that must be filed and processed on an annual basis.

History. Enact. Acts 2005, ch. 168, § 88, effective January 1, 2006.

136.602. Definitions for KRS 136.600 to 136.660.

As used in KRS 136.600 to 136.660 :

  1. “Cable service” means the provision of video, audio, or other programming service to purchasers, and the purchaser interaction, if any, required for the selection or use of the video or other programming service, regardless of whether the programming is transmitted over facilities owned or operated by the provider or by one (1) or more other communications service providers. Included in this definition are basic, extended, and premium service, pay-per-view service, digital or other music services, and other similar services;
  2. “Communications service” means the provision, transmission, conveyance, or routing, for consideration, of voice, data, video, or any other information signals of the purchaser’s choosing to a point or between or among points specified by the purchaser, by or through any electronic, radio, light, fiber-optic, or similar medium or method now in existence or later devised.
    1. “Communications service” includes but is not limited to:
      1. Local and long-distance telephone services;
      2. Telegraph and teletypewriter services;
      3. Prepaid calling services, and postpaid calling services;
      4. Private communications services involving a direct channel specifically dedicated to a customer’s use between specific points;
      5. Channel services involving a path of communications between two (2) or more points;
      6. Data transport services involving the movement of encoded information between points by means of any electronic, radio, or other medium or method;
      7. Caller ID services, ring tones, voice mail and other electronic messaging services;
      8. Mobile telecommunications service as defined in 4 U.S.C. sec. 124(7) ; and
      9. Voice over Internet Protocol (VOIP);
    2. “Communications services” does not include information services or multichannel video programming service;
  3. “Department” means the Department of Revenue;
  4. “End user” means the person who utilized the multichannel video programming service. In the case of an entity, “end user” means the individual who used the service on behalf of the entity;
  5. “Engaged in business” means:
    1. Having any employee, representative, agent, salesman, canvasser, or solicitor operating in this state, under the authority of the provider, its subsidiary, or related entity, for the purpose of selling, delivering, taking orders, or performing any activities that help establish or maintain a marketplace for the provider;
    2. Maintaining, occupying, or using permanently or temporarily, directly or indirectly, or through a subsidiary or any other related entity, agent or representative, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business;
    3. Having real or tangible personal property in this state;
    4. Providing communications service by or through a customer’s facilities located in this state;
    5. Soliciting orders from residents of this state on a continuous, regular, or systematic basis in which the solicitation of the order, placement of the order by the customer or payment of the order utilizes the services of any financial institution, communications system, radio or television station, cable service, direct broadcast satellite or wireless cable service, print media, or other facility or service located in this state; or
    6. Soliciting orders from residents of this state on a continuous regular, systematic basis if the provider benefits from an agent or representative operating in this state under the authority of the provider to repair or service tangible personal property sold by the retailer;
  6. “Gross revenues” means all amounts received in money, credits, property, or other money’s worth in any form, by a provider for furnishing multichannel video programming service or communications service in this state excluding amounts received from:
    1. Charges for Internet access as defined in 47 U.S.C. sec. 151 ; and
    2. Any excise tax, sales tax, or similar tax, fee, or assessment levied by the United States or any state or local political subdivision upon the purchase, sale, use, or other consumption of communications services or multichannel video programming services that is permitted or required to be added to the sales price of the communications service or multichannel video programming service. This exclusion does not include any amount that the provider has retained as a reimbursement for collecting and remitting the tax to the appropriate taxing jurisdiction in a timely manner;
  7. “In this state” means within the exterior limits of the Commonwealth of Kentucky and includes all territory within these limits owned by or ceded to the United States of America;
  8. “Multichannel video programming service” means live, scheduled, or on-demand programming provided by or generally considered comparable to or in competition with programming provided by a television broadcast station and shall include but not be limited to:
    1. Cable service;
    2. Satellite broadcast and wireless cable service;
    3. Internet protocol television provided through wireline facilities without regard to delivery technology; and
    4. Video streaming services;
  9. “Person” means and includes any individual, firm, corporation, joint venture, association, social club, fraternal organization, general partnership, limited partnership, limited liability partnership, limited liability company, nonprofit entity, estate, trust, business trust, receiver, trustee, syndicate, cooperative, assignee, governmental unit or agency, or any other group or combination acting as a unit;
  10. “Place of primary use” means the street address where the end user’s use of the multichannel video programming service primarily occurs;
  11. “Political subdivision” means a city, county, urban-county government, consolidated local government, or charter county government;
  12. “Provider” means any person receiving gross revenues for the provision of multichannel video programming service or communications service in this state;
  13. “Purchaser” means the person paying for multichannel video programming service;
  14. “Resale” means the purchase of a multichannel video programming service by a provider required to collect the tax levied by KRS 136.604 for sale, or incorporation into a multichannel video programming service for sale, including but not limited to:
    1. Charges paid by multichannel video programming service providers for transmission of video or other programming by another provider over facilities owned or operated by the other provider; and
    2. Charges for use of facilities for providing or receiving multichannel video programming services;
  15. “Retail purchase” means any purchase of a multichannel video programming service for any purpose other than resale;
  16. “Ring tones” means digitized sound files that are downloaded onto a device and that may be used to alert the customer with respect to a communication;
  17. “Sale” means the furnishing of a multichannel video programming service for consideration;
    1. “Sales price” means the total amount billed by or on behalf of a provider for the sale of multichannel video programming services in this state valued in money, whether paid in money or otherwise, without any deduction on account of the following: (18) (a) “Sales price” means the total amount billed by or on behalf of a provider for the sale of multichannel video programming services in this state valued in money, whether paid in money or otherwise, without any deduction on account of the following:
      1. Any charge attributable to the connection, movement, change, or termination of a multichannel video programming service; or
      2. Any charge for detail billing;
    2. “Sales price” does not include any of the following:
      1. Charges for installation, reinstallation, or maintenance of wiring or equipment on a customer’s premises;
      2. Charges for the sale or rental of tangible personal property;
      3. Charges for billing and collection services provided to another multichannel video programming service provider;
      4. Bad check charges;
      5. Late payment charges;
      6. Any excise tax, sales tax, or similar tax, fee, or assessment levied by the United States or any state or local political subdivision, upon the purchase, sale, use, or consumption of any multichannel video programming service, that is permitted or required to be added to the sales price of the multichannel video programming service; or
      7. Internet access as defined in 47 U.S.C. sec. 151 ;
  18. “Satellite broadcast and wireless cable service” means point-to-point or point-to-multipoint distribution services that include but are not limited to direct broadcast satellite service and multichannel multipoint distribution services, with programming or voice transmitted or broadcast by satellite, microwave, or any other equipment directly to the purchaser. Included in this definition are basic, extended, and premium service, pay-per-view service, digital or other music services, two (2) way service, and other similar services;
  19. “School district” means a school district as defined in KRS 160.010 and 160.020 ;
  20. “Special district” means a special district as defined in KRS 65.005(2)(a) that currently levies on any provider or its customers the public service corporation property tax under KRS 136.120 ; and
  21. “Video streaming services” means programming that streams live events, movies, syndicated and television programming, or other audio-visual content over the Internet for viewing on a television or other electronic device with or without regard to a particular viewing schedule.

History. Enact. Acts 2005, ch. 168, § 89, effective January 1, 2006; 2006, ch. 6, § 3, effective March 6, 2006; 2007, ch. 141, § 13, effective July 1, 2007; 2009, ch. 99, § 1, effective July 1, 2009; 2013, ch. 40, § 83, effective March 21, 2013; 2019 ch. 151, § 17, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 17 of that Act apply to transactions occurring on or after July 1, 2019.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 26, provides that this section applies retroactively to January 1, 2006.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

Cited in:

Directv, Inc. v. Treesh, 487 F.3d 471, 2007 FED App. 0201P, 2007 U.S. App. LEXIS 12504 (6th Cir. Ky. 2007 ); DirecTV, Inc. v. Treesh, 290 S.W.3d 638, 2009 Ky. LEXIS 145 ( Ky. 2009 ).

136.604. Excise tax — Multichannel video programming services — Rate-sourcing rule.

  1. An excise tax is hereby imposed on the retail purchase of multichannel video programming service provided to a person whose place of primary use is in this state, regardless of where or to whom those services are billed or paid.
  2. The multichannel video programming excise tax rate shall be three percent (3%) of the sales price charged for multichannel video programming service that is billed on or after January 1, 2006.
  3. Providers shall source multichannel video programming services to the end user’s place of primary use.

History. Enact. Acts 2005, ch. 168, § 90, effective January 1, 2006.

NOTES TO DECISIONS

Cited in:

Directv, Inc. v. Treesh, 487 F.3d 471, 2007 FED App. 0201P, 2007 U.S. App. LEXIS 12504 (6th Cir. Ky. 2007 ).

136.605. Sourcing of communications services — Definitions.

  1. For purposes of KRS 136.600 to 136.660 the retailer shall source communications services as follows:
    1. A sale of mobile telecommunications services, other than air-to-ground radiotelephone service and prepaid wireless calling service, shall be sourced to the customer’s or other purchaser’s place of primary use;
    2. A sale of postpaid calling service shall be sourced to the origination point of the telecommunications signal as first identified by either the retailer’s telecommunications system or information received by the retailer from its service provider, where the system used to transport the signal is not that of the retailer;
    3. A sale of prepaid calling service or a sale of a prepaid wireless calling service shall be sourced as follows:
      1. Over the counter. The sale is sourced to the business location of the seller;
      2. Delivery to a specified address. The sale is sourced to the specified address when a purchaser or purchaser’s donee receives the service at a location specified by the purchaser; or
      3. Delivery address unknown. When the retailer does not know the address where the service is received, the sale is sourced to the first address listed in this paragraph that is known to the retailer:
        1. The address of the purchaser available from the business records of the retailer;
        2. The billing address of the purchaser;
        3. The address from which the service was provided; or
        4. In the case of a sale of prepaid wireless calling service, the location associated with the mobile telephone number;
    4. A sale of a private communications service shall be sourced as follows:
      1. Service for a separate charge related to a customer channel termination point shall be sourced to each level of jurisdiction in which the customer channel termination point is located.
      2. Service where all customer termination points are located entirely within one (1) jurisdiction or levels of jurisdiction is sourced in the jurisdiction in which the customer channel termination points are located.
      3. Service for segments of a channel between two (2) customer channel termination points located in different jurisdictions and which segments of channel are separately charged shall be sourced fifty percent (50%) in each level of jurisdiction in which the customer channel termination points are located.
      4. Service for segments of a channel located in more than one (1) jurisdiction or levels of jurisdiction and which segments are not separately billed shall be sourced in each jurisdiction based on the percentage determined by dividing the number of customer channel termination points in the jurisdiction by the total number of customer channel termination points; and
    5. A sale of other communications services:
      1. Sold on a call-by-call basis shall be sourced based on the taxing jurisdiction where the call either originates or terminates and in which the service address is also located; or
      2. Sold on a basis other than a call-by-call basis shall be sourced to the customer’s or other purchaser’s place of primary use.
  2. For purposes of this section:
    1. “Air-to-ground radiotelephone service” has the same meaning as in KRS 139.195 ;
    2. “Call-by-call basis” means any method of charging for communications services where the price is measured by individual calls;
    3. “Communications channel” has the same meaning as in KRS 139.195 ;
    4. “Customer” has the same meaning as in KRS 139.195;
    5. “Customer channel termination point” has the same meaning as KRS 139.195;
    6. “Home service provider” has the same meaning as in KRS 139.195;
    7. “Postpaid calling service” means a communications service obtained by making a payment on a call-by-call basis either through the use of a credit card or payment mechanism such as a bank card, travel card, credit card, or debit card, or by charge made to a telephone number not associated with the origination or termination of the communications service. A postpaid calling service includes a communications service, except a prepaid wireless calling service, that would be a prepaid service except that it is not exclusively a communications service;
    8. “Prepaid calling service” means the right to access exclusively communications services, which are paid for in advance and which enable the origination of calls using an access number or authorization code, whether manually or electronically dialed, and that is sold in predetermined units or dollars of which the number declines with use in a known amount;
    9. “Prepaid wireless calling service” means a communications service that:
      1. Provides the right to utilize mobile wireless service as well as other nontelecommunications services, including the download of digital products delivered electronically, content, and ancillary services;
      2. Must be paid for in advance; and
      3. Is sold in predetermined units of dollars of which the number declines with use in a known amount;
    10. “Private communications service” means a communications service that entitles the customer or other purchaser to exclusive or priority use of a communications channel or group of channels between or among termination points, regardless of the manner in which the channel or channels are connected, and includes switching capacity, extension lines, stations, and any other associated services that are provided in connection with the use of a channel or channels; and
    11. “Service address” has the same meaning as in KRS 139.195.

History. Enact. Acts 2007, ch. 141, § 15, effective July 1, 2007.

136.606. Provider’s power to collect from consumer — Separate display of tax — Taxes collected constitute debt to Commonwealth.

  1. The tax imposed by KRS 136.604 shall be collected by every provider engaged in business in this state from the purchaser. To the extent that the provisions of KRS Chapter 279 are inconsistent with KRS 136.600 to 136.660 , KRS 136.600 to 136.660 shall control. The provider shall give the purchaser a receipt for the tax collected. The provider shall separately state the tax billed from all other charges on the receipt.
  2. Every purchaser is liable for the tax imposed by KRS 136.604 . The liability is not extinguished until the tax has been paid to this state, except that a receipt from a provider registered under KRS 136.618 reflecting that the provider has billed the tax, with evidence that the purchaser has paid the tax, is sufficient to relieve the purchaser from further liability for the tax to which the receipt refers.
  3. The tax or any part thereof required by this section to be collected by the multichannel video programming service provider from the purchaser shall:
    1. Be deemed to be held in trust by the provider for and on account of the Commonwealth of Kentucky; and
    2. Constitute a debt owed by the provider to this state.

History. Enact. Acts 2005, ch. 168, § 91, effective January 1, 2006.

136.608. Exclusions from excise tax.

There are excluded from the tax imposed by KRS 136.604 :

  1. Multichannel video programming services the purchase of which is prohibited from taxation under the Constitution or laws of the United States;
  2. Multichannel video programming services purchased by any cabinet, department, bureau, commission, board, or other statutory or constitutional agency of the state, and multichannel video programming services purchased by counties, cities, schools, or special districts as defined in KRS 65.005 . This exclusion shall apply only to purchases for use solely in the governmental function. A purchaser not qualifying as a governmental agency or unit shall not be entitled to the exemption even though the purchaser may be the recipient of public funds or grants; and
  3. Multichannel video programming services purchased by resident, nonprofit educational, charitable, and religious institutions which have qualified for exemption from income taxation under Section 501(c)(3) of the Internal Revenue Code, provided that the service is to be used solely within the educational, charitable, or religious function of the institution.

History. Enact. Acts 2005, ch. 168, § 92, effective January 1, 2006.

136.610. Credit for tax paid in other state.

To prevent actual multistate taxation of a multichannel video programming service subject to taxation under KRS 136.604 , any provider or purchaser, upon proof that the provider or purchaser has paid a tax in another state on the same multichannel video programming service, shall be allowed a credit against the tax imposed by KRS 136.604 to the extent of the amount of the tax legally paid in the other state.

History. Enact. Acts 2005, ch. 168, § 93, effective January 1, 2006.

136.612. Exception in the case of worthless accounts.

A provider is authorized to take as a deduction from the tax due under KRS 136.604 the amount of multichannel video programming excise tax paid in a prior reporting period on any debt or account receivable arising from the sale of multichannel video programming service that has become worthless and charged off for income tax purposes. If any charged-off multichannel video programming excise tax is thereafter in whole or in part collected by the provider, the amount so collected shall be included in the first return filed after collection.

History. Enact. Acts 2005, ch. 168, § 94, effective January 1, 2006.

136.614. Compensation to collect and timely remit excise tax.

To reimburse the provider for the cost of collecting and remitting the tax imposed under KRS 136.604 , the provider may deduct on each return one and three-fourths percent (1.75%) of the first one thousand dollars ($1,000) of tax due and one percent (1%) of the tax due in excess of one thousand dollars ($1,000), provided that the total reimbursement claimed per taxpayer in any month shall not exceed one thousand five hundred dollars ($1,500), if the amount due is not delinquent at the time of payment. This section does not apply to purchasers who report the tax directly to the department under KRS 136.606(2).

History. Enact. Acts 2005, ch. 168, § 95, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.616. Imposition of tax on gross revenues — Multichannel video programming services and communications services — Rates — Collection of tax from purchaser prohibited — Exclusion for municipal utility.

  1. A tax is hereby imposed on the gross revenues received by all providers.
  2. The tax rate shall be:
    1. Two and four-tenths percent (2.4%) of the gross revenues received for the provision of multichannel video programming service provided to a person whose place of primary use is in this state, billed on or after January 1, 2006; and
    2. One and three-tenths percent (1.3%) of the gross revenues received for the provision of communications services, as sourced under the provisions of KRS 136.605 , billed on or after January 1, 2006.
  3. The provider shall not collect the tax directly from the purchaser or separately state the tax on the bill to the purchaser.
    1. The tax imposed by this section shall apply to all providers except a municipal utility. “Municipal utility” as used in this section means a utility owned, operated, and controlled directly or indirectly by a city. (4) (a) The tax imposed by this section shall apply to all providers except a municipal utility. “Municipal utility” as used in this section means a utility owned, operated, and controlled directly or indirectly by a city.
    2. To the extent that the provisions of KRS Chapter 279 are inconsistent with KRS 136.600 to 136.660 , KRS 136.600 to 136.660 shall control.

History. Enact. Acts 2005, ch. 168, § 96, effective January 1, 2006; 2006, ch. 6, § 4, effective March 6, 2006; 2007, ch. 141, § 14, effective July 1, 2007; 2014, ch. 92, § 219, effective January 1, 2015.

Legislative Research Commission Notes.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 26, provides that this section applies retroactively to January 1, 2006.

NOTES TO DECISIONS

1. Constitutionality.

KRS 136.616(3) violates U.S. Const. amend. I in that the section did not simply prohibit misleading line items, it prohibited all line items, whether the line item contains an accurate description of the associated charge and whether it contains useful information to the consumer; defendants produced no evidence that all line items were misleading. AT&T Corp. v. Rudolph, 2007 U.S. Dist. LEXIS 13962 (E.D. Ky. Feb. 27, 2007).

Enforcement of KRS 136.616(3), which imposed a 1.3% gross revenue tax on local exchange carriers, was enjoined, as was its enforcement provision, KRS 136.990(11), as it violated the First Amendment by prohibiting the cost of the GRT from being passed on to a local exchange carrier’s customers as a line item; line items were “speech,” and the law did not survive intermediate scrutiny as commercial speech because, while the government had a substantial interest in preventing confusing line items, it prevented substantially more speech than was necessary to advance that end. BellSouth Telecomms., Inc. v. Farris, 2007 U.S. Dist. LEXIS 13993 (E.D. Ky. Feb. 27, 2007), aff'd in part and rev'd in part, 542 F.3d 499, 2008 FED App. 0343P, 2008 U.S. App. LEXIS 19170 (6th Cir. Ky. 2008 ).

No-stating-the tax clause of KRS 136.616 restricted speech in violation of the First Amendment because truthfully telling customers why the providers raised prices simply by listing a new tax on a bill was not false or inherently misleading speech. BellSouth Telecomms., Inc. v. Farris, 542 F.3d 499, 2008 FED App. 0343P, 2008 U.S. App. LEXIS 19170 (6th Cir. Ky. 2008 ).

Direct-collection clause of KRS 136.616 referred to non-expressive conduct in connection with collection of a state tax, not speech, and was beyond the protection of the First Amendment. So long as the direct-collection prong could stay on the books, so could the penalty provision, KRS 136.990(11), to which it applied. BellSouth Telecomms., Inc. v. Farris, 542 F.3d 499, 2008 FED App. 0343P, 2008 U.S. App. LEXIS 19170 (6th Cir. Ky. 2008 ).

Cited in:

Directv, Inc. v. Treesh, 487 F.3d 471, 2007 FED App. 0201P, 2007 U.S. App. LEXIS 12504 (6th Cir. Ky. 2007 ).

136.617. Credit for tax on multichannel video programming or communications service paid in another state.

To prevent actual multistate taxation of gross revenues for the provision of multichannel video programming service or communications service subject to tax under KRS 136.616 , any provider, upon proof that the provider has paid a tax in another state for provision of the same multichannel video programming service or communications service to the same customer, shall be allowed a credit against the tax imposed by KRS 136.616 to the extent of the amount of the tax legally paid in the other state.

History. Enact. Acts 2006, ch. 6, § 2, effective March 6, 2006.

Legislative Research Commission Notes.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 26, provides that this section applies retroactively to January 1, 2006.

136.618. Application for certificate of registration.

Every provider shall file an application for a certificate of registration with the department. The application shall be in the form prescribed by the department. The application shall be signed by the owner if a natural person; in the case of an association or partnership, by a member or partner; and in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application.

History. Enact. Acts 2005, ch. 168, § 97, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.620. Taxes due monthly — Required monthly return — Contents of return.

  1. The taxes imposed by KRS 136.604 and 136.616 are due and payable monthly and shall be remitted on or before the twentieth day of the next succeeding calendar month.
  2. On or before the twentieth day of each month, every provider shall file a return for the preceding month with the department in the form prescribed by the department, together with payment of any tax due. The department may allow a provider subject to the taxes imposed under KRS 136.604 and 136.616 to file a single return reporting tax liabilities under both taxes for each reporting period.
  3. The return shall show the:
    1. Gross revenues received subject to the tax imposed under KRS 136.616 ;
    2. Amount billed by the provider for multichannel video programming service subject to the tax imposed under KRS 136.604 ;
    3. Amount of the tax due under KRS 136.604 and 136.616 ; and
    4. Any other information as the department deems necessary for the proper administration of KRS 136.600 to 136.660 .
  4. In the case where the purchaser is liable for the payment of the tax under KRS 136.606(2), the purchaser shall file the return showing the total amount paid for multichannel video programming service that is subject to tax during the reporting period.
  5. The return shall be signed by the person required to file the return or a duly authorized agent.
  6. The person required to file the return shall deliver the return, together with a remittance of the amount of tax due, to the department.
  7. For purposes of calculating the excise tax imposed under KRS 136.604 , if tangible personal property normally subject to sales and use tax under KRS Chapter 139 is sold with multichannel video programming service as a single package for one (1) price, and the tangible personal property is necessary for the provision of the multichannel video programming service, the tax required to be collected by the provider shall be the tax imposed by KRS 136.604 .
  8. For purposes of calculating the excise tax imposed under KRS 136.604 , if communications services subject to sales and use tax under KRS Chapter 139 is sold with multichannel video programming service as a single package for one (1) price, the portion of the sales price attributable to the communications services shall be subject to the excise tax unless the provider can identify, by reasonable and verifiable standards, the communications services from its books and records that are kept in the regular course of business for other purposes, including but not limited to nontax purposes.
  9. For purposes of calculating the gross revenues tax imposed under KRS 136.616 , if communications service is sold with multichannel video programming service as a single package for one (1) price, the gross revenues shall be taxed at the rate of two and four-tenths percent (2.4%).
  10. For purposes of calculating the gross revenues tax imposed under KRS 136.616 , if tangible personal property is sold with:
    1. Multichannel video programming service for one (1) price, the gross revenues shall be taxed at the rate of two and four-tenths percent (2.4%); and
    2. Communications service for one (1) price, the gross revenues shall be taxed at the rate of one and three-tenths percent (1.3%).

History. Enact. Acts 2005, ch. 168, § 98, effective January 1, 2006; 2007, ch. 141, § 16, effective July 1, 2007; 2010, ch. 147, § 5, effective July 15, 2010.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.622. Extension of time for filing return.

  1. The department shall, upon written request received on or prior to the due date of the return or tax, for good cause satisfactory to the department, extend the time for filing the return or paying the taxes imposed by KRS 136.604 and 136.616 for a period not to exceed thirty (30) days.
  2. Any person for which the extension is granted shall pay, in addition to the tax, interest at the tax interest rate as defined in KRS 131.010(6) from the date on which the tax would otherwise have been due.

History. Enact. Acts 2005, ch. 168, § 99, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.624. Time for assessing taxes shown owing.

  1. As soon as practicable after each return is received, the department shall examine it. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the excess shall be assessed by the department within four (4) years from the later of the date the return was filed or due, except that in the case of a failure to file a return or a fraudulent return, the excess may be assessed at any time. A notice of assessment shall be mailed to the provider. The provider and the department may agree to extend this time period.
  2. Any provider aggrieved by any action of the department may request a review and shall have the rights of appeal as set forth in KRS Chapter 131.

History. Enact. Acts 2005, ch. 168, § 100, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.626. Offset of overpayments against tax owing.

In making a determination of tax liability under KRS 136.604 or 136.616 , the department may offset overpayments for a period or periods, together with interest on the overpayments, against underpayments for another period or periods, against penalties, and against the interest on the underpayments.

History. Enact. Acts 2005, ch. 168, § 101, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.628. Record retention.

Every provider shall keep records, receipts, invoices, and other pertinent papers in a form required by the department for not less than four (4) years from the making of the records unless the department in writing authorizes their destruction at an earlier date.

History. Enact. Acts 2005, ch. 168, § 102, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.630. Interest on overdue tax.

In every case, any tax not paid on or before the due date shall bear interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.

History. Enact. Acts 2005, ch. 168, § 103, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.632. Refund or credit of taxes paid — Claims.

  1. The taxes paid under KRS 136.604 or 136.616 shall be refunded or credited in the manner provided in KRS 134.580 .
  2. A claim for refund or credit shall be made on a form prescribed by the department and shall contain all information required by the department.
  3. No provider shall be entitled to a refund or credit of the taxes paid under KRS 136.604 where the taxes have been collected from a customer, unless the amount of taxes collected from the customer are refunded to the customer by the provider who paid the taxes to the State Treasury.

History. Enact. Acts 2005, ch. 168, § 104, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.634. Administration by the department.

The department shall administer the provisions of KRS 136.600 to 136.660 and shall have all of the powers, rights, duties, and authority with respect to the assessment, collection, refunding, and administration of the taxes levied by this chapter, conferred generally upon the department by the Kentucky Revised Statutes, including KRS Chapters 131, 134, and 135.

History. Enact. Acts 2005, ch. 168, § 105, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.636. Security for compliance.

  1. Whenever it is deemed necessary to ensure compliance with KRS 136.600 to 136.660 , the department may require any person required to collect the taxes imposed by KRS 136.604 or 136.616 to place security with the department. The amount of the security shall be fixed by the department, but shall not be greater than three (3) times the estimated average monthly liability of the provider. This limitation shall apply regardless of the type of security placed with the department.
  2. The amount of the security may be increased or decreased by the department subject to the limitations provided in subsection (1) of this section.
  3. If necessary, the department may sell the security at public auction to recover any tax, interest, or penalty due. However, security in the form of a bearer bond issued by the United States or any state or local governmental unit that has a prevailing market price may be sold by the department at a private sale at a price not lower than the prevailing market price.
  4. The department shall provide notice of the date, time, and place of the sale to the person who placed the security with the department. Notice shall be sent by certified mail to the person’s last known address, as reflected in the records of the department, or delivered to the person.
  5. As used in this section, “delivery” or “delivered to” means mailing the notice to the person to whom it is addressed, leaving it at his or her place of business with the person in charge of the place of business, or, if there is no one in charge, leaving it in a conspicuous place at the place of business. If the place of business is closed or the person to be served has no place of business, delivery includes:
    1. Leaving it at the person’s home with some person of suitable age and discretion residing in the home;
    2. Serving it upon the person’s agent for service process; or
    3. Any other method permitted by the Kentucky Revised Statutes.
  6. Notice by certified mail shall be postmarked no later than ten (10) days prior to the sale.
  7. Any surplus above the amounts due to the department after the sale shall be returned to the person who placed the security.

History. Enact. Acts 2005, ch. 168, § 106, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.638. Officer and member liability for taxes due.

  1. Notwithstanding any other provision of law to the contrary, the president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any corporation subject to the provisions of KRS 136.600 to 136.660 shall be personally and individually liable, both jointly and severally, for the taxes imposed under KRS 136.604 or 136.616 . Neither the corporate dissolution or withdrawal of the corporation from the state nor the cessation of holding any corporate office shall discharge the foregoing liability of any person. The personal and individual liability shall apply to each and every person holding the corporate office at the time the taxes become or became due. No person shall be personally and individually liable under this subsection if that person did not have authority to collect, account for, or pay over the tax at the time that the tax imposed by KRS 136.604 or 136.616 become or became due.
  2. Notwithstanding KRS 275.150 , 362.1-306(3) or predecessor law, KRS 362.2-404(3), or any other provision of law to the contrary, the managers of a limited liability company, the partners of a limited liability partnership, and the partners of a limited liability limited partnership or any other person holding any equivalent office of a limited liability company, limited liability partnership, or limited liability limited partnership subject to KRS 136.600 to 136.660 shall be personally and individually liable, both jointly and severally, for the taxes imposed under KRS 135.604 and 136.616 . Neither the dissolution or withdrawal of the limited liability company, limited liability partnership, or limited liability limited partnership from the state nor the cessation of holding any office shall discharge the foregoing liability of any person. The personal and individual liability shall apply to each and every manager of a limited liability company, partner of a limited liability partnership, and general partner of a limited liability limited partnership at the time the taxes become or became due. No person shall be personally and individually liable under this subsection, if that person had no authority to collect, account for, or pay over the tax at the time that the taxes imposed by KRS 136.604 become or became due or account for or pay over the tax at the time that the taxes imposed by KRS 136.616 become or became due.
  3. “Taxes,” as used in this section, shall include interest accrued at the rate provided by KRS 131.183 and all applicable penalties and fees imposed under this chapter and under KRS 131.180 , 131.410 to 131.445 , and 131.990 .

History. Enact. Acts 2005, ch. 168, § 107, effective January 1, 2006; 2006, ch. 149, § 198, effective July 12, 2006.

136.640. Return of tax savings to customers.

To the extent that a provider experiences a tax savings as a result of the provisions of KRS 136.600 to 136.660 in the first year of tax collections under KRS 136.600 to 136.660 , the savings shall be returned proportionately to all residential and business customers of the provider. The specific manner in which the savings are returned to its customers shall be at the discretion of the provider. The Office of the Attorney General is authorized to enforce the requirements of this section.

History. Enact. Acts 2005, ch. 168, § 108, effective January 1, 2006.

136.642. Legal action not to delay collections.

No suit shall be maintained in any court to restrain or delay the collection or payment of the tax levied by KRS 136.604 or 136.616 .

History. Enact. Acts 2005, ch. 168, § 109, effective January 1, 2006.

136.644. Limitations of legal actions.

Any provider subject to the tax imposed by KRS 136.604 or 136.616 that fails to file a return as required by KRS 136.620 or fails to pay the tax as listed on the return shall not maintain an action, suit, or proceeding in any court or before any agency in this state or enforce in any way any obligation of any debt until the return is filed and the tax listed on the return is paid. This provision does not prohibit a provider from the rights afforded by KRS Chapter 131.

History. Enact. Acts 2005, ch. 168, § 110, effective January 1, 2006.

136.646. Penalties.

Penalties shall be imposed and assessed in accordance with the provisions of KRS 131.180 .

History. Enact. Acts 2005, ch. 168, § 111, effective January 1, 2006.

136.648. Gross revenues and excise tax fund and state baseline and local growth fund — Creation and administration of funds.

  1. There is established in the State Treasury a gross revenues and excise tax fund. The fund shall be held and administered by the Finance and Administration Cabinet. The cabinet shall invest money in the fund in the same manner as money in the state general fund.
  2. There is established in the State Treasury a state baseline and local growth fund. The fund shall be held and administered by the Finance and Administration Cabinet. The cabinet shall invest money in the fund in the same manner as money in the state general fund.
  3. All revenue from the tax imposed under KRS 136.604 and 136.616 , including all penalties and interest attributable to the nonpayment of the tax or for noncompliance with KRS 132.825 and 136.600 to 136.660 shall be deposited into gross revenues and excise tax fund. Amounts deposited in the gross revenues and excise tax fund shall be allocated among the state, political subdivisions, school districts and special districts as provided in KRS 136.648 , 136.650 , 136.652 , 136.654 , and 136.656 .
  4. All money in the gross revenues and excise tax fund designated for distribution to political subdivisions under KRS 136.648 , 136.650 , 136.652 , 136.654 , and 136.656 :
    1. Shall not be withheld or reduced by the General Assembly or any state agency for any reason, except for adjustments provided for within KRS 132.825 and 136.600 to 136.660 ; and
    2. Shall be used solely and exclusively for the provision of services to the general public, including public protection, health services, education, libraries, transportation services, and economic development. No amount shall be used for purely local purposes affecting only the inhabitants of the particular political subdivision, such as the administration of local government. Neither the General Assembly nor any state agency shall mandate how the funds are to be used.

History. Enact. Acts 2005, ch. 168, § 112, effective January 1, 2006.

NOTES TO DECISIONS

Cited in:

Directv, Inc. v. Treesh, 487 F.3d 471, 2007 FED App. 0201P, 2007 U.S. App. LEXIS 12504 (6th Cir. Ky. 2007 ).

136.650. Required participation in funds — Computation of amounts — Designated monthly hold harmless amount.

    1. Every political subdivision, school district, and special district shall participate in the gross revenues and excise tax fund and the state baseline and local growth fund. (1) (a) Every political subdivision, school district, and special district shall participate in the gross revenues and excise tax fund and the state baseline and local growth fund.
    2. On or before December 1, 2005, each political subdivision shall certify to the department on a prescribed form the amount of collections it received from the local franchise fees collected from communications service and multichannel video programming service providers and other fees collected to fund public educational and government access programming during the period between July 1, 2004, and June 30, 2005. By certifying its participation under this subsection, each political subdivision:
      1. Consents to the hearing process provided in KRS 136.658 ; and
      2. Agrees to relinquish its right to enforce the portion of any contract or agreement that requires the payment of a franchise fee or tax on communications services and multichannel video programming services, regardless of whether the tax or fee is imposed on the provider or its customers.
    3. The amount of collections received by each political subdivision, school district, special district, and sheriff’s department between July 1, 2004, and June 30, 2005, from the tax imposed by KRS 136.120 attributable to the franchise portion of the operating property, as noted in KRS 136.115 , shall be calculated by the department from assessment data for calendar year 2004.
  1. The monthly portion of the gross revenues and excise tax fund that shall be distributed to political subdivisions, school districts and special districts under KRS 136.652 shall be computed as follows:
    1. Each political subdivision, school district and special district shall be assigned a percentage based on the amount of its collections certified under subsection (1) of this section as a ratio of the total certified amount of collections of all parties participating in the fund. This percentage shall be known as the “local historical percentage.” The portion of the sheriff departments’ certified collections identified in subsection (1) of this section from the tax imposed under KRS 136.120 attributable to the franchise portion of the operating property, as noted in KRS 136.115 , that was imposed by county governments shall be added to each county’s reported collections to determine its local historical percentage;
    2. The sheriff departments’ collections certified under subsection (1) of this section that are retained by the sheriff departments as their fee for collecting the taxes shall be the sheriff departments’ fixed hold-harmless amount;
    3. Three million thirty-four thousand dollars ($3,034,000), which represents one-twelfth (1/12) of the total potential collections, shall be designated as the “monthly hold-harmless amount”; and
    4. Each political subdivision’s, school district’s, and special district’s local historical percentage shall be multiplied by the monthly hold-harmless amount to determine its monthly distribution from the fund.
  2. If during the period between June 30, 2005, and December 31, 2005, any political subdivision had a substantial change in its base revenue by enacting or modifying the rate of a local franchise fee prior to June 30, 2005, the political subdivision may request the department to determine its certified collection amount.
  3. If any political subdivision, school district, special district, or sheriff’s department believes that the data used to determine its certified amount of collections are inaccurate, the political subdivision, school district, special district, or sheriff’s department may request a redetermination by the oversight committee established by KRS 136.658 . A redetermination shall be effective prospectively beginning with the next distribution cycle occurring ninety (90) days after the matter is finally settled.

History. Enact. Acts 2005, ch. 168, § 113, effective January 1, 2006; 2006, ch. 6, § 5, effective March 6, 2006.

Legislative Research Commission Notes.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 27, provides that this section applies retroactively to December 1, 2005.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

Cited in:

Directv, Inc. v. Treesh, 487 F.3d 471, 2007 FED App. 0201P, 2007 U.S. App. LEXIS 12504 (6th Cir. Ky. 2007 ).

136.652. Distribution — Administrative costs — Monthly hold harmless amounts.

Money in the gross revenues and excise tax fund shall be distributed monthly as follows:

  1. One percent (1%) shall be deposited in a trust and agency account created in the State Treasury to be used by the department for administration costs associated with the implementation, collection, and distribution of the tax imposed by KRS 136.604 and 136.616 .
  2. After the distribution required under subsection (1) of this section, the department shall distribute to each political subdivision, school district and special district the applicable monthly hold-harmless amount as calculated under KRS 136.650 . In addition, the department shall distribute one-twelfth (1/12) of the sheriff department’s fixed hold-harmless amount as defined in KRS 136.650 (2)(b). For tax collections received in January and February of 2006, the department shall make the distribution by April 25, 2006. For all other periods, the department shall make distribution by the twenty-fifth day of the next calendar month following the tax receipts.
  3. After the distribution required by subsection (2) of this section, the department shall deposit one million two hundred fifty thousand dollars ($1,250,000) in the state general fund. This amount shall be adjusted on a prospective basis after the collection of the first twelve (12) months of tax receipts from the taxes imposed by KRS 136.604 and 136.616 to equal the average monthly tax receipts attributable to the taxation of satellite broadcast and wireless cable services under KRS 136.604 and 136.616 . The amount shall then become the fixed amount distributed to the general fund.
  4. Money remaining in the gross revenues and excise tax fund after the distribution required by subsection (3) of this section shall be transferred to the state baseline and local growth fund established in KRS 136.648 .

History. Enact. Acts 2005, ch. 168, § 114, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

Research References and Practice Aids

2020-2022 Budget Reference.

See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, F, 8, (1) at 878.

136.654. Determination of distributions — State baseline and local growth fund.

  1. On or before December 1, 2005, and every January 31 thereafter, each participating political subdivision shall certify to the department its total tax receipts for the prior fiscal year. This amount shall be used to calculate the percentage of each political subdivision’s portion of the account labeled under its county’s name within the state baseline and local growth fund as described in subsection (3)(b) of this section. “Total tax receipts” shall not include revenue from nontax sources, such as intergovernmental revenues, charges for services, tuition, interfund transfers, interest and investment income, rental income, income from asset sales, beginning balances, or revenue from licenses and permits. “Total tax receipts” shall include the following:
    1. Real estate and tangible personal property taxes, including delinquent tax receipts;
    2. Franchise fees or taxes on utilities, other than multichannel video programming service and communications service utilities;
    3. Occupational and business license fees or taxes, including insurance premium taxes, net profits taxes, gross receipts taxes, payroll taxes, transient room taxes, restaurant taxes, and bank deposit taxes;
    4. Telephone emergency surcharge fees;
    5. Gross revenues tax hold-harmless and growth fund receipts; and
    6. Payments in lieu of taxes.
  2. On or before every January 31, each participating school district and special district shall certify to the department the amount of its prior year tax assessments under KRS Chapter 132 on companies’ providing of multichannel video programming service and communications service. This amount shall be used to calculate the percentage of each school district’s and special district’s portion of the account labeled under its county’s name within the state baseline and local growth fund as described in subsection (3)(b) of this section. For tax years with no assessments under KRS Chapter 132, the local historical percentage as defined in KRS 136.650 shall be used.
  3. Each political subdivision’s, school district’s, and special district’s monthly portion of the state baseline and local growth fund shall be computed as follows:
    1. A “local growth portion” shall be determined as an amount of money that when added to the hold-harmless amount identified in KRS 136.650(2)(c) equals fifteen and six-tenths percent (15.6%) of the total amount deposited in the gross revenues and excise tax fund, minus the amount of distributions made under KRS 136.652(1) and (3).
    2. The local growth portion shall be accounted for by county within the state baseline and local growth fund based on the ratio of the gross revenues tax collected on multichannel video programming services and communications services provided in each county to the total statewide collections of the gross revenues tax. The county-by-county allotment of the local growth portion shall be known as the “county growth portion.”
    3. The county growth portion shall be further segregated into the political subdivision allotment, the school district allotment, and the special district allotment based upon the ratio of each allotment category’s total historical collections as calculated under KRS 136.650(2) to the total overall county historical collections as calculated from the certified collections under KRS 136.650(1).
    4. On or before April 25, 2006, each political subdivision’s share of the political subdivision allotment shall be determined by multiplying the political subdivision allotment of the local growth portion as determined in paragraph (b) of this subsection by the percentage calculated in subsection (1) of this section.
    5. On or before April 25, 2006, each school district’s share of the school district allotment shall be determined by multiplying the school district allotment as determined in paragraph (c) of this subsection by the percentage calculated in subsection (2) of this section.
    6. On or before April 25, 2006, each special district’s share of the special district allotment shall be determined by multiplying the special district allotment as determined in paragraph (c) of this subsection by the percentage calculated in subsection (2) of this section.
    7. The respective allotment share for each participating political subdivision, school district, and special district shall be adjusted every July 1 following the year 2006, to account for any change in its percentages based on annual certifications required in subsections (1) and (2) of this section.
    8. Notwithstanding the annual certifications required in subsection (1) of this section, following the year 2006, political subdivisions may choose to determine their respective shares of the political subdivision allotment pursuant to an interlocal agreement as authorized under KRS 65.240 . Activation or termination of an interlocal agreement shall comply with the notification requirements of subsection (1) of this section and shall become effective the following July 1. The terms of a timely interlocal agreement governing the distribution of a political subdivision allotment shall remain in effect until its timely termination by one of the participating political subdivisions.

History. Enact. Acts 2005, ch. 168, § 115, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

136.656. Distributions — County growth portion — State baseline portion.

All money deposited in the state baseline and local growth fund created under KRS 136.648 shall be distributed monthly, according to the same schedule for distribution from the gross revenues and excise tax fund, as follows:

  1. The county growth portion shall be distributed in accordance with the formulas established in KRS 136.654 .
  2. After the distribution required under subsection (1) of this section, the remaining balance shall be deposited in the general fund. This amount shall be known as the “state baseline portion,” which shall represent, if sufficient funds are available, eighty-four and four-tenths percent (84.4%) of the total amount deposited in the gross revenues and excise tax fund, minus the amount of distributions made under KRS 136.652(1) and (3).

History. Enact. Acts 2005, ch. 168, § 116, effective January 1, 2006.

136.658. Oversight committee — Creation and duties.

  1. The Local Distribution Fund Oversight Committee is hereby created and administratively attached to and staffed by the department. The oversight committee shall consist of nine (9) members appointed by the Governor and shall be representative of local government and state government officials. The Governor shall receive recommendations for four (4) members each from the Kentucky Association of Counties and the Kentucky League of Cities from which the Governor shall select two (2) members each. The Governor shall receive recommendations for two (2) members each from the Kentucky School Board Association, the Kentucky Superintendents Association, and the Kentucky School Administrators Association from which the Governor shall select one (1) member each. One (1) member shall be appointed by the Governor to represent the interests of special districts other than school districts. The remaining member shall be the commissioner of the Department for Local Government, who shall serve as chairperson of the oversight committee. The members shall serve for a term of three (3) years. Five (5) members of the oversight committee shall constitute a quorum. A member may be removed for cause in accordance with procedures established by the oversight committee and shall serve without salary but shall be reimbursed for expenses in the same manner as state employees. Any vacancy occurring on the oversight committee shall be filled by the Governor for the unexpired term.
  2. The duties of the oversight committee shall be:
    1. To monitor the department’s implementation and distribution of funds from the gross revenues and excise tax fund and the state baseline and local growth fund and to report its findings to the commissioner of the department; and
    2. To act as a finder of fact for the commissioner of the department in disputes in and between political subdivisions, school districts, special districts, and sheriff departments, and between political subdivisions, school districts, special districts, and sheriff departments, and the department regarding the implementation and distribution of funds from the gross revenues and excise tax fund and the state baseline and local growth fund.
  3. The department shall provide the oversight committee with an annual report reflecting the amounts distributed to each participating political subdivision, school district, special district, or sheriff department.
  4. Any political subdivision, school district, special district, or sheriff department may file a complaint and request a hearing with the oversight committee on a form prescribed by the committee. The oversight committee shall give notice to any political subdivision, school district, special district, or sheriff department that may be affected by the complaint. Any political subdivision, school district, special district, or sheriff department intending to respond to the complaint shall do so in writing within thirty (30) days of notice of the complaint.
  5. In conducting its business:
    1. The oversight committee shall give due notice of the times and places of its hearings;
    2. The parties shall be entitled to be heard, to present evidence, and to examine and cross-examine witnesses;
    3. The oversight committee shall act by majority vote;
    4. The oversight committee shall adopt and publish rules of procedure and practice regarding its hearings; and
    5. The oversight committee shall make written findings and recommendations to the commissioner of the department.
  6. The commissioner of the department shall review the findings and recommendations of the oversight committee and issue a final ruling within sixty (60) days of receipt of the recommendations.
  7. The parties in the dispute shall have the rights and duties to appeal any final ruling to the Kentucky Claims Commission under KRS 49.220 .
  8. Nothing contained in this section shall prevent at any time a written compromise of any matter or matters in dispute, if otherwise lawful, by the parties to the hearing process.

HISTORY: Enact. Acts 2005, ch. 168, § 117, effective January 1, 2006; 2007, ch. 47, § 65, effective June 26, 2007; 2010, ch. 117, § 71, effective July 15, 2010; 2017 ch. 74, § 79, effective June 29, 2017.

136.660. Prohibitions — Local franchise fee or tax defined.

  1. Except as provided in subsection (3) of this section, to the extent legally permissible, every political subdivision of this state shall be prohibited from the following:
    1. Levying any franchise fee or tax on multichannel video programming service or communications service, or collecting any franchise fee or tax from providers or purchasers of multichannel video programming service or communications service;
    2. Requiring any provider to enter into or extend the term of any provision of a franchise or other agreement that requires the payment of a franchise fee or tax; or
    3. Enforcing any provision of any ordinance or agreement to the extent that the provision obligates a provider to pay to the political subdivision a franchise fee or tax.
  2. For purposes of this section, “franchise fee or tax” means:
    1. Any tax, charge, or fee, that is required by ordinance or agreement to be paid to a political subdivision by or through a provider, in its capacity as a provider, regardless of whether the tax, charge, or fee, is:
      1. Designated as a franchise fee, sales tax, excise tax, user fee, occupancy fee, subscriber charge, license fee, or otherwise;
      2. Measured by the amounts charged for services, the type or amount of equipment or facilities deployed, or otherwise;
      3. Intended as compensation for the use of public or private rights-of-way, the right to conduct business, or otherwise; or
      4. Permitted or required to be separately stated on the purchaser’s bill; or
    2. Any in-kind payment of property or services that is required to be furnished by a provider by any ordinance that is enacted or agreement that is entered into after January 1, 2006.
  3. The prohibitions in this section shall not apply to:
    1. Ad valorem taxes levied under KRS 132.020 ;
    2. Emergency telephone surcharges;
    3. Surety bonds;
    4. In-kind payments of property or services provided under contracts or agreements in existence prior to January 1, 2006;
    5. Letters of credit designed to protect against damages to public rights-of-way for violations of regulatory requirements;
    6. Permit or inspection fees of general applicability that are:
      1. Related to construction in the rights-of-way; and
      2. Levied solely to defray the actual costs of administering the permitting process or inspection program;
    7. Pole attachment fees;
    8. Fees for the placement of antennas, towers, and other similar devices on publicly owned property that are imposed by a political subdivision pursuant to a written agreement;
    9. Any charge or fee that is imposed on a provider by a political subdivision for the use of property or facilities owned by the political subdivision, if that provider is imposing similar charges or fees on other providers for the use of property or facilities owned or controlled by that provider;
    10. Any requirement by a political subdivision that a provider designate or set aside channel capacity for public, educational, or governmental use; or construct institutional networks; or provide similar services or facilities for public use and benefit that political subdivisions are specifically authorized to require by federal telecommunications laws; and
    11. Gross revenues utility taxes imposed under KRS 160.613 and 160.614 .
  4. Notwithstanding any provision of law to the contrary, if a political subdivision imposes or otherwise attempts to require the payment of a franchise fee or tax, the political subdivision shall not receive any share of the proceeds of the tax levied by KRS 136.604 or 136.616 for the period that the imposition or attempt occurs.
  5. To the extent that a provider actually pays a franchise fee or tax with respect to multichannel video programming service or communications service that is also subject to the taxes imposed by KRS 136.604 or 136.616 , the provider shall be entitled to a credit against the amount payable to the department under KRS 136.604 and 136.616 in the amount of the franchise fee or tax, up to the amount of the total tax due with respect to the multichannel video programming service and communications service provided in that political subdivision, school district, or special district.
  6. Nothing in this section shall prohibit a provider from donating property or services to a political subdivision, school district, or special district or prohibit a political subdivision, school district, or special district from receiving donated property or services.
  7. Nothing in this section shall prohibit a political subdivision from requiring communications service providers or cable service providers to obtain a franchise as required by Section 163 of the Constitution of Kentucky and from regulating to the fullest extent authorized by state and federal law the use of local rights-of-way by communications service providers or cable service providers.

History. Enact. Acts 2005, ch. 168, § 118, effective January 1, 2006.

Legislative Research Commission Notes.

(1/1/2006). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

1. Constitutionality.

Because the satellite companies had not offered any evidence that the statute would have any effect on interstate commerce, the court could not find that KRS 136.660 imposed a burden on such commerce that was clearly excessive to the putative local benefits. DIRECTV, Inc. v. Treesh, 469 F. Supp. 2d 425, 2006 U.S. Dist. LEXIS 16312 (E.D. Ky. 2006 ), aff'd, 487 F.3d 471, 2007 FED App. 0201P, 2007 U.S. App. LEXIS 12504 (6th Cir. Ky. 2007 ).

KRS 136.660(4) and (5) do not violate the dormant Commerce Clause, U.S. Const. art. I, § 8, cl. 3; the state had simply prevented localities from mulcting cable companies through franchise fees, and instead substituted a uniform state taxation scheme. It had not otherwise altered any competitive balance among in and out-of-state competitors. Directv, Inc. v. Treesh, 487 F.3d 471, 2007 FED App. 0201P, 2007 U.S. App. LEXIS 12504 (6th Cir. Ky. 2007 ), cert. denied, 552 U.S. 1311, 128 S. Ct. 1876, 170 L. Ed. 2d 746, 2008 U.S. LEXIS 3095 (U.S. 2008).

Penalties

136.980. Penalty for delinquency in payment.

If any tax imposed by KRS 136.330 to 136.395 , 299.530 and 304.4-030 , whether assessed by the department, or the taxpayer, or any installment or portion of any tax is not paid on or before the date prescribed for its payment, there shall be collected interest upon the unpaid amount at the tax interest rate as defined in KRS 131.010(6) from the date prescribed for its payment until payment is actually made to the department.

History. Enact. Acts 1966, ch. 187, part IV, § 14; 1972, ch. 203, § 15; 1982, ch. 452, § 11, effective July 1, 1982; 1984, ch. 113, § 2, effective July 13, 1984; 1992, ch. 403, § 4, effective July 14, 1992; 2005, ch. 85, § 338, effective June 20, 2005.

Compiler’s Notes.

Section 56 of Acts 1972, ch. 203, read: “Nothing in this act shall be construed to effect any substantive change in the statute law of Kentucky and if any substantive change appears to be effected it shall be disregarded and the law as it existed prior to the effective date of this act shall be given full force and effect.”

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Legislative Research Commission Notes.

This section was amended by 1984 Acts Chapter 111, § 75, and 1984 Acts Chapter 113, § 2, which conflict and cannot be compiled together. Pursuant to KRS 7.136 , the amendment in Chapter 113, § 2, the non-revisory Act, prevails.

136.985. Penalty for failing to file return.

Any person who violates any of the provisions of KRS 136.330 to 136.395 , 299.530 and 304.4-030 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 .

History. Enact. Acts 1966, ch. 187, Part IV, § 15; reen. 1972, ch. 203, § 16; 1984, ch. 113, § 3, effective July 13, 1984; 1992, ch. 403, § 5, effective July 14, 1992.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Section 56 of Acts 1972, ch. 203, read: “Nothing in this act shall be construed to effect any substantive change in the statute law of Kentucky and if any substantive change appears to be effected it shall be disregarded and the law as it existed prior to the effective date of this act shall be given full force and effect.”

Legislative Research Commission Notes.

This section was amended by 1984 Acts Chapter 111, § 76, and 1984 Acts Chapter 113, § 3, which conflict and cannot be compiled together. Pursuant to KRS 7.136 , the amendment in Chapter 113, § 3, the non-revisory Act, prevails.

136.990. Penalties.

  1. Any corporation that fails to pay its taxes, penalty, and interest as provided in subsection (2) of KRS 136.050 , after becoming delinquent, shall be fined fifty dollars ($50) for each day the same remains unpaid, to be recovered by indictment or civil action, of which the Franklin Circuit Court shall have jurisdiction.
  2. Any public service corporation, or officer thereof, that willfully fails or refuses to make reports as required by KRS 136.130 and 136.140 shall be fined one thousand dollars ($1,000), and fifty dollars ($50) for each day the reports are not made after April 30 of each year.
  3. Any superintendent of schools or county clerk who fails to report as required by KRS 136.190 , or who makes a false report, shall be fined not less than fifty dollars ($50) nor more than one hundred dollars ($100) for each offense.
  4. Any company or association that fails or refuses to return the statement or pay the taxes required by KRS 136.330 or 136.340 shall be fined one thousand dollars ($1,000) for each offense.
  5. Any insurance company that fails or refuses for thirty (30) days to return the statement required by KRS 136.330 or 136.340 and to pay the tax required by KRS 136.330 or 136.340 , shall forfeit one hundred dollars ($100) for each offense. The commissioner of insurance shall revoke the authority of the company or its agents to do business in this state, and shall publish the revocation pursuant to KRS Chapter 424.
  6. Any person who violates subsection (3) of KRS 136.390 shall be fined not less than one hundred dollars ($100) nor more than five hundred dollars ($500) for each offense.
  7. Where no other penalty is mentioned for failing to do an act required, or for doing an act forbidden by this chapter, the penalty shall be not less than ten dollars ($10) nor more than five hundred dollars ($500).
  8. The Franklin Circuit Court shall have jurisdiction of all prosecutions under subsections (4) to (6) of this section.
  9. Any person who violates any of the provisions of KRS 136.073 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 .
  10. If the tax imposed by KRS 136.073 , whether assessed by the department or the taxpayer, or any installment or portion of the tax, is not paid on or before the date prescribed for its payment, interest shall be collected upon the nonpaid amount at the tax interest rate as defined in KRS 131.010(6) from the date prescribed for its payment until payment is actually made to the department.
  11. Any provider who violates the provisions of KRS 136.616(3) shall be subject to a penalty of twenty-five dollars ($25) per purchaser offense, not to exceed ten thousand dollars ($10,000) per month.

History. 4019a-15, 4029, 4087, 4091, 4099, 4103, 4230, 4231, 4232, 4236, 4237, 4281j-7; Acts 1958, ch. 126, § 12; 1962, ch. 94, § 9; 1962, ch. 210, § 23; 1966, ch. 255, § 133; 1976, ch. 155, § 6; 1982, ch. 452, § 12, effective July 1, 1982; 1986, ch. 496, § 10, effective August 1, 1986; 1990, ch. 163, § 6, effective July 13, 1990; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 359, effective July 13, 1990; 1992, ch. 338, § 20, effective July 14, 1992; 1992, ch. 403, § 6, effective July 14, 1992; 2005, ch. 85, § 339, effective June 20, 2005; 2006, ch. 6, § 6, effective March 6, 2006; 2010, ch. 24, § 102, effective July 15, 2010; 2019 ch. 151, § 18, effective June 27, 2019.

Compiler’s Notes.

Section 17 of Acts 1976, ch. 155, provided that the provisions of the 1976 amendment to this section should apply to taxable years beginning after December 31, 1975.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 18 of that Act apply to transactions occurring on or after July 1, 2019.

(4/27/2018). KRS 136.070 was repealed in 2018 Ky. Acts chs. 171 and 207, but a conforming amendment was not made to this statute to address the reference it contains to KRS 136.070 . The Reviser of Statutes has determined that making such a conforming change during the 2018 codification exceeds the permissible correction of manifest clerical or typographical errors under KRS 7.136(1)(h). Therefore, the reference to KRS 136.070 remains unchanged and would have to be changed pursuant to future legislative action.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 26, provides that this section applies retroactively to January 1, 2006.

(7/13/90) The Act amending this section prevails over the repeal and reenactment in House Bill 940, Acts Ch. 476, pursuant to Section 653(1) of Acts Ch. 476.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Venue.
  3. Failure to Make Report.
  4. Collection of Fine.
1. Constitutionality.

Direct-collection clause of KRS 136.616 referred to non-expressive conduct in connection with collection of a state tax, not speech, and was beyond the protection of the First Amendment. So long as the direct-collection prong could stay on the books, so could the penalty provision, KRS 136.990(11), to which it applied. BellSouth Telecomms., Inc. v. Farris, 542 F.3d 499, 2008 FED App. 0343P, 2008 U.S. App. LEXIS 19170 (6th Cir. Ky. 2008 ).

2. Venue.

Penal action to recover fine for failing to report as required by KRS 136.130 must be brought in Franklin County. Commonwealth v. Morrell Refrigerator Co., 129 Ky. 738 , 112 S.W. 860, 1908 Ky. LEXIS 216 ( Ky. 1908 ).

3. Failure to Make Report.

Corporation which failed to make required report by KRS 136.130 because it did not receive from Department of Revenue (now Revenue Cabinet) blank form which department (now cabinet) had customarily mailed to corporations in previous years was liable to conviction for “wilfully” failing to report. Nashville, C. & S. L. R. Co. v. Commonwealth, 160 Ky. 50 , 169 S.W. 511, 1914 Ky. LEXIS 394 ( Ky. 1914 ).

Where representative of Department of Revenue (now Revenue Cabinet) required corporation to include in its report certain information that could not be obtained before date on which report was required to be made, corporation could not be convicted of wilfully failing to report under subsection (3) of this section. United Fuel Gas Co. v. Commonwealth, 171 Ky. 525 , 188 S.W. 660, 1916 Ky. LEXIS 400 ( Ky. 1916 ).

Where officer of corporation whose duty it was to file report honestly believed that subordinate officer had filed report, which had been made ready for filing, and report was filed as soon as omission was discovered, corporation could not be convicted of wilful failure to report. Danville Light, Power & Traction Co. v. Commonwealth, 191 Ky. 270 , 230 S.W. 38, 1921 Ky. LEXIS 302 ( Ky. 1921 ).

Mere failure to file the report required by KRS 136.130 does not necessarily constitute “wilful” failure within the meaning of subsection (3) of this section. Danville Light, Power & Traction Co. v. Commonwealth, 191 Ky. 270 , 230 S.W. 38, 1921 Ky. LEXIS 302 ( Ky. 1921 ).

4. Collection of Fine.

Fine imposed by subsection (3) of this section may be recovered by penal action. Commonwealth v. Morrell Refrigerator Co., 129 Ky. 738 , 112 S.W. 860, 1908 Ky. LEXIS 216 ( Ky. 1908 ).

The fine imposed by subsection (3) of this section could not be collected in a civil suit by a revenue agent, it being collectible only after criminal conviction. Louisville Water Co. v. Commonwealth, 132 Ky. 311 , 116 S.W. 711, 1909 Ky. LEXIS 115 ( Ky. 1909 ).

Cited in:

Coleman v. Western & Southern Life Ins. Co., 264 Ky. 210 , 94 S.W.2d 601, 1936 Ky. LEXIS 295 ( Ky. 1936 ).

Research References and Practice Aids

Kentucky Law Journal.

Moreland, Criminal Jurisdiction of Kentucky Courts: A Tentative Codification, 47 Ky. L.J. 7 (1958).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

CHAPTER 137 License Taxes

137.010. Definitions for KRS 137.340 to 137.410. [Repealed.]

Compiler’s Notes.

This section (4224a-10, 4224c-2: amend. Acts 1948, ch. 110, § 1; 1950, ch. 68, §§ 1, 12; 1950, ch. 76, § 1; 1956, ch. 159, § 1; 1964, ch. 174; 1968, ch. 152, § 109) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.020. State license tax on carnivals and circuses; exemptions; civil penalty for nonpayment. [Repealed.]

Compiler’s Notes.

This section (4224c-4, 4224c-6, 4224c-11) was repealed by Acts 1964, ch. 174, § 1.

137.030. License tax may be credited against sales tax. [Repealed.]

Compiler’s Notes.

This section (4224c-10: amended Acts 1960, ch. 5, Art. IV, § 2) was repealed by Acts 1964, ch. 174, § 1.

137.040. State occupational license taxes; imposition; exemptions. [Repealed.]

Compiler’s Notes.

This section (4224a-10: amend. Acts 1952, ch. 156, § 2; 1956, ch. 159, § 2) was repealed by Acts 1962, ch. 92, § 3.

137.050. License to distribute cigarettes. [Repealed.]

Compiler’s Notes.

This section (4224a-10: amend. Acts 1950, ch. 76, § 2; 1956, ch. 159, § 3; 1960, ch. 5, Art. IV, § 3) was repealed by Acts 1962, ch. 92, § 3.

137.060. License for occupations using vehicles. [Repealed.]

Compiler’s Notes.

This section (4224a-10: amend. Acts 1956, ch. 159, § 4) was repealed by Acts 1960, ch. 5, Art. IV, § 1.

137.070. Regulation of cigarette licensees. [Repealed.]

Compiler’s Notes.

This section (4224a-5) was repealed by Acts 1962, ch. 92, § 3.

137.080. When licenses to be obtained; when to expire; proportional rate; additional fee for prior operation without a license. [Repealed.]

Compiler’s Notes.

This section (4224a-3, 4224a-4) was repealed by Acts 1962, ch. 92, § 3.

137.090. Issuance of license by county clerk; forms. [Repealed.]

Compiler’s Notes.

This section (4224a-2, 4224a-7, 4224a-8) was repealed by Acts 1962, ch. 92, § 3.

137.100. Transfer of license. [Repealed.]

Compiler’s Notes.

This section (4224a-7, 4224a-8) was repealed by Acts 1962, ch. 92, § 3.

137.110. Regulation of license records by Department of Revenue; fees of county clerk; report and accounting of taxes. [Repealed.]

Compiler’s Notes.

This section (4224a-6) was repealed by Acts 1962, ch. 92, § 3.

137.115. Permissive county license taxes.

  1. The fiscal court of each county is hereby given the authority to impose with respect:
    1. To each restaurant serving meals, a license fee not to exceed ten dollars ($10) per annum;
    2. To each retail outlet of soft drinks or ice cream, a license fee not to exceed five dollars ($5) per annum. In cases where ice cream and soft drinks are sold by the same retail outlet, one (1) license tax not to exceed ten dollars ($10) per annum;
    3. To each billiard or pool table or bowling alley, irrespective of size, where a fee is charged and collected, directly or indirectly, a license fee not to exceed thirty dollars ($30) per annum for the first table or alley and not to exceed five dollars ($5) per annum for each additional table or alley;
    4. To each place where tobacco products are sold at retail, a license fee not to exceed ten dollars ($10) per annum.
  2. All license fees shall be payable to the county clerk and be credited to the general fund of the county to be used for county purposes only.
  3. The fiscal court of any county may allow the county clerk a commission not to exceed five percent (5%) on the license fees collected and accounted for by him under this section in addition to the fee provided in KRS 64.012 .

History. Enact. Acts 1960, ch. 5, Art. IV, § 4; 1962, ch. 198, § 1; 1980, ch. 188, § 104, effective July 15, 1980; 2006, ch. 255, § 36, effective January 1, 2007.

NOTES TO DECISIONS

1. Restaurant Tax.

Because the General Assembly has given fourth and fifth class cities authority to impose a 3% restaurant tax on its retail sales in KRS 91A.400 , the Circuit Court held that the Russell County Fiscal Court’s attempt to impose such a 3% tax would deprive the two (2) fifth class cities in Russell County of a statutory right, even though such right has not been exercised; further, subdivision (1)(a) of this section, allows a county to impose an annual $10 restaurant license fee and where the General Assembly has given the power to impose a specific tax to one (1) government entity, a fiscal court may not also impose such a tax without violating the expressed limitations on its taxing power contained in KRS 67.083 . Russell County Fiscal Court v. Kelley, 823 S.W.2d 941, 1991 Ky. App. LEXIS 133 (Ky. Ct. App. 1991).

Opinions of Attorney General.

A grocery business selling cold drinks and ice cream is subject to the occupational tax imposed by this section. OAG 60-551 .

As a result of the enactment of this section, the imposition of a license fee on each retail outlet of soft drinks or ice cream became the discretionary act of the county fiscal court rather than a license tax imposed by the state under subsection (3) of KRS 137.050 which has been repealed. OAG 60-788 .

Under this section, the term “retail outlet,” when applied to a situation in which one licensee owns a number of soft drink or ice cream vending machines, means all the vending machines owned by the same person, persons or business entity which are located on a particular premises. OAG 60-788 .

The fiscal court would have no authority to fix a criminal penalty for the failure to take out a license provided under this section. OAG 61-601 .

One operating a grocery store and collecting sales and use tax would still be liable for a license tax imposed by the fiscal court. OAG 61-662 .

The fiscal court had no power to provide criminal penalties for failure to secure licenses imposed by the fiscal court under the statute where the statute did not establish penalties. OAG 62-455 .

A cafeteria operated by an independent contractor on an employer’s premises to provide food service to the employees is a restaurant within the meaning of subsection (1)(a) of this section and is subject to the permissive license tax imposed herein. OAG 62-489 .

A county public school would not be subject to the restaurant license tax on the school cafeteria if it is not serving food to the general public. OAG 62-743 .

By virtue of the exemption from taxation granted to institutions of education by Ky. Const., § 170, county public schools would not be subject to the license tax permitted by this section on the sale of soft drinks or ice cream from the school cafeteria if the income derived from such sales is devoted exclusively to educational purposes. OAG 62-743 .

If the income derived from the operation of a school cafeteria and the sale of soft drinks at school functions such as basketball games, is devoted to the cause of education and does not inure to the benefit of any private person or corporation, the exemption from taxation granted to educational institutions by Ky. Const., § 170 is applicable to exempt such activities from the license taxes permitted by this section. OAG 62-780 .

Soft drink vending machines located on state property and operated by state personnel as a convenience to workers and not for profit are subject to the tax permitted by this section unless the machines are owned and operated by the government. OAG 62-780 .

The ability of the county to levy a tax on places where tobacco products are sold at retail pursuant to subsection (1)(d) of this section was not altered by the enactment of subsection (4) of KRS 138.195 which requires that each vending machine operator shall secure a license for the privilege of dispensing Kentucky taxpaid cigarettes by vending machine. OAG 62-887 .

The license fee paid pursuant to subsection (1)(d) of this section covers each retail outlet regardless of the number of vending machines which may be located at the outlet. OAG 62-887 .

A Masonic lodge does not qualify under the provision of Ky. Const., § 170 which exempts institutions of purely public charity from taxation and if such a lodge serves hot food or drink or both to the general public it is subject to the restaurant license tax permitted by this section. OAG 63-33 .

The legislature intended that the state and its departments be excluded from the operation of this section and the license tax permitted by this section cannot be imposed on the activities of selling cold drinks, ice cream, tobacco and the conduct of a restaurant operation at a state park. OAG 64-504 .

The fiscal court, under subsection (1)(a) of this section, cannot require that an applicant for a restaurant license obtain the approval of the department of health as a condition precedent to the issuance of such license. OAG 66-254 .

Private clubs such as American Legion Posts, the V.F.W. and country clubs which operate a restaurant in which they sell meals to the public are subject to the license tax imposed by this section. OAG 67-350 .

The fiscal court, under this section, may validly impose a license fee upon billiard, pool, or bumper tables on the basis of the number of tables located and used in each separate business establishment and not upon the total number of tables owned by one person or corporation, regardless of location. OAG 67-525 .

A license for vending machines which carry soft drinks, ice cream and tobacco would be issued under this section with enforcement by the fiscal court under KRS 137.990 . OAG 69-339 .

As part of the enforcement procedure, if the fiscal court so desires it can require the business be closed until such time as the fines are paid and the license obtained. OAG 69-339 .

The fiscal court is the proper body to enforce compliance with this section. OAG 69-339 .

Country stores and filling stations which serve such foods as sandwiches, pies, cakes, and cookies prepared elsewhere and placed in vending machines for sale purposes, are not restaurants in the ordinary sense, and the owner of the premises would not be subject to the restaurant license fee under this section. OAG 69-434 .

The term “restaurant” as used in this section is broad enough to cover any form of hot food or hot drink sold on the premises, regardless of whether it is packaged for a vending machine or counter or table sale, or whether it is unpackaged for table or counter sale. OAG 69-434 .

When a fiscal court by resolution imposed a tax under this section, it had the implied authority to impose a civil penalty for failure to observe the resolution or fiscal court order, provided the penalty was a reasonable one. OAG 69-618 .

A service station which sells prepackaged sandwiches in the form in which they are purchased by the station with the exception of an occasional sandwich which is heated in an oven supplied by firm that furnishes the sandwiches is subject to the licensing provision of this section as a restaurant. OAG 70-438 .

A county may impose a license fee for a coin operated pool table higher than that imposed by the state. OAG 71-4 .

Any person who is operating a business which would include new owners would be required under this section to obtain a license to operate the business. OAG 71-384 .

A fiscal court may not levy a license fee on food vending machines located in lunchrooms of factories as the general assembly has pre-empted the field of food dispensing vending machines under KRS 217.808 , 217.809 , 217.811 , 217.812 and 217.990(8). OAG 72-445 .

When a restaurant also serves ice cream and soft drinks, it will only be subject to the restaurant license fee under subsection (1)(a) of this section unless the ice cream or soft drinks are sold in vending machines or otherwise not integrated with the serving of meals. OAG 74-478 .

Where a business is subject to more than one license requirement under this section, the clerk’s fee will be $1.50 for each license unless the fiscal court has authorized the extra commission pursuant to subsection (3) of this section. OAG 74-478 .

Since the occupational license is issued simultaneously with the payment of the license tax due, where no license has been issued the license tax is technically not due, and therefore there would be no civil remedy affording the right to recover the potential tax. OAG 76-289 .

Every time a merchant who has not procured a county occupational license sells some item in his store he may be prosecuted for each such offense, but the fiscal court has no authority to close the affected business until such time as the operator pays the license tax. OAG 76-289 .

Research References and Practice Aids

Cross-References.

General assembly may authorize counties to impose license fees, Ky. Const., § 181.

137.120. Tax on production of crude petroleum.

  1. Every producer of crude petroleum oil shall pay a tax for state purposes equal to four and one-half percent (4.5%) of the market value of all crude petroleum produced by him in this state.
  2. A producer of crude petroleum oil shall include any person owning an interest in crude petroleum oil produced in this state.
  3. The tax provided by this section shall be imposed and attached when the crude petroleum is first transported from the tanks or other receptacle located at the place of production, and shall be imposed ratably upon all persons owning any interest in such oil.

History. 4223c-1, 4223c-3: amend. Acts 1948, ch. 82, § 1; 1980, ch. 392, § 17, effective June 1, 1980.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Construction.
  3. Nature of Tax.
1. Constitutionality.

The oil production tax is a license tax, and is therefore not open to the objection that it imposes double taxation on the same property. Swiss Oil Corp. v. Shanks, 273 U.S. 407, 47 S. Ct. 393, 71 L. Ed. 709, 1927 U.S. LEXIS 976 (U.S. 1927).

Even if the oil production tax should be considered a property tax it does not violate the federal constitution, because it is imposed alike on all crude petroleum produced in the state and the basis of classification is not arbitrary or unreasonable. Swiss Oil Corp. v. Shanks, 273 U.S. 407, 47 S. Ct. 393, 71 L. Ed. 709, 1927 U.S. LEXIS 976 (U.S. 1927).

Insofar as this section provides that the oil production tax shall be in lieu of other taxes it does not violate the federal constitution. Eastern Gulf Oil Co. v. Kentucky State Tax Comm'n, 17 F.2d 394, 1926 U.S. Dist. LEXIS 1671 (D. Ky. 1926 ) (decision prior to 1948 amendment).

The oil production tax, being a license tax for the privilege of producing oil, and not a tax on the product or on the carrier, is not an unconstitutional burden on interstate commerce, regardless of the fact that the ascertainment and payment of the tax are postponed until the oil is first transported. Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453 , 15 S.W.2d 280, 1929 Ky. LEXIS 570 ( Ky. 1929 ), refusing to follow Eastern Gulf Oil Co. v. Kentucky State Tax Comm'n, 17 F.2d 394, 1926 U.S. Dist. LEXIS 1671 (D. Ky. 1926 ).

Since the amount of tax is to be graduated according to the value of the product at the well does not violate the commerce clause of the federal constitution, although the value necessarily must be ascertained from evidence derived from the carrier and transactions in the market after the oil has been transported in interstate commerce. Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453 , 15 S.W.2d 280, 1929 Ky. LEXIS 570 ( Ky. 1929 ).

2. Construction.

Landowner receiving royalties from oil production, but having no voice in the management and operation under oil lease, was not a “producer” within the meaning of this section, and therefore was not liable for a proportionate share of the tax imposed by this section. Burbank v. Sinclair Prairie Oil Co., 304 Ky. 833 , 202 S.W.2d 420, 1946 Ky. LEXIS 940 ( Ky. 1946 ).

In view of the history of this section, it appears that the “person producing” oil means the person engaged in the business of taking the oil from the earth, or, in the ordinary case, the lessee. Burbank v. Sinclair Prairie Oil Co., 304 Ky. 833 , 202 S.W.2d 420, 1946 Ky. LEXIS 940 ( Ky. 1946 ) (decision prior to 1948 amendment).

3. Nature of Tax.

The oil production tax is separate and distinct from the ad valorem tax on the leases under which the oil is produced, and is not in lieu of the ad valorem tax. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ).

The method of determining the tax according to the amount of oil produced is reasonable and proper. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ).

The oil production tax is a license tax and not a property tax. Raydure v. Board of Sup'rs, 183 Ky. 84 , 209 S.W. 19, 1919 Ky. LEXIS 469 ( Ky. 1919 ); Associated Producers' Co. v. Board of Sup'rs, 202 Ky. 538 , 260 S.W. 335, 1924 Ky. LEXIS 746 ( Ky. 1924 ); Swiss Oil Corp. v. Shanks, 208 Ky. 64 , 270 S.W. 478, 1925 Ky. LEXIS 216 ( Ky. 1925 ), cert. denied, 273 U.S. 407, 47 S. Ct. 393, 71 L. Ed. 709, 1927 U.S. LEXIS 976 (U.S. 1927); Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453 , 15 S.W.2d 280, 1929 Ky. LEXIS 570 ( Ky. 1929 ).

Opinions of Attorney General.

The tax provided for in this section is not a license tax but an excise tax. OAG 72-478 .

The tax imposed upon the production of crude petroleum by a county pursuant to this section is an excise tax and not an occupational license tax, and since the tax in question is an excise tax, county government is without power to impose the tax under this section. OAG 78-396 .

A one percent (1%) tax on petroleum producers, as a part of a general license tax, is uniform within that class, and is not excessive, arbitrary or prohibitive. OAG 79-361 .

If the crude petroleum tax is levied under a county ordinance as a license tax on oil producers engaged in the business of oil production, even though it is measured in terms of a percentage of the market value of the crude oil produced during the tax period, the tax would be a license tax. OAG 79-361 .

Where subsection (3) of this section is applied such that the tax is merely a tax on the commodity, petroleum, or is a tax upon the sale, use or transfer of such petroleum, and nothing else, such use would be unconstitutional under the terms of § 181 of the Constitution. OAG 79-361 .

While a 1948 amendment of this section was entitled “An act relating to taxes upon production of crude petroleum: State and County, amending KRS 137.120 ,” and thus the previous title relating to “a license tax on business” was changed as described, this language change in title is not sufficient to base a conclusion of legislative abandonment of the license tax concept, for if the legislature intended to shift the tax from one of license to excise, then it intended an unconstitutional purpose. OAG 79-361 .

137.130. Transporters of crude petroleum must report and register.

  1. Every person engaged in the transportation of crude petroleum in this state from receptacles located at the place of production in this state shall be considered a transporter of crude petroleum. Every transporter of crude petroleum shall make a verified report to the Department of Revenue by the twentieth day of the month succeeding each month in which crude petroleum is so received for transportation, showing the quantity of each kind or quality of crude petroleum so received from each county in this state and the market value of the crude petroleum on the first business day after the tenth day of the month in which the report is made. The report shall show any sales of crude petroleum so received, the quantity of crude petroleum in each sale, the date of each sale, and the market price of the crude petroleum on each date of sale for the preceding month. This report shall be made upon blanks furnished and prescribed by the department. The department may require additional reports from time to time, on blanks prepared by it, from all producers and transporters of crude petroleum.
  2. Every person required to report under subsection (1) of this section shall register as a transporter of crude petroleum in the office of the county clerk in each county in which such business is carried on by him, in a book which the department shall provide, showing the name, residence and place of business of the transporter. The county clerk shall immediately certify to the department a copy of each registration as made.

History. 4223c-4, 4223c-5, 4223c-8: amend. Acts 2005, ch. 85, § 340, effective June 20, 2005.

137.132. Credit for production from recovered inactive petroleum well.

  1. As used in this section, “recovered inactive well” means a well that has been inactive for a consecutive two (2) year period or a well that has been plugged and abandoned, as determined by the Energy and Environment Cabinet, and that resumes producing crude petroleum oil.
  2. Every taxpayer engaged in the production of crude petroleum oil within this Commonwealth shall be allowed a credit against the tax imposed under KRS 137.120 equal to four and one-half percent (4.5%) of the market value of crude petroleum oil that is produced from a recovered inactive well.

History. Enact. Acts 1998, ch. 359, § 1, effective July 15, 1998; 2005, ch. 123 § 15, effective June 20, 2005; 2010, ch. 24, § 103, effective July 15, 2010.

137.140. Transporter to collect and pay over tax.

Every transporter of crude petroleum shall be liable for the taxes imposed under KRS 137.120 on all crude petroleum received by him. He shall collect from the producer, in money or crude petroleum, the taxes imposed. If collection is in crude petroleum, the transporter may sell the same and pay the taxes by check or cash to the Department of Revenue or sheriff, as provided in KRS 137.150 and 137.160 .

History. 4223c-7; amend. Acts 2005, ch. 85, § 341, effective June 20, 2005.

Opinions of Attorney General.

This section requires the transporter of crude petroleum to collect the tax from its producer and pay it over to the state and county. OAG 79-361 .

137.150. Notice of county tax levy — Collection and payment.

Any county imposing a tax under KRS 137.120 shall immediately after the levy of the tax give notice thereof to each transporter of crude petroleum registered in the county. The transporter shall, after the first day of the month immediately following such notice, proceed as provided in KRS 137.140 to collect the county tax and pay it to the sheriff of the county in the manner and at the time payment of such taxes is required to be made to the Department of Revenue. Each county imposing the tax shall, upon the fixing of the levy, certify the same to the department, which shall make the assessment for the county tax in the same manner and at the same value as provided for the state tax, which shall be certified to the county for collection.

History. 4223c-2: amend. Acts 2005, ch. 85, § 342, effective June 20, 2005.

137.160. Valuation of oil for assessment by Department of Revenue — Notice — Appeal.

  1. When the Department of Revenue has received the reports provided for in KRS 137.130 , it shall, upon such reports and such other reports and information as it may secure, assess the value of all grades or kinds of crude petroleum reported for each month.
  2. Where the report shows no sale of crude petroleum during the month covered by the report, the market value of crude petroleum on the first business day after the tenth day of the month in which the report is made shall be fixed by the department as the assessed value of all crude petroleum covered by the report. Where the report shows that all crude petroleum reported has been sold during the month covered by the report, the market price of such crude petroleum on each day of sale shall be the assessed value of all crude petroleum sold on that date of sale, and the total amount of the tax to be reported as the assessment on the report shall be the total of the assessments made on such sales. If the report shows that part of the crude petroleum reported has been sold and part remains unsold, the market price of the crude petroleum on the first business day after the tenth day of the month following the month covered by the report shall be fixed as the assessed value of the portion of the crude petroleum unsold, the market price of the crude petroleum on each day of sale shall be the assessed value of the portion sold, and the total amount of the tax to be reported as the assessment on the report shall be the total of the assessments made on the sold and unsold crude petroleum. The department, in making its assessments, shall take into consideration transportation charges.
  3. The department shall, by the last day of the month in which the reports are required to be made, notify each transporter of his assessment, and certify the assessment to the county clerk of each county that has reported the levy of a county tax under KRS 137.150 . The county clerk shall immediately deliver a copy thereof to the sheriff for collection of the county tax. The transporter so notified of the assessment shall have the right to an appeal to the Kentucky Claims Commission pursuant to KRS 49.220 .

HISTORY: 4223c-6: amend. Acts 1964, ch. 141, § 24; 2005, ch. 85, § 343, effective June 20, 2005; 2017 ch. 74, § 80, effective June 29, 2017.

NOTES TO DECISIONS

  1. Transportation Cost.
  2. Procedure.
1. Transportation Cost.

In determining the value of the oil, the cost of transportation from the well to the market must be deducted. Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453 , 15 S.W.2d 280, 1929 Ky. LEXIS 570 ( Ky. 1929 ).

2. Procedure.

In action by transporter attacking validity of oil production tax law, transporter could not raise objection that law makes no provision for producer to be heard on assessment. Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453 , 15 S.W.2d 280, 1929 Ky. LEXIS 570 ( Ky. 1929 ).

Research References and Practice Aids

Cross-References.

Assessment by Revenue Cabinet, protest of, review by Kentucky Board of Tax Appeals, KRS 131.110 .

137.170. Tentative state license tax on race meetings.

  1. Every person engaged in the business of conducting a race meeting at which live horse races are run for stakes, purses, or prizes, under the jurisdiction of the Kentucky Horse Racing Commission, shall pay a tentative license tax to the state, as provided in subsection (2) of this section.
  2. Any race track for any year commencing December 1 and ending the following November 30 for the days upon which races are actually conducted for any stake, purse, or prize, shall pay a license tax based on the average daily mutuel handle for the preceding year as follows:
  3. As used in subsection (2) of this section the term “daily mutuel handle” shall mean the total gross amount of money bet or wagered by a race track’s patrons by means of pari-mutuel, combination, or French pools on live races conducted by the track.

Average Daily Mutuel Handle License Tax $0 - $25,000 $ 0 $25,000 - $250,000 $ 175 $250,001 - $450,000 $ 500 $450,001 - $700,000 $1,000 $700,001 - $800,000 $1,500 $800,001 - $900,000 $2,000 $900,001 and above $2,500

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History. 4223b-6, 4223b-7: amend. Acts 1942, ch. 90, §§ 1, 2; 1958, ch. 33, §§ 1, 2; 1984, ch. 240, § 1, effective July 13, 1984; 1992, ch. 109, § 4, effective March 30, 1992; 1994, ch. 65, § 6, effective July 15, 1994; 1994, ch. 272, § 1, effective July 15, 1994; 2004, ch. 191, § 46, effective July 13, 2004; 2010, ch. 24, § 104, effective July 15, 2010.

NOTES TO DECISIONS

Cited in:

Churchill Downs-Latonia, Inc. v. Reeves, 297 Ky. 835 , 181 S.W.2d 398, 1944 Ky. LEXIS 813 ( Ky. 1944 ).

Research References and Practice Aids

Cross-References.

Admission tax on race track admissions, KRS 138.480 .

Pari-mutuel tax, KRS 138.510 .

Racing, KRS Ch. 230.

Revocation of license for violation of law as to pari-mutuel tax, KRS 138.550 .

137.180. Report and payment of tentative state license tax — Civil penalty for nonpayment.

  1. Each person engaged in the business of conducting a race track shall, on or before thirty (30) days following the close of each duly licensed race meeting, furnish the Department of Revenue a verified report of the number of days on which races were conducted on that race track during the race meeting, together with a statement of its daily mutuel handle for each day during the meeting, and at the same time pay to the state the tentatively correct amount of the license tax apparently due it pursuant to KRS 137.170 .
  2. On or before December 31 in each year, each person engaged in the business of conducting a race track shall file a final report with the Department of Revenue giving in summary form a recapitulation of the information furnished by the previous tentative reports filed during the year, computing the final license tax due the state for the year ending November 30 and showing the amount of tentative license tax actually paid during the year. Any balance of license tax due the state as shown on the final report shall be paid at the same time as the filing. Any overpayment in license tax disclosed by the final report shall, at the option of the taxpayer, be promptly refunded by the state or credited against the license tax to be due from the taxpayer in the following year.
  3. Any person who violates any provision of this section or KRS 137.170 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest at the tax interest rate as defined in KRS 131.010(6) upon the unpaid amount from the date prescribed for its payment until payment is actually made to the department.

History. 4223b-9, 4223b-11: amend. Acts 1958, ch. 33, §§ 3 to 5; 1986, ch. 496, § 11, effective August 1, 1986; 1992, ch. 338, § 3, effective August 1, 1992; 1992, ch. 403, § 7, effective August 1, 1992; 1994, ch. 65, § 7, effective July 15, 1994; 2005, ch. 85, § 344, effective June 20, 2005.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

137.190. License, admission, and pari-mutuel taxes in lieu of other taxes — Local government not to levy pari-mutuel tax.

The license tax imposed by KRS 137.170 , the admission tax imposed by KRS 138.480 , and the state taxes and contributions imposed by KRS 138.510 to 138.550 and KRS 230.380 on pari-mutuel systems of betting shall be in lieu of all other license, excise, special, or franchise taxes to the state or any county, city, or other political subdivision. No county, city, or other political subdivision may levy any license, income, excise, special, or franchise tax on any such person or corporation engaged in the business of conducting a race track at which races are conducted for stakes, purses or prizes, or operating as a receiving track or simulcast facility, or on the operation or maintenance of any pari-mutuel machine or similar device, or on the money or amount of money handled by or through any pari-mutuel machine or similar device or on the sale of any merchandise during the conducting of races thereon by any such person or corporation.

History. 4223b-12: amend. Acts 1948, ch. 35, § 7; 1992, ch. 109, § 5, effective March 30, 1992.

137.200. State license tax on chain stores; imposition; filling stations exempted. [Repealed.]

Compiler’s Notes.

This section (4202a-25, 4202a-28) was held unconstitutional in Reeves v. Adam Hat Stores, 303 Ky. 633 , 198 S.W.2d 789 (1946), and was repealed by Acts 1966, ch. 255, § 283.

137.210. Rates per store. [Repealed.]

Compiler’s Notes.

This section (4202a-27) was held unconstitutional in Reeves v. Adam Hat Stores, 303 Ky. 633 , 198 S.W.2d 789 (1946), and was repealed by Acts 1966, ch. 255, § 283.

137.220. Annual report of chain store operators. [Repealed.]

Compiler’s Notes.

This section (4202a-26) was held unconstitutional in Reeves v. Adam Hat Stores, 303 Ky. 633 , 198 S.W.2d 789 (1946), and was repealed by Acts 1966, ch. 255, § 283.

137.230. Payment of license tax; civil penalty; other taxes not waived. [Repealed.]

Compiler’s Notes.

This section (4202a-32, 4202a-33) was held unconstitutional in Reeves v. Adam Hat Stores, 303 Ky. 633 , 198 S.W.2d 789 (1946), and was repealed by Acts 1966, ch. 255, § 283.

137.240. Proportional fee for store opened during year. [Repealed.]

Compiler’s Notes.

This section (4202a-29) was held unconstitutional in Reeves v. Adam Hat Stores, 303 Ky. 633 , 198 S.W.2d 789 (1946), and was repealed by Acts 1966, ch. 255, § 283.

137.250. Separate licenses; posting licenses; transfer. [Repealed.]

Compiler’s Notes.

This section (4202a-30, 4202a-33) was held unconstitutional in Reeves v. Adam Hat Stores, 303 Ky. 633 , 198 S.W.2d 789 (1946), and was repealed by Acts 1966, ch. 255, § 283.

137.260. Coin machine licenses required; who to procure; seals; instructions as to use of machine and what user will receive; illegal machines not permitted; exemption of machines in warehouses. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, § 3, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12, effective March 15, 1950.

137.270. Application for coin machine license. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, § 4, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12.

137.280. Coin machine license fees; payment by check. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, §§ 5, 6, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12.

137.290. License year; half-year licenses. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, § 7, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12.

137.300. Transfer of licenses. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, § 9, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12.

137.310. Civil penalty for nonpayment of tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, § 8, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12.

137.320. Administration by Department of Revenue. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, § 2, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12.

137.330. City licenses on coin machines. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 110, § 9A, effective July 1, 1948) was repealed by Acts 1950, ch. 68, § 12.

137.340. Coin-operated music or amusement machines — License tax — Stamps — Instructions — Illegal machines — Exceptions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 68, § 3) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.350. Application for license — Statement. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 68, § 4; 1986, ch. 496, § 12, effective August 1, 1986) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.360. Issuance of license — Fee. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 68, § 5) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.370. License year — Half-year license. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 68, § 6) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.380. Tax penalty and interest. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 68, § 7; 1982, ch. 452, § 13, effective July 1, 1982) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.390. Administration. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 68, § 2) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.400. Disposition of revenue. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 68, § 10) was repealed by Acts 1994, ch. 13, § 3, effective June 30, 1994.

137.410. Municipal tax on coin machines — Definition of coin machines — Maximum tax limit.

Every municipal corporation of the Commonwealth may levy a tax on coin machines. Coin machines shall include any lawful coin or token-operated machine or device which contains no element of chance and which as a result of depositing a coin, token, or other object automatically or by some mechanical operation affords music or amusement of some character with or without vending any merchandise, but in addition to any merchandise. Coin machines shall not include any bona fide merchandise vending machine in which there are no amusement features. Any license tax so imposed by a municipal corporation shall not exceed ten dollars ($10) per machine, except that cities of the first class may levy taxes equal to twenty dollars ($20) per machine.

History. Enact. Acts 1950, ch. 68, § 8; 1994, ch. 13, § 1, effective June 30, 1994.

Opinions of Attorney General.

Washers, dryers and soap vending machines used in an automatic laundry would not be subject to a license tax under this section since there are no amusement features incorporated into the machines. OAG 64-597 .

A city ordinance is valid and in line with the provisions of this section and former KRS 137.010 permitting a city to license coin machines or coin-operated amusement and vending machines so long as such machines are not bona fide merchandise vending machines. OAG 75-30 .

In the absence of a comprehensive occupational and/or business license tax ordinance, a city of the fifth class may impose license tax not to exceed ten dollars per machine upon amusement machines such as electronic video games, pinball machines, and other coin-operated amusement machines. OAG 82-187 .

The legislature has established the maximum municipal rate for the license tax on coin-operated amusement machines; even though the actual cost of regulation of such machines should exceed ten dollars per machine in a city of the second class and smaller, KRS 137.360 (now repealed) prohibits a rate in excess of ten dollars per machine. OAG 82-187 .

Penalties

137.990. Penalties.

    1. Any person who engages in any business or sells or offers to sell or has on hand for the purpose of sale any article or exercises any privilege for which a license is required or imposed by KRS 137.115 before procuring the license and paying the tax shall be fined not less than twenty-five dollars ($25) nor more than two hundred dollars ($200) for each offense, unless otherwise specifically provided; (1) (a) Any person who engages in any business or sells or offers to sell or has on hand for the purpose of sale any article or exercises any privilege for which a license is required or imposed by KRS 137.115 before procuring the license and paying the tax shall be fined not less than twenty-five dollars ($25) nor more than two hundred dollars ($200) for each offense, unless otherwise specifically provided;
    2. Any county clerk who violates any of the provisions of KRS 137.115, or any administrative regulation promulgated by the Department of Revenue thereunder, shall be fined not less than fifty dollars ($50) nor more than one thousand dollars ($1,000) for each offense; and
    3. Any person who makes a false statement in securing a license under KRS 137.115 shall be deemed guilty of a misdemeanor.
    1. Any person who violates any provision of KRS 137.120 to 137.160 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 ; and (2) (a) Any person who violates any provision of KRS 137.120 to 137.160 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 ; and
    2. Any person who violates any of the provisions of KRS 137.120 to 137.160 may be fined not less than one hundred dollars ($100) nor more than five hundred dollars ($500) or imprisoned for not less than thirty (30) days nor more than six (6) months, or both.
  1. Any person who violates any of the provisions of KRS 137.170 or 137.180 shall be fined not more than one thousand dollars ($1,000) or imprisoned in the county jail not more than thirty (30) days, or both so fined and imprisoned. If the offender is a corporation, the principal officer or the officer or employee directly responsible for the violation, or both, shall be punished as provided in this subsection.

History. 4020a-35, 4223b-11, 4223c-9, 4224a-4, 4224a-9, 4224c-7: amend. Acts 1948, ch. 110, § 10; 1950, ch. 68, §§ 9, 12; 1952, ch. 195, § 1; 1962, ch. 92, § 10; 1962, ch. 198, § 2; 1966, ch. 255, § 134; 1986, ch. 496, § 13, effective August 1, 1986; 1992, ch. 403, § 9, effective July 14, 1992; 1994, ch. 13, § 2, effective June 30, 1994; 2005, ch. 85, § 345, effective June 20, 2005.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provision of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Opinions of Attorney General.

A license for vending machines which carry soft drinks, ice cream and tobacco would be issued under KRS 137.115 with enforcement by the fiscal court under this section. OAG 69-339 .

As part of the enforcement procedure, if the fiscal court so desires it can require the business be closed until such time as the fines are paid and the license obtained. OAG 69-339 .

When a fiscal court by resolution imposed a tax under KRS 137.115 , it had the implied authority to impose a civil penalty for failure to observe the resolution or fiscal court order, provided the penalty was a reasonable one. OAG 69-618 .

Any enforcement of the penalty provisions would be the responsibility of the county attorney. OAG 71-384 .

Every time a merchant who has not procured a county occupational license sells some item in his store he may be prosecuted for each such offense, but the fiscal court has no authority to close the affected business until such time as the operator pays the license tax. OAG 76-289 .

CHAPTER 138 Excise Taxes

138.010. Definitions for amusement admission tax. [Repealed.]

Compiler’s Notes.

This section (4281f-1) was repealed by Acts 1958, ch. 23, § 1.

138.020. State tax on amusement admissions; imposition; rates; exemptions. [Repealed.]

Compiler’s Notes.

This section (4281f-2, 4281f-4, 4281f-17; amend. Acts 1954, ch. 146, § 1; 1956 (4th Ex. Sess.), ch. 10, § 1) was repealed by Acts 1958, ch. 23, § 1.

138.030. Reports and payment of tax; civil penalty. [Repealed.]

Compiler’s Notes.

This section (4281f-3) was repealed by Acts 1958, ch. 23, § 1.

138.040. Permit to operate amusement business required; control of ticket sale and purchase. [Repealed.]

Compiler’s Notes.

This section (4281f-4) was repealed by Acts 1958, ch. 23, § 1.

138.045. Failure to procure permit required by KRS 138.040; penalty. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 160, § 1, effective May 18, 1956) was repealed by Acts 1958, ch. 23, § 1.

138.050. Owner to make bond or purchase official tickets or stamps; department records. [Repealed.]

Compiler’s Notes.

This section (4281f-9, 4281f-10, 4281f-11) was repealed by Acts 1958, ch. 23, § 1.

138.060. Use of official admission tickets or stamps; regulation by department. [Repealed.]

Compiler’s Notes.

This section (4281f-11, 4281f-12, 4281f-13) was repealed by Acts 1958, ch. 23, § 1.

138.070. Prohibition of sale or transfer of stamps; presumption of intended use. [Repealed.]

Compiler’s Notes.

This section (4281f-15, 4281f-16) was repealed by Acts 1958, ch. 23, § 1.

138.080. Prohibition of reuse or counterfeiting of official stamps or tickets. [Repealed.]

Compiler’s Notes.

This section (4281f-14) was repealed by Acts 1958, ch. 23, § 1.

138.090. Definitions for bank night awards tax. [Repealed.]

Compiler’s Notes.

This section (4281f-23) was repealed by Acts 1952, ch. 196, § 1.

138.100. State tax on bank night awards; imposition; rate; collection. [Repealed.]

Compiler’s Notes.

This section (4281f-24; 4281f-25) was repealed by Acts 1952, ch. 196, § 1.

138.110. Report and payment of tax. [Repealed.]

Compiler’s Notes.

This section (4281f-26) was repealed by Acts 1952, ch. 196, § 1.

138.120. Civil penalty for failure to report and pay tax; suspension or revocation of permit to operate amusement place. [Repealed.]

Compiler’s Notes.

This section (4281f-29) was repealed by Acts 1952, ch. 196, § 1.

Cigarettes

138.130. Definitions for KRS 138.130 to 138.205.

As used in KRS 138.130 to 138.205 :

    1. “Chewing tobacco” means any leaf tobacco that is not intended to be smoked and includes loose leaf chewing tobacco, plug chewing tobacco, and twist chewing tobacco. (1) (a) “Chewing tobacco” means any leaf tobacco that is not intended to be smoked and includes loose leaf chewing tobacco, plug chewing tobacco, and twist chewing tobacco.
    2. “Chewing tobacco” does not include snuff;
  1. “Cigarettes” means any roll for smoking made wholly or in part of tobacco, or any substitute for tobacco, irrespective of size or shape and whether or not the tobacco is flavored, adulterated, or mixed with any other ingredient, the wrapper or cover of which is made of paper or any other substance or material, except tobacco;
  2. “Cigarette tax” means the group of taxes consisting of:
    1. The tax imposed by KRS 138.140(1)(a);
    2. The surtax imposed by KRS 138.140(1)(b); and
    3. The surtax imposed by KRS 138.140(1)(c);
    1. “Closed vapor cartridge” means a pre-filled disposable cartridge that: (4) (a) “Closed vapor cartridge” means a pre-filled disposable cartridge that:
      1. Is intended to be used with or in a noncombustible product that employs a heating element, battery, power source, electronic circuit, or other electronic, chemical, or mechanical means, regardless of shape or size, to deliver vaporized or aerosolized nicotine, non-nicotine substances, or other materials to users that may be inhaling from the product such as any electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or other similar product or device and every variation thereof, regardless of whether marketed as such; and
      2. Contains nicotine or non-nicotine substances or other material consumed during the process of vaporization or aerosolization.
    2. “Closed vapor cartridge” does not include any product regulated as a drug or device by the United States Food and Drug Administration under Chapter V of the Food, Drug, and Cosmetic Act;
  3. “Department” means the Department of Revenue;
  4. “Distributor” means any person within this state in possession of tobacco products or vapor products for resale within this state on which the tobacco products tax imposed under KRS 138.140(2) has not been paid;
  5. “Half-pound unit” means a consumer-sized container, pouch, or package:
    1. Containing at least four (4) ounces but not more than eight (8) ounces of chewing tobacco by net weight;
    2. Produced by the manufacturer to be sold to consumers as a half-pound unit and not produced to be divided or sold separately; and
    3. Containing one (1) individual container, pouch, or package;
  6. “Manufacturer” means any person who manufactures or produces cigarettes or tobacco products within or without this state;
  7. “Nonresident wholesaler” means any person who purchases cigarettes directly from the manufacturer and maintains a permanent location outside this state where Kentucky cigarette tax evidence is attached or from where Kentucky cigarette tax is reported and paid;
    1. “Open vaping system” means: (10) (a) “Open vaping system” means:
      1. Any noncombustible product that employs a heating element, battery, power source, electronic circuit, or other electronic, chemical, or mechanical means, regardless of shape or size and including the component parts and accessories thereto, that uses a refillable liquid solution to deliver vaporized or aerosolized nicotine, non-nicotine substances, or other materials to users that may be inhaling from the product such as any electronic cigarette, electronic cigar, electronic cigarillo, electronic pipe, or similar product or device and every variation thereof, regardless of whether marketed as such; and
      2. Any liquid solution that is intended to be used with the product described in subparagraph 1. of this paragraph.
    2. “Open vaping system” does not include any product regulated as a drug or device by the United States Food and Drug Administration under Chapter V of the Food, Drug, and Cosmetic Act;
  8. “Person” means any individual, firm, copartnership, joint venture, association, municipal or private corporation whether organized for profit or not, the Commonwealth of Kentucky or any of its political subdivisions, an estate, trust, or any other group or combination acting as a unit;
  9. “Pound unit” means a consumer-sized container, pouch, or package:
    1. Containing more than eight (8) ounces but not more than sixteen (16) ounces of chewing tobacco by net weight;
    2. Produced by the manufacturer to be sold to consumers as a pound unit and not produced to be divided or sold separately; and
    3. Containing one (1) individual container, pouch, or package;
  10. “Reference products” means tobacco products, vapor products, or cigarettes made by a manufacturer specifically for an accredited state college or university to be held by the college or university until sale or transfer to a laboratory, hospital, medical center, institute, college or university, manufacturer, or other institution;
  11. “Resident wholesaler” means any person who purchases at least seventy-five percent (75%) of all cigarettes purchased by the wholesaler directly from the manufacturer on which the cigarette tax is unpaid, and who maintains an established place of business in this state where the wholesaler attaches cigarette tax evidence or receives untax-paid cigarettes;
  12. “Retail distributor” means a retailer who has obtained a retail distributor’s license under KRS 138.195 ;
  13. “Retailer” means any person who sells to a consumer or to any person for any purpose other than resale;
  14. “Sale” or “sell” means any transfer for a consideration, exchange, barter, gift, offer for sale, advertising for sale, soliciting an order for cigarettes or tobacco products, and distribution in any manner or by any means whatsoever;
  15. “Sale at retail” means a sale to any person for any other purpose other than resale;
  16. “Single unit” means a consumer-sized container, pouch, or package:
    1. Containing less than four (4) ounces of chewing tobacco by net weight;
    2. Produced by the manufacturer to be sold to consumers as a single unit and not produced to be divided or sold separately; and
    3. Containing one (1) individual container, pouch, or package;
    1. “Snuff” means tobacco that: (20) (a) “Snuff” means tobacco that:
      1. Is finely cut, ground, or powdered; and
      2. Is not for smoking.
    2. “Snuff” includes snus;
  17. “Sub-jobber” means any person who purchases cigarettes from a resident wholesaler, nonresident wholesaler, or unclassified acquirer licensed under KRS 138.195 on which the cigarette tax has been paid and makes them available to retailers for resale. No person shall make cigarettes available to retailers for resale unless the person certifies and establishes to the satisfaction of the department that firm arrangements have been made to regularly supply at least five (5) retail locations with Kentucky tax-paid cigarettes for resale in the regular course of business;
  18. “Tax evidence” means any stamps, metered impressions, or other indicia prescribed by the department by administrative regulation as a means of denoting the payment of cigarette taxes;
  19. “Tobacco products” means any smokeless tobacco products, smoking tobacco, chewing tobacco, and any kind or form of tobacco prepared in a manner suitable for chewing or smoking, or both, or any kind or form of tobacco that is suitable to be placed in an individual’s oral cavity, except cigarettes;
  20. “Tobacco products tax” means the tax imposed by KRS 138.140(2)(a)1. to 3.;
  21. “Transporter” means any person transporting untax-paid cigarettes obtained from any source to any destination within this state, other than cigarettes transported by the manufacturer thereof;
  22. “Unclassified acquirer” means any person in this state who acquires cigarettes from any source on which the cigarette tax has not been paid, and who is not a person otherwise required to be licensed under KRS 138.195 ;
  23. “Untax-paid cigarettes” means any cigarettes on which the cigarette tax imposed by KRS 138.140 has not been paid;
  24. “Untax-paid tobacco or vapor products” means any tobacco products or vapor products on which the tax imposed by KRS 138.140(2) has not been paid;
  25. “Vapor products” means a closed vapor cartridge or an open vaping system;
  26. “Vapor products tax” means tax imposed under KRS 138.140(2)(a)4. and 5.; and
  27. “Vending machine operator” means any person who operates one (1) or more cigarette vending machines.

HISTORY: 4281e-1: amend. Acts 1950, ch. 215; 1962, ch. 92, § 1; 1978, ch. 233, § 19, effective June 17, 1978; 1982, ch. 386, § 2, effective July 15, 1982; 2005, ch. 85, § 346, effective June 20, 2005; 2005, ch. 168, § 80, effective June 1, 2005; 2006, ch. 6, § 7, effective June 1, 2006; ch. 251, § 48, effective April 25, 2006; 2006, ch. 252, Pt. XXXIII, § 1, effective April 25, 2006; 2007, ch. 84, § 1, effective July 1, 2007; 2013, ch. 97, § 1, effective August 1, 2013; 2016 ch. 14, § 1, effective August 1, 2016; repealed and reenacted by 2018 ch. 171, § 24, effective April 14, 2018; repealed and reenacted by 2018 ch. 207, § 24, effective April 27, 2018.

Legislative Research Commission Notes.

(6/1/2006). This section was amended by 2006 Ky. Acts chs. 6, sec. 7; 252, Pt. XXXIII, sec. 1, and 251, sec. 48, which specifically amends this statute as it appears in Section 1 of Part XXXIII of 2006 Regular Session HB 380/EN. These do not appear to be in conflict and have been codified together.

138.132. Contraband products — Property used in substantial connection with knowing violation of KRS 138.130 to 138.205 — Seizure — Sale — Remission of forfeiture — Appeal.

  1. It is the declared legislative intent of KRS 138.130 to 138.205 that any untax-paid tobacco products or vapor products held, owned, possessed, or in control of any person other than as provided in KRS 138.130 to 138.205 are contraband and subject to seizure and forfeiture as set out in this section.
    1. If a retailer, who is not a licensed retail distributor, purchases tobacco products or vapor products from a licensed distributor and the purchase invoice does not contain the separate identification and display of the tobacco products tax or vapor products tax, the retailer shall, within twenty-four (24) hours, notify the department in writing. (2) (a) If a retailer, who is not a licensed retail distributor, purchases tobacco products or vapor products from a licensed distributor and the purchase invoice does not contain the separate identification and display of the tobacco products tax or vapor products tax, the retailer shall, within twenty-four (24) hours, notify the department in writing.
    2. The notification shall include the name and address of the person from whom the tobacco products or vapor products were purchased and a copy of the purchase invoice.
    3. The tobacco products or vapor products for which the required information was not included on the invoice shall be retained by the retailer, and not sold, for a period of fifteen (15) days after giving the proper notice as required by this subsection.
    4. After the fifteen (15) day period, the retailer may pay the tax due on the tobacco products or vapor products described in paragraph (c) of this subsection according to administrative regulations promulgated by the department, and after which may proceed to sell the tobacco products or vapor products.
  2. If a retailer, who is not a licensed retail distributor, purchases tobacco products or vapor products for resale from a person not licensed under KRS 138.195(7), which is prohibited by KRS 138.140(2), the retailer may not sell those tobacco products or vapor products until the retailer applies for and is granted a retail distributor’s license under KRS 138.195(7)(b).
  3. If, upon examination, the department determines that the retailer has failed to comply with the provisions of subsection (3) of this section, the retailer shall pay all tax and interest and applicable penalties due and the following shall apply:
    1. For the first offense, an additional penalty shall be assessed equal to ten percent (10%) of the tax due;
    2. For a second offense within three (3) years or less of the first offense, an additional penalty shall be assessed equal to twenty-five percent (25%) of the tax due; and
    3. For a third offense or subsequent offense within three (3) years or less of the first offense, the tobacco products or vapor products shall be contraband and subject to seizure and forfeiture as provided in subsection (5) of this section.
    1. Whenever a representative of the department finds contraband tobacco products or contraband vapor products within the borders of this state, the tobacco products or vapor products shall be immediately seized and stored in a depository to be determined by the representative. (5) (a) Whenever a representative of the department finds contraband tobacco products or contraband vapor products within the borders of this state, the tobacco products or vapor products shall be immediately seized and stored in a depository to be determined by the representative.
    2. At the time of seizure, the representative shall deliver to the person in whose custody the tobacco products or vapor products are found a receipt for the seized products. The receipt shall state on its face that any inquiry concerning any tobacco products or vapor products seized shall be directed to the commissioner of the Department of Revenue, Frankfort, Kentucky.
    3. Immediately upon seizure, the representative shall notify the commissioner of the nature and quantity of the tobacco products or vapor products seized. Any seized tobacco products or vapor products shall be held for a period of twenty (20) days, and if after that period no person has claimed the tobacco products or vapor products as his or her property, the commissioner shall cause the tobacco products or vapor products to be destroyed.
  4. All fixtures, equipment, materials, and personal property used in substantial connection with the sale or possession of tobacco products or vapor products involved in a knowing and intentional violation of KRS 138.130 to 138.205 shall be contraband and subject to seizure and forfeiture as follows:
    1. The department’s representative shall seize the property and store the property in a safe place selected by the representative; and
    2. The representative shall proceed as provided in KRS 138.165(2). The commissioner shall cause the property to be sold after notice published pursuant to KRS Chapter 424. The proceeds from the sale shall be applied as provided in KRS 138.165(2).
  5. The owner or any person having an interest in the fixtures, materials, or personal property that has been seized as provided by subsection (6) of this section may apply to the commissioner for remission of the forfeiture for good cause shown. If it is shown to the satisfaction of the commissioner that the owner or person having an interest in the property was without fault, the department shall remit the forfeiture.
  6. Any party aggrieved by an order entered under this section may appeal to the Kentucky Claims Commission pursuant to KRS 49.220 .

HISTORY: Enact. Acts 2013, ch. 97, § 5, effective January 1, 2014; 2017 ch. 74, § 81, effective June 29, 2017; 2018 ch. 171, § 25, effective April 14, 2018; 2018 ch. 207, § 25, effective April 27, 2018; 2020 ch. 91, § 51, effective August 1, 2020.

138.135. Manufacturers to report all shipments into or within state — Records to be kept by licensed distributors, retail distributors, and retailers.

    1. Every manufacturer, whether located in this state or outside this state, that ships tobacco products or vapor products to a distributor, retailer, retail distributor, or any other person located in this state shall file a report with the department on or before the twentieth day of each month identifying all such shipments made by the manufacturer during the preceding month. The department, within its discretion, may allow a manufacturer to file the report for periods other than monthly. (1) (a) Every manufacturer, whether located in this state or outside this state, that ships tobacco products or vapor products to a distributor, retailer, retail distributor, or any other person located in this state shall file a report with the department on or before the twentieth day of each month identifying all such shipments made by the manufacturer during the preceding month. The department, within its discretion, may allow a manufacturer to file the report for periods other than monthly.
    2. The reports shall identify:
      1. The names and addresses of the persons in this state to whom the shipments were made;
      2. The quantities of tobacco products and vapor products shipped, by type of product and brand; and
      3. Any other information the department may require.
  1. Each licensed distributor and each licensed retail distributor shall keep in each licensed place of business complete and accurate records for that place of business, including:
    1. Itemized invoices of:
      1. Tobacco products and vapor products purchased, manufactured, imported, or caused to be imported into this state from outside this state, or shipped or transported to other distributors or retailers in this state or outside this state, including type of product and brand;
      2. All sales of tobacco products and vapor products, including sales of tobacco products and vapor products manufactured or produced in this state, including type of product and brand; and
      3. All tobacco products and vapor products transferred to retail outlets owned or controlled by the licensed distributor, including type of product and brand; and
    2. Any other records required by the department.
  2. Each retailer of tobacco products or vapor products shall keep complete and accurate records of all purchases of tobacco products or vapor products, including invoices that identify:
    1. The distributor’s name and address;
    2. The name, quantity, and purchase price of the product purchased;
    3. The license number of the distributor licensed under KRS 138.195(7); and
    4. The tobacco products tax or the vapor products tax imposed by KRS 138.140 .
  3. All books, records, invoices, and documents required by this section shall be preserved, in a form prescribed by the department, for not less than four (4) years from the making of the records unless the department authorizes, in writing, the destruction of the records.

HISTORY: Enact. Acts 2013, ch. 97, § 4, effective July 1, 2013; 2018 ch. 171, § 26, effective April 14, 2018; 2018 ch. 207, § 26, effective April 27, 2018; 2020 ch. 91, § 52, effective August 1, 2020.

138.140. Taxation of cigarettes, tobacco products, and vapor products — Taxes not applicable to reference tobacco products — Rates — Liability for and remittance of tax — Administrative regulations — General Assembly’s recognition of effect of increased tobacco taxes on public health — Potential reduction of tax on modified risk tobacco product.

    1. A tax shall be paid on the sale of cigarettes within the state at a proportionate rate of three cents ($0.03) on each twenty (20) cigarettes. (1) (a) A tax shall be paid on the sale of cigarettes within the state at a proportionate rate of three cents ($0.03) on each twenty (20) cigarettes.
    2. Effective July 1, 2018, a surtax shall be paid in addition to the tax levied in paragraph (a) of this subsection at a proportionate rate of one dollar and six cents ($1.06) on each twenty (20) cigarettes.
    3. A surtax shall be paid in addition to the tax levied in paragraph (a) of this subsection and in addition to the surtax levied by paragraph (b) of this subsection, at a proportionate rate of one cent ($0.01) on each twenty (20) cigarettes. The revenues from this surtax shall be deposited in the cancer research institutions matching fund created in KRS 164.043 .
    4. The surtaxes imposed by paragraphs (b) and (c) of this subsection shall be paid at the time that the tax imposed by paragraph (a) of this subsection is paid.
    1. An excise tax is hereby imposed upon every distributor for the privilege of selling tobacco products in this state at the following rates: (2) (a) An excise tax is hereby imposed upon every distributor for the privilege of selling tobacco products in this state at the following rates:
      1. Upon snuff at the rate of nineteen cents ($0.19) per each one and one- half (1-1/2) ounces or portion thereof by net weight sold;
      2. Upon chewing tobacco at the rate of:
        1. Nineteen cents ($0.19) per each single unit sold;
        2. Forty cents ($0.40) per each half-pound unit sold; or
        3. Sixty-five cents ($0.65) per each pound unit sold.
      3. Upon tobacco products sold, at the rate of fifteen percent (15%) of the actual price for which the distributor sells tobacco products, except snuff and chewing tobacco, within the Commonwealth;
      4. Upon closed vapor cartridges, one dollar and fifty cents ($1.50) per cartridge; and
      5. Upon open vaping systems, fifteen percent (15%) of the actual price for which the distributor sells the open vaping system.
    2. The net weight posted by the manufacturer on the container, pouch, or package or on the manufacturer’s invoice shall be used to calculate the tax due on snuff or chewing tobacco.
      1. A retailer located in this state shall not purchase tobacco products for resale to consumers from any person within or outside this state unless that person is a distributor licensed under KRS 138.195(7)(a) or the retailer applies for and is granted a retail distributor’s license under KRS 138.195(7)(b) for the privilege of purchasing untax-paid tobacco products and remitting the tax as provided in this paragraph. (c) 1. A retailer located in this state shall not purchase tobacco products for resale to consumers from any person within or outside this state unless that person is a distributor licensed under KRS 138.195(7)(a) or the retailer applies for and is granted a retail distributor’s license under KRS 138.195(7)(b) for the privilege of purchasing untax-paid tobacco products and remitting the tax as provided in this paragraph.
      2. A licensed retail distributor of tobacco products shall be subject to the excise tax as follows:
        1. On purchases of untax-paid snuff, at the same rate levied by paragraph (a)1. of this subsection;
        2. On purchases of untax-paid chewing tobacco, at the same rates levied by paragraph (a)2. of this subsection;
        3. On purchases of untax-paid tobacco products, except snuff and chewing tobacco, fifteen percent (15%) of the total purchase price as invoiced by the retail distributor’s supplier;
        4. On purchases of untax-paid closed vapor cartridges, at the same rate levied by paragraph (a)4. of this subsection; and
        5. On purchases of untax-paid open vaping systems, fifteen percent (15%) of the total purchase price as invoiced by the retail distributor’s supplier.
      1. The licensed distributor that first possesses tobacco products or vapor products for sale to a retailer in this state or for sale to a person who is not licensed under KRS 138.195(7) shall be the distributor liable for the tax imposed by this subsection except as provided in subparagraph 2. of this paragraph. (d) 1. The licensed distributor that first possesses tobacco products or vapor products for sale to a retailer in this state or for sale to a person who is not licensed under KRS 138.195(7) shall be the distributor liable for the tax imposed by this subsection except as provided in subparagraph 2. of this paragraph.
      2. A distributor licensed under KRS 138.195(7)(a) may sell tobacco products or vapor products to another distributor licensed under KRS 138.195(7)(a) without payment of the excise tax. In such case, the purchasing licensed distributor shall be the distributor liable for the tax.
      3. A licensed distributor or licensed retail distributor shall:
        1. Identify and display the distributor’s or retail distributor’s license number on the invoice to the retailer; and
        2. Identify and display the excise tax separately on the invoice to the retailer. If the excise tax is included as part of the product’s sales price, the licensed distributor or licensed retail distributor shall list the total excise tax in summary form by tax type with invoice totals.
      4. It shall be presumed that the excise tax has not been paid if the licensed distributor or licensed retail distributor does not comply with subparagraph 3. of this paragraph.
    3. No tax shall be imposed on tobacco products or vapor products under this subsection that are not within the taxing power of this state under the Commerce Clause of the United States Constitution.
    1. The taxes imposed by subsections (1) and (2) of this section: (3) (a) The taxes imposed by subsections (1) and (2) of this section:
      1. Shall not apply to reference products; and
      2. Shall be paid only once, regardless of the number of times the cigarettes or tobacco products may be sold.
    2. The taxes imposed by subsection (1)(a) and (b) and subsection (2) of this section shall be reduced by:
      1. Fifty percent (50%) on any product as to which a modified risk tobacco product order is issued under 21 U.S.C. sec. 387 k(g)(1); or
      2. Twenty-five percent (25%) for any product as to which a modified risk tobacco product order is issued under 21 U.S.C. sec. 387 k(g)(2).
  1. A reference product shall carry a marking labeling the contents as a research cigarette, research vapor product, or a research tobacco product to be used only for tobacco-health research and experimental purposes and shall not be offered for sale, sold, or distributed to consumers.
  2. The department may prescribe forms and promulgate administrative regulations to execute and administer the provisions of this section.
  3. The General Assembly recognizes that increasing taxes on tobacco products should reduce consumption, and therefore result in healthier lifestyles for Kentuckians. The relative taxes on tobacco products proposed in this section reflect the growing data from scientific studies suggesting that although smokeless tobacco poses some risks, those health risks are significantly less than the risks posed by other forms of tobacco products. Moreover, the General Assembly acknowledges that some in the public health community recognize that tobacco harm reduction should be a complementary public health strategy regarding tobacco products. Taxing tobacco products according to relative risk is a rational tax policy and may well serve the public health goal of reducing smoking-related mortality and morbidity and lowering health care costs associated with tobacco-related disease.
  4. Any person subject to the taxes imposed under subsections (1) and (2) of this section that:
    1. Files an application related to a modified risk tobacco product shall report to the department that an application has been filed within thirty (30) days of that filing; and
    2. Receives an order authorizing the marketing of a modified risk tobacco product shall report to the department that an authorizing order has been received.
  5. Upon receipt of the information required by subsection (7)(b) of this section, the department shall reduce the tax imposed on the modified risk tobacco product as required by subsection (3)(b) of this section on the first day of the calendar month following the expiration of forty-five (45) days following receipt of the information required by subsection (7)(b) of this section.

If the container, pouch, or package on which the tax is levied contains more than sixteen (16) ounces by net weight, the rate that shall be applied to the unit shall equal the sum of sixty-five cents ($0.65) plus nineteen cents ($0.19) for each increment of four (4) ounces or portion thereof exceeding sixteen (16) ounces sold;

History. 4281e-2 to 4281e-4, 4281e-10, 4281e-11: amend. Acts 1954, ch. 77, § 1; 1960, ch. 5, Art. IV, § 5; 1962, ch. 92, § 2; 1970, ch. 255, § 4; 1976, ch. 155, § 2; 2005, ch. 168, § 81, effective June 1, 2005; 2005, ch. 173, Part XXV, § 1, effective March 20, 2005; 2006, ch. 251, §§ 49, 50, and 51, effective April 25, 2006; ch. 252, Pt. XXXII, § 2, effective April 25, 2006; 2006, ch. 252, Pt. XXXIII, § 2, effective April 25, 2006; 2009, ch. 2, § 1, effective February 13, 2009; 2013, ch. 97, § 2, effective August 1, 2013; 2016 ch. 14, § 2, effective August 1, 2016; 2018 ch. 171, § 27, effective April 14, 2018; 2018 ch. 207, § 27, effective April 27, 2018; 2020 ch. 91, § 53, effective August 1, 2020.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 150, the amendments made to this statute in that Act apply to the sale of cigarettes on or after July 1, 2018.

(4/25/2006). This section was amended by 2006 Ky. Acts ch. 252, Pt. XXXII, sec. 2, and Pt. XXXIII, sec. 2; and ch. 251, secs. 49, 50, and 51, which specifically amend this statute as it appears in Section 2 of Part XXXIII of 2006 Regular Session HB 380/EN.

NOTES TO DECISIONS

Cited in:

Frito-Lay v. United States EEOC, 964 F. Supp. 236, 1997 U.S. Dist. LEXIS 6754 (W.D. Ky. 1997 ).

Opinions of Attorney General.

Since the sales tax imposed by KRS 139.200 is a license tax upon the retailer for the privilege of engaging in the business of selling tangible personal property, and the cigarette tax imposed by this section is a specific excise tax which applies one time to a particular quantity of cigarettes regardless of the number of times they are sold, the application of the sales tax to the gross receipts from sales of cigarettes is not double taxation. OAG 60-1089 .

Since cigarette excise tax is not an element of the cost of the package of cigarettes sold to the purchaser-consumer by the retailer, it should be deducted from retailer-vending machine operator’s gross receipts in determining the amount of gross receipts liable to the five percent (5%) retail sales tax and this also applies to other retailers who deduct the three cents per package before calculating sales tax charged to the ultimate consumer. OAG 75-169 .

Research References and Practice Aids

Cross-References.

Unfair cigarette sale law to be enforced by the Revenue Cabinet, KRS 365.260 to 365.390.

Kentucky Law Journal.

Allphin, 1954 Kentucky Tax Legislation, 43 Ky. L.J. 76 (1954).

138.143. Floor stocks tax on cigarettes, snuff, and other tobacco products — Rates — Required returns — Installment payments.

  1. Every retailer, sub-jobber, resident wholesaler, nonresident wholesaler, and unclassified acquirer shall:
    1. Take a physical inventory of all cigarettes in packages bearing Kentucky tax stamps, and all unaffixed Kentucky cigarette tax stamps possessed by them or in their control at 11:59 p.m. on June 30, 2018. Inventory of cigarettes in vending machines may be accomplished by:
      1. Taking an actual physical inventory;
      2. Estimating the cigarettes in vending machines by reporting one-half (1/2) of the normal fill capacity of the machines, as reflected in individual inventory records maintained for vending machines; or
      3. Using a combination of the methods prescribed in subparagraphs 1. and 2. of this paragraph;
    2. File a return with the department on or before July 10, 2018, showing the entire wholesale and retail inventories of cigarettes in packages bearing Kentucky tax stamps, and all unaffixed Kentucky cigarette tax stamps possessed by them or in their control at 11:59 p.m. on June 30, 2018; and
    3. Pay a floor stock tax at a proportionate rate equal to fifty cents ($0.50) on each twenty (20) cigarettes in packages bearing a Kentucky tax stamp and unaffixed Kentucky tax stamps in their possession or control at 11:59 p.m. on June 30, 2018.
  2. Every retailer and sub-jobber shall:
      1. Take a physical inventory of all units of snuff possessed by them or in their control at 11:59 p.m. on March 31, 2009; (a) 1. Take a physical inventory of all units of snuff possessed by them or in their control at 11:59 p.m. on March 31, 2009;
      2. File a return with the department on or before April 10, 2009, showing the entire inventory of snuff possessed by them or in their control at 11:59 p.m. on March 31, 2009; and
      3. Pay a floor stock tax at a proportionate rate equal to nine and one-half cents ($0.095) on each unit of snuff in their possession or control at 11:59 p.m. on March 31, 2009; and
      1. a. Take a physical inventory of all other tobacco products possessed by them or in their control at 11:59 p.m. on March 31, 2009; (b) 1. a. Take a physical inventory of all other tobacco products possessed by them or in their control at 11:59 p.m. on March 31, 2009;
        1. As used in this paragraph, “purchase price” means the actual amount paid for the other tobacco products subject to the tax imposed by this paragraph. 2. a. As used in this paragraph, “purchase price” means the actual amount paid for the other tobacco products subject to the tax imposed by this paragraph.
        2. If the retailer or sub-jobber cannot determine the actual amount paid for each item of other tobacco product, the retailer or sub-jobber may use as the purchase price the amount per unit paid as reflected on the most recent invoice received prior to April 1, 2009, for the same category of other tobacco product.
        3. To prevent double taxation, if the invoice used by the retailer or sub-jobber to determine the purchase price of the other tobacco product does not separately state the tax paid by the wholesaler, the retailer or sub-jobber may reduce the amount paid per unit by seven and one-half percent (7.5%).

      b. File a return with the department on or before April 10, 2009, showing the entire inventories of other tobacco products possessed by them or in their control at 11:59 p.m. on March 31, 2009; and

      c. Pay a floor stock tax at a proportionate rate equal to seven and one-half percent (7.5%) on the purchase price of other tobacco products in their possession or control at 11:59 p.m. on March 31, 2009.

    1. The taxes imposed by this section may be paid in three (3) installments. The first installment, in an amount equal to at least one-third (1/3) of the total amount due, shall be remitted with the return provided by the department on or before July 10, 2018. The second installment, in an amount that brings the total amount paid to at least two-thirds (2/3) of the total amount due, shall be remitted on or before August 10, 2018. The third installment, in an amount equal to the remaining balance, shall be remitted on or before September 10, 2018. (3) (a) The taxes imposed by this section may be paid in three (3) installments. The first installment, in an amount equal to at least one-third (1/3) of the total amount due, shall be remitted with the return provided by the department on or before July 10, 2018. The second installment, in an amount that brings the total amount paid to at least two-thirds (2/3) of the total amount due, shall be remitted on or before August 10, 2018. The third installment, in an amount equal to the remaining balance, shall be remitted on or before September 10, 2018.
    2. Interest shall not be imposed against any outstanding installment payment not yet due from any retailer, sub-jobber, resident wholesaler, nonresident wholesaler, or unclassified acquirer who files the return and makes payments as required under this section.
    3. Any retailer, sub-jobber, resident wholesaler, nonresident wholesaler, or unclassified acquirer who fails to file a return or make a payment on or before the dates provided in this section shall, in addition to the tax, pay interest at the tax interest rate as defined in KRS 131.010(6) from the date on which the return was required to be filed.

HISTORY: Enact. Acts 2005, ch. 168, § 82, effective May 31, 2005 and ch. 173, Part XXV, § 2, effective March 20, 2005; 2009, ch. 2, § 2, effective February 13, 2009; 2018 ch. 171, § 28, effective April 14, 2018; 2018 ch. 207, § 28, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(2/13/2009). A reference to “paragraphs (a) and (b) of this subsection” in subsection (1)(a)3. of this statute has been changed in codification to “subparagraphs 1. and 2. of this paragraph” by the Reviser of Statutes under KRS 7.136(1) to correct an oversight in the drafting of 2009 Ky. Acts ch. 2, sec. 2, which inserted various subsection, paragraph, and subparagraph designations into this statute, but failed to change the existing internal reference.

(5/31/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

138.145. “Floor stocks” tax on cigarettes for 1954. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 77, § 3) was repealed by Acts 1962, ch. 92, § 3.

138.146. Evidence of cigarette tax payments — When payment for units of cigarette tax evidence shall be made — Consequence of failure to make timely payment.

  1. The cigarette tax shall be due when any licensed wholesaler or unclassified acquirer takes possession within this state of untax-paid cigarettes.
    1. The cigarette tax shall be paid by the purchase of stamps by a resident wholesaler within forty-eight (48) hours after the wholesaler receives the cigarettes. (2) (a) The cigarette tax shall be paid by the purchase of stamps by a resident wholesaler within forty-eight (48) hours after the wholesaler receives the cigarettes.
    2. A stamp shall be affixed to each package of an aggregate denomination not less than the amount of the cigarette tax on the package.
    3. The affixed stamp shall be prima facie evidence of payment of the cigarette tax.
    4. Unless stamps have been previously affixed, they shall be affixed by each resident wholesaler prior to the delivery of any cigarettes to a retail location or any person in this state.
    5. The evidence of cigarette tax payment shall be affixed to each individual package of cigarettes by a nonresident wholesaler prior to the introduction or importation of the cigarettes into the territorial limits of this state.
    6. The evidence of cigarette tax payment shall be affixed by an unclassified acquirer within twenty-four (24) hours after the cigarettes are received by the unclassified acquirer.
    1. The department shall by regulation prescribe the form of cigarette tax evidence, the method and manner of the sale and distribution of cigarette tax evidence, and the method and manner that tax evidence shall be affixed to the cigarettes. (3) (a) The department shall by regulation prescribe the form of cigarette tax evidence, the method and manner of the sale and distribution of cigarette tax evidence, and the method and manner that tax evidence shall be affixed to the cigarettes.
    2. All cigarette tax evidence prescribed by the department shall be designed and furnished in a fashion to permit identification of the person that affixed the cigarette tax evidence to the particular package of cigarettes, by means of numerical rolls or other mark on the cigarette tax evidence.
    3. The department shall maintain for at least three (3) years information identifying the person that affixed the cigarette tax evidence to each package of cigarettes. This information shall not be kept confidential or exempt from disclosure to the public through open records.
    1. Units of cigarette tax evidence shall be sold at their face value, but the department shall allow as compensation to any licensed wholesaler an amount of tax evidence equal to thirty cents ($0.30) face value for each three dollars ($3) of tax evidence purchased at face value and attributable to the tax assessed in KRS 138.140(1)(a). No compensation shall be allowed for tax evidence purchased at face value attributable to the surtaxes imposed in KRS 138.140(1)(b) or (c). (4) (a) Units of cigarette tax evidence shall be sold at their face value, but the department shall allow as compensation to any licensed wholesaler an amount of tax evidence equal to thirty cents ($0.30) face value for each three dollars ($3) of tax evidence purchased at face value and attributable to the tax assessed in KRS 138.140(1)(a). No compensation shall be allowed for tax evidence purchased at face value attributable to the surtaxes imposed in KRS 138.140(1)(b) or (c).
    2. The department shall have the power to withhold compensation as provided in paragraph (a) of this subsection from any licensed wholesaler for failure to abide by any provisions of KRS 138.130 to 138.205 or any administrative regulations promulgated thereunder. Any refund or credit for unused cigarette tax evidence shall be reduced by the amount allowed as compensation at the time of purchase.
    1. Payment for units of cigarette tax evidence shall be made at the time the units are sold, unless the licensed wholesaler: (5) (a) Payment for units of cigarette tax evidence shall be made at the time the units are sold, unless the licensed wholesaler:
      1. Has filed with the department a bond, issued by a corporation authorized to do surety business in Kentucky, in an amount equal to or greater than the amount of payment for the units of cigarette tax evidence purchased, plus all penalties, interest, and collection fees applicable to that amount, should the taxpayer default on the payment; and
      2. Has registered and agrees to make the payment of tax to the department electronically.
    2. Except as provided in paragraph (c) of this subsection, if the licensed wholesaler qualifies under paragraph (a) of this subsection, the licensed wholesaler shall have ten (10) days from the date of purchase to remit payment of cigarette tax, without the assessment of civil penalties under KRS 131.180 or interest under KRS 131.183 during the ten (10) day period.
      1. The ten (10) day payment period under paragraph (b) of this subsection shall not apply to the payment for units of cigarette tax evidence during the last ten (10) days of the month of June during each fiscal year. (c) 1. The ten (10) day payment period under paragraph (b) of this subsection shall not apply to the payment for units of cigarette tax evidence during the last ten (10) days of the month of June during each fiscal year.
      2. All payments for units of cigarette tax evidence made under paragraph (b) of this subsection during the month of June shall be made the earlier of:
        1. The ten (10) day period; or
        2. June 25.
    3. If the licensed wholesaler does not make the payment of cigarette tax within the ten (10) day period, or within the period of time under paragraph (c) of this subsection, the department shall:
      1. Revoke the license required under KRS 138.195 ;
      2. Issue a demand for payment in an amount equal to the cigarette tax evidence purchased, plus all penalties, interest, and collection fees applicable to that amount; and
      3. Require immediate payment of the bond.
    1. The bond required under subsection (5) of this section shall be on a form and with a surety approved by the department. (6) (a) The bond required under subsection (5) of this section shall be on a form and with a surety approved by the department.
    2. The licensed wholesaler shall be named as the principal obligor and the department shall be named as the obligee within the bond.
    3. The bond shall be conditioned upon the payment by the licensed wholesaler of all cigarette tax imposed by the Commonwealth.
    4. The provisions of KRS 131.110 shall not apply to the demand for payment required under subsection (5)(c)2. of this section.
    1. No tax evidence may be affixed, or used in any way, by any person other than the person purchasing the evidence from the department. (7) (a) No tax evidence may be affixed, or used in any way, by any person other than the person purchasing the evidence from the department.
    2. Tax evidence may not be transferred or negotiated, and may not, by any scheme or device, be given, bartered, sold, traded, or loaned to any other person.
    3. Unaffixed tax evidence may be returned to the department for credit or refund for any reason satisfactory to the department.
    1. In the event any retailer receives into his possession cigarettes to which evidence of Kentucky tax payment is not properly affixed, the retailer shall, within twenty-four (24) hours, notify the department of the receipt. (8) (a) In the event any retailer receives into his possession cigarettes to which evidence of Kentucky tax payment is not properly affixed, the retailer shall, within twenty-four (24) hours, notify the department of the receipt.
    2. The notification to the department shall be in writing, stating the name of the person from whom the cigarettes were received and the quantity of those cigarettes.
    3. The written notice may be:
      1. Given to any field agent of the department; or
      2. Directed to the commissioner of the Department of Revenue, Frankfort, Kentucky.
    4. If the notice is given by means of the United States mail, it shall be sent by certified mail.
    5. Any such cigarettes shall be retained by the retailer, and not sold, for a period of fifteen (15) days after giving the notice provided in this subsection.
    6. The retailer may, at his option, pay the tax due on those cigarettes according to administrative regulations prescribed by the department, and proceed to sell those cigarettes after the payment.
    1. Cigarettes stamped with the cigarette tax evidence of another state shall at no time be commingled with cigarettes on which the Kentucky cigarette tax evidence has been affixed. (9) (a) Cigarettes stamped with the cigarette tax evidence of another state shall at no time be commingled with cigarettes on which the Kentucky cigarette tax evidence has been affixed.
    2. Any licensed wholesaler, licensed sub-jobber, or licensed vending machine operator may hold cigarettes stamped with the tax evidence of another state for any period of time, subsection (2) of this section notwithstanding.

HISTORY: Enact. Acts 1962, ch. 92, § 5; 1982, ch. 386, § 3, effective July 15, 1982; 1990, ch. 216, § 1, effective July 13, 1990; 2001, ch. 150, § 11, effective January 1, 2002; 2005, ch. 85, § 347, effective June 20, 2005; 2005, ch. 168, § 83, effective June 1, 2005; 2005, ch. 173, Part XXV, § 3, effective March 20, 2005; 2018 ch. 171, § 29, effective April 14, 2018; 2018 ch. 207, § 29, effective April 27, 2018; 2020 ch. 91, § 39, effective August 1, 2020.

Legislative Research Commission Notes.

(6/1/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

1. Relationship to Other Law.

Because there was evidence of the intent to deprive Kentucky of its property (the purpose of transferring title to cigarettes was a scheme designed to avoid the payment of excise tax on the sale of cigarettes located in Kentucky), the government had alleged the elements of wire fraud. United States v. Bello, 2013 U.S. Dist. LEXIS 67624 (W.D. Ky. May 13, 2013).

Cited in:

Pulaski Fiscal Court v. Floyd, 374 S.W.2d 863, 1964 Ky. LEXIS 399 ( Ky. 1964 ).

138.150. Control of form, sale and distribution of stamps by department; allowance to wholesaler for affixing stamps and reporting. [Repealed.]

Compiler’s Notes.

This section (4281e-5, 4281e-10: amend. Acts 1954, ch. 77, § 2) was repealed by Acts 1962, ch. 92, § 3.

138.155. Payment of tax without affixing evidence to individual packs.

In lieu of the affixing of cigarette tax evidence to individual packages of cigarettes as the means of denoting payment of the cigarette tax, the department may prescribe, by an administrative regulation sufficient to protect the revenue of this state, a method of reporting, payment, and collection of the cigarette tax, without the affixing of tax evidence to individual packages of cigarettes. In the event a system is adopted by administrative regulation, no compensation for reporting for the purpose of such tax in excess of two percent (2%) of the tax due shall be allowed to any person.

HISTORY: Enact. Acts 1962, ch. 92, § 6; 2005, ch. 85, § 348, effective June 20, 2005; 2018 ch. 171, § 30, effective April 14, 2018; 2018 ch. 207, § 30, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

138.160. Cancellation of tax stamps on cigarettes manufactured for shipment and sale outside state, or sold by resident wholesaler to nonresident retailer; refund. [Repealed.]

Compiler’s Notes.

This section (4281e-6: amend. Acts 1942, ch. 159, §§ 1, 2) was repealed by Acts 1962, ch. 92, § 3.

138.165. Contraband cigarettes — Vending machines and motor vehicles — Seizure — Sale — Remission of forfeiture — Appeal.

  1. It is declared to be the legislative intent of KRS 138.130 to 138.205 that any untax-paid cigarettes held, owned, possessed, or in control of any person other than as provided in KRS 138.130 to 138.205 are contraband and subject to seizure and forfeiture as set out in this section.
    1. Whenever any peace officer of this state, or any representative of the department, finds any untax-paid cigarettes within the borders of this state in the possession of any person other than a licensee authorized to possess untax-paid cigarettes by the provisions of KRS 138.130 to 138.205 , those cigarettes shall be immediately seized and stored in a depository to be selected by the officer or agent. (2) (a) Whenever any peace officer of this state, or any representative of the department, finds any untax-paid cigarettes within the borders of this state in the possession of any person other than a licensee authorized to possess untax-paid cigarettes by the provisions of KRS 138.130 to 138.205 , those cigarettes shall be immediately seized and stored in a depository to be selected by the officer or agent.
    2. At the time of seizure, the officer or agent shall deliver to the person in whose custody the cigarettes are found a receipt for the cigarettes. The receipt shall state on its face that any inquiry concerning any goods seized shall be directed to the commissioner of the Department of Revenue, Frankfort, Kentucky.
    3. Immediately upon seizure, the officer or agent shall notify the commissioner of the department of the nature and quantity of the goods seized.
    4. Any seized goods shall be held for a period of twenty (20) days and if after that period no person has claimed the cigarettes, the commissioner shall cause the same to be exposed to public sale to any person authorized to purchase untax-paid cigarettes. The sale shall be on notice published pursuant to KRS Chapter 424. All proceeds, less the cost of sale, from the sale shall be paid into the Kentucky State Treasury for general fund purposes.
  2. It is declared to be the legislative intent that any vending machine used for dispensing cigarettes on which Kentucky cigarette tax has not been paid is contraband and subject to seizure and forfeiture. In the event any peace officer or agent of the department finds any vending machine within the borders of this state dispensing untax-paid cigarettes, the officer or agent shall immediately seize the vending machine and store the vending machine in a safe place selected by the officer or agent. The officer or agent shall proceed as provided in subsection (2) of this section and the commissioner of the department shall cause the vending machine to be sold, and the proceeds applied, as established in subsection (2) of this section.
  3. No untax-paid cigarettes shall be transported within this state by any person other than a manufacturer or a person licensed under the provisions of KRS 138.195 . It is declared to be the legislative intent that any motor vehicle used to transport any such cigarettes by other persons is contraband and subject to seizure and forfeiture. If any peace officer or agent of the department finds any such motor vehicle, the vehicle shall be seized immediately and stored in a safe place. The peace officer or agent of the department shall proceed as provided in subsection (2) of this section and the commissioner of the department shall cause the motor vehicle to be sold, and the proceeds applied, as established in subsection (2) of this section.
    1. The owner or any person having an interest in any goods, machines or vehicles seized as provided under subsections (1) to (4) of this section may apply to the commissioner of the department for remission of the forfeiture for good cause shown. (5) (a) The owner or any person having an interest in any goods, machines or vehicles seized as provided under subsections (1) to (4) of this section may apply to the commissioner of the department for remission of the forfeiture for good cause shown.
    2. If it is shown to the satisfaction of the department that the owner was without fault in the possession, dispensing, or transportation of the untax-paid cigarettes, the department shall remit the forfeiture.
    3. If the department determines that the possession, dispensing, or transportation of untax-paid cigarettes was willful or intentional, the department may nevertheless remit the forfeiture on condition that the owner pay a penalty to be prescribed by the department of not more than fifty percent (50%) of the value of the property forfeited. All taxes due on untax-paid cigarettes shall be paid in addition to the penalty, if any.
  4. Any party aggrieved by an order entered hereunder may appeal to the Kentucky Claims Commission pursuant to KRS 49.220 .

HISTORY: Enact. Acts 1962, ch. 92, § 7(1) to (6); 1964, ch. 141, § 25; 1966, ch. 239, § 140; 2005, ch. 168, § 84, effective June 1, 2005; 2005, ch. 85, § 349, effective June 20, 2005; 2017 ch. 74, § 82, effective June 29, 2017; 2018 ch. 171, § 31, effective April 14, 2018; 2018 ch. 207, § 31, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/1/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

1. Relationship to Other Law.

Because there was evidence of the intent to deprive Kentucky of its property (the purpose of transferring title to cigarettes was a scheme designed to avoid the payment of excise tax on the sale of cigarettes located in Kentucky), the government had alleged the elements of wire fraud. United States v. Bello, 2013 U.S. Dist. LEXIS 67624 (W.D. Ky. May 13, 2013).

Research References and Practice Aids

Cross-References.

Forfeitures under penal code, KRS 500.090 .

138.170. Civil penalty for failure to affix stamps; prohibition of possession of unstamped cigarettes. [Repealed.]

Compiler’s Notes.

This section (4281e-8) was repealed by Acts 1962, ch. 92, § 3.

138.175. Selling contraband cigarettes.

No person shall sell or offer to sell to any other person cigarettes made contraband by subsection (1) of KRS 138.165 .

History. Enact. Acts 1962, ch. 92, § 8.

138.180. Prohibition of reuse or counterfeiting of tax stamps. [Repealed.]

Compiler’s Notes.

This section (4281e-7) was repealed by Acts 1962, ch. 92, § 3.

138.183. Officer and member liability.

  1. Notwithstanding any other provision of this chapter to the contrary, the president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any corporation subject to the provisions of KRS 138.130 to 138.205 shall be personally and individually liable, both jointly and severally, for the taxes imposed by KRS 138.140 .
  2. Corporate dissolution, withdrawal of the corporation from the state, or the cessation of holding any corporate office shall not discharge the liability of any person. The personal and individual liability shall apply to every person holding a corporate office at the time the tax becomes or became due.
  3. Notwithstanding any other provision of this chapter, KRS 275.150 , 362.1-306(3) or predecessor law, or KRS 362.2-404(3) to the contrary, the managers of a limited liability company, the partners of a limited liability partnership, and the general partners of a limited liability limited partnership or any other person holding any equivalent office of a limited liability company, limited liability partnership or limited liability limited partnership subject to the provisions of KRS 138.130 to 138.205 shall be personally and individually liable, both jointly and severally, for the taxes imposed by KRS 138.140 .
  4. Dissolution, withdrawal of the limited liability company, limited liability partnership, or limited liability limited partnership from the state, or the cessation of holding any office shall not discharge the liability of any person. The personal and individual liability shall apply to every manager of a limited liability company, partner of a limited liability partnership or general partner of a limited liability limited partnership at the time the tax becomes or became due.
  5. No person shall be personally and individually liable under this section who had no authority to collect, truthfully account for, or pay over any tax imposed by KRS 138.140 at the time the taxes imposed become or became due.
  6. “Taxes” as used in this section include interest accrued at the rate provided by KRS 131.183 , all applicable penalties imposed under the provisions of this chapter, and all applicable penalties imposed under the provisions of KRS 131.180 , 131.410 to 131.445 , and 131.990 .

HISTORY: Enact. Acts 2005, ch. 168, § 86, effective June 1, 2005; 2006, ch. 149, § 199, effective July 12, 2006; 2018 ch. 171, § 32, effective April 14, 2018; 2018 ch. 207, § 32, effective April 27, 2018; 2020 ch. 91, § 54, effective August 1, 2020.

138.185. Civil penalties for violation of KRS 138.130 to 138.205.

Any person who violates any provision of KRS 138.130 to 138.205 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.

History. Enact. Acts 1962, ch. 92, § 7(11); 1978, ch. 233, § 20, effective June 17, 1978; 1982, ch. 452, § 14, effective July 1, 1982; 1992, ch. 403, § 10, effective July 14, 1992.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

138.190. Records and reports. [Repealed.]

Compiler’s Notes.

This section (4281e-12) was repealed by Acts 1962, ch. 92, § 3.

138.195. License required for various dealers — Fees — Revocation of licenses — Appeals — Records — Reports — Administrative regulations — Tax returns — Grounds for denial of license.

    1. No person other than a manufacturer shall acquire cigarettes in this state on which the Kentucky cigarette tax has not been paid, nor act as a resident wholesaler, nonresident wholesaler, vending machine operator, sub-jobber, transporter or unclassified acquirer of such cigarettes without first obtaining a license from the department as set out in this section. (1) (a) No person other than a manufacturer shall acquire cigarettes in this state on which the Kentucky cigarette tax has not been paid, nor act as a resident wholesaler, nonresident wholesaler, vending machine operator, sub-jobber, transporter or unclassified acquirer of such cigarettes without first obtaining a license from the department as set out in this section.
    2. No person shall act as a distributor of tobacco products or vapor products without first obtaining a license from the department as set out in this section.
    3. For licenses effective for periods beginning on or after July 1, 2015, no individual, entity, or any other group or combination acting as a unit may be eligible to obtain a license under this section if the individual, or any partner, director, principal officer, or manager of the entity or any other group or combination acting as a unit has been convicted of or entered a plea of guilty or nolo contendere to:
      1. A crime relating to the reporting, distribution, sale, or taxation of cigarettes, tobacco products, or vapor products; or
      2. A crime involving fraud, falsification of records, improper business transactions or reporting;
    1. Each resident wholesaler shall secure a separate license for each place of business at which cigarette tax evidence is affixed or at which cigarettes on which the Kentucky cigarette tax has not been paid are received. (2) (a) Each resident wholesaler shall secure a separate license for each place of business at which cigarette tax evidence is affixed or at which cigarettes on which the Kentucky cigarette tax has not been paid are received.
    2. Each nonresident wholesaler shall secure a separate license for each place of business at which evidence of Kentucky cigarette tax is affixed or from where Kentucky cigarette tax is reported and paid.
    3. Each license shall be secured on or before July 1 of each year.
    4. Each licensee shall pay the sum of five hundred dollars ($500) for each year, or portion thereof, for which each license is secured.
    1. Each sub-jobber shall secure a separate license for each place of business from which cigarettes, upon which the cigarette tax has been paid, are made available to retailers, whether the place of business is located within or without this state. (3) (a) Each sub-jobber shall secure a separate license for each place of business from which cigarettes, upon which the cigarette tax has been paid, are made available to retailers, whether the place of business is located within or without this state.
    2. Each license shall be secured on or before July 1 of each year.
    3. Each licensee shall pay the sum of five hundred dollars ($500) for each year, or portion thereof, for which each license is secured.
    1. Each vending machine operator shall secure a license for the privilege of dispensing cigarettes, on which the cigarette tax has been paid, by vending machines. (4) (a) Each vending machine operator shall secure a license for the privilege of dispensing cigarettes, on which the cigarette tax has been paid, by vending machines.
    2. Each license shall be secured on or before July 1 of each year.
    3. Each licensee shall pay the sum of twenty-five dollars ($25) for each year, or portion thereof, for which each license is secured.
    4. No vending machine shall be operated within this Commonwealth without having prominently affixed thereto the name of its operator and the license number assigned to that operator by the department.
    5. The department shall prescribe by administrative regulation the manner in which the information shall be affixed to the vending machine.
    1. Each transporter shall secure a license for the privilege of transporting cigarettes within this state. (5) (a) Each transporter shall secure a license for the privilege of transporting cigarettes within this state.
    2. Each license shall be secured on or before July 1 of each year.
    3. Each licensee shall pay the sum of fifty dollars ($50) for each year, or portion thereof, for which each license is secured.
    4. No transporter shall transport any cigarettes without having in actual possession an invoice or bill of lading therefor, showing:
      1. The name and address of the consignor and consignee;
      2. The date acquired by the transporter;
      3. The name and address of the transporter;
      4. The quantity of cigarettes being transported; and
      5. The license number assigned to the transporter by the department.
  1. Each unclassified acquirer shall secure a license for the privilege of acquiring cigarettes on which the cigarette tax has not been paid. The license shall be secured on or before July 1 of each year. Each licensee shall pay the sum of fifty dollars ($50) for each year, or portion thereof, for which the license is secured.
      1. Each distributor shall secure a license for the privilege of selling tobacco products or vapor products in this state. Each license shall be secured on or before July 1 of each year, and each licensee shall pay the sum of five hundred dollars ($500) for each year, or portion thereof, for which the license is secured. (7) (a) 1. Each distributor shall secure a license for the privilege of selling tobacco products or vapor products in this state. Each license shall be secured on or before July 1 of each year, and each licensee shall pay the sum of five hundred dollars ($500) for each year, or portion thereof, for which the license is secured.
        1. A resident wholesaler, nonresident wholesaler, or subjobber licensed under this section may also obtain and maintain a distributor’s license at each place of business at no additional cost each year. 2. a. A resident wholesaler, nonresident wholesaler, or subjobber licensed under this section may also obtain and maintain a distributor’s license at each place of business at no additional cost each year.
        2. An unclassified acquirer licensed under this section may also obtain and maintain a distributor’s license for the privilege of selling tobacco products or vapor products in this state. The license shall be secured on or before July 1 of each year, and each licensee shall pay the sum of four hundred fifty dollars ($450) for each year, or portion thereof, for which the license is secured.
      2. The department may, upon application, grant a distributor’s license to a person other than a retailer and who is not otherwise required to hold a distributor’s license under this paragraph. If the department grants the license, the licensee shall pay the sum of five hundred dollars ($500) for each year, or portion thereof, for which the license is secured, and the licensee shall be subject to the excise tax in the same manner and subject to the same requirements as a distributor required to be licensed under this paragraph.
    1. The department may, upon application, grant a retail distributor’s license to a retailer for the privilege of purchasing tobacco products or vapor products from a distributor not licensed by the department. If the department grants the license, the licensee shall pay the sum of one hundred dollars ($100) for each year, or portion thereof, for which the license is secured.
  2. Nothing in KRS 138.130 to 138.205 shall be construed to prevent the department from requiring a person to purchase more than one (1) license if the nature of that person’s business is so diversified as to justify the requirement.
    1. The department may by administrative regulation require any person requesting a license or holding a license under this section to supply such information concerning his business, sales or any privilege exercised, as is deemed reasonably necessary for the regulation of the licensees, and to protect the revenues of the state. (9) (a) The department may by administrative regulation require any person requesting a license or holding a license under this section to supply such information concerning his business, sales or any privilege exercised, as is deemed reasonably necessary for the regulation of the licensees, and to protect the revenues of the state.
    2. Failure on the part of the applicant or licensee to:
      1. Comply with KRS 131.600 to 131.630 , 138.130 to 138.205 , 248.752 , or 248.754 or any administrative regulations promulgated thereunder; or
      2. Permit an inspection of premises, machines, or vehicles by an authorized agent of the department at any reasonable time;
    3. The commissioner may assign a time and place for the hearing and may appoint a conferee who shall conduct a hearing, receive evidence, and hear arguments.
    4. The conferee shall thereupon file a report with the commissioner together with a recommendation as to the denial or revocation of the license.
    5. From any denial or revocation made by the commissioner on the report, the licensee may prosecute an appeal to the Kentucky Claims Commission pursuant to KRS 49.220 .
    6. Any person whose license has been revoked for the willful violation of any provision of KRS 131.600 to 131.630 , 138.130 to 138.205 , 248.752 , or 248.754 or any administrative regulations promulgated thereunder shall not be entitled to any license provided for in this section, or have any interest in any license, either disclosed or undisclosed, either as an individual, partnership, corporation or otherwise, for a period of two (2) years after the revocation.
  3. No license issued pursuant to this section shall be transferable or negotiable except that a license may be transferred between an individual and a corporation, if that individual is the exclusive owner of that corporation, or between a subsidiary corporation and its parent corporation.
  4. Every manufacturer located or doing business in this state and the first person to import cigarettes into this state shall keep written records of all shipments of cigarettes to persons within this state, and shall submit to the department monthly reports of such shipments. All books, records, invoices, and documents required by this section shall be preserved in a form prescribed by the department for not less than four (4) years from the making of the records unless the department authorizes, in writing, the destruction of the records.
  5. No person licensed under this section except nonresident wholesalers shall either sell to or purchase from any other such licensee untax-paid cigarettes.
    1. Licensed distributors of tobacco products or vapor products shall pay and report the tobacco products tax or vapor products tax on or before the twentieth day of the calendar month following the month in which the possession or title of the tobacco products or vapor products are transferred from the licensed distributor to retailers or consumers in this state, as the case may be. (13) (a) Licensed distributors of tobacco products or vapor products shall pay and report the tobacco products tax or vapor products tax on or before the twentieth day of the calendar month following the month in which the possession or title of the tobacco products or vapor products are transferred from the licensed distributor to retailers or consumers in this state, as the case may be.
    2. Retailers who have applied for and been granted a retail distributor’s license for the privilege of purchasing tobacco products or vapor products from a person who is not a distributor licensed under KRS 138.195(7)(a) shall report and pay the tobacco products tax or vapor products tax on or before the twentieth day of the calendar month following the month in which the products are acquired by the licensed retail distributors.
    3. If the distributor or retail distributor timely reports and pays the tax due, the distributor or retail distributor may deduct an amount equal to one percent (1%) of the tax due.
    4. The department shall promulgate administrative regulations setting forth the details of the reporting requirements.
  6. A tax return shall be filed for each reporting period whether or not tax is due.
  7. Any license issued by the department under this section shall not be construed to waive or condone any violation that occurred or may have occurred prior to the issuance of the license and shall not prevent subsequent proceedings against the licensee.
    1. The department may deny the issuance of a license under this section if: (16) (a) The department may deny the issuance of a license under this section if:
      1. The applicant has made any material false statement on the application for the license; or
      2. The applicant has violated any provision of KRS 131.600 to 131.630 , 138.130 to 138.205 , 248.754 , or 248.756 or any administrative regulations promulgated thereunder.
    2. If the department denies the applicant a license under this section, the department shall notify the applicant of the grounds for the denial, and the applicant may request a hearing and appeal the denial as provided in subsection (9) of this section.

for ten (10) years from the expiration of probation or final discharge from parole or maximum expiration of sentence.

shall be grounds for the denial or revocation of any license issued by the department, after due notice and a hearing by the department.

HISTORY: Enact. Acts 1962, ch. 92, § 4; 1964, ch. 141, § 26; 1982, ch. 386, § 4, effective July 15, 1982; 1988, ch. 40, § 1, effective July 15, 1988; 2005, ch. 85, § 350, effective June 20, 2005; 2005, ch. 168, § 85, effective June 1, 2005; 2008, ch. 132, § 2, effective April 24, 2008; repealed and reenact., Acts 2009, ch. 86, § 2, effective March 24, 2009; 2013, ch. 97, § 3, effective August 1, 2013; 2015 ch. 55, § 16, effective July 1, 2015; 2017 ch. 74, § 83, effective June 29, 2017; 2018 ch. 171, § 33, effective April 14, 2018; 2018 ch. 207, § 33, effective April 27, 2018; 2020 ch. 91, § 55, effective August 1, 2020.

Legislative Research Commission Notes.

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that “The intent of the General Assembly in repealing and reenacting KRS 136.392 , 138.195 , 141.160 , 160.6156 , 160.6157 , 160.6158 , 131.183 , 141.044 , 141.235 , 134.580 , 393.060 , and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides “To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood.”

(6/20/2005). 2005 Ky. Acts ch. 168, § 85, contained a reference in the newly created subsection (12) of this section to “subsections (3) and (4) of Section 81 of this Act” (KRS 138.140 ). In merging the provisions of 2005 Ky. Acts chs. 168 and 173 in codification, subsections (3) and (4) became subsections (4) and (5).

(6/1/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

Opinions of Attorney General.

The enactment of this section did not alter the ability of the county to levy a tax on places where tobacco products are sold at retail pursuant to KRS 137.115 . OAG 62-887 .

138.197. Publication of licensed distributors on department’s Web site.

The department shall publish and maintain on its Web site an up-to-date list of tobacco products and vapor products distributors licensed under KRS 138.195(7).

History. Enact. Acts 2013, ch. 97, § 6, effective August 1, 2013; 2020 ch. 91, § 56, effective August 1, 2020.

138.200. Duty to make returns and permit examination of records. [Repealed.]

Compiler’s Notes.

This section (4281e-15) was repealed by Acts 1962, ch. 92, § 3.

138.205. Prohibited acts by licensees and manufacturers — Acting without license.

  1. Any licensee under KRS 138.195 who violates any provision of KRS 138.130 to 138.205 , or any administrative regulation promulgated under them, shall become indebted to the Commonwealth in the sum of five hundred dollars ($500) for each violation. The civil penalty may be collected by action in the Franklin Circuit Court.
  2. Any manufacturer who fails to keep written records, and submit reports to the department, as required by the provisions of subsection (10) of KRS 138.195 , shall become indebted to the Commonwealth in the sum of one thousand dollars ($1,000) for each violation. The penalty may be enforced by action of the Franklin Circuit Court.
  3. Any manufacturer doing business within this state without having complied with the provisions of KRS Chapter 271B as to designation of process agent shall, by so doing of business, be deemed to have made the Secretary of State its agent for the service of process in any civil action instituted in the Franklin Circuit Court for the recovery of the penalty. In any action, the complaint shall set forth the post office address of the home office of the manufacturer.
  4. Any nonresident person licensed under the provisions of KRS 138.195 shall, at the time of application for license, designate some resident of this state as a process agent for the purpose of service of civil process in any civil action originating in any court of this Commonwealth, and service upon the person so designated shall be sufficient to bring the nonresident person before any court of this Commonwealth for all purposes.
  5. Any person acting in the capacity of a licensee under the provisions of KRS 138.130 to 138.205 without having secured a license as provided in KRS 138.195 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.

History. Enact. Acts 1962, ch. 92, § 7, subsecs. 7 to 10, 12; 1972, ch. 274, § 146; 1994, ch. 65, § 8, effective July 15, 1994; 2005, ch. 85, § 351, effective June 20, 2005.

138.207. Refund of tax on cigarettes donated to institutions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 240, § 1; 2005, ch. 85, § 352, effective June 20, 2005) was repealed by Act 2005, ch. 168, § 157, effective June 1, 2005.

Legislative Research Commission Notes.

(6/01/2005). Under KRS 446.260 , the repeal of this section in 2005 Ky. Acts ch. 168 prevails over its amendment in 2005 Ky. Acts ch. 85.

Gasoline and Special Fuels Tax

138.210. Definitions for KRS 138.220 to 138.446.

As used in KRS 138.220 to 138.446 , unless the context requires otherwise:

  1. “Accountable loss” means loss or destruction of “received” gasoline or special fuel through wrecking of transportation conveyance, explosion, fire, flood or other casualty loss, or contaminated and returned to storage. The loss shall be reported within thirty (30) days after discovery of the loss to the department in a manner and form prescribed by the department, supported by proper evidence which in the sole judgment of the department substantiates the alleged loss or contamination and which is confirmed in writing to the reporting dealer by the department. The department may make any investigation deemed necessary to establish the bona fide claim of the loss;
  2. “Agricultural purposes” means purposes directly related to the production of agricultural commodities and the conducting of ordinary activities on the farm;
  3. “Annual survey value” means the average of the quarterly survey values for a fiscal year, as determined by the department, based upon surveys taken during the first month of each quarter of the fiscal year;
  4. “Average wholesale price” means the weighted average per gallon wholesale price of gasoline, based on the quarterly survey value as determined by the department, and as adjusted by KRS 138.228 ;
  5. “Bulk storage facility” means gasoline or special fuels storage facilities of not less than twenty thousand (20,000) gallons owned or operated at one (1) location by a single owner or operator for the purpose of storing gasoline or special fuels for resale or delivery to retail outlets or consumers;
  6. “Dealer” means any person who is:
    1. Regularly engaged in the business of refining, producing, distilling, manufacturing, blending, or compounding gasoline or special fuels in this state;
    2. Regularly importing gasoline or special fuel, upon which no tax has been paid, into this state for distribution in bulk to others;
    3. Distributing gasoline from bulk storage in this state;
    4. Regularly engaged in the business of distributing gasoline or special fuels from bulk storage facilities primarily to others in arm’s-length transactions;
    5. In the case of gasoline, receiving or accepting delivery within this state of gasoline for resale within this state in amounts of not less than an average of one hundred thousand (100,000) gallons per month during any prior consecutive twelve (12) months’ period, when in the opinion of the department, the person has sufficient financial rating and reputation to justify the conclusion that he or she will pay all taxes and comply with all other obligations imposed upon a dealer; or
    6. Regularly exporting gasoline or special fuels;
  7. “Department” means the Department of Revenue;
  8. “Diesel fuel” means any liquid other than gasoline that, without further processing or blending, is suitable for use as a fuel in a diesel powered highway vehicle. Diesel fuel does not include unblended kerosene, No. 5, and No. 6 fuel oil as described in ASTM specification D 396 or F-76 Fuel Naval Distillate MILL-F-166884;
  9. “Dyed diesel fuel” means diesel fuel that is required to be dyed under United States Environmental Protection Agency rules for high sulfur diesel fuel, or is dyed under the Internal Revenue Service rules for low sulfur fuel, or pursuant to any other requirements subsequently set by the United States Environmental Protection Agency or the Internal Revenue Service;
  10. “Financial instrument” means a bond issued by a corporation authorized to do business in Kentucky, a line of credit, or an account with a financial institution maintaining a compensating balance;
  11. “Gasoline” means all liquid fuels, including liquids ordinarily, practically, and commercially usable in internal combustion engines for the generation of power, and all distillates of and condensates from petroleum, natural gas, coal, coal tar, vegetable ferments, and all other products so usable which are produced, blended, or compounded for the purpose of operating motor vehicles, showing a flash point of 110 degrees Fahrenheit or below, using the Eliott Closed Cup Test, or when tested in a manner approved by the United States Bureau of Mines, are prima facie commercially usable in internal combustion engines. The term “gasoline” as used herein shall include casing head, absorption, natural gasoline, and condensates when used without blending as a motor fuel, sold for use in motors direct, or sold to those who blend for their own use, but shall not include: propane, butane, or other liquefied petroleum gases, kerosene, cleaner solvent, fuel oil, diesel fuel, crude oil or casing head, absorption, natural gasoline and condensates when sold to be blended or compounded with other less volatile liquids in the manufacture of commercial gasoline for motor fuel, industrial naphthas, rubber solvents, Stoddard solvent, mineral spirits, VM and P & naphthas, turpentine substitutes, pentane, hexane, heptane, octane, benzene, benzine, xylol, toluol, aromatic petroleum solvents, alcohol, and liquefied gases which would not exist as liquids at a temperature of sixty (60) degrees Fahrenheit and a pressure of 14.7 pounds per square inch absolute, unless the products are used wholly or in combination with gasoline as a motor fuel;
  12. “Motor vehicle” means any vehicle, machine, or mechanical contrivance propelled by an internal combustion engine and licensed for operation and operated upon the public highways and any trailer or semitrailer attached to or having its front end supported by the motor vehicles;
  13. “Public highways” means every way or place generally open to the use of the public as a matter or right for the purpose of vehicular travel, notwithstanding that they may be temporarily closed or travel thereon restricted for the purpose of construction, maintenance, repair, or reconstruction;
    1. “Quarterly survey value” means a value determined by the department for each calendar quarter of the weighted average per gallon wholesale price of gasoline, determined from information available through independent statistical surveys of gasoline prices or, if requested, from information furnished by licensed gasoline dealers. The department shall determine, within twenty (20) days following the end of the first month of each calendar quarter, the weighted average of per gallon wholesale selling prices of gasoline for the previous month. That value shall be the quarterly survey value for the beginning of the following calendar quarter. (14) (a) “Quarterly survey value” means a value determined by the department for each calendar quarter of the weighted average per gallon wholesale price of gasoline, determined from information available through independent statistical surveys of gasoline prices or, if requested, from information furnished by licensed gasoline dealers. The department shall determine, within twenty (20) days following the end of the first month of each calendar quarter, the weighted average of per gallon wholesale selling prices of gasoline for the previous month. That value shall be the quarterly survey value for the beginning of the following calendar quarter.
    2. “Quarterly survey value” shall be determined exclusive of any federal gasoline tax and any fee on imported oil imposed by the Congress of the United States;
  14. “Received” or “received gasoline” or “received special fuels” shall have the following meanings:
    1. Gasoline and special fuels produced, manufactured, or compounded at any refinery in this state or acquired by any dealer and delivered into or stored in refinery, marine, or pipeline terminal storage facilities in this state shall be deemed to be received when it has been loaded for bulk delivery into tank cars or tank trucks consigned to destinations within this state. For the purpose of the proper administration of this chapter and to prevent the evasion of the tax and to enforce the duty of the dealer to collect the tax, it shall be presumed that all gasoline and special fuel loaded by any licensed dealer within this state into tank cars or tank trucks is consigned to destinations within this state, unless the contrary is established by the dealer, pursuant to administrative regulations prescribed by the department; and
    2. Gasoline and special fuels acquired by any dealer in this state, and not delivered into refinery, marine, or pipeline terminal storage facilities, shall be deemed to be received when it has been placed into storage tanks or other containers for use or subject to withdrawal for use, delivery, sale, or other distribution. Dealers may sell gasoline or special fuels to licensed bonded dealers in this state in transport truckload, carload, or cargo lots, withdrawing it from refinery, marine, pipeline terminal, or bulk storage tanks, without paying the tax. In these instances, the licensed bonded dealer purchasing the gasoline or special fuels shall be deemed to have received that fuel at the time of withdrawal from the seller’s storage facility and shall be responsible to the state for the payment of the tax thereon;
  15. “Refinery” means any place where gasoline or special fuel is refined, manufactured, compounded, or otherwise prepared for use;
  16. “Retail filling station” means any place accessible to general public vehicular traffic where gasoline or special fuel is or may be placed into the fuel supply tank of a licensed motor vehicle;
  17. “Special fuels” means and includes all combustible gases and liquids capable of being used for the generation of power in an internal combustion engine to propel vehicles of any kind upon the public highways, including diesel fuel, and dyed diesel fuel used exclusively for nonhighway purposes in off-highway equipment and in nonlicensed motor vehicles, except that it does not include gasoline, aviation jet fuel, kerosene unless used wholly or in combination with special fuel as a motor fuel, or liquefied petroleum gas as defined in KRS 234.100 ;
  18. “Storage” means all gasoline and special fuels produced, refined, distilled, manufactured, blended, or compounded and stored at a refinery storage or delivered by boat at a marine terminal for storage, or delivered by pipeline at a pipeline terminal, delivery station, or tank farm for storage;
  19. “Transporter” means any person who transports gasoline or special fuels on which the tax has not been paid or assumed; and
  20. “Wholesale floor price” means:
    1. Prior to April 1, 2015, one dollar and seventy-eight and six-tenths cents ($1.786) per gallon; and
    2. On and after April 1, 2015, two dollars and seventeen and seven-tenths cents ($2.177) per gallon.

History. 4281g-1: amend. Acts 1952, ch. 193, § 1; 1962, ch. 203, § 1; 1980, ch. 218, § 1, effective July 1, 1980; 1982, ch. 255, § 1, effective July 15, 1982; 1982, ch. 386, § 5, effective July 15, 1982; 1984, ch. 260, § 1, effective July 13, 1984; 1986, ch. 174, § 12, effective July 1, 1986; 1988, ch. 285, § 1, effective August 1, 1988; 1990, ch. 98, § 1, effective July 13, 1990; 1990, ch. 177, § 3, effective July 13, 1990; 1992, ch. 390, § 1, effective July 14, 1992; 2000, ch. 397, § 4, effective July 14, 2000; 2002, ch. 267, § 1, effective July 15, 2002; 2005, ch. 85, § 353, effective June 20, 2005; 2005, ch. 173, Pt. XVII, § 1, effective March 20, 2005; 2006, ch. 252, Pt. XVIII, § 1, effective April 25, 2006; 2009, ch. 8, § 1, effective March 13, 2009; 2015 ch. 67, § 14, effective March 25, 2015.

NOTES TO DECISIONS

Cited in:

Brooks v. Pure Oil Co., 126 F. Supp. 426, 1954 U.S. Dist. LEXIS 2496 (D. Ky. 1954 ); Commonwealth ex rel. Howard v. Imperial Oil Co., 304 Ky. 705 , 202 S.W.2d 413, 1947 Ky. LEXIS 719 ( Ky. 1947 ); Davis v. Howard, 306 Ky. 149 , 206 S.W.2d 467, 1947 Ky. LEXIS 965 ( Ky. 1947 ); Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ).

Opinions of Attorney General.

A charitable organization under the provisions of § 170 of the Kentucky constitution is not exempt from paying the Kentucky gasoline tax. OAG 72-745 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

138.220. State gasoline and special fuel tax — Supplementary highway user motor fuel tax — Imposition — Determination of average wholesale price — Additional tax or credit for tax-paid inventory — Notification of average wholesale price to be given at least 20 days before July 1 of every year.

    1. An excise tax at the rate of nine percent (9%) of the average wholesale price rounded to the nearest one-tenth of one cent ($0.001) shall be paid on all gasoline and special fuel received in this state. The tax shall be paid on a per gallon basis. (1) (a) An excise tax at the rate of nine percent (9%) of the average wholesale price rounded to the nearest one-tenth of one cent ($0.001) shall be paid on all gasoline and special fuel received in this state. The tax shall be paid on a per gallon basis.
    2. The average wholesale price shall be determined and adjusted as provided in KRS 138.228 .
    3. For the purposes of the allocations in KRS 177.320(1) and (2) and 177.365 , the amount calculated under this subsection shall be reduced by the amount calculated in subsection (3) of this section.
    4. Except as provided by KRS Chapter 138, no other excise or license tax shall be levied or assessed on gasoline or special fuel by the state or any political subdivision of the state.
    5. The tax herein imposed shall be paid by the dealer receiving the gasoline or special fuel to the State Treasurer in the manner and within the time specified in KRS 138.230 to 138.340 and all such tax may be added to the selling price charged by the dealer or other person paying the tax on gasoline or special fuel sold in this state.
    6. Nothing herein contained shall authorize or require the collection of the tax upon any gasoline or special fuel after it has been once taxed under the provisions of this section, unless such tax was refunded or credited.
    1. In addition to the excise tax provided in subsection (1) of this section, there is hereby levied a supplemental highway user motor fuel tax to be paid in the same manner and at the same time as the tax provided in subsection (1) of this section. (2) (a) In addition to the excise tax provided in subsection (1) of this section, there is hereby levied a supplemental highway user motor fuel tax to be paid in the same manner and at the same time as the tax provided in subsection (1) of this section.
    2. The tax shall be:
      1. Five cents ($0.05) per gallon on gasoline; and
      2. Two cents ($0.02) per gallon on special fuel.
    3. The supplemental highway user motor fuel tax provided by this subsection and the provisions of subsections (1) and (3) of this section shall constitute the tax on motor fuels imposed by KRS 138.220 .
  1. Two and one-tenth cents ($0.021), of the tax collected under subsection (1) of this section shall be excluded from the calculations in KRS 177.320(1) and (2) and 177.365 . The funds identified in this subsection shall be deposited into the state road fund.
  2. Notification of the average wholesale price shall be given to all licensed dealers at least twenty (20) days in advance of July 1 of each calendar year.
  3. Dealers with a tax-paid gasoline or special fuel inventory at the time an average wholesale price becomes effective, shall be subject to additional tax or appropriate tax credit to reflect the increase or decrease in the average wholesale price for the new quarter. The department shall promulgate administrative regulations to properly administer this provision.

History. 4281g-2: amend. Acts 1948, ch. 45, § 1; 1972, ch. 61, § 1; 1976 (Ex. Sess.), ch. 6, § 1; 1980, ch. 218, § 2, effective July 1, 1980; 1986, ch. 174, § 13, effective July 1, 1986; 1988, ch. 285, § 2, effective August 1, 1988; 2005, ch. 85, § 354, effective June 20, 2005; 2005, ch. 173, Pt. XVII, § 2, effective July 1, 2005; 2006 Ky. Acts ch. 252, Pt. XVIII, § 2, effective April 25, 2006; 2009, ch. 8, § 2, effective March 13, 2009; 2015 ch. 67, § 15, effective March 25, 2015; 2020 ch. 91, § 4, effective April 15, 2020.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Exemption.
  3. Interstate Commerce.
1. Constitutionality.

Payment of gasoline tax by boards of education does not violate Const., § 184. Board of Education v. Talbott, 286 Ky. 543 , 151 S.W.2d 42, 1941 Ky. LEXIS 283 ( Ky. 1941 ).

This section, when read with KRS 138.660 and 138.665 , is unconstitutional when applied to fuel used on highways in other states in that, as was found in the case of Commonwealth v. Ashland Oil & Ref. Co., 449 S.W.2d 904, 1970 Ky. LEXIS 482 Ky. App. 1970, such a tax imposes a burden on interstate commerce. Department of Revenue v. Jack Cole Co., 474 S.W.2d 70, 1971 Ky. LEXIS 83 ( Ky. 1971 ).

2. Exemption.

The fact that a corporation dealing in gasoline paid the corporation license tax did not exempt it from paying the gasoline tax, the imposition of both taxes not constituting “double taxation.” Shanks v. Kentucky Independent Oil Co., 225 Ky. 303 , 8 S.W.2d 383, 1928 Ky. LEXIS 756 ( Ky. 1928 ) (decided under prior law).

Cities were not exempt from payment of tax on gasoline purchased for use in vehicles used for municipal purposes. The gasoline tax was an excise tax, to which the exemptions specified in Ky. Const., § 170 did not apply. Louisville v. Cromwell, 233 Ky. 828 , 27 S.W.2d 377, 1930 Ky. LEXIS 663 ( Ky. 1930 ) (decided under prior law).

The fact that dealer’s place of business was near state boundary line and a substantial portion of gasoline sold was used by purchasers in interstate commerce was not grounds for exempting dealer from payment of tax. Kentucky Independent Oil Co. v. Coleman, 236 Ky. 592 , 33 S.W.2d 615, 1930 Ky. LEXIS 795 ( Ky. 1930 ) (decided under prior law).

Where gasoline was stored in Kentucky, the fact that it was used in a vehicle traveling in interstate commerce did not prevent the imposition of the tax. Commonwealth by Nelson v. Dixie Greyhound Lines, Inc., 255 Ky. 111 , 72 S.W.2d 1032, 1934 Ky. LEXIS 198 ( Ky. 1934 ) (decided under prior law).

Where bus company operating interstate buses purchased large quantities of gasoline outside of Kentucky and stored it in tanks at its terminal in Kentucky, all of such gasoline was subject to tax, although a substantial portion was used in interstate commerce. Commonwealth by Nelson v. Dixie Greyhound Lines, Inc., 255 Ky. 111 , 72 S.W.2d 1032, 1934 Ky. LEXIS 198 ( Ky. 1934 ) (decided under prior law).

Boards of education are liable for tax on gasoline purchased by them. Board of Education v. Talbott, 286 Ky. 543 , 151 S.W.2d 42, 1941 Ky. LEXIS 283 ( Ky. 1941 ).

3. Interstate Commerce.

Where Illinois ferry company purchased gasoline in Illinois and used it to operate ferries across Ohio River between Illinois and Kentucky, the gasoline being stored in Illinois, the Kentucky gasoline tax could not be imposed, although 75 percent of gasoline was consumed within Kentucky boundaries, since the imposition of the tax would constitute an unreasonable burden on interstate commerce. Helson & Randolph v. Kentucky, 279 U.S. 245, 49 S. Ct. 279, 73 L. Ed. 683, 1929 U.S. LEXIS 45 (U.S. 1929) (decided under prior law).

The fact that the person who purchased gasoline from a dealer used it in interstate commerce did not render the imposition of the tax unconstitutional as a burden on interstate commerce. Kentucky Independent Oil Co. v. Coleman, 236 Ky. 592 , 33 S.W.2d 615, 1930 Ky. LEXIS 795 ( Ky. 1930 ) (decided under prior law).

Cited in:

Brooks v. Pure Oil Co., 126 F. Supp. 426, 1954 U.S. Dist. LEXIS 2496 (D. Ky. 1954 ); Davis v. Howard, 306 Ky. 149 , 206 S.W.2d 467, 1947 Ky. LEXIS 965 ( Ky. 1947 ); Dalton v. State Property & Bldgs. Com., 304 S.W.2d 342, 1957 Ky. LEXIS 276 ( Ky. 1957 ); Standard Oil Co. v. Commonwealth, 311 S.W.2d 372, 1957 Ky. LEXIS 8 ( Ky. 1958 ); Turnpike Authority of Kentucky v. Wall, 336 S.W.2d 551, 1960 Ky. LEXIS 331 ( Ky. 1960 ); Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ); Jefferson County v. King, 479 S.W.2d 880, 1972 Ky. LEXIS 320 ( Ky. 1972 ); Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ); Commonwealth, Transp. Cabinet v. Tony Brewer Trucking, Inc., 734 S.W.2d 486, 1987 Ky. App. LEXIS 509 (Ky. Ct. App. 1987).

Opinions of Attorney General.

A county air board, being a political subdivision of the commonwealth, would be prohibited from levying an excise or license tax on gasoline or special fuels delivered to the airport. OAG 69-3 .

Neither KRS 189.276(4) (repealed) nor any other provision of Acts 1982, ch. 203, exempts a motor carrier from the gasoline tax under this section or the special fuels tax under KRS 138.565 (repealed). OAG 82-193 .

The combined 11 percent highway motor fuels use tax provided in KRS 138.660(1) and (2) is entirely separate and distinct from the gasoline tax levied under this section and the special fuels tax levied under KRS 138.565 (now repealed). OAG 82-193 .

Research References and Practice Aids

Cross-References.

Proceeds from gasoline tax to go to road fund, Ky. Const., § 230; KRS 47.010 .

Road construction bonds, funds from certain taxes to provide for payment, KRS 177.595 .

Use of portion of gasoline tax revenue for rural and secondary roads, KRS 177.320 to 177.360 .

138.221. Tax credit for use of gasoline-alcohol blend — Requirements — Reports. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1986, ch. 174, § 10) was repealed by Acts 1990, ch. 98, § 15, effective July 13, 1990.

138.222. Special fuels floor stocks tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 285, § 38) was repealed by Acts 1990, ch. 98, § 15, effective July 13, 1990.

138.223. Tax credit for use of gasoline-alcohol blend — Dealer’s report — Use of coal produced in United States — Use of distilled spirits produced in Kentucky — Refunds. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1982, ch. 255, § 2, effective July 15, 1986) was repealed by Acts 1986, ch. 174, § 21, effective July 1, 1986.

138.224. Presumption of taxability.

It shall be presumed that all untaxed motor fuels are subject to the tax levied under KRS 138.220 unless the contrary is established pursuant to KRS 138.210 to 138.490 or administrative regulations promulgated thereunder by the department. The tax shall be paid by the licensed dealer to the department. The burden of proving that any motor fuel is not subject to tax shall be upon the dealer or any person who imports, causes to be imported, receives, uses, sells, stores, or possesses untaxed motor fuel in this state. Any dealer or other person who imports, causes to be imported, receives, uses, sells, stores, or possesses untaxed motor fuels but fails to comply with all statutory and regulatory restrictions applicable to the fuel shall be jointly and severally liable for payment of the tax due on the fuel. A person’s liability shall not be extinguished until the tax due has been paid to the department.

History. Enact. Acts 1988, ch. 285, § 3, effective August 1, 1988; 2002, ch. 267, § 3, effective July 15, 2002; 2005, ch. 85, § 355, effective June 20, 2005; 2006, ch. 251, § 9, effective July 12, 2006.

138.225. Imposition of additional tax — Implementation and collection. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976 (1st Ex. Sess.), ch. 6, § 5; 1980, ch. 188, § 105, effective July 15, 1980) was repealed by Acts 1984, ch. 111, § 199, effective July 13, 1984.

138.226. Department of Revenue to administer gasoline and special fuel taxes.

  1. The department shall administer the taxes provided under KRS 138.210 to 138.490 , except KRS 138.463 and 138.463 1, and may prescribe, adopt, and enforce administrative regulations relating to the administration and enforcement thereof.
  2. The department shall, upon the request of the officials to whom are entrusted the enforcement of the motor fuels tax law of any other state, the United States, the provinces of the Dominion of Canada, forward to such officials any information which it may have relative to the manufacture, receipt, sale, use, transportation, shipment or delivery by any person of motor fuels, provided such other state or states provide for the furnishing of like information to this state.

History. Enact. Acts 1988, ch. 285, § 29, effective August 1, 1988; 2005, ch. 85, § 356, effective June 20, 2005; 2006, ch. 251, § 10, effective July 12, 2006.

138.227. Authorization for entry into International Fuel Tax Agreement or certain other cooperative compacts or agreements.

The Transportation Cabinet may enter the International Fuel Tax Agreement or other cooperative compacts or agreements with other states or jurisdictions in order to permit base state or base jurisdiction licensing of persons using motor fuel in this state. Those agreements may provide for the cooperation and assistance among member states in the administration and collection of motor fuel tax, including, but not limited to, exchanges of information, auditing and assessing of interstate carriers and suppliers, and any other activities necessary to further uniformity.

History. Enact. Acts 1992, ch. 300, § 1, effective July 14, 1992.

138.228. Calculation of average wholesale price of gasoline.

The department shall calculate the average wholesale price as follows:

  1. For fiscal years beginning before July 1, 2015, the average wholesale price shall be calculated each quarter, as provided in this subsection. The average wholesale price shall be the quarterly survey value unless the quarterly survey value is:
    1. Less than the wholesale floor price, in which case the average wholesale price shall be the wholesale floor price; or
    2. Greater than one hundred and ten percent (110%) of the average wholesale price at the close of the previous fiscal year, in which case the average wholesale price shall be one hundred and ten percent (110%) of the average wholesale price in effect at the close of the previous fiscal year;
  2. For the fiscal year beginning on July 1, 2015 and ending June 30, 2016, the average wholesale price shall be the wholesale floor price; and
    1. For fiscal years beginning on or after July 1, 2016, the average wholesale price shall be calculated annually, as provided in this subsection, and shall be effective on the first day of the fiscal year. (3) (a) For fiscal years beginning on or after July 1, 2016, the average wholesale price shall be calculated annually, as provided in this subsection, and shall be effective on the first day of the fiscal year.
    2. On or before June 1, 2016, and on or before each June 1 thereafter, the annual survey value shall be calculated for the current fiscal year.
      1. The average wholesale price on July 1, 2016, and on July 1 of each fiscal year thereafter, shall be the annual survey value determined pursuant to paragraph (b) of this subsection, unless the annual survey value is: (c) 1. The average wholesale price on July 1, 2016, and on July 1 of each fiscal year thereafter, shall be the annual survey value determined pursuant to paragraph (b) of this subsection, unless the annual survey value is:
        1. Greater than one hundred and ten percent (110%) of the average wholesale price in effect at the close of the previous fiscal year, in which case the average wholesale price shall be one hundred and ten percent (110%) of the average wholesale price in effect at the close of the previous fiscal year; or
        2. Less than ninety percent (90%) of the average wholesale price in effect at the close of the previous fiscal year, in which case the average wholesale price shall be ninety percent (90%) of the average wholesale price in effect at the close of the previous fiscal year.
      2. Notwithstanding subparagraph 1. of this paragraph, the average wholesale price shall not be less than the wholesale floor price.

HISTORY: 2015 ch. 67, § 13, effective March 25, 2015.

138.230. Dealer’s records.

Every dealer receiving gasoline or special fuel in this state shall keep, and preserve for five (5) years, an accurate record of all receipts and of all production, refining, manufacture, compounding, use, sale, distribution and delivery of gasoline and special fuel, together with invoices, bills of lading and other pertinent records and papers required by the Department of Revenue. Every person purchasing gasoline or special fuel from a dealer for resale shall keep, and preserve for a period of five (5) years, a record of all such gasoline or special fuel so purchased and sold or used, and the amount of tax paid to the dealers as part of the purchase price, together with delivery tickets, invoices, bills of lading and such other records as the department shall require.

History. 4281g-4: amend. Acts 1988, ch. 285, § 4, effective August 1, 1988; 2005, ch. 85, § 357, effective June 20, 2005.

138.240. Dealer’s reports of gasoline and special fuels received and sold — Electronic reporting requirements.

  1. Every gasoline dealer and every special fuel dealer shall, by the twenty-fifth day of each month, transmit to the department reports on the forms the department may prescribe, of the total number of gallons of gasoline and special fuel received in this state during the next preceding calendar month. This report shall include the following information:
    1. An itemized statement of the number of gallons received that have been produced, refined, manufactured, or compounded by the dealer in this state during the next preceding calendar month; and
    2. An itemized statement of the number of gallons received by the dealer in this state from any source during the next preceding calendar month, as shown by shippers’ invoices, other than the gasoline and special fuel falling within the provisions of paragraph (a) of this subsection, together with a statement showing the date of receipt, the name of the person from whom purchased, the date of receipt of each shipment, the point of origin and the point of destination, the quantity of each purchase or shipment, the name of the carrier, the initials and number of each tank car, the date of receipt, and the number of gallons contained in each car if shipped by rail or the name and owner of the boat, ship, truck, transport, barge, or vessel if shipped by water.
  2. The reports required by subsection (1) of this section shall also contain an itemized statement of the number of gallons received by the dealer during the preceding calendar month of:
    1. Bulk sales of gasoline or bulk sales of special fuels sold to the United States government for use exclusively in equipment or vehicles owned or leased by the United States government;
    2. Gasoline and special fuels sold for delivery in this state in transport truck, tank car, or cargo lots to licensed bonded dealers. The statement shall give a record of all such transport truck, tank car, or cargo sales, giving the date of shipment, the number of gallons contained in each shipment, the name of owner and license number of truck if shipped by transport truck, the initials and number of the tank car if shipped by rail, the name and owner of the boat, barge, or vessel, and the number of gallons contained therein if shipped by water, and the name of the person to whom sold, point of shipment, and point of delivery;
    3. Gasoline and special fuels lost through accountable losses;
    4. Gasoline and special fuel exported from this state to any other state in transport truck, tank car or cargo lots;
    5. Gasoline or special fuel delivered upon or immediately adjacent to a river or stream, if:
      1. The gasoline or special fuel is or will be delivered into the fuel supply tank of a commercial ship or vessel which has a valid certificate of documentation issued by the United States Coast Guard; and
      2. All the fuel will be used exclusively in the operation of a commercial ship or vessel.
    6. Special fuel delivered to a railroad company principally engaged in the commercial transportation of property for others as a common carrier or in the conveyance of persons for hire, if the railroad company is the holder of a Kentucky motor fuels tax refund permit and certifies that the fuel is to be used exclusively for the purpose of powering locomotives and unlicensed company vehicles or equipment for nonhighway use. Railroad company as used herein shall not include any company described in KRS 136.120(4)(a) in effect on August 1, 1988; and
    7. Special fuels used in unlicensed vehicles or equipment by licensed special fuels dealers for nonhighway purposes related to the distribution of gasoline or special fuels to others.
  3. All gasoline and special fuel gallons received or distributed by a dealer from marine terminal, refinery or pipeline terminal storage in this state shall be reported at sixty (60) degrees Fahrenheit.

History. 4281g-8: amend. Acts 1942, ch. 64, § 1, and ch. 92, § 1; Acts 1956 (2nd Ex. Sess.), ch. 8, § 1; 1972, ch. 61, § 2; 1986, ch. 496, § 14, effective August 1, 1986; 1988, ch. 285, § 5, effective August 1, 1988; 1990, ch. 98, § 2, effective July 13, 1990; 1992, ch. 390, § 2, effective July 14, 1992; 2005, ch. 134, § 3, effective June 20, 2005; 2006, ch. 188, § 1, effective July 12, 2006; 2010, ch. 147, § 6, effective July 15, 2010.

Compiler’s Notes.

In subsection (2)(f) of this section there is a reference to “KRS 136.120 (4)(a) in effect on August 1, 1988”. Subsection (4)(a) of KRS 136.120 was deleted by amendment in 1990. Prior to its deletion such section read: “(4)(a) The revenue cabinet shall likewise have sole power to value and assess all the property within the taxing jurisdiction of this Commonwealth of every passenger, sleeping, freight, and private car company, which is hereby defined as any company, other than a railroad company, which owns, uses, furnishes, leases, rents, or operates to, from, through, in or across this state or any part thereof, any kind of railroad car including but not necessarily limited to flat, tank, refrigerator, passenger, or similar type car. The cabinet shall not certify the assessment of the rolling stock of such companies to any county, city, or taxing district, but shall apportion and certify the operating property, other than rolling stock, to the counties, cities, and taxing districts where such property is located. On or before November 1, 1984, and each year thereafter, the revenue cabinet shall establish the state tax rate for rolling stock of private car lines based on average tax rate for tangible personal property except motor vehicles, within the Commonwealth subject to state, county, school and applicable city levy. The rolling stock of such companies shall be taxable for state purposes only and shall not be subject to taxation by a county, city, or other taxing district.”

Legislative Research Commission Notes.

(6/20/2005). The reference to KRS 136.120 (4)(a) in subsection (2)(f) of this section is outdated and inaccurate. 1990 Ky. Acts ch. 437, sec. 5, amended KRS 136.120 to delete subsection (4), but a conforming amendment to this section was not made.

NOTES TO DECISIONS

  1. Interstate Commerce.
  2. Refund.
1. Interstate Commerce.

Imposition of tax was not unconstitutional merely because a portion of gasoline received by dealer was used by him in making interstate deliveries and no record was kept as to amount so used, where there was no proof that it would have been impracticable to keep such records. Kentucky Independent Oil Co. v. Coleman, 236 Ky. 592 , 33 S.W.2d 615, 1930 Ky. LEXIS 795 ( Ky. 1930 ) (decided under prior law).

2. Refund.

Dealer was not entitled to refund for tax paid on gasoline used by him in making interstate deliveries, where he kept no accurate record as to amount so used. Kentucky Independent Oil Co. v. Coleman, 236 Ky. 592 , 33 S.W.2d 615, 1930 Ky. LEXIS 795 ( Ky. 1930 ) (decided under prior law).

Research References and Practice Aids

Cross-References.

Statistics of tax-paid gasoline gallonage may be made public, KRS 131.190 .

Kentucky Law Journal.

Luckett, Taxation, 45 Ky. L.J. 136 (1956).

138.250. Refiners’ and importers’ reports — Deduction for evaporation, shrinkage and unaccountable losses — Measurement of terminal storage tanks.

  1. Any person who produces, refines, manufactures or compounds gasoline or special fuel in this state shall, by the twenty-fifth day of each month, file a report with the Department of Revenue, on forms prescribed by it, covering the next preceding calendar month, showing the number of gallons of gasoline and special fuels at sixty (60) degrees Fahrenheit produced, refined, manufactured or compounded, the number of gallons at sixty (60) degrees Fahrenheit withdrawn from storage and received and the number of gallons withdrawn at sixty (60) degrees Fahrenheit from refinery storage and shipped to points outside of this state, and the number of gallons at sixty (60) degrees Fahrenheit withdrawn from refinery storage and shipped to points within this state upon which the tax has not been paid. This report shall give in detail such information as the department may require, regarding each separate shipment, the date of shipment, the number of gallons at sixty (60) degrees Fahrenheit in each shipment, the name of owner and license number of truck if shipped by transport truck, the initial and number of tank car if shipped by rail, the name and owner of barge if shipped by water, the name and address of person to whom shipped, the point of shipment, the point of destination and the name of carrier to whom delivered for transportation to destination.
  2. Any person who imports and stores gasoline or special fuel in any marine or pipeline terminal storage in this state, shall by the twenty-fifth day of the month, file a report with the Department of Revenue, on forms prescribed by it, covering the next preceding calendar month, showing the number of gallons of gasoline and special fuels at sixty (60) degrees Fahrenheit unexported and stored, the number of gallons at sixty (60) degrees Fahrenheit withdrawn from storage and received, the number of gallons at sixty (60) degrees Fahrenheit withdrawn from storage and shipped to points outside of this state, and the number of gallons at sixty (60) degrees Fahrenheit withdrawn from storage and shipped to points within this state, upon which the tax has not been paid. This report shall give in detail such information as the department may require, regarding each separate shipment, the date of shipment, the number of gallons at sixty (60) degrees Fahrenheit in each shipment, the name of owner and license number of truck if shipped by transport truck, the initial and number of tank car if shipped by rail, the name and owner of barge if shipped by water, the name and address of person to whom shipped, the point of shipment and point of destination, and the name of carrier to whom delivered for transportation to destination.
  3. There shall be allowed a monthly deduction for evaporation, shrinkage or unaccountable losses while in storage, of that number of gallons equal to the actual loss of gasoline or special fuel so sustained out of the total number of gallons of gasoline or special fuel stored in any marine terminal, refinery or pipeline terminal, except that such deduction may not in any event exceed three-fourths of one percent of the total number of gallons of gasoline or special fuel stored in any marine terminal, refinery or pipeline terminal. The remaining gasoline and special fuel placed in storage must be fully accounted for as in physical inventory, accountable loss, withdrawn for export or withdrawn from storage and received for taxable purposes.
  4. The number of gallons of gasoline or special fuel added to marine, pipeline or refinery storage shall be determined by the department by actual measurement of terminal storage tanks in the manner it deems necessary.

History. 4281g-5: amend. Acts 1950, ch. 24, § 1; 1952, ch. 193, § 2; 1956 (2nd Ex. Sess.), ch. 8, § 2; 1972, ch. 61, § 3; 1988, ch. 285, § 6, effective August 1, 1988; 2005, ch. 85, § 359, effective June 20, 2005.

138.260. Transportation companies’ reports.

Every transportation company and every other person transporting gasoline or special fuel from without this state to points within this state, or between points within this state, shall report to the Department of Revenue on forms prescribed by the department. The reports shall give the name and address of each person to whom deliveries of gasoline or special fuel have been made, the name and address of the original consignee if deliveries are made to any other than the original consignee, the name and address of the consignor, the point of origin, the point of delivery, the date of delivery, the number and initials of each tank car if shipped by rail, the quantity of each shipment and delivery in gallons, the manner of shipment and delivery, and such other information as the department may require relative to the transportation and delivery of such fuel. The reports shall include intracity switching movements in tank cars or otherwise. The reports shall be made under oath and shall be filed by the twenty-fifth day of each month, covering all such deliveries made within this state during the preceding calendar month.

History. 4281g-6: amend. Acts 1972, ch. 61, § 4; 1988, ch. 285, § 7, effective August 1, 1988; 2005, ch. 85, § 360, effective June 20, 2005.

138.270. Computation of gasoline and special fuels tax and supplemental highway user motor fuel tax — Monthly reports, when due.

    1. From the total number of gallons of gasoline and special fuel received by the dealer within this state during the next preceding calendar month, deductions shall be made for the total number of gallons received by the dealer within this state that were sold or otherwise disposed of during the next preceding calendar month as set forth in subsection (2) of KRS 138.240 . (1) (a) From the total number of gallons of gasoline and special fuel received by the dealer within this state during the next preceding calendar month, deductions shall be made for the total number of gallons received by the dealer within this state that were sold or otherwise disposed of during the next preceding calendar month as set forth in subsection (2) of KRS 138.240 .
    2. To cover evaporation, shrinkage, unaccountable losses, collection costs, bad debts, and handling and reporting the tax, each dealer shall be allowed compensation equal to two and one-fourth percent (2.25%) of the net tax due the Commonwealth pursuant to KRS 138.210 to 138.490 before all allowable tax credits, except the credit authorized pursuant to KRS 138.358 . No compensation shall be allowed if the completed tax return and payment are not submitted to the department within the time prescribed by KRS 138.210 to 138.490 .
  1. The tax imposed by KRS 138.220(1) and (2) shall be computed on the number of gallons remaining after the deductions set forth in subsection (1) of this section have been made, and shall constitute the amount of tax payable for the next preceding calendar month.
  2. Notwithstanding any other provision of this chapter to the contrary, any person who shall remit to the department, by the twenty-fifth day of the next month, an estimated tax due amount equal to not less than ninety-five percent (95%) of his tax liability, as finally determined for the report month, shall not be required to file the monthly reports required by this chapter until the last day of the month following the report month, and shall be permitted to claim as a credit against the tax liability shown due on the report the estimated tax due amount so paid.

History. 4281g-10: amend. Acts 1986, ch. 174, § 14, effective July 1, 1986; 1988, ch. 285, § 8, effective August 1, 1988; 1990, ch. 98, § 3, effective July 13, 1990; 2005, ch. 85, § 361, effective June 20, 2005; 2006, ch. 251, § 11, effective July 12, 2006.

NOTES TO DECISIONS

1. Exemption.

Cities were not exempt from payment of tax on gasoline purchased for use in vehicles used for municipal purposes. Louisville v. Cromwell, 233 Ky. 828 , 27 S.W.2d 377, 1930 Ky. LEXIS 663 ( Ky. 1930 ) (decided under prior law).

Cited in:

Brooks v. Pure Oil Co., 126 F. Supp. 426, 1954 U.S. Dist. LEXIS 2496 (D. Ky. 1954 ); Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ).

138.280. Payment of tax — Electronic payment requirements.

  1. For tax periods beginning prior to January 1, 2007, the reports required by KRS 138.240 shall be accompanied by a certified or cashier’s check, payable to the State Treasurer, for the amount of tax due for the preceding calendar month, computed as provided in KRS 138.270 ; except that the department may waive this requirement and accept the dealer’s check or allow for remittance of the tax owed to the department by electronic fund transfer where the dealer is of sound financial condition and has established a good record of compliance with the requirements of KRS 138.210 to 138.340 .
  2. By virtue of the allowance provided by KRS 138.270 to dealers for collecting and remitting the tax, every dealer is a trust officer of the state.

History. 4281g-10, 4281g-12: amend. Acts 1950, ch. 24, § 2; 2005, ch. 85, § 362, effective June 20, 2005; 2005, ch. 134, § 4, effective June 20, 2005; 2006, ch. 188, § 2, effective July 12, 2006; 2010, ch. 147, § 7, effective July 15, 2010.

Legislative Research Commission Notes.

(6/20/2005). Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123 and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

Cited in:

Standard Oil Co. v. Commonwealth, 311 S.W.2d 372, 1957 Ky. LEXIS 8 ( Ky. 1958 ).

138.290. Civil penalties for violation of KRS 138.240 to 138.260.

Any person who violates any provision of KRS 138.240 to 138.260 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest at the tax interest rate as defined in KRS 131.010(6) from the date when due shall be paid.

History. 4281g-11: amend. Acts 1950, ch. 24, § 3; 1952, ch. 193, § 4; 1962, ch. 203, § 2; 1982, ch. 452, § 15, effective July 1, 1982; 1988, ch. 285, § 9, effective August 1, 1988; 1992, ch. 403, § 11, effective July 14, 1992.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

NOTES TO DECISIONS

Cited in:

Board of Education v. Talbott, 286 Ky. 543 , 151 S.W.2d 42, 1941 Ky. LEXIS 283 ( Ky. 1941 ).

138.300. Duty to make returns, pay tax, and keep and permit examination of records for tax purposes.

No dealer or other person shall fail or refuse to make the returns and pay the tax prescribed by KRS 138.220 to 138.280 , or refuse to permit the Department of Revenue or its representatives appointed by the commissioner of the Department of Revenue in writing to examine his records, papers, files and equipment pertaining to the taxable business. No person shall make an incomplete, false or fraudulent return, or do or attempt to do anything to avoid a full disclosure of the amount of business done or to avoid the payment of the whole or any part of the tax or penalties due. No person shall fail to keep and preserve records of gasoline and special fuel manufactured, transported, received, used, sold or delivered or to make reports as required by KRS 138.230 to 138.280 .

History. 4281g-16: amend. Acts 1988, ch. 285, § 10, effective August 1, 1988; 2005, ch. 85, § 363, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Statistics of tax-paid gasoline gallonage may be made public, KRS 131.190 .

Tax returns to be confidential, official exchange of information, KRS 131.190 .

138.310. Dealer’s or transporter’s license required — Display on motor vehicle — Civil penalties and interest.

  1. No person shall refine, produce, distill, manufacture, blend, compound, receive, use, sell, transport, store, or distribute any gasoline or special fuel upon which the tax due has not been paid or assumed or engage in the sale, storage or transportation of any gasoline or special fuel within this state upon which the tax has not been paid unless he is the holder of an uncanceled license issued by the Department of Revenue to engage in the business.
  2. Any transporter, other than a regularly licensed gasoline or special fuel dealer, transporting gasoline or special fuel by motor vehicle shall have plainly painted on the vehicle the name, address, and permit number of the transporter.
  3. Any person who engages in the business of refining, producing, distilling, manufacturing, blending, compounding, receiving, using, selling, transporting, storing, or distributing gasoline or special fuel in this state as a dealer, storage operator, or transporter without holding an uncanceled license to engage in that business, or who without the license, refines, produces, distills, manufacturers, blends, compounds, receives, uses, sells, transports, stores, or distributes any gasoline or special fuel upon which the tax imposed by KRS 138.220 has not been reported and paid, shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.

History. 4281g-17, 4281g-20: amend. Acts 1952, ch. 193, § 3; 1988, ch. 285, § 11, effective August 1, 1988; 1990, ch. 98, § 4, effective July 13, 1990; 1994, ch. 65, § 9, effective July 15, 1994; 2005, ch. 85, § 364, effective June 20, 2005.

NOTES TO DECISIONS

1. Board of Education.

A county board of education buying gasoline wholesale in tank car lots and distributing it itself to its own buses must comply with the law as to dealers. Board of Education v. Talbott, 286 Ky. 543 , 151 S.W.2d 42, 1941 Ky. LEXIS 283 ( Ky. 1941 ).

138.320. Procurement of dealer’s or transporter’s license — Grounds for refusal — Nonassignability — Records — Suspension or revocation.

  1. To procure the license required by KRS 138.310 , every dealer or transporter so required shall file with the Department of Revenue an application in such form and containing such information as the department may deem necessary.
  2. If the dealer or transporter is a corporation organized under the laws of another state, it shall file with its application a certified copy of the certificate or license issued by the Secretary of State of this state showing that the corporation is authorized to transact business in this state.
  3. At the time of filing application for a license, a financial instrument in the amount provided for in KRS 138.330 shall be filed with the department. No license shall be issued upon any application unless accompanied by this financial instrument.
  4. If application for such a license is filed by any person whose license has at any time previously been canceled for cause by the department, or if the department is of the opinion that the application is not filed in good faith, or that the application is filed by some person as a subterfuge for the real person in interest whose license or registration has previously been canceled for cause by the department, the department may, after a hearing of which the applicant has been given five (5) days’ notice in writing, and in which the applicant shall have the right to appear in person or by counsel and present testimony, refuse to issue a license to that person.
  5. The application in proper form having been accepted for filing, and the financial instrument having been accepted and approved, the department shall issue to the applicant a license, subject to cancellation as provided by KRS 138.340 . The license shall not be assignable, and shall be valid only for the person in whose name it is issued, and shall be displayed conspicuously in the principal place of business of the dealer in this state.
  6. The department shall keep and file all applications and financial instruments, with an alphabetical index thereof, together with a record of all licensed dealers or transporters. The department shall publish and keep currently up to date a list of licensed dealers and transporters, and transmit a copy of list and all revisions thereof to all licensed dealers and transporters.
  7. All licenses shall be valid and remain in full force and effect until suspended or revoked for cause or otherwise canceled.

History. 4281g-17: amend. Acts 1952, ch. 193, § 5; 1986, ch. 496, § 15, effective August 1, 1986; 1988, ch. 285, § 12, effective August 1, 1988; 2005, ch. 85, § 365, effective June 20, 2005; 2005, ch. 134, § 5, effective June 20, 2005; 2015 ch. 67, § 16, effective March 25, 2015.

138.321. Denial of license due to previous revocation.

Any gasoline dealer or special fuels dealer having a license revoked for the violation of any of the provisions contained in KRS Chapter 138 may, within the discretion of the department, be denied the issuance of a gasoline dealer or special fuels dealer license, and any such licensee shall not have an interest in any such license, either disclosed or undisclosed, whether as an individual, partnership, corporation or otherwise.

History. Enact. Acts 1988, ch. 285, § 30, effective August 1, 1988; 2005, ch. 85, § 366, effective June 20, 2005.

138.330. Dealer’s and transporter’s financial instrument.

    1. Every dealer or transporter required to be licensed under KRS 138.310 shall file with the department a financial instrument in an amount not to exceed three (3) months’ estimated liability as computed by the department or five thousand dollars ($5,000) whichever is greater, or in the case of a new licensee in the minimum amount of five thousand dollars ($5,000) until such time as an estimated three (3) months’ liability can be established, provided that the maximum amount of any financial instrument may be reduced to an amount sufficient in the opinion of the department, considering the financial rating and reputation of the company, to insure payment to the department of the amount of tax, penalties and interest for which the dealer or transporter may become liable. (1) (a) Every dealer or transporter required to be licensed under KRS 138.310 shall file with the department a financial instrument in an amount not to exceed three (3) months’ estimated liability as computed by the department or five thousand dollars ($5,000) whichever is greater, or in the case of a new licensee in the minimum amount of five thousand dollars ($5,000) until such time as an estimated three (3) months’ liability can be established, provided that the maximum amount of any financial instrument may be reduced to an amount sufficient in the opinion of the department, considering the financial rating and reputation of the company, to insure payment to the department of the amount of tax, penalties and interest for which the dealer or transporter may become liable.
    2. The financial instrument shall be on a form and with a surety approved by the department.
    3. The dealer or transporter shall be the principal obligor and the state the obligee.
    4. The financial instrument shall be conditioned upon the prompt filing of true reports by the dealer and transporter and the payment by the dealer to the State Treasurer of all gasoline and special fuel excise taxes imposed by the state, together with all penalties and interest thereon, and generally upon faithful compliance with the provisions of KRS 138.210 to 138.340 .
  1. If liability upon the financial instrument is discharged or reduced, whether by judgment rendered, payment made, or otherwise, or if in the opinion of the department any surety on the financial instrument has become unsatisfactory or unacceptable, the department may require the licensee to file a new financial instrument with satisfactory sureties in the same amount, failing which the department shall cancel the license of the licensee in accordance with the provisions of KRS 138.340 . If a new financial instrument is furnished as provided above, the department shall cancel and surrender the financial instrument for which the new financial instrument is substituted.
  2. If upon hearing, of which the licensee shall be given five (5) days’ notice in writing, the department decides that the amount of the existing financial instrument is insufficient to insure payment to the state of the amount of tax, penalties, and interest for which the licensee is or may become liable, the licensee shall, upon the written demand of the department, file an additional financial instrument in the same manner and form with a surety thereon approved by the department, in any amount determined by the department to be necessary, failing which the department shall cancel the license of the licensee in accordance with the provisions of KRS 138.340 .
  3. Any surety on a financial instrument furnished as required by this section shall be released from all liability to the state accruing on the financial instrument after the expiration of sixty (60) days from the date upon which the surety has lodged with the department a written request to be released, but this request shall not operate to release the surety from any liability already accrued or which shall accrue before the expiration of the sixty (60) day period. The department shall promptly, upon receipt of a request, notify the licensee who furnished the financial instrument, and unless the licensee, before the expiration of the sixty (60) day period, files with the department a new financial instrument with a surety satisfactory to the department in the amount and form prescribed in this section, the department shall cancel the license of the licensee in accordance with the provisions of KRS 138.340 . If an approved new financial instrument is filed, the department shall cancel and surrender the financial instrument for which the new financial instrument is substituted.

HISTORY: 4281g-18: amend. Acts 1952, ch. 193, § 6; 1962, ch. 203, § 3; 1988, ch. 285, § 13, effective August 1, 1988; 1996, ch. 318, § 39, effective July 15, 1996; 2002, ch. 267, § 4, effective July 15, 2002; 2005, ch. 85, § 367, effective June 20, 2005; 2015 ch. 67, § 8, effective June 24, 2015.

NOTES TO DECISIONS

Cited in:

Board of Education v. Talbott, 286 Ky. 543 , 151 S.W.2d 42, 1941 Ky. LEXIS 283 ( Ky. 1941 ).

138.340. Revocation of dealer’s or transporter’s license — Notice — Hearing — Appeal — Cancellation.

  1. If any dealer or transporter required to be licensed under KRS 138.310 files a false report of the data or information required by KRS 138.210 to 138.280 , or fails, refuses or neglects to file the reports required by those sections, even though no tax is due, or to pay the full amount of tax as required by those sections, or fails to meet the qualifications of a dealer as set out in KRS 138.210 , or violates any other provision of this chapter, the license of the dealer or transporter may be revoked by the Department of Revenue. The licensee shall be notified by certified or registered letter or summons. The letter or summons shall apprise the licensee of the charge or charges made against him and he shall have a reasonable opportunity to be heard before his license may be revoked. The summons may be served in the same manner and by the same officers or persons as provided by the Rules of Civil Procedure, or it may be served in that manner by an employee of the Department of Revenue. The hearing shall be set at least five (5) days after the summons is served or the letter delivered. Any aggrieved licensee may appeal from an order of revocation by the Department of Revenue to the Kentucky Claims Commission pursuant to KRS 49.220 , subject to the condition that the licensee has made bond sufficient in the opinion of the Department of Revenue to protect the Commonwealth from loss of revenue.
  2. The department may cancel the license:
    1. Upon request in writing from the licensee, the cancellation to become effective sixty (60) days from the date of receipt of the request; or
    2. Upon determination that the licensee has had no reportable activity in Kentucky for at least the immediately preceding six (6) consecutive monthly reporting periods.

HISTORY: 4281g-19: amend. Acts 1942, ch. 92, § 2, 3; 1952, ch. 193, § 7; 1962, ch. 203, § 4; 1964, ch. 141, § 27; 1980, ch. 218, § 3, effective July 1, 1980; 1988, ch. 285, § 14, effective August 1, 1988; 1990, ch. 98, § 5, effective July 13, 1990; 2005, ch. 85, § 368, effective June 20, 2005; 2015 ch. 67, § 17, effective March 25, 2015; 2017 ch. 74, § 84, effective June 29, 2017.

138.341. Refund of tax on fuel used in aircraft — Bond — Assignment of right to receive refund.

  1. When gasoline or special fuel on which the tax has been paid pursuant to the provisions of KRS 138.210 to 138.340 has been used for the purpose of operating any aircraft engaged in the transportation of persons or property, the purchaser of the liquid fuel so used shall be reimbursed for the tax paid. No tax shall be refunded except that paid upon the fuel used exclusively in aircraft motors.
  2. No person shall be entitled to a refund hereunder unless he shall have first filed with the Department of Revenue a bond with approved surety in an amount of not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000) to be determined by the Department of Revenue, conditioned upon faithful compliance with this section and KRS 138.342 and upon the payment to the Commonwealth of any refunds to which he was not entitled.
  3. The right to receive any refund pursuant to subsection (1) of this section shall be assignable by the purchaser to the seller of the gasoline or special fuel if the seller has posted a bond with the department and the aviation gasoline or special fuel purchased by the assignor is delivered directly into the fuel tank of aircraft owned or operated by him or his authorized agent. Any assignment shall be evidenced by noting upon the face and all copies of the retail sale invoice the following:

“TAX REFUND ASSIGNED TO SELLER. Signed: (Purchaser or Agent.)”

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History. Enact. Acts 1942, ch. 157, § 1, 2, 4; 1946, ch. 246; 1948, ch. 94, § 1; 1988, ch. 285, § 15, effective August 1, 1988; 1990, ch. 98, § 6, effective July 13, 1990, effective January 1, 1991; 2005, ch. 85, § 369, effective June 20, 2005.

Compiler’s Notes.

This section (Acts 1942, ch. 157, §§ 1, 2, 4) was formerly compiled as KRS 138.345 .

Section 16 of Acts 1990, ch. 98 provided that the amendment of subsection (1) of this section should become effective on January 1, 1991.

NOTES TO DECISIONS

Cited in:

Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ).

Opinions of Attorney General.

In the absence of any specific provision for the refund of gasoline tax used by nonprofit ambulance services, a refund of gasoline tax on gasoline used in such operations cannot be obtained. OAG 75-22 .

138.342. Application for refund — Investigation and payment — Effect of false and fraudulent application.

  1. Applications for refund pursuant to KRS 138.341 shall be made to the department on a calendar quarter or calendar year basis on forms and in the manner prescribed by it for the refund of tax paid on aviation motor fuel used during the calendar quarter or calendar year. Each application for a refund shall show the number of gallons of aviation motor fuel purchased during the preceding month; the date and quantity of each purchase; the vendor from whom the fuel was purchased; the number of gallons on which refund is claimed; and other information the department may require.
  2. The department shall audit the application and make other investigation it deems necessary to determine whether it constitutes a proper claim. When the department is satisfied that a refund is proper, it shall authorize the tax paid to be refunded as other refunds are made and the amount refunded shall be deducted from current motor fuel tax receipts. The tax shall be refunded with interest at the tax interest rate as defined in KRS 131.010(6).
  3. When the department finds that an application for a refund contains a false or fraudulent statement or that a refund has been fraudulently obtained, the department shall refuse to grant any refunds to the person making the false or fraudulent statement or fraudulently obtaining a refund for a period of two (2) years from the date of the finding.

History. Enact. Acts 1942, ch. 157, § 3; 1948, ch. 94, § 2, 3; 1956, ch. 151; 1986, ch. 496, § 16, effective August 1, 1986; 1988, ch. 285, § 16, effective August 1, 1988; 1990, ch. 98, § 7, effective January 1, 1991; 1994, ch. 65, § 10, effective July 15, 1994; 2005, ch. 85, § 370, effective June 20, 2005.

Compiler’s Notes.

This section (Acts 1942, ch. 157, § 3) was formerly compiled as KRS 138.346 .

Section 16 of Acts 1990, ch. 98 provided that the amendment of this section should become effective on January 1, 1991.

Research References and Practice Aids

Cross-References.

Refund of taxes, KRS 134.580 .

138.343. Definitions for KRS 138.343 to 138.355. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 10, § 1) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988.

138.344. Refund of tax paid on gasoline or special fuels used in farm tractors or stationary engines — Credit in lieu of refund.

  1. Except as otherwise provided in KRS 138.220 to 138.490 , any person who shall purchase gasoline or special fuel, on which the tax as imposed by KRS 138.220 has been paid, for the purpose of operating or propelling stationary engines or tractors for agricultural purposes, or who shall purchase special fuels, on which the tax as imposed by KRS 138.220 has been paid, for consumption in unlicensed vehicles or equipment for nonhighway purposes shall be reimbursed for the tax so paid on the gasoline or special fuel. No refund shall be authorized unless applications and all necessary information are filed with the department on a calendar quarter or calendar year basis on forms and in the manner prescribed by it for refund of the tax paid on the fuel. In lieu of the tax refund procedure, the tax on special fuels and the tax on gasoline used for the purpose of operating or propelling stationary engines or tractors for agricultural purposes may be credited by the dealer to the purchaser as provided in KRS 138.358 . The dealer and the purchases shall be subject to the same rules, conditions, and responsibilities as provided in KRS 138.344 to 138.355 . The tax shall be refunded with interest at the tax interest rate as defined in KRS 131.010(6).
  2. The information to be required from the permit holder, by the department, in order that the refund may be allowed, shall be as follows:
    1. Name and address of permit holder  . . . . . . . . . . . . . . . . . . .  permit number  . . . . .
    2. Total number of gallons purchased  . . . . .  and total purchase price  . . . . . . .  (Invoices to be attached to refund application.)
    3. Total number of gallons used on highways  . . . . .
    4. Total number of gallons on which refund is claimed  . . . . .  (Line b minus line c.)
    5. Other information as the department may require to reasonably protect the revenues of the Commonwealth.

History. Enact. Acts 1946, ch. 10, § 2; 1954, ch. 231; 1956, ch. 88; 1960, ch. 186, Art. IV, § 1; 1978, ch. 233, § 38, effective June 17, 1978; 1988, ch. 285, § 17, effective August 1, 1988; 1990, ch. 98, § 8, effective January 1, 1991; 1994, ch. 65, § 11, effective July 15, 1994; 1996, ch. 315, § 2, effective July 15, 1996; 2000, ch. 397, § 1, effective July 14, 2000; 2002, ch. 33, § 1, effective July 15, 2002; 2005, ch. 85, § 371, effective June 20, 2005; 2006, ch. 251, § 12, effective July 12, 2006.

Compiler’s Notes.

Section 16 of Acts 1990, ch. 98 provided that the amendment of this section should become effective on January 1, 1991.

NOTES TO DECISIONS

1. Constitutionality.

Trial court erred in finding that Kentucky's refund scheme for special fuel taxes and petroleum environmental assurance fees violated the Due Process Clause where those taxes and fees were properly applied to any and all people or companies purchasing the relevant products, and the pre-purchase refund permit process was a valid procedural requirement that gave taxpayers an opportunity to challenge the taxes and fees owed on special fuels so long as they met statutory requirements. Dep't of Revenue, Fin. & Admin. Cabinet v. Revelation Energy, LLC, 544 S.W.3d 170, 2018 Ky. App. LEXIS 98 (Ky. Ct. App. 2018).

Cited in:

Washington Nat’l Ins. Co. v. Burke, 258 S.W.2d 709, 1953 Ky. LEXIS 878 , 38 A.L.R.2d 861 ( Ky. 1953 ); Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ).

Opinions of Attorney General.

In the absence of any specific provision for the refund of gasoline tax used by nonprofit ambulance services, a refund of gasoline tax on gasoline used in such operations cannot be obtained. OAG 75-22 .

138.345. Refund permit required — Application for.

No person shall secure a refund of tax under KRS 138.344 unless the person is the holder of an unrevoked refund permit issued by the Department of Revenue before the purchase of the gasoline or special fuel, which permit shall entitle the person to make application for a refund under KRS 138.344 to 138.355 . To procure a permit, every person shall file with the department an application under oath, on forms furnished by the department, setting forth the information incident to the refunding of the tax paid on gasoline or special fuel as the department may require. The properly completed and signed application shall be filed with the department on or before the date the permit, if approved by the department, is to become effective.

History. Enact. Acts 1946, ch. 10, § 3; 1988, ch. 285, § 18, effective August 1, 1988; 1990, ch. 98, § 9, effective July 13, 1990; 2005, ch. 85, § 372, effective June 20, 2005.

Compiler’s Notes.

The original section KRS 138.345 (Enact. Acts 1942, ch. 157, §§ 1, 2, 4) was renumbered as KRS 138.341 .

NOTES TO DECISIONS

1. Constitutionality.

Trial court erred in finding that Kentucky's refund scheme for special fuel taxes and petroleum environmental assurance fees violated the Due Process Clause where those taxes and fees were properly applied to any and all people or companies purchasing the relevant products, and the pre-purchase refund permit process was a valid procedural requirement that gave taxpayers an opportunity to challenge the taxes and fees owed on special fuels so long as they met statutory requirements. Dep't of Revenue, Fin. & Admin. Cabinet v. Revelation Energy, LLC, 544 S.W.3d 170, 2018 Ky. App. LEXIS 98 (Ky. Ct. App. 2018).

138.346. Bond for refund permit — Amount.

The department may require the applicant to execute a corporate surety bond to be approved by the department, conditioned upon the payment of all taxes, penalties and fines for which such applicant may become liable under KRS 138.344 to 138.355 . Such bond shall be in an amount equal to an applicant’s one (1) year estimated refund claim, but not less than one thousand dollars ($1,000).

History. Enact. Acts 1946, ch. 10, § 4; 1988, ch. 285, § 19, effective August 1, 1988; 2005, ch. 85, § 373, effective June 20, 2005.

Compiler’s Notes.

The original section KRS 138.346 (Enact. Acts 1942, ch. 157, § 3) was renumbered as KRS 138.342 .

138.347. Records of dealers and holders of refund permits.

  1. Each licensed gasoline and special fuel dealer shall, in accordance with the department’s requirements, keep at his principal place of business in this state a complete record of all such gasoline and special fuel sold by him under gasoline refund invoices provided for in KRS 138.351 , which records shall give the date of each such sale, the number of gallons sold, the name of the person to whom sold and the sale price.
  2. Every person to whom a refund permit has been issued under KRS 138.345 shall, in accordance with the department’s requirements, keep at his residence or principal place of business in this state a record of each purchase of gasoline and special fuel from a licensed dealer or the dealer’s authorized agent, the number of gallons purchased, the name of the seller, and the date of purchase.
  3. The records required to be kept under subsections (1) and (2) of this section shall at all reasonable hours be subject to inspection by the department or by any person duly authorized by it. Such records shall be preserved and shall not be destroyed until five (5) years after the date the gasoline and special fuel to which they relate was sold and purchased.

History. Enact. Acts 1946, ch. 10, § 5; 1988, ch. 285, § 20, effective August 1, 1988; 2005, ch. 85, § 374, effective June 20, 2005.

138.348. Identification of refund gasoline or special fuel — Refund permit for portable facility — Records of refund permit holder — Inspection of premises.

  1. The department may require any dealer or any dealer’s authorized agent to identify refund gasoline or special fuel sold by him by adding thereto any chemical or substance, which shall be furnished by the cabinet and used in the manner as prescribed by the department.
  2. The refund permit holder shall receive and store all the gasoline and special fuel in containers plainly marked with distinguishing letters “Refund Motor Fuel,” or comparable letters prescribed by the Department of Revenue, and shall keep the containers on his premises accessible to agents of the department and separate from other gasoline and special fuel stored on his premises.
  3. The Department of Revenue may, within its discretion, issue a refund permit for a portable storage facility if the applicant satisfies the department that the facility will be used exclusively for the purpose of fueling unlicensed vehicles or equipment at multiple locations for nonhighway purposes, and fueling the vehicles or equipment from a nonportable facility would not be practical.
  4. Every refund permit holder who uses on the public highways motor fuel of the type for which refund is claimed shall keep detailed records of all the motor fuel acquired, monthly odometer readings of all licensed motor vehicles owned or operated by the holder which use the fuel, and other records the Department of Revenue may, in writing, require to protect the revenues of the Commonwealth.
  5. Agents of the department may go upon the premises of any permit holder or of any licensed gasoline or special fuel dealer or his authorized agent to make inspections to ascertain any matter connected with the operation of KRS 138.344 to 138.355 or the enforcement thereof. No agent shall enter the dwelling of any person without the occupant’s consent or the authority from a court of competent jurisdiction.

History. Enact. Acts 1946, ch. 10, § 6; 1988, ch. 285, § 21, effective August 1, 1988; 1990, ch. 98, § 10, effective July 13, 1990; 1996, ch. 315, § 1, effective July 15, 1996; 2005, ch. 85, § 375, effective June 20, 2005.

138.349. Refund invoices, execution of.

No person shall execute a gasoline or special fuel refund invoice, as described in KRS 138.351 , who is not a dealer, as defined in KRS 138.210 or a sub-jobber duly authorized by a licensed dealer, to execute refund invoices as his agent. In no instance shall refund invoices be executed for purchases from retail filling stations.

History. Enact. Acts 1946, ch. 10, § 7; 1988, ch. 285, § 22, effective August 1, 1988; 2015 ch. 67, § 18, effective March 25, 2015.

138.350. Definitions for tax on motor fuels other than gasoline. [Renumbered.]

Compiler’s Notes.

This section (4281h-1) was renumbered as former KRS 138.359 .

138.351. Refund invoices, form, executor — Application for grant of refund — Right to refund not assignable — Interest on refunds.

  1. When gasoline or special fuel is sold to a person who shall claim to be entitled to refund under KRS 138.344 , the licensed dealer or his duly authorized agent who sells the gasoline or special fuel shall make out in duplicate a gasoline or special fuel refund invoice supplied or approved in writing by the department, which invoice shall have printed thereon that the liability to the Commonwealth of Kentucky for the excise tax imposed under KRS 138.220 with respect to the gasoline or special fuel has been assumed by the seller and that the excise tax has already been paid or will be paid by the seller when the same shall become payable, a statement setting forth the name and address of the purchaser, the number of gallons of gasoline or special fuel so sold, the proposed use for which the gasoline or special fuel is purchased, and other information as the department shall require. The original gasoline or special fuel refund invoice shall be given to the purchaser, and the duplicate shall be retained by the seller.
  2. The refund permit holder shall file with the department an application for refund on forms furnished by the department, stating the quantity of gasoline and special fuel used for the purposes as set out in KRS 138.344 . The application shall be accompanied by the original invoice, or certified copy thereof, showing the purchase, and, if required by the department, evidence of payment therefor. When the department is satisfied that a refund is proper, it shall authorize the tax paid to be refunded as other refunds are made; and the amount refunded shall be deducted from gasoline or special fuel tax receipts as appropriate.
  3. The right to receive any refund under the provisions of this section shall not be assignable, except to the executor or administrator, or to the receiver, trustee in bankruptcy, or assignee in insolvency proceedings of the person entitled thereto.
  4. Interest on refunds authorized under the provisions of this section shall be paid at the tax interest rate, as defined in KRS 131.010(6), and shall begin to accrue sixty (60) days after the postmark date of the application for refund.

History. Enact. Acts 1946, ch. 10, § 8; 1988, ch. 285, § 23, effective August 1, 1988; 1990, ch. 98, § 11, effective July 13, 1990; 1992, ch. 98, § 2, effective July 14, 1992; 2005, ch. 85, § 376, effective June 20, 2005.

138.352. Appeal from denial of refund. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 10, § 9) was repealed by Acts 1964, ch. 141, § 39.

138.353. Assessment for amount erroneously refunded.

If any excise taxes on gasoline or special fuel be erroneously refunded, the department shall issue an assessment for the amount erroneously refunded. The refund error shall be assessed, collected, and paid in the same manner as if it were a deficiency.

History. Enact. Acts 1946, ch. 10, § 10; 1974, ch. 315, § 13; 1980, ch. 114, § 19, effective July 15, 1980; 1988, ch. 285, § 24, effective August 1, 1988; 1994, ch. 65, § 12, effective July 15, 1994; 2005, ch. 85, § 377, effective June 20, 2005.

138.354. Revocation of permits and privileges for violations.

  1. No person shall make a false or fraudulent statement in an application for a refund permit or in a gasoline or special fuel refund invoice, or in an application for a refund of any taxes as set out in KRS 138.344 to 138.355 ; or fraudulently obtain a refund of such taxes; or knowingly aid or assist in making any such false or fraudulent statement or claim; or having bought gasoline or special fuel under the provisions of KRS 138.344 to 138.355 , shall use or permit such gasoline or special fuel or any part thereof to be used for any purpose other than as provided in KRS 138.344.
  2. The refund permit of any person who shall violate any provision of subsection (1) of this section may be revoked by the Department of Revenue subject to appeal to the Kentucky Claims Commission pursuant to KRS 49.220 , and may not be reissued until two (2) years have elapsed from the date of such revocation.
  3. The refund permit of any person who shall violate any provision of KRS 138.344 to 138.355 , other than those contained in subsection (1) of this section, may be suspended by the Department of Revenue for any period in its discretion not exceeding six (6) months with the right of appeal to the Kentucky Claims Commission pursuant to KRS 49.220 .
  4. If a dealer violates any provision of KRS 138.344 to 138.355 , his privilege to sign refund invoices may be suspended by the Department of Revenue for a period of not more than two (2) years subject to appeal to the Kentucky Claims Commission pursuant to KRS 49.220 . No refund shall be made on gasoline or special fuel purchased from a dealer while a suspension of his privilege to sign refund invoices is in effect.

HISTORY: Enact. Acts 1946, ch. 10, § 11; 1964, ch. 141, § 28; 1988, ch. 285, § 25, effective August 1, 1988; 2005, ch. 85, § 378, effective June 20, 2005; 2017 ch. 74, § 85, effective June 29, 2017.

138.355. Proceedings for revocation of license or permit — Appeal.

If the department reasonably believes that any dealer or refund permit holder has been guilty of a violation of KRS 138.344 to 138.355 , which would subject the dealer or permit holder to a suspension or revocation of his license or permit under the provisions of subsections (2), (3) or (4) of KRS 138.354 , said dealer or permit holder may be cited by the department to show cause at a public hearing before the Department of Revenue why his license or permit should not be suspended or revoked. The dealer or refund permit holder shall be notified by certified or registered letter. The letter shall inform the dealer or refund permit holder of the charge or charges made against him and he shall have a reasonable opportunity to be heard before his license or permit may be revoked or suspended. The hearing shall be set at least five (5) days after the receipt of the letter. Any aggrieved dealer or refund permit holder may appeal any order entered to the Kentucky Claims Commission pursuant to KRS 49.220 , subject to the condition that he make bond sufficient in the opinion of the department to protect the Commonwealth from loss of revenue.

HISTORY: Enact. Acts 1946, ch. 10, § 12; 1964, ch. 141, § 28; 1988, ch. 285, § 26, effective August 1, 1988; 2005, ch. 85, § 379, effective June 20, 2005; 2017 ch. 74, § 86, effective June 29, 2017.

138.356. Personnel and expenses of administration; Refund Expense Account. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 10, § 13; 1948, ch. 94, § 5) was repealed by Acts 1950, ch. 25, § 1.

138.357. When refunds to begin. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 10, § 14) was repealed by Acts 1968, ch. 152, § 168.

138.358. Home heating, agricultural, nonprofit, governmental, or nonhighway purposes gasoline or special fuels credit to dealers.

  1. Any special fuels dealer who delivers special fuels, on which the tax imposed by KRS 138.220 has been paid, into a tank having no dispensing outlet and used exclusively to heat a personal residence, shall be entitled to claim a credit against the tax due pursuant to KRS 138.220 equal to the tax paid on the fuel if the dealer obtains from the purchaser and retains in his files a signed and dated statement from the purchaser certifying that the fuel will be used exclusively to heat the personal residence to which it is delivered. No person so certifying shall use the special fuel for any other purpose. The Department of Revenue may require dealers claiming the credit authorized herein to submit information required by the department to reasonably protect the revenues of the Commonwealth.
  2. Any special fuels dealer who sells gasoline or special fuels, on which the tax imposed by KRS 138.220 has been paid, exclusively for the purpose of operating or propelling stationary engines or tractors for agricultural purposes, shall be entitled to claim a credit against the tax due pursuant to KRS 138.220 equal to the tax paid on the fuel if the dealer obtains from the purchaser and retains in his files a signed and dated statement from the purchaser certifying that the fuel will be used exclusively for the purpose of operating or propelling stationary engines or tractors for agricultural purposes. No person so certifying shall use gasoline or the special fuels for any other purpose. Sales made from a retail filling station do not qualify for the credit. The Department of Revenue may require dealers claiming the credit authorized herein to submit information required by the department to reasonably protect the revenues of the Commonwealth.
  3. Any special fuels dealer who delivers special fuels, on which the tax imposed by KRS 138.220 has been paid, into a nonhighway use storage tank of a resident nonprofit religious, charitable, or educational organization or state or local governmental agency which has qualified for exemption from Kentucky sales and use tax pursuant to KRS 139.470(6) or 139.495 shall be entitled to claim a credit against the tax due pursuant to KRS 138.220 equal to the tax paid on the fuel if the dealer obtains from the purchaser and retains in his files a signed and dated statement certifying the purchaser’s sales and use tax purchase exemption authorization issued pursuant to KRS Chapter 139. No organization or agency so certifying shall use or allow the use of any nonhighway special fuel so acquired for any purpose other than fueling unlicensed vehicles or equipment for nonhighway purposes. The Department of Revenue may require dealers claiming the credit authorized herein to submit information required by the department to reasonably protect the revenues of the Commonwealth.
  4. Any special fuels dealer who sells special fuels, on which the tax imposed by KRS 138.220 has been paid, which shall be used exclusively for consumption in unlicensed vehicles or equipment for nonhighway purposes, shall be entitled to claim a credit against the tax due pursuant to KRS 138.220 equal to the tax paid on the fuel if the dealer obtains from the purchaser and retains in his files a signed and dated statement from the purchaser certifying that the fuel will be used exclusively for nonhighway purposes. No person making the certification shall use the special fuels for any other purpose. Sales made from a retail filling station do not qualify for the credit. The Department of Revenue may require dealers claiming the credit authorized in this subsection to submit information required by the department to reasonably protect the revenues of the Commonwealth. This credit shall not apply to special fuels taxes subject to a refund under KRS 138.445 .

HISTORY: Enact. Acts 1988, ch. 285, § 28, effective August 1, 1988; 1990, ch. 98, § 12, effective July 13, 1990; 1994, ch. 3, § 1, effective July 15, 1994; 2000, ch. 397, § 2, effective July 14, 2000; 2002, ch. 33, § 2, effective July 15, 2002; 2005, ch. 85, § 380, effective June 20, 2005; 2018 ch. 207, § 160, effective April 27, 2018.

138.359. Definitions for tax on motor fuels other than gasoline. [Repealed.]

Compiler’s Notes.

This section (4281h-1) was repealed by Acts 1952, ch. 191, § 19.

138.360. State tax on motor fuels other than gasoline; imposition; rate; part earmarked for rural and secondary roads. [Repealed.]

Compiler’s Notes.

This section (4281h-2: amend. Acts 1948, ch. 98, § 1) was repealed by Acts 1952, ch. 191, § 19.

138.370. Users’ records. [Repealed.]

Compiler’s Notes.

This section (4281h-11) was repealed by Acts 1952, ch. 191, § 19.

138.380. Transportation companies’ reports. [Repealed.]

Compiler’s Notes.

This section (4281h-10) was repealed by Acts 1952, ch. 191, § 19.

138.390. Computation and payment of tax. [Repealed.]

Compiler’s Notes.

This section (4281h-6: amend. Acts 1948, ch. 98, § 2; 1950, ch. 24, § 4) was repealed by Acts 1952, ch. 191, § 19.

138.400. Civil penalty for failure to make return or pay tax; estimate by department; burden of proof in action for collection. [Repealed.]

Compiler’s Notes.

This section (4281h-8, 4281h-9; amend. Acts 1950, ch. 24, § 5) was repealed by Acts 1952, ch. 191, § 19.

138.410. Duty to make returns, pay tax and keep and permit examination of records for tax purposes. [Repealed.]

Compiler’s Notes.

This section (4281h-15) was repealed by Acts 1952, ch. 191, § 19.

138.420. User’s license. [Repealed.]

Compiler’s Notes.

This section (4281h-4) was repealed by Acts 1952, ch. 191, § 19.

138.430. User’s bond. [Repealed.]

Compiler’s Notes.

This section (4281h-5) was repealed by Acts 1952, ch. 191, § 19.

138.440. Cancellation of user’s license; surrender of bond. [Repealed.]

Compiler’s Notes.

This section (4281h-7, 4281h-16) was repealed by Acts 1952, ch. 191, § 19.

138.445. Refund of tax paid on fuels used in operation of watercraft — Filing of refund claims.

  1. Except as provided in KRS 138.240(2)(e), any person who buys any liquid fuel for the purpose of dispensing it directly into fuel tanks installed in or attached to watercraft, for the purpose of operating or propelling watercraft, shall be reimbursed for the tax paid by him pursuant to the provisions of KRS 138.220 to 138.340 upon presenting to the department an application accompanied by the original invoices showing the payment of the purchases, including the liquid fuel tax. The application shall set forth the total amount of the liquid fuel purchased and used by the applicant in the operation or propulsion of watercraft.
    1. When liquid fuel on which the tax has been paid pursuant to the provisions of KRS 138.220 to 138.340 has been used for the purpose of operating any watercraft and was delivered directly to the fuel tanks installed in or attached to the watercraft, the purchaser of the liquid fuel so used shall be reimbursed for the tax paid. No tax shall be refunded except that paid upon the fuel used exclusively in watercraft motors; and (2) (a) When liquid fuel on which the tax has been paid pursuant to the provisions of KRS 138.220 to 138.340 has been used for the purpose of operating any watercraft and was delivered directly to the fuel tanks installed in or attached to the watercraft, the purchaser of the liquid fuel so used shall be reimbursed for the tax paid. No tax shall be refunded except that paid upon the fuel used exclusively in watercraft motors; and
    2. No person shall be entitled to a refund hereunder unless he shall have first filed with the department a bond with approved surety in the amount of not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000) to be determined by the department and upon the payment to the Commonwealth of any refunds to which he was not entitled.
  2. All refund claims authorized by this section shall be filed with the department on a calendar quarter or calendar year basis on forms and in the manner prescribed by it for refund of the tax paid on the fuel. If the application for refund is mailed to the department, the date of mailing as shown by the postmark shall be taken as the time and date of filing with the department.
  3. Refunds shall be made only on gasoline and special fuels purchased by locations designated by the department. The tax shall be refunded with interest at the tax interest rate as defined in KRS 131.010(6).

History. Enact. Acts 1960, ch. 214, § 1, 3; 1986, ch. 496, § 17, effective August 1, 1986; 1988, ch. 285, § 27, effective August 1, 1988; 1990, ch. 98, § 13, effective January 1, 1991; 1994, ch. 65, § 13, effective July 15, 1994; 2005, ch. 85, § 381, effective June 20, 2005.

Compiler’s Notes.

Section 16 of Acts 1990, ch. 98 provided that the amendment of this section should become effective on January 1, 1991.

NOTES TO DECISIONS

Cited in:

Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ).

Opinions of Attorney General.

In the absence of any specific provision for the refund of gasoline tax used by nonprofit ambulance services, a refund of gasoline tax on gasoline used in such operations cannot be obtained. OAG 75-22 .

In the absence of an express exemption to religious organizations in this section for vehicles which they purchase for use on public highways, the motor vehicle usage tax applies to such vehicles and must be paid at the time the vehicle is presented for registration. OAG 76-391 .

While it is true that subsection (1) of this section provides for the refund to anyone who buys and uses the fuel for the purpose of operating or propelling motor boats, this provision must be read in conjunction with subsection (4) of this section; accordingly, where the Department of Revenue promulgated a regulation that only locations located at public boat docks would be approved for a refund, a retailer who sold the boating fuel at his place of business on a public highway was not qualified to receive a refund. OAG 82-470 .

138.446. Refund to bus companies, taxicab companies, and senior citizen programs — Bond — Application — Audit.

  1. Bus companies and taxicab companies operating under a certificate issued pursuant to KRS Chapter 281 and senior citizen programs which utilize Title III funds of the Older Americans Act in the provision of transportation services shall be entitled to a refund of seven-ninths (7/9) of the amount of KRS Chapter 138 taxes paid on motor fuels used in their regularly scheduled operations in Kentucky.
  2. No person shall be entitled to a refund pursuant to this section unless he shall have first filed with the department a bond issued by a surety company authorized to do business in Kentucky in an amount of not less than one thousand dollars ($1,000) nor more than five thousand dollars ($5,000) to be determined by the department, conditioned upon faithful compliance with this section and upon the payment to the Commonwealth of any refunds to which he was not entitled.
  3. Applications for refund shall be filed with the department on a calendar quarter or calendar year basis on forms and in the manner prescribed by it for refund of tax paid on motor fuel used by buses or taxicabs. Each application for a refund shall show the number of gallons of motor fuel purchased during the quarter for use in buses or taxicabs; the date and quantity of each purchase; the vendor from whom the fuel was purchased; the number of gallons on which refund is claimed; and other information the department may require. Invoices shall be attached to applications from taxicab companies.
  4. The department may require any gasoline dealer or any dealer’s authorized agent to identify gasoline sold by him for taxicab use by adding any chemical or substance, which shall be furnished by the department and used in the manner as prescribed by the department. The department also may require that the dealer keep a complete record of all the gasoline sold by him, which records shall give the date of each sale, the number of gallons sold, the name of the person to whom sold, and the sale price.
  5. The department shall audit the application and make any other investigation it deems necessary to determine whether it constitutes a proper claim. When the department is satisfied that a refund is proper, it shall authorize seven-ninths (7/9) of the amount of the tax paid to be refunded as other refunds are made and the amount refunded shall be deducted from current motor fuel tax receipts. The tax shall be refunded with interest at the tax interest rate as defined in KRS 131.010(6).
  6. When the department finds that an application for a refund contains a false or fraudulent statement or that a refund has been fraudulently obtained, the department shall refuse to grant any refunds to the person making the false or fraudulent statement or fraudulently obtaining a refund for a period of two (2) years from the date of the findings.
  7. The department may prescribe, promulgate and enforce administrative regulations relating to the administration and enforcement of this section.
  8. The refund provided for in this section shall be effective on motor fuel purchased on or after July 1, 1978.

HISTORY: Enact. Acts 1960, ch. 186, Art. IV, § 9; 1962, ch. 203, § 10; 1972, ch. 61, § 8; 1978, ch. 208, § 1, effective June 17, 1978; 1984, ch. 411, § 2, effective July 13, 1984; 1986, ch. 496, § 20, effective August 1, 1986; 1990, ch. 98, § 14, effective January 1, 1991; 1994, ch. 65, § 14, effective July 15, 1994; 2002, ch. 274, § 12, effective July 15, 2002; 2005, ch. 85, § 382, effective June 20, 2005; 2015 ch. 19, § 36, effective June 24, 2015.

Compiler’s Notes.

This section was formerly compiled as KRS 138.662 .

Section 16 of Acts 1990, ch. 98 provided that the amendment of this section should become effective on January 1, 1991.

The Older Americans Act, referred to in subsection (1), is compiled as 42 USCS §§ 3001-3037a; Title III is compiled as 42 USCS §§ 3021-3030g.

138.447. Election for exemption from KRS 138.330 — Filing of financial instrument — Certification of amount of gasoline and special fuels tax due.

  1. A dealer may elect to be exempted from the provisions of KRS 138.330 , subject to the following provisions:
    1. An election for exemption shall be made on an annual basis and shall be for a calendar year;
    2. At the conclusion of the year, the election for exemption shall continue for the next calendar year unless the dealer notifies the Department of Revenue of the dealer’s intention to void the election for exemption by January fifteenth of the next calendar year; and
    3. If the election for exemption is voided, the provisions of KRS 138.330 immediately apply.
    1. A dealer electing to be exempted from the provisions of KRS 138.330 shall file with the department a financial instrument in an amount not to exceed two (2) months’ estimated liability, as calculated by the department, or five thousand dollars ($5,000), whichever is greater. (2) (a) A dealer electing to be exempted from the provisions of KRS 138.330 shall file with the department a financial instrument in an amount not to exceed two (2) months’ estimated liability, as calculated by the department, or five thousand dollars ($5,000), whichever is greater.
    2. The financial instrument shall be on a form and with a surety to do business in this state.
    3. The dealer shall be the principal obligor and the state the obligee.
    4. The financial instrument shall be conditioned upon the prompt filing of true reports and the payment by the dealer to the State Treasurer of all gasoline and special fuel excise taxes now or hereafter imposed by the state, together with all penalties and interest thereon, and generally upon faithful compliance with the provisions of KRS 138.210 to 138.340 .
    1. In addition to the provisions of KRS 138.210 to 138.340 the dealer shall certify to the department no later than the fifteenth day of each month the amount of gasoline and special fuels tax due the Commonwealth by the twenty-fifth day of that month. (3) (a) In addition to the provisions of KRS 138.210 to 138.340 the dealer shall certify to the department no later than the fifteenth day of each month the amount of gasoline and special fuels tax due the Commonwealth by the twenty-fifth day of that month.
    2. The certification shall be submitted via an electronic method acceptable by both the dealer and the department.
    3. By certifying the amount of tax which is to be remitted to the department, the dealer agrees to initiate an Automated Clearing House credit transaction to electronically transfer the amount of tax from the dealer’s account to the Kentucky State Treasurer on the twenty-fifth day of that month.
    4. If the dealer fails to certify the amount of tax collected as prescribed by this section or does not perform the electronic fund transfer, the department may immediately make demand on the financial instrument and revoke the license of the dealer notwithstanding the provisions of KRS 138.340.

History. Enact. Acts 2002, ch. 267, § 5, effective July 15, 2002; 2005, ch. 85, § 383, effective June 20, 2005.

138.448. Liability of officers of business organizations for gasoline and special fuels tax — Exemptions.

  1. Notwithstanding any other provision of this chapter to the contrary, the president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any corporation subject to the provisions of KRS 138.210 to 138.446 shall be personally and individually liable, both jointly and severally, for the tax imposed under KRS 138.210 to 138.446 . Corporate dissolution, withdrawal of the corporation from the state, or the cessation of holding any corporate office shall not discharge the liability of any person. The personal and individual liability shall apply to each and every person holding a corporate office at the time the tax becomes or became due. No person shall be personally and individually liable under this subsection who had no authority to collect, truthfully account for, or pay over any tax imposed by KRS 138.210 to 138.446 at the time the tax imposed becomes or became due. “Taxes” as used in this section shall include interest accrued at the rate provided by KRS 131.183 , all applicable penalties imposed under the provisions of this chapter, and all applicable penalties imposed under the provisions of KRS 131.180 , 131.410 to 131.445 , and 131.990 .
    1. The provisions of this section shall not apply if a corporation on an annual basis elects to be exempt from the provisions of KRS 138.224 by:
      1. Filing with the department a financial instrument in an amount not to exceed two (2) months’ estimated liability, as calculated by the department, or five thousand dollars ($5,000), whichever is greater;
      2. Certifying by an electronic method acceptable by both the dealer and the department no later than the fifteenth day of each month the amount of gasoline and special fuels tax due the Commonwealth by the twenty-fifth day of that month; and
      3. Agreeing to initiate an Automated Clearing House credit transaction to electronically transfer the amount of tax from the dealer’s account to the Kentucky State Treasurer on the twenty-fifth day of that month.
    2. If a dealer fails to certify the amount of tax collected or does not perform the electronic fund transfer as prescribed by paragraph (a) of this subsection, the department may immediately make demand of the financial instrument and revoke the license of the dealer notwithstanding the provisions of KRS 138.340 , and the provisions of this section shall apply.
  2. Notwithstanding any other provision of this chapter, KRS 275.150 , 362.1-306(3) or predecessor law, or 362.2-404(3) to the contrary, the managers of a limited liability company, the partners of a limited liability partnership, and the general partners of a limited liability limited partnership or any other person holding any equivalent office of a limited liability company, limited liability partnership, or limited liability limited partnership subject to the provisions of KRS 138.210 to 138.446 shall be personally and individually liable, both jointly and severally, for the tax imposed under KRS 138.210 to 138.446 . Dissolution, withdrawal of the limited liability company, limited liability partnership, or limited liability limited partnership from the state, or the cessation of holding any office shall not discharge the liability of any person. The personal and individual liability shall apply to each and every manager of a limited liability company, partner of a limited liability partnership and general partner of a limited liability limited partnership at the time the tax becomes or became due. No person shall be personally and individually liable under this subsection who had no authority to collect, truthfully account for, or pay over any tax imposed by KRS 138.210 to 138.446 at the time the tax becomes or became due. “Taxes” as used in this section shall include interest accrued at the rate provided by KRS 131.183 , all applicable penalties imposed under the provisions of this chapter, and all applicable penalties imposed under the provisions of KRS 131.180 , 131.410 to 131.445 , and KRS 131.990 .
    1. The provisions of this section shall not apply if a limited liability company, a limited liability partnership, or limited liability limited partnership on an annual basis elects to be exempt from the provisions of KRS 138.224 by:
      1. Filing with the department a financial instrument in an amount not to exceed two (2) months’ estimated liability, as calculated by the department, or five thousand dollars ($5,000), whichever is greater;
      2. Certifying by an electronic method acceptable by both the dealer and the department no later than the fifteenth day of each month the amount of gasoline and special fuels tax due the Commonwealth by the twenty-fifth day of that month; and
      3. Agreeing to initiate an Automated Clearing House credit transaction to electronically transfer the amount of tax from the dealer’s account to the Kentucky State Treasurer on the twenty-fifth day of that month.
    2. If a dealer fails to certify the amount of tax collected or does not perform the electronic fund transfer prescribed by paragraph (a) of this subsection, the department may immediately make demand of the financial instrument and revoke the license of the dealer notwithstanding the provisions of KRS 138.340 , and the provisions of this section shall apply.

For the purpose of this paragraph, a “financial instrument” means a bond issued by a corporation authorized to do business in Kentucky, a line of credit, or an account with a financial institution maintaining a compensating balance.

For the purpose of this paragraph, a “financial instrument” means a bond issued by a corporation authorized to do business in Kentucky, a line of credit, or an account with a financial institution maintaining a compensating balance.

History. Enact. Acts 2002, ch. 366, § 15, effective January 1, 2003; 2005, ch. 85, § 384, effective June 20, 2005; 2006, ch. 149, § 200, effective July 12, 2006.

Legislative Research Commission Notes.

(1/1/2003). The provisions of subsection (2) of this statute created in 2002 Ky. Acts ch. 366, sec. 15, “apply retroactively to July 15, 1994.” Ky. Acts ch. 366, sec. 19.

Motor Vehicle Usage

138.450. Definitions for KRS 138.455 to 138.470.

As used in KRS 138.455 to 138.470 , unless the context requires otherwise:

  1. “Current model year” means a motor vehicle of either the model year corresponding to the current calendar year or of the succeeding calendar year, if the same model and make is being offered for sale by local dealers;
  2. “Dealer” means “motor vehicle dealer” as defined in KRS 190.010 ;
  3. “Dealer demonstrator” means a new motor vehicle or a previous model year motor vehicle with an odometer reading of least one thousand (1,000) miles that has been used either by representatives of the manufacturer or by a licensed Kentucky dealer, franchised to sell the particular model and make, for demonstration;
  4. “Historic motor vehicle” means a motor vehicle registered and licensed pursuant to KRS 186.043 ;
  5. “Motor vehicle” means any vehicle that is propelled by other than muscular power and that is used for transportation of persons or property over the public highways of the state, except road rollers, mopeds, vehicles that travel exclusively on rails, and vehicles propelled by electric power obtained from overhead wires;
  6. “Moped” means either a motorized bicycle whose frame design may include one (1) or more horizontal crossbars supporting a fuel tank so long as it also has pedals, or a motorized bicycle with a step through type frame which may or may not have pedals rated no more than two (2) brake horsepower, a cylinder capacity not exceeding fifty (50) cubic centimeters, an automatic transmission not requiring clutching or shifting by the operator after the drive system is engaged, and capable of a maximum speed of not more than thirty (30) miles per hour;
  7. “New motor vehicle” means a motor vehicle of the current model year which has not previously been registered in any state or country;
  8. “Previous model year motor vehicle” means a motor vehicle not previously registered in any state or country which is neither of the current model year nor a dealer demonstrator;
  9. “Total consideration given” means the amount given, valued in money, whether received in money or otherwise, at the time of purchase or at a later date, including consideration given for all equipment and accessories, standard and optional. “Total consideration given” shall not include:
    1. Any amount allowed as a manufacturer or dealer rebate if the rebate is provided at the time of purchase and is applied to the purchase of the motor vehicle;
    2. Any interest payments to be made over the life of a loan for the purchase of a motor vehicle; and
    3. The value of any items that are not equipment or accessories including but not limited to extended warranties, service contracts, and items that are given away as part of a promotional sales campaign;
  10. “Trade-in allowance” means:
    1. The value assigned by the seller of a motor vehicle to a motor vehicle registered to the purchaser and offered in trade by the purchaser as part of the total consideration given by the purchaser and included in the notarized affidavit attesting to total consideration given; or
    2. In the absence of a notarized affidavit, the value of the vehicle being offered in trade as established by the department through the use of the reference manual;
  11. “Used motor vehicle” means a motor vehicle which has been previously registered in any state or country;
  12. “Retail price” for:
    1. New motor vehicles;
    2. Dealer demonstrator vehicles;
    3. Previous model year motor vehicles; and
    4. U-Drive-It motor vehicles that have been transferred within one hundred eighty (180) days of being registered as a U-Drive-It and that have less than five thousand (5,000) miles;
  13. “Retail price” for historic motor vehicles shall be one hundred dollars ($100);
  14. “Retail price” for used motor vehicles being titled or registered by a new resident for the first time in Kentucky whose values appear in the reference manual means the trade-in value given in the reference manual;
  15. “Retail price” for older used motor vehicles being titled or registered by a new resident for the first time in Kentucky whose values no longer appear in the reference manual shall be one hundred dollars ($100);
    1. “Retail price” for: (16) (a) “Retail price” for:
      1. Used motor vehicles, except those vehicles for which the retail price is established in subsection (13), (14), (15), (17), or (19) of this section; and
      2. U-Drive-It motor vehicles that are not transferred within one hundred eighty (180) days of being registered as a U-Drive-It or that have more than five thousand (5,000) miles;
    2. The trade-in allowance shall also be disclosed in the notarized affidavit.
    3. If a notarized affidavit is not available, “retail price” shall be established by the department through the use of the reference manual;
  16. Except as provided in KRS 138.470(6), if a motor vehicle is received by an individual as a gift and not purchased or leased by the individual, “retail price” shall be the trade-in value given in the reference manual;
  17. If a dealer transfers a motor vehicle which he has registered as a loaner or rental motor vehicle within one hundred eighty (180) days of the registration, and if less than five thousand (5,000) miles have been placed on the vehicle during the period of its registration as a loaner or rental motor vehicle, then the “retail price” of the vehicle shall be the same as the retail price determined by paragraph (a) of subsection (12) of this section computed as of the date on which the vehicle is transferred;
  18. “Retail price” for motor vehicles titled pursuant to KRS 186A.520 , 186A.525 , 186A.530 , or 186A.555 means the total consideration given as attested to in a notarized affidavit;
  19. “Loaner or rental motor vehicle” means a motor vehicle owned or registered by a dealer and which is regularly loaned or rented to customers of the service or repair component of the dealership;
  20. “Department” means the Department of Revenue;
  21. “Notarized affidavit” means a dated affidavit signed by the buyer and the seller on which the signature of the buyer and the signature of the seller are individually notarized; and
  22. “Reference manual” means the automotive reference manual prescribed by the department.

means the total consideration given, as determined in KRS 138.4603 ;

means the total consideration given, excluding any amount allowed as a trade-in allowance by the seller, as attested to in a notarized affidavit, provided that the retail price established by the notarized affidavit shall not be less than fifty percent (50%) of the difference between the trade-in value, as established by the reference manual, of the motor vehicle offered for registration and the trade-in value, as established by the reference manual, of any motor vehicle offered in trade as part of the total consideration given.

History. 4281i-1: amend. Acts 1960, ch. 186, Art. IV, § 2; 1968, ch. 40, part III, § 1; 1976, ch. 349, § 1, effective July 1, 1976; 1976 (Ex. Sess.), ch. 6, § 6; 1978, ch. 349, § 1, effective June 17, 1978; 1982, ch. 194, § 1, effective July 15, 1982; 1982, ch. 387, § 2, effective July 15, 1982; 1986, ch. 431, § 2, effective July 15, 1986; 1992, ch. 269, § 1, effective July 14, 1992; 1994, ch. 54, § 1, effective July 15, 1994; 1994, ch. 405, § 16, effective July 15, 1994; 1998, ch. 166, § 2, effective July 15, 1998; 1998, ch. 600, § 3, effective April 14, 1998; 2002, ch. 26, § 1, effective July 15, 2002; 2005, ch. 85, § 385, effective June 20, 2005; 2006, ch. 6, § 8, effective March 6, 2006; 2006 ch. 251, § 3, effective July 12, 2006; 2006, ch. 252, Pt. XXXV, § 1, effective January 1, 2007; 2009 (1st. Ex. Sess.), ch. 1, § 111, effective September 1, 2009; 2020 ch. 91, § 5, effective April 15, 2020.

Compiler’s Notes.

Section 11 of Acts 1998, ch. 600, stated: “The amendments contained in Sections 3 to 8 of this Act shall apply to motor vehicles sold after July 31, 1998.”

Legislative Research Commission Notes.

(9/1/2009). The internal numbering of subsection (12) of this statute has been altered in codification by the Reviser of Statutes from the way it appeared in 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 94, to correct a manifest clerical or typographical error under the authority of KRS 7.136 .

(1/1/2007). This section was amended by 2006 Ky. Acts chs. 6, 251, and 252. Where these Acts are not in conflict, they have been codified together. Where a conflict exists between Acts ch. 6, and chs. 251 and 252, Acts chs. 251 and 252, which were enacted by the General Assembly after Acts ch. 6, prevail under KRS 446.250 .

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 29, provides that this section applies retroactively to July 1, 2005.

NOTES TO DECISIONS

  1. Retail Price.
  2. Semitrailers.
1. Retail Price.

The different tax treatment in KRS 138.450(12)(a) and (f) of new and used vehicle sales does not violate the Equal Protection Clause, because the statute furthers a legitimate state interest in stimulating the used car industry, and the classification is rationally related to that goal. Fin. & Admin. Cabinet v. Beyer, 193 S.W.3d 755, 2006 Ky. App. LEXIS 152 (Ky. Ct. App. 2006).

Since KRS 138.450(12)(a) and (f) further a legitimate governmental interest (stimulating the used car market in Kentucky) the distinction between a new car and a used car for the purpose of taxation was not an exercise of arbitrary power over property by the legislature. Accordingly, KRS 138.450(12)(a) and (f) do not violate Ky. Const. § 2. Fin. & Admin. Cabinet v. Beyer, 193 S.W.3d 755, 2006 Ky. App. LEXIS 152 (Ky. Ct. App. 2006).

2. Semitrailers.

Semitrailers must be considered as motor vehicles since they are treated as one unit with the drawing or propelling agency. Department of Revenue ex rel. Carpenter v. Pullman, Inc. (Trailmobile Div.), 560 S.W.2d 18, 1977 Ky. App. LEXIS 875 (Ky. Ct. App. 1977).

Cited in:

Furste v. Dixie Traction Co., 286 Ky. 336 , 150 S.W.2d 913, 1941 Ky. LEXIS 265 ( Ky. 1941 ); George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ).

Opinions of Attorney General.

The motor vehicle usage tax applies to the certified or photostat copy of the itemized billing required to be furnished the clerk and does not apply to any price privately agreed to between the dealer and the customer. OAG 61-519 .

In the case of new passenger vehicles the usage tax should be levied upon 90 per cent of the total amount of the manufacturer’s suggested retail price, the price of all equipment and accessories, and the destination charges. OAG 61-829 .

The fair market value of the vehicle taken in trade should be in the area of the values set out in the N.A.D.A. Official Used Car Guide furnished to county clerks by the Department of Revenue. OAG 69-457 .

In order to make the retail price provisions of the section workable under a situation where an application for a historic motor vehicle registration is made under KRS 186.043 , the actual purchase price of vehicle should be used. OAG 72-732 .

Since the motor vehicle usage tax set forth in KRS 138.460 is paid by the purchaser, the sales tax does not apply to unclaimed vehicles sold at auction by city for towing and storage costs. OAG 82-287 .

138.455. Construction of KRS 138.450 to 138.470.

The tax imposed by KRS 138.450 to 138.470 shall be construed as a tax on the privilege of using a motor vehicle upon the public highways of this Commonwealth and shall be separate and distinct from all other taxes imposed by this Commonwealth. The provisions of KRS 138.450 to 138.470 shall in no way be construed together with the provisions of KRS Chapters 132 or 139.

History. Enact. Acts 1968, ch. 40, part III, § 5.

NOTES TO DECISIONS

Cited in:

Revenue Cabinet v. Budget Rent-A-Car of Cincinnati, Inc., 704 S.W.2d 199, 1986 Ky. LEXIS 220 ( Ky. 1986 ), appeal denied, Budget Rent-A-Car of Cincinnati, Inc. v. Kentucky Revenue Cabinet, 467 U.S. 1137, 106 S. Ct. 2239, 90 L. Ed. 2d 687, 1986 U.S. LEXIS 1388 (1986).

138.460. Motor vehicle usage tax — Imposition — Rate — Collection — Refunds.

  1. A tax levied upon its retail price at the rate of six percent (6%) shall be paid on the use in this state of every motor vehicle, except those exempted by KRS 138.470 , at the time and in the manner provided in this section.
  2. The tax shall be collected by the county clerk or other officer with whom the vehicle is required to be titled or registered:
    1. When the fee for titling or registering a motor vehicle the first time it is offered for titling or registration in this state is collected; or
    2. Upon the transfer of title or registration of any motor vehicle previously titled or registered in this state.
  3. The tax imposed by subsection (1) of this section and collected under subsection (2) of this section shall not be collected if the owner provides to the county clerk a signed affidavit of nonhighway use, on a form provided by the department, attesting that the vehicle will not be used on the highways of the Commonwealth. If this type of affidavit is provided, the clerk shall, in accordance with the provisions of KRS Chapter 139, immediately collect the applicable sales and use tax due on the vehicle.
    1. The tax collected by the county clerk under this section shall be reported and remitted to the department on forms prescribed and provided by the department. The department shall provide each county clerk affidavit forms which the clerk shall provide to the public free of charge to carry out the provisions of KRS 138.450 and subsection (3) of this section. The county clerk shall for his services in collecting the tax be entitled to retain an amount equal to three percent (3%) of the tax collected and accounted for. (4) (a) The tax collected by the county clerk under this section shall be reported and remitted to the department on forms prescribed and provided by the department. The department shall provide each county clerk affidavit forms which the clerk shall provide to the public free of charge to carry out the provisions of KRS 138.450 and subsection (3) of this section. The county clerk shall for his services in collecting the tax be entitled to retain an amount equal to three percent (3%) of the tax collected and accounted for.
    2. The sales and use tax collected by the county clerk under subsection (3) of this section shall be reported and remitted to the department on forms which the department shall prescribe and provide at no cost. The county clerk shall, for his or her services in collecting the tax, be entitled to retain an amount equal to three percent (3%) of the tax collected and accounted for.
    3. Motor vehicle dealers licensed pursuant to KRS Chapter 190 shall not owe or be responsible for the collection of sales and use tax due under subsection (3) of this section.
  4. A county clerk or other officer shall not title, register or issue any license tags to the owner of any motor vehicle subject to the tax imposed by subsection (1) of this section or the tax imposed by KRS Chapter 139, when the vehicle is being offered for titling or registration for the first time, or transfer the title of any motor vehicle previously registered in this state, unless the owner or his agent pays the tax levied under subsection (1) of this section or the tax imposed by KRS Chapter 139, if applicable, in addition to any title, registration, or license fees.
    1. When a person offers a motor vehicle: (6) (a) When a person offers a motor vehicle:
      1. For titling on or after July 1, 2005; or
      2. For registration;
    2. When a resident of this state offers a motor vehicle for registration for the first time in this state:
      1. Upon which the Kentucky sales and use tax was paid by the resident offering the motor vehicle for registration at the time of titling under subsection (3) of this section; and
      2. For which the resident provides proof that the tax was paid;
    1. A county clerk or other officer shall not title, register, or issue any license tags to the owner of any motor vehicle subject to this tax, when the vehicle is then being offered for titling or registration for the first time, unless the seller or his agent delivers to the county clerk a notarized affidavit, if required, and available under KRS 138.450 attesting to the total and actual consideration paid or to be paid for the motor vehicle. (7) (a) A county clerk or other officer shall not title, register, or issue any license tags to the owner of any motor vehicle subject to this tax, when the vehicle is then being offered for titling or registration for the first time, unless the seller or his agent delivers to the county clerk a notarized affidavit, if required, and available under KRS 138.450 attesting to the total and actual consideration paid or to be paid for the motor vehicle.
    2. If a notarized affidavit is not available, the clerk shall follow the procedures under KRS 138.450(12) for new vehicles, and KRS 138.450(14) or (15) for used vehicles.
    3. The clerk shall attach the notarized affidavit, if available, or other documentation attesting to the retail price of the vehicle as the department may prescribe by administrative regulation promulgated under KRS Chapter 13A to the copy of the certificate of registration and application for title mailed to the department.
  5. Notwithstanding the provisions of KRS 138.450 , the tax shall not be less than six dollars ($6) upon titling or first registration of a motor vehicle in this state, except where the vehicle is exempt from tax under KRS 138.470 or 154.45-090 .
  6. Where a motor vehicle is sold by a dealer and the purchaser returns the vehicle for any reason to the same dealer within sixty (60) days for a vehicle replacement or a refund of the purchase price, the purchaser shall be entitled to a refund of the amount of usage tax received by the department as a result of the registration of the returned vehicle. In the case of a new motor vehicle, the registration of the returned vehicle shall be canceled and the vehicle shall be considered to have not been previously registered in Kentucky when resold by the dealer.
  7. When a manufacturer refunds the retail purchase price or replaces a new motor vehicle for the original purchaser within ninety (90) days because of malfunction or defect, the purchaser shall be entitled to a refund of the amount of motor vehicle usage tax received by the department as a result of the first titling or registration. A person shall not be entitled to a refund unless the person has filed with the department a report from the manufacturer identifying the vehicle that was replaced and stating the date of replacement.
  8. Notwithstanding the time limitations of subsections (9) and (10) of this section, when a dealer or manufacturer refunds the retail purchase price or replaces a motor vehicle for the purchaser as a result of formal arbitration or litigation, or, in the case of a manufacturer, because ordered to do so by a dispute resolution system established under KRS 367.865 or 16 C.F.R. 703, the purchaser shall be entitled to a refund of the amount of motor vehicle usage tax received by the department as a result of the titling or registration. A person shall not be entitled to a refund unless the person files with the department a report from the dealer or manufacturer identifying the vehicle that was replaced.
    1. An owner who has paid the tax levied under this section on a used motor vehicle or U-Drive-It vehicle based upon the retail price as defined in KRS 138.450(16)(a) shall be entitled to a refund of any tax overpayment, plus applicable interest as provided in KRS 131.183 , if the owner: (12) (a) An owner who has paid the tax levied under this section on a used motor vehicle or U-Drive-It vehicle based upon the retail price as defined in KRS 138.450(16)(a) shall be entitled to a refund of any tax overpayment, plus applicable interest as provided in KRS 131.183 , if the owner:
      1. Files for a refund with the department within four (4) years from the date the tax was paid as provided in KRS 134.580 ; and
      2. Documents to the satisfaction of the department that the condition of the vehicle merits a retail price lower than the retail price as defined in KRS 138.450(16)(a).
    2. The department shall promulgate administrative regulations to develop the forms and the procedures by which the owner can apply for a refund and document the condition of the vehicle. The department shall provide the information to each county clerk.
    3. The refund shall be based upon the difference between the tax paid and the tax determined to be due by the department at the time the owner titled or registered the vehicle.

for the first time in this state which was registered in another state that levied a tax substantially identical to the tax levied under this section, the person shall be entitled to receive a credit against the tax imposed by this section equal to the amount of tax paid to the other state. A credit shall not be given under this subsection for taxes paid in another state if that state does not grant similar credit for substantially identical taxes paid in this state.

a nonrefundable credit shall be given against the tax imposed by subsection (1) of this section for the sales and use tax paid.

HISTORY: 4281i-2, 4281i-4, 4281i-5: amend. Acts 1960, ch. 186, Art. IV, § 3; 1968, ch. 40, part III, § 2; 1972, ch. 84, part IV, § 2; 1974, ch. 325, § 1; 1976, ch. 89, § 2; 1976, ch. 133, § 1; 1976, ch. 155, § 3; 1976, ch. 349, § 2, effective July 1, 1976; 1978, ch. 10, § 1, effective June 17, 1978; 1978, ch. 384, § 283, effective June 17, 1978; 1982, ch. 375, § 2, effective July 15, 1982; 1984, ch. 409, § 1, effective July 13, 1984; 1986, ch. 496, § 18, effective August 1, 1986; 1990, ch. 476, Pt. VII B, § 626, effective July 1, 1990; 1994, ch. 54, § 3, effective July 15, 1994; 1994, ch. 65, § 15, effective July 15, 1994; 1998, ch. 600, § 4, effective April 14, 1998; 2005, ch. 85, § 386, effective June 20, 2005; 2005, ch. 173, Pt. XIV, § 1, effective March 20, 2005; 2006, ch. 6, § 9, effective March 6, 2006; 2006, ch. 251, § 4, effective July 12, 2006; 2006, ch. 252, Pt. XXXV, § 2, effective January 1, 2007; 2009 (1st Ex. Sess.), ch. 1, § 113, effective September 1, 2009; 2015 ch. 67, § 9, effective June 24, 2015.

Compiler’s Notes.

Section 11 of Acts 1998, ch. 600, provided that the 1998 amendments to this section “shall apply to motor vehicles sold after July 31, 1998.”

Legislative Research Commission Notes.

(1/1/2007). This section was amended by 2006 Ky. Acts chs. 6, 251, and 252. Where these Acts are not in conflict, they have been codified together. Where a conflict exists between Acts ch. 6 and chs. 251 and 252, Acts chs. 251 and 252, which were enacted by the General Assembly after Acts ch. 6, prevail under KRS 446.250 .

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 29, provides that this section applies retroactively to July 1, 2005.

(6/20/2005) 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Tax Paid Elsewhere.
  3. Public Charities.
1. Constitutionality.

Court of Appeals held that Ky. Const., § 170 exempted cities from the tax imposed by this section. Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ) (decision prior to 1968 amendment of KRS 138.470 ).

The different tax treatment in former KRS 138.450(12)(a) and (f) (deleted by amendment) of new and used vehicle sales does not violate the Equal Protection Clause, because the statute furthers a legitimate state interest in stimulating the used car industry, and the classification is rationally related to that goal. Fin. & Admin. Cabinet v. Beyer, 193 S.W.3d 755, 2006 Ky. App. LEXIS 152 (Ky. Ct. App. 2006).

Since former KRS 138.450(12)(a) and (f) (deleted by amendment) further a legitimate governmental interest (stimulating the used car market in Kentucky) the distinction between a new car and a used car for the purpose of taxation was not an exercise of arbitrary power over property by the legislature. Accordingly, KRS 138.450(12)(a) and (f) do not violate Ky. Const. § 2. Fin. & Admin. Cabinet v. Beyer, 193 S.W.3d 755, 2006 Ky. App. LEXIS 152 (Ky. Ct. App. 2006).

2. Tax Paid Elsewhere.

Persons who have paid use or sales taxes in their former state of residence upon their motor vehicles are entitled to have their motor vehicles registered and licensed in Kentucky upon proof of same. George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ).

3. Public Charities.

Institutions of purely public charity are exempted by KRS 138.470 from paying the tax imposed by this section. Gray v. Methodist Episcopal Church, etc., 272 Ky. 646 , 114 S.W.2d 1141, 1938 Ky. LEXIS 180 ( Ky. 1938 ).

Cited in:

Furste v. Dixie Traction Co., 286 Ky. 336 , 150 S.W.2d 913, 1941 Ky. LEXIS 265 ( Ky. 1941 ); Munson v. White, 309 Ky. 295 , 217 S.W.2d 641, 1949 Ky. LEXIS 691 ( Ky. 1949 ); Revenue Cabinet v. Budget Rent-A-Car of Cincinnati, Inc., 704 S.W.2d 199, 1986 Ky. LEXIS 220 ( Ky. 1986 ).

Opinions of Attorney General.

County school boards are not liable for the payment of the tax imposed by this section. OAG 60-817 .

The determination of tax liability under this section is based on the date upon which a motor vehicle is presented for registration and not the date of purchase or transfer of title. OAG 60-878 .

Where the county clerk failed to collect at first registration the usage tax on trucks previously exempt, he could withhold registration and licensing of the vehicles until the tax is paid. OAG 61-32 .

Motor vehicle usage tax must be collected before registration even though sales tax was paid when the automobile was purchased from wrecking company and sales tax was paid on parts to repair it. OAG 61-181 .

The motor vehicle usage tax applies to the certified or photostat copy of the itemized billing required to be furnished the clerk and does not apply to any price privately agreed to between the dealer and the customer. OAG 61-519 .

In the case of new passenger vehicles the usage tax should be levied upon 90 per cent of the total amount of the manufacturer’s suggested retail price, the price of all equipment and accessories, and the destination charges. OAG 61-829 .

The tax provided for in this section is computed on 90 percent of the total factory price, transportation charges, and any additional equipment not included in the factory price. OAG 63-590 .

The motor vehicle usage tax was due on the transfer of a car from father to son upon the son’s reaching the age of 21. OAG 68-326 .

The tax imposed by this section applies on the entire value of the vehicle when the owner of one undivided one-half (1/2) of the vehicle transfers his interest to the owner of the other undivided one-half (1/2). OAG 68-328 .

A city is exempt from the payment of the motor vehicle usage tax on vehicles it purchases for city use. OAG 70-129 .

Where a sheriff sells an automobile under an execution, the purchaser, upon registering the vehicle, shall pay the required use tax. OAG 74-727 .

Acts 1976, ch. 236 and ch. 133 as they relate to registration of motor vehicles, house trailers, mobile homes, or recreational vehicles and the collection of sales and use tax on such vehicles do not apply to the registration of motor boats, since the term “recreational vehicles” and the term “motor vehicle” do not embrace motor boats. OAG 76-357 .

In the absence of a specific exemption of the motor vehicle usage tax in KRS 138.470 , a motor vehicle leased to a fourth class city by an automobile dealer is subject to the usage tax so long as title remains in the dealer. OAG 77-752 .

Motor homes and school buses are not to be classified as trucks and are not entitled to have the motor vehicle usage tax levied upon 90% of the taxable value of such vehicles. OAG 78-546 .

A Kentucky resident should without exception be credited with the tax paid in the foreign state when registering his motor vehicle in Kentucky upon proof that the sales tax was in fact paid in the foreign state. OAG 79-406 .

The Kentucky General Assembly did not intend the absurd, unreasonable and unjust result of requiring a Kentucky resident to pay both the sales tax of the foreign state and the vehicle usage tax of Kentucky for the simple reason that the Kentucky resident failed to register the motor vehicle in the state of its purchase since such a result is diametrically opposed to the intent and spirit of the reciprocal agreements for which this section provides. OAG 79-406 .

The legislative intent of subsection (5) of this section is to protect Kentucky residents from the evil of being forced to pay the full Kentucky motor vehicle usage tax in addition to the sales tax of the foreign state in which the vehicle was purchased. OAG 79-406 .

Automobiles sold by a person going out of business, as dealt with factually in OAG 81-233 , are subject to the motor vehicle usage tax of this section even though a one-time sale, or going-out-of-business sale, is an “occasional sale,” so that motor vehicles are exempt from the tax of KRS 139.310 , since the tax of KRS 139.310 and the tax of this section are two different taxes, although highly similar in incidence and operative effect. OAG 81-294 .

Where a lessee leases a motor vehicle for a certain term and then purchases the vehicle for a nominal consideration at the end of the lease term, the fact that he paid the five percent use tax pursuant to KRS 138.463 during the term of the lease does not preclude the state from also collecting the five percent tax based on book value under this section before title and registration will be transferred. OAG 82-20 .

Since the motor vehicle usage tax set forth in this section is paid by the purchaser, the sales tax does not apply to unclaimed vehicles sold at auction by city for towing and storage costs. OAG 82-287 .

Research References and Practice Aids

Kentucky Law Journal.

Vanlandingham. The Fee System in Kentucky Counties, 40 Ky. L.J. 275 (1952).

Article: The Tortuous History of Section 170 of the Kentucky Constitution: Has the Kentucky Supreme Court Finally and Conclusively Determined its Scope? ,57 U. Louisville L. Rev. 285, (2019).

138.4602. Determination of motor vehicle retail price for sales on or after September 1, 2009, and before July 1, 2014.

    1. Effective for sales on or after September 1, 2009, and before July 1, 2014, of: (1) (a) Effective for sales on or after September 1, 2009, and before July 1, 2014, of:
      1. New motor vehicles;
      2. Dealer demonstrator vehicles;
      3. Previous model year motor vehicles; and
      4. U-Drive-It motor vehicles that have been transferred within one hundred eighty (180) days of being registered as a U-Drive-It and that have less than five thousand (5,000) miles;
    2. The retail price shall not include that portion of the price of the vehicle attributable to equipment or adaptive devices necessary to facilitate or accommodate an operator or passenger with physical disabilities.
    1. The value of the purchased motor vehicle offered for registration and the value of the vehicle offered in trade shall be attested to in a notarized affidavit, provided that the retail price established by the notarized affidavit shall not be less than fifty percent (50%) of the difference between the applicable value of the purchased motor vehicle, as determined under the method described in paragraph (b) of this subsection, and the trade-in value of any motor vehicle offered in trade, as established by the reference manual. (2) (a) The value of the purchased motor vehicle offered for registration and the value of the vehicle offered in trade shall be attested to in a notarized affidavit, provided that the retail price established by the notarized affidavit shall not be less than fifty percent (50%) of the difference between the applicable value of the purchased motor vehicle, as determined under the method described in paragraph (b) of this subsection, and the trade-in value of any motor vehicle offered in trade, as established by the reference manual.
    2. If a notarized affidavit is not available:
      1. The retail price of the purchased motor vehicle offered for registration shall be determined as follows:
        1. Ninety percent (90%) of the manufacturer’s suggested retail price of the vehicle with all equipment and accessories, standard and optional, and transportation charges; or
        2. Eighty-one percent (81%) of the manufacturer’s suggested retail price of the vehicle with all equipment and accessories, standard and optional, and transportation charges in the case of new trucks of gross weight in excess of ten thousand (10,000) pounds; and
      2. The value of the vehicle offered in trade shall be the trade-in value, as established by the reference manual.
    1. The trade-in allowance permitted by subsection (1) of this section shall be for motor vehicles purchased between September 1, 2009, and ending June 30, 2011. The total amount of reduced tax receipts related to the trade-in allowance shall be subject to a cap of twenty-five million dollars ($25,000,000). The trade-in allowance shall be available on a first-come, first-served basis. Implementation and application of the cap shall be determined by the department through the promulgation of an administrative regulation in accordance with KRS Chapter 13A. (3) (a) The trade-in allowance permitted by subsection (1) of this section shall be for motor vehicles purchased between September 1, 2009, and ending June 30, 2011. The total amount of reduced tax receipts related to the trade-in allowance shall be subject to a cap of twenty-five million dollars ($25,000,000). The trade-in allowance shall be available on a first-come, first-served basis. Implementation and application of the cap shall be determined by the department through the promulgation of an administrative regulation in accordance with KRS Chapter 13A.
    2. The administrative regulation shall include:
      1. A method for new vehicle dealers and county clerks to determine the amount of the new vehicle credit cap at any point in time during the year; and
      2. A notification process to all county clerks when the new vehicle credit cap has been reached during the year.
  1. When the cap established by subsection (3) of this section has been reached, or for all motor vehicles purchased after June 30, 2011, and before July 1, 2014, the retail price of all motor vehicles listed in subsection (1) of this section shall be:
    1. The total consideration given, including any trade-in allowance, as attested in a notarized affidavit; or
    2. If a notarized affidavit is not available, the retail price of the motor vehicle offered for registration shall be determined as follows:
      1. Ninety percent (90%) of the manufacturer’s suggested retail price of the vehicle with all equipment and accessories, standard and optional, and transportation charges; or
      2. Eighty-one percent (81%) of the manufacturer’s suggested retail price of the vehicle with all equipment and accessories, standard and optional, and transportation charges in the case of new trucks of gross weight in excess of ten thousand (10,000) pounds.

the retail price shall be determined by reducing the amount of total consideration given by the trade-in allowance of any motor vehicle traded in by the buyer. The value of the purchased motor vehicle and the amount of the trade-in allowance shall be determined as provided in subsection (2) of this section, and the availability of the trade-in allowance shall be subject to subsection (3) of this section.

The retail price shall not include that portion of the price of the vehicle attributable to equipment or adaptive devices necessary to facilitate or accommodate an operator or passenger with physical disabilities.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 112, effective September 1, 2009; 2010 (1st Ex. Sess.), ch. 2, § 2, effective June 4, 2010; 2013, ch. 119, § 10, effective June 25, 2013.

Legislative Research Commission Notes.

(6/4/2010). 2010 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 28, provides: “Section 2 of this Act (this section) applies retroactively to June 26, 2009.”

138.4603. Determination of motor vehicle retail price for sales on or after July 1, 2014.

    1. Effective for sales on or after July 1, 2014, of: (1) (a) Effective for sales on or after July 1, 2014, of:
      1. New motor vehicles;
      2. Dealer demonstrator vehicles;
      3. Previous model year motor vehicles; and
      4. U-Drive-It motor vehicles that have been transferred within one hundred eighty (180) days of being registered as a U-Drive-It and that have less than five thousand (5,000) miles;
    2. The retail price shall not include that portion of the price of the vehicle attributable to equipment or adaptive devices necessary to facilitate or accommodate an operator or passenger with physical disabilities.
    1. The value of the purchased motor vehicle offered for registration and the value of the vehicle offered in trade shall be attested to in a notarized affidavit. (2) (a) The value of the purchased motor vehicle offered for registration and the value of the vehicle offered in trade shall be attested to in a notarized affidavit.
    2. If a notarized affidavit is not available:
      1. The retail price of the purchased motor vehicle offered for registration shall be determined as follows:
        1. Ninety percent (90%) of the manufacturer’s suggested retail price of the vehicle with all equipment and accessories, standard and optional, and transportation charges; or
        2. Eighty-one percent (81%) of the manufacturer’s suggested retail price of the vehicle with all equipment and accessories, standard and optional, and transportation charges in the case of new trucks of gross weight in excess of ten thousand (10,000) pounds; and
      2. The value of the vehicle offered in trade shall be the trade-in value, as established by the reference manual.

the retail price shall be determined by reducing the amount of total consideration given by the trade-in allowance of any motor vehicle traded in by the buyer. The value of the purchased motor vehicle and the amount of the trade-in allowance shall be determined as provided in subsection (2) of this section.

HISTORY: Enact. Acts 2013, ch. 119, § 11, effective June 25, 2013; 2015 ch. 67, § 10, effective June 24, 2015.

138.4605. Taxes on loaner or rental motor vehicles.

  1. A motor vehicle dealer who operates a service or repair component in his dealership may register a motor vehicle to be used exclusively as a loaner or rental motor vehicle to the customers of this service or repair department. The dealer may pay usage tax on the loaner or rental motor vehicle as provided in KRS 138.460 , or, subject to the provisions of this section, may pay a usage tax of twenty-five dollars ($25) per month on the loaner or rental motor vehicle.
  2. A dealer shall pay the usage tax on a loaner or rental motor vehicle in the manner provided by KRS 138.460 unless the dealer shows to the satisfaction of the Department of Revenue that he is regularly engaged in the servicing or repair of motor vehicles and loans or rents the loaner or rental motor vehicle to a retail customer while the customer’s motor vehicle is at the dealership for repair or service.
  3. For a dealer to be eligible to pay the usage tax on a loaner or rental motor vehicle under this section, the dealer shall identify the motor vehicle as a loaner or rental motor vehicle to the Department of Revenue and shall maintain records, as required by the Department of Revenue, which show all uses of the loaner or rental motor vehicle.
  4. The tax due under subsection (1) of this section shall be remitted to the Department of Revenue monthly on forms prescribed by and in accordance with administrative regulations promulgated by the department.
  5. Failure of a motor vehicle dealer to remit the taxes applicable to a loaner or rental motor vehicle under this section shall be sufficient cause for the Department of Revenue to revoke the authority to use that motor vehicle as a loaner or rental motor vehicle and cause the usage tax on that motor vehicle to be due and payable in accordance with KRS 138.460 on the retail price of that motor vehicle when it was first registered as a loaner or rental motor vehicle.
  6. A motor vehicle no longer covered under the loaner permit program shall be taxed in the same manner as motor vehicles under KRS 138.450(12) or (16).

History. Enact. Acts 1998, ch. 166, § 1, effective July 15, 1998; 2002, ch. 26, § 2, effective July 15, 2002; 2005, ch. 85, § 387, effective June 20, 2005; 2006, ch. 251, § 5, effective July 12, 2006; 2006, ch. 252, Pt. XXXV, § 3, effective January 1, 2007.

Legislative Research Commission Notes.

(1/1/2007). This section was amended by 2006 Ky. Acts chs. 251, sec. 5, and 252, Pt. XXXV, sec. 3, which are identical and have been codified together.

138.462. Definitions for KRS 138.463 and 138.4631.

As used in KRS 138.463 and 138.463 1, unless the context requires otherwise:

  1. “Cabinet” means the Transportation Cabinet;
  2. “Rent” and “rental” means a contract, supported by a consideration, for the use of a motor vehicle for a period of less than three hundred sixty-five (365) days;
  3. “Lease” and “leasing” means a contract, supported by a consideration, for the use of a motor vehicle for a period of three hundred sixty-five (365) days or more; and
  4. “Gross rental charge” means the amount paid by a customer for time and mileage only.

History. Enact. Acts 1986, ch. 431, § 3, effective January 1, 1987.

Legislative Research Commission Notes.

Acts 1986, ch. 431, § 15 read: “Such administrative expenses for the administration of KRS 138.462 to 138.4631 , 138.990 and 186.010 shall be appropriated to the transportation cabinet as determined to be necessary by the cabinet. Any additional employees deemed necessary by the transportation cabinet for the administration of KRS 138.462 to 138.4631 , 138.990 and 186.010 shall not be deemed a violation of numerical employee limits that may be imposed by the 1986 General Assembly.”

138.463. Collection of U-Drive-It tax.

  1. A holder of a certificate as required under KRS 281.630 to operate as a U-Drive-It as defined in KRS 281.010 may pay the usage tax as provided in KRS 138.460 or, subject to the provisions of this section, may pay a usage tax of six percent (6%) levied upon the amount of the gross rental or lease charges paid by a customer or lessee renting or leasing a motor vehicle from such holder of the certificate.
  2. The provisions of KRS 138.462 and this section shall apply to all rental and leasehold contracts entered into after March 9, 1990.
  3. A holder of a certificate shall pay the usage tax as provided in KRS 138.460 unless he shows to the satisfaction of the cabinet that he is regularly engaged in the renting or leasing of motor vehicles to retail customers as a part of an established business. The issuance of a U-Drive-It certificate under the provisions of KRS Chapter 281 shall create a rebuttable presumption that the holder of a certificate is regularly engaged in renting or leasing. Persons first engaging in the renting or leasing of motor vehicles to retail customers shall, in addition to obtaining a certificate required under KRS 281.630 , demonstrate to the satisfaction of the cabinet that they are prepared to qualify under the standards set forth in this subsection.
  4. In the event the holder of such certificate qualifies under subsection (3) of this section and elects to pay the usage tax by the alternate method as provided in subsection (1) of this section, or is required by subsection (8) of this section to pay by the alternate method, he shall pay the fee imposed by KRS 281.631(3) and in addition shall pay the monthly tax authorized by subsection (1) of this section.
  5. The tax authorized by subsection (1) of this section shall be the direct obligation of the holder of the certificate but it may be charged to and collected from the customer in addition to the rental or lease charges. The tax due shall be remitted to the cabinet each month on forms and pursuant to regulations promulgated by the cabinet.
    1. As soon as practicable after each return is received, the cabinet shall examine and audit it. If the amount of tax computed by the cabinet is greater than the amount returned by the taxpayer, the excess shall be assessed by the cabinet within four (4) years from the date the return was filed, except as provided in paragraph (c) of this subsection, and except that in the case of a failure to file a return or of a fraudulent return the excess may be assessed at any time. A notice of such assessment shall be mailed to the taxpayer. The time herein provided may be extended by agreement between the taxpayer and the cabinet. (6) (a) As soon as practicable after each return is received, the cabinet shall examine and audit it. If the amount of tax computed by the cabinet is greater than the amount returned by the taxpayer, the excess shall be assessed by the cabinet within four (4) years from the date the return was filed, except as provided in paragraph (c) of this subsection, and except that in the case of a failure to file a return or of a fraudulent return the excess may be assessed at any time. A notice of such assessment shall be mailed to the taxpayer. The time herein provided may be extended by agreement between the taxpayer and the cabinet.
    2. For the purpose of paragraphs (a) and (c) of this subsection, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
    3. Notwithstanding the four (4) year time limitation of paragraph (a) of this subsection, in the case of a return where the tax computed by the cabinet is greater by twenty-five percent (25%) or more than the amount returned by the taxpayer, the excess shall be assessed by the cabinet within six (6) years from the date the return was filed.
  6. Failure of the holder of the certificate to remit the taxes applicable to the rental charges as provided herein shall be sufficient cause for the Department of Vehicle Regulation to void the certificate issued to such holder and the usage tax on each of the motor vehicles which had been registered by the holder under the certificate shall be due and payable on the retail price of each such motor vehicle when it was first purchased by the holder.
  7. Notwithstanding the provisions of KRS 138.460 and subsection (1) of this section, a holder of a certificate operating a fleet of rental passenger cars which has been registered pursuant to an allocation formula approved by the cabinet shall pay the tax by the method provided in this section. The provisions of this section shall apply to all vehicles rented by the holder in this state.
  8. The usage tax reported and paid on every rental or lease of a vehicle registered pursuant to this section shall be based on the fair market rental or lease value of the vehicle. Fair market rental or lease value shall be based on standards established by administrative regulation promulgated by the cabinet. The cabinet may remove a vehicle from the U-Drive-It program without a hearing if it is determined by the cabinet that no taxes have been remitted on that vehicle during the registration period. However, the tax reported and paid to the Transportation Cabinet shall not be less than the amount due based on the actual terms of a rental or lease agreement. The burden of proving that the consideration charged by the holder satisfies this subsection is on the holder.

HISTORY: Enact. Acts 1972, ch. 184, § 2; 1974, ch. 74, Art. IV, § 20(2); 1982, ch. 387, § 3, effective July 15, 1982; 1986, ch. 431, § 4, effective January 1, 1987; 1988, ch. 113, § 1, effective July 15, 1988; 1990, ch. 466, § 5, effective July 13, 1990; 1990, ch. 476, Pt. VII B, § 627, effective July 1, 1990; 1996, ch. 55, § 1, effective July 15, 1996; 1998, ch. 166, § 4, effective July 15, 1998; 2015 ch. 19, § 37, effective June 24, 2015.

NOTES TO DECISIONS

  1. In General.
  2. Constitutionality.
  3. Alternative Tax.
  4. Use of Vehicles.
1. In General.

Under this section, the out-of-state lessor is required to pay taxes on all charges, including “total time and mileage,” “full collision insurance,” “personal accident insurance,” and “drop-off charges,” as set out in the lease agreement. Revenue Cabinet v. Budget Rent-A-Car of Cincinnati, Inc., 704 S.W.2d 199, 1986 Ky. LEXIS 220 ( Ky. 1986 ).

Under this section, the U-Drive-It operator may pay the usage tax provided by KRS 138.460 at the time of registration on all vehicles registered in this Commonwealth and exclude those vehicles registered in another state, or he may elect to pay the 5% usage tax derived from leases entered into in this commonwealth on all vehicles in the rental fleet which are leased in this Commonwealth. Revenue Cabinet v. Budget Rent-A-Car of Cincinnati, Inc., 704 S.W.2d 199, 1986 Ky. LEXIS 220 ( Ky. 1986 ).

2. Constitutionality.

Where there was no discrimination between foreign and state corporations operating in the same line of business, the entire activities of the lessor in renting its fleet at its airport location were intrastate, not interstate, the lessee operated upon the highways of this Commonwealth for some portion of the trip, and the tax was on the privilege to use the highways in this Commonwealth, not on the use itself, this section and the applicable regulations promulgated thereunder were not in violation of the United States Constitution, art. 1, § 8, cl. 3, the Interstate Commerce Clause. Revenue Cabinet v. Budget Rent-A-Car of Cincinnati, Inc., 704 S.W.2d 199, 1986 Ky. LEXIS 220 ( Ky. 1986 ).

3. Alternative Tax.

The alternative tax in the statute is based upon amounts charged in a lease or rental agreement, not upon amounts that the taxpayer asserts (without documentation) it actually received. Bob Hook Chevrolet Isuzu, Inc. v. Transportation Cabinet, 983 S.W.2d 488, 1998 Ky. LEXIS 150 ( Ky. 1998 ).

4. Use of Vehicles.

An automobile dealership could not pay tax under subsection (1) for vehicles registered under its “U-drive-it” permit where the vehicles registered udder the permit were not used for leasing or rental purposes and, instead, were utilized as customer courtesy cars or loaners or for various other business purposes. Bob Hook Chevrolet Isuzu, Inc. v. Transportation Cabinet, 983 S.W.2d 488, 1998 Ky. LEXIS 150 ( Ky. 1998 ).

Opinions of Attorney General.

Where a lessee leases a motor vehicle for a certain term and then purchases the vehicle for a nominal consideration at the end of the lease term, the fact that he paid the five percent (5%) use tax pursuant to this section during the term of the lease does not preclude the state from also collecting the five percent (5%) tax based on book value under KRS 138.460 before title and registration will be transferred. OAG 82-20 .

138.4631. Estimated assessment, plus penalty and interest, against holders of U-Drive-It permits and against dealers with loaner motor vehicles for failure or refusal to pay tax.

  1. If any holder of a permit under KRS 138.463(2) fails or refuses to file a return or furnish any information requested in writing, the cabinet may, from any information in its possession, make an estimate of the permit holder’s gross rental or lease charges and issue an assessment against the permit holder based on the estimated gross rental or lease charges and add a penalty of ten percent (10%) of the amount of the assessment so determined. This penalty shall be in addition to all other applicable penalties provided by law.
  2. If a dealer under KRS 138.4605 fails or refuses to file a return or furnish any information requested in writing, the cabinet may, from any information in its possession, make an estimate of the tax owed by the dealer on his loaner motor vehicles and issue an assessment against the dealer after adding a penalty of ten percent (10%) of the amount of the assessment so determined. The penalty shall be in addition to all other applicable penalties provided by law.
  3. If any holder of a permit under KRS 138.463 (2) or a dealer under KRS 138.4605 fails to make and file a return required by KRS 138.4605 or 138.463 on or before the due date of the return or the due date as extended by the cabinet, or if the tax, or any installment or portion of the tax imposed by KRS 138.4605 or 138.463 , is not paid on or before the date prescribed for its payment, then, unless it is shown to the satisfaction of the cabinet that the failure is due to a reasonable cause, five percent (5%) of the tax found to be due shall be added to the tax for each thirty (30) days or fraction thereof elapsing between the due date of the return and the date on which filed, but the total penalty shall not exceed twenty-five percent (25%) of the tax; provided, however, that in no case shall the penalty be less than ten dollars ($10).
  4. If the tax imposed by KRS 138.4605 or 138.463 , whether assessed by the cabinet, the dealer, or the permit holder, or any installment or portion of the tax is not paid on or before the date prescribed for its payment, there shall be collected, as a part of the tax, interest upon the unpaid amount at the tax interest rate as defined in KRS 131.010(6) from the date prescribed for its payment until payment is actually made.

History. Enact. Acts 1982, ch. 387, § 5, effective July 15, 1982; 1986, ch. 431, § 5, effective July 15, 1986; 1992, ch. 338, § 4, effective August 1, 1992; 1998, ch. 166, § 3, effective July 15, 1998.

138.464. Weekly report to department — Daily deposit in state depository.

  1. The county clerk shall report each Monday to the department all moneys collected during the previous week, together with a duplicate of all receipts issued by him during the same period.
    1. For collections prior to August 1, 2010, the clerk shall deposit motor vehicle usage tax and sales and use tax collections not later than the next business day following receipt in a Commonwealth of Kentucky, department account in a bank designated as a depository for state funds. The clerk may be required to then cause the funds to be transferred from the local depository bank to the State Treasury in whatever manner and at times prescribed by the commissioner of the department or his designee. (2) (a) For collections prior to August 1, 2010, the clerk shall deposit motor vehicle usage tax and sales and use tax collections not later than the next business day following receipt in a Commonwealth of Kentucky, department account in a bank designated as a depository for state funds. The clerk may be required to then cause the funds to be transferred from the local depository bank to the State Treasury in whatever manner and at times prescribed by the commissioner of the department or his designee.
    2. For collections on or after August 1, 2010, the provisions of KRS 131.155 shall apply.
  2. Failure to forward duplicates of all receipts issued during the reporting period or failure to file the weekly report of moneys collected within seven (7) working days after the report is due shall subject the clerk to a penalty of two and one-half percent (2.5%) of the amount of moneys collected during the reporting period for each month or fraction thereof until the documents are filed.
  3. Failure to deposit or, if required, transfer collections as required above shall subject the clerk to a penalty of two and one-half percent (2.5%) of the amount not deposited or, if required, not transferred for each day until the collections are deposited or transferred as required above. The penalty for failure to deposit or transfer money collected shall not be less than fifty dollars ($50) nor more than five hundred dollars ($500) per day.
  4. The penalties provided in this section shall not apply if the failure of the clerk is due to reasonable cause.
  5. The department may in its discretion grant a county clerk a reasonable extension of time to file his report or make any transfer of deposits as required above. The extension, however, must be requested prior to the end of the seven (7) day period and shall begin to run at the end of said period.
  6. All penalties collected under this provision shall be paid into the State Treasury as a part of the revenue collected under KRS 138.450 to 138.729 and 139.778 .

History. Enact. Acts 1974, ch. 325, § 2; 1982, ch. 387, § 4, effective July 15, 1982; 1990, ch. 187, § 2, effective July 13, 1990; 2005, ch. 85, § 388, effective June 20, 2005; 2006, ch. 6, § 10, effective March 6, 2006; 2006, ch. 251, § 6, effective July 12, 2006; 2006, ch. 252, Pt. XIV, § 2, effective January 1, 2007; 2006, ch. 252, Pt. XXXV, § 4, effective January 1, 2007; 2010, ch. 147, § 8, effective July 15, 2010.

Legislative Research Commission Notes.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 29, provides that this section applies retroactively to July 1, 2005.

138.465. Individual seller to deliver registration certificate with assignment form to county clerk.

  1. Any person other than a dealer, as defined in KRS 186.010(10), who sells or transfers a motor vehicle in this state shall deliver to the county clerk the certificate of title with the assignment form on the reverse side properly executed and shall transfer the vehicle to the new owner within ten (10) days of the date of the sale or transfer of ownership.
  2. Any person who violates subsection (1) of this section shall be subject to the penalties set out in KRS 186.990(2).

History. Enact. Acts 1968, ch. 40, part III, § 4; 1976, ch. 133, § 2; 1994, ch. 51, § 3, effective July 15, 1994; 2006, ch. 6, § 11, effective March 6, 2006.

Legislative Research Commission Notes.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 29, provides that this section applies retroactively to July 1, 2005.

138.470. Exemptions from tax.

There is expressly exempted from the tax imposed by KRS 138.460 :

  1. Motor vehicles titled or registered to the United States, or to the Commonwealth of Kentucky or any of its political subdivisions;
  2. Motor vehicles titled or registered to institutions of purely public charity and institutions of education not used or employed for gain by any person or corporation;
  3. Motor vehicles which have been previously titled in Kentucky on or after July 1, 2005, or previously registered and titled in any state or by the federal government when being sold or transferred to licensed motor vehicle dealers for resale. The motor vehicles shall not be leased, rented, or loaned to any person and shall be held for resale only;
  4. Motor vehicles sold by or transferred from dealers registered and licensed in compliance with the provisions of KRS 186.070 and KRS 190.010 to 190.080 to members of the Armed Forces on duty in this Commonwealth under orders from the United States government;
  5. Commercial motor vehicles, excluding passenger vehicles having a seating capacity for nine (9) persons or less, owned by nonresident owners and used primarily in interstate commerce and based in a state other than Kentucky which are required to be registered in Kentucky by reason of operational requirements or fleet proration agreements and are registered pursuant to KRS 186.145 ;
  6. Motor vehicles titled in Kentucky on or after July 1, 2005, or previously registered in Kentucky, transferred between husband and wife, parent and child, stepparent and stepchild, or grandparent and grandchild;
  7. Motor vehicles transferred when a business changes its name and no other transaction has taken place or an individual changes his or her name;
  8. Motor vehicles transferred to a corporation from a proprietorship or limited liability company, to a limited liability company from a corporation or proprietorship, or from a corporation or limited liability company to a proprietorship, within six (6) months from the time that the business is incorporated, organized, or dissolved, if the transferor and the transferee are the same business entity except for a change in legal form;
  9. Motor vehicles transferred by will, court order, or under the statutes covering descent and distribution of property, if the vehicles were titled in Kentucky on or after July 1, 2005, or previously registered in Kentucky;
  10. Motor vehicles transferred between a subsidiary corporation and its parent corporation if there is no consideration, or nominal consideration, or in sole consideration of the cancellation or surrender of stock;
  11. Motor vehicles transferred between a limited liability company and any of its members, if there is no consideration, or nominal consideration, or in sole consideration of the cancellation or surrender of stock;
  12. The interest of a partner in a motor vehicle when other interests are transferred to him;
  13. Motor vehicles repossessed by a secured party who has a security interest in effect at the time of repossession and a repossession affidavit as required by KRS 186.045(6). The repossessor shall hold the vehicle for resale only and not for personal use, unless he has previously paid the motor vehicle usage tax on the vehicle;
  14. Motor vehicles transferred to an insurance company to settle a claim. These vehicles shall be junked or held for resale only;
  15. Motor carriers operating under a charter bus certificate issued by the Transportation Cabinet under KRS Chapter 281;
      1. Motor vehicles registered under KRS 186.050 that have a declared gross vehicle weight with any towed unit of forty-four thousand and one (44,001) pounds or greater; and (16) (a) 1. Motor vehicles registered under KRS 186.050 that have a declared gross vehicle weight with any towed unit of forty-four thousand and one (44,001) pounds or greater; and
      2. Farm trucks registered under KRS 186.050(4) that have a declared gross vehicle weight with any towed unit of forty-four thousand and one (44,001) pounds or greater;
    1. To be eligible for the exemption established in paragraph (a) of this subsection, motor vehicles shall be registered at the appropriate range for the declared gross weight of the vehicle established in KRS 186.050(3)(b) and shall be prohibited from registering at a higher weight range. If a motor vehicle is initially registered in one (1) declared gross weight range and subsequently is registered at a declared gross weight range lower than forty-four thousand and one (44,001) pounds, the person registering the vehicle shall be required to pay the county clerk the usage tax due on the vehicle unless the person can provide written proof to the clerk that the tax has been previously paid;
  16. Motor vehicles transferred to a trustee to be held in trust, or from a trustee to a beneficiary of the trust, if a direct transfer from the grantor of the trust to all individual beneficiaries of the trust would have qualified for an exemption from the tax pursuant to subsection (6) or (9) of this section;
  17. Motor vehicles transferred to a trustee to be held in trust, if the grantor of the trust is a natural person and is treated as the owner of any portion of the trust for federal income tax purposes under the provisions of 26 U.S.C. secs. 671 to 679;
  18. Motor vehicles transferred from a trustee of a trust to another person if:
    1. The grantor of the trust is a natural person and is treated as the owner of any portion of the trust for federal income tax purposes under the provisions of 26 U.S.C. secs. 671 to 679; and
    2. A direct transfer from the grantor of the trust to the person would have qualified for an exemption from the tax pursuant to subsection (6) or (9) of this section; and
  19. Motor vehicles under a manufacturer’s statement of origin in possession of a licensed new motor vehicle dealer that are titled and transferred to a licensed used motor vehicle dealer and held for sale.

HISTORY: 4281i-3: amend. Acts 1950, ch. 63, § 59; 1956 (2nd Ex. Sess.), ch. 5, § 4A; 1960, ch. 5, Art. II, § 2; 1968, ch. 40, part III, § 3; 1970, ch. 13, § 1; 1972, ch. 84, part IV, § 1; 1972, ch. 184, § 1; 1974, ch. 123, § 1; 1976, ch. 155, § 4; 1980, ch. 144, § 1, effective July 15, 1980; 1986, ch. 118, § 105, effective July 1, 1987; 1990, ch. 187, § 3, effective July 13, 1990; 1992, ch. 342, § 1, effective July 14, 1992; 1994, ch. 54, § 2, effective July 15, 1994; 1998, ch. 290, § 1, effective July 15, 1998; 2003, ch. 103, § 4, effective October 1, 2003; 2003, ch. 124, § 39, effective October 1, 2003; 2005, ch. 173, Pt. XIX, § 1, effective August 1, 2005; 2006, ch. 6, § 12, effective March 6, 2006; 2011, ch. 53, § 1, effective August 1, 2011; 2014, ch. 83, § 4, effective July 15, 2014; 2015 ch. 88, § 1, effective June 24, 2015.

Compiler’s Notes.

Section 2 of Acts 1998, ch. 290, provided that the 1998 amendments to this section “shall apply for motor vehicles transferred after July 31, 1998.”

Legislative Research Commission Notes.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 29, provides that this section applies retroactively to July 1, 2005.

(6/24/2003). 2000 Ky. Acts ch. 408, sec. 178, renumbered the former subsection (4) of KRS 186.045 as subsection (3), but that Act failed to include a conforming amendment to change the reference to that subsection in subsection (13) of this statute. Under KRS 7.136(1)(e), that change has now been made.

NOTES TO DECISIONS

  1. Municipalities.
  2. Religious Institutions.
  3. Commercial Motor Vehicles.
1. Municipalities.

Fourth-class city held exempt from the payment of use taxes on automobiles purchased by the city for municipal use. Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ) (decided under prior law).

2. Religious Institutions.

This section exempted religious institutions from the tax imposed by subsection (2) of KRS 138.460 . Gray v. Methodist Episcopal Church, etc., 272 Ky. 646 , 114 S.W.2d 1141, 1938 Ky. LEXIS 180 ( Ky. 1938 ) (decided under prior law).

3. Commercial Motor Vehicles.

This section did not exempt common carriers of passengers by motor bus from usage tax. Furste v. Dixie Traction Co., 286 Ky. 336 , 150 S.W.2d 913, 1941 Ky. LEXIS 265 ( Ky. 1941 ) (decided under prior law).

Cited in:

George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ).

Opinions of Attorney General.

Subsection (1) of this section does not exempt a motor vehicle sold to a pastor in his capacity as a private individual for his personal use. OAG 60-181 .

The LKLP Council, a private nonprofit corporation whose general objective is the social, individual, and economic growth of Leslie, Knott, Letcher and Perry Counties, is not a governmental agency as defined in this section and is not entitled to an official license tag. OAG 67-257 .

The motor vehicle usage tax was due on the transfer of a car from father to son upon the son’s reaching the age of 21. OAG 68-326 .

Since the Council of State Governments is a public institution it is exempted by this section from the motor vehicle usage tax. OAG 69-49 .

A county humane society was an institution of public charity and as such was entitled to exemption from the motor vehicle usage tax on its animal ambulance. OAG 69-535 .

An automobile owned by a church to transport children to a music education program was not exempt from the motor vehicle usage tax. OAG 71-233 .

A county water district is a political subdivision of the commonwealth of Kentucky and is entitled to an exemption from the motor vehicle usage tax when its vehicles are presented for registration with the county clerk. OAG 71-376 .

When the Kentucky Inspection Bureau was consolidated with Insurance Services Offices and that agency acquired all of the assets and liabilities of the Kentucky Inspection Bureau, the transfer of vehicles registered in the name of Kentucky Inspection Bureau to Insurance Services Offices could not be exempted from the motor vehicle usage tax under either subsection (7) or (8) of this section. OAG 72-71 .

A fire truck owned by a nonstock, nonprofit corporation whose purpose is to offer fire protection to citizens and their property in Owen County would be considered engaged primarily in charitable activities and exempted from paying the usage tax provided in subsection (2) of this section. OAG 73-145 .

Since the federal Soldiers and Sailors Civil Relief Act exempts servicemen from motor vehicle usage tax without any qualification, the 1974 amendment to subsection (4) of this section which sought to limit such exemption only to motor vehicles acquired from dealers licensed or registered in Kentucky was unconstitutional. OAG 74-319 .

The Grant County REACT organization is not entitled to exemption from the motor vehicle usage tax and is not entitled to official Kentucky motor vehicle license tags. OAG 77-36 .

A motor vehicle leased to a fourth class city by an automobile dealer is subject to the motor vehicle usage tax imposed by KRS 138.460 so long as title remains in the automobile dealer. OAG 77-752 .

The Department of Revenue’s requirement, pursuant to subsection (8) of this section, that a transfer of a motor vehicle from a proprietorship to a corporation must take place on the same day the corporation is formed or a reasonable number of days thereafter is not in conflict with the statute. OAG 78-680 .

Research References and Practice Aids

Kentucky Law Journal.

Garrison, Martin, History of Kentucky Commercial Motor Vehicle Transportation Tax Legislation, 33 Ky. L.J. 3 (1944).

Article: The Tortuous History of Section 170 of the Kentucky Constitution: Has the Kentucky Supreme Court Finally and Conclusively Determined its Scope? ,57 U. Louisville L. Rev. 285, (2019).

Race Track Admissions

138.480. State tax on race track admissions.

Except for the conduct of harness racing at a county fair, each person entering the grounds or enclosure of any race track at which a live race meeting is being conducted under the jurisdiction of the Kentucky Horse Racing Commission, for the purpose of attending the races or for any other purpose connected therewith, shall pay a tax of fifteen cents ($0.15) to the state, except as otherwise provided in this section. If tickets good for more than one (1) day are issued, the sum of fifteen cents ($0.15) shall be paid by each person using such ticket on each day that it is used. No admission tax shall be collected from any of the employees of the race track, or any of the owners or trainers of horses, or jockeys, or their employees. The admission tax provided for in this section shall be collected by the race track from each person on entering the race track or enclosure on a paid or free admission. The race track shall account to and pay to the state the money so collected.

History. 4223b-8: amend. Acts 1992, ch. 109, § 6, effective March 30, 1992; 1994, ch. 272, § 3, effective July 15, 1994; 2004, ch. 191, § 47, effective July 13, 2004; 2010, ch. 24, § 105, effective July 15, 2010.

Research References and Practice Aids

Cross-References.

Admission tax and license tax are in lieu of other taxes, KRS 137.190 .

License tax on race tracks, KRS 137.170 .

Racing, KRS Ch. 230.

138.490. Report and payment of tax — Civil penalty.

  1. Each person engaged in the business of conducting a race track shall furnish the Department of Revenue, within thirty (30) days after the end of each race meeting, a report of the number of persons subject to the tax levied in KRS 138.480 who enter the grounds or inclosure during the race meeting. At the same time, the person shall pay to the state the correct amount due by reason of the collection of the tax from persons entering the grounds or inclosure of the race track.
  2. Any person who violates any provision of this section or KRS 138.480 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest at the tax interest rate as defined in KRS 131.010(6).

History. 4223b-9, 4223b-11: amend. Acts 1982, ch. 452, § 16, effective July 1, 1982; 1986, ch. 496, § 19, effective August 1, 1986; 1992, ch. 403, § 12, effective July 14, 1992; 2005, ch. 85, § 389, effective June 20, 2005.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Payment Under Protest

138.500. Payment of excise tax under protest — Actions to recover tax paid — Refund. [Repealed.]

Compiler’s Notes.

This section (4281e-13, 4281f-18, 4281g-15, 4281h-14, 4281i-7: amend. Acts 1948, ch. 99; 1958, ch. 126, § 13; 1988, ch. 285, § 31, effective August 1, 1988) was repealed by Acts 2006, ch. 251, § 94, effective July 12, 2006.

138.502. Prohibition on the sale, delivery, provision, or use of untaxed or dyed diesel fuel — Exceptions — Civil penalty.

  1. A person shall not sell or deliver untaxed diesel fuel or dyed diesel fuel when the person knows or has reason to know that the fuel will be used in a motor vehicle on any public highway.
  2. A person shall not introduce untaxed diesel fuel or dyed diesel fuel into the supply tank of any motor vehicle licensed for highway use.
  3. A person shall not use untaxed diesel fuel or dyed diesel fuel in any motor vehicle actually used on a public highway.
  4. The prohibitions contained in this section shall not apply to:
    1. Persons operating motor vehicles that have received fuel into the fuel tank outside this state in a jurisdiction that permits introduction of untaxed diesel fuel or dyed diesel fuel into the fuel supply tank of highway vehicles; and
    2. Uses of untaxed fuel or dyed diesel fuel on the highway which are lawful under the Internal Revenue Code and regulations, including state and local government vehicles, and buses, unless otherwise prohibited by this chapter.
  5. The department may assess a civil penalty as follows:
    1. For first offenses, one thousand dollars ($1,000) or ten dollars ($10) per gallon of untaxed fuel or dyed diesel fuel involved, whichever is greater, against any person who violates this section. The capacity of the fuel tank shall be assumed to be the amount of fuel involved, unless a lesser amount can be adequately verified by the violator; and
    2. For subsequent offenses, the penalty shall be the amount determined in paragraph (a) of this subsection, multiplied by the number of separate violations by the violator.

History. Enact. Acts 2000, ch. 397, § 3, effective July 14, 2000; 2002, ch. 267, § 2, effective July 15, 2002; 2005, ch. 85, § 390, effective June 20, 2005.

Pari-Mutuel Betting

138.510. Taxes on pari-mutuel wagering on live racing and telephone account, intertrack, and interstate wagering — Exemptions — Uses of tax revenue — Two-day international horse racing event.

    1. Except as provided in paragraph (d) of this subsection and subsection (3) of this section, an excise tax is imposed on all tracks conducting pari-mutuel wagering on live racing under the jurisdiction of the commission as follows: (1) (a) Except as provided in paragraph (d) of this subsection and subsection (3) of this section, an excise tax is imposed on all tracks conducting pari-mutuel wagering on live racing under the jurisdiction of the commission as follows:
      1. For each track with a daily average live handle of one million two hundred thousand dollars ($1,200,000) or above, the tax shall be in the amount of three and one-half percent (3.5%) of all money wagered on live races at the track during the fiscal year; and
      2. For each track with a daily average live handle under one million two hundred thousand dollars ($1,200,000), the tax shall be one and one-half percent (1.5%) of all money wagered on live races at the track during the fiscal year.
    2. Beginning on April 1, 2014, an excise tax is imposed on all tracks conducting pari-mutuel wagering on historical horse races under the jurisdiction of the commission at a rate of one and one-half percent (1.5%) of all money wagered on historical horse races at the track during the fiscal year.
    3. Money shall be deducted from the tax paid under paragraphs (a) and (b) of this subsection and deposited as follows:
      1. An amount equal to three-quarters of one percent (0.75%) of all money wagered on live races and historical horse races at the track for Thoroughbred racing shall be deposited in the Thoroughbred development fund established in KRS 230.400 ;
      2. An amount equal to one percent (1%) of all money wagered on live races and historical horse races at the track for harness racing shall be deposited in the Kentucky standardbred development fund established in KRS 230.770 ;
      3. An amount equal to one percent (1%) of all money wagered on live races and historical horse races at the track for quarter horse, paint horse, Appaloosa, and Arabian horse racing shall be deposited in the Kentucky quarter horse, paint horse, Appaloosa, and Arabian development fund established by KRS 230.445 ;
      4. An amount equal to two-tenths of one percent (0.2%) of all money wagered on live races and historical horse races at the track shall be deposited in the equine industry program trust and revolving fund established by KRS 230.550 to support the Equine Industry Program at the University of Louisville, except that the amount deposited from money wagered on historical horse races in any fiscal year shall not exceed six hundred fifty thousand dollars ($650,000);
        1. An amount equal to one-tenth of one percent (0.1%) of all money wagered on live races and historical horse races at the track shall be deposited in a trust and revolving fund to be used for the construction, expansion, or renovation of facilities or the purchase of equipment for equine programs at state universities, except that the amount deposited from money wagered on historical horse races in any fiscal year shall not exceed three hundred twenty thousand dollars ($320,000). 5. a. An amount equal to one-tenth of one percent (0.1%) of all money wagered on live races and historical horse races at the track shall be deposited in a trust and revolving fund to be used for the construction, expansion, or renovation of facilities or the purchase of equipment for equine programs at state universities, except that the amount deposited from money wagered on historical horse races in any fiscal year shall not exceed three hundred twenty thousand dollars ($320,000).
        2. These funds shall not be used for salaries or for operating funds for teaching, research, or administration. Funds allocated under this subparagraph shall not replace other funds for capital purposes or operation of equine programs at state universities.
        3. The Kentucky Council on Postsecondary Education shall serve as the administrative agent and shall establish an advisory committee of interested parties, including all universities with established equine programs, to evaluate proposals and make recommendations for the awarding of funds.
        4. The Kentucky Council on Postsecondary Education may promulgate administrative regulations to establish procedures for administering the program and criteria for evaluating and awarding grants; and
      5. An amount equal to one-tenth of one percent (0.1%) of all money wagered on live races and historical horse races shall be distributed to the commission to support equine drug testing as provided in KRS 230.265(3), except that the amount deposited from money wagered on historical horse races in any fiscal year shall not exceed three hundred twenty thousand dollars ($320,000).
    4. The excise tax imposed by paragraph (a) of this subsection shall not apply to pari-mutuel wagering on live harness racing at a county fair.
    5. The excise tax imposed by paragraph (a) of this subsection, and the distributions provided for in paragraph (c) of this subsection, shall apply to money wagered on historical horse races beginning September 1, 2011, through March 31, 2014, and historical horse races shall be considered live racing for purposes of determining the daily average live handle. Beginning April 1, 2014, the tax imposed by paragraph (b) of this subsection shall apply to money wagered on historical horse races.
    1. Except as provided in paragraph (c) of this subsection, an excise tax is imposed on: (2) (a) Except as provided in paragraph (c) of this subsection, an excise tax is imposed on:
      1. All tracks conducting telephone account wagering;
      2. All tracks participating as receiving tracks in intertrack wagering under the jurisdiction of the commission; and
      3. All tracks participating as receiving tracks displaying simulcasts and conducting interstate wagering thereon.
    2. The tax shall be three percent (3%) of all money wagered on races as provided in paragraph (a) of this subsection during the fiscal year.
    3. A noncontiguous track facility approved by the commission on or after January 1, 1999, shall be exempt from the tax imposed under this subsection, if the facility is established and operated by a licensed track which has a total annual handle on live racing of two hundred fifty thousand dollars ($250,000) or less. The amount of money exempted under this paragraph shall be retained by the noncontiguous track facility, KRS 230.3771 and 230.378 notwithstanding.
    4. Money shall be deducted from the tax paid under paragraphs (a) and (b) of this subsection as follows:
      1. An amount equal to two percent (2%) of the amount wagered shall be deposited as follows:
        1. In the Thoroughbred development fund established in KRS 230.400 if the host track is conducting a Thoroughbred race meeting or the interstate wagering is conducted on a Thoroughbred race meeting;
        2. In the Kentucky standardbred development fund established in KRS 230.770 , if the host track is conducting a harness race meeting or the interstate wagering is conducted on a harness race meeting; or
        3. In the Kentucky quarter horse, paint horse, Appaloosa, and Arabian development fund established by KRS 230.445 , if the host track is conducting a quarter horse, paint horse, Appaloosa, or Arabian horse race meeting or the interstate wagering is conducted on a quarter horse, paint horse, Appaloosa, or Arabian horse race meeting;
      2. An amount equal to one-twentieth of one percent (0.05%) of the amount wagered shall be allocated to the equine industry program trust and revolving fund established by KRS 230.550 to be used to support the Equine Industry Program at the University of Louisville;
      3. An amount equal to one-tenth of one percent (0.1%) of the amount wagered shall be deposited in a trust and revolving fund to be used for the construction, expansion, or renovation of facilities or the purchase of equipment for equine programs at state universities, as detailed in subsection (1)(c)5. of this section; and
      4. An amount equal to one-tenth of one percent (0.1%) of the amount wagered shall be distributed to the commission to support equine drug testing as provided in KRS 230.265(3).
  1. If a host track in this state is the location for the conduct of a two (2) day international horse racing event that distributes in excess of a total of twenty million dollars ($20,000,000) in purses and awards:
    1. The excise tax imposed by subsection (1)(a) of this section shall not apply to money wagered at the track on live races conducted at the track during the two (2) day international horse racing event; and
    2. Amounts wagered at the track on live races conducted at the track during the two (2) day international horse racing event shall not be included in calculating the daily average live handle for purposes of subsection (1) of this section.
  2. The taxes imposed by this section shall be paid, collected, and administered as provided in KRS 138.530 .

HISTORY: Enact. Acts 1948, ch. 35, § 1; 1954, ch. 76, § 1; 1956, ch. 13, § 1; 1970, ch. 258, § 1; 1976, ch. 343, § 2; 1978, ch. 190, § 2, effective June 17, 1978; 1982, ch. 100, § 8, effective July 15, 1982; 1984, ch. 240, § 2, effective July 13, 1984; 1986, ch. 215, § 1, effective July 15, 1986; 1986, ch. 296, § 1, effective July 15, 1986; 1988, ch. 376, § 5, effective July 15, 1988; 1990, ch. 159, § 2, effective July 13, 1990; 1992, ch. 109, § 7, effective March 30, 1992; 1992, ch. 194, § 1, effective July 14, 1992; 1994, ch. 114, § 1, effective July 15, 1994; 1994, ch. 272, § 2, effective July 15, 1994; 1994, ch. 438, § 5, effective July 15, 1994; 1997 (1st Ex. Sess.), ch. 1, § 43, effective May 30, 1997; 2000, ch. 447, § 2, effective July 14, 2000; 2004, ch. 191, § 48, effective July 13, 2004; 2005, ch. 106, § 6, effective June 20, 2005; 2009 (1st Ex. Sess.), ch. 1, § 107, effective June 26, 2009; 2010, ch. 24, § 106, effective July 15, 2010; 2010, ch. 57, § 1, effective July 15, 2010; 2014, ch. 102, § 7, effective April 10, 2014; 2015 ch. 4, § 1, effective March 17, 2015; 2015 ch. 47, § 5, effective June 24, 2015; 2018 ch. 12, § 1, effective July 14, 2018.

Legislative Research Commission Notes.

(4/10/2014). 2014 Ky. Acts ch. 102, sec. 39 provides that the amendments to this statute made in 2014 Ky. Acts ch. 102, sec. 7, shall apply retroactively beginning September 1, 2011.

(7/14/2000). In codifying the 2000 Regular Session changes to this statute, an existing reference to “subsection (2)” has been changed to “subsection (3)” under KRS 7.136(1). 1994 Ky. Acts ch. 438, sec. 5, broke down the prior subsection (2) into subsections (2) and (3), and the reference to fiscal year remained in the resulting subsection (3), but the necessary adjustment to the reference in subsection (1) was inadvertently overlooked.

(7/14/92). This section was amended by two 1992 Acts. Where those Acts are not in conflict, they have been compiled together. Where a conflict exists, the Act which was last enacted by the General Assembly prevails, pursuant to KRS 446.250 .

NOTES TO DECISIONS

1. Historical Horse Racing.

Department of Revenue exceeded its statutory authority when it amended a regulation to provide for the collection of a tax on the money wagered on historical horse racing devices. If the legislature intended to tax wagering on historical horse racing, it would not do so by means of a statute that limited the Department’s taxing authority in this context to monies wagered on live racing and live races. Appalachian Racing, LLC v. Family Trust Found. of Ky., Inc., 423 S.W.3d 726, 2014 Ky. LEXIS 88 ( Ky. 2014 ).

Opinions of Attorney General.

Funds paid to Churchill Downs under interstate wagering agreements are not wagers placed at Kentucky tracks and are not taxable under this section; the provisions of this section must be limited to what is constitutionally permissible, the taxing of wagers made within the borders of Kentucky. OAG 84-182 .

Wagers placed at tracks or other facilities not located in Kentucky are not taxable by Kentucky since a state may not lay an excise tax upon the exercise or enjoyment of a privilege in another state derived from the laws of that state and therein exercised and engaged; the pari-mutuel wagering conducted by those entities is a privilege stemming from the laws of the jurisdiction in which they are located, not the laws of Kentucky and the taxable event is the placing of a wager and that occurs in other jurisdictions. An imposition by a state of a tax on a privilege exercised outside of its borders amounts to a deprivation by the taxing state of the property of the taxpayer without due process of law in violation of U.S. Const., Amend. 14. OAG 84-182 .

The fee paid to Churchill Downs for administration of the 1991 Breeder’s Cup National Pick-Seven Wager, under agreements with participating outlets outside of the Commonwealth of Kentucky, is not subject to an additional excise tax imposed by this section. OAG 91-125 .

Research References and Practice Aids

2020-2022 Budget Reference.

See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, K, 8, (3) at 897.See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. I, L, 8, (2) at 899.

Kentucky Law Journal.

Bonnie, Corrupt Horse Racing Practices Act of 1980: A Threat to State Control of Horse Racing, 70 Ky. L.J. 1159 (1981-82).

138.511. Definitions for KRS 138.510 to 138.550.

As used in KRS 138.510 to 138.550 :

  1. “Advanced deposit account wagering” has the same meaning as in KRS 230.210 ;
  2. “Advanced deposit account wagering license” has the same meaning as in KRS 230.210 ;
  3. “Association” has the same meaning as in KRS 230.210 ;
  4. “Commission” means the Kentucky Horse Racing Commission;
  5. “Daily average live handle” means:
    1. The handle from wagers made at a track on live racing during the fiscal year, excluding amounts wagered:
      1. At a receiving track;
      2. At a simulcast facility;
      3. On telephone account wagering;
      4. Through advance deposit account wagering;
      5. At a track participating as a receiving track or simulcast facility displaying simulcasts and conducting interstate wagering as permitted by KRS 230.3771 and 230.3773 ; and
      6. Beginning April 1, 2014, on historical horse races;
    2. The total number of days that live racing was conducted at the track during the fiscal year;
  6. “Department” means the Department of Revenue;
  7. “Fiscal year” means a time frame beginning 12:01 a.m. July 1, and ending 12 midnight June 30;
  8. “Handle” means total wagers made on a race;
    1. “Historical horse race” means any horse race that: (9) (a) “Historical horse race” means any horse race that:
      1. Was previously run at a licensed pari-mutuel facility in the United States;
      2. Concluded with official results; and
      3. Concluded without scratches, disqualifications, or dead-heat finishes.
    2. As used in this subsection, the terms “pari-mutuel,” “scratch,” “disqualification,” and “dead heat” have the same meaning as established by the commission pursuant to an administrative regulation promulgated under KRS Chapter 13A;
  9. “Host track” has the same meaning as in KRS 230.210 ;
  10. “Interstate wagering” has the same meaning as in KRS 230.210 ;
  11. “Intertrack wagering” has the same meaning as in KRS 230.210 ;
  12. “Kentucky resident” means:
    1. An individual domiciled within this state;
    2. An individual who maintains a place of abode in this state and spends, in the aggregate, more than one hundred eighty-three (183) days of the taxable year in this state; or
    3. An individual who lists a Kentucky address as his or her principal place of residence when applying for an account to participate in advance deposit account wagering;
  13. “Receiving track” has the same meaning as in KRS 230.210 ;
  14. “Simulcast facility” has the same meaning as in KRS 230.210 ;
  15. “Takeout” means that portion of the handle which is distributed to persons other than those making wagers;
  16. “Telephone account wagering” has the same meaning as in KRS 230.210 ; and
  17. “Track” has the same meaning as in KRS 230.210 .

divided by:

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 106, effective June 26, 2009; 2010, ch. 24, § 107, effective July 15, 2010; 2014, ch. 102, § 6, effective April 10, 2014.

Legislative Research Commission Notes.

(4/10/2014). 2014 Ky. Acts ch. 102, sec. 39 provides that the amendments to this statute made in 2014 Ky. Acts ch. 102, sec. 6, shall apply retroactively beginning September 1, 2011.

(6/26/2009). 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 106, created a new section consisting of definitions for KRS 138.510 to 138.550 . All of the definitions except subsections (7) and (8) were listed in alphabetical order. The Reviser of Statutes has altered the internal numbering of those subsections under the authority of KRS 7.136 .

138.512. Exemption of nonprofit track from tax on pari-mutuel betting. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 13, § 2) was repealed by Acts 1958, ch. 26.

138.513. Tax on advance deposit account wagering licensees.

  1. Beginning August 1, 2014, an excise tax is imposed on all advance deposit account wagering licensees licensed under KRS 230.260 at a rate of one-half of one percent (0.5%) of all amounts wagered through the licensee by Kentucky residents.
  2. The tax imposed by this section shall be paid, collected, administered, and distributed as provided in KRS 138.530 .

History. Enact. Acts 2014, ch. 102, § 8, effective July 15, 2014.

Legislative Research Commission Notes.

(7/15/2014). In codification, the Reviser of Statutes has corrected an inadvertent drafting error in subsection (1) of this statute by changing a reference to “KRS 236.260 ” as it appeared in 2014 Ky. Acts ch. 102, sec. 8, to “KRS 230.260 .” KRS Chapter 230 is titled “Horse Racing and Showing” while KRS Chapter 236 is titled “Boiler and Pressure Vessel Safety.” It is obvious that the bill drafter knew which statute (KRS 230.260 ) within KRS Chapter 230 relating to advance deposit account wagering licensing to refer to, but because of a typographical error mistakenly cited to KRS 236.260 instead. This correction has been made under the authority of KRS 7.136(1)(h).

138.515. Limitation on commission of owner or operator of horse race track — Breaks — Payment to backside improvement fund. [Repealed, reenacted and amended.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 35, § 1; 1954, ch. 76, § 1; 1956, ch. 13, § 1; 1970, ch. 258, § 1; 1976, ch. 343, § 2, effective June 17, 1978; 1980, ch. 343, § 1, effective July 15, 1980; 1986, ch. 214, § 1, effective July 15, 1986; 1986, ch. 296, § 2, effective July 15, 1986; 1990, ch. 159, § 3, effective July 13, 1990) was repealed, reenacted and amended as KRS 230.3615 by Acts 1992, ch. 109, § 8, effective March 30, 1992.

138.520. Exemption of nonprofit track. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 35, § 2) was repealed by Acts 1954, ch. 76, § 3.

138.530. Administration and collection of tax — Remittances — Reports — Books — Records — Distribution of tax revenue generated under KRS 138.513.

  1. The department shall enforce the provisions of and collect the tax and penalties imposed and other payments required by KRS 138.510 to 138.550 , and in doing so it shall have the general powers and duties granted it in KRS Chapters 131 and 135, including the power to enforce, by an action in the Franklin Circuit Court, the collection of the tax, penalties and other payments imposed or required by KRS 138.510 to 138.550 .
    1. The remittance of the taxes imposed by KRS 138.510 shall be made weekly to the department no later than the fifth business day, excluding Saturday and Sunday, following the close of each week of racing, during each race meeting, and following the close of each week when historical horse races are conducted, and shall be accompanied by reports as prescribed by the department. (2) (a) The remittance of the taxes imposed by KRS 138.510 shall be made weekly to the department no later than the fifth business day, excluding Saturday and Sunday, following the close of each week of racing, during each race meeting, and following the close of each week when historical horse races are conducted, and shall be accompanied by reports as prescribed by the department.
    2. Except as otherwise provided in KRS 138.510 to 138.550 , all funds received by the department from the taxes imposed by KRS 138.510 shall be paid into the State Treasury and shall be credited to the general fund.
    3. The supervisor of pari-mutuel betting appointed by the commission shall weekly, during each race meeting, and during each week when historical horse races are conducted, report to the department the total amount bet or handled the preceding week and the amount of tax due the state thereon, under the provisions of KRS 138.510 to 138.550 .
    4. The supervisor of pari-mutuel betting appointed by the commission or his or her duly authorized representatives shall, at all reasonable times, have access to all books, records, issuing or vending machines, adding machines, and all other pari-mutuel equipment for the purpose of examining and checking the same and ascertaining whether or not the proper amount or amounts due the state are being or have been paid.
    5. Every person, corporation, or association required to pay the tax imposed by KRS 138.510 shall keep its books and records so as to clearly show by a separate record the total amount of money contributed to every pari-mutuel pool.
    1. The remittance of the tax imposed by KRS 138.513 shall be made weekly to the department no later than the first business day of the week next succeeding the week during which the wagers forming the base of the tax were received. (3) (a) The remittance of the tax imposed by KRS 138.513 shall be made weekly to the department no later than the first business day of the week next succeeding the week during which the wagers forming the base of the tax were received.
    2. Along with the remittance of the tax, each advance deposit account wagering licensee shall file a return that includes the information required by the department.
    3. Every advance deposit account wagering licensee shall keep its books and records in such a manner that:
      1. Kentucky residents having accounts with the advance deposit account wagering licensee can be individually identified and their identity and residence verified; and
      2. The amount wagered through each account held by a Kentucky resident and the date of each wager can be determined and verified.
    4. All books and records of the advance deposit account wagering licensee required by paragraph (c) of this subsection and any books and records that the department requires a licensee to maintain through promulgation of an administrative regulation shall be open to inspection by the department and the commission.
    5. All revenue received by the department from the tax imposed by KRS 138.513 shall be distributed as follows:
      1. Fifteen percent (15%) shall be distributed to the Commonwealth and credited to the general fund; and
        1. Eighty-five percent (85%) of revenue received from a wager placed on a race conducted at a track in Kentucky shall be distributed to the association that conducted the race; 2. a. Eighty-five percent (85%) of revenue received from a wager placed on a race conducted at a track in Kentucky shall be distributed to the association that conducted the race;
        2. Eighty-five percent (85%) of revenue received from a wager placed on a race conducted at a track outside Kentucky shall be distributed to the Kentucky track that is recognized as the host track by the commission at the time the wager is placed. However, if a wager subject to the tax imposed by KRS 138.513 is placed on a race conducted at a track outside Kentucky, and the individual placing the wager has registered an address with the advance deposit account wagering licensee that is within twenty-five (25) miles of a Kentucky track, the association licensed by the commission to operate that track shall receive the tax revenue derived from that wager; and
        3. An association receiving distributions under subdivisions a. and b. of this subparagraph shall allocate one-half (1/2) of the amount distributed to its purse account.

History. Enact. Acts 1948, ch. 35, § 3; 1992, ch. 109, § 9, effective March 30, 1992; 1998, ch. 237, § 2, effective July 15, 1998; 2004, ch. 191, § 49, effective July 13, 2004; 2005, ch. 85, § 391, effective June 20, 2005; 2009 (1st Ex. Sess.), ch. 1, § 108, effective June 26, 2009; 2010, ch. 24, § 108, effective July 15, 2010; 2014, ch. 102, § 9, effective April 10, 2014.

Legislative Research Commission Notes.

(4/10/2014). 2014 Ky. Acts ch. 102, sec. 39 provides that the amendments to this statute made in 2014 Ky. Acts ch. 102, sec. 9, shall apply retroactively beginning September 1, 2011.

138.540. Civil penalties for violation of KRS 138.510 to 138.530.

Any person who violates any provision of KRS 138.510 to 138.530 shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest at the tax interest rate as defined in KRS 131.010(6).

History. Enact. Acts 1948, ch. 35, § 4; 1982, ch. 452, § 17, effective July 1, 1982; 1992, ch. 403, § 13, effective July 14, 1992.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Research References and Practice Aids

Cross-References.

Disposition of penalties on delinquent taxes, KRS 134.552 .

138.550. Suspension or revocation of race track license.

In addition to all other penalties provided in KRS 138.510 to 138.540 :

  1. When the pari-mutuel system of betting is operated at a track licensed under KRS Chapter 230, the license may be suspended, revoked or renewal refused by the commission upon the failure of the operator to comply with KRS 138.510 to 138.540 or the rules and regulations promulgated by the department pursuant thereto, even though the pari-mutuel system of betting and the track are operated by different persons, corporations, or associations; and
  2. Any advance deposit account wagering licensee that fails to remit the tax imposed by KRS 138.513 , to remit returns required by KRS 138.530 , or to maintain the records required by KRS 138.530 or administrative regulations promulgated by the department, may have the license granted under KRS 230.260 suspended, revoked, or not renewed by the commission.

History. Enact. Acts 1948, ch. 35, § 5; 2004, ch. 191, § 50, effective July 13, 2004; 2005, ch. 85, § 392, effective June 20, 2005; 2009 (1st Ex. Sess.), ch. 1, § 109, effective June 26, 2009; 2010, ch. 24, § 109, effective July 15, 2010; 2014, ch. 102, § 10, effective July 15, 2014.

Boxing and Wrestling

138.553. Reports of attendance at prize fight or wrestling match on closed circuit television; gross receipts tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 126, § 1) was repealed by Acts 1964, ch. 170, § 26.

138.556. Tax on payment for right to televise or broadcast fight or match. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 126, § 2) was repealed by Acts 1964, ch. 170, § 26.

Special Fuels

138.560. Definitions for KRS 138.560 to 138.640. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 1; 1956 (2nd Ex. Sess.), ch. 9, § 1; 1958, ch. 70, § 1; 1960, ch. 176, § 1; 1962, ch. 203, § 5) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.565. Tax on special fuels — Allowances — Limitation on supplemental highway user motor fuel tax on special fuels. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 2; 1956 (2nd Ex. Sess.), ch. 9, § 2; 1958, ch. 70, § 2; 1960, ch. 186, Art. IV, § 4; 1962, ch. 203, § 6; 1972, ch. 61, § 5; 1976 (1st Ex. Sess.), ch. 6, § 2; 1980, ch. 218, § 4, effective July 1, 1980; 1986, ch. 174, § 15, effective July 1, 1986) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.570. License required — Application — Bond, issuance of license — Revocation — Nonassignability — Records. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 3; 1956 (2nd Ex. Sess.), ch. 9, § 3; 1958, ch. 70, § 3; 1984, ch. 113, § 4, effective July 13, 1984) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.575. Bond, form, amount and conditions — New bond to be executed, when — Hearing and notice on efficiency of bond — Discharge of surety. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 4; 1956 (2nd Ex. Sess.), ch. 9, § 4; 1958, ch. 70, § 4, effective July 1, 1958) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.580. Cancellation of licenses — Voluntary surrender of license certificate — Notice to cabinet of discontinuation of business — Accrued taxes — Surrender of bond. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 5; 1956 (2nd Ex. Sess.), ch. 9, § 5; 1958, ch. 70, § 5, effective July 1, 1958) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.585. Records and other papers to be kept. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 6; 1956 (2nd Ex. Sess.), ch. 9, § 6; 1958, ch. 70, § 6, effective July 1, 1956) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.590. Monthly tax returns — Remittance. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 7; 1956 (2nd Ex. Sess.), ch. 9, § 7; 1958, ch. 70, § 7, effective July 1, 1958; 1972, ch. 61, § 6) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.591. Filing of monthly reports may be delayed. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 61, § 20; 1974, ch. 304, § 32) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988. For present law see KRS 138.210 et seq.

138.595. Computation of tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 8; 1956 (2nd Ex. Sess.), ch. 9, § 8; 1958, ch. 70, § 8) was repealed by Acts 1962, ch. 203, § 7. For present law see KRS 138.270 .

138.600. Credit for taxes paid on fuel used in vehicles operated on highways of both this and other state; deferred credits. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 9; 1956 (2nd Ex. Sess.), ch. 9, § 1) was repealed by Acts 1958, ch. 70, § 31.

138.605. Credit and refund permits. [Repealed.]

Compiler’s Notes.

This sections (Enact. Acts 1952, ch. 191, § 10) was repealed by Acts 1956 (2nd Ex. Sess.), ch. 9, § 29.

138.610. Procedure for obtaining credit or refund; appeal from refusal to authorize credit or refund. [Repealed.]

Compiler’s Notes.

This sections (Enact. Acts 1952, ch. 191, § 11) was repealed by Acts 1956 (2nd Ex. Sess.), ch. 9, § 29.

138.615. Audit of books and records of licensee. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 12; 1956 (2nd Ex. Sess.), ch. 9, § 10; 1958, ch. 70, § 9, effective July 1, 1958) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988.

138.620. Method of payment of tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 13; 1956 (2nd Ex. Sess.), ch. 9, § 11; 1958, ch. 70, § 10, effective July 1, 1958; 1966, ch. 255, § 135) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988.

138.625. Penalties for failure or refusal to file return or report. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 14; 1956 (2nd Ex. Sess.), ch. 9, § 12; 1958, ch. 70, § 11, effective July 1, 1958) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988.

138.630. Prohibited acts. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 15; 1956 (2nd Ex. Sess.), ch. 9, § 13; 1958, ch. 70, § 12, effective July 1, 1958; 1962, ch. 203, § 8) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988.

138.640. Functions of revenue cabinet in administration of taxes provided under KRS 138.560 to 138.640. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 191, § 16; 1956 (2nd Ex. Sess.), ch. 9, § 14; 1958, ch. 70, § 13, effective July 1, 1958) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988.

138.645. Denial of license. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 203, § 9) was repealed by Acts 1988, ch. 285, § 36, effective August 1, 1988.

138.650. Declaration of legislative policy concerning payment of gasoline tax by motor carriers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 97, § 1) was repealed by Acts 1956 (2nd Ex. Sess.), ch. 9, § 29, effective March 28, 1956.

Motor Carriers

138.655. Definitions for KRS 138.660 to 138.7291 and KRS 138.990(14) and (15).

As used in KRS 138.660 to 138.7291 and KRS 138.990(14) and (15), unless the context requires otherwise:

  1. “Cabinet” means the Transportation Cabinet;
  2. “Person” includes every natural person, fiduciary, association, state or political subdivision, or corporation. Whenever used in any clause describing and imposing imprisonment the term “person” as applied to an association means and includes the partners or members thereof, and as applied to a corporation the officers thereof;
  3. “Public highway” means every way or place generally open to the use of the public as a matter of right for the purpose of vehicular travel notwithstanding that it may be temporarily closed or travel thereon restricted for the purpose of construction, maintenance, repair, or reconstruction; also including all city streets, alleys, and any way or place on which a toll is charged for using such way or place;
  4. “Motor vehicle” means any vehicle, machine, or mechanical contrivance propelled by an internal combustion engine and licensed for operation and operated upon the public highways and any trailer or semitrailer attached to or having its front end supported by such motor vehicle;
  5. “Motor carrier” means every person who operates or causes to be operated on any highway in this state, any bus engaged in hauling passengers for hire operating under a certificate of convenience and necessity and any commercial truck or commercial tractor-trailer combination having a total of two (2) or more axles and a declared gross weight above twenty-six thousand (26,000) pounds. The number of axles shall include not only those axles on the power unit but if a tractor-trailer combination is involved, also those axles on the trailer or semitrailer:
    1. “Axle” means any two (2) or more load-carrying wheels mounted in a single transverse vertical plane;
    2. “Trailers and semitrailers” are those as defined in subsections (1) and (2) of KRS 186.650 , except that it does not include those trailers defined in subsections (3) and (4) of KRS 186.650 and those exempted from regulation under KRS 186.675 . The term “motor carrier” shall not mean or shall not include any person operating or causing to be operated a city bus;
    3. “Commercial” refers to any activity for business purposes;
    4. For the purposes of KRS 138.660(3) motor carriers, trailers, and semitrailers shall not mean a farm vehicle as defined in KRS 186.050(4) or under another jurisdiction’s law as a farm vehicle;
  6. “City bus” means any motor vehicle used for the transportation of persons for hire exclusively within the limits of any city or within ten (10) miles of its limits over a regular route and exclusively within the boundaries of this state;
  7. “Heavy equipment motor carrier” means any person who operates on the public highways of this state as a “motor carrier” as defined in subsection (5) of this section, except that it shall not include motor vehicles used to transport persons for hire;
  8. “Trip permit” means a permit for the operating during a ten (10) consecutive day period of any motor vehicle of any “heavy equipment motor carrier” not licensed under KRS 138.665 ;
  9. “Licensee” means for purposes of KRS 138.660 to 138.7291 any person who has been granted a license as a “motor carrier” or a “heavy equipment motor carrier,” or any motor vehicle in which a valid trip permit is carried;
  10. “Use” means the consumption of gasoline and special fuels in propelling motor vehicles on the public highways;
  11. “Gasoline” has the same meaning as in KRS 138.210 ;
  12. “Special fuels” means and includes all combustible gases and liquids used for the generation of power in an internal combustion engine to propel vehicles of any kind upon the public highways, except that it does not include gasoline;
  13. “Quarterly” for the purposes of KRS 138.660 to 138.7291 means a calendar quarter;
  14. “Combined licensed weight” shall mean the greater of:
    1. The declared combined maximum gross weight of the vehicle and any towed unit for registration purposes for the current registration period; or
    2. The highest actual combined gross weight of the vehicle and any towed unit when operated on the public highways of the state during the current registration period.

History. Enact. Acts 1954, ch. 97, § 4; 1956 (2nd Ex. Sess.), ch. 9, § 15; 1956, ch. 171, § 1; 1958, ch. 70, § 14; 1960, ch. 186, Art. IV, § 5; 1962, ch. 62, § 21; 1974, ch. 74, Art. IV, § 20(2); 1978, ch. 384, § 564, effective June 17, 1978; 1982, ch. 265, § 2, effective April 1, 1982; 1984, ch. 151, § 4, effective July 13, 1984; 1986, ch. 454, § 1, effective July 15, 1986; 1986, ch. 174, § 2, effective January 1, 1987; 1988, ch. 175, § 3, effective April 1, 1988; 1996, ch. 363, § 2, effective July 15, 1996; 2015 ch. 67, § 19, effective March 25, 2015.

Legislative Research Commission Notes.

(11/16/90) Because of the amendment of KRS 138.990 in 1988 Acts Ch. 285, § 33, the text of subsections (17) and (18) of that statute were reassigned as subsections (14) and (15). Pursuant to KRS 7.136(1), cross-references to those two subsections in this statute have been changed to agree with this renumbering.

NOTES TO DECISIONS

Cited in:

Department of Revenue v. Greyhound Corp., 321 S.W.2d 60, 1959 Ky. LEXIS 267 ( Ky. 1959 ); Commonwealth, Transp. Cabinet v. Tony Brewer Trucking, Inc., 734 S.W.2d 486, 1987 Ky. App. LEXIS 509 (Ky. Ct. App. 1987).

Opinions of Attorney General.

While subdivision (5)(d) of this section does exempt farm vehicles from the weight distance tax, it does not exempt such vehicles from the cab card requirement; thus since the cab card is used for purposes other than the weight distance tax, such as for fuel tax purposes, owners of farm vehicles must obtain a cab card if they meet the definition of a motor carrier as defined by subdivision (5) of this section. OAG 82-495 .

138.660. Motor fuels tax — Surtax — Weight distance tax.

  1. Every motor carrier, excluding charter bus operators registered pursuant to KRS Chapter 281, shall pay a tax at the rate levied in KRS 138.220(1) and (2) on the amount of gasoline and special fuels used in operations on the public highways of this state.
  2. In addition to the tax imposed in subsection (1) of this section, if the motor carrier is a heavy equipment motor carrier as defined in KRS 138.655 , he shall pay a surtax at the rate of two percent (2%) of the average wholesale price as provided in subsection (1) of this section, on the amount of gasoline and at the rate of four and seven-tenths percent (4.7%) on the amount of special fuels used in operations on public highways of this state.
  3. Every motor carrier shall pay for every motor vehicle operated upon the public highways of this state with a combined licensed weight in excess of fifty-nine thousand nine hundred and ninety-nine (59,999) pounds a weight distance tax computed at the rate of two and eighty-five hundredths cents ($0.0285) per mile.
  4. Those taxes levied under this section shall be computed and paid as provided in KRS 138.685 and 138.690 .

History. Enact. Acts 1954, ch. 97, § 3; 1956 (2nd Ex. Sess.), ch. 9, § 16; 1958, ch. 70, § 15, effective July 1, 1958; 1972, ch. 61, § 7; 1976 (Ex. Sess.), ch. 6, § 3; 1980, ch. 218, § 5, effective July 1, 1980; 1982, ch. 265, § 6, effective April 1, 1982; 1984, ch. 111, § 77, effective July 13, 1984; 1984, ch. 151, § 5, effective July 13, 1984; 1986, ch. 174, § 1, effective January 1, 1987; 1988, ch. 175, § 4, effective April 1, 1988; 1988, ch. 285, § 32, effective August 1, 1988; 1996, ch. 363, § 3, effective July 15, 1996.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Construction.
  3. Legislative Intent.
1. Constitutionality.

The Supplemental Highway Users Tax violates the Commerce Clause of the United States Constitution as an unapportioned flat tax that fails to meet the “internal consistency test” and therefore is unconstitutional. Commonwealth, Transp. Cabinet v. American Trucking Assos., 746 S.W.2d 65, 1988 Ky. LEXIS 18 ( Ky. 1988 ) (decision prior to 1988 amendment).

2. Construction.

A highway motor fuel user of special fuels such as diesel fuel is required to pay the tax imposed by this section in Kentucky. Texaco, Inc. v. John Martin Distributor, Inc., 472 S.W.2d 674, 1971 Ky. LEXIS 206 ( Ky. 1971 ).

3. Legislative Intent.

This section reflects a recognition by the General Assembly of a need to require those engaged in the business of operating heavily loaded trucks upon the highways of this state to pay a fair share of the cost of the construction and maintenance of highways provided by the state for their use; it is fairly apportioned, is not discriminatory, and it constitutes a reasonable exercise of legislative judgment. American Trucking Asso. v. Commonwealth, Transp. Cabinet, 676 S.W.2d 785, 1984 Ky. LEXIS 268 ( Ky. 1984 ) (decision prior to 1988 amendment).

Cited in:

Dalton v. State Property & Bldgs. Com., 304 S.W.2d 342, 1957 Ky. LEXIS 276 ( Ky. 1957 ); Commonwealth, Transp. Cabinet v. Tony Brewer Trucking, Inc., 734 S.W.2d 486, 1987 Ky. App. LEXIS 509 (Ky. Ct. App. 1987).

Opinions of Attorney General.

If they otherwise meet the definition of motor carriers and heavy equipment motor carriers, trucks licensed under KRS 186.052(2) and 186.070 are subject to the tax imposed by this section. OAG 70-35 .

A motor carrier hauling natural resources under a permit authorized by KRS 189.276 (now repealed) is not entitled to the credit provided by KRS 138.695 for payment of the gasoline tax or special fuels tax; since, under KRS 189.276 (4) (now repealed), the motor carrier is exempt from this section, he cannot be a “ . . . . . licensee subject to the tax imposed by subsections (1) and (2) of this section” and thus is ineligible for the credit for payment of the gasoline tax or special fuels tax. OAG 82-193 .

The combined 11 percent highway motor fuels tax provided in subsections (1) and (2) of this section is entirely separate and distinct from the gasoline tax levied under KRS 138.220 and the special fuels tax levied under KRS 138.565 (now repealed). OAG 82-193 .

While KRS 138.655(5)(d) does exempt farm vehicles from the weight distance tax, it does not exempt such vehicles from the cab card requirement; thus since the cab card is used for purposes other than the weight distance tax such as for fuel tax purposes, owners of farm vehicles must obtain a cab card if they meet the definition of a motor carrier as defined by KRS 138.655(5). OAG 82-495 .

138.6601. Fuel tax on motor carriers with combined license weight in excess of 59,999 pounds. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 175, § 1, effective April 1, 1988) was repealed by Acts 1996, ch. 363, § 6, effective July 15, 1996.

138.661. Funding for implementation and administration of tax — Trust and agency fund account — Audit within three years — Regulations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1982, ch. 265, § 9, effective April 1, 1982) was repealed by Acts 1986, ch. 174, § 20, effective January 1, 1987.

138.662. Refund to city and suburban bus companies and taxicab companies — Bond — Application — Audit. [Renumbered.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 186, Art. IV, § 9; 1962, ch. 203, § 10; 1972, ch. 61, § 8; 1978, ch. 208, § 1, effective June 17, 1978; 1984, ch. 411, § 2, effective July 13, 1984; 1986, ch. 496, § 20, effective August 1, 1986) was renumbered as KRS 138.446 .

138.665. License for use of public highways — Exemption.

    1. A license shall be required of each motor carrier or heavy equipment motor carrier subject to the provisions of KRS 138.660 before he uses or continues to use the public highways of this state. (1) (a) A license shall be required of each motor carrier or heavy equipment motor carrier subject to the provisions of KRS 138.660 before he uses or continues to use the public highways of this state.
    2. Notwithstanding the requirement in subsection (1)(a), the cabinet may issue a trip permit for each motor vehicle subject to KRS 138.660(1) for a fee of twenty dollars ($20) for each permit. If the vehicle is subject to those taxes in KRS 138.660(1) to (3), the cabinet may issue a trip permit for each motor vehicle for a fee of forty dollars ($40) for each permit.
  1. Application for a license or trip permit shall be made to the cabinet and shall contain such information as the cabinet deems necessary.
  2. The application in proper form having been accepted for filing, the bond, if required, having been accepted and approved and the other conditions and requirements of this section having been complied with, the cabinet shall issue a license. However, if an application for a license is filed by any person whose license has at any time previously been revoked for cause by the cabinet, or if the cabinet is of the opinion that the person who makes the application does so as a subterfuge for the real party in interest whose license, prior to the time of filing the application, has been revoked for cause, or that the application is not for any other reason filed in good faith or is not sufficient cause, the cabinet may, after a hearing of which the applicant shall be given ten (10) days’ notice in writing and in which he shall have the right to appear in person or by counsel and present testimony, refuse to issue a license to that person.
  3. All licenses shall be valid and remain in full force and effect until suspended or revoked for cause or otherwise canceled.
  4. A license shall not be assignable or transferable and shall be valid only for the person in whose name it is issued.
  5. The cabinet shall keep and file all applications and bonds, with an alphabetical index thereof.
  6. Each holder of a license required by subsection (1) shall display his license number or other identification on or in each vehicle subject to the taxes imposed by KRS 138.655 to 138.7291 in the manner prescribed by the cabinet. The cabinet may require the license number or other identifier to be displayed so that it can be readily recorded either manually or electronically by cabinet representatives. In addition, the cabinet may require each individual unit in the license holder’s fleet of vehicles subject to these taxes to be uniquely identified.
  7. The provisions of this section shall not apply to a nonresident motor carrier engaged in transporting passengers for hire in irregular route interstate charter or special operations, provided reciprocal privileges are granted to similar nonresident carriers by the laws and regulations of his state.

History. Enact. Acts 1954, ch. 97, § 4; 1956 (2nd Ex. Sess.), ch. 9, § 17; 1958, ch. 70, § 16; 1974, ch. 74, Art. IV, § 20(2); 1978, ch. 384, § 564, effective June 17, 1978; 1982, ch. 265, § 2, effective April 1, 1982; 1984, ch. 151, § 4, effective July 13, 1984; 1986, ch. 174, § 3, effective January 1, 1987; 1988, ch. 175, § 5, effective April 1, 1988; 1990, ch. 466, § 6, effective July 13, 1990; 1996, ch. 363, § 4, effective July 15, 1996; 1998, ch. 31, § 1, effective July 15, 1998.

NOTES TO DECISIONS

1. Constitutionality.

A truck driver whose vehicle was impounded in accord with KRS 138.990(15), which requires mandatory impoundment of a vehicle when the driver found to be operating the vehicle without a Kentucky motor fuel user’s license (KYU), was not deprived of his due process rights since he had statutory opportunities for a hearing and appeal when his license was originally revoked for failure to maintain a fuel tax bond. Transportation Cabinet v. Cassity, 912 S.W.2d 48, 1995 Ky. LEXIS 149 ( Ky. 1995 ), cert. denied, 517 U.S. 1209, 116 S. Ct. 1825, 134 L. Ed. 2d 931, 1996 U.S. LEXIS 3285 (U.S. 1996).

Cited in:

American Trucking Asso. v. Commonwealth, Transp. Cabinet, 676 S.W.2d 785, 1984 Ky. LEXIS 268 ( Ky. 1984 ); Commonwealth, Transp. Cabinet v. Tony Brewer Trucking, Inc., 734 S.W.2d 486, 1987 Ky. App. LEXIS 509 (Ky. Ct. App. 1987).

138.670. Amount and conditions of bond — Cabinet may require new bond — Additional bond — Release of surety. [Repealed]

HISTORY: Enact. Acts 1954, ch. 97, § 5; 1956 (2nd Ex. Sess.), ch. 9, § 18; 1970, ch. 57, § 1; 1998, ch. 31, § 2, effective July 15, 1998; Repealed., Acts 2018, ch. 135, § 6, effective July 14, 2018.

138.675. Cancellation of license — Precipitation of taxes — Cancellation of bond.

  1. If a licensee at any time files a false quarterly report of the information required or fails or refuses to file the quarterly report or to pay the full amount of the tax or violates any other provisions of KRS 138.655 to 138.725 , inclusive, without a showing that such failure was due to reasonable cause, the cabinet may cancel his license.
  2. Upon voluntary surrender of the license certificate or upon receipt of a written request by a licensee, the cabinet may cancel his license, effective sixty (60) days from the date of the request, but no such license shall be canceled upon surrender or request unless the licensee has, prior to the date of cancellation, paid to this state all taxes, penalties, interest and fines that are due or have accrued, and unless the licensee has surrendered to the cabinet his license certificate.
  3. If upon investigation the cabinet ascertains that any motor carrier or heavy equipment motor carrier to whom a license has been issued is no longer engaged as such and has not been so engaged for a period of six (6) months, the cabinet may cancel such license by giving the motor carrier or heavy equipment motor carrier sixty (60) days’ notice of cancellation mailed to his last known address in which event the license certificate shall be surrendered to the cabinet.
  4. Whenever a licensee ceases to engage in business within this state, he shall notify the cabinet in writing within fifteen (15) days after discontinuance. All taxes that have accrued under KRS 138.655 to 138.725 , inclusive, whether or not then due, shall become due and payable concurrently with such discontinuance. The licensee shall make a report and pay all such taxes and any interest and penalties thereon, and shall surrender to the cabinet his license certificate.
  5. If the license of a motor carrier or heavy equipment motor carrier is canceled by the cabinet as provided in this section and if the licensee has paid to this state all of the taxes, interest and penalties due under KRS 138.655 to 138.725 and 138.990(14) and (15), the cabinet shall cancel the bond filed by the licensee.

History. Enact. Acts 1954, ch. 97, § 6; 1956, ch. 171, § 2; 1956 (2nd Ex. Sess.), ch. 9, § 19.

NOTES TO DECISIONS

1. Constitutionality.

A truck driver whose vehicle was impounded in accord with KRS 138.990(15), which requires mandatory impoundment of a vehicle when the driver is found to be operating the vehicle without a Kentucky motor fuel user’s license, was not deprived of his due process rights since he had statutory opportunities for a hearing and appeal when his license was originally revoked for failure to maintain a fuel tax bond. Transportation Cabinet v. Cassity, 912 S.W.2d 48, 1995 Ky. LEXIS 149 ( Ky. 1995 ), cert. denied, 517 U.S. 1209, 116 S. Ct. 1825, 134 L. Ed. 2d 931, 1996 U.S. LEXIS 3285 (U.S. 1996).

138.680. Records required to be kept.

  1. Every licensee shall maintain complete records on all motor vehicles, by type, operating on Kentucky highways, weight and number of axles, mileage records and records of all purchases, use, and other dispositions of gasoline and special fuels. Such records, together with manifests of lading, invoices and other papers pertaining to gasoline or special fuels consumption, shall be retained for a period of five (5) years, and shall be made available to the Transportation Cabinet upon request for examination.
  2. If any licensee fails or refuses upon written request to furnish any information to the Transportation Cabinet concerning an audit, assessment, or verification of tax information, the cabinet may make an estimate of the licensee’s tax due and issue an assessment against the licensee based upon the estimated tax due. Such assessment may be used by the cabinet in any legal proceeding for collection of the tax. The cabinet may at any subsequent proceeding require the taxpayer to file any reports or additional information it deems necessary.

History. Enact. Acts 1954, ch. 97, § 7; 1956 (2nd Ex. Sess.), ch. 9, § 20; 1958, ch. 70, § 17; 1988, ch. 175, § 6, effective July 15, 1988.

138.685. Quarterly returns to be filed — Remittance.

  1. Every licensee shall file with the cabinet, in the format prescribed by the cabinet, a quarterly tax return. The return shall be made under penalty of perjury and shall show such information as the cabinet may require. The licensee shall file the return on or before the last day of the next succeeding calendar month following the quarterly period to which it relates.
  2. The quarterly tax return shall be accompanied by a remittance covering the tax due.

History. Enact. Acts 1954, ch. 97, § 8; 1956, ch. 171, § 3; 1956 (2nd Ex. Sess.), ch. 9, § 21; 1986, ch. 174, § 4, effective January 1, 1987; 1988, ch. 175, § 7, effective July 15, 1988; 1998, ch. 31, § 3, effective July 15, 1998.

138.690. Computation of tax.

  1. Those taxes imposed by subsections (1) and (2) of KRS 138.660 shall be determined as follows: The total number of gallons of gasoline and special fuels used during the taxable period in the licensee’s operations on the public highways in Kentucky shall be multiplied by the tax rate.
  2. The tax imposed by KRS 138.660(3) shall be determined as follows: the total number of miles driven during the taxable period in the licensee’s operations on public highways in this state shall be multiplied by the combined licensed weight tax rate.

History. Enact. Acts 1954, ch. 97, § 9; 1956 (2nd Ex. Sess.), ch. 9, § 22; 1958, ch. 70, § 18; 1982, ch. 265, § 7, effective April 1, 1982; 1986, ch. 174, § 5, effective January 1, 1987; 1988, ch. 175, § 8, effective April 1, 1988; 1996, ch. 363, § 5, effective July 15, 1996.

NOTES TO DECISIONS

Cited in:

American Trucking Asso. v. Commonwealth, Transp. Cabinet, 676 S.W.2d 785, 1984 Ky. LEXIS 268 ( Ky. 1984 ).

138.695. Credits for payment of gasoline tax — Records.

  1. Every licensee subject to the tax imposed by subsections (1) and (2) of KRS 138.660 shall be entitled to a credit for each quarterly period beginning on and after July 1, 1980, equivalent to the tax rate levied in KRS 138.220(1) and (2) on gasoline and special fuels purchased by such licensee during such period for use in its operations, provided such gasoline and special fuels were purchased in Kentucky during the same period and the tax imposed by KRS 138.220(1) and (2), 138.565 , and 234.320 has been paid. Evidence of the payment of such tax in such form as may be required by or satisfactory to the cabinet shall be furnished by each such licensee claiming the credit herein allowed.
  2. The cabinet shall at the close of each quarterly period, ending September 30, December 31, March 31, and June 30, compute all credits granted by the cabinet during such quarter, which credits shall be except as provided in subsection (3) of this section, applied only to taxes due on the report filed for the next quarter.
  3. If the credit or credits referred to in subsections (1) and (2) of this section would expire solely by reason of the lapse of time allowed in subsection (2) of this section, then the balance of any credit shall be refunded to the licensee, provided application therefor and all necessary information shall be filed with the cabinet within sixty (60) days after the time the credit would otherwise expire as provided in subsection (2) of this section, except a credit shall not be refunded to the licensee, where, as estimated by the cabinet, the cost to the cabinet of making the refund would exceed the amount of the refund.
  4. In order to facilitate administration of the credits and refunds allowed herein, the cabinet shall prescribe what records must be kept by the licensee or any other person and the cabinet shall also prescribe the form and content of said records and any reports to be made relative thereto.

History. Enact. Acts 1954, ch. 97, § 10; 1956 (2nd Ex. Sess.), ch. 9, § 23; 1958, ch. 70, § 19; 1960, ch. 186, Art. IV, § 6; 1972, ch. 61, § 9; 1974, ch. 74, Art. IV, § 20(2); 1978, ch. 229, § 1, effective June 17, 1978; 1980, ch. 218, § 6, effective July 1, 1980; 1982, ch. 265, § 8, effective April 1, 1982; 1986, ch. 174, § 6, effective July 1, 1986.

Compiler’s Notes.

KRS 138.565 referred in subsection (1) of this section has been repealed.

NOTES TO DECISIONS

  1. Use in Its Operations.
  2. Credit for Fuel Tax.
1. Use in Its Operations.

The phrase “for use in its operations” contained in subsection (1) of this section is intended to cover the whole range of operations conducted by a motor carrier, regardless of the type of road on which they take place. Commonwealth, Transp. Cabinet v. Tony Brewer Trucking, Inc., 734 S.W.2d 486, 1987 Ky. App. LEXIS 509 (Ky. Ct. App. 1987).

2. Credit for Fuel Tax.

The motor carrier was entitled to credit for all fuel tax which he actually paid on fuel purchased in Kentucky towards his state highway use tax liability. Commonwealth, Transp. Cabinet v. Tony Brewer Trucking, Inc., 734 S.W.2d 486, 1987 Ky. App. LEXIS 509 (Ky. Ct. App. 1987).

Cited in:

Texaco, Inc. v. John Martin Distributor, Inc., 472 S.W.2d 674, 1971 Ky. LEXIS 206 ( Ky. 1971 ).

Opinions of Attorney General.

A motor carrier hauling natural resources under a permit authorized by KRS 189.276 (repealed) is not entitled to the credit provided by this section for payment of the gasoline tax or special fuels tax; since, under KRS 189.276 (4) (now repealed), the motor carrier is exempt from KRS 138.660 , he cannot be a “ . . . . . licensee subject to the tax imposed by subsections (1) and (2) of KRS 138.660 ” and thus is ineligible for the credit for payment of the gasoline tax or special fuels tax. OAG 82-193 .

Where some but not all of the vehicles of a licensee subject to credit under this section are used in the transporting of natural resources under a permit authorized by KRS 189.276 (now repealed), then as to those vehicles transporting natural resources under such permit, the licensee is not subject to the tax levied under KRS 138.660 (1) and (2) and thus is not eligible for the credit authorized against the tax; conversely, vehicles engaged in transporting other commodities remain subject to the tax levied under KRS 138.660 and are thus eligible for the credit authorized under this section. OAG 82-193 .

138.700. Application for credit; appeal from refusal to grant. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1954, ch. 97, § 11) was repealed by Acts 1956 (2nd Ex. Sess.), ch. 9, § 29.

138.705. Audit of licensee’s records — Erroneous credits — Refunds.

  1. The cabinet may audit the books and records of each licensee who has at any time since the last audit was made applied for a credit or refund thereunder and make such other investigations as it deems necessary to determine whether the credits or refunds applied for constitute proper claims.
  2. If gasoline or special fuels taxes are erroneously credited or refunded, the cabinet shall advise the licensee of the erroneous credit or refund. If the licensee fails to reimburse the Commonwealth within fifteen (15) days after the receipt of notice, an action may be instituted by the cabinet in the Franklin Circuit Court and the cabinet shall recover from the licensee the amount of the erroneous credit or refund plus a penalty of twenty percent (20%).

History. Enact. Acts 1954, ch. 97, § 12; 1956 (2nd Ex. Sess.), ch. 9, § 24; 1958, ch. 70, § 20; 1960, ch. 186, Art. IV, § 7.

138.710. Method of payment of tax.

  1. The reports required by KRS 138.685 shall be accompanied by a certified, electronic, or cashier’s check payable to the State Treasurer for the amount of tax due for the preceding calendar quarter computed as provided in KRS 138.690 , except that the cabinet may waive this requirement and accept the check of the licensee if he is of sound financial condition and has established a good record of compliance with the requirements of KRS 138.655 to 138.725 , inclusive.
  2. The Transportation Cabinet may promulgate administrative regulations providing for the payment by credit card of any tax or fee that it collects. The administrative regulation may require the payee to add to his tax or fee, the administrative charge of the financial institution.

History. Enact. Acts 1954, ch. 97, § 13; 1956, ch. 171, § 4; 1956 (2nd Ex. Sess.), ch. 9, § 25; 1998, ch. 31, § 4, effective July 15, 1998.

138.715. Civil penalties and interest.

  1. If any licensee neglects or refuses to make the return or pay the tax at the time provided in KRS 138.685 , a penalty of twenty percent (20%) of the tax and interest at the tax interest rate as defined in KRS 131.010(6) from the date when due shall be paid on the tax.
  2. If any licensee subject to the penalty provided in subsection (1) of this section submits to the department in writing the reasons for failure to comply with KRS 138.660 to 138.7291 and if the department finds the reasons sufficient evidence or justifiable cause for modifying the penalty provided in subsection (1) of this section, it may modify the penalty enacted therein to five percent (5%) of the amount of the tax due and delinquent, provided the five percent (5%) penalty may be reduced to one percent (1%) if the violation is the first violation by the taxpayer within the twelve (12) months.
  3. If the penalties provided by this section are collected by proceedings in court, an additional penalty of twenty percent (20%) shall be collected and distributed as is authorized by KRS 134.552 . Whenever any licensee neglects or refuses to make and file any report for any calendar quarter as required by KRS 138.685 , or files an incorrect or fraudulent report, the department shall determine after an investigation the amount of the liability which the licensee has incurred under KRS 138.660 to 138.7291 for any particular quarter and assess and collect the amount of tax and penalties due.
  4. Any licensee who fails to make any report required under the provisions of KRS 138.660 to 138.7291 within the time allowed may be required to pay a penalty of five hundred dollars ($500) for any offense. The penalty is to be assessed and collected in the manner provided for the assessment and collection of taxes, or the licensee may be proceeded against in a civil action instigated by the department. In addition, such licensee may be compelled to make the required return.
  5. In any action for the collection of taxes due under KRS 138.660 to 138.7291 and any penalties or interest imposed in connection therewith, an assessment by the department of the amount of tax due and the interest or penalties due to the state shall constitute prima facie evidence of the claim of the state and the burden of proof shall be on the licensee to show that the assessment was incorrect or contrary to law.

HISTORY: Enact. Acts 1954, ch. 97, § 14; 1956, ch. 171, § 5; 1956 (2nd Ex. Sess,), ch. 9, § 26; 1970, ch. 57, § 2; 1982, ch. 452, § 19, effective July 1, 1982; 1986, ch. 174, § 7, effective January 1, 1987; 1988, ch. 175, § 9, effective July 15, 1988; 1998, ch. 31, § 5, effective July 15, 1998; 2009, ch. 10, § 51, effective January 1, 2010; 2018 ch. 135, § 1, effective July 14, 2018.

138.720. Prohibited acts.

With respect to KRS 138.655 to 138.725 , it is unlawful for any person to:

  1. Fail to pay the tax imposed;
  2. Fail, neglect, or refuse to file any return in the manner or within the time required;
  3. Make any false statement or conceal any material fact in any record, return, or affidavit;
  4. Conduct any activities requiring a license without such license or after such license has been surrendered, canceled or revoked;
  5. Assign or attempt to assign a license; or
  6. Violate any other provisions.

History. Enact. Acts 1954, ch. 97, § 15(1); 1958, ch. 70, § 21.

NOTES TO DECISIONS

1. Constitutionality.

A truck driver whose vehicle was impounded in accord with KRS 138.990(15), which requires mandatory impoundment of a vehicle when the driver is found to be operating the vehicle without a Kentucky motor fuel user’s license, was not deprived of his due process rights since he had statutory opportunities for a hearing and appeal when his license was originally revoked for failure to maintain a fuel tax bond. Transportation Cabinet v. Cassity, 912 S.W.2d 48, 1995 Ky. LEXIS 149 ( Ky. 1995 ), cert. denied, 517 U.S. 1209, 116 S. Ct. 1825, 134 L. Ed. 2d 931, 1996 U.S. LEXIS 3285 (U.S. 1996).

138.725. Administration by Department of Vehicle Regulation — Reciprocity in furnishing information.

  1. The Department of Vehicle Regulation shall administer the provisions of KRS 138.655 to 138.725 and 138.990 , and may prescribe, adopt and enforce regulations relating to the administration and enforcement thereof.
  2. The Department of Vehicle Regulation shall, upon the request of the officials to whom are entrusted the enforcement of the gasoline and special fuels tax law of any other state, the United States, or the provinces of the Dominion of Canada, forward to such officials any information which it shall have relative to the receipt, sale, use, transportation, shipment or delivery by any person of gasoline and special fuels provided such state or states makes provision in its law for the furnishing of like information to this state.

History. Enact. Acts 1954, ch. 97, § 16; 1956 (2nd Ex. Sess.), ch. 9, § 27; 1958, ch. 70, § 22; 1962, ch. 62, § 23.

NOTES TO DECISIONS

Cited in:

Transportation Cabinet v. Cassity, 912 S.W.2d 48, 1995 Ky. LEXIS 149 ( Ky. 1995 ), cert. denied, Cassity v. Kentucky Transp. Cabinet, 517 U.S. 1209, 116 S. Ct. 1825, 134 L. Ed. 2d 931, 1996 U.S. LEXIS 3285, 64 U.S.L.W. 3778 (1996).

138.727. Coordination between Department of Vehicle Regulation and Department of Revenue.

  1. Nothing in KRS 138.655 to 138.725 shall deny the right of the Department of Revenue to make audits of a taxpayer’s records and accounts, even though the same taxpayer may be or should be a motor carrier and subject to investigation by the Department of Vehicle Regulation.
  2. The Department of Vehicle Regulation shall, upon request of the Department of Revenue, furnish the Department of Revenue any information which it may have in its records with regard to the administration of KRS 138.655 to 138.725 .
  3. The Department of Vehicle Regulation shall not make any refunds to any person or company without inquiring of the Department of Revenue as to the person or company being indebted to the Commonwealth of Kentucky by reason of any tax liability, and no refunds shall be made if such person or company is indebted in any fashion to the Commonwealth of Kentucky.

History. Enact. Acts 1962, ch. 62, § 22; 2005, ch. 85, § 393, effective June 20, 2005.

Legislative Research Commission Notes.

(7/1/2006). In subsection (1) of this statute, the phrase “Nothing in KRS 186.655 to 186.725” has been changed to read “Nothing in KRS 138.655 to 138.725 .” This change corrects an error that was made in 1962 when the word “herein” appearing in 1962 Ky. Acts ch. 62, sec. 22, was codified as a reference to KRS Chapter 186. The correct citation to KRS Chapter 138 has been substituted by the Reviser of Statutes in accordance with KRS 7.136(1)(e), (f), and (h).

138.729. Appeal.

Any final ruling of the Department of Vehicle Regulation with regard to the administration of KRS 138.655 to 138.725 shall be appealed to the Kentucky Claims Commission pursuant to KRS 49.220 .

HISTORY: Enact. Acts 1962, ch. 62, § 24; 1964, ch. 141, §§ 35, 39, effective July 1, 1964; 2017 ch. 74, § 87, effective June 29, 2017.

Compiler’s Notes.

Section 35 of Acts 1964, ch. 141 amended this section. However, section 39 of Acts 1964, ch. 141 stated that it was repealing this section.

NOTES TO DECISIONS

1. Constitutionality.

A truck driver whose vehicle was impounded in accord with KRS 138.990(15), which requires mandatory impoundment of a vehicle when the driver is found to be operating the vehicle without a Kentucky motor fuel user’s license, was not deprived of his due process rights since he had statutory opportunities for a hearing and appeal when his license was originally revoked for failure to maintain a fuel tax bond. Transportation Cabinet v. Cassity, 912 S.W.2d 48, 1995 Ky. LEXIS 149 ( Ky. 1995 ), cert. denied, 517 U.S. 1209, 116 S. Ct. 1825, 134 L. Ed. 2d 931, 1996 U.S. LEXIS 3285 (U.S. 1996).

138.7291. Transportation Cabinet authorized to order agreements relating to collection of motor fuel taxes.

The Transportation Cabinet may enter into motor fuels tax agreements on behalf of the Commonwealth with authorized representatives of other jurisdictions providing for the collection, refund, or audit of interstate motor fuel taxes. Copies of any and all agreements shall be maintained by the secretary of the cabinet.

History. Enact. Acts 1988, ch. 175, § 2, effective July 15, 1988.

Liability of Rural Cooperatives

138.730. Rural co-ops are not exempt from excise taxes.

The exemptions allowed under KRS 279.200 and KRS 279.530 shall not apply to the taxes levied under this chapter and no refund shall be allowed by reason of the provisions of KRS 279.200 or KRS 279.530 .

History. Enact. Acts 1960, ch. 186, Art. IV, § 8, effective July 1, 1960.

138.750. Imposition of additional tax — Implementation and collection. [Repealed and reenacted.]

Compiler’s Notes.

This section (Enact. Acts 1976 (Ex. Sess.), ch. 6, § 5) was repealed and reenacted as KRS 138.225 by Acts 1980, ch. 188, § 105.

138.755. Attorney general to confirm federal action affecting gasoline, diesel, or special motor fuel tax rates — Cabinet to announce any increase. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976 (Ex. Sess.), ch. 6, § 7) was repealed by Acts 1986, ch. 174, § 21, effective July 1, 1986, and was also repealed by Acts 1986, ch. 331, § 63, effective July 15, 1986.

Contaminated and Radioactive Waste Materials

138.810. Definitions for KRS 138.820 to 138.860.

As used in KRS 138.820 to 138.860 :

  1. “Contaminated waste materials” means those materials, in solid, liquid or gaseous form, which are transported or buried with radioactive wastes;
  2. “Department” means the Department of Revenue;
  3. “Person” includes every natural person, fiduciary, association, state or political subdivision, or corporation;
  4. “Processor” means any person receiving delivery or any person having an interest or right of occupancy or use in real property or improvements or any person owning, operating or maintaining a radioactive waste disposal site or facility of contaminated waste materials or radioactive waste materials for processing, packaging, storage, disposal, burial or other disposition;
  5. “Radioactive waste disposal site or facility” means any installation constructed, used or placed in operation primarily for disposing of contaminated waste materials or radioactive wastes;
  6. “Radioactive wastes” means any and all material which is radioactive or is contaminated by or with radioactive material including but not limited to any structures used in containing such radioactive wastes; and
  7. “Radioactive material” means any material, solid, liquid or gas, which emits radiation spontaneously.

History. Enact. Acts 1976, ch. 376, § 1; 1986, ch. 331, § 25, effective July 15, 1986; 2005, ch. 85, § 394, effective June 20, 2005.

Opinions of Attorney General.

The tax on the storage of nuclear waste should be paid only once when the material is deposited or stored in the disposal site and it is the responsibility of the user of nuclear material to determine when such material ceases to be useful and becomes waste. OAG 77-5 .

138.820. Imposition of tax — Rate — Collection — Monthly return.

  1. An excise tax of ten cents ($0.10) per pound is hereby levied and shall be paid by the processor to the department upon all contaminated waste materials and all radioactive waste material delivered in the Commonwealth of Kentucky for processing, packaging, storage, disposal, burial or other disposition.
  2. Any person receiving contaminated waste materials or radioactive waste material or both or any person having an interest or right of occupancy or use in real property or improvements and any person owning, operating or maintaining a solid waste disposal site or facility as defined in KRS 224.1-010 upon or in which the same shall be deposited for processing, packaging, storage, disposal, burial or other disposition shall collect from the person delivering such material the tax imposed by this section.
  3. Every processor shall file with the department, on forms prescribed by the department, a monthly tax return. The return shall be made under penalty of perjury and shall contain such information as the department may require.
  4. The monthly tax return shall be accompanied by remittance of the tax then due.

History. Enact. Acts 1976, ch. 376, § 2; 1980, ch. 188, § 106, effective July 15, 1980; 2005, ch. 85, § 395, effective June 20, 2005.

Compiler’s Notes.

This section is set out above to reflect a correction to the section reference appearing in subsection (2) from 224.01-010 to 224.1-010 due to renumbering by the state reviser effective in 2013.

Legislative Research Commission Notes.

(1988). A technical correction has been made in this section by the Reviser of Statutes pursuant to KRS 7.136 .

138.830. Maintenance and retention of records.

Every processor shall maintain complete records of all deliveries of contaminated waste materials and of radioactive waste materials. Such records, together with manifests of lading, invoices, correspondence and other papers pertaining thereto shall be retained for a minimum period of two (2) years, and, if requested by the department, shall be made available for examination by the department.

History. Enact. Acts 1976, ch. 376, § 3; 2005, ch. 85, § 396, effective June 20, 2005.

138.840. Audit by department.

The department may audit the books and records of each processor and make such other investigations as it deems necessary to determine the payment of tax and other requirements imposed by KRS 138.820 to 138.860 .

History. Enact. Acts 1976, ch. 376, § 4; 2005, ch. 85, § 397, effective June 20, 2005.

138.850. Monthly payment of tax.

The tax returns required by KRS 138.820(3) shall be accompanied by a certified or cashier’s check, payable to the state treasurer, for the amount of tax due for the preceding calendar month except that the department may waive this requirement and accept the check of the processor if he is of sound financial condition and has established a record of compliance.

History. Enact. Acts 1976, ch. 376, § 5; 2005, ch. 85, § 398, effective June 20, 2005.

138.860. Regulations.

The department shall administer the taxes provided under KRS 138.820(1) and may prescribe, adopt and enforce regulations relating to the administration and enforcement thereof.

History. Enact. Acts 1976, ch. 376, § 6; 2005, ch. 85, § 399, effective June 20, 2005.

Marijuana and Controlled Substances

138.870. Definitions for KRS 138.870 to 138.889.

As used in KRS 138.870 to 138.889 , unless the context requires otherwise:

  1. “Marijuana” means marijuana, whether real or counterfeit, as defined in KRS 218A.010 .
  2. “Controlled substance” means any controlled substance, whether real or counterfeit, as defined in KRS 218A.010 or any regulation promulgated thereunder, except that it shall not include marijuana.
  3. “Offender” means a person who engages in this state in a taxable activity as defined in subsection (4) of this section.
  4. “Taxable activity” means producing, cultivating, manufacturing, importing, transporting, distributing, acquiring, purchasing, storing, selling, using, or otherwise possessing, in violation of KRS Chapter 218A, more than five (5) marijuana plants with foliation, 42.5 grams of marijuana which has been detached from the plant on which it grew, seven (7) grams of any controlled substance, or fifty (50) or more dosage units of any controlled substance which is not sold by weight. The weight or dosage units in this subsection shall include the weight of marijuana or the weight or dosage units of the controlled substance, whether pure, impure, or diluted. A quantity of a controlled substance is diluted if it consists of a detectable quantity of a pure controlled substance and any excipients or fillers.
  5. “Dosage unit” means a tablet, capsule, vial, or ampule of a controlled substance or, in cases of mass volume or diluted quantities, the proper dose or quantity of a controlled substance to be taken all at one (1) time or in fractional amounts within a given period, as defined and adopted by the United States Pharmacopeia.
  6. “Possessing” includes either actual possession or constructive possession, or a combination of both actual and constructive possession. Mere possession or ownership of real estate or an interest therein does not establish constructive possession.

History. Enact. Acts 1994, ch. 315, § 1, effective July 15, 1994; 2001, ch. 155, § 1, effective June 21, 2001.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

NOTES TO DECISIONS

1. Constitutionality.

The drug tax does not bar subsequent criminal prosecution on double jeopardy grounds since it provides for anonymous tax payment, which is due “immediately upon the occurrence of taxable activity,” and precludes the use of tax information in criminal prosecutions and, therefore, is not a “punishment.” Commonwealth v. Bird, 979 S.W.2d 915, 1998 Ky. LEXIS 142 ( Ky. 1998 ), cert. denied, 526 U.S. 1145, 119 S. Ct. 2019, 143 L. Ed. 2d 1031, 1999 U.S. LEXIS 3681 (U.S. 1999), cert. denied, 526 U.S. 1145, 119 S. Ct. 2019, 143 L. Ed. 2d 1031, 1999 U.S. LEXIS 3682 (U.S. 1999).

Opinions of Attorney General.

The Kentucky marijuana and controlled substances tax at KRS 138.870-138.889 is not unconstitutional under the double jeopardy clause of the U.S. Constitution. OAG 95-13 .

138.872. Levy of tax on offenders engaging in a taxable activity — Rates.

  1. A tax is hereby levied on each offender engaging in a taxable activity in this state. The tax shall be paid at the following rates:
    1. One thousand dollars ($1,000) per plant, whether growing or detached from the soil, on each marijuana plant with foliation;
    2. Three dollars and fifty cents ($3.50) on each gram, or portion thereof, of marijuana which has been detached from the plant on which it grew;
    3. Two hundred dollars ($200) on each gram, or portion thereof, of controlled substances; and
    4. Two thousand dollars ($2,000) on each fifty (50) dosage units, or portion thereof, of a controlled substance that is not sold by weight.
  2. For the purpose of calculating the tax levied pursuant to subsections (1)(b), (1)(c), and (1)(d) of this section, the quantity shall be measured by the weight of the marijuana or controlled substance, whether pure, impure, or diluted, or by dosage units when a controlled substance is not sold by weight.
  3. An offender lawfully engaged in a taxable activity shall be exempt from the tax imposed by this section if the offender is not in violation of any law which authorizes him to engage in the activity.

History. Enact. Acts 1994, ch. 315, § 2, effective July 15, 1994; 2001, ch. 155, § 2, effective June 21, 2001.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.874. Taxable activity prohibited unless tax paid — Purchase of tax indicia.

  1. Except as provided in KRS 138.870 to 138.889 , no offender shall engage in this state in a taxable activity unless the tax imposed pursuant to KRS 138.872 has been paid as evidenced by the affixing of a tax stamp, label, or other tax indicia to the marijuana or controlled substance as prescribed by the Department of Revenue. The tax shall be due and payable immediately upon the occurrence of the taxable activity in this state. If an offender engages in a taxable activity in this state involving marijuana or a controlled substance on which a tax stamp, label, or other tax indicia evidencing payment of the tax imposed pursuant to KRS 138.872 has not already been affixed, the offender shall immediately permanently affix the required tax stamp, label, or other tax indicia.
  2. Tax stamps, labels, or other tax indicia required to be affixed to marijuana or controlled substances shall be purchased from the Department of Revenue. The purchaser shall pay one hundred percent (100%) of the face value for each tax stamp, label, or other tax indicia at the time of the purchase. The Department of Revenue shall maintain an inventory of tax stamps, labels, or other tax indicia in denominations it deems necessary to facilitate compliance by taxpayers with the provisions of this section. No purchaser of tax stamps, labels, or other tax indicia pursuant to this section shall be required to give his name, address, or otherwise identify himself to the Department of Revenue.
  3. Each tax stamp, label, or other tax indicia shall be used only once and shall expire one (1) year after issuance by the Department of Revenue to the original purchaser thereof.

History. Enact. Acts 1994, ch. 315, § 3, effective July 15, 1994; 2001, ch. 155, § 3, effective June 21, 2001; 2005, ch. 85, § 400, effective June 20, 2005.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.876. Administration by Department of Revenue — Authority for administrative regulations.

The Department of Revenue shall administer the provisions of KRS 138.870 to 138.889 and may adopt regulations for the administration and enforcement of KRS 138.870 to 138.889 . The Department of Revenue shall adopt a uniform system for providing, affixing, and displaying tax stamps, labels, or other tax indicia required pursuant to KRS 138.874 . Payments required by KRS 138.872 shall be made to the Department of Revenue in the form the Department of Revenue requires to protect the revenues of the Commonwealth.

History. Enact. Acts 1994, ch. 315, § 4, effective July 15, 1994; 2005, ch. 85, § 401, effective June 20, 2005.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.878. No preclusion from criminal prosecution.

Nothing in KRS 138.870 to 138.889 , including payment of the tax, shall in any manner provide immunity for an offender from criminal prosecution pursuant to Kentucky law.

History. Enact. Acts 1994, ch. 315, § 5, effective July 15, 1994; 2001, ch. 155, § 4, effective June 21, 2001.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.880. Notification of Department of Revenue by Commonwealth’s attorney or county attorney of nonpayment of tax after conviction or plea — Filing of notice of lien — Release of lien.

  1. Each Commonwealth’s attorney or county attorney in this state who obtains a conviction of, or a guilty or Alford plea from, an offender for violating KRS Chapter 218A shall, within seventy-two (72) hours after the conviction or the plea, notify the department in writing if the offender has not paid the tax imposed by KRS 138.872 as evidenced by the absence of the tax stamps, labels, or other official tax indicia required to be affixed to the marijuana or controlled substance that was the subject of the conviction or plea. The weight or dosage units prescribed in this subsection shall include the weight of the marijuana or the weight or dosage units of the controlled substance, whether pure, impure, or diluted. The notice required in this subsection shall be submitted in the manner prescribed by the department and shall include:
    1. The name, address, and Social Security number of the offender from whom the conviction or plea was obtained;
    2. The type and quantity of the items that were the subject of the conviction or plea;
    3. Any information developed during the course of the investigation regarding any real or personal properties owned by the offender from whom the conviction or plea was obtained; and
    4. Other information the Department of Revenue may require to facilitate the assessment and collection of the tax due pursuant to KRS 138.872 .
  2. To facilitate collection of the tax due pursuant to KRS 138.872 , the Commonwealth’s attorney or county attorney shall, as an authorized agent of the department, simultaneously file a copy of the notice required pursuant to subsection (1) of this section with:
    1. The county clerk of the county in which the conviction or the guilty or Alford plea was entered;
    2. The county clerk of the county in which the offender resides if different from the county in which the conviction or plea was entered;
    3. The county clerk of any other county in which the Commonwealth’s attorney or county attorney reasonably believes the offender from whom the conviction or plea was obtained owns real or personal property; and
    4. Each financial institution or other custodian the Commonwealth’s attorney or county attorney reasonably believes possesses any funds, safe deposit box, or other assets owned in whole or in part by the offender from whom the conviction or plea was obtained.
  3. The notice required by subsection (2) of this section shall be a lien in favor of the Commonwealth pursuant to KRS 131.515 to secure payment of the tax, penalty, and interest due. The tax shall be and remain a lien upon the property, and all property subsequently acquired, and may be enforced as other liens on similar property are enforced. The lien may be released only upon written notice from the department that:
    1. The tax, penalty and interest due pursuant to KRS 138.872 and 138.889 have been paid;
    2. A bond has been given to the department as provided in KRS 131.150 ; or
    3. The tax, penalty, and interest are determined by the department not to be due.
  4. The county clerk recording or releasing a state tax lien pursuant to this section shall be entitled to the fee prescribed therefor by KRS 64.012 .
  5. Except as necessary to accept taxes that the offender voluntarily pays under KRS 138.874 , the department shall not require a bond or otherwise attempt to collect the tax due under KRS 138.874 until the offender’s taxable activity results in a conviction or a guilty or Alford plea for a violation of KRS Chapter 218A. However, the department may impose a notice of lien on issuance of a warrant or indictment, which shall be released upon acquittal or dismissal of the case.

History. Enact. Acts 1994, ch. 315, § 6, effective July 15, 1994; 2001, ch. 155, § 5, effective June 21, 2001; 2005, ch. 85, § 402, effective June 20, 2005; 2009, ch. 10, § 52, effective January 1, 2010.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.882. Assessments deemed prima facie valid — Collection.

  1. The tax, penalty, and interest assessed by the Department of Revenue pursuant to KRS 138.872 and 138.889 shall be deemed prima facie valid and correctly determined and assessed. The burden shall be upon the taxpayer in any judicial or administrative proceeding in this state to show their incorrectness or invalidity.
  2. The collection provisions of KRS 131.500 , and any other remedy provided by the laws of the Commonwealth for collection of a tax administered by the Department of Revenue, shall apply with respect to the collection of the tax, penalty, and interest imposed by KRS 138.872 and 138.889 , but it shall not be necessary for the Department of Revenue to await the expiration of the times specified in KRS 131.500 to levy upon and sell any property or rights to property found within the Commonwealth belonging to the offender failing to pay the tax, penalty, or interest due pursuant to KRS 138.872 and 138.889 .
  3. No person shall bring an action in any court to restrain or delay the assessment or collection of any tax, penalty, or interest imposed by KRS 138.872 and 138.889 .
  4. Notwithstanding any provision of KRS 138.870 to 138.889 , or any other provision of law, collection of any tax, penalty, or interest under KRS 138.872 and 138.889 or imposition of any revenue liens arising as a result of KRS 138.880 shall not interfere with any forfeiture of money or any other type or kind of property under the drug forfeiture laws of this state, or with any distribution of property or funds under the drug forfeiture laws of this state. Regardless of the order in which proceedings are begun, forfeiture of money or any other type or kind of property and distribution of property and funds under the drug forfeiture laws of this state shall take precedence over any proceedings to collect the tax, penalty, or interest due pursuant to KRS 138.872 and 138.889.

History. Enact. Acts 1994, ch. 315, § 7, effective July 15, 1994; 2001, ch. 155, § 6, effective June 21, 2001; 2005, ch. 85, § 403, effective June 20, 2005.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.884. Investigative powers of department.

For the purpose of determining the correctness of any return; determining the amount of tax that should have been paid; determining whether or not the offender should have made a return or paid tax; or collecting any tax, penalty, or interest under KRS 138.872 and 138.889 , the Department of Revenue may examine, or cause to be examined, any books, papers, records, or memoranda that may be relevant to making any determinations, whether the books, papers, records, or memoranda are the property of or in the possession of the offender or another person. The Department of Revenue may require the attendance of any person having knowledge or information that may be relevant; compel the production of books, papers, records, or memoranda by persons required to attend; take testimony on matters material to the determination; and administer oaths or affirmations. The Department of Revenue may issue subpoenas which may be served by authorized agents of the Department of Revenue to compel the attendance of witnesses or the production of documents, books, papers, records, bank records, and any other writing or memoranda.

History. Enact. Acts 1994, ch. 315, § 8, effective July 15, 1994; 2001, ch. 155, § 7, effective June 21, 2001; 2005, ch. 85, § 404, effective June 20, 2005.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.885. Personal and individual liability of officers of corporation subject to KRS 138.870 to 138.889.

The president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any corporation subject to the provisions of KRS 138.870 to 138.889 , shall be personally and individually liable, both jointly and severally, for the tax, penalty, and interest imposed under KRS 138.872 and 138.889 , and neither the corporate dissolution nor withdrawal of the corporation from the state nor the cessation of holding any corporate office shall discharge the liability of any person. The personal and individual liability shall apply to each and every person holding the corporate office at the time the tax becomes or became due. No person shall be personally and individually liable pursuant to KRS 138.870 to 138.889 who had no authority in the management of the business or financial affairs of the corporation at the time that the tax imposed by KRS 138.872 becomes or became due.

History. Enact. Acts 1994, ch. 315, § 9, effective July 15, 1994.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.886. Prohibition against use of information in criminal cases — Penalty — Publication of statistics not barred.

  1. The provisions of KRS 138.870 to 138.889 shall not inculpate any person or otherwise cause any person to incriminate himself in violation of his constitutional rights and, notwithstanding the exceptions provided in KRS 131.190 or any other law, neither the Department of Revenue nor any public employee may reveal facts contained in any report required by KRS 138.870 to 138.889 , nor shall any information contained in any report filed pursuant to KRS 138.870 to 138.889 be used against an offender in any criminal proceeding, except in connection with a proceeding involving the tax, penalty, or interest due under KRS 138.872 and 138.889, unless the information is independently obtained. Further, possession of any tax stamp, label, or other tax indicia evidencing payment of tax pursuant to KRS 138.874 shall not be used against any person in any criminal proceeding.
  2. Any person violating this section shall be guilty of a Class B misdemeanor.
  3. This section shall not prohibit the Department of Revenue from publishing statistics that do not disclose the identity of offenders or the contents of particular returns or reports.

History. Enact. Acts 1994, ch. 315, § 10, effective July 15, 1994; 2001, ch. 155, § 8, effective June 21, 2001; 2005, ch. 85, § 405, effective June 20, 2005.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.888. Collections to be deposited in general fund.

All funds collected pursuant to KRS 138.870 to 138.889 shall be deposited in the state general fund.

History. Enact. Acts 1994, ch. 315, § 12, effective July 15, 1994.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

138.889. Penalties.

  1. Any offender violating KRS 138.870 to 138.889 shall, in addition to paying the tax imposed pursuant to KRS 138.872 , pay a penalty equal to one hundred percent (100%) of the tax due and interest at the tax interest rate as defined in KRS 131.010(6) on the principal amount of the tax during the period in which the tax is due and unpaid.
    1. Any offender failing to affix the appropriate tax stamps, labels, or other tax indicia to any marijuana or controlled substance as required by KRS 138.874 is guilty of a Class C felony and, upon conviction, may be punished as provided in the Kentucky Penal Code. The penalty shall be cumulative to any other penalty or crime. Jurisdiction and venue for prosecution of this crime shall be in the Franklin Circuit Court. (2) (a) Any offender failing to affix the appropriate tax stamps, labels, or other tax indicia to any marijuana or controlled substance as required by KRS 138.874 is guilty of a Class C felony and, upon conviction, may be punished as provided in the Kentucky Penal Code. The penalty shall be cumulative to any other penalty or crime. Jurisdiction and venue for prosecution of this crime shall be in the Franklin Circuit Court.
    2. Notwithstanding any other provision of the criminal laws of this state, an indictment may be found and filed upon any criminal offense specified in this section within six (6) years after the commission of the offense.

History. Enact. Acts 1994, ch. 315, § 11, effective July 15, 1994; 2001, ch. 155, § 9, effective June 21, 2001.

Compiler’s Notes.

Section 13 of Acts 1994, ch. 315 provided that KRS 138.870 to 138.889 “shall apply beginning August 1, 1994.”

Penalties

138.990. Penalties.

  1. Any person who violates any provision of KRS 138.140 , 138.146 , or 138.195 for which a specific penalty is not provided shall be guilty of a violation for the first offense; for each such subsequent offense, he shall be guilty of a Class A misdemeanor. These penalties shall be in addition to the civil penalties provided by KRS 138.165 , 138.185 , and 138.205 .
  2. Any person who fails to supply the information required by subsection (8) of KRS 138.195 shall be guilty of a violation; for each subsequent offense, he shall be guilty of a Class B misdemeanor. These penalties shall be in addition to any civil penalty provided by KRS 138.165 , 138.185 , and 138.205 .
  3. Any person violating subsection (10) of KRS 138.195 or any regulations adopted thereunder shall be guilty of a Class A misdemeanor. This penalty shall be in addition to any civil penalty provided by KRS 138.165 , 138.185 , and 138.205 .
  4. Any person who makes a false entry upon any invoices or any record relating to the purchase, possession, transportation, or sale of cigarettes, and presents any such false entry to the department or any of its agents with the intent to avoid any tax imposed by KRS 138.130 to 138.205 , shall be guilty of a Class D felony.
  5. Any person who shall counterfeit any cigarette tax evidence shall be guilty of a Class D felony.
  6. Any person who sells, offers to sell, or uses counterfeit cigarette tax evidence, affixed or unaffixed, with the intention of evading any tax imposed by KRS 138.130 to 138.205 shall be guilty of a Class D felony.
  7. Any person who fails to remit gasoline or special fuel tax money to the state as provided in KRS 138.280 is guilty of embezzlement of state funds. Embezzlement of state funds, for the first offense, shall be a Class A misdemeanor, and for the second offense, shall be a Class D felony.
  8. Any person who violates any of the provisions of KRS 138.300 shall be guilty of a Class A misdemeanor. This penalty shall be in addition to the penalty provided in subsection (7) of this section.
  9. Any person who violates KRS 138.310 shall be guilty of a Class A misdemeanor. Each day or part of a day of doing business as a dealer without an uncanceled license shall be a separate offense.
    1. Any person who willfully and fraudulently gives a false statement as to the total and actual consideration paid for a motor vehicle under KRS 138.450 shall be guilty of a Class D felony and shall be fined not less than two thousand dollars ($2,000) per offense. (10) (a) Any person who willfully and fraudulently gives a false statement as to the total and actual consideration paid for a motor vehicle under KRS 138.450 shall be guilty of a Class D felony and shall be fined not less than two thousand dollars ($2,000) per offense.
    2. Any person who violates any of the other provisions of KRS 138.460 to 138.470 shall be fined not less than twenty-five dollars ($25) nor more than one thousand dollars ($1,000) and if the offender is an individual, he shall be guilty of a Class A misdemeanor.
  10. Any person who violates any of the provisions of KRS 138.480 or 138.490 shall be guilty of a Class B misdemeanor.
  11. If any offender under the provisions of subsections (1) to (9), (11) or (16) of this section is a corporation, the principal officer or the officer directly responsible for the violation, or both, may be imprisoned as provided in those subsections.
  12. Any person who violates any provision of subsection (1) of KRS 138.354 , whether or not his permit has been revoked, shall be guilty of a Class A misdemeanor.
  13. Any person violating any provision of KRS 138.655 to 138.725 is guilty of a Class A misdemeanor.
  14. In addition to the penalties provided in KRS 138.990(14), the motor vehicle or vehicles of any person violating any provision of KRS 138.720 shall be subject to seizure by any officer duly authorized to enforce the provisions of KRS 138.655 to 138.725 .
  15. Any person violating KRS 138.175 shall be guilty of a Class D felony.
  16. Any person who intentionally evades payment of the tax imposed by KRS 138.460 or 138.463 shall be liable for the taxes evaded, with applicable interest and penalties, and in addition shall be guilty of:
    1. A Class B misdemeanor if the amount of tax evaded is two hundred fifty dollars ($250) or less; and
    2. A Class A misdemeanor if the amount of tax evaded is greater than two hundred fifty dollars ($250).

History. 4223b-11, 4281e-7, 4281e-8, 4281e-15, 4281f-14, 4281f-20, 4281f-29, 4281g-12, 4281g-16, 4281g-20, 4281h-11, 4281h-15, 4281h-16, 4281i-9: amend. Acts 1946, ch. 10, § 11; 1948, ch. 94, § 4; 1952, ch. 191, § 15; 1954, ch. 97, § 15; 1956 (2nd Ex. Sess.), ch. 9, § 28; 1958, ch. 70, § 23; 1958, ch. 126, § 15; 1962, ch. 92, § 9; 1964, ch. 141, § 36; 1966, ch. 255, § 136; 1986, ch. 431, § 6, effective January 1, 1987; 1988, ch. 285, § 33, effective August 1, 1988; 1992, ch. 463, § 15, effective July 14, 1992; 1998, ch. 600, § 5, effective April 14, 1998; 2005, ch. 85, § 406, effective June 20, 2005.

Compiler’s Notes.

Section 11 of Acts 1998, ch. 600, stated: “The amendments contained in Sections 3 to 8 of this Act shall apply to motor vehicles sold after July 31, 1998.”

Legislative Research Commission Notes.

1986 Acts, ch. 431, § 15 read: “Such administrative expenses for the administration of KRS 138.462 to 138.4631 , 138.990 and 186.010 shall be appropriated to the transportation cabinet as determined to be necessary by the cabinet. Any additional employees deemed necessary by the transportation cabinet for the administration of KRS 138.462 to 138.4631 , 138.990 and 186.010 shall not be deemed a violation of numerical employee limits that may be imposed by the 1986 General Assembly.”

NOTES TO DECISIONS

1. Constitutionality.

A truck driver whose vehicle was impounded in accord with subsection (15) of this section, which requires mandatory impoundment of a vehicle when the driver is found to be operating the vehicle without a Kentucky motor fuel user’s license, was not deprived of his due process rights since he had statutory opportunities for a hearing and appeal when his license was originally revoked for failure to maintain a fuel tax bond. Transportation Cabinet v. Cassity, 912 S.W.2d 48, 1995 Ky. LEXIS 149 ( Ky. 1995 ), cert. denied, 517 U.S. 1209, 116 S. Ct. 1825, 134 L. Ed. 2d 931, 1996 U.S. LEXIS 3285 (U.S. 1996).

Cited in:

Board of Education v. Talbott, 286 Ky. 543 , 151 S.W.2d 42, 1941 Ky. LEXIS 283 ( Ky. 1941 ).

138.991. Penalties.

  1. Any person who shall change or alter the date, name, gallonage or other information shown on any invoice used to support any claim for refund authorized in KRS 138.341 , 138.344 , 138.445 , 138.358 , or 138.446 shall forfeit the right to such refund.
  2. Any person, firm or corporation who shall make any false statement in connection with an application for the refund of any money, as provided in KRS 138.341 , 138.344 , 138.445 , 138.358 , or 138.446 or who shall collect or cause to be repaid to him or to any person any such taxes without being entitled to the same shall be fined not less than twenty-five dollars ($25) nor more than one thousand dollars ($1,000).

History. Enact. Acts 1960, ch. 214, § 2; 1988, ch. 285, § 34, effective August 1, 1988.

138.992. Penalty for unauthorized use of gasoline or special fuels.

Any person who knowingly uses gasoline or special fuels, the tax on which is subject to refund or credit, for any purpose other than as provided in KRS 138.341 , 138.344 , 138.445 , 138.358 , or 138.446 , shall be fined not less than one hundred (100) nor more than five hundred dollars ($500), or imprisoned not exceeding one (1) year, or both so fined and imprisoned.

History. Enact. Acts 1960, ch. 156; 1988, ch. 285, § 35, effective August 1, 1988.

CHAPTER 139 Sales and Use Taxes

139.010. Definitions for chapter.

As used in this chapter, unless the context otherwise provides:

    1. “Admissions” means the fees paid for: (1) (a) “Admissions” means the fees paid for:
      1. The right of entrance to a display, program, sporting event, music concert, performance, play, show, movie, exhibit, fair, or other entertainment or amusement event or venue; and
      2. The privilege of using facilities or participating in an event or activity, including but not limited to:
        1. Bowling centers;
        2. Skating rinks;
        3. Health spas;
        4. Swimming pools;
        5. Tennis courts;
        6. Weight training facilities;
        7. Fitness and recreational sports centers; and
        8. Golf courses, both public and private;
    2. “Admissions” does not include:
      1. Any fee paid to enter or participate in a fishing tournament; or
      2. Any fee paid for the use of a boat ramp for the purpose of allowing boats to be launched into or hauled out from the water;
  1. “Advertising and promotional direct mail” means direct mail the primary purpose of which is to attract public attention to a product, person, business, or organization, or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. As used in this definition, “product” means tangible personal property, an item transferred electronically, or a service;
  2. “Business” includes any activity engaged in by any person or caused to be engaged in by that person with the object of gain, benefit, or advantage, either direct or indirect;
  3. “Commonwealth” means the Commonwealth of Kentucky;
  4. “Department” means the Department of Revenue;
    1. “Digital audio-visual works” means a series of related images which, when shown in succession, impart an impression of motion, with accompanying sounds, if any. (6) (a) “Digital audio-visual works” means a series of related images which, when shown in succession, impart an impression of motion, with accompanying sounds, if any.
    2. “Digital audio-visual works” includes movies, motion pictures, musical videos, news and entertainment programs, and live events.
    3. “Digital audio-visual works” shall not include video greeting cards, video games, and electronic games;
    1. “Digital audio works” means works that result from the fixation of a series of musical, spoken, or other sounds. (7) (a) “Digital audio works” means works that result from the fixation of a series of musical, spoken, or other sounds.
    2. “Digital audio works” includes ringtones, recorded or live songs, music, readings of books or other written materials, speeches, or other sound recordings.
    3. “Digital audio works” shall not include audio greeting cards sent by electronic mail;
    1. “Digital books” means works that are generally recognized in the ordinary and usual sense as books, including any literary work expressed in words, numbers, or other verbal or numerical symbols or indicia if the literary work is generally recognized in the ordinary or usual sense as a book. (8) (a) “Digital books” means works that are generally recognized in the ordinary and usual sense as books, including any literary work expressed in words, numbers, or other verbal or numerical symbols or indicia if the literary work is generally recognized in the ordinary or usual sense as a book.
    2. “Digital books” shall not include digital audio-visual works, digital audio works, periodicals, magazines, newspapers, or other news or information products, chat rooms, or Web logs;
    1. “Digital code” means a code which provides a purchaser with a right to obtain one (1) or more types of digital property. A “digital code” may be obtained by any means, including electronic mail messaging or by tangible means, regardless of the code’s designation as a song code, video code, or book code. (9) (a) “Digital code” means a code which provides a purchaser with a right to obtain one (1) or more types of digital property. A “digital code” may be obtained by any means, including electronic mail messaging or by tangible means, regardless of the code’s designation as a song code, video code, or book code.
    2. “Digital code” shall not include a code that represents:
      1. A stored monetary value that is deducted from a total as it is used by the purchaser; or
      2. A redeemable card, gift card, or gift certificate that entitles the holder to select specific types of digital property;
    1. “Digital property” means any of the following which is transferred electronically: (10) (a) “Digital property” means any of the following which is transferred electronically:
      1. Digital audio works;
      2. Digital books;
      3. Finished artwork;
      4. Digital photographs;
      5. Periodicals;
      6. Newspapers;
      7. Magazines;
      8. Video greeting cards;
      9. Audio greeting cards;
      10. Video games;
      11. Electronic games; or
      12. Any digital code related to this property.
    2. “Digital property” shall not include digital audio-visual works or satellite radio programming;
    1. “Direct mail” means printed material delivered or distributed by United States mail or other delivery service to a mass audience or to addressees on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipient. (11) (a) “Direct mail” means printed material delivered or distributed by United States mail or other delivery service to a mass audience or to addressees on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipient.
    2. “Direct mail” includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail retailer for inclusion in the package containing the printed material.
    3. “Direct mail” does not include multiple items of printed material delivered to a single address;
  5. “Directly used in the manufacturing or industrial processing process” means the process  that commences with the movement of raw materials from storage into a continuous, unbroken, integrated process and ends when the finished product is packaged and ready for sale;
    1. “Extended warranty services” means services provided through a service contract agreement between the contract provider and the purchaser where the purchaser agrees to pay compensation for the contract and the provider agrees to repair, replace, support, or maintain tangible personal property or digital property according to the terms of the contract if: (13) (a) “Extended warranty services” means services provided through a service contract agreement between the contract provider and the purchaser where the purchaser agrees to pay compensation for the contract and the provider agrees to repair, replace, support, or maintain tangible personal property or digital property according to the terms of the contract if:
      1. The service contract agreement is sold or purchased on or after July 1, 2018; and
      2. The tangible personal property or digital property for which the service contract agreement is provided is subject to tax under this chapter or under KRS 138.460 .
    2. “Extended warranty services” does not include the sale of a service contract agreement for tangible personal property to be used by a small telephone utility as defined in KRS 278.516 or a Tier III CMRS provider as defined in KRS 65.7621 to deliver communications services as defined in KRS 136.602 or broadband as defined in KRS 278.5461 ;
    1. “Finished artwork” means final art that is used for actual reproduction by photomechanical or other processes or for display purposes. (14) (a) “Finished artwork” means final art that is used for actual reproduction by photomechanical or other processes or for display purposes.
    2. “Finished artwork” includes:
      1. Assemblies;
      2. Charts;
      3. Designs;
      4. Drawings;
      5. Graphs;
      6. Illustrative materials;
      7. Lettering;
      8. Mechanicals;
      9. Paintings; and
      10. Paste-ups;
    1. “Gross receipts” and “sales price” mean the total amount or consideration, including cash, credit, property, and services, for which tangible personal property, digital property, or services are sold, leased, or rented, valued in money, whether received in money or otherwise, without any deduction for any of the following: (15) (a) “Gross receipts” and “sales price” mean the total amount or consideration, including cash, credit, property, and services, for which tangible personal property, digital property, or services are sold, leased, or rented, valued in money, whether received in money or otherwise, without any deduction for any of the following:
      1. The retailer’s cost of the tangible personal property, digital property, or services sold;
      2. The cost of the materials used, labor or service cost, interest, losses, all costs of transportation to the retailer, all taxes imposed on the retailer, or any other expense of the retailer;
      3. Charges by the retailer for any services necessary to complete the sale;
      4. Delivery charges, which are defined as charges by the retailer for the preparation and delivery to a location designated by the purchaser including transportation, shipping, postage, handling, crating, and packing;
      5. Any amount for which credit is given to the purchaser by the retailer, other than credit for tangible personal property or digital property traded when the tangible personal property or digital property traded is of like kind and character to the property purchased and the property traded is held by the retailer for resale; and
      6. The amount charged for labor or services rendered in installing or applying the tangible personal property, digital property, or service sold.
    2. “Gross receipts” and “sales price” shall include consideration received by the retailer from a third party if:
      1. The retailer actually receives consideration from a third party and the consideration is directly related to a price reduction or discount on the sale to the purchaser;
      2. The retailer has an obligation to pass the price reduction or discount through to the purchaser;
      3. The amount of consideration attributable to the sale is fixed and determinable by the retailer at the time of the sale of the item to the purchaser; and
      4. One (1) of the following criteria is met:
        1. The purchaser presents a coupon, certificate, or other documentation to the retailer to claim a price reduction or discount where the coupon, certificate, or documentation is authorized, distributed, or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate, or documentation is presented;
        2. The price reduction or discount is identified as a third-party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate, or other documentation presented by the purchaser; or
        3. The purchaser identifies himself or herself to the retailer as a member of a group or organization entitled to a price reduction or discount. A “preferred customer” card that is available to any patron does not constitute membership in such a group.
    3. “Gross receipts” and “sales price” shall not include:
      1. Discounts, including cash, term, or coupons that are not reimbursed by a third party and that are allowed by a retailer and taken by a purchaser on a sale;
      2. Interest, financing, and carrying charges from credit extended on the sale of tangible personal property, digital property, or services, if the amount is separately stated on the invoice, bill of sale, or similar document given to the purchaser; or
      3. Any taxes legally imposed directly on the purchaser that are separately stated on the invoice, bill of sale, or similar document given to the purchaser.
    4. As used in this subsection, “third party” means a person other than the purchaser;
  6. “In this state” or “in the state” means within the exterior limits of the Commonwealth and includes all territory within these limits owned by or ceded to the United States of America;
  7. “Industrial processing” includes:
    1. Refining;
    2. Extraction of minerals, ores, coal, clay, stone, petroleum, or natural gas;
    3. Mining, quarrying, fabricating, and industrial assembling;
    4. The processing and packaging of raw materials, in-process materials, and finished products; and
    5. The processing and packaging of farm and dairy products for sale;
    1. “Lease or rental” means any transfer of possession or control of tangible personal property for a fixed or indeterminate term for consideration. A lease or rental shall include future options to: (18) (a) “Lease or rental” means any transfer of possession or control of tangible personal property for a fixed or indeterminate term for consideration. A lease or rental shall include future options to:
      1. Purchase the property; or
      2. Extend the terms of the agreement and agreements covering trailers where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined in 26 U.S.C. sec. 7701(h)(1) .
    2. “Lease or rental” shall not include:
      1. A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments;
      2. A transfer of possession or control of property under an agreement that requires the transfer of title upon completion of the required payments and payment of an option price that does not exceed the greater of one hundred dollars ($100) or one percent (1%) of the total required payments; or
      3. Providing tangible personal property and an operator for the tangible personal property for a fixed or indeterminate period of time. To qualify for this exclusion, the operator must be necessary for the equipment to perform as designed, and the operator must do more than maintain, inspect, or setup the tangible personal property.
    3. This definition shall apply regardless of the classification of a transaction under generally accepted accounting principles, the Internal Revenue Code, or other provisions of federal, state, or local law;
    1. “Machinery for new and expanded industry” means machinery: (19) (a) “Machinery for new and expanded industry” means machinery:
      1. Directly used in the manufacturing or industrial processing process of:
        1. Tangible personal property at a plant facility;
        2. Distilled spirits or wine at a plant facility or on the premises of a distiller, rectifier, winery, or small farm winery licensed under KRS 243.030 that includes a retail establishment on the premises; or
        3. Malt beverages at a plant facility or on the premises of a brewer or microbrewery licensed under KRS 243.040 that includes a retail establishment;
      2. Which is incorporated for the first time into:
        1. A plant facility established in this state; or
        2. Licensed premises located in this state; and
      3. Which does not replace machinery in the plant facility or licensed premises unless that machinery purchased to replace existing machinery:
        1. Increases the consumption of recycled materials at the plant facility by not less than ten percent (10%);
        2. Performs different functions;
        3. Is used to manufacture a different product; or
        4. Has a greater productive capacity, as measured in units of production, than the machinery being replaced.
    2. “Machinery for new and expanded industry” does not include repair, replacement, or spare parts of any kind, regardless of whether the purchase of repair, replacement, or spare parts is required by the manufacturer or seller as a condition of sale or as a condition of warranty;
  8. “Manufacturing” means any process through which material having little or no commercial value for its intended use before processing has appreciable commercial value for its intended use after processing by the machinery;
  9. “Marketplace” means any physical or electronic means through which one (1) or more retailers may advertise and sell tangible personal property, digital property, or services, or lease tangible personal property or digital property, such as a catalog, Internet Web site, or television or radio broadcast, regardless of whether the tangible personal property, digital property, or retailer is physically present in this state;
    1. “Marketplace provider” means a person, including any affiliate of the person, that facilitates a retail sale by satisfying subparagraphs 1. and 2. of this paragraph as follows: (22) (a) “Marketplace provider” means a person, including any affiliate of the person, that facilitates a retail sale by satisfying subparagraphs 1. and 2. of this paragraph as follows:
      1. The person directly or indirectly:
        1. Lists, makes available, or advertises tangible personal property, digital property, or services for sale by a marketplace retailer in a marketplace owned, operated, or controlled by the person;
        2. Facilitates the sale of a marketplace retailer’s product through a marketplace by transmitting or otherwise communicating an offer or acceptance of a retail sale of tangible personal property, digital property, or services between a marketplace retailer and a purchaser in a forum including a shop, store, booth, catalog, Internet site, or similar forum;
        3. Owns, rents, licenses, makes available, or operates any electronic or physical infrastructure or any property, process, method, copyright, trademark, or patent that connects marketplace retailers to purchasers for the purpose of making retail sales of tangible personal property, digital property, or services;
        4. Provides a marketplace for making retail sales of tangible personal property, digital property, or services, or otherwise facilitates retail sales of tangible personal property, digital property, or services, regardless of ownership or control of the tangible personal property, digital property, or services, that are the subject of the retail sale;
        5. Provides software development or research and development activities related to any activity described in this subparagraph, if the software development or research and development activities are directly related to the physical or electronic marketplace provided by a marketplace provider;
        6. Provides or offers fulfillment or storage services for a marketplace retailer;
        7. Sets prices for a marketplace retailer’s sale of tangible personal property, digital property, or services;
        8. Provides or offers customer service to a marketplace retailer or a marketplace retailer’s customers, or accepts or assists with taking orders, returns, or exchanges of tangible personal property, digital property, or services sold by a marketplace retailer; or
        9. Brands or otherwise identifies sales as those of the marketplace provider; and
      2. The person directly or indirectly:
        1. Collects the sales price or purchase price of a retail sale of tangible personal property, digital property, or services;
        2. Provides payment processing services for a retail sale of tangible personal property, digital property, or services;
        3. Through terms and conditions, agreements, or arrangements with a third party, collects payment in connection with a retail sale of tangible personal property, digital property, or services from a purchaser and transmits that payment to the marketplace retailer, regardless of whether the person collecting and transmitting the payment receives compensation or other consideration in exchange for the service; or
        4. Provides a virtual currency that purchasers are allowed or required to use to purchase tangible personal property, digital property, or services.
    2. “Marketplace provider” includes but is not limited to a person that satisfies the requirements of this subsection through the ownership, operation, or control of a digital distribution service, digital distribution platform, online portal, or application store;
  10. “Marketplace retailer” means a seller that makes retail sales through any marketplace owned, operated, or controlled by a marketplace provider;
    1. “Occasional sale” includes: (24) (a) “Occasional sale” includes:
      1. A sale of tangible personal property or digital property not held or used by a seller in the course of an activity for which he or she is required to hold a seller’s permit, provided such sale is not one (1) of a series of sales sufficient in number, scope, and character to constitute an activity requiring the holding of a seller’s permit. In the case of the sale of the entire, or a substantial portion of the nonretail assets of the seller, the number of previous sales of similar assets shall be disregarded in determining whether or not the current sale or sales shall qualify as an occasional sale; or
      2. Any transfer of all or substantially all the tangible personal property or digital property held or used by a person in the course of such an activity when after such transfer the real or ultimate ownership of such property is substantially similar to that which existed before such transfer.
    2. For the purposes of this subsection, stockholders, bondholders, partners, or other persons holding an interest in a corporation or other entity are regarded as having the “real or ultimate ownership” of the tangible personal property or digital property of such corporation or other entity;
    1. “Other direct mail” means any direct mail that is not advertising and promotional direct mail, regardless of whether advertising and promotional direct mail is included in the same mailing. (25) (a) “Other direct mail” means any direct mail that is not advertising and promotional direct mail, regardless of whether advertising and promotional direct mail is included in the same mailing.
    2. “Other direct mail” includes but is not limited to:
      1. Transactional direct mail that contains personal information specific to the addressee, including but not limited to invoices, bills, statements of account, and payroll advices;
      2. Any legally required mailings, including but not limited to privacy notices, tax reports, and stockholder reports; and
      3. Other nonpromotional direct mail delivered to existing or former shareholders, customers, employees, or agents, including but not limited to newsletters and informational pieces.
    3. “Other direct mail” does not include the development of billing information or the provision of any data processing service that is more than incidental to the production of printed material;
  11. “Person” includes any individual, firm, copartnership, joint venture, association, social club, fraternal organization, corporation, estate, trust, business trust, receiver, trustee, syndicate, cooperative, assignee, governmental unit or agency, or any other group or combination acting as a unit;
  12. “Permanent,” as the term applies to digital property, means perpetual or for an indefinite or unspecified length of time;
  13. “Plant facility” means a single location that is exclusively dedicated to manufacturing or industrial processing activities. A location shall be deemed to be exclusively dedicated to manufacturing or industrial processing activities even if retail sales are made there, provided that the retail sales are incidental to the manufacturing or industrial processing activities occurring at the location. The term “plant facility” shall not include any restaurant, grocery store, shopping center, or other retail establishment;
    1. “Prewritten computer software” means: (29) (a) “Prewritten computer software” means:
      1. Computer software, including prewritten upgrades, that are not designed and developed by the author or other creator to the specifications of a specific purchaser;
      2. Software designed and developed by the author or other creator to the specifications of a specific purchaser when it is sold to a person other than the original purchaser; or
      3. Any portion of prewritten computer software that is modified or enhanced in any manner, where the modification or enhancement is designed and developed to the specifications of a specific purchaser, unless there is a reasonable, separately stated charge on an invoice or other statement of the price to the purchaser for the modification or enhancement.
    2. When a person modifies or enhances computer software of which the person is not the author or creator, the person shall be deemed to be the author or creator only of the modifications or enhancements the person actually made.
    3. The combining of two (2) or more prewritten computer software programs or portions thereof does not cause the combination to be other than prewritten computer software;
    1. “Purchase” means any transfer of title or possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner or by any means whatsoever, of: (30) (a) “Purchase” means any transfer of title or possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner or by any means whatsoever, of:
      1. Tangible personal property;
      2. An extended warranty service;
      3. Digital property transferred electronically; or
      4. Services included in KRS 139.200 ;
    2. “Purchase” includes:
      1. When performed outside this state or when the customer gives a resale certificate, the producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting;
      2. A transaction whereby the possession of tangible personal property or digital property is transferred but the seller retains the title as security for the payment of the price; and
      3. A transfer for a consideration of the title or possession of tangible personal property or digital property which has been produced, fabricated, or printed to the special order of the customer, or of any publication;
  14. “Recycled materials” means materials which have been recovered or diverted from the solid waste stream and reused or returned to use in the form of raw materials or products;
  15. “Recycling purposes” means those activities undertaken in which materials that would otherwise become solid waste are collected, separated, or processed in order to be reused or returned to use in the form of raw materials or products;
  16. “Remote retailer” means a retailer with no physical presence in this state;
    1. “Repair, replacement, or spare parts” means any tangible personal property used to maintain, restore, mend, or repair machinery or equipment. (34) (a) “Repair, replacement, or spare parts” means any tangible personal property used to maintain, restore, mend, or repair machinery or equipment.
    2. “Repair, replacement, or spare parts” does not include machine oils, grease, or industrial tools;
    1. “Retailer” means: (35) (a) “Retailer” means:
      1. Every person engaged in the business of making retail sales of tangible personal property, digital property, or furnishing any services in a retail sale included in KRS 139.200 ;
      2. Every person engaged in the business of making sales at auction of tangible personal property or digital property owned by the person or others for storage, use or other consumption, except as provided in paragraph (c) of this subsection;
      3. Every person making more than two (2) retail sales of tangible personal property, digital property, or services included in KRS 139.200 during any twelve (12) month period, including sales made in the capacity of assignee for the benefit of creditors, or receiver or trustee in bankruptcy;
      4. Any person conducting a race meeting under the provision of KRS Chapter 230, with respect to horses which are claimed during the meeting.
    2. When the department determines that it is necessary for the efficient administration of this chapter to regard any salesmen, representatives, peddlers, or canvassers as the agents of the dealers, distributors, supervisors or employers under whom they operate or from whom they obtain the tangible personal property, digital property, or services sold by them, irrespective of whether they are making sales on their own behalf or on behalf of the dealers, distributors, supervisors or employers, the department may so regard them and may regard the dealers, distributors, supervisors or employers as retailers for purposes of this chapter.
      1. Any person making sales at a charitable auction for a qualifying entity shall not be a retailer for purposes of the sales made at the charitable auction if: (c) 1. Any person making sales at a charitable auction for a qualifying entity shall not be a retailer for purposes of the sales made at the charitable auction if:
        1. The qualifying entity, not the person making sales at the auction, is sponsoring the auction;
        2. The purchaser of tangible personal property at the auction directly pays the qualifying entity sponsoring the auction for the property and not the person making the sales at the auction; and
        3. The qualifying entity, not the person making sales at the auction, is responsible for the collection, control, and disbursement of the auction proceeds.
      2. If the conditions set forth in subparagraph 1. of this paragraph are met, the qualifying entity sponsoring the auction shall be the retailer for purposes of the sales made at the charitable auction.
      3. For purposes of this paragraph, “qualifying entity” means a resident:
        1. Church;
        2. School;
        3. Civic club; or
        4. Any other nonprofit charitable, religious, or educational organization;
  17. “Retail sale” means any sale, lease, or rental for any purpose other than resale, sublease, or subrent;
    1. “Ringtones” means digitized sound files that are downloaded onto a device and that may be used to alert the customer with respect to a communication. (37) (a) “Ringtones” means digitized sound files that are downloaded onto a device and that may be used to alert the customer with respect to a communication.
    2. “Ringtones” shall not include ringback tones or other digital files that are not stored on the purchaser’s communications device;
    1. “Sale” means: (38) (a) “Sale” means:
      1. The furnishing of any services included in KRS 139.200 ;
      2. Any transfer of title or possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner or by any means whatsoever, of:
        1. Tangible personal property; or
        2. Digital property transferred electronically;
    2. “Sale” includes but is not limited to:
      1. The producing, fabricating, processing, printing, or imprinting of tangible personal property or digital property for a consideration for purchasers who furnish, either directly or indirectly, the materials used in the producing, fabricating, processing, printing, or imprinting;
      2. A transaction whereby the possession of tangible personal property or digital property is transferred, but the seller retains the title as security for the payment of the price; and
      3. A transfer for a consideration of the title or possession of tangible personal property or digital property which has been produced, fabricated, or printed to the special order of the purchaser.
    3. This definition shall apply regardless of the classification of a transaction under generally accepted accounting principles, the Internal Revenue Code, or other provisions of federal, state, or local law;
  18. “Seller” includes every person engaged in the business of selling tangible personal property, digital property, or services of a kind, the gross receipts from the retail sale of which are required to be included in the measure of the sales tax, and every person engaged in making sales for resale;
    1. “Storage” includes any keeping or retention in this state for any purpose except sale in the regular course of business or subsequent use solely outside this state of tangible personal property or digital property purchased from a retailer. (40) (a) “Storage” includes any keeping or retention in this state for any purpose except sale in the regular course of business or subsequent use solely outside this state of tangible personal property or digital property purchased from a retailer.
    2. “Storage” does not include the keeping, retaining, or exercising any right or power over tangible personal property for the purpose of subsequently transporting it outside the state for use thereafter solely outside the state, or for the purpose of being processed, fabricated, or manufactured into, attached to, or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state;
  19. “Tangible personal property” means personal property which may be seen, weighed, measured, felt, or touched, or which is in any other manner perceptible to the senses and includes natural, artificial, and mixed gas, electricity, water, steam, and prewritten computer software;
  20. “Taxpayer” means any person liable for tax under this chapter;
  21. “Transferred electronically” means accessed or obtained by the purchaser by means other than tangible storage media; and
    1. “Use” includes the exercise of: (44) (a) “Use” includes the exercise of:
      1. Any right or power over tangible personal property or digital property incident to the ownership of that property, or by any transaction in which possession is given, or by any transaction involving digital property where the right of access is granted; or
      2. Any right or power to benefit from extended warranty services.
    2. “Use” does not include the keeping, retaining, or exercising any right or power over tangible personal property or digital property for the purpose of:
      1. Selling tangible personal property or digital property in the regular course of business; or
      2. Subsequently transporting tangible personal property outside the state for use thereafter solely outside the state, or for the purpose of being processed, fabricated, or manufactured into, attached to, or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state.

regardless of whether the fee paid is per use or in any other form, including but not limited to an initiation fee, monthly fee, membership fee, or combination thereof.

for a consideration.

for a consideration.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 1, effective February 5, 1960; 2008, ch. 95, § 4, effective August 1, 2008; 2009, ch. 73, § 1, effective July 1, 2009; 2009, ch. 86, § 13, effective August 1, 2009; 2011, ch. 33, § 1, effective July 1, 2011; 2018 ch. 171, § 36, effective April 14, 2018; 2018 ch. 207, § 36, effective April 27, 2018; 2019 ch. 151, § 19, effective June 27, 2019; 2020 ch. 91, § 34, effective August 1, 2020.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 19 of that Act apply to transactions occurring on or after July I, 2019.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(8/1/2009). The Reviser of Statutes has altered the numbering of subsection (26) of this statute from the way it appeared in 2009 Ky. Acts ch. 73, sec. 1 under the authority of KRS 7.136(1)(c).

NOTES TO DECISIONS

The “activity” referred to is the activity of selling goods. Commonwealth ex rel. Luckett v. Revday Industries, Inc., 432 S.W.2d 819, 1968 Ky. LEXIS 359 ( Ky. 1968 ).

The word “activity” should be construed narrowly. Commonwealth ex rel. Luckett v. Revday Industries, Inc., 432 S.W.2d 819, 1968 Ky. LEXIS 359 ( Ky. 1968 ).

While manufacturing may have a relation to selling it is not a part of the activity of selling. Commonwealth ex rel. Luckett v. Revday Industries, Inc., 432 S.W.2d 819, 1968 Ky. LEXIS 359 ( Ky. 1968 ).

On a sale of the entire assets of a business which has been engaged in manufacturing a product and selling it at retail, the Kentucky sales tax is not applicable to the sale of that portion of the assets consisting of manufacturing equipment. Commonwealth ex rel. Luckett v. Revday Industries, Inc., 432 S.W.2d 819, 1968 Ky. LEXIS 359 ( Ky. 1968 ).

Occasional sale exemption was not intended to apply to the taxpayer’s leasing of equipment to sister corporations, which occurred frequently and continuously over several years. Revenue Cabinet v. Lwd, Inc., 2001 Ky. App. LEXIS 1495 (Ky. Ct. App. Nov. 30, 2001), sub. op., 2002 Ky. App. LEXIS 503 (Ky. Ct. App. Mar. 15, 2002).

A sale of property held or used in that part of the seller’s business for which he must have a seller’s permit is not exempt. Commonwealth ex rel. Luckett v. Revday Industries, Inc., 432 S.W.2d 819, 1968 Ky. LEXIS 359 ( Ky. 1968 ).

One of the important circumstances in construing the word “manufacturing” as used in a tax-exemption statute is the apparent objective of the Legislature in enacting it. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

It is not the number of processes or the various kinds of treatment through which the alleged manufactured article is subjected that determines the question of whether or not it is a manufacturing process, but rather the character and kind of article that is produced, after being subjected, that is the decisive factor. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

Items consisting primarily of repair and replacement parts from machinery used in industrial processing and producing of scrap material for resale were not exempt from the sales and use tax under Regulation No. SU-5 of the Department of Revenue, as the regulation did not use the word “parts,” the things specifically mentioned in the regulation were not in the category of a part, and machines themselves and replacements for them were not exempt except original machines for new and expanded industry. Mansbach Metal Co. v. Commonwealth, Dep't of Revenue, 521 S.W.2d 85, 1975 Ky. LEXIS 151 ( Ky. 1975 ) (decided under prior law).

Gasoline sold as fuel for motor boats is not subject to the use or sales taxes. Commonwealth ex rel. Ross v. Lee's Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ).

Semitrailers are treated as one unit with the truck tractor which pulls them and, accordingly, are motor vehicles exempted from the sales tax. Department of Revenue ex rel. Carpenter v. Pullman, Inc. (Trailmobile Div.), 560 S.W.2d 18, 1977 Ky. App. LEXIS 875 (Ky. Ct. App. 1977).

Gross receipts which an automobile dealer received from the purchaser of new motor vehicles for undercoating or a “full protection package” were not subject to sales tax. Revenue Cabinet v. Mountain Ford, 875 S.W.2d 903, 1994 Ky. App. LEXIS 20 (Ky. Ct. App. 1994).

In order to qualify for an exemption from sales and use tax under the statute, the machinery must be used directly in a manufacturing or processing production process and the machinery must be installed in a plant facility. Revenue Cabinet v. Kentucky-American Water Co., 997 S.W.2d 2, 1999 Ky. LEXIS 54 ( Ky. 1999 ), sub. op., modified, 1999 Ky. LEXIS 99 (Ky. Aug. 26, 1999).

The exemption from the sales tax of machinery used in manufacturing is not arbitrary and unreasonable because it does not equally exempt similar machinery used in a service industry or plant. Department of Revenue v. Spalding Laundry & Dry Cleaning Co., 436 S.W.2d 522, 1968 Ky. LEXIS 184 ( Ky. 1968 ).

The ultimate purpose of the exemption for machinery used in new manufacturing processes is to enhance the competitive position of this state as against other states in encouraging the location and expansion of the industries whose manufacturing processes require volume employment of people. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

System used to convey empty bottles from loading point to bottling lines in distillery was “machinery used directly in the manufacturing process” and, as such, was exempt from sales and use taxes. Schenley Distillers, Inc. v. Commonwealth, 467 S.W.2d 598, 1971 Ky. LEXIS 391 ( Ky. 1971 ).

A storage bin was machinery for new and expanded industry directly used in the process of manufacturing asphalt and was therefore exempt from the sales and use tax as was pollution control equipment since without it bituminous asphalt could not be manufactured at all. Department of Revenue v. State Contracting & Stone Co., 559 S.W.2d 166, 1977 Ky. App. LEXIS 859 (Ky. Ct. App. 1977).

Machinery used to process and reconstitute used drums is machinery used directly in a manufacturing process and, thus, is exempt from sales and use tax. Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ).

Where the main function of a computer was to receive data placed on prepunched cards by the workers, process the data and release information and instructions designed to assist the plant personnel in performing their duties and it did not participate in any way in the physical production of transformers, it was not machinery used directly in the manufacturing process and was not exempt from sales tax. Commonwealth, Dep't of Revenue v. Kuhlman Corp., 564 S.W.2d 14, 1978 Ky. LEXIS 347 ( Ky. 1978 ).

Pollution control equipment is indispensable to the operation of a limestone “crusher,” which is directly engaged in manufacturing asphalt, and is mandated by federal law and regulations; therefore, it is exempt. Department of Revenue v. State Contracting & Stone Co., 572 S.W.2d 421, 1978 Ky. LEXIS 398 ( Ky. 1978 ).

Certain pieces of equipment used by a foreign corporation that provided various services to businesses engaged in extraction of oil and gas did not qualify for exemption from use taxes as “machinery for new and expanded industry”; the corporation did not produce a marketable commodity and its machinery was not “incorporated” at any facility that extracted oil and gas. Nowsco Well Service v. Revenue Cabinet Commonwealth, 804 S.W.2d 10, 1990 Ky. App. LEXIS 182 (Ky. Ct. App. 1990).

Photograph processing equipment installed in camera stores was exempt from sales tax as the equipment was installed in a “plant facility”; that term is not properly construed as a narrow term of limitation which requires that the machinery be installed at a single permanent location used almost exclusively for industrial manufacturing or processing, which would exclude primarily retail business locations. Camera Ctr., Inc. v. Revenue Cabinet, 34 S.W.3d 39, 2000 Ky. LEXIS 110 ( Ky. 2000 ).

Materials and supplies having a useful life of less than a year which were used in the operation, maintenance and repair of machinery were not exempt from the sales and use tax where the materials and supplies consisted basically of nonexempt replacement parts for machinery which was not exempt. Mansbach Metal Co. v. Commonwealth, Dep't of Revenue, 521 S.W.2d 85, 1975 Ky. LEXIS 151 ( Ky. 1975 ).

Where in manufacturing venture, the fabrication of blooms, no two were alike because each purchaser formulated its own specifications to suit a particular purpose and thus this created a problem regarding spare or replacement parts would also be unique to a given bloom caster and first spares were not to be utilized after others had worn out following installation of the bloom caster, but were necessary to make it operational in the first instance and if they were not purchased when the caster was originally purchased, in all probability not only would it not be operating, it would not even be operational for initial installation and testing. Thus, these first spares were “appurtenant equipment necessary to the completed installation” and as such, were exempt from sales and use tax. Revenue Cabinet Commonwealth v. Armco, Inc., 838 S.W.2d 396, 1992 Ky. App. LEXIS 69 (Ky. Ct. App. 1992).

A scoop loader used to load limestone onto trucks for the use of an asphalt company and its customers was subject to the sales and use tax since it was used primarily for the physical transfer of material from one place to another. Department of Revenue v. State Contracting & Stone Co., 559 S.W.2d 166, 1977 Ky. App. LEXIS 859 (Ky. Ct. App. 1977).

Contested machinery constituted equipment used at sawmill to carry logs to the conveyors and to transfer the lumber to the drying sheds, and was essential to the total process of manufacturing; all the items were therefore exempt as being “directly used in the manufacturing process.” Ross v. Greene & Webb Lumber Co., 567 S.W.2d 302, 1978 Ky. LEXIS 368 ( Ky. 1978 ).

Where the mining company used an underground scoop powered by batteries which moved loosened coal to an exterior stockpile area, and the scoop required three (3) complete sets of batteries, each of which is used for approximately three (3) hours while the other two (2) were being recharged, all three (3) sets of batteries and the battery charger were used “directly” in the extraction of coal and therefore were exempt from the sales and use taxes as machinery for a new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

The roof bolter which was used by the mining company to help support the roof of one excavated area so that more coal could be mined in that area was an indispensable part of the mining process since additional coal could not be mined without support for the roof of previously mined areas; therefore, the roof bolter was within the exemption under KRS 139.480 from sales and use taxes for machinery for new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

Reclamation machinery and equipment are part and parcel of the process of extraction of minerals, ores, coal, clay, stone and natural gas; therefore, such machinery and equipment is exempt from the sales and use taxes as machinery for a new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

Since construction company purchased pieces of equipment in order to expand its road paving business and not as replacement equipment, and where asphalt generated by company’s plant was used exclusively by company, and where no other paving company supported the circuit court and Tax Board’s ruling that construction company’s business was an “integrated enterprise,” the equipment was exempt. Revenue Cabinet of Kentucky v. Carpenter Constr. Co., 763 S.W.2d 130, 1988 Ky. App. LEXIS 106 (Ky. Ct. App. 1988).

Television broadcasting is not a manufacturing process. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

Chemical used to clean evaporator tubes which converted distiller’s “slop” into a cattle and chicken feed product was a material directly used in manufacturing process and was, consequently, exempt from sales and use tax. Schenley Distillers, Inc. v. Commonwealth, 467 S.W.2d 598, 1971 Ky. LEXIS 391 ( Ky. 1971 ).

Limiting the definition of manufacturing to a process that transforms the article into a new and different article having a distinctive name, character or use is too restrictive. Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ).

The definition of a manufacturing process is that material having no commercial value for its intended use before processing has appreciable commercial value for its intended use after processing by the machinery. Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ); Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

A process which involves a material having commercial value for its intended use, that merely upgrades the material so as to increase the value, obviously would not be manufacturing. Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ).

Contested machinery constituted equipment used at sawmill to carry logs to the conveyors and to transfer the lumber to the drying sheds, and was essential to the total process of manufacturing; all the items were therefore exempt as being “directly used in the manufacturing process.” Ross v. Greene & Webb Lumber Co., 567 S.W.2d 302, 1978 Ky. LEXIS 368 ( Ky. 1978 ).

The manufacturing process in a sawmill begins when the logs are taken from the stacks and moved onto the conveyor and ends after the lumber is air-dried so that it is marketable, so that, under the “integrated plant” theory, the whole procedure in the operation of the sawmill constituted manufacturing. Ross v. Greene & Webb Lumber Co., 567 S.W.2d 302, 1978 Ky. LEXIS 368 ( Ky. 1978 ).

Hot-mix storage bins are used “directly in the manufacturing process” of asphalt and are exempt from the Kentucky sales and use tax as machinery for new and expanded industry. Department of Revenue v. State Contracting & Stone Co., 572 S.W.2d 421, 1978 Ky. LEXIS 398 ( Ky. 1978 ).

Machinery used in procedures essential to the total process of manufacturing are used directly in the manufacturing process, and are thus exempt from sales and use taxes. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

A water distribution system from a water treatment plant to private consumers was not part of an integrated plant manufacturing process and, therefore, the water company was not entitled to a sales and use tax exemption. Revenue Cabinet v. Kentucky-American Water Co., 997 S.W.2d 2, 1999 Ky. LEXIS 54 ( Ky. 1999 ), sub. op., modified, 1999 Ky. LEXIS 99 (Ky. Aug. 26, 1999).

The one time nonrecurring bulk sale, liquidation and dissolution by a retail cigarette vendor of its own entire business assets was not an “occasional sale” under this section and was subject to the retail sales tax under KRS 139.200 . George Wohrley, Inc. v. Commonwealth, Dep't of Revenue, 495 S.W.2d 173, 1973 Ky. LEXIS 390 ( Ky. 1973 ).

The exemption for an “occasional sale” did not apply to three going-out-of-business sales where there were seven (7) of such sales; the fact that five (5) of these sales were not subject to sales tax in no wise limited them from being counted as transactions in which the title and possession passed to the buyers. Revenue Cabinet, Commonwealth v. Corum & Co., 700 S.W.2d 417, 1985 Ky. App. LEXIS 650 (Ky. Ct. App. 1985).

Corporation that leased equipment to sister corporations was not entitled to the occasional sale exemption from the sales and use tax as its activities constituted transactions that occurred frequently and continuously over several years. Revenue Cabinet v. LWD, Inc., 2002 Ky. App. LEXIS 503 (Ky. Ct. App. Mar. 15, 2002), aff'd, 136 S.W.3d 472, 2004 Ky. LEXIS 145 ( Ky. 2004 ).

Corporations’ multiple, continuous, and ongoing leasing of equipment to its sister corporations was not an occasional sale under former KRS 139.070(1)(b), and was not exempt from the Kentucky sales tax; such an interpretation would be contrary to the legislature’s intent as it would exempt both the purchase for resale and the lease exempt from taxation. LWD Equip., Inc. v. Revenue Cabinet, 136 S.W.3d 472, 2004 Ky. LEXIS 145 ( Ky. 2004 ).

Where a foreign corporation engaged in the business of general contracting entered upon a construction project in this state which involved moving substantial items of equipment here and which were sold when no longer required for use by the company, the contractor was a “retailer” as defined by this section and such sales were subject to imposition of a sales tax under KRS 139.200 . Gust K. Newburg Constr. Co. v. Commonwealth, 516 S.W.2d 846, 1974 Ky. LEXIS 174 ( Ky. 1974 ).

Where the only evidence presented on whether a religious organization’s activities at the state fair were proselytizing and solicitation or retail sales was an affidavit by the director of sales and severance tax division stating ultimate fact that defendant engaged in retail sales and affidavit of leader of the organization that they proselytized but did not engage in sales, the facts, upon being construed against the Commonwealth under CR 56.02, precluded summary judgment for the Commonwealth, since it cannot be concluded as a matter of law that the religious organization was engaged in selling at retail under former KRS 139.100 to KRS 139.120 . International Soc. for Krishna Consciousness, Inc. v. Commonwealth, 610 S.W.2d 910, 1980 Ky. App. LEXIS 406 (Ky. Ct. App. 1980).

Where the only evidence presented on whether a religious organization’s activities at the state fair were proselytizing and solicitation or retail sales was an affidavit by the director of sales and severance tax division stating ultimate fact that defendant engaged in retail sales and affidavit of leader of the organization that they proselytized but did not engage in sales, the facts, upon being construed against the Commonwealth under CR 56.02, precluded summary judgment for the Commonwealth, since it cannot be concluded as a matter of law that the religious organization was engaged in selling at retail under former KRS 139.100 to KRS 139.120 . International Soc. for Krishna Consciousness, Inc. v. Commonwealth, 610 S.W.2d 910, 1980 Ky. App. LEXIS 406 (Ky. Ct. App. 1980).

Sales conducted in a going-out-of-business process are “retail sales” and are subject to sales tax. Revenue Cabinet, Commonwealth v. Corum & Co., 700 S.W.2d 417, 1985 Ky. App. LEXIS 650 (Ky. Ct. App. 1985).

In an action against a tavern for failure to collect and remit a sales tax on admission fees, the tavern failed to meet its burden of proving it was not a place of entertainment whose admission fees were subject to the sales tax where the tavern played music over a loudspeaker, provided a dance floor, and featured television sets, video games and foosball games. J. Sutter's Mill, Inc. v. Revenue Cabinet, Commonwealth, 793 S.W.2d 838, 1990 Ky. App. LEXIS 54 (Ky. Ct. App. 1990).

Substantial evidence supported the determination of the Kentucky Board of Tax Appeals that parts and supplies provided by a taxpayer to customers under maintenance agreements for office equipment constituted a retail sale pursuant to former KRS 139.100 and KRS 139.120(1), such that sales tax was to be charged to the customers under KRS 139.200 rather than having a use tax charged to the taxpayer under former KRS 139.190 . Fin. & Admin. Cabinet v. Duplicator Sales & Serv., 2007 Ky. App. LEXIS 287 (Ky. Ct. App.), sub. op., 2007 Ky. App. Unpub. LEXIS 478 (Ky. Ct. App. Aug. 17, 2007).

Where soft drink bottles and cases were delivered and sold by a soft drink company to its dealers for resale by them, the transaction was not a retail sale and hence was exempt from sales tax. Coca--Cola Bottling Works Co., Div. of Coca--Cola Bottling Corp. v. Kentucky Dep't of Revenue, 517 S.W.2d 746, 1974 Ky. LEXIS 37 ( Ky. 1974 ).

Though a hotel’s guests paid a sales tax on the room rental charges and the price of meals, the hotel could not avoid payment of use taxes on items of personal property purchased for use in connection with the renting of rooms and the selling of meals on the theory that the hotel acquired the property for resale to its customers who were the ultimate users. Kentucky Board of Tax Appeals v. Brown Hotel Co., 528 S.W.2d 715, 1975 Ky. LEXIS 83 ( Ky. 1975 ).

The sales and use tax law is designed to tax the gross receipts from sales of “tangible personal property”; it is not designed to tax services, with the exception of specified situations enumerated in former KRS 139.100(2). Revenue Cabinet v. Corum & Edwards, Inc., 673 S.W.2d 736, 1984 Ky. App. LEXIS 559 (Ky. Ct. App. 1984).

Where defendant taxpayer, in the business of manufacturing, marketing, and servicing coal mining equipment, conducted a “Component Exchange Program” (CEP), available to any customer who has purchased its mining equipment, under which taxpayer charged sales tax on the parts involved in the CEP, but did not charge sales tax on the labor, since the essential elements of the transaction in the CEP appear to be the labor and materials involved in repairing the inoperative (replaced) component, there being no charge for the exchanged (replacement) piece of equipment, and since this program involves substantial services rather than the transfer of tangible personal property, the taxpayer was not subject to sales and use tax on this transaction. Revenue Cabinet v. Joy Technologies, Inc., 838 S.W.2d 406, 1992 Ky. App. LEXIS 95 (Ky. Ct. App. 1992).

Bullion coins fall within the meaning of the definition of tangible property; hence, a retail sale of such coins is a transaction to which the sales tax applies. Revenue Cabinet Kentucky v. Saylor, 738 S.W.2d 426, 1987 Ky. App. LEXIS 585 (Ky. Ct. App. 1987).

It may be generally said that delivery charges rendered after passage of title are not “services that are a part of the sale” within the meaning of the sales and use tax law. Revenue Cabinet v. Corum & Edwards, Inc., 673 S.W.2d 736, 1984 Ky. App. LEXIS 559 (Ky. Ct. App. 1984).

“Zone charges” and “trip charges” (two different categories of delivery charges) exacted by defendant manufacturer in its business of selling ready-mix concrete were not gross receipts from sales of personal property and therefore were not subject to taxation under the sales and use tax law. Revenue Cabinet v. Corum & Edwards, Inc., 673 S.W.2d 736, 1984 Ky. App. LEXIS 559 (Ky. Ct. App. 1984).

George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ).

Opinions of Attorney General.

There is no provision in this chapter exempting building materials and supplies sold to educational institutions or school boards from the tax imposed herein. OAG 60-817 .

A water company’s receipts from charges made on a city for the privilege of connecting fire hoses to hydrants would not be subject to tax under this chapter. OAG 61-694 .

The exemption from sales tax to a charitable organization is limited to an organization whose function is purely charitable within the meaning of Const., § 170 and the cases decided thereunder. OAG 61-1097 .

There is no exemption to a church under the sales tax. OAG 61-1097 .

Library districts organized under KRS 173.470 or 173.720 are not exempt from the payment of the tax imposed by this chapter. OAG 68-241 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

139.020. Appropriation of tax receipts. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 1, Art. II, § 1; 1968, ch. 40, part I, § 1) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.025. Regulations providing for use of tax basis other than accrual.

The department may promulgate administrative regulations providing for the reporting of gross receipts and payment of taxes levied by this chapter on a basis other than accrual.

History. Enact. Acts 1990, ch. 163, § 1, effective July 13, 1990; 2005, ch. 85, § 407, effective June 20, 2005; 2008, ch. 95, § 5, effective August 1, 2008.

139.030. Construction of chapter. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 2, effective February 5, 1960) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

Definitions and General Provisions

139.040. “Business.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art, I, § 3, effective February 5, 1960) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.050. “Gross receipts” — “Sales price.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 4; 1968, ch. 40, Part I, § 2; 1978, ch. 233, § 26, effective June 17, 1978; 1982, ch. 390, § 1, effective June 1, 1982; 1994, ch. 42, § 10, effective July 15, 1994; 1994, ch. 54, § 4, effective July 15, 1994; 1996, ch. 226, § 1, effective July 15, 1996; 2000, ch. 547, § 5, effective January 1, 2001; 2003, ch. 124, § 1, effective July 1, 2004; 2007, ch. 141, § 1, effective July 1, 2007) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.060. “In this state.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 5, effective February 5, 1960) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.070. “Occasional sale.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 6, effective February 5, 1960; 1992, ch. 361, § 6, effective July 14, 1992) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.080. “Person.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 7, effective February 5, 1960) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.090. “Purchase.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 8, effective February 5, 1960; 1985 (1st Ex. Sess.), ch. 6, part III, § 6, effective August 1, 1985) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.095. “Recycling purposes.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 12, § 45, effective February 26, 1991) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.100. “Retail sale.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 9, effective February 5, 1960; 1992, ch. 165, § 3, effective July 14, 1992; 2000, ch. 547, § 6, effective January 1, 2001; 2002, ch. 69, § 1, effective July 15, 2002; 2003, ch. 124, § 2, effective July 1, 2004) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.105. Sourcing of retail sales — Communications services, digital property, and florist wire sales.

    1. For purposes of the retailer’s obligation to pay or collect and remit the taxes imposed by KRS 65.7634 , 139.200 , and 139.310 , the retailer shall source retail sales not addressed in subsections (2), (3), and (4) of this section as follows: (1) (a) For purposes of the retailer’s obligation to pay or collect and remit the taxes imposed by KRS 65.7634 , 139.200 , and 139.310 , the retailer shall source retail sales not addressed in subsections (2), (3), and (4) of this section as follows:
      1. Over the counter. When the purchaser receives tangible personal property, digital property, or service at a business location of the retailer, the sale is sourced to that business location;
      2. Delivery to a specified address. When a purchaser or purchaser’s donee receives tangible personal property, digital property, or service at a location specified by the purchaser, the sale is sourced to that location; or
      3. Address unknown. When the retailer of a product does not know the address where the tangible personal property, digital property, or service is received, the sale is sourced to the first address listed in this paragraph that is known to the retailer:
        1. The address of the purchaser;
        2. The billing address of the purchaser;
        3. The address of the purchaser’s payment instrument; or
        4. The address from which the tangible personal property was shipped; from which the computer software delivered electronically or the digital property transferred electronically was first available for transmission by the retailer; or from which the service was provided, disregarding for these purposes any location that merely provided the actual digital transfer of the product sold.
    2. Nothing included in this subsection shall affect the obligation of a purchaser to remit use tax pursuant to KRS 139.310.
  1. The retailer shall source communications services as follows:
    1. A sale of mobile telecommunications services, other than air-ground radiotelephone service and prepaid wireless calling service, shall be sourced to the customer’s or other purchaser’s place of primary use;
    2. A sale of postpaid calling service shall be sourced to the origination point of the telecommunications signal as first identified by either the retailer’s telecommunications system or information received by the retailer from its service provider, where the system used to transport the signals is not that of the retailer;
    3. A sale of prepaid calling service or a sale of a prepaid wireless calling service shall be sourced according to the provisions of subsection (1) of this section. If the sale is of a prepaid wireless calling service and the retailer does not know the address where the service is received, the sale shall be sourced to the first of the following that is known by the retailer:
      1. The address of the customer available from the business records of the retailer;
      2. The billing address of the customer;
      3. The address from which the service was provided; or
      4. The location associated with the mobile telephone number;
    4. A sale of a private communications service shall be sourced as follows:
      1. Service for a separate charge related to a customer channel termination point shall be sourced to each level of jurisdiction in which the customer channel termination point is located.
      2. Service where all customer termination points are located entirely within one (1) jurisdiction or levels of jurisdiction is sourced in the jurisdiction in which the customer channel termination points are located.
      3. Service for segments of a channel between two (2) customer channel termination points located in different jurisdictions and which segments of channel are separately charged shall be sourced fifty percent (50%) in each level of jurisdiction in which the customer channel termination points are located.
      4. Service for segments of a channel located in more than one (1) jurisdiction or levels of jurisdiction and which segments are not separately billed shall be sourced in each jurisdiction based on the percentage determined by dividing the number of customer channel termination points in the jurisdiction by the total number of customer channel termination points;
    5. A sale of an ancillary service is sourced to the customer’s place of primary use; and
    6. A sale of other communications services:
      1. Sold on a call-by-call basis shall be sourced based on the taxing jurisdiction where the call either originates or terminates and in which the service address is also located; or
      2. Sold on a basis other than a call-by-call basis shall be sourced to the customer’s or other purchaser’s place of primary use.
  2. Florist wire sales shall be sourced in accordance with an administrative regulation promulgated by the department.
  3. Advertising and promotional direct mail and other direct mail shall be sourced as provided in KRS 139.777 .

History. Enact. Acts 2003, ch. 124, § 23, effective July 1, 2004; 2005, ch. 154, § 1, effective June 20, 2005; 2007, ch. 141, § 2, effective July 1, 2007; 2009, ch. 73, § 2, effective July 1, 2009; 2011, ch. 33, § 2, effective July 1, 2011; 2016 ch. 111, § 14, effective January 1, 2017.

Legislative Research Commission Notes.

(6/20/2005). Under KRS 7.136(1)(h), the Reviser of Statutes has corrected the capitalization and punctuation of an amendment that was made to subsection (2)(c) of this statute in 2005 Ky. Acts ch. 154, sec. 1.

139.110. “Retailer.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 10, effective February 5, 1960; 2003, ch. 124, § 3, effective July 1, 2004; 2005, ch. 85, § 408, effective June 20, 2005; 2008, ch. 132, § 7, effective August 1, 2008) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

Legislative Research Commission Notes.

(8/1/2008). Under KRS 446.260 , the repeal of this section in 2008 Ky. Acts ch. 95 prevails over its amendment in 2008 Ky. Acts ch. 132.

139.120. “Sale” — “Lease or rental.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 11, effective February 5, 1960; 1985 (1st Ex. Sess.), ch. 6, part III, § 7, effective August 1, 1985; 2003, ch. 124, § 4, effective July 1, 2004) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.125. Procurement, processing or distribution of blood or human tissue deemed service and not sale.

The procurement, processing, distribution or use of whole blood, plasma, blood products, blood derivatives and other human tissues such as corneas, bones or organs for the purpose of injecting, transfusing or transplanting any of them into the human body is declared to be, for all purposes, the rendition of a service by every person participating therein and, whether or not any remuneration is paid therefor, is declared not to be a sale of such whole blood, plasma, blood products, blood derivatives or other tissues, for any purpose, subsequent to enactment of this section.

History. Enact. Acts 1968, ch. 85, § 1.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Purpose.
  3. Construction.
  4. Product Liability.
  5. Tax Exemptions.
1. Constitutionality.

This section is not unconstitutional under §§ 27, 28, 59, and 109 of the Kentucky Constitution. McKee v. Cutter Laboratories, Inc., 866 F.2d 219, 1989 U.S. App. LEXIS 722 (6th Cir. Ky. 1989 ).

An action for strict product liability was not established in Kentucky when its constitution was adopted in 1891 and that such an action is not preserved without limitation by §§ 14, 26, 54, and 241 of the Kentucky Constitution. Therefore, this section, which is a bar to strict liability actions for blood and blood products transactions, does not violate these constitutional provisions. McKee v. Cutter Laboratories, Inc., 866 F.2d 219, 1989 U.S. App. LEXIS 722 (6th Cir. Ky. 1989 ).

2. Purpose.

This Commonwealth’s blood shield statute was intended to preclude the assertion of product liability claims arising out of the sale of blood components. McKee v. Miles Laboratories, Inc., 675 F. Supp. 1060, 1987 U.S. Dist. LEXIS 12025 (E.D. Ky. 1987 ), aff'd, 866 F.2d 219, 1989 U.S. App. LEXIS 722 (6th Cir. Ky. 1989 ).

3. Construction.

The plain and unambiguous words of this section clearly state that supplying blood or blood derivatives is to be considered a service by every person participating therein. McKee v. Miles Laboratories, Inc., 675 F. Supp. 1060, 1987 U.S. Dist. LEXIS 12025 (E.D. Ky. 1987 ), aff'd, 866 F.2d 219, 1989 U.S. App. LEXIS 722 (6th Cir. Ky. 1989 ).

4. Product Liability.

Because transactions involving blood and blood components are considered services, as opposed to sales, they are outside the purview of this Commonwealth’s product liability statute. McKee v. Miles Laboratories, Inc., 675 F. Supp. 1060, 1987 U.S. Dist. LEXIS 12025 (E.D. Ky. 1987 ), aff'd, 866 F.2d 219, 1989 U.S. App. LEXIS 722 (6th Cir. Ky. 1989 ).

A blood product transaction, as the rendition of a service, bars plaintiff’s strict liability claims. McKee v. Cutter Laboratories, Inc., 866 F.2d 219, 1989 U.S. App. LEXIS 722 (6th Cir. Ky. 1989 ).

Plaintiffs’ strict liability and breach of warranty claims arising from the use of transvaginal surgical mesh were barred by Kentucky’s blood shield statute, because the mesh was processed from donated human tissue and the providers of the mesh were involved in a service not subject to a products liability action. Allen v. Coloplast Corp. (In re Coloplast Corp. Pelvic Support Sys. Prods. Liab. Litig.), 2016 U.S. Dist. LEXIS 161590 (S.D. W. Va. Nov. 22, 2016).

5. Tax Exemptions.

The plain language of this section, enacted to shield entities such as party corporation which operates two (2) plasmapheresis centers, from products liability claims, indicates that plasmapheresis and the distribution of source plasma is a service, not a sale; the blood shield statute cannot be used as a tax-avoidance sword, and exemptions claimed with regard to property described by said company as used in the manufacturing or processing of tangible personal property for sale and as containers used in packaging products for resale, do not apply. Revenue Cabinet, Commonwealth v. Plasma Alliance, Inc., 794 S.W.2d 639, 1990 Ky. App. LEXIS 60 (Ky. Ct. App. 1990).

Cited in:

McMichael v. American Red Cross, 532 S.W.2d 7, 1975 Ky. LEXIS 21 ( Ky. 1975 ).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Ausness, Torts, 65 Ky. L.J. 301 (1976-77).

Kentucky Law Survey, Clark, Medical Malpractice, 65 Ky. L.J. 337 (1976-77).

Brickey, Products Liability in Kentucky: The Doctrinal Dilemma, 65 Ky. L.J. 593 (1976-77).

Northern Kentucky Law Review.

Braden, Aids: Dealing With the Plague, 19 N. Ky. L. Rev. 277 (1992).

139.130. “Sales price.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 12; 1968, ch. 40, part I, § 3; 1996, ch. 226, § 2, effective July 15, 1996) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.140. “Seller.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 13, effective February 5, 1960; 2003, ch. 124, § 5, effective July 1, 2004) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.150. “Storage.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, §§ 14, 15, effective February 5, 1960) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.160. “Tangible personal property” — “Prewritten computer software.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 16, effective February 5, 1960; 2000, ch. 547, § 7, effective January 1, 2001; 2003, ch. 124, § 6, effective July 1, 2004) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.170. Definitions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 17, effective February 5, 1960; 1976 (Ex. Sess.), ch. 7, § 1; 1991 (1st Ex. Sess.), ch. 12, § 44, effective February 26, 1991; 1994, ch. 501, § 1, effective July 15, 1994; 2001, ch. 68, § 1, effective March 15, 2001) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.180. “Taxpayer” — “Department.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 18, effective February 5, 1960; 2005, ch. 85, § 409, effective June 20, 2005) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.185. Corporate officers, managers of limited liability companies, and partners of registered limited liability partnerships personally liable.

  1. Notwithstanding any other provisions of this chapter to the contrary, the president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any corporation subject to the provisions of this chapter shall be personally and individually liable, both jointly and severally, for the taxes imposed under this chapter, and neither the corporate dissolution nor withdrawal of the corporation from the state nor the cessation of holding any corporate office shall discharge the foregoing liability of any person. The personal and individual liability shall apply to each and every person holding the corporate office at the time the taxes become or became due. No person will be personally and individually liable pursuant to this section who had no authority in the management of the business or financial affairs of the corporation at the time that the taxes imposed by this chapter become or became due. Taxes as used in this section shall include interest accrued at the rate provided by KRS 139.650 and all applicable penalties imposed under this chapter and all applicable penalties and fees imposed under KRS 131.180 , 131.410 to 131.445 , and 131.990 .
  2. Notwithstanding any other provisions of this chapter, KRS 275.150 , 362.1-306(3) or predecessor law, or 362.2-404(3) to the contrary, the managers of a limited liability company, the partners of a limited liability partnership, and the general partners of a limited liability limited partnership or any other person holding any equivalent office of a limited liability company, limited liability partnership, or limited liability limited partnership subject to the provisions of this chapter shall be personally and individually liable, both jointly and severally, for the taxes imposed under this chapter. Dissolution, withdrawal of the limited liability company, limited liability partnership, or limited liability limited partnership from the state, or the cessation of holding any office shall not discharge the liability of any person. The personal and individual liability shall apply to each and every manager of a limited liability company, partner of a limited liability partnership, and the general partners of a limited liability limited partnership at the time the taxes become or became due. No person shall be personally and individually liable under this subsection who had no authority to collect, truthfully account for, or pay over any tax imposed by this chapter at the time that the taxes imposed by this chapter become or became due. “Taxes” as used in this section shall include interest accrued at the rate provided by KRS 131.183 , all applicable penalties imposed under this chapter, and all applicable penalties and fees imposed under KRS 131.180 , 131.410 to 131.445 , and 131.990 .

History. Enact. Acts 1988, ch. 322, § 9, effective July 15, 1988; 1994, ch. 65, § 16, effective July 15, 1994; 2002, ch. 366, § 16, effective January 1, 2003; 2006, ch. 149, § 201, effective July 12, 2006.

Legislative Research Commission Notes.

(1/1/2003). The amendments made in 2002 Ky. Acts ch. 366, sec. 16, which created subsection (2) of this statute, “apply retroactively to July 15, 1994.” 2002 Ky. Acts ch. 366, sec. 19.

Research References and Practice Aids

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

Kentucky Survey Issue: Article: Personal Liability Regarding Taxation of Kentucky Corporations: Responsible Person Obligations Under the IRC and the KRS, 38 N. Ky. L. Rev. 285 (2011).

139.190. “Use.” [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 19, effective February 5, 1960) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008. For comparable provisions, see KRS 139.010 .

139.195. Definitions for KRS 139.105, 139.200, 139.215, and 139.775.

As used in KRS 139.105 , 139.200 , 139.215 , and 139.775 :

  1. “Ancillary services” means services that are associated with or incidental to the provision of telecommunications services, including caller ID services, detailed telecommunications billing, directory assistance, vertical services, conference bridging services, and voice mail services;
  2. “Air-to-ground radiotelephone service” means a radio service, as defined in 47 C.F.R. 22.99, in which common carriers are authorized to offer and provide radio telecommunications service for hire to subscribers in aircraft;
  3. “Call-by-call basis” means any method of charging for telecommunications services where the price is measured by individual calls;
  4. “Communications channel” means a physical or virtual path of communications over which signals are transmitted between or among customer channel termination points;
    1. “Communications service” means telecommunications services and ancillary services. (5) (a) “Communications service” means telecommunications services and ancillary services.
    2. “Communications service” does not include the sale of communications service to a communications provider that is buying the communications service for sale or incorporation into a communications service for sale if:
      1. The seller separately itemizes the charges for these services on the bill provided to the purchaser; or
      2. The seller can identify, by reasonable and verifiable standards, the charges for these services from its books and records kept in the regular course of business for other purposes including nontax purposes. These services include:
        1. Carrier access charges, excluding user access fees;
        2. Right of access charges;
        3. Interconnection charges paid by the provider of mobile telecommunications services or other communications providers;
        4. Charges for the sale of unbundled network elements as defined in 47 U.S.C. sec. 153(29) on January 1, 2001, to which access is provided on an unbundled basis in accordance with 47 U.S.C. sec. 251(c)(3) ; and
        5. Charges for use of facilities for providing or receiving communications service;
  5. “Conference bridging services” means an ancillary service that links two (2) or more participants of an audio or video conference call and may include the provision of a telephone number. “Conference bridging services” does not include the telecommunications services used to reach the conference bridge;
  6. “Customer” means the person or entity that contracts with the seller of communications services. If the end user of communications services is not the contracting party, the end user of the communications service is the customer of the communications service, but only as it applies to the sourcing of the sale of communications services as provided in KRS 139.105 . “Customer” does not include a reseller of communications service or a serving carrier providing mobile telecommunications service under an agreement to serve the customer outside the home service provider’s licensed service area;
  7. “Customer channel termination point” means the location where the customer or other purchaser either inputs or receives communications;
  8. “Detailed telecommunications billing service” means an ancillary service of separately stated information pertaining to individual calls on a customer’s billing statement;
  9. “Directory assistance” means an ancillary service of providing telephone number information or address information;
  10. “End user” means the person who utilized the communications service. In the case of an entity, “end user” means the individual who utilized the service on behalf of the entity;
  11. “Fixed wireless service” means a telecommunications service that provides radio communications between fixed points;
  12. “Home service provider” means the same as provided in 4 U.S.C. sec. 124(5) ;
  13. “International” means a service that originates or terminates in the United States and terminates or originates outside the United States, respectively. United States includes the District of Columbia or a United States territory or possession;
  14. “Interstate” means a service that originates in one (1) state of the United States or a United States territory or possession and terminates in a different state of the United States or United States territory or possession;
  15. “Intrastate” means a service that originates in one (1) state of the United States or a United States territory or possession and terminates in the same state of the United States or a United States territory or possession;
  16. “Mobile telecommunications service” means the same as provided in 4 U.S.C. sec. 124(7) ;
  17. “Mobile wireless service” means a telecommunications service that is transmitted, conveyed, or routed regardless of the technology used, whereby the origination and termination points or the origination or termination points of the transmission, conveyance, or routing are not fixed, including, by the way of example only, telecommunications services that are provided by a commercial mobile radio service provider;
  18. “Paging service” means a telecommunications service that provides a transmission of coded radio signals for the purpose of activating specific pagers. Such transmissions may include messages or sounds;
  19. “Pay telephone service” means a telecommunications service provided through any pay telephone;
  20. “Place of primary use” means the street address where the customer’s or other purchaser’s use of the communications service primarily occurs, and that is the residential street address or the primary business street address of the customer or other purchaser. In the case of mobile telecommunications service, “place of primary use” shall be within the licensed service area of the home service provider;
  21. “Postpaid calling service” means a telecommunications service obtained by making a payment on a call-by-call basis either through the use of a credit card or payment mechanism such as a bank card, travel card, credit card, or debit card, or by charge made to a telephone number not associated with the origination or termination of the telecommunications service. A postpaid calling service includes a telecommunications service, except a prepaid wireless calling service, that would be a prepaid service except that it is not exclusively a telecommunications service;
  22. “Prepaid calling service” means the right to access exclusively telecommunications services, which are paid for in advance and which enable the origination of calls using an access number or authorization code, whether manually or electronically dialed, and that is sold in predetermined units or dollars of which the number declines with use in a known amount;
  23. “Prepaid wireless calling service” means a telecommunications service that:
    1. Provides the right to utilize mobile wireless service as well as other nontelecommunications services, including the download of digital products delivered electronically, content, and ancillary services;
    2. Must be paid for in advance; and
    3. Is sold in predetermined units of dollars of which the number declines with use in a known amount;
  24. “Private communications service” means a telecommunications service that entitles the customer or other purchaser to exclusive or priority use of a communications channel or group of channels between or among termination points, regardless of the manner in which the channel or channels are connected, and includes switching capacity, extension lines, stations, and any other associated services that are provided in connection with the use of a channel or channels;
    1. “Service address” means the location of communications equipment to which a customer’s or other purchaser’s call is charged and from which the call originates or terminates, regardless of where the call is billed or paid. (26) (a) “Service address” means the location of communications equipment to which a customer’s or other purchaser’s call is charged and from which the call originates or terminates, regardless of where the call is billed or paid.
    2. If the location of the communications equipment is not known, “service address” means the origination point of the signal of the communications services first identified by either the seller’s communications system or in information received by the seller from its service provider, where the system used to transport the signals is not that of the seller.
    3. If the location cannot be determined according to the guidelines set forth in paragraphs (a) and (b) of this subsection, “service address” means the location of the customer’s or other purchaser’s place of primary use;
  25. “Telecommunications nonrecurring charges” means an amount billed for the installation, connection, change, or initiation of telecommunications service received by the customer;
    1. “Telecommunications service” means the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points. (28) (a) “Telecommunications service” means the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points.
    2. “Telecommunications service” includes but is not limited to:
      1. The transmission, conveyance, or routing in which computer processing applications are used to act on the form, code, or protocol of the content for purposes of transmission, conveyance, or routing without regard to whether the service is referred to as voice over Internet protocol (VOIP) services or is classified by the Federal Communications Commission as enhanced or value-added;
      2. Paging service;
      3. Telegraph and teletypewriter services;
      4. Local and long distance telephone services;
      5. Fixed wireless service;
      6. Mobile wireless service;
      7. Private communications service;
      8. Telecommunications nonrecurring charges;
      9. Value-added nonvoice data service;
      10. 800 service; and
      11. 900 service.
    3. “Telecommunications service” does not include:
      1. Data processing and information services that allow data to be generated, acquired, stored, processed, or retrieved and delivered by an electronic transmission to a purchaser where the purchaser’s primary purpose for the underlying transaction is the processed data or information;
      2. Installation or maintenance of wiring or equipment on a customer’s premises;
      3. Tangible personal property or digital property;
      4. Advertising, including but not limited to directory advertising;
      5. Billing and collection services provided to third parties;
      6. Internet access service as defined in 47 U.S.C. sec. 151 ;
      7. Radio and television audio and video programming services, regardless of the medium, including the furnishing of transmission, conveyance, and routing of such services by the programming service provider. Radio and television audio and video programming services shall include but not be limited to cable services as defined in 47 U.S.C. sec. 522(6) and audio and video programming services delivered by commercial mobile radio service providers, as defined in 47 C.F.R. 20.3;
      8. Ancillary services;
      9. Digital products delivered electronically, including but not limited to software, music, video, rating materials, or ring tones; or
      10. Telephone answering services;
  26. “Value-added nonvoice data service” means a service that otherwise meets the definition of telecommunications service in which computer processing applications are used to act on the form, content, code, or protocol of the information or data primarily for the purpose other than transmission, conveyance, or routing;
  27. “Vertical service” means an ancillary service that is offered in connection with one (1) or more telecommunications services, which offers advanced calling features that allow customers to identify callers and to manage multiple calls and call connections, including conference bridging services;
  28. “Voice mail service” means an ancillary service that enables the customer to store, send, or receive recorded messages. “Voice mail service” does not include any vertical services that the customer may be required to have in order to utilize the voice mail service;
  29. “800 service” means a telecommunications service that allows a caller to dial a toll-free number without incurring a charge for the call. The service is typically marketed under the name “800,” “855,” “866,” “877,” and “888” toll-free calling, and any subsequent numbers designated by the Federal Communications Commission; and
  30. “900 service” means an inbound toll telecommunications service purchased by a subscriber that allows the subscriber’s customers to call in to the subscriber’s prerecorded announcement or live serve. “900 service” does not include the charge for collections services provided to the seller of the telecommunications services to the subscriber, or service or product sold by the subscriber to the subscriber’s customer. The service is typically marketed under the name “900” service and any subsequent numbers designated by the Federal Communications Commission.

History. Enact. Acts 2003, ch. 124, § 8, effective July 1, 2004; 2005, ch. 168, § 126 effective January 1, 2006; 2007, ch. 141, § 3, effective July 1, 2007; 2009, ch. 73, § 3, effective July 1, 2009.

Legislative Research Commission Notes.

(7/1/2007). Under the authority of KRS 7.135(1)(h), during codification a manifest clerical or typographical error occurring in 2007 Ky. Acts ch. 141, sec. 3(1), has been corrected by changing “detailed communications billing” to “detailed telecommunications billing” to conform with definitions for that section.

Sales Tax

139.200. Imposition of sales tax.

A tax is hereby imposed upon all retailers at the rate of six percent (6%) of the gross receipts derived from:

  1. Retail sales of:
    1. Tangible personal property, regardless of the method of delivery, made within this Commonwealth; and
    2. Digital property regardless of whether:
      1. The purchaser has the right to permanently use the property;
      2. The purchaser’s right to access or retain the property is not permanent; or
      3. The purchaser’s right of use is conditioned upon continued payment; and
  2. The furnishing of the following:
    1. The rental of any room or rooms, lodgings, campsites, or accommodations furnished by any hotel, motel, inn, tourist camp, tourist cabin, campgrounds, recreational vehicle parks, or any other place in which rooms, lodgings, campsites, or accommodations are regularly furnished to transients for a consideration. The tax shall not apply to rooms, lodgings, campsites, or accommodations supplied for a continuous period of thirty (30) days or more to a person;
    2. Sewer services;
    3. The sale of admissions, except:
      1. Admissions to racetracks taxed under KRS 138.480 ;
      2. Admissions to historical sites exempt under KRS 139.482 ;
      3. Admissions taxed under KRS 229.031 ;
      4. Admissions that are charged by nonprofit educational, charitable, or religious institutions and for which an exemption is provided under KRS 139.495 ; and
      5. Admissions that are charged by nonprofit civic, governmental, or other nonprofit organizations and for which an exemption is provided under KRS 139.498 ;
    4. Prepaid calling service and prepaid wireless calling service;
    5. Intrastate, interstate, and international communications services as defined in KRS 139.195 , except the furnishing of pay telephone service as defined in KRS 139.195 ;
    6. Distribution, transmission, or transportation services for natural gas that is for storage, use, or other consumption in this state, excluding those services furnished:
      1. For natural gas that is classified as residential use as provided in KRS 139.470(7); or
      2. To a seller or reseller of natural gas;
    7. Landscaping services, including but not limited to:
      1. Lawn care and maintenance services;
      2. Tree trimming, pruning, or removal services;
      3. Landscape design and installation services;
      4. Landscape care and maintenance services; and
      5. Snow plowing or removal services;
    8. Janitorial services, including but not limited to residential and commercial cleaning services, and carpet, upholstery, and window cleaning services;
    9. Small animal veterinary services, excluding veterinary services for equine, cattle, poultry, swine, sheep, goats, llamas, alpacas, ratite birds, buffalo, and cervids;
    10. Pet care services, including but not limited to grooming and boarding services, pet sitting services, and pet obedience training services;
    11. Industrial laundry services, including but not limited to industrial uniform supply services, protective apparel supply services, and industrial mat and rug supply services;
    12. Non-coin-operated laundry and dry cleaning services;
    13. Linen supply services, including but not limited to table and bed linen supply services and nonindustrial uniform supply services;
    14. Indoor skin tanning services, including but not limited to tanning booth or tanning bed services and spray tanning services;
    15. Non-medical diet and weight reducing services;
    16. Limousine services, if a driver is provided; and
    17. Extended warranty services.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 20; 1968, ch. 40, part I, § 4; 1990, ch. 476, Pt. VII A, § 617, effective July 1, 1990; 2003, ch. 124, § 7, effective July 1, 2004; 2005, ch. 168, § 72, effective January 1, 2006; 2005, ch. 173, Pt. VI, § 2, effective June 1, 2005; 2007, ch. 141, § 4, effective July 1, 2007; 2009, ch. 73, § 4, effective July 1, 2009; 2018 ch. 171, § 37, effective April 14, 2018; 2018 ch. 207, § 37, effective April 27, 2018; 2019 ch. 151, § 20, effective June 27, 2019; 2020 ch. 91, § 42, effective August 1, 2020.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 20 of that Act apply to transactions occurring on or after July 1, 2019.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

NOTES TO DECISIONS

  1. Constitutionality.
  2. No Ambiguity.
  3. No Double Taxation.
  4. Legal Incidence on Retailer.
  5. Liquidation of Business.
  6. Nonexempt Sales.
  7. Exempt Sales.
  8. Construction Equipment.
  9. Proceeds to Out-of-State Partners.
  10. Out-of-State Purchaser.
  11. Goods Taken Out of State.
  12. Mobile Homes.
  13. Delivery Charges.
  14. Admission Fees.
  15. Collection.
  16. Automobile Undercoating.
  17. Imposition of Tax.
1. Constitutionality.

The Legislature may properly classify occupations for tax purposes based on the competitive environment in which they operate and the overall economic impact on the state economy. The different tax treatment for airlines, truck lines, barge lines, bus lines and railroad lines can be justified by their different competitive environment and their different significance to the overall state economy; the railroads and barges are critical to the marketing of Kentucky coal; the exemption for barge and rail lines can be justified as a reasonable effort to maintain the viability of transportation systems which are necessary to the state’s economy and threatened by the great competitiveness of other forms of transportation. Although similarities can be found whereby airlines, railroads and barges could be uniformly classified, there are many dissimilarities. Thus, the Legislature’s failure to provide airlines with a similar exemption does not make the application of sales tax unconstitutional. Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, 689 S.W.2d 14, 1985 Ky. LEXIS 225 ( Ky. 1985 ).

2. No Ambiguity.

The mere existence of other related sections and regulations concerning sales tax does not make this section ambiguous; KRS 139.260 creates a presumption to be used when the facts are not completely developed to support the imposition of a tax. There is no ambiguity or confusion because of KRS 139.470(1); if the revenue statute conflicts with the Kentucky or United States Constitutions, it is simply void, but it is not ambiguous. Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, 689 S.W.2d 14, 1985 Ky. LEXIS 225 ( Ky. 1985 ).

3. No Double Taxation.

If an airline pays the Kentucky sales tax on fuel it purchases in Kentucky, it would not be subjected to any additional use taxes from any other jurisdiction whose air space it might use while consuming the fuel or other items of tangible personal property; Kentucky is not imposing any tax on items consumed over Kentucky which were purchased in other states. Thus, there is no double taxation. Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, 689 S.W.2d 14, 1985 Ky. LEXIS 225 ( Ky. 1985 ).

4. Legal Incidence on Retailer.

The Legislature intended to place the legal incidence of the sales tax on the retailer, even though the economic burden might be passed on to the consumer. Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ), limited, Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ).

5. Liquidation of Business.

The one time nonrecurring bulk sale, liquidation and dissolution by a retail cigarette vendor of its own entire business assets was not an “occasional sale” under KRS 139.070 (repealed; see now KRS 139.010(15)) and was subject to the retail sales tax under this section. George Wohrley, Inc. v. Commonwealth, Dep't of Revenue, 495 S.W.2d 173, 1973 Ky. LEXIS 390 ( Ky. 1973 ).

6. Nonexempt Sales.

Materials and supplies having a useful life of less than a year which were used in the operation, maintenance and repair of machinery were not exempt from the sales and use tax where the materials and supplies consisted basically of nonexempt replacement parts for machinery which was not exempt. Mansbach Metal Co. v. Commonwealth, Dep't of Revenue, 521 S.W.2d 85, 1975 Ky. LEXIS 151 ( Ky. 1975 ).

7. Exempt Sales.

Kentucky Board of Tax Appeals properly held that the 1986 version of KRS 139.472 was neither ambiguous nor absurd and that it provided an exemption, parallel to the exemption for sales of prescription medicine, for all sales of artificial devices prescribed by a licensed physician. King Drugs, Inc. v. Commonwealth, 250 S.W.3d 643, 2008 Ky. LEXIS 98 ( Ky. 2008 ).

8. Construction Equipment.

Where a foreign corporation engaged in the business of general contracting entered upon a construction project in this state which involved moving substantial items of equipment here and which were sold when no longer required for use by the company, the contractor was a “retailer” as defined by subsection (1) of KRS 139.110 (repealed; see now KRS § 139.010(24)) and such sales were subject to imposition of a sales tax under this section. Gust K. Newburg Constr. Co. v. Commonwealth, 516 S.W.2d 846, 1974 Ky. LEXIS 174 ( Ky. 1974 ).

9. Proceeds to Out-of-State Partners.

This section and KRS 139.260 impose the five (now six) percent sales tax on the gross receipts of all retail sales. Therefore, the taxpayer’s argument that a portion of such receipts were paid to an out-of-state partner is irrelevant; as such, the Board of Tax Appeals and the circuit court erred, as a matter of law, in allowing the taxpayer to exempt sales of various personal property items from the sales and use tax on the basis that the proceeds from the sales were forwarded to out-of-state partners. Department of Revenue v. Cox Machinery Co., 650 S.W.2d 261, 1982 Ky. App. LEXIS 291 (Ky. Ct. App. 1982).

10. Out-of-State Purchaser.

Where goods were sold by a Kentucky company to an out-of-state purchaser, and the goods were shipped by a common carrier F.O.B., the seller’s place of business, the sales were exempt from the sales and use tax. Department of Revenue v. Cox Machinery Co., 650 S.W.2d 261, 1982 Ky. App. LEXIS 291 (Ky. Ct. App. 1982).

The Board of Tax Appeals erred in imposing a sales and use tax on transactions involving an out-of-state purchaser, when the machinery in question was shipped to the purchaser under a common carrier despite the fact that title passed to the out-of-state purchaser within this commonwealth. Department of Revenue v. Cox Machinery Co., 650 S.W.2d 261, 1982 Ky. App. LEXIS 291 (Ky. Ct. App. 1982).

11. Goods Taken Out of State.

The provisions of this section are imposed on retail sales and all retailers; there is nothing in the law which indicates that a retailer is relieved from collecting the tax from a purchaser because the purchaser will thereafter take the goods out of the state. Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, 689 S.W.2d 14, 1985 Ky. LEXIS 225 ( Ky. 1985 ).

12. Mobile Homes.

KRS 132.750 (now repealed), as amended in 1982, does not exempt mobile homes from the sales tax law imposed under this section. Home Folks Mobile Homes, Inc. v. Revenue Cabinet, 700 S.W.2d 75, 1985 Ky. App. LEXIS 686 (Ky. Ct. App. 1985).

13. Delivery Charges.

“Zone charges” and “trip charges” (two different categories of delivery charges) exacted by defendant manufacturer in its business of selling ready-mix concrete were not gross receipts from sales of personal property and therefore were not subject to taxation under the sales and use tax law. Revenue Cabinet v. Corum & Edwards, Inc., 673 S.W.2d 736, 1984 Ky. App. LEXIS 559 (Ky. Ct. App. 1984).

14. Admission Fees.

In an action against a tavern for failure to collect and remit a sales tax on admission fees, the tavern failed to meet its burden of proving it was not a place of entertainment whose admission fees were subject to the sales tax where the tavern played music over a loudspeaker, provided a dance floor, and featured television sets, video games and foosball games. J. Sutter's Mill, Inc. v. Revenue Cabinet, Commonwealth, 793 S.W.2d 838, 1990 Ky. App. LEXIS 54 (Ky. Ct. App. 1990).

15. Collection.

Sales tax may not be collected from the vendee/consumer after the performance of the contract under circumstances where the contract is silent as to liability. ITT Fluid Products Corp. v. Crane Co., 793 S.W.2d 844, 1990 Ky. App. LEXIS 94 (Ky. Ct. App. 1990).

The vendor/retailer, as the taxpayer, is always liable to the Commonwealth for the payment of the tax, although the tax may be passed on and collected from the vendee/consumer, but it is implied by law that the provision for collection of the taxes be provided for at the time of the transaction. ITT Fluid Products Corp. v. Crane Co., 793 S.W.2d 844, 1990 Ky. App. LEXIS 94 (Ky. Ct. App. 1990).

16. Automobile Undercoating.

Gross receipts which an automobile dealer received from the purchaser of new motor vehicles for undercoating or a “full protection package” were not subject to sales tax. Revenue Cabinet v. Mountain Ford, 875 S.W.2d 903, 1994 Ky. App. LEXIS 20 (Ky. Ct. App. 1994).

17. Imposition of Tax.

Substantial evidence supported the determination of the Kentucky Board of Tax Appeals that parts and supplies provided by a taxpayer to customers under maintenance agreements for office equipment constituted a retail sale pursuant to KRS 139.100 (repealed; see now KRS 139.010(25)) and KRS 139.120(1) (repealed; see now KRS 139.010(27)), such that sales tax was to be charged to the customers under KRS 139.200 rather than having a use tax charged to the taxpayer under KRS 139.190 (repealed; see now KRS 139.010(33)); as the customers involved in the disputed assessments that were made against the taxpayer were tax-exempt entities, pursuant to KRS 139.495(1) the assessments were deemed erroneous. Fin. & Admin. Cabinet v. Duplicator Sales & Serv., 2007 Ky. App. LEXIS 287 (Ky. Ct. App.), sub. op., 2007 Ky. App. Unpub. LEXIS 478 (Ky. Ct. App. Aug. 17, 2007).

Cited in:

George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ); Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ); Genex/London, Inc. v. Kentucky Bd. of Tax Appeals, 622 S.W.2d 499, 1981 Ky. LEXIS 275 , 31 A.L.R.4th 1194 ( Ky. 1981 ); Revenue Cabinet v. Moors Resort, Inc., 675 S.W.2d 859, 1984 Ky. App. LEXIS 562 (Ky. Ct. App. 1984); Stoner Creek Stud, Inc. v. Revenue Cabinet Commonwealth, 746 S.W.2d 73, 1987 Ky. App. LEXIS 609 (Ky. Ct. App. 1987).

Opinions of Attorney General.

The sales tax statute makes no provision for exemptions in connection with retail sales to the state, its agencies and instrumentalities, or political subdivisions, and receipts from such sales must be included in taxable gross receipts. OAG 60-542 ; 60-603.

The tax imposed by this section applies to motor vehicles licensed with the department of motor transportation as buses engaged in the transportation of persons for hire and the director of qualifications is required to collect the tax at the time when such vehicles are first qualified and licensed in this state for the transportation of persons for hire. OAG 60-981 .

Since the tax imposed by this section is a license tax upon the retailer for the privilege of engaging in the business of selling tangible personal property, and the cigarette tax imposed under KRS 138.140 is a specific excise tax which applies one time to a particular quantity of cigarettes regardless of the number of times they are sold, the application of the sales tax to the gross receipts from sales of cigarettes is not double taxation. OAG 60-1089 .

Section 184 of the Kentucky Constitution is not violated by the payment of a sales tax by a board of education since the tax is not imposed upon the board as a consumer but upon the retailer. OAG 61-908 .

One operating a nursery and greenhouse business is responsible for collecting the sales tax on sales made. OAG 61-1016 .

A county is not exempt from the tax imposed by this section. OAG 66-600 .

It is unlawful for merchants in the Commonwealth to advertise that they will either absorb or pay the sales or use tax in connection with products they advertise in newspapers throughout the state. OAG 68-164 .

Purchases made by the council of state governments from a Kentucky retailer, including telephone calls, are subject to the sales tax, except for certain transactions listed in KRS 139.470 . OAG 69-49 .

Purchases of materials by a city from Kentucky suppliers for the construction of an industrial plant were subject to the tax imposed by this section. OAG 70-168 .

Sales of candy made by students of a school to the general public are not within the educational function of the institution and are therefore subject to sales tax. OAG 74-140 .

Under this section and KRS 139.100 (now repealed) and 139.210 , a board of education is not exempt from the sales tax passed on by the retailer on sales of electric services, telephone, water, natural gas or other forms of utilities. OAG 75-71 .

Since the motor vehicle usage tax set forth in KRS 138.460 is paid by the purchaser, the sales tax does not apply to unclaimed vehicles sold at auction by city for towing and storage costs. OAG 82-287 .

Where a customer of a bank places an order for the purchase of certain gold coins which are neither owned nor held by the bank and directs the bank to place the order with a coin dealer whose place of business is out of Kentucky, where the bank places the order with the coin dealer who then forwards the coins to the bank for delivery to the customer and where the customer then pays the bank the purchase price of the coins and the bank remits to the seller the purchase price less a small commission for acting as agent in the transaction, the bank would be a retailer within the meaning of KRS 139.100 (now repealed) and would be subject to the sales tax imposed under this section in the event that the out-of-state coin dealer was not a retail permit holder under the Kentucky Sales and Use Tax Act. Since the sales tax would apply to the bank in the event that the out-of-state coin dealer was not a retail permit holder, levy of the use tax would not occur under the provisions of KRS 139.500 ; however, if the sales tax were not applicable, the bank would be liable for the use tax pursuant to KRS 139.340 . OAG 83-217 , withdrawing OAG 74-901 .

An agency subverted the intent of the Open Records Act, short of denial of inspection, by requiring a requester to pay sales tax for copies of public records in addition to the reasonable fee contemplated by KRS 61.874(3) as the provision of records under the act is not a sale of the records. OAG 99-ORD-102.

Research References and Practice Aids

Journal of Mineral Law & Policy.

Comments, The Sales Tax Exemption for Machinery for New and Expanded Industry Applied to Coal Mining After Amax Coal Company, 3 J.M.L. & P. 551 (1988).

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

139.210. Retailer’s powers to collect from purchaser — Separate display of tax — Taxes collected constitute debt to Commonwealth.

  1. Except as provided in subsection (2) of this section, the tax shall be required to be collected by the retailer from the purchaser. The tax shall be displayed separately from the sales price, the price advertised in the premises, the marked price, or other price on the sales receipt or other proof of sales.
  2. The department may relieve certain retailers from the provisions of subsection (1) of this section of separate display of the tax when the circumstances of the retailer make compliance impracticable. If the retailer establishes to the satisfaction of the department that the sales tax has been added to the total amount of the sales price and has not been absorbed by the retailer, the amount of the sales price shall be the amount received exclusive of the tax imposed.
  3. The taxes collected under this section shall be deemed to be held in trust by the retailer for and on account of the Commonwealth.
  4. The taxes to be collected under this section shall constitute a debt of the retailer to the Commonwealth.

History. Enact. Acts 1960, ch. 5, Art. I, § 21, effective February 5, 1960; 1990, ch. 137, § 1, effective July 13, 1990; 2003, ch. 124, § 9, effective July 1, 2004; 2005, ch. 85, § 410, effective June 20, 2005; 2007, ch. 141, § 5, effective July 1, 2007; 2008, ch. 95, § 6, effective August 1, 2008.

NOTES TO DECISIONS

  1. Exemption.
  2. Burden on Consumer (now “purchaser”).
  3. Goods Taken Out of State.
  4. Collection.
1. Exemption.

The Louisville Municipal Housing Commission is not exempt from paying that part of price which represents the sales tax passed on it by a utility company, for the legal incidence of the sales tax is upon the retailer and Const., § 170 does not apply. Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ), limited, Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ).

2. Burden on Consumer (now “purchaser”).

The Legislature intended to place the legal incidence of the sales tax on the retailer, even though the economic burden might be passed on to the consumer (now “purchaser”). Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ), limited, Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ).

The vendor/retailer, as the taxpayer, is always liable to the Commonwealth for the payment of the tax, although the tax may be passed on and collected from the vendee/consumer (now “purchaser”), but it is implied by law that the provision for collection of the taxes be provided for at the time of the transaction. ITT Fluid Products Corp. v. Crane Co., 793 S.W.2d 844, 1990 Ky. App. LEXIS 94 (Ky. Ct. App. 1990).

3. Goods Taken Out of State.

The provisions of KRS 139.200 are imposed on retail sales and all retailers; there is nothing in the law which indicates that a retailer is relieved from collecting the tax from a purchaser because the purchaser will thereafter take the goods out of the state. Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, 689 S.W.2d 14, 1985 Ky. LEXIS 225 ( Ky. 1985 ).

4. Collection.

Sales tax may not be collected from the vendee/consumer (now “purchaser”) after the performance of the contract under circumstances where the contract is silent as to liability. ITT Fluid Products Corp. v. Crane Co., 793 S.W.2d 844, 1990 Ky. App. LEXIS 94 (Ky. Ct. App. 1990).

Digital subscriber line services customers’ conversion claims were dismissed because the claims were not fundamentally different from those in a tax refund action that was before the state tax board of appeals. Each claim shared the common question of whether under federal and state law the state revenue department could impose, and the telecommunications provider could collect, a state tax on DSL services. Clark v. Bellsouth Telcoms., 461 F. Supp. 2d 541, 2006 U.S. Dist. LEXIS 80705 (W.D. Ky. 2006 ).

Cited in:

Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ); Luckett v. Electric & Water Plant Board, 558 S.W.2d 611, 1977 Ky. LEXIS 543 ( Ky. 1977 ); Revenue Cabinet v. Moors Resort, Inc., 675 S.W.2d 859, 1984 Ky. App. LEXIS 562 (Ky. Ct. App. 1984).

Opinions of Attorney General.

Under this section and KRS 139.100 (now repealed) and 139.200 , a board of education is not exempt from paying the sales tax passed on by the retailer on sales of electric service, telephone, water, natural gas or other forms of utilities. OAG 75-71 .

Although a sales tax would be due on tickets sold by an educational institution for athletic events, no sales tax would apply to the sale of food in cafeterias or lunchrooms which are not open to the public. OAG 76-201 .

139.215. Taxation of bundled transactions.

  1. Unless otherwise provided by federal law, the following rules shall apply to a bundled transaction, as defined in subsection (3) of this section, that includes any or all of a telecommunications service, ancillary service, Internet access, audio programming, or video programming:
    1. If the price is attributable to products that are taxable and products that are nontaxable, the portion of the price attributable to the nontaxable product is subject to tax unless the provider can identify, by reasonable and verifiable standards, the portion of the products that are nontaxable from its books and records that are kept in the regular course of business for other purposes, including nontax purposes; or
    2. If the price is attributable to products that are subject to tax at different rates, the total price shall be treated as attributable to the products subject to tax at the highest rate unless the provider can identify, by reasonable and verifiable standards, the portion of the price attributable to the products subject to tax at the lower rate from its books and records that are kept in the regular course of business for other purposes, including nontax purposes.
  2. The following rules shall apply to all bundled transactions, except as provided in subsection (1) of this section:
    1. If the price is attributable to products where taxable and exempt tangible personal property have been bundled together and sold by the retailer as a bundled transaction, the entire charge is subject to tax;
    2. If the price is attributable to products where taxable products and exempt services have been bundled together and sold by the retailer as a bundled transaction, the entire charge is subject to tax.
  3. For purposes of this section:
    1. “Bundled transaction” means the retail sale of two (2) or more products, except real property and services to real property, where:
      1. The products are otherwise distinct and identifiable; and
      2. The products are sold for one (1) nonitemized price;
    2. “Distinct and identifiable products” do not include:
      1. Packaging such as containers, boxes, sacks, bags, bottles, wrapping materials, labels, tags, or instruction guides that accompany the retail sale of the products and are incidental or immaterial to the retail sale thereof. Examples include grocery sacks, shoe boxes, dry cleaning garment bags, and express delivery envelopes and boxes.
      2. A product provided free of charge with the required purchase of another product. A product is provided free of charge if the sales price of the product purchased does not vary depending on the inclusion of the product provided free of charge; or
      3. Items included in the definition of sales price: and
    3. “One (1) nonitemized price” does not include a price that is separately identified by product on binding sales or other supporting sales-related documentation made available to the customer in paper or electronic form, including but not limited to an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, or price list.
  4. A “bundled transaction” does not include:
    1. The retail sale of any products in which the sales price varies or is negotiable, based on the selection by the purchaser of the products included in the transaction;
    2. The retail sale of tangible personal property and a service where the tangible personal property is essential to the use of the service, and is provided exclusively in connection with the service, and the true object of the transaction is the service;
    3. The retail sale of digital property and a service where the digital property is essential to the use of the service, and is provided exclusively in connection with the service, and if the true object of the transaction is the service;
    4. The retail sale of services where one (1) service is provided that is essential to the use or receipt of a second service and the first service is provided exclusively in connection with the second service and the true object of the transaction is the second service;
    5. A transaction that includes taxable products and nontaxable products if the purchase price or sales price of the taxable products is de minimis. For purposes of this section, “de minimis” means the seller’s purchase price or the sales price of the taxable products is ten percent (10%) or less of the total purchase price or sales price of the bundled products. Sellers shall use either the purchase price or the sales price of the products to determine if the taxable products are de minimis. Sellers shall not use a combination of the purchase price and the sales price of the products to determine if the taxable products are de minimis. Sellers shall use the full term of a service contract to determine if the taxable products are de minimis; or
    6. The retail sale of exempt tangible personal property and taxable tangible personal property where:
      1. The transaction includes:
        1. Food and food ingredients as defined in KRS 139.485 ;
        2. Drugs as defined in KRS 139.472 ;
        3. Durable medical equipment as defined in KRS 139.472 ;
        4. Mobility enhancing equipment as defined in KRS 139.472;
        5. Medical supplies; or
        6. Over-the-counter drugs as defined in KRS 139.472; and
      2. The seller’s purchase price or sales price of the taxable tangible personal property is fifty percent (50%) or less of the total purchase price or sales price of the bundled tangible personal property. Sellers shall not use a combination of the purchase price and the sales price of the tangible personal property when making the fifty percent (50%) determination for a transaction.

History. Enact. Acts 2007, ch. 141, § 6, effective July 1, 2007; 2008, ch. 95, § 7, effective August 1, 2008; 2009, ch. 73, § 5, effective July 1, 2009.

139.220. Prohibited advertising.

It is unlawful for any retailer to advertise or hold out or state to the public or to any customer, directly or indirectly, that the tax levied by KRS 139.200 or required to be collected under KRS 139.340 or any part thereof will be assumed or absorbed by the retailer or that the tax will not be added to the selling price of the tangible personal property, digital property, or services sold or that if added the tax or any part thereof will be refunded.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 22, effective February 5, 1960; 2003, ch. 124, § 10, effective July 1, 2004; 2005, ch. 168, § 153, effective March 18, 2005; 2009, ch. 73, § 6, effective July 1, 2009; 2018 ch. 171, § 38, effective April 14, 2018; 2018 ch. 207, § 38, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

Cited in:

Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ).

Opinions of Attorney General.

It is unlawful for merchants in the Commonwealth to advertise that they will either absorb or pay the sales or use tax in connection with products they advertise in newspapers throughout the state. OAG 68-164 .

139.230. Elimination of fractions of a cent.

To eliminate fractions of one cent ($0.01), and to ensure that the aggregate collections of taxes by a retailer, so far as may be practicable, shall be equal to six percent (6%) of gross receipts or sales price, as the case may be, the tax shall be computed by applying the six percent (6%) rate to the sales price carried to the third decimal place and rounded to the nearest cent by eliminating any fraction less than one-half of one cent ($0.005) and increasing any fraction of one-half of one cent ($0.005) or over to the next higher cent.

History. Enact. Acts 1960, ch. 5, Art. I, § 23; 1968, ch. 40, part 1, § 5; 1990, ch. 476, Pt. VII A, § 618, effective July 1, 1990; 2003, ch. 124, § 11, effective July 1, 2004.

139.240. Application for retailer’s or seller’s permit to do business.

  1. Every person presently engaged or desiring to engage in or conduct business as a retailer or seller within this state shall file with the department an application for a permit for each place of business.
  2. Every application for a permit shall:
    1. Be made upon a form prescribed by the department;
    2. Set forth the name under which the applicant transacts or intends to transact business and the location of the place or places of business; and
    3. Set forth other information as the department may require.
  3. The application shall be signed by:
    1. The owner, if he or she is a natural person;
    2. A member or partner, if the entity is an association, limited liability company, limited liability partnership, or partnership;
    3. An executive officer, if the entity is a corporation, or some person specifically authorized by the corporation to sign the application, to which shall be attached written evidence of his or her authority; or
    4. A licensed certified public accountant, or an attorney licensed to practice law in the Commonwealth, specifically authorized by and acting on behalf of an owner, an association, a partnership, a limited liability company, a limited liability partnership, a corporation, or other business entity.
  4. A written signature shall not be required if the applicant registers electronically.

History. Enact. Acts 1960, ch. 5, Art. I, § 24, effective February 5, 1960; 2002, ch. 44, § 2, effective July 15, 2002; 2003, ch. 124, § 12, effective July 1, 2004; 2005, ch. 85, § 411, effective June 20, 2005; 2008, ch. 95, § 8, effective August 1, 2008.

NOTES TO DECISIONS

Cited in:

Commonwealth ex rel. Luckett v. Revday Industries, Inc., 432 S.W.2d 819, 1968 Ky. LEXIS 359 , 42 A.L.R.3d 287 ( Ky. 1968 ).

139.250. Seller’s permit to do business — Issuance — Nonassignability — Display.

After compliance with KRS 139.240 and 139.660 by the applicant, the department shall grant and issue to each applicant a separate permit for each place of business within the state. A permit shall not be assignable, and shall be valid only for the person in whose name it is issued and for the transaction of business at the place designated therein. It shall at all times be conspicuously displayed at the place for which issued.

History. Enact. Acts 1960, ch. 5, Art. I, § 25, effective February 5, 1960; 2005, ch. 85, § 412, effective June 20, 2005.

NOTES TO DECISIONS

1. Personal Liability for Corporate Sales.

The taxpayer was personally liable for the sales which took place subsequent to the date he incorporated his business, where he never formally notified the cabinet either orally or in writing that he had incorporated his business, his corporation never applied for a sales tax permit, and he never designated the corporation as the taxpayer on his tax returns but merely signed them as “owner” without indicating that he was doing so as a corporate officer. Revenue Cabinet Kentucky v. Saylor, 738 S.W.2d 426, 1987 Ky. App. LEXIS 585 (Ky. Ct. App. 1987).

The taxpayer was not entitled to be relieved from personal liability for corporate sales made pursuant to the authority conferred by his individual sales tax permit merely because the taxes remitted during this period were paid by issuance of a corporate check, where the corporation was operating illegally without having applied for a sales tax permit, and the taxpayer failed to notify the Revenue Cabinet that he had ceased conducting a sole proprietorship business under the permit issued in his individual name. Revenue Cabinet Kentucky v. Saylor, 738 S.W.2d 426, 1987 Ky. App. LEXIS 585 (Ky. Ct. App. 1987).

Cited in:

Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ); Commonwealth ex rel. Luckett v. Revday Industries, Inc., 432 S.W.2d 819, 1968 Ky. LEXIS 359 , 42 A.L.R.3d 287 ( Ky. 1968 ).

139.260. Presumption that all gross receipts and tangible personal property, digital property, and services sold for delivery in this state are taxable — Burden of proof.

For the purpose of the proper administration of this chapter and to prevent evasion of the duty to collect the taxes imposed by KRS 139.200 and 139.310 , it shall be presumed that all gross receipts and all tangible personal property, digital property, and services sold by any person for delivery or access in this state are subject to the tax until the contrary is established. The burden of proving the contrary is upon the person who makes the sale of:

  1. Tangible personal property or digital property unless the person takes from the purchaser a certificate to the effect that the property is either:
    1. Purchased for resale according to the provisions of KRS 139.270 ;
    2. Purchased through a fully completed certificate of exemption or fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption in accordance with KRS 139.270 ; or
    3. Purchased according to administrative regulations promulgated by the department governing a direct pay authorization;
  2. A service included in KRS 139.200(2)(a) to (f) unless the person takes from the purchaser a certificate to the effect that the service is purchased through a fully completed certificate of exemption or fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption in accordance with KRS 139.270 ; and
  3. A service included in KRS 139.200(2)(g) to (q) unless the person takes from the purchaser a certificate to the effect that the service is:
    1. Purchased for resale according to KRS 139.270 ;
    2. Purchased through a fully completed certificate of exemption or fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption in accordance with KRS 139.270 ; or
    3. Purchased according to administrative regulations promulgated by the department governing a direct pay authorization.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 26, effective February 5, 1960; 1988, ch. 135, § 1, effective July 15, 1988; 2003, ch. 124, § 13, effective July 1, 2004; 2005, ch. 85, § 413, effective June 20, 2005; 2007, ch. 141, § 19, effective July 1, 2007; 2009, ch. 73, § 7, effective July 1, 2009; 2011, ch. 33, § 3, effective July 1, 2011; 2018 ch. 171, § 39, effective April 14, 2018; 2018 ch. 207, § 39, effective April 27, 2018; 2019 ch. 151, § 21, effective June 27, 2019; 2020 ch. 91, § 6, effective April 15, 2020.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 21 of that Act apply to transactions occurring on or after July 1, 2019.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

NOTES TO DECISIONS

  1. Burden of Proof.
  2. Evidence.
  3. Paving Material Taxed.
  4. Proceeds to Out-of-State Partner.
  5. No Ambiguity.
  6. Taxpayer.
1. Burden of Proof.

The presumption is absolute that the gross receipts taken by the seller are taxable, and the burden of proving that the property sold is not taxable to the seller is shifted only if the certificates for resale are taken in good faith by the seller. Department of Revenue v. Warren Chemical & Janitor Supply Co., 562 S.W.2d 644, 1977 Ky. App. LEXIS 896 (Ky. Ct. App. 1977).

Where it was clear from the record that a wholesaler exercised no diligence to ascertain whether the property sold was actually for resale or consumption by the buyer, its blind acceptance of the certificates of the resale was not legally acceptable and did not shift the burden of proof from the wholesaler to the Kentucky Department of Revenue. Department of Revenue v. Warren Chemical & Janitor Supply Co., 562 S.W.2d 644, 1977 Ky. App. LEXIS 896 (Ky. Ct. App. 1977).

The burden is upon the party claiming an exemption to demonstrate their entitlement to the exemption and that they have met all the statutory requirements. Epsilon Trading Co. v. Revenue Cabinet, 775 S.W.2d 937, 1989 Ky. App. LEXIS 116 (Ky. Ct. App. 1989).

This section throws the burden of establishing “the contrary” squarely on the taxpayer. J. Sutter's Mill, Inc. v. Revenue Cabinet, Commonwealth, 793 S.W.2d 838, 1990 Ky. App. LEXIS 54 (Ky. Ct. App. 1990).

In an action against a tavern for failure to collect and remit a sales tax on admission fees, the tavern failed to meet its burden of proving it was not a place of entertainment whose admission fees were subject to the sales tax where the tavern played music over a loudspeaker, provided a dance floor, and featured television sets, video games and foosball games. J. Sutter's Mill, Inc. v. Revenue Cabinet, Commonwealth, 793 S.W.2d 838, 1990 Ky. App. LEXIS 54 (Ky. Ct. App. 1990).

A retailer who is primarily liable for the collection of sales tax unless a certificate of resale is taken is relieved from the burden of proof only if the certificate is taken in good faith, an element demonstrated by the retailer if it makes a determination that the type of property it sold is normally offered for resale in the type of business operated by the purchaser. The failure of the retailer’s agents to diligently examine the certificates of resale to learn what appears obvious on their faces demonstrates a lack of good faith, rendering the retailer liable for the sales taxes. Pace Membership Warehouse, Inc. v. Revenue Cabinet, 808 S.W.2d 353, 1991 Ky. App. LEXIS 55 (Ky. Ct. App. 1991).

2. Evidence.

Where a wholesaler sold items such as paper towels, paper cups, insect sprays and cleaning supplies to numerous purchasers, such as theaters, restaurants, service stations and others, taking certifications for resale from each one but making no effort to determine whether the goods actually were resold, a tax deficiency assessment against the wholesaler was supported by the evidence. Department of Revenue v. Warren Chemical & Janitor Supply Co., 562 S.W.2d 644, 1977 Ky. App. LEXIS 896 (Ky. Ct. App. 1977).

Taxpayer fulfilled burden of proving that sales of houseboats were not a retail sale subject to tax, by testimony of interested parties that the transactions as to each of the sales transpired between the manufacturers and the ultimate customers, that taxpayer at no time held title to the crafts and by offering evidence that in most, if not all, cases, the manufacturers and purchasers were in other states, and the boats were delivered directly from the manufacturers to the customers, there being no delivery in this jurisdiction, each boat was “customized,” according to the desire of the particular purchaser, that taxpayer maintained no stock or inventory, no showroom, literature, sales office or dealer’s license, and its principal business was that of operating a boat dock, marina, restaurant and cottage rental, that its chief officer, being the operator of a popular marina in the area, came into contact with many would-be boat purchasers and simply arranged for purchases directly from manufacturers, with his reward being a commission. Revenue Cabinet v. Moors Resort, Inc., 675 S.W.2d 859, 1984 Ky. App. LEXIS 562 (Ky. Ct. App. 1984).

3. Paving Material Taxed.

Where the paving contract provided that the job would be done at a unit price per square yard, the contractor was not entitled to recover the amount of sales tax paid by it for the material used in performing its paving contract. Consolidated Developments, Inc. v. Southeastern Stone Quarries, Inc., 495 S.W.2d 772, 1973 Ky. LEXIS 406 ( Ky. 1973 ).

4. Proceeds to Out-of-State Partner.

KRS 139.200 and this section impose the five (5) (now six (6)) percent sales tax on the gross receipts on all retail sales. Therefore, the taxpayer’s argument that a portion of such receipts were paid to an out-of-state partner is irrelevant; as such, the Board of Tax Appeals and the Circuit Court erred, as a matter of law, in allowing the taxpayer to exempt sales of various personal property items from the sales and use tax on the basis that the proceeds from the sales were forwarded to out-of-state partners. Department of Revenue v. Cox Machinery Co., 650 S.W.2d 261, 1982 Ky. App. LEXIS 291 (Ky. Ct. App. 1982).

5. No Ambiguity.

The mere existence of other related sections and regulations concerning sales tax does not make KRS 139.200 ambiguous. This section creates a presumption to be used when the facts are not completely developed to support the imposition of a tax. There is no ambiguity or confusion because of KRS 139.470(1); if the revenue statute conflicts with the Kentucky or United States Constitutions, it is simply void, but it is not ambiguous. Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, 689 S.W.2d 14, 1985 Ky. LEXIS 225 ( Ky. 1985 ).

6. Taxpayer.

For the purpose of collecting and remitting the sales tax, the retailer is considered to be the taxpayer. Revenue Cabinet v. Moors Resort, Inc., 675 S.W.2d 859, 1984 Ky. App. LEXIS 562 (Ky. Ct. App. 1984).

Cited in:

Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ); George Wohrley, Inc. v. Commonwealth, Dep’t of Revenue, 495 S.W.2d 173, 1973 Ky. LEXIS 390 ( Ky. 1973 ); Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ); Dep't of Revenue, Fin. & Admin. Cabinet v. Shinin' B Trailer Sales, LLC, 2015 Ky. App. LEXIS 131 (Sept. 4, 2015).

139.270. Resale certificate and certificates of exemption.

  1. The resale certificate, certificate of exemption, or Streamlined Sales and Use Tax Agreement Certificate of Exemption relieves the retailer or seller from the burden of proof if the retailer or seller:
    1. Within ninety (90) days after the date of sale:
      1. Obtains a fully completed resale certificate, certificate of exemption, or Streamlined Sales and Use Tax Agreement Certificate of Exemption; or
      2. Captures the relevant data elements that correspond to the information that the purchaser would otherwise provide to the retailer or seller on the Streamlined Sales and Use Tax Agreement Certificate of Exemption; and
    2. Maintains a file of the certificate obtained or relevant data elements captured in accordance with KRS 139.720 .
  2. The relief from liability provided to the retailer or the seller in this section does not apply to a retailer or seller who:
    1. Fraudulently fails to collect the tax;
    2. Solicits purchasers to participate in the unlawful claiming of an exemption; or
    3. Accepts an exemption certificate when the purchaser claims an entity-based exemption when:
      1. The product sought to be covered by the exemption certificate is actually received by the purchaser at a location operated by the retailer or seller; and
      2. The state in which that location resides provides an exemption certificate that clearly and affirmatively indicates that the claimed exemption is not available in that state.
    1. If the department requests that the seller or retailer substantiate that the sale was a sale for resale or an exempt sale and the retailer or seller has not complied with subsection (1) of this section, the seller or retailer shall be relieved of any liability for the tax on the transaction if the seller or retailer, within one hundred twenty (120) days of the department’s request: (3) (a) If the department requests that the seller or retailer substantiate that the sale was a sale for resale or an exempt sale and the retailer or seller has not complied with subsection (1) of this section, the seller or retailer shall be relieved of any liability for the tax on the transaction if the seller or retailer, within one hundred twenty (120) days of the department’s request:
      1. Obtains a fully completed resale certificate, exemption certificate, or Streamlined Sales and Use Tax Agreement Certificate of Exemption from the purchaser for an exemption that:
        1. Was available under this chapter on the date the transaction occurred;
        2. Could be applicable to the item being purchased; and
        3. Is reasonable for the purchaser’s type of business; or
      2. Obtains other information establishing that the transaction was not subject to the tax.
    2. Notwithstanding paragraph (a) of this subsection, if the department discovers through the audit process that the seller or retailer had knowledge or had reason to know at the time the information was provided that the information relating to the exemption claimed was materially false, or the seller or retailer otherwise knowingly participated in activity intended to purposefully evade the tax that is properly due on the transaction, the seller or retailer shall not be relieved of the tax on the transaction. The department shall bear the burden of proof that the seller or retailer had knowledge or had reason to know at the time the information was provided that the information was materially false.
  3. Notwithstanding subsections (1) and (3) of this section, the seller or retailer may still offer additional documentation that is acceptable by the department that the transaction is not subject to tax and to relieve the seller or retailer from the tax liability.
  4. If the department later finds that the retailer or seller complied with subsections (1), (3), and (4) of this section, but that the purchaser used the property or service in a manner that would not have qualified for resale status or the purchaser issued a certificate of exemption or a Streamlined Sales and Use Tax Agreement Certificate of Exemption and used the property or service in some other manner or for some other purpose, the department shall hold the purchaser liable for the remittance of the tax originally due and may apply penalties provided in KRS 139.990 .

For purposes of this paragraph, “entity-based exemption” means an exemption based on who purchases the product or who sells the product. An exemption available to all individuals shall not be considered an entity-based exemption.

History. Enact. Acts 1960, ch. 5, Art. I, § 27, effective February 5, 1960; 1982, ch. 208, § 1, effective July 15, 1982; 1988, ch. 135, § 2, effective July 15, 1988; 2003, ch. 124, § 14, effective July 1, 2004; 2005, ch. 85, § 414, effective June 20, 2005; 2007, ch. 141, § 7, effective July 1, 2007; 2009, ch. 73, § 8, effective July 1, 2009; 2011, ch. 33, § 4, effective July 1, 2011; 2019 ch. 151, § 22, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 22 of that Act apply to transactions occurring on or after July 1, 2019.

NOTES TO DECISIONS

  1. Burden of Proof.
  2. Evidence.
1. Burden of Proof.

Where it was clear from the record that a wholesaler exercised no diligence to ascertain whether the property sold was actually for resale or consumption by the buyer, its blind acceptance of the certificates of the resale was not legally acceptable and did not shift the burden of proof from the wholesaler to the Kentucky Department of Revenue. Department of Revenue v. Warren Chemical & Janitor Supply Co., 562 S.W.2d 644, 1977 Ky. App. LEXIS 896 (Ky. Ct. App. 1977).

A retailer who is primarily liable for the collection of sales tax unless a certificate of resale is taken is relieved from the burden of proof only if the certificate is taken in good faith, an element demonstrated by the retailer if it makes a determination that the type of property it sold is normally offered for resale in the type of business operated by the purchaser the failure of the retailer’s agents to diligently examine the certificates of resale to learn what appears obvious on their faces demonstrates a lack of good faith, rendering the retailer liable for the sales taxes. Pace Membership Warehouse, Inc. v. Revenue Cabinet, 808 S.W.2d 353, 1991 Ky. App. LEXIS 55 (Ky. Ct. App. 1991).

2. Evidence.

Where a wholesaler sold items such as paper towels, paper cups, insect sprays and cleaning supplies to numerous purchasers, such as theaters, restaurants, service stations and others, taking certifications for resale from each one but making no effort to determine whether the goods actually were resold, a tax deficiency assessment against the wholesaler was supported by the evidence. Department of Revenue v. Warren Chemical & Janitor Supply Co., 562 S.W.2d 644, 1977 Ky. App. LEXIS 896 (Ky. Ct. App. 1977).

Cited in:

Revenue Cabinet v. Moors Resort, Inc., 675 S.W.2d 859, 1984 Ky. App. LEXIS 562 (Ky. Ct. App. 1984); Whayne Supply Co. v. Commonwealth, 682 S.W.2d 791, 1985 Ky. App. LEXIS 498 (Ky. Ct. App. 1985).

139.280. Contents and form of certificate.

  1. The resale certificate shall:
    1. Be signed by and bear the name and address of the purchaser;
    2. Indicate the number of the permit issued to the purchaser;
    3. Indicate the general character of the tangible personal property, digital property, or services sold by the purchaser in the regular course of business.
  2. The certificate shall be substantially in a form as the department may prescribe.
  3. A signature shall not be required if the purchaser provides the retailer with an electronic resale certificate.

History. Enact. Acts 1960, ch. 5, Art. I, § 28, effective February 5, 1960; 2003, ch. 124, § 15, effective July 1, 2004; 2005, ch. 85, § 415, effective June 20, 2005; 2009, ch. 73, § 9, effective July 1, 2009; 2019 ch. 151, § 23, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 23 of that Act apply to transactions occurring on or after July 1, 2019.

139.290. Property used by purchaser after giving certificate — When retailer may deduct purchase price.

  1. If a retailer or seller who gives a resale certificate makes any use of the tangible personal property or digital property other than retention, demonstration or display while holding it for sale in the regular course of business, the use shall be taxable to the retailer or seller as of the time the property is first used by the retailer or seller, and the sales price of the property to the retailer or seller shall be deemed the measure of the tax.
  2. If the sole use of the property by the retailer other than retention, demonstration or display in the regular course of business is the rental of the property while holding it for sale, the retailer shall include in gross receipts the amount of the rental charged rather than the sales price of the property.
  3. If a retailer sells tangible personal property or digital property before making any use thereof, other than retention, demonstration, or display while holding it for sale in the regular course of business, the retailer may take a deduction of the purchase price of the property if, with respect to its purchase, the retailer has reimbursed the vendor for the sales tax or has paid the use tax. If a deduction is taken by the retailer, no refund or credit shall be allowed to the vendor with respect to the sale of that property.

History. Enact. Acts 1960, ch. 5, Art. I, § 29, effective February 5, 1960; 1985 (1st Ex. Sess.), ch. 6, part III, § 8, effective August 1, 1985; 2003, ch. 124, § 16, effective July 1, 2004; 2009, ch. 73, § 10, effective July 1, 2009.

Legislative Research Commission Notes.

1985 (1st Extra. Sess.), Ky. Acts ch. 6, Pt. III, sec. 11, directed that the provisions of this section would be effective August 1, 1985.

NOTES TO DECISIONS

1. Seller Liable for Tax.

There is nothing in this section that requires the Revenue Cabinet to first look to the purchaser for the recovery of the sales tax where the seller accepted a resale certificate without first making the statutorily required determinations in order to comply with the good faith requirement. Pace Membership Warehouse, Inc. v. Revenue Cabinet, 808 S.W.2d 353, 1991 Ky. App. LEXIS 55 (Ky. Ct. App. 1991).

139.300. Fungible goods bought under certificate commingled with goods bought otherwise.

If a purchaser gives a certificate with respect to the purchase of fungible goods and thereafter commingles these goods with other fungible goods not so purchased but of such similarity that the identity of the constituent goods in the commingled mass cannot be determined, sales from the mass of commingled goods shall be deemed to be sales of the goods so purchased until a quantity of commingled goods equal to the quantity of purchased goods so commingled has been sold.

History. Enact. Acts 1960, ch. 5, Art. I, § 30, effective February 5, 1960.

Use Tax

139.310. Imposition of excise tax on storage, use, or other consumption.

  1. An excise tax is hereby imposed on the storage, use, or other consumption in this state of tangible personal property, digital property, and extended warranty services purchased for storage, use, or other consumption in this state at the rate of six percent (6%) of the sales price.
  2. The excise tax applies to the purchase of digital property regardless of whether:
    1. The purchaser has the right to permanently use the goods;
    2. The purchaser’s right to access or retain the digital property is not permanent; or
    3. The purchaser’s right of use is conditioned upon continued payment.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 31; 1968, ch. 40, part I, § 6; 1990, ch. 476, Pt. VII A, § 619, effective July 1, 1990; 2009, ch. 73, § 11, effective July 1, 2009; 2018 ch. 171, § 40, effective April 14, 2018; 2018 ch. 207, § 40, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Nature of Tax.
  3. Legal Incidence on Consumer.
  4. Exemption.
  5. Manufactured Article.
  6. Out-of-State Sellers.
  7. Regulation.
  8. Television Broadcast.
  9. Distribution of Free Samples.
1. Constitutionality.

Sales and use taxes imposed on railroad company’s purchase of roadway machinery and equipment outside this state for use in interstate railroad system traversing 13 states was not an impermissible burden on interstate commerce. Louisville & N. R. Co. v. Department of Revenue, 551 S.W.2d 259, 1977 Ky. App. LEXIS 721 (Ky. Ct. App. 1977).

The tax levied by this section is an excise tax, the incidence of which is so similar to that of an ad valorem tax as to render its enforcement against cities unconstitutional. Commonwealth ex rel. Luckett v. Elizabethtown, 435 S.W.2d 78, 1968 Ky. LEXIS 199 ( Ky. 1968 ).

Imposition of a use tax upon purchase of materials used in the publication of a newspaper delivered free of charge was not in violation of the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution and Ky. Const., §§ 2 and 171. Box Photo & Engraving Co. v. Revenue Cabinet, 743 S.W.2d 849, 1987 Ky. App. LEXIS 557 (Ky. Ct. App. 1987).

2. Nature of Tax.

The use tax is an excise and not an ad valorem tax. Commonwealth ex rel. Luckett v. Elizabethtown, 435 S.W.2d 78, 1968 Ky. LEXIS 199 ( Ky. 1968 ).

The use tax is not upon the property per se, for it is levied upon the transfer presumably for its use, storage or consumption within this state. Commonwealth ex rel. Luckett v. Elizabethtown, 435 S.W.2d 78, 1968 Ky. LEXIS 199 ( Ky. 1968 ).

3. Legal Incidence on Consumer.

The use tax must be collected by the retailer from the consumer and therefore the legal incidence of the tax falls upon the consumer. Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ), limited, Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ).

4. Exemption.

The Louisville Municipal Housing Commission was exempted from the use tax as an “institution of purely public charity” under Ky. Const., § 170. Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ), limited, Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ).

Soft drink bottles and cases, when delivered and sold to retail dealers in other states for resale, did not constitute property purchased for storage, use or other consumption and hence were exempt from use tax. Coca--Cola Bottling Works Co., Div. of Coca--Cola Bottling Corp. v. Kentucky Dep't of Revenue, 517 S.W.2d 746, 1974 Ky. LEXIS 37 ( Ky. 1974 ).

Acquisition of an oil painting of one of the taxpayer’s stallions constituted a nontaxable sale of professional services and was not subject to a use tax as a transfer or sale of tangible personal property pursuant to this section. Stoner Creek Stud, Inc. v. Revenue Cabinet Commonwealth, 746 S.W.2d 73, 1987 Ky. App. LEXIS 609 (Ky. Ct. App. 1987).

A foreign corporation that provided various services to businesses engaged in extraction of oil and gas was not exempt from use taxes on raw materials and industrial supplies consumed as part of its services even though the corporation listed supplies separate from other charges on its invoices. Nowsco Well Service v. Revenue Cabinet Commonwealth, 804 S.W.2d 10, 1990 Ky. App. LEXIS 182 (Ky. Ct. App. 1990).

5. Manufactured Article.

It is not the number of processes or the various kinds of treatment through which the alleged manufactured article is subjected that determines the question of whether or not it is a manufacturing process, but rather the character and kind of article that is produced, after being so subjected, that is the decisive factor. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

Television broadcasting is not a manufacturing process within the meaning of KRS 139.170 (now repealed) and former subsection (8) of KRS 139.480 . Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

6. Out-of-State Sellers.

The tax imposed upon a purchase of consumable supplies by a Kentucky corporation from out-of-state sellers was a use tax under this section and, as such, the Kentucky corporate taxpayer was liable for the tax pursuant to KRS 139.330 and not the sellers, as would be the case if the tax were a sales tax. Genex/London, Inc. v. Kentucky Bd. of Tax Appeals, 622 S.W.2d 499, 1981 Ky. LEXIS 275 ( Ky. 1981 ).

The Revenue Cabinet was correct in imposing a use tax on the taxpayer’s purchases of hay from an out-of-state vendor. Stoner Creek Stud, Inc. v. Revenue Cabinet Commonwealth, 746 S.W.2d 73, 1987 Ky. App. LEXIS 609 (Ky. Ct. App. 1987).

When material is created, designed and printed outside of Kentucky, a Kentucky retailer is liable for state use tax both on pre-printed newspaper supplements shipped directly from the out-of-state printer to Kentucky, and catalogs mailed directly from the out-of-state printer to potential customers in Kentucky because they are tangible property stored, used, and consumed in Kentucky in the process of advertising goods. Revenue Cabinet v. Lazarus, Inc., 49 S.W.3d 172, 2001 Ky. LEXIS 86 ( Ky. 2001 ).

7. Regulation.

Regulation 103 KAR 26:070 which provides that a contractor is a consumer of materials it uses in fulfillment of its contracts, even if the entity it contracts with is itself exempt from the tax, is neither arbitrary nor unconstitutional; it is a proper and reasonable clarification of this section. Pete Koenig Co. v. Department of Revenue, 655 S.W.2d 496, 1983 Ky. App. LEXIS 342 (Ky. Ct. App. 1983).

8. Television Broadcast.

The right to broadcasting television programs is an intangible broadcasting right and is not subject to a use tax and such broadcasting right is not made tangible and therefore taxable when purchased at the same time as a videotape that is being used to transmit the broadcast. WDKY-TV, Inc. v. Revenue Cabinet Commonwealth, 838 S.W.2d 431, 1992 Ky. App. LEXIS 158 (Ky. Ct. App. 1992).

9. Distribution of Free Samples.

The distribution of free drug samples by a pharmaceutical company constituted a “use” within the meaning of the statute. Smithkline Beecham Corp. v. Revenue Cabinet, 40 S.W.3d 883, 2001 Ky. App. LEXIS 8 (Ky. Ct. App. 2001).

Cited in:

George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ); Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ); Revenue Cabinet, Commonwealth v. Plasma Alliance, Inc., 794 S.W.2d 639, 1990 Ky. App. LEXIS 60 (Ky. Ct. App. 1990); Revenue Cabinet v. Ashland Oil, 888 S.W.2d 701, 1994 Ky. App. LEXIS 100 (Ky. Ct. App. 1994).

Opinions of Attorney General.

A county is exempt from the payment of use tax on items of tangible personal property it purchases outside the Commonwealth for use by the county. OAG 69-30 .

A city is exempt from the use tax on tangible personal property which it purchases outside the Commonwealth and brings into the city for municipal use. OAG 70-129 .

Where a bank, at the request of a customer, places an order for gold coins which are neither held nor owned by the bank and which the bank orders and then forwards to the customer who pays the bank and the bank forwards the purchase price less a small commission to the seller, the bank is not the retailer but merely acting as the agent for an out-of-state retailer and the liability for the reporting of the value of the property purchased from the out-of-state retailer and paying the use tax imposed by this section falls upon the Kentucky purchaser, under KRS 139.330 . OAG 74-901 .

Construction materials and supplies for use on county bridge projects purchased by a county after May 15, 1975, are exempt from the tax if purchased by the county in view of section 1 of former Regulation 103 KAR 30:225E, but this regulation does not apply to private contractors, and supplies and materials purchased by them for use on county projects are subject to the tax. OAG 75-551 .

Automobiles sold by a person going out of business, as dealt with factually in OAG 81-233 , are subject to the motor vehicle usage tax of KRS 138.460 even though a one-time sale, or going-out-of-business sale, is an “occasional sale,” so that motor vehicles are exempt from the tax under this section, since the tax of this section and the tax of KRS 138.460 are two (2) different taxes, although highly similar in incidence and operative effect. OAG 81-294 .

Research References and Practice Aids

Journal of Mineral Law & Policy.

Comments, The Sales Tax Exemption for Machinery for New and Expanded Industry Applied to Coal Mining After Amax Coal Company, 3 J.M.L. & P. 551 (1988).

139.320. Use tax on machinery brought into state for construction project. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 57; 1968, ch. 40, part I, § 7; 1978, ch. 233, § 27; 1990, ch. 476, Pt. VII A, § 620; 2005, ch. 85, § 416) was repealed by Acts 2007, ch. 141, § 29, effective July 1, 2007.

139.330. Purchaser’s liability for tax imposed by KRS 139.310.

Every person storing, using or otherwise consuming in this state tangible personal property, digital property, or an extended warranty service purchased from a retailer is liable for the use tax levied under KRS 139.310 . His liability is not extinguished until the tax has been paid to this state, except that a receipt from a retailer engaged in business in this state or from a retailer who is authorized by the department, under such rules and regulations as it may prescribe, to collect the tax and who is, for the purpose of this chapter relating to the use tax, regarded as a retailer engaged in business in this state, given to the purchaser pursuant to KRS 139.340 is sufficient to relieve the purchaser from further liability for the tax to which the receipt refers.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 32, effective February 5, 1960; 2005, ch. 85, § 417, effective June 20, 2005; 2009, ch. 73, § 12, effective July 1, 2009; 2018 ch. 171, § 41, effective April 14, 2018; 2018 ch. 207, § 41, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

1. Out-of-State Sellers.

The tax imposed upon a purchase of consumable supplies by a Kentucky corporation from out-of-state sellers was a use tax under KRS 139.310 and, as such, the Kentucky corporate taxpayer was liable for the tax pursuant to this section and not the sellers, as would be the case if the tax were a sales tax. Genex/London, Inc. v. Kentucky Bd. of Tax Appeals, 622 S.W.2d 499, 1981 Ky. LEXIS 275 ( Ky. 1981 ).

Cited in:

Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ); Cimmaron Coal Corp. v. Department of Revenue, 681 S.W.2d 435, 1984 Ky. App. LEXIS 534 (Ky. Ct. App. 1984).

Opinions of Attorney General.

Where a bank, at the request of a customer, places an order for gold coins which are neither held nor owned by the bank and which the bank orders and then forwards to the customer who pays the bank and the bank forwards the purchase price less a small commission to the seller, the bank is not the retailer but merely acting as the agent for an out-of-state retailer and the liability for the reporting of the value of the property purchased from the out-of-state retailer and paying the use tax imposed by KRS 139.310 falls upon the Kentucky purchaser. OAG 74-901 .

Although the Kentucky sales tax does not apply to the purchase of products which are ordered by mail or telephone from out-of-state companies and subsequently shipped into Kentucky, the use tax imposed by this section is imposed on the purchaser of the product, unless the out-of-state company voluntarily collects it for remittance to Kentucky. OAG 82-66 .

139.340. Retailer’s duty to collect tax — Taxes deemed to be held by retailer in trust — Registration and collection by remote retailer.

  1. Except as provided in KRS 139.470 and 139.480 , every retailer engaged in business in this state shall collect the tax imposed by KRS 139.310 from the purchaser and give to the purchaser a receipt therefor in the manner and form prescribed by the department. The taxes collected or required to be collected by the retailer under this section shall be deemed to be held in trust for and on account of the Commonwealth.
  2. “Retailer engaged in business in this state” as used in KRS 139.330 and this section includes any of the following:
    1. Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary or any other related entity, representative, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business. Property owned by a person who has contracted with a printer for printing, which consists of the final printed product, property which becomes a part of the final printed product, or copy from which the printed product is produced, and which is located at the premises of the printer, shall not be deemed to be an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business maintained, occupied, or used by the person;
    2. Any retailer having any representative, agent, salesman, canvasser, or solicitor operating in this state under the authority of the retailer or its subsidiary for the purpose of selling, delivering, or the taking of orders for any tangible personal property, digital property, or an extended warranty service. An unrelated printer with which a person has contracted for printing shall not be deemed to be a representative, agent, salesman, canvasser, or solicitor for the person;
    3. Any retailer soliciting orders for tangible personal property, digital property, or an extended warranty service from residents of this state on a continuous, regular, or systematic basis in which the solicitation of the order, placement of the order by the customer or the payment for the order utilizes the services of any financial institution, telecommunication system, radio or television station, cable television service, print media, or other facility or service located in this state;
    4. Any retailer deriving receipts from the lease or rental of tangible personal property situated in this state;
    5. Any retailer soliciting orders for tangible personal property, digital property, or an extended warranty service from residents of this state on a continuous, regular, systematic basis if the retailer benefits from an agent or representative operating in this state under the authority of the retailer to repair or service tangible personal property or digital property sold by the retailer;
    6. Any retailer located outside Kentucky that uses a representative in Kentucky, either full-time or part-time, if the representative performs any activities that help establish or maintain a marketplace for the retailer, including receiving or exchanging returned merchandise; or
      1. Any remote retailer selling tangible personal property or digital property delivered or transferred electronically to a purchaser in this state, including retail sales facilitated by a marketplace provider on behalf of the remote retailer, if: (g) 1. Any remote retailer selling tangible personal property or digital property delivered or transferred electronically to a purchaser in this state, including retail sales facilitated by a marketplace provider on behalf of the remote retailer, if:
        1. The remote retailer sold tangible personal property or digital property that was delivered or transferred electronically to a purchaser in this state in two hundred (200) or more separate transactions in the previous calendar year or the current calendar year; or
        2. The remote retailer’s gross receipts derived from the sale of tangible personal property or digital property delivered or transferred electronically to a purchaser in this state in the previous calendar year or current calendar year exceeds one hundred thousand dollars ($100,000).
      2. Any remote retailer that meets either threshold provided in subparagraph 1. of this paragraph shall register for a sales and use tax permit and collect the tax imposed by KRS 139.310 from the purchaser by the first day of the calendar month that begins no later than thirty (30) days after either threshold is reached.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 33, effective February 5, 1960; 1988, ch. 111, § 2, effective July 15, 1988; 1988, ch. 171, § 1, effective July 15, 1988; 1990, ch. 137, § 2, effective July 13, 1990; 1990, ch. 414, § 1, effective July 13, 1990; 1996, ch. 215, § 1, effective July 15, 1996; 2003, ch. 124, § 17, effective July 1, 2004; 2005, ch. 85, § 418, effective June 20, 2005; 2005, ch. 168, § 73, effective August 1, 2005; 2008, ch. 95, § 9, effective August 1, 2008; 2009, ch. 73, § 13, effective July 1, 2009; 2018 ch. 171, § 42, effective April 14, 2018; 2018 ch. 207, § 42, effective April 27, 2018; 2019 ch. 151, § 24, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019) Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 25 of that Act apply to transactions occurring on or after July 1, 2019.

NOTES TO DECISIONS

1. Legal Incidence on Consumer.

The use tax must be collected by the retailer from the consumer and therefore the legal incidence of the tax falls upon the consumer. Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ), limited, Thomas v. Elizabethtown, 403 S.W.2d 269, 1965 Ky. LEXIS 8 ( Ky. 1965 ).

Cited in:

Commonwealth ex rel. Ross v. Lee’s Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ); Genex/London, Inc. v. Kentucky Bd. of Tax Appeals, 622 S.W.2d 499, 1981 Ky. LEXIS 275 , 31 A.L.R.4th 1194 ( Ky. 1981 ); Cimmaron Coal Corp. v. Department of Revenue, 681 S.W.2d 435, 1984 Ky. App. LEXIS 534 (Ky. Ct. App. 1984).

Opinions of Attorney General.

It is unlawful for merchants in the Commonwealth to advertise that they will either absorb or pay the sales or use tax in connection with products they advertise in newspapers throughout the state. OAG 68-164 .

Where a customer of a bank places an order for the purchase of certain gold coins which are neither owned nor held by the bank and directs the bank to place the order with a coin dealer whose place of business is out of Kentucky, where the bank places the order with the coin dealer who then forwards the coins to the bank for delivery to the customer and where the customer then pays the bank the purchase price of the coins and the bank remits to the seller the purchase price less a small commission for acting as agent in the transaction, the bank would be a retailer within the meaning of KRS 139.100 (repealed; see now KRS 139.010(24)) and would be subject to the sales tax imposed under KRS 139.200 in the event that the out-of-state coin dealer was not a retail permit holder under the Kentucky Sales and Use Tax Act. Since the sales tax would apply to the bank in the event that the out-of-state coin dealer was not a retail permit holder, levy of the use tax would not occur under the provisions of KRS 139.500 ; however, if the sales tax were not applicable, the bank would be liable for the use tax pursuant to this section. OAG 83-217 , withdrawing OAG 74-901 .

Research References and Practice Aids

Kentucky Law Journal.

Article: The Fading Bright Line of Physical Presence: Did KFC Corporation v. Iowa Department of Revenue Give States the Secret Recipe for Repudiating Quill? 100 Ky. L.J. 339 (2011/2012).

139.350. Exception in the case of bad debts.

  1. A retailer may deduct as a bad debt the amount found to be worthless and charged off for income tax purposes provided the retailer is reporting and remitting the tax on the accrual basis. The retailer may take the deduction on the return for the period during which the bad debt is written off as uncollectable in the retailer’s books and records and is eligible to be charged off for income tax purposes. For purposes of this section, “charged off for income tax purposes” includes the charging off of unpaid balances due on accounts determined to be uncollectable, or declaring as uncollectable the unpaid balance due on accounts if a retailer is not required to file federal income tax returns.
  2. In determining the basis for calculating bad debt recovery, the definition of “bad debt” as provided in 26 U.S.C. sec. 166 shall be used, except “bad debt” shall not include financing charges or interest, sales or use taxes charged on the purchase price, uncollectable amounts on property that remains in the possession of the retailer until the full purchase price is paid, expenses incurred in attempting to collect any debt, or repossessed property.
  3. Notwithstanding KRS 131.183 , any deduction taken for bad debts shall not include interest.
  4. A retailer may obtain a refund of tax on the amount of bad debt that exceeds the amount of taxable sales for the period during which the bad debt is written off. Notwithstanding KRS 131.183 , the refund claim must be made within four (4) years from the due date of the return on which the bad debt could first be claimed.
  5. If any bad debt accounts are thereafter in whole or in part collected by the retailer, the amount collected shall be included in the return filed for the period in which the collection is made and the amount of the tax due shall be paid with the return.
  6. If a retailer’s filing responsibilities have been assumed by a certified service provider as provided by KRS 139.795 , the certified service provider may claim, on behalf of the retailer, any bad debt allowance provided by this section. The certified service provider shall credit or refund the full amount of any bad debt allowance or refund received to the retailer.
  7. For purposes of computing a bad debt deduction or reporting a payment received on a previously claimed bad debt, any payments made on a debt or account shall be applied first to the price of the property or service and the sales tax on it, proportionally, and secondly to interest, service charges, and any other charges.

History. Enact. Acts 1960, ch. 5, Art. I, § 34, effective February 5, 1960; 2003, ch. 124, § 18, effective July 1, 2004.

139.360. Tax due is retailer’s debt.

The tax or any part thereof required by KRS 139.340 to be collected by the retailer constitutes a debt owed by the retailer to this state.

History. Enact. Acts 1960, ch. 5, Art. I, § 35, effective February 5, 1960.

NOTES TO DECISIONS

Cited in:

Marcum v. Louisville Municipal Housing Com., 374 S.W.2d 865, 1963 Ky. LEXIS 182 ( Ky. 1963 ).

139.365. Exemption from collection duty for out-of-state commercial printers and mailers.

  1. Notwithstanding KRS 139.340 , a commercial printer or mailer engaged in business in this state shall not be required to collect use tax on sales of printing, advertising and promotional direct mail, or other direct mail that are printed out of state and delivered out of state to the United States Postal Service for mass mailing to third-party Kentucky residents who are not purchasers of the advertising and promotional direct mail or other direct mail if the commercial printers or mailers:
    1. Maintain records relating to those sales to assist the department in the collection of use tax; and
    2. File reports as provided by KRS 139.730 if requested by the department.
  2. If the commercial printer or mailer complies with the provisions of subsection (1) of this section, the purchaser of the printing, advertising and promotional direct mail, or other direct mail shall have the sole responsibility for reporting and paying the use tax imposed by KRS 139.310 .

History. Enact. Acts 2006, ch. 251, § 7, effective July 12, 2006; 2011, ch. 33, § 5, effective July 1, 2011.

139.370. Prohibited advertising. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 36, effective February 5, 1960) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.380. Separate display of tax and price.

The tax required to be collected by the retailer under KRS 139.340 from the purchaser shall be displayed separately from the list price, the price advertised in the premises, the marked price, or other price on the sales check or other proof of sales. If taxable goods are bundled with services and are sold as a single package for one (1) price, the tax required to be collected by the retailer from the purchaser shall be computed on the entire amount and shall be displayed separately from the list price, the price advertised on the premises, the marked price, or other price on the sales check or other proof of sales.

History. Enact. Acts 1960, ch. 5, Art. I, § 37, effective February 5, 1960; 2003, ch. 124, § 19, effective July 1, 2004.

139.390. Registration by retailer.

Every retailer selling tangible personal property, digital property, or an extended warranty service for storage, use or other consumption in this state shall register with the department and give:

  1. The name and address of all agents operating in this state;
  2. The location of all distribution or sales houses or offices or other places of business in this state;
  3. Such other information as the department may require.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 38, effective February 5, 1960; 2005, ch. 85, § 419, effective June 20, 2005; 2009, ch. 73, § 14, effective July 1, 2009; 2018 ch. 171, § 43, effective April 14, 2018; 2018 ch. 207, § 43, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

139.400. Presumption that property sold is for use in this state. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 39, effective February 5, 1960; 1988, ch. 135, § 3, effective July 15, 1988) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.410. Resale certificate. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 40, effective February 5, 1960; 1982, ch. 208, § 2, effective July 15, 1982; 1988, ch. 135, § 4, effective July 15, 1988) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.420. Contents and form of certificate. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 41, effective February 5, 1960) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.430. Property used by purchaser after giving certificate.

If a purchaser who gives a certificate makes any storage or use of the property other than retention, demonstration or display while holding it for sale in the regular course of business, the storage or use is taxable as of the time the property is first so stored or used. If the sole use of the property, other than retention, demonstration or display in the regular course of business, is the rental of the property while holding it for sale, the purchaser shall pay the tax on the use measured by the amount of the rental charged rather than the sales price of the property to him.

History. Enact. Acts 1960, ch. 5, Art. I, § 42, effective February 5, 1960; 1985 (1st Ex. Sess.), ch. 6, part III, § 9, effective August 1, 1985.

Legislative Research Commission Notes.

Acts 1985, Ex. Sess., ch. 6, Part III, Section 11, directed that the provisions of this section would be effective August 1, 1985.

NOTES TO DECISIONS

  1. Application.
  2. Rental of Property.
1. Application.

This section applies to parts when they are integrated into leased equipment. Whayne Supply Co. v. Commonwealth, 682 S.W.2d 791, 1985 Ky. App. LEXIS 498 (Ky. Ct. App. 1985).

2. Rental of Property.

This section grants the taxpayer the option of paying use tax on the rental proceeds of property which is rented while being held for resale as opposed to paying use tax on the full value of such property. Whayne Supply Co. v. Commonwealth, 682 S.W.2d 791, 1985 Ky. App. LEXIS 498 (Ky. Ct. App. 1985).

139.440. Fungible goods bought under certificate commingled with goods bought otherwise.

If a purchaser gives a certificate with respect to the purchase of fungible goods and thereafter commingles those goods with other fungible goods not so purchased but of such similarity that the identity of the constituent goods in the commingled mass cannot be determined, sales from the mass of commingled goods shall be deemed to be sales of the goods so purchased until a quantity of commingled goods equal to the quantity of purchased goods so commingled has been sold.

History. Enact. Acts 1960, ch. 5, Art. I, § 43, effective February 5, 1960.

139.450. Presumption about property shipped, brought, or electronically transferred into state — Duties of marketplace provider — No class action relating to overpayment of tax.

  1. It shall be presumed that:
    1. Tangible personal property shipped or brought to this state by the purchaser; or
    2. Digital property delivered or transferred electronically into this state;
    1. A marketplace provider that makes retail sales on its own behalf or facilitates retail sales of tangible personal property, digital property, or services that are delivered or transferred electronically to a purchaser in this state for one (1) or more marketplace retailers that in any sales combination exceeds one hundred thousand dollars ($100,000) or reaches two hundred (200) or more separate transactions in the immediately preceding calendar year or current calendar year shall be subject to this section. (2) (a) A marketplace provider that makes retail sales on its own behalf or facilitates retail sales of tangible personal property, digital property, or services that are delivered or transferred electronically to a purchaser in this state for one (1) or more marketplace retailers that in any sales combination exceeds one hundred thousand dollars ($100,000) or reaches two hundred (200) or more separate transactions in the immediately preceding calendar year or current calendar year shall be subject to this section.
    2. The marketplace provider shall:
      1. Register for a sales and use tax permit number to report and remit the tax due on the marketplace provider’s sales;
      2. Register for a separate sales and use tax permit number to report and remit the tax due on all of the sales it facilitates for one (1) or more marketplace retailers; and
      3. Collect tax imposed under this chapter;
    3. The marketplace provider shall collect Kentucky tax on the entire sales price or purchase price paid by a purchaser on each retail sale subject to tax under this chapter that is made on its own behalf or that is facilitated by the marketplace provider, regardless of whether the seller would have been required to collect the tax had the retail sale not been facilitated by the marketplace provider.
  2. Nothing in this section shall be construed to relieve the marketplace provider of liability for collecting but failing to remit the taxes imposed under this chapter.
    1. The marketplace provider shall be subject to audit on all sales made on its own behalf and on all sales facilitated by the marketplace provider. (4) (a) The marketplace provider shall be subject to audit on all sales made on its own behalf and on all sales facilitated by the marketplace provider.
    2. The marketplace retailer shall be relieved of all liability for the collection and remittance of the sales or use tax on sales facilitated by the marketplace provider.
  3. No class action may be brought against a marketplace provider on behalf of purchasers arising from or in any way related to an overpayment of tax collected by the marketplace provider.

was purchased from a retailer for storage, use, or other consumption in this state.

by the first day of the calendar month that begins no later than thirty (30) days after either threshold in paragraph (a) of this subsection is reached.

History. Enact. Acts 1960, ch. 5, Art. I, § 44; 1968, ch. 40, part I, § 8; 1990, ch. 476, Pt. VII A, § 621, effective July 1, 1990; 2009, ch. 73, § 15, effective July 1, 2009; 2013, ch. 119, § 12, effective July 1, 2013; 2019 ch. 151, § 25, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 25 of that Act apply to transactions occurring on or after July 1, 2019.

139.460. Presumption as to property delivered outside state to Kentucky resident — How controverted. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 45, effective February 5, 1960) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

Exemptions

139.470. Exempt transactions.

There are excluded from the computation of the amount of taxes imposed by this chapter:

  1. Gross receipts from the sale of, and the storage, use, or other consumption in this state of, tangible personal property or digital property which this state is prohibited from taxing under the Constitution or laws of the United States, or under the Constitution of this state;
  2. Gross receipts from sales of, and the storage, use, or other consumption in this state of:
    1. Nonreturnable and returnable containers when sold without the contents to persons who place the contents in the container and sell the contents together with the container; and
    2. Returnable containers when sold with the contents in connection with a retail sale of the contents or when resold for refilling;
  3. Gross receipts from occasional sales of tangible personal property or digital property and the storage, use, or other consumption in this state of tangible personal property or digital property, the transfer of which to the purchaser is an occasional sale;
  4. Gross receipts from sales of tangible personal property to a common carrier, shipped by the retailer via the purchasing carrier under a bill of lading, whether the freight is paid in advance or the shipment is made freight charges collect, to a point outside this state and the property is actually transported to the out-of-state destination for use by the carrier in the conduct of its business as a common carrier;
  5. Gross receipts from sales of tangible personal property sold through coin-operated bulk vending machines, if the sale amounts to fifty cents ($0.50) or less, if the retailer is primarily engaged in making the sales and maintains records satisfactory to the department. As used in this subsection, “bulk vending machine” means a vending machine containing unsorted merchandise which, upon insertion of a coin, dispenses the same in approximately equal portions, at random and without selection by the customer;
  6. Gross receipts from sales to any cabinet, department, bureau, commission, board, or other statutory or constitutional agency of the state and gross receipts from sales to counties, cities, or special districts as defined in KRS 65.005 . This exemption shall apply only to purchases of tangible personal property, digital property, or services for use solely in the government function. A purchaser not qualifying as a governmental agency or unit shall not be entitled to the exemption even though the purchaser may be the recipient of public funds or grants;
    1. Gross receipts from the sale of sewer services, water, and fuel to Kentucky residents for use in heating, water heating, cooking, lighting, and other residential uses. As used in this subsection, “fuel” shall include but not be limited to natural gas, electricity, fuel oil, bottled gas, coal, coke, and wood. Determinations of eligibility for the exemption shall be made by the department; (7) (a) Gross receipts from the sale of sewer services, water, and fuel to Kentucky residents for use in heating, water heating, cooking, lighting, and other residential uses. As used in this subsection, “fuel” shall include but not be limited to natural gas, electricity, fuel oil, bottled gas, coal, coke, and wood. Determinations of eligibility for the exemption shall be made by the department;
    2. In making the determinations of eligibility, the department shall exempt from taxation all gross receipts derived from sales:
      1. Classified as “residential” by a utility company as defined by applicable tariffs filed with and accepted by the Public Service Commission;
      2. Classified as “residential” by a municipally owned electric distributor which purchases its power at wholesale from the Tennessee Valley Authority;
      3. Classified as “residential” by the governing body of a municipally owned electric distributor which does not purchase its power from the Tennessee Valley Authority, if the “residential” classification is reasonably consistent with the definitions of “residential” contained in tariff filings accepted and approved by the Public Service Commission with respect to utilities which are subject to Public Service Commission regulation.
    3. The exemption shall not apply if charges for sewer service, water, and fuel are billed to an owner or operator of a multi-unit residential rental facility or mobile home and recreational vehicle park other than residential classification; and
    4. The exemption shall apply also to residential property which may be held by legal or equitable title, by the entireties, jointly, in common, as a condominium, or indirectly by the stock ownership or membership representing the owner’s or member’s proprietary interest in a corporation owning a fee or a leasehold initially in excess of ninety-eight (98) years;
  7. Gross receipts from sales to an out-of-state agency, organization, or institution exempt from sales and use tax in its state of residence when that agency, organization, or institution gives proof of its tax-exempt status to the retailer and the retailer maintains a file of the proof;
    1. Gross receipts derived from the sale of tangible personal property, as provided in paragraph (b) of this subsection, to a manufacturer or industrial processor if the property is to be directly used in the manufacturing or industrial processing process of: (9) (a) Gross receipts derived from the sale of tangible personal property, as provided in paragraph (b) of this subsection, to a manufacturer or industrial processor if the property is to be directly used in the manufacturing or industrial processing process of:
      1. Tangible personal property at a plant facility;
      2. Distilled spirits or wine at a plant facility or on the premises of a distiller, rectifier, winery, or small farm winery licensed under KRS 243.030 that includes a retail establishment on the premises; or
      3. Malt beverages at a plant facility or on the premises of a brewer or microbrewery licensed under KRS 243.040 that includes a retail establishment;
    2. The following tangible personal property shall qualify for exemption under this subsection:
      1. Materials which enter into and become an ingredient or component part of the manufactured product;
      2. Other tangible personal property which is directly used in the manufacturing or industrial processing process, if the property has a useful life of less than one (1) year. Specifically these items are categorized as follows:
        1. Materials. This refers to the raw materials which become an ingredient or component part of supplies or industrial tools exempt under subdivisions b. and c. below;
        2. Supplies. This category includes supplies such as lubricating and compounding oils, grease, machine waste, abrasives, chemicals, solvents, fluxes, anodes, filtering materials, fire brick, catalysts, dyes, refrigerants, and explosives. The supplies indicated above need not come in direct contact with a manufactured product to be exempt. “Supplies” does not include repair, replacement, or spare parts of any kind; and
        3. Industrial tools. This group is limited to hand tools such as jigs, dies, drills, cutters, rolls, reamers, chucks, saws, and spray guns and to tools attached to a machine such as molds, grinding balls, grinding wheels, dies, bits, and cutting blades. Normally, for industrial tools to be considered directly used in the manufacturing or industrial processing process, they shall come into direct contact with the product being manufactured or processed; and
      3. Materials and supplies that are not reusable in the same manufacturing or industrial processing process at the completion of a single manufacturing or processing cycle. A single manufacturing cycle shall be considered to be the period elapsing from the time the raw materials enter into the manufacturing process until the finished product emerges at the end of the manufacturing process.
    3. The property described in paragraph (b) of this subsection shall be regarded as having been purchased for resale.
    4. For purposes of this subsection, a manufacturer or industrial processor includes an individual or business entity that performs only part of the manufacturing or industrial processing activity, and the person or business entity need not take title to tangible personal property that is incorporated into, or becomes the product of, the activity.
    5. The exemption provided in this subsection does not include repair, replacement, or spare parts;
  8. Any water use fee paid or passed through to the Kentucky River Authority by facilities using water from the Kentucky River basin to the Kentucky River Authority in accordance with KRS 151.700 to 151.730 and administrative regulations promulgated by the authority;
  9. Gross receipts from the sale of newspaper inserts or catalogs purchased for storage, use, or other consumption outside this state and delivered by the retailer’s own vehicle to a location outside this state, or delivered to the United States Postal Service, a common carrier, or a contract carrier for delivery outside this state, regardless of whether the carrier is selected by the purchaser or retailer or an agent or representative of the purchaser or retailer, or whether the F.O.B. is retailer’s shipping point or purchaser’s destination.
    1. As used in this subsection:
      1. “Catalogs” means tangible personal property that is printed to the special order of the purchaser and composed substantially of information regarding goods and services offered for sale; and
      2. “Newspaper inserts” means printed materials that are placed in or distributed with a newspaper of general circulation.
    2. The retailer shall be responsible for establishing that delivery was made to a non-Kentucky location through shipping documents or other credible evidence as determined by the department;
  10. Gross receipts from the sale of water used in the raising of equine as a business;
  11. Gross receipts from the sale of metal retail fixtures manufactured in this state and purchased for storage, use, or other consumption outside this state and delivered by the retailer’s own vehicle to a location outside this state, or delivered to the United States Postal Service, a common carrier, or a contract carrier for delivery outside this state, regardless of whether the carrier is selected by the purchaser or retailer or an agent or representative of the purchaser or retailer, or whether the F.O.B. is the retailer’s shipping point or the purchaser’s destination.
    1. As used in this subsection, “metal retail fixtures” means check stands and belted and nonbelted checkout counters, whether made in bulk or pursuant to specific purchaser specifications, that are to be used directly by the purchaser or to be distributed by the purchaser.
    2. The retailer shall be responsible for establishing that delivery was made to a non-Kentucky location through shipping documents or other credible evidence as determined by the department;
  12. Gross receipts from the sale of unenriched or enriched uranium purchased for ultimate storage, use, or other consumption outside this state and delivered to a common carrier in this state for delivery outside this state, regardless of whether the carrier is selected by the purchaser or retailer, or is an agent or representative of the purchaser or retailer, or whether the F.O.B. is the retailer’s shipping point or purchaser’s destination;
  13. Amounts received from a tobacco buydown. As used in this subsection, “buydown” means an agreement whereby an amount, whether paid in money, credit, or otherwise, is received by a retailer from a manufacturer or wholesaler based upon the quantity and unit price of tobacco products sold at retail that requires the retailer to reduce the selling price of the product to the purchaser without the use of a manufacturer’s or wholesaler’s coupon or redemption certificate;
  14. Gross receipts from the sale of tangible personal property or digital property returned by a purchaser when the full sales price is refunded either in cash or credit. This exclusion shall not apply if the purchaser, in order to obtain the refund, is required to purchase other tangible personal property or digital property at a price greater than the amount charged for the property that is returned;
  15. Gross receipts from the sales of gasoline and special fuels subject to tax under KRS Chapter 138;
  16. The amount of any tax imposed by the United States upon or with respect to retail sales, whether imposed on the retailer or the consumer, not including any manufacturer’s excise or import duty;
  17. Gross receipts from the sale of any motor vehicle as defined in KRS 138.450 which is:
    1. Sold to a Kentucky resident, registered for use on the public highways, and upon which any applicable tax levied by KRS 138.460 has been paid; or
    2. Sold to a nonresident of Kentucky if the nonresident registers the motor vehicle in a state that:
      1. Allows residents of Kentucky to purchase motor vehicles without payment of that state’s sales tax at the time of sale; or
      2. Allows residents of Kentucky to remove the vehicle from that state within a specific period for subsequent registration and use in Kentucky without payment of that state’s sales tax;
  18. Gross receipts from the sale of a semi-trailer as defined in KRS 189.010(12) and trailer as defined in KRS 189.010(17);
  19. Gross receipts from the collection of:
    1. Any fee or charge levied by a local government pursuant to KRS 65.760 ;
    2. The charge imposed by KRS 65.7629(3);
    3. The fee imposed by KRS 65.7634 ; and
    4. The service charge imposed by KRS 65.7636 ;
  20. Gross receipts derived from charges for labor or services to apply, install, repair, or maintain tangible personal property directly used in manufacturing or industrial processing process of:
    1. Tangible personal property at a plant facility;
    2. Distilled spirits or wine at a plant facility or on the premises of a distiller, rectifier, winery, or small farm winery licensed under KRS 243.030 ; or
    3. Malt beverages at a plant facility or on the premises of a brewer or microbrewery licensed under KRS 243.040
    1. For persons selling services included in KRS 139.200(2)(g) to (q) prior to January 1, 2019, gross receipts derived from the sale of those services if the gross receipts were less than six thousand dollars ($6,000) during calendar year 2018. When gross receipts from these services exceed six thousand dollars ($6,000) in a calendar year: (23) (a) For persons selling services included in KRS 139.200(2)(g) to (q) prior to January 1, 2019, gross receipts derived from the sale of those services if the gross receipts were less than six thousand dollars ($6,000) during calendar year 2018. When gross receipts from these services exceed six thousand dollars ($6,000) in a calendar year:
      1. All gross receipts over six thousand dollars ($6,000) are taxable in that calendar year; and
      2. All gross receipts are subject to tax in subsequent calendar years.
    2. The exemption provided in this subsection shall not apply to a person also engaged in the business of selling tangible personal property, digital property, or services included in KRS 139.200(2)(a) to (f); and
    1. For persons that first begin making sales of services included in KRS 139.200(2)(g) to (q) on or after January 1, 2019, gross receipts derived from the sale of those services if the gross receipts are less than six thousand dollars ($6,000) within the first calendar year of operation. When gross receipts from these services exceed six thousand dollars ($6,000) in a calendar year: (24) (a) For persons that first begin making sales of services included in KRS 139.200(2)(g) to (q) on or after January 1, 2019, gross receipts derived from the sale of those services if the gross receipts are less than six thousand dollars ($6,000) within the first calendar year of operation. When gross receipts from these services exceed six thousand dollars ($6,000) in a calendar year:
      1. All gross receipts over six thousand dollars ($6,000) are taxable in that calendar year; and
      2. All gross receipts are subject to tax in subsequent calendar years.
    2. The exemption provided in this subsection shall not apply to a person that is also engaged in the business of selling tangible personal property, digital property, or services included in KRS 139.200(2)(a) to (f).

As used in this section the term “returnable containers” means containers of a kind customarily returned by the buyer of the contents for reuse. All other containers are “nonreturnable containers”;

If the service is classified as residential, use other than for “residential” purposes by the customer shall not negate the exemption;

and which will be for sale.

that is not otherwise exempt under subsection (9) of this section or KRS 139.480(10), if the charges for labor or services are separately stated on the invoice, bill of sale, or similar document given to purchaser;

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 46; 1966, ch. 240, § 1; 1976, ch. 155, § 18; 1976, ch. 77, part III, § 1, effective July 1, 1976; 1979 (Ex. Sess.), ch. 18, § 1, effective June 1, 1979; 1982, ch. 395, § 8, effective July 15, 1982; 1984, ch. 162, § 1, effective July 13, 1984; 1986, ch. 312, § 1, effective July 15, 1986; 1988, ch. 136, § 1, effective July 15, 1988; 1990, ch. 414, § 2, effective July 13, 1990; 1992, ch. 214, § 1, effective July 14, 1992; 1994, ch. 501, § 2, effective July 15, 1994; 1996, ch. 229, § 5, effective July 15, 1996; 1996, ch. 344, § 10, effective July 15, 1996; 1998, ch. 125, § 2, effective July 15, 1998; 1998, ch. 536, § 1, effective July 15, 1998; 1998, ch. 412, § 1, effective August 1, 1998; 2000, ch. 352, § 1, effective July 14, 2000; 2001, ch. 68, § 2, effective March 15, 2001; 2002, ch. 361, § 14, effective August 1, 2002; 2003, ch. 100, § 1, effective June 24, 2003; 2003, ch. 124, § 20, effective July 1, 2004; 2005, ch. 85, § 420, effective June 20, 2005; 2005, ch. 184, § 17, effective June 20, 2005; 2006, ch. 252, Pt. XXXVI, § 1, effective August 1, 2006; 2007, ch. 141, § 8, effective July 1, 2007; 2008, ch. 95, § 10, effective August 1, 2008; 2009, ch. 2, § 3, effective April 1, 2009; 2009, ch. 73, § 16, eff. July 1, 2009; 2013, ch. 119, § 13, effective July 1, 2013; 2016 ch. 111, § 28, effective January 1, 2017; 2018 ch. 207, § 121, effective April 27, 2018; 2019 ch. 151, § 26, effective June 27, 2019; 2020 ch. 91, § 35, effective August 1, 2020.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occur- ring on or after July 1, 2018.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

(6/24/2003). This section was amended by 2003 Ky. Acts ch. 100, sec. 1, effective June 24, 2003. Section 2 of that Act said, “The provisions of this Act shall also apply retroactively to periods beginning prior to the effective date of this Act.”

NOTES TO DECISIONS

1. Horse trailers.

Circuit court properly found that horse trailers which include living quarters similar to those in recreational vehicles fall within the statutory exemption from sales taxes under Ky. Rev. Stat. Ann. § 139.470(21). Appellant was not required to prove that the trailers were exclusively or primarily intended for carriage of freight or merchandise. Dep't of Revenue, Fin. & Admin. Cabinet v. Shinin' B Trailer Sales, LLC, 471 S.W.3d 309, 2015 Ky. App. LEXIS 131 (Ky. Ct. App. 2015).

Research References and Practice Aids

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Complaint by Landlord Against Tenant for Fixtures Removed, Form 302.01.

Lexis KY Tax P.I. 4,491 Sales to Non-Profit Organizations are exempt from sales tax on purchases with limitations.

Lexis KY Tax P.I. 4,113 Sales Tax on Industrial Machinery and Materials.

139.471. Transactions excluded from additional tax.

Excluded from the additional taxes imposed by KRS 139.200 and 139.310 are gross receipts:

  1. Derived from sales of and the storage, use, or other consumption of tangible personal property purchased for use in the performance of a lump-sum, fixed-fee contract executed on or before March 9, 1990;
  2. Derived from sales made under fixed price sales contracts executed on or before March 9, 1990, provided the contract specifies a five percent (5%) sales tax rate; and
  3. Derived from a lease or rental agreement entered into on or before March 9, 1990.

History. Enact. Acts 1990, ch. 476, Pt. VII A, § 623, effective July 1, 1990; 2007, ch. 141, § 20, effective July 1, 2007.

139.472. Exemption for certain medical items.

  1. Notwithstanding any other provisions of this chapter, the taxes imposed by this chapter shall not apply to the sale or purchase of:
    1. A drug purchased for the treatment of a human being for which a prescription is required by state or federal law, whether the drug is dispensed by a licensed pharmacist, administered by a physician or other health care provider, or distributed as a free sample to or from a physician’s office;
    2. An over-the-counter drug purchased for the treatment of a human being for which a prescription is issued;
    3. Medical oxygen and oxygen delivery equipment purchased for home use. Oxygen delivery equipment includes:
      1. High pressure cylinders, cryogenic tanks, oxygen concentrators, or similar medical oxygen delivery equipment including repair and replacement parts for the equipment; and
      2. Tubes, masks, and similar items required for the delivery of oxygen to the patient;
    4. Insulin and diabetic supplies, including hypodermic syringes, needles, and sugar (urine and blood) testing materials purchased by an individual for private use;
    5. Colostomy, urostomy, or ileostomy supplies purchased by an individual for private use;
    6. Prosthetic devices purchased by any health care provider for use in the treatment of a specific individual or purchased by an individual as prescribed by a person authorized under the laws of the Commonwealth to issue prescriptions;
    7. Prosthetic devices that are individually designed or created for an individual regardless of the purchaser;
    8. Mobility enhancing equipment for which a prescription is issued; and
    9. Durable medical equipment, including hospital beds for which a prescription is issued.
  2. Except as specifically provided in subsection (1) of this section, supplies or equipment used to deliver a drug to a patient are taxable.
  3. As used in this section:
    1. “Drug” means a compound, substance, or preparation and any component of a compound, substance, or preparation, other than food and food ingredients, dietary supplements, or alcoholic beverages as defined in KRS 139.485 , that is recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, or a supplement to any of them, or is:
      1. Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in humans; or
      2. Intended to affect the structure or any function of the human body;
    2. “Grooming and hygiene products” means soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions, regardless of whether the items meet the definition of an over-the-counter drug;
      1. “Over-the-counter drug” means a drug that contains a label that identifies the product as a drug as required by 21 C.F.R. sec. 201.66. The “over-the-counter drug” label shall include: (c) 1. “Over-the-counter drug” means a drug that contains a label that identifies the product as a drug as required by 21 C.F.R. sec. 201.66. The “over-the-counter drug” label shall include:
        1. A “Drug Facts” panel; or
        2. A statement of the active ingredients with a list of those ingredients contained in the compound, substance, or preparation.
      2. “Over-the-counter drug” shall not include grooming and hygiene products;
    3. “Prescription” means an order, formula, or recipe issued in any form of oral, written, electronic, or other means of transmission by a person authorized under the laws of the Commonwealth to prescribe a drug;
      1. “Prosthetic device” means a replacement, corrective, or supportive device, including repair and replacement parts for the device, worn on or in the body to: (e) 1. “Prosthetic device” means a replacement, corrective, or supportive device, including repair and replacement parts for the device, worn on or in the body to:
        1. Artificially replace a missing portion of the body;
        2. Prevent or correct a physical deformity or malfunction; or
        3. Support a weak or deformed portion of the body.
      2. “Prosthetic device” shall not include any of the following:
        1. Corrective eyeglasses;
        2. Contact lenses; or
        3. Dental prosthesis;
      1. “Mobility enhancing equipment” means equipment, including repair and replacements part for same, which: (f) 1. “Mobility enhancing equipment” means equipment, including repair and replacements part for same, which:
        1. Is primarily and customarily used to provide or increase the ability to move from one place to another and which is appropriate for use either in a home or a motor vehicle;
        2. Is not generally used by persons with normal mobility; and
        3. Does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.
      2. “Mobility enhancing equipment” shall not include durable medical equipment; and
      1. “Durable medical equipment” means equipment, including repair and replacement parts for same, which: (g) 1. “Durable medical equipment” means equipment, including repair and replacement parts for same, which:
        1. Can withstand repeated use;
        2. Is primarily and customarily used to serve a medical purpose;
        3. Generally is not useful to a person in the absence of illness or injury; and
        4. Is not worn in or on the body.
      2. “Durable medical equipment” shall not include mobility enhancing equipment or oxygen delivery equipment that is not worn in or on the body.
      3. As used in this paragraph, “repair and replacement parts” includes all components or attachments used in connection with durable medical equipment.

History. Enact. Acts 1970, ch. 12, § 1, effective January 1, 1971; 1986, ch. 471, § 1, effective July 15, 1986; 2000, ch. 209, § 1, effective July 14, 2000; 2001, ch. 9, § 1, effective June 21, 2001; 2003, ch. 124, § 21, effective July 1, 2004; 2005, ch. 154, § 2, effective June 20, 2005; 2007, ch. 141, § 9, effective July 1, 2007; 2008, ch. 39, § 1, effective August 1, 2008; 2008, ch. 95, § 1, effective August 1, 2008; 2009, ch. 73, § 17, effective July 1, 2009.

Compiler’s Notes.

Section 2 of Acts 2000, ch. 209, effective July 14, 2000, read: “The provisions of this Act shall apply to sales made on or after August 1, 2000.”

Section 2 of Acts, 2001, ch. 9, read: “This Act shall only apply to the sale or distribution of prescription medicine on or after July 1, 2001.”

Legislative Research Commission Notes.

(8/1/2008). Under the authority of KRS 7.136(1), the Reviser of Statutes has inserted subparagraph and subdivision designations in subsection (3)(f) of this statute during codification. The words in the text were not changed.

NOTES TO DECISIONS

  1. Construction.
  2. Administration of Drugs and Medicine By Injection.
  3. Prosthetic Devices.
  4. Distribution of Free Drug Samples.
1. Construction.

It was a forbidden, arbitrary and naked exercise of power for the Revenue Cabinet to apply the statute in a particular manner for 18 years and then, with no public hearing or any other logical reason, to announce an opposite interpretation of the statute. Revenue Cabinet v. Humana, Inc., 998 S.W.2d 494, 1998 Ky. App. LEXIS 89 (Ky. Ct. App. 1998).

2. Administration of Drugs and Medicine By Injection.

Since exemption of this section and former 103 KAR 26:020 is limited to situations where drugs and medicines are prescribed for the treatment of patients by an authorized person and dispensed by a registered pharmacist and that administering defined prescription medicine by injection is not equivalent to supplying or dispensing medicine, since it is undisputed that defendant injected all the drugs and medicine into his patients and none of the medication in question was provided by defendant to his patients to be taken outside of his office and administered by the patient, such transactions are not exempt from the sales and use tax pursuant to this section and 103 KAR 26:020(2). Revenue Cabinet v. Charles R. Gaba, P.S.C., 885 S.W.2d 706, 1994 Ky. App. LEXIS 122 (Ky. Ct. App. 1994).

3. Prosthetic Devices.

Dental items, including dentures, crowns, bridges, and braces, did not constitute prosthetic devices within the meaning of the statute since a person who needs dentures, crowns, bridges, or braces for his or her teeth is not crippled. Revenue Cabinet v. Revenue Cabinet, 37 S.W.3d 717, 2000 Ky. LEXIS 201 ( Ky. 2000 ).

Because the addition of the words “prescribed by a licensed physician” evidences a legislative intent to exempt certain prosthetic devices from a sales and use tax, the former version of KRS 139.472(2) required that the devices be for the use of a crippled person, inter alia, as a brace or substitute for a bodily structure; therefore, the taxpayers were not entitled to an exemption for any artificial device prescribed by a licensed physician. King Drugs, Inc. v. Commonwealth, 2005 Ky. App. LEXIS 240 (Ky. Ct. App. Sept. 2, 2005), rev'd, 250 S.W.3d 643, 2008 Ky. LEXIS 98 ( Ky. 2008 ).

Kentucky Board of Tax Appeals properly held that the 1986 version of KRS 139.472 was neither ambiguous nor absurd and that it provided an exemption, parallel to the exemption for sales of prescription medicine, for all sales of artificial devices prescribed by a licensed physician. King Drugs, Inc. v. Commonwealth, 250 S.W.3d 643, 2008 Ky. LEXIS 98 ( Ky. 2008 ).

4. Distribution of Free Drug Samples.

The distribution of free drug samples by a pharmaceutical company was exempt from taxation under the statute since it is the nature of the medicine, rather than the manner in which it is actually dispensed, that qualifies it as a prescription medicine. Smithkline Beecham Corp. v. Revenue Cabinet, 40 S.W.3d 883, 2001 Ky. App. LEXIS 8 (Ky. Ct. App. 2001).

Opinions of Attorney General.

Eyeglasses are not exempt from the sales tax under this section. OAG 70-469 .

To qualify for the prescription medicine exemption under subsection (1) of this section, three criteria must be met: (1) The drug or medicine must be a substance or preparation used to diagnose, cure, mitigate, treat or prevent disease; (2) The drug or medicine must be prescribed for treatment of a human being by a person authorized to prescribe such medicine; and (3) The drug or medicine must be dispensed by a registered pharmacist. OAG 85-64 .

The liberal language of subsection (1) of this section makes it clear that as long as a prescription has been issued, the drug or medicine may be purchased tax free, even if the drug or medicine could be purchased lawfully without a prescription. OAG 85-64 .

Only drugs or medicines applied to the body externally or internally are eligible for exemption under subsection (1) of this section. OAG 85-64 .

Prior to the 2003 amendment, items such as hypodermic syringes, Testape and Clinitest are not medicinal substances or preparations within the statutory definition of “prescription medicine,” and are therefore not eligible for exemption from sales and use tax pursuant to subsection (1) of this section. OAG 85-64 .

139.474. State owned and operated college bookstores competing with off-campus privately operated stores subject to tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1970, ch. 275, § 1) was repealed by Acts 1978, ch. 258, § 3, effective June 17, 1978.

139.480. Property exempt.

Any other provision of this chapter to the contrary notwithstanding, the terms “sale at retail,” “retail sale,” “use,” “storage,” and “consumption,” as used in this chapter, shall not include the sale, use, storage, or other consumption of:

  1. Locomotives or rolling stock, including materials for the construction, repair, or modification thereof, or fuel or supplies for the direct operation of locomotives and trains, used or to be used in interstate commerce;
  2. Coal for the manufacture of electricity;
    1. All energy or energy-producing fuels used in the course of manufacturing, processing, mining, or refining and any related distribution, transmission, and transportation services for this energy that are billed to the user, to the extent that the cost of the energy or energy-producing fuels used, and related distribution, transmission, and transportation services for this energy that are billed to the user exceed three percent (3%) of the cost of production. (3) (a) All energy or energy-producing fuels used in the course of manufacturing, processing, mining, or refining and any related distribution, transmission, and transportation services for this energy that are billed to the user, to the extent that the cost of the energy or energy-producing fuels used, and related distribution, transmission, and transportation services for this energy that are billed to the user exceed three percent (3%) of the cost of production.
    2. Cost of production shall be computed on the basis of a plant facility, which shall include all operations within the continuous, unbroken, integrated manufacturing or industrial processing process that ends with a product packaged and ready for sale.
    3. A person who performs a manufacturing or industrial processing activity for a fee and does not take ownership of the tangible personal property that is incorporated into, or becomes the product of, the manufacturing or industrial processing activity is a toller. For periods on or after July 1, 2018, the costs of the tangible personal property shall be excluded from the toller’s cost of production at a plant facility with tolling operations in place as of July 1, 2018.
    4. For plant facilities that begin tolling operations after July 1, 2018, the costs of tangible personal property shall be excluded from the toller’s cost of production if the toller:
      1. Maintains a binding contract for periods after July 1, 2018, that governs the terms, conditions, and responsibilities with a separate legal entity, which holds title to the tangible personal property that is incorporated into, or becomes the product of, the manufacturing or industrial processing activity;
      2. Maintains accounting records that show the expenses it incurs to fulfill the binding contract that include but are not limited to energy or energy-producing fuels, materials, labor, procurement, depreciation, maintenance, taxes, administration, and office expenses;
      3. Maintains separate payroll, bank accounts, tax returns, and other records that demonstrate its independent operations in the performance of its tolling responsibilities;
      4. Demonstrates one (1) or more substantial business purposes for the tolling operations germane to the overall manufacturing, industrial processing activities, or corporate structure at the plant facility. A business purpose is a purpose other than the reduction of sales tax liability for the purchases of energy and energy-producing fuels; and
      5. Provides information to the department upon request that documents fulfillment of the requirements in subparagraphs 1. to 4. of this paragraph and gives an overview of its tolling operations with an explanation of how the tolling operations relate and connect with all other manufacturing or industrial processing activities occurring at the plant facility.
  3. Livestock of a kind the products of which ordinarily constitute food for human consumption, provided the sales are made for breeding or dairy purposes and by or to a person regularly engaged in the business of farming;
  4. Poultry for use in breeding or egg production;
  5. Farm work stock for use in farming operations;
  6. Seeds, the products of which ordinarily constitute food for human consumption or are to be sold in the regular course of business, and commercial fertilizer to be applied on land, the products from which are to be used for food for human consumption or are to be sold in the regular course of business; provided such sales are made to farmers who are regularly engaged in the occupation of tilling and cultivating the soil for the production of crops as a business, or who are regularly engaged in the occupation of raising and feeding livestock or poultry or producing milk for sale; and provided further that tangible personal property so sold is to be used only by those persons designated above who are so purchasing;
  7. Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals to be used in the production of crops as a business, or in the raising and feeding of livestock or poultry, the products of which ordinarily constitute food for human consumption;
  8. Feed, including pre-mixes and feed additives, for livestock or poultry of a kind the products of which ordinarily constitute food for human consumption;
  9. Machinery for new and expanded industry;
  10. Farm machinery. As used in this section, the term “farm machinery”:
    1. Means machinery used exclusively and directly in the occupation of:
      1. Tilling the soil for the production of crops as a business;
      2. Raising and feeding livestock or poultry for sale; or
      3. Producing milk for sale;
    2. Includes machinery, attachments, and replacements therefor, repair parts, and replacement parts which are used or manufactured for use on, or in the operation of farm machinery and which are necessary to the operation of the machinery, and are customarily so used, including but not limited to combine header wagons, combine header trailers, or any other implements specifically designed and used to move or transport a combine head; and
    3. Does not include:
      1. Automobiles;
      2. Trucks;
      3. Trailers, except combine header trailers; or
      4. Truck-trailer combinations;
  11. Tombstones and other memorial grave markers;
  12. On-farm facilities used exclusively for grain or soybean storing, drying, processing, or handling. The exemption applies to the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities;
  13. On-farm facilities used exclusively for raising poultry or livestock. The exemption shall apply to the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities. The exemption shall apply but not be limited to vent board equipment, waterer and feeding systems, brooding systems, ventilation systems, alarm systems, and curtain systems. In addition, the exemption shall apply whether or not the seller is under contract to deliver, assemble, and incorporate into real estate the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities;
  14. Gasoline, special fuels, liquefied petroleum gas, and natural gas used exclusively and directly to:
    1. Operate farm machinery as defined in subsection (11) of this section;
    2. Operate on-farm grain or soybean drying facilities as defined in subsection (13) of this section;
    3. Operate on-farm poultry or livestock facilities defined in subsection (14) of this section;
    4. Operate on-farm ratite facilities defined in subsection (23) of this section;
    5. Operate on-farm llama or alpaca facilities as defined in subsection (25) of this section; or
    6. Operate on-farm dairy facilities;
  15. Textbooks, including related workbooks and other course materials, purchased for use in a course of study conducted by an institution which qualifies as a nonprofit educational institution under KRS 139.495 . The term “course materials” means only those items specifically required of all students for a particular course but shall not include notebooks, paper, pencils, calculators, tape recorders, or similar student aids;
  16. Any property which has been certified as an alcohol production facility as defined in KRS 247.910 ;
  17. Aircraft, repair and replacement parts therefor, and supplies, except fuel, for the direct operation of aircraft in interstate commerce and used exclusively for the conveyance of property or passengers for hire. Nominal intrastate use shall not subject the property to the taxes imposed by this chapter;
  18. Any property which has been certified as a fluidized bed energy production facility as defined in KRS 211.390 ;
      1. Any property to be incorporated into the construction, rebuilding, modification, or expansion of a blast furnace or any of its components or appurtenant equipment or structures as part of an approved supplemental project, as defined by KRS 154.26-010 ; and (20) (a) 1. Any property to be incorporated into the construction, rebuilding, modification, or expansion of a blast furnace or any of its components or appurtenant equipment or structures as part of an approved supplemental project, as defined by KRS 154.26-010 ; and
      2. Materials, supplies, and repair or replacement parts purchased for use in the operation and maintenance of a blast furnace and related carbon steel-making operations as part of an approved supplemental project, as defined by KRS 154.26-010.
    1. The exemptions provided in this subsection shall be effective for sales made:
      1. On and after July 1, 2018; and
      2. During the term of a supplemental project agreement entered into pursuant to KRS 154.26-090 ;
  19. Beginning on October 1, 1986, food or food products purchased for human consumption with food coupons issued by the United States Department of Agriculture pursuant to the Food Stamp Act of 1977, as amended, and required to be exempted by the Food Security Act of 1985 in order for the Commonwealth to continue participation in the federal food stamp program;
  20. Machinery or equipment purchased or leased by a business, industry, or organization in order to collect, source separate, compress, bale, shred, or otherwise handle waste materials if the machinery or equipment is primarily used for recycling purposes;
  21. Ratite birds and eggs to be used in an agricultural pursuit for the breeding and production of ratite birds, feathers, hides, breeding stock, eggs, meat, and ratite by-products, and the following items used in this agricultural pursuit:
    1. Feed and feed additives;
    2. Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;
    3. On-farm facilities, including equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities. The exemption shall apply to incubation systems, egg processing equipment, waterer and feeding systems, brooding systems, ventilation systems, alarm systems, and curtain systems. In addition, the exemption shall apply whether or not the seller is under contract to deliver, assemble, and incorporate into real estate the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities;
  22. Embryos and semen that are used in the reproduction of livestock, if the products of these embryos and semen ordinarily constitute food for human consumption, and if the sale is made to a person engaged in the business of farming;
  23. Llamas and alpacas to be used as beasts of burden or in an agricultural pursuit for the breeding and production of hides, breeding stock, fiber and wool products, meat, and llama and alpaca by-products, and the following items used in this pursuit:
    1. Feed and feed additives;
    2. Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; and
    3. On-farm facilities, including equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities. The exemption shall apply to waterer and feeding systems, ventilation systems, and alarm systems. In addition, the exemption shall apply whether or not the seller is under contract to deliver, assemble, and incorporate into real estate the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities;
  24. Baling twine and baling wire for the baling of hay and straw;
  25. Water sold to a person regularly engaged in the business of farming and used in the:
    1. Production of crops;
    2. Production of milk for sale; or
    3. Raising and feeding of:
      1. Livestock or poultry, the products of which ordinarily constitute food for human consumption; or
      2. Ratites, llamas, alpacas, buffalo, cervids or aquatic organisms;
  26. Buffalos to be used as beasts of burden or in an agricultural pursuit for the production of hides, breeding stock, meat, and buffalo by-products, and the following items used in this pursuit:
    1. Feed and feed additives;
    2. Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals;
    3. On-farm facilities, including equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities. The exemption shall apply to waterer and feeding systems, ventilation systems, and alarm systems. In addition, the exemption shall apply whether or not the seller is under contract to deliver, assemble, and incorporate into real estate the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities;
  27. Aquatic organisms sold directly to or raised by a person regularly engaged in the business of producing products of aquaculture, as defined in KRS 260.960 , for sale, and the following items used in this pursuit:
    1. Feed and feed additives;
    2. Water;
    3. Insecticides, fungicides, herbicides, rodenticides, and other farm chemicals; and
    4. On-farm facilities, including equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities and, any gasoline, special fuels, liquefied petroleum gas, or natural gas used to operate the facilities. The exemption shall apply, but not be limited to: waterer and feeding systems; ventilation, aeration, and heating systems; processing and storage systems; production systems such as ponds, tanks, and raceways; harvest and transport equipment and systems; and alarm systems. In addition, the exemption shall apply whether or not the seller is under contract to deliver, assemble, and incorporate into real estate the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities;
  28. Members of the genus cervidae permitted by KRS Chapter 150 that are used for the production of hides, breeding stock, meat, and cervid by-products, and the following items used in this pursuit:
    1. Feed and feed additives;
    2. Insecticides, fungicides, herbicides, rodenticides, and other chemicals; and
    3. On-site facilities, including equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities. In addition, the exemption shall apply whether or not the seller is under contract to deliver, assemble, and incorporate into real estate the equipment, machinery, attachments, repair and replacement parts, and any materials incorporated into the construction, renovation, or repair of the facilities;
    1. Repair or replacement parts for the direct operation or maintenance of a motor vehicle, including any towed unit, used exclusively in interstate commerce for the conveyance of property or passengers for hire, provided the motor vehicle is licensed for use on the highway and its declared gross vehicle weight with any towed unit is forty-four thousand and one (44,001) pounds or greater. Nominal intrastate use shall not subject the property to the taxes imposed by this chapter; (31) (a) Repair or replacement parts for the direct operation or maintenance of a motor vehicle, including any towed unit, used exclusively in interstate commerce for the conveyance of property or passengers for hire, provided the motor vehicle is licensed for use on the highway and its declared gross vehicle weight with any towed unit is forty-four thousand and one (44,001) pounds or greater. Nominal intrastate use shall not subject the property to the taxes imposed by this chapter;
    2. Repair or replacement parts for the direct operation and maintenance of a motor vehicle operating under a charter bus certificate issued by the Transportation Cabinet under KRS Chapter 281, or under similar authority granted by the United States Department of Transportation; and
    3. For the purposes of this subsection, “repair or replacement parts” means tires, brakes, engines, transmissions, drive trains, chassis, body parts, and their components. “Repair or replacement parts” shall not include fuel, machine oils, hydraulic fluid, brake fluid, grease, supplies, or accessories not essential to the operation of the motor vehicle itself, except when sold as part of the assembled unit, such as cigarette lighters, radios, lighting fixtures not otherwise required by the manufacturer for operation of the vehicle, or tool or utility boxes; and
  29. Food donated by a retail food establishment or any other entity regulated under KRS 217.127 to a nonprofit organization for distribution to the needy.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 47; 1968, ch. 36; 1974, ch. 137, § 2; 1976, ch. 226, § 1; 1976, ch. 286, § 1; 1978, ch. 135, § 1, effective June 17, 1978; 1978, ch. 233, § 28, effective June 17, 1978; 1978, ch. 258, § 1, effective June 17, 1978; 1980, ch. 210, § 4, effective July 15, 1980; 1982, ch. 431, § 5, effective July 15, 1982; 1986, ch. 206, § 1, effective July 15, 1986; 1986, ch. 210, § 1, effective July 15, 1986; 1986, ch. 211, § 1, effective July 15, 1986; 1986, ch. 396, § 1, effective July 15, 1986; 1986, ch. 476, § 3, effective July 15, 1986; 1988, ch. 302, § 1, effective July 15, 1988; 1990, ch. 344, § 1, effective July 13, 1990; 1991 (1st Ex. Sess.), ch. 12, § 46, effective February 26, 1991; 1992, ch. 7, § 1, effective July 14, 1992; 1992, ch. 364, § 1, effective July 14, 1992; 1992, ch. 380, § 1, effective July 14, 1992; 1994, ch. 68, § 4, effective July 15, 1994; 1996, ch. 333, § 1, effective April 10, 1996; 1998, ch. 35, § 1, effective July 15, 1998; 1998, ch. 125, § 1, effective July 15, 1998; 1998, ch. 366, § 1, effective July 15, 1998; 1998, ch. 536, § 3, effective July 15, 1998; 1998, ch. 29, § 1, effective August 1, 1998; 1998, ch. 264, § 1, effective August 1, 1998; 1998, ch. 265, § 1, effective August 1, 1998; 2002, ch. 254, § 1, effective April 8, 2002; 2003, ch. 124, § 40, effective January 1, 2004; 2005, ch. 173, Pt. XVI, § 3, effective June 1, 2005; 2005, ch. 173, § Pt. XIX, § 2, effective August 1, 2005; 2006, ch. 64, § 4, effective July 12, 2006; 2013, ch. 119, § 14, effective July 1, 2013; 2014, ch. 129, § 6, effective August 1, 2014; 2016 ch. 109, § 4, effective August 1, 2016; 2018 ch. 171, § 44, effective April 14, 2018; 2018 ch. 207, § 44, effective April 27, 2018; 2019 ch. 151, § 27, effective June 27, 2019.

Compiler’s Notes.

Section 2 of Acts 1996, ch. 333 read: “The amendment contained in Section 1 of this Act is retroactive to January 1, 1980. No refund of tax paid for purchases made before the effective date of this Act shall be made.”

The Food Stamp Act of 1977, referred to in this section, is compiled principally as 7 USCS § 2011 et seq., and the Food Security Act of 1985 (P.L. 99-198) is compiled throughout Titles 7, 16 and 46 of the USCS.

Legislative Research Commission Notes.

(6/27/2019). This statute was amended in Section 27 of 2019 Ky. Acts ch. 151. Section 86 of that Act reads, “No claim for refund or credit of a tax overpayment for any taxable period ending prior to July 1, 2018, made by an amended return, tax refund application, or any other method after June 30, 2018, and based on the amendments to subsection (3) of Section 27 of this Act [this statute] or based on the amendments to Section 74 or 75 of this Act, shall be recognized for any purpose.”

(6/27/2019). This statute was amended in Section 27 of 2019 Ky. Acts ch. 151. Section 87 of that Act reads, “Notwithstanding KRS 446.090 , the amendments to subsection (3) of Section 27 of this Act [this statute] and the amendments to Sections 74 [KRS 160.613 ] and 75 [KRS 160.6131 ] of this Act are not severable. If the amendment made to subsection (3) of Section 27 of this Act or the amendments to Section 74 or 75 of this Act is declared invalid for any reason, then all amendments to subsection (3) of Section 27 of this Act and the amendments to Sections 74 and 75 of this Act shall also be invalid.”

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/8/2002). The amendment made to this statute in 2002 Ky. Acts ch. 254, sec. 1 which created subsection (31) of this statute, “applies to sales made on or after July 1, 2002.” 2002 Ky. Acts ch. 254, sec. 3.

(7/15/98). This section was amended by 1998 Ky. Acts chs. 29, 35, 125, 264, 265, 366, and 536. Where these Acts are not in conflict, they have been codified together. Where a conflict exists between chs. 29 and 35 and ch. 536, Acts ch. 536, which was last enacted by the General Assembly, prevails under KRS 446.250 .

NOTES TO DECISIONS

  1. Purpose.
  2. Construction.
  3. Legislative Determination.
  4. Promotion of Industrial Development.
  5. Machinery.
  6. Manufactured Article.
  7. Television Broadcasting.
  8. Rolling Stock.
  9. Computers.
  10. Mining Equipment.
  11. Livestock.
  12. —Feed.
  13. Burden of Proof.
  14. Costs of Production.
  15. Plant Facilities.
  16. Energy Costs.
1. Purpose.

The ultimate purpose of the exemption for machinery used in new manufacturing processes is to enhance the competitive position of this state as against other states in encouraging the location and expansion of the industries whose manufacturing processes require volume employment of people. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

The legislative intent in enacting the exemption statute was to enhance Kentucky’s competitive position in manufacturing. Ross v. Greene & Webb Lumber Co., 567 S.W.2d 302, 1978 Ky. LEXIS 368 ( Ky. 1978 ); Department of Revenue v. State Contracting & Stone Co., 572 S.W.2d 421, 1978 Ky. LEXIS 398 ( Ky. 1978 ).

The legislature intended that a taxpayer who seeks the exemption allowed under subsection (3) of this section must include in its calculation of cost of production only the permanent structures which contain the operation for which the exemption is sought. Revenue Cabinet, Commonwealth v. Beam, 798 S.W.2d 134, 1990 Ky. LEXIS 89 ( Ky. 1990 ).

2. Construction.

One of the important circumstances in construing the word “manufacturing” as used in a tax-exemption statute is the apparent objective of the Legislature in enacting it. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

The “cost of production” includes the cost of raw materials as well as the cost of processing; thus, a vegetable oil refining and distribution company was required to include the cost of the crude oil itself in its cost of production for the purposes of the revenue statute. Also, the fact that the cost-of-energy computation must be made on the basis of plant facilities at one location does not serve to limit taxpayer’s production costs. Further, the statute does not violate the equal protection provisions of the Kentucky Constitution because a processor of bought materials is not similarly situated to a processor of materials owned by others or a processor of its own materials. Louisville Edible Oil Prods. v. Revenue Cabinet Commonwealth, 957 S.W.2d 272, 1997 Ky. App. LEXIS 81 (Ky. Ct. App. 1997).

3. Legislative Determination.

The policy matter of exempting new machinery to be used in new business from sales taxation is for legislative determination and not for judicial determination. Department of Revenue v. Spalding Laundry & Dry Cleaning Co., 436 S.W.2d 522, 1968 Ky. LEXIS 184 ( Ky. 1968 ).

4. Promotion of Industrial Development.

The promotion of new and expanded industrial development, by providing tax benefits, is a fixed policy of the Commonwealth. Department of Revenue v. Spalding Laundry & Dry Cleaning Co., 436 S.W.2d 522, 1968 Ky. LEXIS 184 ( Ky. 1968 ).

5. Machinery.

The exemption from the sales tax of machinery used in manufacturing is not arbitrary and unreasonable because it does not equally exempt similar machinery used in a service industry or plant. Department of Revenue v. Spalding Laundry & Dry Cleaning Co., 436 S.W.2d 522, 1968 Ky. LEXIS 184 ( Ky. 1968 ).

Materials and supplies having a useful life of less than a year which were used in the operation, maintenance and repair of machinery were not exempt from the sales and use tax where the materials and supplies consisted basically of nonexempt replacement parts for machinery which was not exempt. Mansbach Metal Co. v. Commonwealth, Dep't of Revenue, 521 S.W.2d 85, 1975 Ky. LEXIS 151 ( Ky. 1975 ).

A scoop loader used to load limestone onto trucks for the use of an asphalt company and its customers was subject to the sales and use tax since it was used primarily for the physical transfer of material from one place to another. Department of Revenue v. State Contracting & Stone Co., 559 S.W.2d 166, 1977 Ky. App. LEXIS 859 (Ky. Ct. App. 1977).

A storage bin was machinery for new and expanded industry directly used in the process of manufacturing asphalt and was therefore exempt from the sales and use tax as was pollution control equipment since without it bituminous asphalt could not be manufactured at all. Department of Revenue v. State Contracting & Stone Co., 559 S.W.2d 166, 1977 Ky. App. LEXIS 859 (Ky. Ct. App. 1977).

Machinery used to process and reconstitute used drums is machinery used directly in a manufacturing process and, thus, is exempt from sales and use tax. Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ).

Contested machinery constituted equipment used at sawmill to carry logs to the conveyors and to transfer the lumber to the drying sheds, and was essential to the total process of manufacturing; all the items were therefore exempt as being “directly used in the manufacturing process.” Ross v. Greene & Webb Lumber Co., 567 S.W.2d 302, 1978 Ky. LEXIS 368 ( Ky. 1978 ).

Machinery used in procedures essential to the total process of manufacturing are used directly in the manufacturing process, and are thus exempt from sales and use taxes. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

Reclamation machinery and equipment are part and parcel of the process of extraction of minerals, ores, coal, clay, stone and natural gas; therefore, such machinery and equipment is exempt from the sales and use taxes as machinery for a new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

Where the mining company used an underground scoop powered by batteries which moved loosened coal to an exterior stockpile area, and the scoop required three (3) complete sets of batteries, each of which is used for approximately three hours while the other two (2) were being recharged, all three (3) sets of batteries and the battery charger were used “directly” in the extraction of coal and therefore were exempt from the sales and use taxes as machinery for a new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

Horses are not livestock under this section and the machinery used in the taxpayer’s regular horse farm activities could not be classified as “farm machinery.” Stoner Creek Stud, Inc. v. Revenue Cabinet Commonwealth, 746 S.W.2d 73, 1987 Ky. App. LEXIS 609 (Ky. Ct. App. 1987).

Since construction company purchased pieces of equipment in order to expand its road paving business and not as replacement equipment, and where asphalt generated by company’s plant was used exclusively by company, and where no other paving company supported the circuit court and Tax Board’s ruling that construction company’s business was an “integrated enterprise,” the equipment was exempt. Revenue Cabinet of Kentucky v. Carpenter Constr. Co., 763 S.W.2d 130, 1988 Ky. App. LEXIS 106 (Ky. Ct. App. 1988).

Furniture, building materials and interior decorations utilized in a horse farm manager’s house and “advertising complex” were not exempt from the sales and use tax pursuant to subdivision (8) (now subdivision (10)) of this section because they cannot be classified as “machinery for new and expanded industry.” Shadowlawn Farm v. Revenue Cabinet, Commonwealth, 779 S.W.2d 232, 1989 Ky. App. LEXIS 145 (Ky. Ct. App. 1989).

Certain pieces of equipment used by a foreign corporation that provided various services to businesses engaged in extraction of oil and gas did not qualify for exemption from use taxes as “machinery for new and expanded industry”; the court held that the corporation did not produce a marketable commodity and its machinery was not “incorporated” at any facility that extracted oil and gas. Nowsco Well Service v. Revenue Cabinet Commonwealth, 804 S.W.2d 10, 1990 Ky. App. LEXIS 182 (Ky. Ct. App. 1990).

6. Manufactured Article.

It is not the number of processes or the various kinds of treatment through which the alleged manufactured article is subjected that determines the question of whether or not it is a manufacturing process, but rather the character and kind of article that is produced, after being so subjected, that is the decisive factor. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

7. Television Broadcasting.

Television broadcasting is not a manufacturing process within the meaning of former subdivision (8) of this section. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ).

8. Rolling Stock.

Materials exempt from use tax as rolling stock includes only those items which become a component part of the locomotive or rolling stock being constructed, repaired or modified. Louisville & N. R. Co. v. Department of Revenue, 551 S.W.2d 259, 1977 Ky. App. LEXIS 721 (Ky. Ct. App. 1977).

9. Computers.

Where the main function of a computer was to receive data placed on prepunched cards by the workmen, process the data and release information and instructions designed to assist the plant personnel in performing their duties and it did not participate in any way in the physical production of transformers, it was not machinery used directly in the manufacturing process and was not exempt from sales tax. Commonwealth, Dep't of Revenue v. Kuhlman Corp., 564 S.W.2d 14, 1978 Ky. LEXIS 347 ( Ky. 1978 ).

10. Mining Equipment.

The roof bolter which was used by the mining company to help support the roof of one excavated area so that more coal could be mined in that area was an indispensable part of the mining process since additional coal could not be mined without support for the roof of previously mined areas; therefore, the roof bolter was within the exemption under this section from sales and use taxes for machinery for new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ).

11. Livestock.

Horses are not livestock since they are not consumed at the dinner table and therefore, subdivision (7) (now subdivision (9)) of this section did not exempt feed, fertilizer, tractor parts and other items used in operating a horse farm. Shadowlawn Farm v. Revenue Cabinet, Commonwealth, 779 S.W.2d 232, 1989 Ky. App. LEXIS 145 (Ky. Ct. App. 1989).

12. —Feed.

Feed purchased by taxpayer for use in its horse farming operations was not exempt from use and sales taxes pursuant to subdivision (7) (now subdivision (9)) of this section. Stoner Creek Stud, Inc. v. Revenue Cabinet Commonwealth, 746 S.W.2d 73, 1987 Ky. App. LEXIS 609 (Ky. Ct. App. 1987).

13. Burden of Proof.

The burden is upon the party claiming an exemption to demonstrate their entitlement to the exemption and that they have met all the statutory requirements. Epsilon Trading Co. v. Revenue Cabinet, 775 S.W.2d 937, 1989 Ky. App. LEXIS 116 (Ky. Ct. App. 1989).

14. Costs of Production.

A taxpayer which can demonstrate that the operation for which the exemption under subsection (3) of this section is claimed is a truly separate and complete operation, not dependent on the other operations at that site for production of a completed product or process, need not include the costs of the other unrelated operations in its costs of production for that one operation. Revenue Cabinet, Commonwealth v. Beam, 798 S.W.2d 134, 1990 Ky. LEXIS 89 ( Ky. 1990 ).

15. Plant Facilities.

The definition of plant facilities found in subsection (3) does not apply only to the energy exemption; it also controls with respect to the new and expanded industry exemption. Camera Ctr., Inc. v. Revenue Cabinet, 34 S.W.3d 39, 2000 Ky. LEXIS 110 ( Ky. 2000 ).

16. Energy Costs.

Corporations were entitled to tax refunds pursuant to KRS 139.480(3), because the corporations’ Plexiglas operation, emulsions operation, and distilling operations were separate and distinct for purposes of KRS 139.480(3); although the corporations’ downstream operations were dependent upon distilled methyl methacrylate, they were not dependent upon the distilling operation to produce it, and each of the three operations produced a completed product that was marketable for its intended use without regard to the other operations. Fin. & Admin. Cabinet, Dep't of Revenue v. Rohm & Haas Co., 2009 Ky. App. LEXIS 18 (Ky. Ct. App.), sub. op., 2009 Ky. App. Unpub. LEXIS 1087 (Ky. Ct. App. Feb. 6, 2009), review denied, ordered not published, 2010 Ky. LEXIS 37 (Ky. Jan. 13, 2010).

Cited in:

George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ); Paducah Marine Ways, Inc. v. Revenue Cabinet Commonwealth, 730 S.W.2d 956, 1987 Ky. App. LEXIS 495 (Ky. Ct. App. 1987); Revenue Cabinet v. Kentucky-American Water Co., 997 S.W.2d 2, 1999 Ky. LEXIS 54 ( Ky. 1999 ).

Opinions of Attorney General.

Since the state government is not exempt from payment of Kentucky sales and use tax, a state agency could not be exempted from the tax. OAG 61-520 .

Hydraulic fluid is not an energy fuel or an energy producing fluid but a medium of transferring energy already created and is not exempted from the sales tax by this section. OAG 62-709 .

Under this section fuel oil used in producing steam for curing manufactured blocks is exempt from sales tax if its cost exceeds three percent (3%) of the cost of production which would include the cost of raw materials, labor costs, and overhead. OAG 62-709 .

An examination of this section and former KRS 139.170 and the implementing regulation, No. SU-8, leads to the conclusion that mining machinery purchased by an incorporator of a newly formed corporation and then leased to the corporation is exempt from sales and use tax as machinery for new and expanded industry. OAG 75-47 .

Liquefied petroleum gas used for the following purposes: grain drying, tobacco curing, dairy production (dairy parlors), farrowing pens, and poultry houses for the production of poultry, would come within subsection (13) (now (16)) of this section. OAG 78-613 .

Research References and Practice Aids

Journal of Mineral Law & Policy.

Comments, The Sales Tax Exemption for Machinery for New and Expanded Industry Applied to Coal Mining After Amax Coal Company, 3 J.M.L. & P. 551 (1988).

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Cox, What May States Do About Out-of-State Waste in Light of Recent Supreme Court Decisions Applying the Dormant Commerce Clause? Kentucky As Case Study in the Waste Wars, 83 Ky. L.J. 551 (1994-95).

139.481. Agriculture exemption number required for exemption — Eligibility for application — Documentation to seller for receipt of exemption — Administrative regulations — Expiration and renewal of exemption number — Searchable database of agriculture exemption numbers.

  1. On and after January 1, 2022, every person claiming an exemption provided under KRS 139.480(4) to (9), KRS 139.480(11), KRS 139.480(13) to (15), and KRS 139.480(23) to (30) shall include on the appropriate exemption certificate an agriculture exemption number issued by the department.
  2. A person is eligible to apply for an agriculture exemption number if the person is:
    1. Regularly engaged in the occupation of tilling and cultivating the soil for the production of crops as a business;
    2. Regularly engaged in the occupation of raising and feeding livestock of a kind the products of which ordinarily constitute food for human consumption;
    3. Raising and feeding poultry;
    4. Producing milk for sale; or
    5. Regularly engaged in raising ratite birds, llamas, alpacas, buffalos, cervids, or aquatic organisms as an agricultural pursuit.
    1. On and after January 1, 2022, persons that receive an agriculture exemption number and choose to claim the exemptions outlined in subsection (1) of this section shall, at least one (1) time, provide the seller or retailer from whom they purchase exempt tangible personal property with one (1) of the following: (3) (a) On and after January 1, 2022, persons that receive an agriculture exemption number and choose to claim the exemptions outlined in subsection (1) of this section shall, at least one (1) time, provide the seller or retailer from whom they purchase exempt tangible personal property with one (1) of the following:
      1. A fully completed exemption certificate, as prescribed by the department, which shall contain the agriculture exemption number issued by the department; or
      2. A fully completed Streamlined Sales Tax Certificate of Exemption which shall include the agriculture exemption number.
    2. A purchaser that has met the requirements of paragraph (a) of this subsection may issue the agriculture exemption number to the seller or retailer for subsequent purchases as evidence of an exempt purchase for as long as the agriculture exemption number is valid.
    3. Persons that meet the requirements of subsection (2) of this section but have not yet received an agriculture exemption number from the department prior to January 1, 2022, may issue a fully completed exemption certificate without the agriculture exemption number prior to July 1, 2022.
    1. On or before April 1, 2021, the department, by administrative regulation, shall develop an application form for the agriculture exemption number and procedures by which the application form may also be submitted either electronically or by paper filing no later than January 1, 2022. (4) (a) On or before April 1, 2021, the department, by administrative regulation, shall develop an application form for the agriculture exemption number and procedures by which the application form may also be submitted either electronically or by paper filing no later than January 1, 2022.
    2. The application shall include:
      1. The person’s name and mailing address;
      2. The farm address, if different from the person’s mailing address;
      3. An affirmation that the person meets at least one (1) of the criteria outlined in subsection (2) of this section;
      4. The person’s driver’s license number; and
      5. One (1) of the following forms of documentation:
        1. IRS Schedule F, Profit or Loss from Farming;
        2. IRS Form 4835, Farm Rental Income and Expenses;
        3. The farm service agency number or numbers assigned by the United States Department of Agriculture pertaining to the parcels of land on which agriculture activity will take place; or
        4. Any other type of information that may establish to the satisfaction of the Commissioner that the applicant qualifies for the agriculture exemption number.
    1. The agriculture exemption number shall expire three (3) years from the date that the number is issued by the department or when the person ceases to engage in the agriculture activity for which the agriculture exemption number was granted, whichever comes first. (5) (a) The agriculture exemption number shall expire three (3) years from the date that the number is issued by the department or when the person ceases to engage in the agriculture activity for which the agriculture exemption number was granted, whichever comes first.
    2. The person may apply for a renewal of the agriculture exemption number prior to the expiration date if the person continues to meet the requirements of subsection (2) of this section and provides documentation required by subsection (4)(b)5. of this section. The department shall, by administrative regulation, prescribe the electronic process for renewing an agriculture exemption number.
    1. On or before July 1, 2022, the department shall develop and provide an online searchable database on the department’s Web site that the seller or retailer may use to confirm the agriculture exemption number if the purchaser cannot produce documentation of the agriculture exemption number at the time of sale. (6) (a) On or before July 1, 2022, the department shall develop and provide an online searchable database on the department’s Web site that the seller or retailer may use to confirm the agriculture exemption number if the purchaser cannot produce documentation of the agriculture exemption number at the time of sale.
    2. To search the database, the seller or retailer shall provide the name of the person assigned the agriculture exemption number and one (1) of the following:
      1. The agriculture exemption number;
      2. The agriculture exemption number expiration date;
      3. The person’s driver’s license number;
      4. The farm service agency parcel number; or
      5. Any other unique identifier that may be accepted by the department.
    3. The seller or retailer shall be relieved of the liability for collecting and remitting the sales and use tax if the seller or retailer meets the requirements of KRS 139.260 and 139.270 .

HISTORY: 2020 ch. 38, § 1, effective July 15, 2020.

139.482. Historical sites.

  1. “Historical site,” as used in this section, means properties listed by the United States department of interior in the National Register as authorized by title 16, United States Code, section 470(f).
  2. There is excluded from the computation of the amount of taxes imposed by this chapter:
    1. Gross receipts from charges for admission to historical sites, operated by a nonprofit corporation, society, or organization; and
    2. Gross receipts from the sales of materials, supplies, and services to a nonprofit corporation, society, or organization to be used to restore, maintain, or operate a historical site.

History. Enact. Acts 1976, ch. 318, §§ 2, 3.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

139.483. Exemption of vessels and maritime supplies.

The taxes imposed under the provisions of this chapter shall not apply to the sale of, or the storage, use, or other consumption of, ships and vessels, including property used in the repair or construction of, supplies and fuel consumed in the operation of, and supplies consumed by crew members aboard such ships and vessels which are used principally in the transportation of property or in the conveyance of persons for hire.

History. Enact. Acts 1966, ch. 64, § 12.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Application.
  3. Houseboats.
1. Constitutionality.

If this section is applied so as to exclude from taxation boats or vessels used as pleasure commercial craft, but not other vessels, then the statute is unconstitutional because it results in discrimination and unjust treatment of a particular taxpayer. Barnes v. Department of Revenue, 575 S.W.2d 169, 1978 Ky. App. LEXIS 647 (Ky. Ct. App. 1978).

2. Application.

This section contains no reference to a distinction between industrial commercial craft as opposed to pleasure commercial craft, and the statute has a general application to all ships and vessels which are used primarily in the transportation of property or in the conveyance of persons for hire. Barnes v. Department of Revenue, 575 S.W.2d 169, 1978 Ky. App. LEXIS 647 (Ky. Ct. App. 1978).

All property used in the repair and construction of ships and vessels is exempt from sales and use tax. Paducah Marine Ways, Inc. v. Revenue Cabinet Commonwealth, 730 S.W.2d 956, 1987 Ky. App. LEXIS 495 (Ky. Ct. App. 1987).

Although tax statutes creating liability are to be strictly construed against the taxing authority, exemptions are to be narrowly construed against the taxpayer. Popplewell's Alligator Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d 456, 2004 Ky. LEXIS 92 ( Ky. 2004 ).

The sales and use tax exemption of KRS 139.483 does not apply to houseboats used principally for lodging. Popplewell's Alligator Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d 456, 2004 Ky. LEXIS 92 ( Ky. 2004 ).

Exemption in KRS 139.483 applies to any vessel used principally in the transportation of property, regardless of whether it is transporting property for compensation, but applies to a vessel conveying persons only when the conveyance is in exchange for compensation. Popplewell's Alligator Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d 456, 2004 Ky. LEXIS 92 ( Ky. 2004 ).

3. Houseboats.

Houseboats are exempt from the use tax provision of KRS Chapter 139 by virtue of the exemption created in this section. Barnes v. Department of Revenue, 575 S.W.2d 169, 1978 Ky. App. LEXIS 647 (Ky. Ct. App. 1978).

The statute did not apply to the appellant’s sale of gasoline in association with its lease of houseboats as the fuel used to operate the houseboats was not used in the operation of a ship or vessel principally engaged or used in the transportation of property or the conveyance of persons for hire; rather, the fuel was sold to individuals for use in the operation of houseboats for their personal pleasure or recreational use. State Dock v. Revenue Cabinet, 2001 Ky. App. LEXIS 19 (Ky. Ct. App. Feb. 23, 2001), aff'd in part and rev'd in part, 133 S.W.3d 456, 2004 Ky. LEXIS 92 ( Ky. 2004 ).

139.484. Exemption of moneys paid for lease or rental of films by commercial motion picture theaters.

There shall be excluded from the computation of the amount of taxes imposed by this chapter moneys paid for the lease or rental of films by commercial motion picture theaters when the lease or rental is for the sole purpose of use in the normal course of business, if an admission fee is charged and if the commercial motion picture theater collects and remits all other applicable sales and use taxes, including, but not limited to, that on admissions.

History. Enact. Acts 1990, ch. 121, § 1, effective July 13, 1990.

NOTES TO DECISIONS

Cited in:

WDKY-TV, Inc. v. Revenue Cabinet Commonwealth, 838 S.W.2d 431, 1992 Ky. App. LEXIS 158 (Ky. Ct. App. 1992).

139.485. Exemption of food items — Definitions.

  1. Except as otherwise provided, the terms “retail sale,” “use,” “storage,” and “consumption” as used in this chapter shall not include the sale, use, storage or consumption of food and food ingredients for human consumption.
  2. The term “food and food ingredients” as used in subsection (1) of this section means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. “Food and food ingredients” shall not include:
    1. Alcoholic beverages;
    2. Tobacco;
    3. Candy;
    4. Dietary supplements;
    5. Soft drinks; and
    6. Prepared food.
  3. For purposes of this section:
    1. “Alcoholic beverages” means beverages that are suitable for human consumption and contain one-half of one percent (0.5%) or more of alcohol by volume;
    2. “Tobacco” means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco;
    3. “Candy” means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. “Candy” shall not include:
      1. Any preparation containing flour; or
      2. Any item requiring refrigeration;
    4. “Dietary supplement” means any product, other than tobacco, intended to supplement the diet that:
      1. Contains one (1) or more of the following dietary ingredients:
        1. A vitamin;
        2. A mineral;
        3. An herb or other botanical;
        4. An amino acid;
        5. A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or
        6. A concentrate, metabolite, constituent, extract, or combination of any ingredient described above;
      2. Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form or, if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and
      3. Is required to be labeled as a dietary supplement, identifiable by the “Supplement facts” box found on the label as required pursuant to 21 C.F.R. 101.36;
    5. “Soft drinks” means nonalcoholic beverages that contain natural or artificial sweeteners. “Soft drinks” does not include beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or greater than fifty percent (50%) of vegetable or fruit juice by volume;
    6. “Food sold through vending machines” means food dispensed from a machine or other mechanical device that accepts payment;
    7. “Prepared food” means:
      1. Food sold in a heated state or heated by the retailer;
      2. Two (2) or more food ingredients mixed or combined by the retailer for sale as a single item except food that is only cut, repackaged, or pasteurized by the retailer, eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the Food and Drug Administration in Chapter 3, Part 401.11 of the FDA Food Code so as to prevent food-borne illnesses; or
      3. Food sold with eating utensils provided by the retailer, including plates, knives, forks, spoons, glasses, cups, napkins, or straws;
    8. Notwithstanding paragraph (g) of this subsection, “prepared food” shall not include the following items if sold without eating utensils provided by the seller:
      1. Food sold by a seller whose proper primary North American Industry Classification System classification is manufacturing in sector 311, except subsector 3118; or
      2. Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danishes, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas.
  4. Notwithstanding the provisions of subsection (1) of this section, “food and food ingredients” sold through vending machines or nonmechanical self-service vending systems shall be subject to the tax imposed by this chapter.

History. Enact. Acts 1972, ch. 62, part I, § 1, effective October 1, 1972; 1994, ch. 65, § 17, effective July 15, 1994; 2003, ch. 124, § 22, effective July 1, 2004; 2007, ch. 141, § 10, effective July 1, 2007.

NOTES TO DECISIONS

  1. Meals.
  2. Ready-to-Eat Foods.
1. Meals.

In determining whether a cooked and sold or delivered pizza constituted a meal ready for immediate human consumption, as the word “meal” is used in subdivision (3)(h) of this section, the Court of Appeals took judicial notice of the fact that millions of Americans consider pizza a meal, and that most pizzas contain components drawn from the four (4) basic food groups—bread, cheese, vegetables, and meat. Department of Revenue v. To Your Door Pizza, Inc., 670 S.W.2d 482, 1983 Ky. App. LEXIS 358 (Ky. Ct. App. 1983).

2. Ready-to-Eat Foods.

Cooked pizzas sold and served on a take-out basis or delivered to customers’ homes, by a pizza chain that had no facilities for on-premises consumption were not exempt from sales tax. Department of Revenue v. To Your Door Pizza, Inc., 670 S.W.2d 482, 1983 Ky. App. LEXIS 358 (Ky. Ct. App. 1983).

It is clear that the Legislature intended to tax ready-to-eat pizzas, hot dogs, and hamburgers. Department of Revenue v. To Your Door Pizza, Inc., 670 S.W.2d 482, 1983 Ky. App. LEXIS 358 (Ky. Ct. App. 1983).

Opinions of Attorney General.

Any food items, whether freeze dried or dehydrated, that are not served for consumption at tables, chairs, or counters but are sold on take-out or order basis to be consumed off the premises are exempt from sales tax, which would include freeze dried foods which are sold through a local sporting goods store. OAG 73-582 .

Although a county fair is a nonprofit organization, food prepared for immediate consumption sold at food stands, concessions, restaurants and similar type businesses are not exempt from sales tax. OAG 75-549 .

139.486. Sale, use, storage, or consumption of “industrial machinery” — Definitions for section.

  1. As used in this section:
    1. “Industrial machinery” means machinery manufactured in Kentucky directly used in manufacturing or processing which operations encompass all activities commencing with the receipt of the raw materials through the point at which the finished product is ready for sale and delivery to the purchaser.
    2. The term “processing” shall include: the processing and packaging of raw materials, in-process materials and finished products; the processing and packaging of farm and dairy products for sale; and the extraction of minerals, ores, coal, clay, stone, and natural gas.
  2. Any other provision of this section to the contrary notwithstanding, the terms “sale at retail,” “retail sale,” “use,” “storage,” and “consumption,” do not include the sale, use, storage, or other consumption of “industrial machinery,” when the “industrial machinery” is delivered to a manufacturer or processor, or their agent for use out of state.
  3. For purposes of the exemptions provided in subsection (2) of this section, “industrial machinery” will be presumed for sale, use, storage, or consumption outside the state if:
    1. Delivery is to a common carrier, whether chosen by the seller or by the purchaser, and whether F.O.B. seller’s shipping point or F.O.B. purchaser’s destination, provided the shipping document indicates delivery to a location outside the state; or
    2. Delivery is made by seller’s own transportation vehicles to a location outside the state.

History. Enact. Acts 1982, ch. 431, § 2, effective July 15, 1982; 2008, ch. 95, § 11, effective August 1, 2008.

NOTES TO DECISIONS

  1. Machinery.
  2. Loading Equipment.
  3. Mining Equipment.
  4. Road Paving Equipment.
1. Machinery.

The exemption from the sales tax of machinery used in manufacturing is not arbitrary and unreasonable because it does not equally exempt similar machinery used in a service industry or plant (decided under prior law). Department of Revenue v. Spalding Laundry & Dry Cleaning Co., 436 S.W.2d 522, 1968 Ky. LEXIS 184 ( Ky. 1968 ).

The ultimate purpose of the exemption for machinery used in new manufacturing processes is to enhance the competitive position of this state as against other states in encouraging the location and expansion of the industries whose manufacturing processes require volume employment of people. Commonwealth ex rel. Luckett v. WLEX-TV, Inc., 438 S.W.2d 520, 1968 Ky. LEXIS 154 ( Ky. 1968 ) (decided under prior law).

System used to convey empty bottles from loading point to bottling lines in distillery was “machinery used directly in the manufacturing process” and, as such, was exempt from sales and use taxes. Schenley Distillers, Inc. v. Commonwealth, 467 S.W.2d 598, 1971 Ky. LEXIS 391 ( Ky. 1971 ) (decided under prior law).

A storage bin was machinery for new and expanded industry directly used in the process of manufacturing asphalt and was therefore exempt from the sales and use tax as was pollution control equipment since without it bituminous asphalt could not be manufactured at all. Department of Revenue v. State Contracting & Stone Co., 559 S.W.2d 166, 1977 Ky. App. LEXIS 859 (Ky. Ct. App. 1977) (decided under prior law).

Machinery used to process and reconstitute used drums is machinery used directly in a manufacturing process and, thus, is exempt from sales and use tax (decided under prior law). Department of Revenue ex rel. Luckett v. Allied Drum Service, Inc., 561 S.W.2d 323, 1978 Ky. LEXIS 318 ( Ky. 1978 ).

Where the main function of a computer was to receive data placed on prepunched cards by the workers, process the data and release information and instructions designed to assist the plant personnel in performing their duties and it did not participate in any way in the physical production of transformers, it was not machinery used directly in the manufacturing process and was not exempt from sales tax (decided under prior law). Commonwealth, Dep't of Revenue v. Kuhlman Corp., 564 S.W.2d 14, 1978 Ky. LEXIS 347 ( Ky. 1978 ).

Pollution control equipment is indispensable to the operation of a limestone “crusher,” which is directly engaged in manufacturing asphalt, and is mandated by federal law and regulations; therefore, it is exempt. Department of Revenue v. State Contracting & Stone Co., 572 S.W.2d 421, 1978 Ky. LEXIS 398 ( Ky. 1978 ) (decided under prior law).

Certain pieces of equipment used by a foreign corporation that provided various services to businesses engaged in extraction of oil and gas did not qualify for exemption from use taxes as “machinery for new and expanded industry”; the court held that the corporation did not produce a marketable commodity and its machinery was not “incorporated” at any facility that extracted oil and gas. Nowsco Well Service v. Revenue Cabinet Commonwealth, 804 S.W.2d 10, 1990 Ky. App. LEXIS 182 (Ky. Ct. App. 1990) (decided under prior law).

Photograph processing equipment installed in camera stores was exempt from sales tax as the equipment was installed in a “plant facility”; that term is not properly construed as a narrow term of limitation which requires that the machinery be installed at a single permanent location used almost exclusively for industrial manufacturing or processing, which would exclude primarily retail business locations. Camera Ctr., Inc. v. Revenue Cabinet, 34 S.W.3d 39, 2000 Ky. LEXIS 110 ( Ky. 2000 ) (decided under prior law).

2. Loading Equipment.

A scoop loader used to load limestone onto trucks for the use of an asphalt company and its customers was subject to the sales and use tax since it was used primarily for the physical transfer of material from one place to another. Department of Revenue v. State Contracting & Stone Co., 559 S.W.2d 166, 1977 Ky. App. LEXIS 859 (Ky. Ct. App. 1977) (decided under prior law).

Contested machinery constituted equipment used at sawmill to carry logs to the conveyors and to transfer the lumber to the drying sheds, and was essential to the total process of manufacturing; all the items were therefore exempt as being “directly used in the manufacturing process.” Ross v. Greene & Webb Lumber Co., 567 S.W.2d 302, 1978 Ky. LEXIS 368 ( Ky. 1978 ) (decided under prior law).

3. Mining Equipment.

Where the mining company used an underground scoop powered by batteries which moved loosened coal to an exterior stockpile area, and the scoop required three (3) complete sets of batteries, each of which is used for approximately three (3) hours while the other two (2) were being recharged, all three (3) sets of batteries and the battery charger were used “directly” in the extraction of coal and therefore were exempt from the sales and use taxes as machinery for a new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ) (decided under prior law).

The roof bolter which was used by the mining company to help support the roof of one excavated area so that more coal could be mined in that area was an indispensable part of the mining process since additional coal could not be mined without support for the roof of previously mined areas; therefore, the roof bolter was within the exemption under KRS 139.480 from sales and use taxes for machinery for new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ) (decided under prior law).

Reclamation machinery and equipment are part and parcel of the process of extraction of minerals, ores, coal, clay, stone and natural gas; therefore, such machinery and equipment is exempt from the sales and use taxes as machinery for a new and expanded industry. Revenue Cabinet, Commonwealth v. Amax Coal Co., 718 S.W.2d 947, 1986 Ky. LEXIS 293 ( Ky. 1986 ) (decided under prior law).

4. Road Paving Equipment.

Since construction company purchased pieces of equipment in order to expand its road paving business and not as replacement equipment, and where asphalt generated by company’s plant was used exclusively by company, and where no other paving company supported the circuit court and Tax Board’s ruling that construction company’s business was an “integrated enterprise,” the equipment was exempt. Revenue Cabinet of Kentucky v. Carpenter Constr. Co., 763 S.W.2d 130, 1988 Ky. App. LEXIS 106 (Ky. Ct. App. 1988) (decided under prior law).

139.487. Exemption of industrial machinery. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1982, ch. 431, § 3, effective July 15, 1982) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.488. Determination of presumption of out-of-state sale, use, storage or consumption. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1982, ch. 431, § 4, effective July 15, 1982) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.490. Purchaser’s liability for using property in other than exempt way after certification. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 49, effective February 5, 1960; 1982, ch. 102, § 1, effective July 15, 1982; 1988, ch. 135, § 5, effective July 15, 1988) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.495. Application of taxes to resident nonprofit institutions and to certain limited liability companies — Exemptions — Refund.

  1. The taxes imposed by this chapter shall apply to:
    1. Resident, nonprofit educational, charitable, or religious institutions which have qualified for exemption from income taxation under Section 501(c)(3) of the Internal Revenue Code; and
    2. Any resident, single member limited liability company that is:
      1. Wholly owned and controlled by a resident or nonresident, nonprofit educational, charitable, or religious institution which has qualified for exemption from income taxation under Section 501(c)(3) of the Internal Revenue Code; and
      2. Disregarded as an entity separate from the resident or nonresident, nonprofit educational, charitable, or religious institution for federal income tax purposes pursuant to 26 C.F.R. sec. 301.7701-2;
    1. Tax does not apply to: (2) (a) Tax does not apply to:
      1. Sales of tangible personal property, digital property, or services to these institutions or limited liability companies described in subsection (1) of this section, provided the tangible personal property, digital property, or service is to be used solely in this state within the educational, charitable, or religious function;
      2. Sales of food to students in school cafeterias or lunchrooms;
      3. Sales by school bookstores of textbooks, workbooks, and other course materials;
      4. Sales by nonprofit, school sponsored clubs and organizations, provided such sales do not include tickets for athletic events;
      5. Sales of admissions, including the sales of admissions to a golf course when the admission is the result of a fundraising event, by nonprofit educational, charitable, or religious institutions described in subsection (1) of this section. All other sales of admissions to a golf course by these institutions are not exempt from tax under this section; or
        1. Fundraising event sales made by nonprofit educational, charitable, or religious institutions and limited liability companies described in subsection (1) of this section. 6. a. Fundraising event sales made by nonprofit educational, charitable, or religious institutions and limited liability companies described in subsection (1) of this section.
        2. For the purposes of this subparagraph, “fundraising event sales” does not include sales related to the operation of a retail business, including but not limited to thrift stores, bookstores, surplus property auctions, recycle and reuse stores, or any ongoing operations in competition with for-profit retailers.
    2. The exemptions provided in subparagraphs 5. and 6. of paragraph (a) of this subsection shall not apply to sales generated by or arising at a tourism development project approved under KRS 148.851 to 148.860 .
  2. An institution shall be entitled to a refund equal to twenty-five percent (25%) of the tax collected on its sale of donated goods if the refund is used exclusively as reimbursement for capital construction costs of additional retail locations in this state, provided the institution:
    1. Routinely sells donated items;
    2. Provides job training and employment to individuals with workplace disadvantages and disabilities;
    3. Spends at least seventy-five percent (75%) of its annual revenue on job training, job placement, or other related community services;
    4. Submits a refund application to the department within sixty (60) days after the new retail location opens for business; and
    5. Provides records of capital construction costs for the new retail location and any other information the department deems necessary to process the refund.
  3. Notwithstanding any other provision of law to the contrary, refunds under subsection (3) of this section shall be made directly to the institution. Interest shall not be allowed or paid on the refund. The department may examine any refund within four (4) years from the date the refund application is received. Any overpayment shall be subject to the interest provisions of KRS 131.183 and the penalty provisions of KRS 131.180 .
  4. All other sales made by nonprofit educational, charitable, or religious institutions or limited liability companies described in subsection (1) of this section are taxable and the tax may be passed on to the purchaser as provided in KRS 139.210 .

as provided in this section.

The maximum refund allowed for any location shall not exceed one million dollars ($1,000,000). As used in this subsection, “capital construction cost” means the cost of construction of any new facilities or the purchase and renovation of any existing facilities, but does not include the cost of real property other than real property designated as a brownfield site as defined in KRS 65.680(4).

History. Enact. Acts 1976, ch. 77, part III, § 2, effective March 29, 1976; 1978, ch. 258, § 2, effective June 17, 1978; 1980, ch. 392, § 18, effective June 1, 1980; 2005, ch. 46, § 1, effective August 1, 2005; 2005, ch. 173, Pt. XVI, § 1, effective August 1, 2005; 2009, ch. 73, § 18, effective July 1, 2009; 2016 ch. 110, § 13, effective August 1, 2016; 2019 ch. 151, § 28, effective March 26, 2019; 2020 ch. 91, § 40, effective August 1, 2020.

Compiler’s Notes.

Section 501 (c)(3) of the Internal Revenue Code, referred to in the introductory clause of this section, is compiled as 26 USCS § 501(c)(3).

Legislative Research Commission Notes.

(3/26/2019). Under the authority of KRS 7.136(1), the Reviser of Statutes has modified the internal lettering of subsection (2) of this statute from the way it appeared in 2019 Ky. Acts ch. 151, sec. 28. The words in the text were not changed.

(3/26/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 28 of that Act apply to transactions occurring on or after July 1, 2019.

(8/1/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

1. Applicability.

Substantial evidence supported the determination of the Kentucky Board of Tax Appeals that parts and supplies provided by a taxpayer to customers under maintenance agreements for office equipment constituted a retail sale pursuant to KRS 139.100 (repealed; see now KRS 139.010(25)) and KRS 139.120(1) (repealed; see now KRS 139.010(27)), such that sales tax was to be charged to the customers under KRS 139.200 rather than having a use tax charged to the taxpayer under KRS 139.190 (repealed; see now KRS 139.010(33)); as the customers involved in the disputed assessments that were made against the taxpayer were tax-exempt entities, pursuant to KRS 139.495(1) the assessments were deemed erroneous. Fin. & Admin. Cabinet v. Duplicator Sales & Serv., 2007 Ky. App. LEXIS 287 (Ky. Ct. App.), sub. op., 2007 Ky. App. Unpub. LEXIS 478 (Ky. Ct. App. Aug. 17, 2007).

Opinions of Attorney General.

Although a sales tax would be due on tickets sold by an educational institution for athletic events, no sales tax would apply to the sale of food in cafeterias or lunchrooms which are not open to the public. OAG 76-201 .

If a church sponsors activities in connection with a fund drive but is not conducting a regular selling activity in competition with private businesses, the first $500 of such sales are exempt from sales tax. OAG 78-36 .

Exempt institutions regularly engaged in a selling activity are required to hold a sales and use tax permit, file returns and pay the tax due on gross receipts. OAG 78-37 .

Since sales tax can be collected from a customer, the economic incidence of the tax is not on the school, church or other organization, and, in such cases, it is not necessary for the institution to direct any funds used in financing its programs to payment of the tax. OAG 79-320 .

The Louisville Orchestra, Inc., is, under Const., § 170, a “purely public charity,” and is thus exempt from the sales tax on admissions. OAG 80-598 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Treatises

Lexis KY Tax P.I. 4,498 Contractors can't take on the status of nonprofit or governmental agencies while completing a construction contract.

Lexis KY Tax P.I. 4,494 Delivery charges are not a valid deduction from gross receipts on taxable transactions under Kentucky tax law.

139.496. Exemption of certain sales.

  1. The taxes imposed in this chapter do not apply to the first one thousand dollars ($1,000) of sales made in any calendar year by individuals not engaged in the business of selling. This exemption is limited to garage or yard sales of household items by an individual or family which are in no way associated with or related to the operation of a business.
  2. The exemption does not apply to activities in which all or substantially all the household goods of a person are offered for sale.

History. Enact. Acts 1976, ch. 77, part III, § 3, effective July 1, 1976; 1984, ch. 331, § 2, effective July 13, 1984; 1990, ch. 476, Pt. V, § 360; 1990, ch. 476, Pt. VII A, § 624, effective July 1, 1990; 2019 ch. 151, § 30, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 30 of that Act apply to transactions occurring on or after July 1, 2019.

(7/13/90) The amendment to this section contained in Section 624 of Acts ch. 476 prevails over its repeal and reenactment in Section 360 of that Act, pursuant to Section 353(1) of the Act.

Opinions of Attorney General.

If a church sponsors activities in connection with a fund drive but is not conducting a regular selling activity in competition with private businesses, the first $500 of such sales are exempt from sales tax. OAG 78-36 .

Exempt institutions regularly engaged in a selling activity are required to hold a sales and use tax permit, file returns and pay the tax due on gross receipts. OAG 78-37 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Treatises

Lexis KY Tax P.I. 4,491 Sales to Non-Profit Organizations are exempt from sales tax on purchases with limitations.

139.497. Exemption for sales by schools, school-sponsored clubs and organizations or affiliated groups, certain nonprofit educational youth programs, and federally chartered education-related corporation at annual national convention held in state.

Notwithstanding any other provisions of this chapter, the taxes imposed herein do not apply to:

  1. Sales by elementary or secondary schools or nonprofit elementary or secondary school-sponsored clubs and organizations or any nonprofit, elementary, or secondary school-affiliated groups such as parent-teacher organizations and booster clubs, whose membership may be composed of individuals other than students, provided the net proceeds from the sales are used solely for the benefit of the elementary or secondary school or its students. Nontaxable sales shall include sales resulting from agreements or contracts entered into with resident or nonresident organizations to participate in fund-raising campaigns for a percentage of the gross receipts where students act as agents or salesmen for the organizations by selling or taking orders for the sale of tangible personal property, and no one shall be required to pay sales or use taxes on such sales;
  2. Sales made by nonprofit educational youth programs affiliated with a land grant university cooperative extension service, if the net proceeds from the sales are used solely for the benefit of the affiliated programs; or
    1. Sales of tangible personal property made by a federally chartered corporation at the corporation’s annual national convention held in the Commonwealth. (3) (a) Sales of tangible personal property made by a federally chartered corporation at the corporation’s annual national convention held in the Commonwealth.
    2. As used in this subsection, “federally chartered corporation” means a corporation federally chartered under Title 36 of the United States Code and whose stated purpose is to serve students and former students of vocational agriculture in middle and secondary schools to develop character, train for useful citizenship, and foster patriotism.
    3. The exemption provided in this subsection applies to sales made on and after October 1, 2014, but before December 31, 2021.

History. Enact. Acts 1984, ch. 331, § 1, effective July 13, 1984; 1986, ch. 167, § 1, effective July 15, 1986; repealed and reenact., Acts 1990, ch. 476, Pt. V, § 361, effective July 13, 1990; 1998, ch. 80, § 1, effective July 15, 1998; 2014, ch. 103, § 1, effective July 15, 2014.

Compiler’s Notes.

Former KRS 139.497 (Enact. Acts 1984, ch. 331, § 1, effective July 13, 1984; 1986, ch. 167, § 1, effective July 15, 1986) was repealed and reenacted by Acts 1990, ch. 476, Pt. V, § 361, effective July 13, 1990.

139.498. Exemption for sale of admissions and fundraising event sales by nonprofit organizations.

    1. For nonprofit civic, governmental, or other nonprofit organizations, except as described in KRS 139.495 and 139.497 , the taxes imposed by this chapter do not apply to: (1) (a) For nonprofit civic, governmental, or other nonprofit organizations, except as described in KRS 139.495 and 139.497 , the taxes imposed by this chapter do not apply to:
      1. The sale of admissions, including the sales of admissions to a golf course when the admission is the result of a fundraising event. All other sales of admissions to a golf course by these organizations are not exempt from tax under this section; or
        1. Fundraising event sales. 2. a. Fundraising event sales.
        2. For the purposes of this paragraph, “fundraising event sales” does not include sales related to the operation of a retail business, including but not limited to thrift stores, bookstores, surplus property auctions, recycle and reuse stores, or any ongoing operations in competition with for-profit retailers.
    2. The exemption provided in subparagraph 1. of paragraph (a) of this subsection shall not apply to the sale of admissions to a public facility that qualifies for a sales tax rebate under KRS 139.533 .
  1. All other sales made by organizations referred to in subsection (1) of this section are taxable.

HISTORY: 2019 ch. 151, § 29, effective March 26, 2019; 2020 ch. 91, § 41, effective August 1, 2020.

Legislative Research Commission Notes.

(3/26/2019). Section 82 of 2019 Ky. Acts ch. 151 states that this statute, which was created in Section 29 of that Act, applies to transactions occurring on or after July 1, 2019.

139.500. Exemption from use tax of property subject to sales or gasoline tax.

  1. The storage, use, or other consumption in this state of property, the gross receipts from the sale of which are required to be included in the measure of the tax levied under KRS 139.200 is not subject to the use tax.
  2. The storage, use, or other consumption in this state of gasoline or special fuels on which the tax under KRS Chapter 138 has been paid and which is not subject to refund under KRS 138.341 , 138.344 , 138.445 , 279.200 , or 279.530 shall not be subject to the use tax.

History. Enact. Acts 1960, ch. 5, Art. I, § 48, effective February 5, 1960; 1990, ch. 414, § 3, effective July 13, 1990.

NOTES TO DECISIONS

1. Gasoline for Motor Boats.

Gasoline sold as fuel for motor boats is not subject to the use or sales taxes. Commonwealth ex rel. Ross v. Lee's Ford Dock, Inc., 551 S.W.2d 236, 1977 Ky. LEXIS 463 ( Ky. 1977 ).

Cited in:

Genex/London, Inc. v. Kentucky Bd. of Tax Appeals, 622 S.W.2d 499, 1981 Ky. LEXIS 275 , 31 A.L.R.4th 1194 ( Ky. 1981 ); Delta Air Lines, Inc. v. Commonwealth, Revenue Cabinet, 689 S.W.2d 14, 1985 Ky. LEXIS 225 ( Ky. 1985 ); Stoner Creek Stud, Inc. v. Revenue Cabinet Commonwealth, 746 S.W.2d 73, 1987 Ky. App. LEXIS 609 (Ky. Ct. App. 1987).

Opinions of Attorney General.

Where a customer of a bank places an order for the purchase of certain gold coins which are neither owned nor held by the bank and directs the bank to place the order with a coin dealer whose place of business is out of Kentucky, where the bank places the order with the coin dealer who then forwards the coins to the bank for delivery to the customer and where the customer then pays the bank the purchase price of the coins and the bank remits to the seller the purchase price less a small commission for acting as agent in the transaction, the bank would be a retailer within the meaning of KRS 139.100 (repealed: see now KRS 139.010 ) and would be subject to the sales tax imposed under KRS 139.200 in the event that the out-of-state coin dealer was not a retail permit holder under the Kentucky Sales and Use Tax Act. Since the sales tax would apply to the bank in the event that the out-of-state coin dealer was not a retail permit holder, levy of the use tax would not occur under the provisions of this section; however, if the sales tax were not applicable, the bank would be liable for the use tax pursuant to KRS 139.340 . OAG 83-217 , withdrawing OAG 74-901 .

139.505. Refundable credit of portion of sales tax paid on interstate business communications service.

  1. For the purpose of this section, “gross receipts” means:
    1. Sales of tangible personal property in this state if:
      1. The property is delivered or shipped to a purchaser, other than the United States government, or to the designee of the purchaser within this state regardless of the f.o.b. point or other conditions of the sale; or
      2. The property is shipped from an office, store, warehouse, factory, or other place of storage in this state and the purchaser is the United States government; and
    2. Sales other than sales of tangible personal property in this state if the income-producing activity is performed in this state; or the income-producing activity is performed both in and outside this state and a greater proportion of the income-producing activity is performed in this state than in any other state, based on cost of performance, or gross receipt allocation method as provided by statute and elected by the taxpayer.
  2. Any business whose interstate communications service, subject to the sales tax imposed under KRS Chapter 139 and deducted for federal income tax purposes, exceeds five percent (5%) of the business’s Kentucky gross receipts during the preceding calendar year is entitled to a refundable credit if:
    1. The business’s annual Kentucky gross receipts are equal to or more than one million dollars ($1,000,000); and
    2. The majority of the interstate communications service billed to a Kentucky service address for the annual period is for communications service originating outside of this state and terminating in this state.
  3. The refundable credit shall be equal to the sales tax paid on the difference by which the interstate communications service purchased by the business exceeds five percent (5%) of the business’s Kentucky gross receipts.
  4. Any business that qualifies for the refundable credit authorized by subsection (2) of this section shall make an annual application for the refund on or after June 1, 2002, and on or after every June 1 thereafter. The application shall be made to the department on forms as the department may prescribe and shall contain information regarding interstate communications service purchases and any other information deemed necessary for the department to determine the business’s eligibility to receive a refund.
  5. Notwithstanding the provisions of KRS 134.580 to the contrary, the department, upon receipt of a properly documented refund application, shall cause a timely refund to be made directly to the eligible business. Interest shall not be allowed or paid on any refund made under this section.
  6. To facilitate the administration of the refundable tax credit, the department shall grant eligible businesses that apply for the tax credit permission to directly report and pay the sales tax applicable to the purchase of communications service. Once the business receives permission to directly report and pay the tax, refunds issued according to subsection (2) of this section shall not include any sales tax collected and paid by a communications service provider.
  7. Any refund application submitted under this section is subject to examination by the department. The examination shall occur within four (4) years from the date the refund application is received by the department. Any overpayment resulting from the examination shall be repaid to the State Treasury. In addition, the amount required to be repaid is subject to the interest provisions of KRS 131.183 and to the penalty provisions of KRS 131.180 .
  8. If a business owns directly or indirectly fifty percent (50%) or more of another business, the credit computed under subsection (2) of this section shall be computed on a combined basis, excluding any intercompany Kentucky gross receipts.

History. Enact. Acts 2000, ch. 547, § 8, effective January 1, 2001; 2005, ch. 173, Pt. XVI, § 4, effective March 20, 2005; 2005, ch. 168, § 127, effective June 1, 2005; 2005, ch. 85, § 421, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts ch. 173, Part XVI, § 7, provides that the amendments made to this section in Section 4 of that Part (and coincidentally in 2005 Ky. Acts ch. 168, § 127), relating to the sales tax on communication services, shall apply to applicants filing on or after June 1, 2003.

(3/20/2005). This section was amended by 2005 Ky. Acts chs. 85, 168 and 173, which do not appear to be in conflict and have been codified together.

(3/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

1. Exhaustion of administrative remedies.

Court of Appeals erred in determining that a facial constitutional issue raised by a taxpayer was one that the Kentucky Board of Tax Appeals could not decide because the case did not challenge the constitutionality of the administrative process for collecting a tax refund, there were several administrative issues that had to be resolved prior to addressing the statute's constitutionality, which necessitated formal written findings, and the deference afforded the findings would be dependent upon their sufficiency. Commonwealth v. AT&T Corp., 462 S.W.3d 399, 2015 Ky. LEXIS 1631 ( Ky. 2015 ).

139.510. Use tax credit for sales tax paid in another state under reciprocal arrangement — Tax credit for taxes paid in another state on communications service.

  1. The tax levied by KRS 139.310 shall not apply with respect to the storage, use, or other consumption of tangible personal property, digital property, or extended warranty services in this state upon which a tax substantially identical to the tax levied under KRS 139.200 (not including any special excise taxes such as are imposed on alcoholic beverages, cigarettes, and the like) equal to or greater than the amount of tax imposed by KRS 139.310 has been legally paid in another state. Proof of payment of such tax shall be according to rules and regulations of the department. If the amount of tax paid in another state is not equal to or greater than the amount of tax imposed by KRS 139.310, then the taxpayer shall pay to the department an amount sufficient to make the tax paid in the other state and in this state equal to the amount imposed by KRS 139.310. No credit shall be given under this section for sales taxes paid in another state if that state does not grant credit for sales taxes paid in this state.
  2. To prevent actual multistate taxation of a communications service subject to taxation under this chapter, any provider or purchaser, upon proof that the provider or purchaser has paid a tax in another state on the same communications services, shall be allowed a credit against the tax imposed by this chapter to the extent of the amount of the tax legally paid in the other state.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 72, effective February 5, 1960; 2000, ch. 547, § 9, effective January 1, 2001; 2005, ch. 85, § 422, effective June 20, 2005; 2009, ch. 73, § 19, effective July 1, 2009; 2018 ch. 171, § 45, effective April 14, 2018; 2018 ch. 207, § 45, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

1. Constitutionality.

Neither the Kentucky sales tax nor the Kentucky use tax upon construction machinery and materials brought into the state is a burden upon interstate commerce because it is levied after such property comes to rest in Kentucky; accordingly, this section is constitutional and does not violate Ky. Const., § 171, the 14th Amendment to the United States Constitution, or U.S. Const., Art. 1, § 8; moreover, this section reflects a legitimate public purpose in allowing the tax credit to equalize the tax burden among each taxpayer coming within the purview of that particular classification. Genex/London, Inc. v. Kentucky Bd. of Tax Appeals, 622 S.W.2d 499, 1981 Ky. LEXIS 275 ( Ky. 1981 ).

Entitlement to a credit or exemption for use tax paid on a lease to another state, as afforded by this section, preserves the constitutionality of the use tax law by preventing the risk of multiple taxation condemned by the Commerce Clause and the apportionment prong of the Commerce Clause test enunciated by the U.S. Supreme Court in Complete Auto Transit v. Brady, 430 U.S. 274, 51 L. Ed. 2d 326, 97 S. Ct. 1076, 1977 U.S. LEXIS 56 (1977). Revenue Cabinet v. Ashland Oil, 888 S.W.2d 701, 1994 Ky. App. LEXIS 100 (Ky. Ct. App. 1994), cert. denied, 515 U.S. 1103, 115 S. Ct. 2248, 132 L. Ed. 2d 256, 1995 U.S. LEXIS 3671 (U.S. 1995).

Opinions of Attorney General.

The state of Ohio grants credit for Kentucky motor vehicle usage tax so that a taxpayer who has previously registered a motor vehicle in Ohio, upon registering the vehicle in Kentucky for the first time, may receive credit for sales or use tax paid in Ohio. OAG 66-241 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

139.515. Sales tax refund program for qualifying signature projects.

  1. As used in this section:
    1. “Agency” has the same meaning as in KRS 154.30-010 ;
    2. “Signature project” means a project that meets the requirements established by KRS 154.30-050 ; and
    3. “Tangible personal property used in the construction of a signature project” means tangible personal property that:
      1. Consists of:
        1. Permanently incorporated building materials and fixtures that are an improvement to real property on the signature project;
        2. Building materials temporarily incorporated into the signature project for infrastructure support during construction; or
        3. Temporarily incorporated specialized forms for concrete that are for exclusive use on the qualifying signature project; and
      2. Is not machinery or equipment.
    1. Notwithstanding any other provision of KRS Chapter 139 and KRS 134.580 , the sales or use tax paid on the purchase of tangible personal property used in the construction of the portion of a signature project that does not relate to approved public infrastructure costs or approved signature project costs, as defined in KRS 154.30-010 , may be refunded to the agency under the conditions established by subsection (3) of this section. (2) (a) Notwithstanding any other provision of KRS Chapter 139 and KRS 134.580 , the sales or use tax paid on the purchase of tangible personal property used in the construction of the portion of a signature project that does not relate to approved public infrastructure costs or approved signature project costs, as defined in KRS 154.30-010 , may be refunded to the agency under the conditions established by subsection (3) of this section.
    2. The authority, as defined in KRS 154.30-010, shall notify the department upon the approval of a signature project. The notification shall include the name of the signature project, the name of the agency, the name of the project developer, the commencement date of the tax incentive agreement, and the percentage of total anticipated expenditures for tangible personal property used in the construction of a signature project that are not included in the project grant agreement as approved public infrastructure costs or approved signature project costs.
    3. The department shall determine the total amount of eligible refund due under each application for refund based upon the actual percentage of total expenditures for tangible personal property used in the construction of a signature project that are not included in the project grant agreement as approved public infrastructure costs reported in the refund request reduced by the amount of vendor compensation taken in accordance with KRS 139.570 .
  2. To qualify for the refund established by subsection (2) of this section, the agency shall collect from the purchasers of tangible personal property used in the construction of the signature project all documentation relating to the payment of sales or use tax, and shall file an application for refund of the sales or use tax paid by the purchasers as reflected in the documentation collected. Requests for refund shall be filed annually during the first twelve (12) years the project grant agreement is in effect, and shall cover purchases made during the immediately preceding year. Requests for refund shall be filed in the manner directed by the department.
    1. The agency shall file the first year refund request within sixty (60) days following the end of the fiscal year in which the project grant agreement is executed. The agency shall file the final refund request within sixty (60) days following the end of the eleventh fiscal year following the fiscal year in which the project grant agreement was executed, or within sixty (60) days after construction is complete, whichever date is earlier. All other annual refund requests shall be filed within sixty (60) days after the completion of each fiscal year. (4) (a) The agency shall file the first year refund request within sixty (60) days following the end of the fiscal year in which the project grant agreement is executed. The agency shall file the final refund request within sixty (60) days following the end of the eleventh fiscal year following the fiscal year in which the project grant agreement was executed, or within sixty (60) days after construction is complete, whichever date is earlier. All other annual refund requests shall be filed within sixty (60) days after the completion of each fiscal year.
    2. Failure to file a refund request within the timeframes provided in paragraph (a) of this subsection shall result in an adjustment to the refund amount paid as follows:
      1. For late refund requests filed within the first one hundred twenty (120) days after the request was due, for each month or portion thereof that the refund request is late, the refund amount shall be reduced by one twelfth (1/12) of the total amount determined by the department to be due to the agency.
      2. Any refund request filed more than one hundred twenty (120) days after the timeframes provided in paragraph (a) of this subsection shall be rejected and no refunds shall be paid for the time period covered by the request.
  3. Interest shall not be allowed or paid on any refund made under the provisions of this section.
  4. The agency shall execute information sharing agreements prescribed by the department with contractors, vendors, and other related parties to verify construction material costs.

History. Enact. Acts 2007, ch. 95, § 28, effective March 23, 2007; 2008, ch. 178, § 13, effective July 15, 2008; 2009, ch. 12, § 40, effective June 25, 2009.

139.517. Sales tax incentive for alternative fuel, gasification, and renewable energy facilities.

  1. As used in this section:
    1. “Approved company” has the same meaning as in KRS 154.27-010 ;
    2. “Authority” means the Kentucky Economic Development Finance Authority established under KRS 154.20-010 ;
    3. “Eligible project” has the same meaning as in KRS 154.27-010 ; and
    4. “Tax incentive agreement” has the same meaning as in KRS 154.27-010.
  2. Notwithstanding any other provision of KRS 134.580 or this chapter, an approved company constructing, retrofitting, or upgrading an eligible project may be eligible for a sales tax incentive of up to one hundred percent (100%) of the Kentucky sales or use tax paid on tangible personal property purchased during the construction, retrofit, or upgrade of the eligible project as provided in KRS 154.27-070 . The tangible personal property shall be incorporated into the eligible project to qualify for the sales tax incentive.
  3. The authority shall notify the department upon approval of an eligible project. The notification shall include the name of the eligible project, the name of the approved company, and the date on which the approved company is eligible to receive incentives under this section.
    1. An approved company seeking an incentive under this section shall file a request for incentives within sixty (60) days following the end of the calendar year in which the activation date occurs. The request shall include all documentation relating to the payment of the sales and use tax. (4) (a) An approved company seeking an incentive under this section shall file a request for incentives within sixty (60) days following the end of the calendar year in which the activation date occurs. The request shall include all documentation relating to the payment of the sales and use tax.
    2. In subsequent years, the approved company shall file a request for incentives within sixty (60) days following the end of each calendar year.
    3. The approved company shall file a final request for incentives within sixty (60) days from the earlier of the completion of the construction, retrofit, or upgrade of the eligible project, or the five (5) year anniversary of the activation date.
    4. The request for incentives shall be in the form prescribed by the department through the promulgation of administrative regulations in accordance with KRS Chapter 13A.
  4. Interest shall not be allowed or paid on any sales tax incentive payment made under the provisions of this section.
  5. The sales tax incentive shall be reduced by the amount of vendor compensation allowed under KRS 139.570 .
  6. The approved company seeking the sales tax incentive payment shall execute information-sharing agreements prescribed by the department with contractors, vendors, and other related parties to verify the costs of tangible personal property eligible for the sales tax incentive payment under this section.
  7. The department shall notify the authority of the incentive distributed to each approved company upon request.

History. Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 10, effective August 30, 2007.

139.518. Sales or use tax refund on energy-efficiency products used at manufacturing plant.

  1. “Energy efficiency project” means a project undertaken by a person engaged in manufacturing whereby the person purchases new or replacement machinery or equipment that reduces the consumption of energy or energy-producing fuels in the manufacturing process at a plant facility in this state by at least fifteen percent (15%) measured in megawatts, gallons, or other measurable units of energy, while maintaining or increasing the number of units of production for that same period. For purposes of this section, “machinery or equipment” does not include:
    1. Windows, lighting, or other improvements to buildings; or
    2. Repair, replacement, and spare parts as defined in KRS 139.010 .
    1. The consumption reduction and the production rate shall be calculated by comparing the consumption and production rates during a twelve (12) month period immediately after the new or replacement machinery or equipment is placed in service with the consumption and production rates for the twelve (12) month period submitted with the application for preapproval as required in subsection (4) of this section. (2) (a) The consumption reduction and the production rate shall be calculated by comparing the consumption and production rates during a twelve (12) month period immediately after the new or replacement machinery or equipment is placed in service with the consumption and production rates for the twelve (12) month period submitted with the application for preapproval as required in subsection (4) of this section.
    2. If the manufacturer believes that the method described in paragraph (a) of this subsection does not accurately reflect the reduction in energy or energy-producing fuels used in the manufacturing process, the manufacturer may submit additional information to the department for consideration.
  2. Notwithstanding KRS 134.580(3) and 139.770 , a person engaged in manufacturing at a plant facility located in this state may apply for a refund equal to the amount of Kentucky sales or use tax paid on the purchase of new or replacement machinery or equipment for an energy efficiency project purchased on or after July 1, 2008, reduced by the amount of vendor compensation allowed under KRS 139.570 .
  3. The manufacturer shall file an application for preapproval with the department, on a form provided by the department, prior to purchasing the new or replacement machinery or equipment that includes:
    1. A description of the new or replacement machinery or equipment;
    2. Documentation of the amount of energy or energy-producing fuels consumed in the twelve (12) month period prior to the application for preapproval; and
    3. Any other information the department may request.
  4. The department shall acknowledge receipt of the application for preapproval.
  5. The manufacturer shall file an application for incentives that includes documentation of:
    1. The achievement of the energy-efficiency standards required by subsection (1) of this section within eighteen (18) months from the time the machinery or equipment was placed in service; and
    2. Verification that the Kentucky sales and use tax was paid on the purchase of the new or replacement machinery or equipment.
  6. The burden of proof that the purchase of the machinery or equipment resulted in a decrease in the consumption of energy or energy-producing fuels shall be upon the applicant.
  7. Interest shall not be allowed or paid on any refund made under this section.

History. Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 17, effective August 30, 2007; 2008, ch. 95 § 12, effective August 1, 2008.

139.519. Sales and use tax refund on building materials used for disaster recovery.

  1. As used in this section:
    1. “Building materials” means all tangible personal property which enters into and becomes a permanent part of a building;
    2. “Disaster” means damage resulting from a flood, rain storm, ice storm, wind storm, tornado, hurricane, earthquake, or terrorist attack; and
    3. “Disaster area” means a county that has been declared a disaster by the President of the United States pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. secs. 5121 to 5206.
    1. Notwithstanding KRS 139.770 , a legal owner of a building located in a disaster area and damaged, in whole or in part, as a result of a disaster may qualify for a refund of the sales and use tax paid on the purchase of building materials used to: (2) (a) Notwithstanding KRS 139.770 , a legal owner of a building located in a disaster area and damaged, in whole or in part, as a result of a disaster may qualify for a refund of the sales and use tax paid on the purchase of building materials used to:
      1. Repair that building; or
      2. Construct a new building in a disaster area to replace the building damaged or destroyed by the disaster.
    2. The refund allowed by paragraph (a) of this subsection shall be limited to the lesser of:
      1. One hundred percent (100%) of the Kentucky sales and use tax actually paid, reduced by the amount of vendor compensation allowed under KRS 139.570 ; or
      2. Six thousand dollars ($6,000) for each building in the disaster area which is damaged or destroyed by the disaster regardless of the number of legal owners.
  2. Notwithstanding KRS 134.580 and 139.770 , to qualify for the refund provided by subsection (2) of this section:
    1. The building materials for which the sales and use tax refund is sought shall be purchased:
      1. For the purpose of repairing or constructing a building within a disaster area;
        1. By the legal owner of the building; or 2. a. By the legal owner of the building; or
        2. By a contractor who is under contract with the legal owner to incorporate the building materials into the building; and
      2. On or after the date the disaster area is declared a disaster; and
    2. The legal owner of the building for which the sales and use tax refund is sought shall:
      1. Provide documentation that the legal owner is eligible for assistance from the Federal Emergency Management Agency, United States Department of Homeland Security; or
      2. Provide a copy of the claim filed for insurance purposes for verification of the building in the disaster area that was damaged by the disaster, in whole or in part.
  3. The application for the sales and use tax refund provided by subsection (2) of this section shall be filed with the department:
    1. Within three (3) years from the date the disaster area is declared a disaster; and
    2. By the legal owner of the building on the form prescribed by the department.
    1. The legal owner of the building shall file an application for refund and submit sales receipts, invoices, photographs, and any other documents supporting the legal owner’s claim for refund, as requested by the department. (5) (a) The legal owner of the building shall file an application for refund and submit sales receipts, invoices, photographs, and any other documents supporting the legal owner’s claim for refund, as requested by the department.
    2. If the legal owner repairs or replaces more than one (1) building destroyed by the disaster, the legal owner shall file a separate application for refund for each building.
    3. The legal owner of the building shall execute information-sharing agreements prescribed by the department with contractors, vendors, and other related parties so that the department may verify expenditures and the sales and use tax paid.
    4. The legal owner of the building shall have no obligation to refund or otherwise return any amount of the sales and use tax refund received to any person who originally collected the tax and remitted it to the Commonwealth or to a contractor or subcontractor who paid the tax on the purchase of the materials to fulfill the terms of a construction contract.
  4. Interest shall not be allowed or paid on any refund made under this section.
    1. The department shall prescribe and make available the forms required under this section, and may promulgate administrative regulations in accordance with KRS Chapter 13A that are necessary to implement this section. (7) (a) The department shall prescribe and make available the forms required under this section, and may promulgate administrative regulations in accordance with KRS Chapter 13A that are necessary to implement this section.
    2. By October 1 of each year, the department shall report to the Legislative Research Commission, for the preceding fiscal year, the number of owners that have applied for refunds under this section by disaster area and the value of the refunds issued by disaster area.

History. Enact. Acts 2012, ch. 145, § 1, effective April 16, 2012.

Legislative Research Commission Notes.

(4/16/2012). 2012 Ky. Acts ch. 145, which created this statute as emergency legislation in Section 1, took effect upon being signed by the Governor on April 16, 2012. However, Section 5 of that Act provides that the Act applies retroactively to the disaster occurring on Wednesday, February 29, 2012, to Saturday, March 3, 2012.

139.520. Inapplicability of other statutory exemptions.

Unless otherwise expressly provided in this chapter, the exemptions provided for in any section, or sections, of the Kentucky Revised Statutes, including KRS 279.200 and 279.530 , shall not be applicable with respect to the taxes levied by this chapter, and to the extent such section, or sections, are inconsistent herewith, the same are hereby repealed.

History. Enact. Acts 1960, ch. 5, Art. I, § 84, effective February 5, 1960.

139.530. Sales and use taxes are in addition to other taxes.

The taxes imposed by this chapter shall be in addition to any excise, license, privilege or other tax imposed under existing provisions of the Kentucky Revised Statutes, including KRS 279.200 and 279.530 .

History. Enact. Acts 1960, ch. 5, Art. I, § 85, effective February 5, 1960.

Opinions of Attorney General.

The application of a sales tax on the retail sale of whiskey is not prohibited either by the Kentucky Constitution or the case law of the Court of Appeals and is expressly declared to be public policy by the General Assembly of the Commonwealth. OAG 70-609 .

The legislative policy is to impose sales and use taxes in addition to any excise, license, privilege, or other tax imposed under existing provisions of the Kentucky Revised Statutes. OAG 70-609 .

139.531. Application of taxes to horse industry.

  1. Notwithstanding any other provisions of this chapter to the contrary, the taxes imposed by this chapter shall apply to:
    1. Fees paid for breeding a stallion to a mare in this state;
    2. Sales of horses unless exempted under the provisions of subsections (2)(a) or (2)(d) of this section; and
    3. The sales price of any horse claimed at any race meeting within this state.
  2. In addition to any other exemptions provided for the horse industry in this chapter, the taxes imposed under the provisions of this chapter shall not apply to the following activities:
    1. The sale or use of horses, or interests or shares in horses, provided the purchase or use is made for breeding purposes only;
    2. The use of a stallion for breeding purposes by an owner or shareholder of the stallion;
    3. The trading of stallion services by an owner or shareholder of the stallion;
    4. The sale of horses less than two (2) years of age at the time of sale, provided the sale is made to a nonresident of Kentucky. For the purposes of this section, a nonresident means a person as defined in KRS 141.010 who is not a resident in this state as defined by KRS 141.010 or who is not commercially domiciled in this state as defined in KRS 141.901 ;
    5. The boarding and training of horses within this state; and
    6. The temporary use of horses within this state for purposes of racing, exhibiting, or performing.

HISTORY: Enact. Acts 1976, ch. 155, § 29; 2005 ch. 168, § 132, effective June 1, 2005; 2018 ch. 171, § 75, effective April 14, 2018; 2018 ch. 207, § 75, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

  1. Lifetime Breeding Right.
  2. Interest.
1. Lifetime Breeding Right.

A lifetime breeding right is, in its simplest form, a fee paid, albeit substantial, for breeding a stallion to a mare in this state for the lifetime of the stallion and thus, falls squarely within the confines of the taxing statute. Calumet Farm, Inc. v. Revenue Cabinet, Commonwealth, 793 S.W.2d 830, 1990 Ky. App. LEXIS 43 (Ky. Ct. App. 1990).

The interest conveyed by a lifetime breeding right is not equivalent to a share; no interest is conveyed by the lifetime breeding right other than an interest in the breeding right of the stallion, whereas a share transfers an ownership interest in the horse itself. Calumet Farm, Inc. v. Revenue Cabinet, Commonwealth, 793 S.W.2d 830, 1990 Ky. App. LEXIS 43 (Ky. Ct. App. 1990).

2. Interest.

The “interest” as mentioned in subdivision (2)(a) of this section contemplates some type of interest in the horse itself, which is not present in the case of a lifetime breeding right. Calumet Farm, Inc. v. Revenue Cabinet, Commonwealth, 793 S.W.2d 830, 1990 Ky. App. LEXIS 43 (Ky. Ct. App. 1990).

Cited in:

Paducah v. T.C.B., Inc., 817 S.W.2d 234, 1991 Ky. App. LEXIS 119 (Ky. Ct. App. 1991); Commonwealth, Revenue Cabinet v. Kenington Sales, Inc., 836 S.W.2d 902, 1992 Ky. App. LEXIS 129 (Ky. Ct. App. 1992).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Kropp, Landen and Donath, The Prevention and Treatment of Breeding Contract Controversies, 74 Ky. L.J. 715 (1985-86).

Miller, America Singing: The Role of Custom and Usage in the Thoroughbred Horse Business, 74 Ky. L.J. 781 (1985-86).

Sales and Use Tax Planning for the Horse Industry, 78 Ky. L.J. 601 (1989-90).

139.5313. Application of taxes to mortuary industry.

Notwithstanding any other provisions of this chapter, morticians, undertakers, and funeral directors are consumers of all items including caskets and vaults, which they use or consume in the performance of their services and the taxes imposed by this chapter apply at the time of the sale to the mortician, undertaker, or funeral director.

History. Enact. Acts 1990, ch. 275, § 1, effective July 13, 1990.

139.532. Applicability of sales or use tax to gross receipts from various sources. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1985 (1st Ex. Sess.), ch. 6, part III, § 10, effective August 1, 1985) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.533. Sales tax rebate on sales of admissions and tangible personal property at governmental facility — Limitation beginning July 1, 2020.

  1. Beginning July 1, 2020, no additional applications for a sales tax rebate shall be accepted under this section. Any qualified applicant which has applied and been granted a sales tax rebate under this section shall continue to receive the sales tax rebates provided by this section as long as the governmental entity continues to qualify for the sales tax rebate under this section.
  2. As used in this section:
    1. “Effective date” means the first day of the month following the month in which the department notifies the governmental entity that it is eligible to receive a sales tax rebate;
    2. “Governmental entity” means:
      1. Any county with a population of less than one hundred thousand (100,000) residents; or
      2. Any city, agency, instrumentality, quasi-governmental entity, or other political subdivision of the Commonwealth that is located in a county with a population of less than one hundred thousand (100,000) residents; and
      1. “Public facility” means a building owned and operated by a governmental entity that is a multipurpose facility open to the general public for performances and programs relating to arts, sports, and entertainment and which includes at least five hundred (500) seats but not more than eight thousand (8,000) seats. (c) 1. “Public facility” means a building owned and operated by a governmental entity that is a multipurpose facility open to the general public for performances and programs relating to arts, sports, and entertainment and which includes at least five hundred (500) seats but not more than eight thousand (8,000) seats.
      2. “Public facility” does not include a university, college, or school gymnasium or auditorium.
    1. Notwithstanding KRS 134.580 and 139.770 , effective July 1, 2010, a governmental entity may be granted a sales tax rebate of up to one hundred percent (100%) of the Kentucky sales tax generated by the sale of admissions to the public facility and the sale of tangible personal property at the public facility. The tax rebate shall be reduced by the vendor compensation allowed under KRS 139.570 on or after July 1, 2010. (3) (a) Notwithstanding KRS 134.580 and 139.770 , effective July 1, 2010, a governmental entity may be granted a sales tax rebate of up to one hundred percent (100%) of the Kentucky sales tax generated by the sale of admissions to the public facility and the sale of tangible personal property at the public facility. The tax rebate shall be reduced by the vendor compensation allowed under KRS 139.570 on or after July 1, 2010.
    2. The governmental entity shall have no obligation to refund or otherwise return any amount of the sales tax rebate to the persons from whom the sales tax was collected.
    3. The total tax rebate for each public facility shall not exceed two hundred fifty thousand dollars ($250,000) in each calendar year.
    1. To be eligible for a sales tax rebate under this section, the governmental entity shall file an application with the department in the form prescribed by the department through the promulgation of an administrative regulation in accordance with KRS Chapter 13A. (4) (a) To be eligible for a sales tax rebate under this section, the governmental entity shall file an application with the department in the form prescribed by the department through the promulgation of an administrative regulation in accordance with KRS Chapter 13A.
    2. The department shall:
      1. Review the application;
      2. Determine whether the applicant meets the requirements of this section; and
      3. Notify the applicant in writing whether the applicant qualifies for a rebate and the effective date of qualification.
  3. A qualified applicant shall file a request for a sales tax rebate within sixty (60) days following the end of each calendar quarter for sales made during the quarter. The request shall be submitted in the form prescribed by the department through the promulgation of an administrative regulation in accordance with KRS Chapter 13A, and shall include supporting information and documentation as determined necessary by the department to verify the requested tax rebate.
  4. The department shall review the request, verify the amount of sales tax rebate due to the governmental entity, and pay the amount determined due within forty-five (45) days of receipt of the request and all necessary supporting information to the extent the cap established by subsection (3)(c) of this section has not been met.
  5. Interest shall not be allowed or paid on any sales tax rebate payment made under this section.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 74, effective June 26, 2009; 2019 ch. 151, § 31, effective June 27, 2019.

139.534. Tax refund for purchases and operation of certain communications and computer systems costing $100 million or more.

  1. As used in this section:
    1. “Approved company” means an eligible company that has received preliminary approval from the department for a sales and use tax refund under this section;
    2. “Communications system” means a system composed of equipment used to provide communications services as defined in KRS 139.195 . “Communications system” does not include repair, replacement, or spare parts as defined in KRS 139.010 , installation materials, operating supplies, office supplies, or supplies to maintain the system;
    3. “Computer software” means a set of coded instructions designed to cause a computer or automatic processing equipment to perform a task;
    4. “Computer system” means a system composed of personal computers, laptops, computer software, computer servers, processors, coprocessors, memory devices, storage devices, input and output devices, and other similar devices deployed as part of the system configuration. “Computer system” does not include repair, replacement, or spare parts as defined in KRS 139.010 , installation materials, operating supplies, office supplies, or supplies to maintain the system;
    5. “Eligible company” means a corporation, limited liability company, partnership, registered limited liability partnership, sole proprietorship, business trust, or any other entity that is classified under the following 2007 North American Industry Classification System (NAICS) industry codes, including any subsequent updates or revisions thereto:
      1. NAICS 511210, Software publishers;
      2. NAICS 518210, Data processing, hosting, and related services;
      3. NAICS 519130, Internet publishing, broadcasting, and web search portal business; or
      4. NAICS 541511, Custom computer programming services; and
    6. “Qualifying system” means:
      1. A communications system;
      2. A computer system; or
      3. A combination thereof;
  2. Notwithstanding KRS 134.580(3) and 139.770 , an approved company may qualify for a refund of up to one hundred percent (100%) of the Kentucky sales and use tax paid, reduced by the amount of vendor compensation allowed under KRS 139.570 , on the purchase of a qualifying system.
  3. To qualify for the refund provided in subsection (2) of this section, all of the following requirements shall be met:
    1. The eligible company shall file an application for preliminary approval with the department prior to making the purchase;
    2. Upon receiving preliminary approval, the approved company shall purchase the qualifying system on or after July 1, 2010, and shall spend one hundred million dollars ($100,000,000) or more on the purchase or purchases, excluding tax;
    3. The qualifying system shall be installed at a single location in the Commonwealth within eighteen (18) months from the date the department preliminarily approves the eligible company for a sales and use tax refund as provided in subsection (5) of this section; and
    4. The approved company shall use the qualifying system:
      1. At the specified location until the property is fully depreciated or, if the approved company elects to expense the property under Section 179 of the Internal Revenue Code, the property shall be operated at the Kentucky location for the same time as if the property were depreciated under Section 167 or 168 of the Internal Revenue Code; and
      2. In the business activities that are included within the NAICS industry codes listed in subsection (1)(e) of this section.
  4. The eligible company shall file an application for preliminary approval with the department prior to purchasing the qualifying system. The application shall be in the form prescribed by the department and shall include:
    1. The name and address of the eligible company;
    2. A description of the eligible company’s business activities and applicable NAICS code;
    3. A description of the qualifying system and an explanation of how the components thereof will be used by the eligible company in its business activities;
    4. The estimated cost of the system;
    5. The business location where the system will be located;
    6. The date of anticipated purchase;
    7. The anticipated installation completion date; and
    8. Any other information the department may require.
  5. The department shall notify the eligible company that the application for preliminary approval has been approved or denied.
    1. To be eligible to receive a full refund, the approved company shall file a request for a sales and use tax refund within sixty (60) days following the completed installation of qualifying system. (6) (a) To be eligible to receive a full refund, the approved company shall file a request for a sales and use tax refund within sixty (60) days following the completed installation of qualifying system.
    2. Failure to file a refund request within sixty (60) days shall result in an adjustment to the refund amount paid as follows:
      1. For late refund requests filed on or after the sixty-first day and prior to the one hundred eighty-first day after the completed installation, for each thirty (30) days, or portion thereof, that the refund request is late, the refund amount shall be reduced by one-twelfth (1/12) of the total amount determined by the department; and
      2. Any refund request filed more than one hundred eighty (180) days after the completed installation shall be rejected, and no refunds shall be paid for the time period covered by the request.
  6. Interest shall not be allowed or paid on any sales and use tax refund made under this section.
    1. If the approved company does not operate the qualifying system at the business location where the system was initially installed for the time period required under subsection (3)(d)1. of this section, or in the manner required under subsection (3)(d)2. of this section, the approved company shall notify the department that the requirements of subsection (3) of this section have not been met. The approved company shall repay the previously received sales and use tax refunds plus interest at the rate established in KRS 131.183 computed from the date the refund was issued. (8) (a) If the approved company does not operate the qualifying system at the business location where the system was initially installed for the time period required under subsection (3)(d)1. of this section, or in the manner required under subsection (3)(d)2. of this section, the approved company shall notify the department that the requirements of subsection (3) of this section have not been met. The approved company shall repay the previously received sales and use tax refunds plus interest at the rate established in KRS 131.183 computed from the date the refund was issued.
    2. If the approved company fails to pay the tax and interest within thirty (30) days of the notification, the department shall apply all applicable penalties provided in KRS 131.180 .

that is subject to depreciation under Section 167 or 168 of the Internal Revenue Code, including assets expensed under Section 179 of the Internal Revenue Code.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 35, effective June 26, 2009.

139.535. Sales and use tax incentive for approved companies on qualifying purchases for economic development projects approved under KRS 154.31-030.

  1. As used in this section:
    1. “Agreement” has the same meaning as in KRS 154.31-010 ;
    2. “Approved company” has the same meaning as in KRS 154.31-010 ;
    3. “Economic development project” has the same meaning as in KRS 154.31-010;
    4. “Electronic processing” has the same meaning as in KRS 154.31-010;
    5. “Equipment” has the same meaning as in KRS 154.31-010;
    6. “Project term” has the same meaning as in KRS 154.31-010; and
    7. “Research and development” has the same meaning as in KRS 154.31-010.
  2. Notwithstanding any provision of KRS 139.770 to the contrary, an approved company may receive a refund of sales and use tax paid on approved expenses after execution of the agreement for building and construction materials, and equipment used in research and development or for electronic processing at an economic development project as provided in the agreement executed under KRS 154.31-030 .
    1. The approved company shall apply for the sales and use tax incentives as provided in this subsection. (3) (a) The approved company shall apply for the sales and use tax incentives as provided in this subsection.
    2. For an economic development project with a project term of three (3) years or less, the approved company shall submit an application to receive the sales and use tax incentives to the department within sixty (60) days of the earlier of the completion of the economic development project or the expiration of the project term.
      1. For an economic development project with a project term of greater than three (3) years, the approved company shall, beginning with the third year of the project term, file with the department annually an information return, and any supporting documentation required by the department. The approved company shall not be eligible to receive the sales and use tax incentives until the project is complete and the application for incentives is submitted to the department as required by subparagraph 3. of this paragraph. (c) 1. For an economic development project with a project term of greater than three (3) years, the approved company shall, beginning with the third year of the project term, file with the department annually an information return, and any supporting documentation required by the department. The approved company shall not be eligible to receive the sales and use tax incentives until the project is complete and the application for incentives is submitted to the department as required by subparagraph 3. of this paragraph.
      2. The information return and documentation shall be filed with the department within sixty (60) days following the end of the calendar year, and shall include information relating to prior unreported years.
      3. The approved company shall file a final request for sales and use tax incentives within sixty (60) days of the earlier of the completion of the economic development project or the expiration of the project term.
  3. The approved company shall have no obligation to refund or otherwise return any amount of the sales and use tax refund received to the person who originally collected the tax and remitted it to the Commonwealth.
  4. An approved company shall execute information-sharing agreements prescribed by the department with contractors, vendors, and other related parties so that the department may verify expenditures and sales and use tax paid.
  5. Interest shall not be allowed or paid on any incentives paid under this section. The department may examine any distribution of sales and use tax incentives within four (4) years from the date the final application for sales and use tax incentives is received. An overpayment resulting from the examination shall be repaid to the State Treasury. Any amount required to be repaid is subject to the interest provisions of KRS 131.183 and to the penalty provisions of KRS 131.180 .
  6. The department may promulgate administrative regulations in accordance with KRS Chapter 13A, and shall require the filing of forms designed by the department to reflect the intent of this section.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 23, effective June 26, 2009.

Legislative Research Commission Notes.

(6/26/2009). In codification, the Reviser of Statutes has corrected a manifest clerical or typographical error in 2009 (1st Extra. Sess.) Ky. Acts ch. 1, sec. 23, subsection (7) (this statute), by replacing an incorrect reference to “this subchapter” with the correct reference to “this section” under the authority of KRS 7.136 .

139.536. Tourism attraction project credit against sales tax.

  1. As used in this section:
    1. “Agreement” means the same as defined in KRS 148.851 ;
    2. “Approved company” means the same as defined in KRS 148.851 ;
    3. “Approved costs” means the same as defined in KRS 148.851;
    4. “Authority” means the same as defined in KRS 148.851;
    5. “Cabinet” means the same as defined in KRS 148.851;
    6. “Secretary” means the secretary of the Tourism, Arts and Heritage Cabinet; and
    7. “Tourism development project” means the same as defined in KRS 148.851.
    1. In consideration of the execution of the agreement and notwithstanding any provision of KRS 139.770 to the contrary, the approved company excluding its lessees, may be granted a sales tax incentive based on the Kentucky sales tax imposed by KRS 139.200 on the sales generated by or arising at the tourism development project as provided in KRS 148.853 . (2) (a) In consideration of the execution of the agreement and notwithstanding any provision of KRS 139.770 to the contrary, the approved company excluding its lessees, may be granted a sales tax incentive based on the Kentucky sales tax imposed by KRS 139.200 on the sales generated by or arising at the tourism development project as provided in KRS 148.853 .
    2. The approved company shall have no obligation to refund or otherwise return any amount of this sales tax refund to the persons from whom the sales tax was collected.
  2. The authority shall notify the department upon approval of a tourism development project. The notification shall include the name of the approved company, the name of the tourism development project, the date on which the approved company is eligible to receive incentives under this section, the term of the agreement, the estimated approved costs, and the specified percentage of the approved costs that the approved company is eligible to receive and any other information that the department may require.
  3. The sales tax incentive shall be reduced by the amount of vendor compensation allowed under KRS 139.570 .
  4. The approved company seeking the incentives shall execute information-sharing agreements prescribed by the department with its lessees and other related parties to verify the amount of sales tax eligible for the sales tax refund under this section.
  5. By October 1 of each year, the department shall certify to the authority and the secretary the sales tax liability of the approved companies receiving incentives under this section and KRS 148.851 to 148.860 , and their lessees, and the amount of the sales tax refunds issued pursuant to this section for the preceding fiscal year.
  6. Interest shall not be allowed or paid on any refund made under the provisions of this section.
  7. The department may promulgate administrative regulations and require the filing of forms designed by the department to reflect the intent of this section and KRS 148.851 to 148.860 .

History. Enact. Acts 1996, ch. 335, § 6, effective July 15, 1996; 1998, ch. 238, § 6, effective April 1, 1998; 1998, ch. 48, § 5, effective July 15, 1998; 2000, ch. 315, § 2, effective July 14, 2000; 2001, ch. 1, § 8, effective June 21, 2001; 2005, ch. 173, Pt. XXIV, § 1, effective March 20, 2005; 2005, ch. 85, § 423, effective June 20, 2005; 2005, ch. 95, § 14, effective June 20, 2005; 2005, ch. 184, § 14, effective June 20, 2005; 2008, ch. 95, § 13, effective August 1, 2008; 2009, ch. 16, § 12, effective June 25, 2009; 2009 (1st Ex. Sess.), ch. 1, § 42, effective June 26, 2009.

Legislative Research Commission Notes.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 32 (HB 354). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 32, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 32, was not codified.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

139.537. Exemption for coal-based near zero emission power plant.

  1. As used in this section, “coal-based near zero emission power plant” means a facility designed to achieve minimum emissions, built in Kentucky for demonstrating the feasibility of producing electricity and hydrogen from coal, whose site has been determined acceptable from an environmental impact perspective in a record of decision published by the United States Department of Energy after January 1, 2006, and that has received all applicable local planning and zoning approvals.
  2. Notwithstanding all other provisions of this chapter, effective July 1, 2006, the taxes imposed by this chapter shall not apply to the sale, rental, storage, use, or other consumption of tangible personal property used to construct, repair, renovate, or upgrade a coal-based near zero emission power plant, including repair and replacement parts purchased for the plant.
  3. The Cabinet for Economic Development, with input from the Energy and Environment Cabinet, shall establish standards for making applications for the exemptions provided in this section. Prior to the Cabinet for Economic Development granting approval, the Office of the Budget Director shall determine if the power plant results in a net positive economic impact to the Commonwealth and shall provide a certification in writing to the Cabinet for Economic Development. The Cabinet for Economic Development shall notify the department in writing that a power plant has qualified for the exemptions.
  4. The Cabinet for Economic Development may promulgate administrative regulations necessary to administer the application and certification process of this section.
  5. The department may promulgate administrative regulations necessary to administer the exemptions provided in this section.
  6. The provisions of this section shall not apply to sales or purchases made after December 31, 2030.

History. Enact. Acts 2006 (1st Ex. Sess.), ch. 2, § 72, effective June 28, 2006; 2009, ch. 16, § 13, effective June 25, 2009.

Legislative Research Commission Notes.

(7/15/2010). A reference to the “Environmental and Public Protection Cabinet” in this section has been changed in codification to the “Energy and Environment Cabinet” to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938.

(6/28/2006). 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

Motion Picture Production Company Refundable Credits

139.538. Encouragement of motion picture industry — Legislative purpose — Definitions — Tax credit — Administrative regulations.

  1. It is the intent and purpose of the General Assembly in enacting this section and KRS 139.990(5), to encourage the motion picture industry to choose locations in the Commonwealth for the filming or producing of motion pictures, by providing an exemption from sales and use taxes. The exemption is accomplished by granting a refundable credit for sales and use taxes paid on purchases made in connection with the filming or producing of motion pictures in Kentucky.
    1. On or after April 27, 2017, and until July 1, 2022, the department shall not accept any new applications as provided by subsection (4) of this section. (2) (a) On or after April 27, 2017, and until July 1, 2022, the department shall not accept any new applications as provided by subsection (4) of this section.
    2. On or before June 1, 2019, the department shall provide the following information to the Interim Joint Committee on Appropriations and Revenue for all fiscal years data is available:
      1. The name of the motion picture company;
      2. The filming location or locations in this state;
      3. A brief description of the production;
      4. The amount of sales and use tax refunded; and
      5. The total amount of all sales and use tax refunded to motion picture production companies during each fiscal year reported.
  2. As used in this section and KRS 139.990(5):
    1. “Financial institution” means any bank or savings and loan institution in the Commonwealth which carries FDIC or FSLIC insurance;
    2. “Motion picture production company” means a company engaged in the business of producing motion pictures intended for a theatrical release or for exhibition on national television either by a network or for national syndication, or television programs which will serve as a pilot for or a segment of a nationally televised dramatic series, either by a network or for national syndication; and
    3. “Secretary” means the secretary of the Kentucky Finance and Administration Cabinet.
  3. Any motion picture production company that intends to film all or parts of a motion picture in the Commonwealth and desires to receive the credit provided for in subsection (7) of this section shall, prior to the commencement of filming:
    1. Provide the department with the address of a Kentucky location at which records of expenditures qualifying for the tax credit will be maintained, and with the name of the individual maintaining these records; and
    2. File an application for the tax credit within sixty (60) days after the completion of filming or production in Kentucky. The application shall include a final expenditure report providing documentation for expenditures in accordance with administrative regulations promulgated by the department.
  4. To qualify as a basis for the financial incentive, expenditures must be made by check drawn upon any Kentucky financial institution.
  5. The twelve (12) month period during which expenditures may qualify for the tax credit shall begin on the date of the earliest expenditure reported.
  6. Any motion picture production company which films or produces one (1) or more motion pictures in the Commonwealth during any twelve (12) month period shall, upon making application therefor and meeting the other requirements prescribed in this section, be entitled to a refundable tax credit equal to the amount of Kentucky sales and use tax paid for purchases made in connection with the filming or production of a motion picture.
  7. The department shall, within sixty (60) days following the receipt of an application for a credit for sales and use tax paid, calculate the total expenditures of the motion picture production company for which there is documentation for funds expended in the Commonwealth, calculate the amount of credit to which the applicant is entitled, and certify the amount of the credit to the secretary. In the case of an audit, as provided for in subsection (13) of this section, the department shall certify the amount of the credit due to the secretary within one hundred eighty (180) days following the receipt of the motion picture production company’s application.
  8. Upon receipt of the certification of the amount of credit from the department, the secretary shall cause the refund of sales taxes paid to be remitted to the motion picture production company. For purposes of payment and funding thereof, the credit shall be paid in the same manner as other claims on the State Treasury are paid. They shall not be charged against any appropriation but shall be deducted from tax receipts for the current fiscal year.
  9. The sales and use taxes paid by the motion picture production company for which a refundable tax credit is granted shall be deemed not to have been legally paid into the State Treasury, and the refund of the credit shall not be in violation of Section 59 of the Kentucky Constitution.
  10. Any tax credit or part thereof paid to a motion picture production company as a result of error by the department shall be repaid by such company to the secretary.
  11. Any tax credit or part thereof paid to a motion picture production company as a result of error or fraudulent statements made by the motion picture production company shall be repaid by such company to the secretary, together with interest, at the tax interest rate provided for in KRS 131.010(6).
  12. The department may require that reported expenditures and the application for the tax credit from a motion picture production company be subjected to an audit by the department auditors to verify expenditures.
  13. For companies in the business of producing films or television shows other than those which would qualify them for the credit under the definition of “motion picture production company,” the department may require separate accounting records for the reporting of expenditures made in connection with the application for a refundable tax credit.
  14. The department may promulgate appropriate administrative regulations to carry out the intent and purposes of this section.

HISTORY: Enact. Acts 1986, ch. 464, § 1, effective July 15, 1986; 2008, ch. 95, § 14, effective August 1, 2008; 2018 ch. 171, § 46, effective April 14, 2018; 2018 ch. 207, § 46, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(11/16/90) Because of the amendment of KRS 139.990 in 1988 Acts Ch. 135, § 6, the text of subsection (6) of that statute was reassigned as subsection (5). Pursuant to KRS 7.136(1), the cross-references to that subsection in this statute has been changed to agree with this renumbering.

139.5381. Definitions for KRS 139.5382 to 139.5386 and 139.990(5). [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1986, ch. 464, § 2, effective July 15, 1986; 2005, ch. 85, § 424, effective June 20, 2005) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.5382. Requirements for eligibility to receive refund. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1986, ch. 464, § 4, effective July 15, 1986; 2005, ch. 85, § 425, effective June 20, 2005) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.5383. Refund of sales and use tax paid for purchases made in connection with filming or production of motion picture. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1986, ch. 464, § 3, effective July 15, 1986) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.5384. Duty of Department of Revenue — Duty of secretary of Finance and Administration Cabinet. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1986, ch. 464, § 5, effective July 15, 1986; 2005, ch. 85, § 426, effective June 20, 2005) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.5385. Repayment of tax credit by motion picture production company. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1986, ch. 464, § 6, effective July 15, 1986; 2005, ch. 85, § 427, effective June 20, 2005) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

139.5386. Audit — Separate accounting records — Regulations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1986, ch. 464, § 7, effective July 15, 1986; 2005, ch. 85, § 428, effective June 20, 2005) was repealed by Acts 2008, ch. 95, § 20, effective August 1, 2008.

Administration

139.540. Taxes are due monthly.

The taxes imposed by this chapter are due and payable to the department monthly and shall be remitted on or before the twentieth day of the next succeeding calendar month.

History. Enact. Acts 1960, ch. 5, Art. I, § 50, effective February 5, 1960; 2005, ch. 85, § 429, effective June 20, 2005.

NOTES TO DECISIONS

1. Accrual of Interest.

Where overdue use taxes were assessed against a hotel on items of tangible personal property used in connection with the renting of rooms and the selling of meals, interest accrued on all amounts due and owing from the hotel from the due date as determined by this section. Kentucky Board of Tax Appeals v. Brown Hotel Co., 528 S.W.2d 715, 1975 Ky. LEXIS 83 ( Ky. 1975 ).

139.550. Required monthly return.

  1. On or before the twentieth day of the month following each calendar month, a return for the preceding month shall be filed with the department in a form the department may prescribe.
    1. For purposes of the sales tax, a return shall be filed by every retailer or seller. (2) (a) For purposes of the sales tax, a return shall be filed by every retailer or seller.
    2. For purposes of the use tax, a return shall be filed by every retailer engaged in business in the state and by every person purchasing tangible personal property, digital property, or an extended warranty service, the storage, use or other consumption of which is subject to the use tax, who has not paid the use tax due to a retailer required to collect the tax.
    3. If a retailer’s responsibilities have been assumed by a certified service provider as defined by KRS 139.795 , the certified service provider shall file the return.
    4. When a remote retailer’s product is sold through a marketplace, then the marketplace provider that facilitated the sale shall file the return and remit the tax due on those sales.
  2. Returns shall be signed by the person required to file the return or by a duly authorized agent but need not be verified by oath.
  3. Persons not regularly engaged in selling at retail and not having a permanent place of business, but who are temporarily engaged in selling from trucks, portable roadside stands, concessionaires at fairs, circuses, carnivals, and the like, shall report and remit the tax on a nonpermit basis, under rules as the department shall provide for the efficient collection of the sales tax on sales.
  4. The return shall show the amount of the taxes for the period covered by the return and other information the department deems necessary for the proper administration of this chapter.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 51, effective February 5, 1960; 2003, ch. 124, § 26, effective July 1, 2004; 2005, ch. 85, § 430, effective June 20, 2005; 2009, ch. 73, § 20, effective July 1, 2009; 2018 ch. 171, § 47, effective April 14, 2018; 2018 ch. 207, § 47, effective April 27, 2018; 2019 ch. 151, § 33, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 33 of that Act apply to transactions occurring on or after July 1, 2019.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

139.560. Contents of monthly return. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 52; 1972, ch. 84, part I, § 1) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.570. Reimbursement of seller’s collection costs.

    1. For reimbursement of the cost of collecting and remitting the tax, the seller shall deduct on each return one and three-quarters percent (1.75%) of the first one thousand dollars ($1,000) of tax due and one and one-half percent (1.5%) of the tax due in excess of one thousand dollars ($1,000), provided the amount due is not delinquent at the time of payment. (1) (a) For reimbursement of the cost of collecting and remitting the tax, the seller shall deduct on each return one and three-quarters percent (1.75%) of the first one thousand dollars ($1,000) of tax due and one and one-half percent (1.5%) of the tax due in excess of one thousand dollars ($1,000), provided the amount due is not delinquent at the time of payment.
    2. The total reimbursement allowed for each seller in any reporting period shall not exceed fifty dollars ($50).
  1. Notwithstanding subsection (1) of this section, the rate of compensation for taxes collected or returns filed by certified service providers and other model sellers participating in the agreement as defined in KRS 139.781 shall be determined according to the terms of the agreement as provided in KRS 139.789(7).

History. Enact. Acts 1960, ch. 5, Art. I, § 53; 1968, ch. 40, part I, § 9; 1972, ch. 84, part I, § 2; 1990, ch. 476, Pt. VII A, § 622, effective July 1, 1990; 2005, ch. 154, § 3, effective June 20, 2005; 2008, ch. 39, § 2, effective July 1, 2008; repealed and reenact., Acts 2009, ch. 92, § 1, effective June 25, 2009; 2013, ch. 119, § 15, effective July 1, 2013.

139.580. Delivery of return and remittance of tax.

The person required to file the return shall deliver the return together with a remittance of the amount of the tax due to the department.

History. Enact. Acts 1960, ch. 5, Art. I, § 54, effective February 5, 1960; 2005, ch. 85, § 431, effective June 20, 2005.

NOTES TO DECISIONS

Cited in:

Kentucky Board of Tax Appeals v. Brown Hotel Co., 528 S.W.2d 715, 1975 Ky. LEXIS 83 ( Ky. 1975 ).

139.590. Returns for other than monthly periods.

  1. For purposes of facilitating the administration, payment, or collection of the taxes levied by this chapter, the department may, within its discretion, permit or require returns or tax payments for periods other than those prescribed by KRS 139.540 and 139.550 .
  2. Notwithstanding the provisions of KRS 139.550 , any retailer who desires to file his return on a quarterly basis shall make application in writing to the department at least ninety (90) days prior to the due date of such quarterly return. When permitted, quarterly returns shall be filed in such manner as the department may prescribe. No retailer may change from a quarterly reporting system to monthly reporting without authorization of the department.
  3. In no case shall a retailer be permitted to file quarterly unless monthly payments for the immediately preceding month are made on the basis of taxable gross receipts or total sales price of property used, consumed, or stored, as the case may be.

History. Enact. Acts 1960, ch. 5, Art. I, § 55, effective February 5, 1960; 2005, ch. 85, § 432, effective June 20, 2005.

139.600. Sales tax on rental receipts.

For the purposes of the sales tax, gross receipts from rentals or leases of tangible personal property shall be reported and the tax paid in accordance with such rules and regulations as the department may prescribe.

History. Enact. Acts 1960, ch. 5, Art. I, § 56, effective February 5, 1960; 2005, ch. 85, § 433, effective June 20, 2005.

139.610. Extension of time for filing return.

  1. The department shall upon written request received on or prior to the due date of the return or tax, for good cause satisfactory to the department, extend the time for filing the return or paying the tax for a period not exceeding thirty (30) days.
  2. Any person to whom an extension is granted and who pays the tax within the period for which the extension is granted shall pay, in addition to the tax, interest at the tax interest rate as defined in KRS 131.010(6) from the date on which the tax would otherwise have been due.

History. Enact. Acts 1960, ch. 5, Art. I, § 58; 1976, ch. 155, § 19; 1992, ch. 338, § 5, effective August 1, 1992; 2005, ch. 85, § 434, effective June 20, 2005.

139.620. Time for assessing taxes shown owing by the return.

  1. As soon as practicable after each return is received, the department shall examine and audit it. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the excess shall be assessed by the department within four (4) years from the date the return was filed, except as provided in subsection (2), and except that in the case of a failure to file a return or of a fraudulent return the excess may be assessed at any time. A notice of such assessment shall be mailed to the taxpayer. The time herein provided may be extended by agreement between the taxpayer and the department.
  2. For the purposes of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
  3. When a business is discontinued, a determination may be made at any time thereafter within the periods specified in subsection (1) as to liability arising out of that business, irrespective of whether the determination is issued prior to the due date of the liability as otherwise specified in this chapter.

History. Enact. Acts 1960, ch. 5, Art. I, § 59, effective February 5, 1960; 1978, ch. 233, § 29, effective June 17, 1978; 1990, ch. 414, § 4, effective July 13, 1990; 2005, ch. 85, § 435, effective June 20, 2005.

NOTES TO DECISIONS

  1. Notice of Assessment.
  2. Entitlement to Refund.
1. Notice of Assessment.

Where in an action to collect unpaid sales taxes, the defendant corporation claimed that it had never received notice of the assessment, and the record disclosed that the commonwealth did not or could not offer any proof that the subject notice of taxes due had been mailed to, or received by, the defendant corporation, the commonwealth was not entitled to a presumption that the tax notices were properly mailed as a usual business practice; therefore, where there was no proof by the commonwealth of a regular system or scheme for mailing the tax notices, it was a question of fact as to whether the defendant received the notice of assessment, and the trial court erred when it granted summary judgment in favor of the commonwealth. Koscot Interplanetary, Inc. v. Commonwealth, 649 S.W.2d 201, 1983 Ky. LEXIS 243 ( Ky. 1983 ).

Department’s initial, timely letter, which notified the telephone company of a sales tax assessment and of the amount of the assessed tax deficiency, was sufficient to satisfy the statute of limitations, KRS 139.620(1), and to allow collection of the tax because the letter was not required to contain all five requirements of KRS 131.081(8). Revenue Cabinet v. GTE South, Inc., 238 S.W.3d 655, 2007 Ky. LEXIS 160 ( Ky. 2007 ).

2. Entitlement to Refund.

Under KRS 134.580 , an “overpayment” or “payment where no tax was due” must occur before a refund is authorized under KRS 139.770 , and, thus, a taxpayer is only entitled to a refund if he has overpaid his tax liability; therefore, although the court had held that a timely notice of assessment issued by the Commonwealth of Kentucky, Revenue Cabinet was deficient under KRS 131.081(8) and KRS 131.110(1) and that its subsequent notice was barred by the statute of limitations under KRS 139.620(1), it accepted the Cabinet’s alternative argument that the taxpayer was not entitled to a refund concerning the sales and use taxes it paid during a certain period because it did not “overpay” its taxes for that period, and it held that the Cabinet had the right to retain prior excess payments for that time period to the extent that they did not exceed the amount which might have been properly assessed and demanded. GTE South, Inc. v. Commonwealth, 2004 Ky. App. LEXIS 86 (Ky. Ct. App. 2004), rehearing denied, 2004 Ky. App. LEXIS 180 (Ky. Ct. App. 2004), rev’d, Revenue Cabinet v. GTE South, Inc., 238 S.W.3d 655, 2007 Ky. LEXIS 160 ( Ky. 2007 ) (on grounds that the notice was sufficient).

139.630. Interest on tax shown owing by return. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 60) was repealed by Acts 1976, ch. 155, § 30.

139.640. Offset of overpayments against tax owing.

In making a determination of tax liability the department may offset overpayments for a period or periods, together with interest on the overpayments, against underpayments for another period or periods, against penalties, and against the interest on the underpayments.

History. Enact. Acts 1960, ch. 5, Art. I, § 61, effective February 5, 1960; 2005, ch. 85, § 436, effective June 20, 2005.

139.650. Interest on overdue tax.

In every case, any tax not paid on or before the due date shall bear interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.

History. Enact. Acts 1960, ch. 5, Art. I, § 62; 1976, ch. 155, § 21; 1982, ch. 452, § 20, effective July 1, 1982.

NOTES TO DECISIONS

1. Date of Accrual.

Where overdue use taxes were assessed against a hotel on items of tangible personal property used in connection with the renting of rooms and the selling of meals, interest accrued on all amounts due and owing from the hotel from the due date as determined by the statute concerned with collection of the taxes (KRS 139.540 ). Kentucky Board of Tax Appeals v. Brown Hotel Co., 528 S.W.2d 715, 1975 Ky. LEXIS 83 ( Ky. 1975 ).

Cited in:

Department of Revenue v. To Your Door Pizza, Inc., 670 S.W.2d 482, 1983 Ky. App. LEXIS 358 (Ky. Ct. App. 1983).

Opinions of Attorney General.

The tax interest rate is that rate in effect the next day after the tax became due and such tax remained unpaid; thus, under the 1982 amendments to KRS 131.010 , 131.183 and this section, the tax interest rate on any delinquent taxes (regardless of the year) on and after July 1, 1982, shall be sixteen percent. However, the sixteen percent rate is not to be retroactively applied to delinquent taxes which were due prior to July 1, 1982. OAG 83-12 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

139.660. Security for compliance with chapter.

  1. Whenever it is deemed necessary to insure compliance with this chapter, the department may require any person subject thereto to place with it such security as the department may determine. The amount of the security shall be fixed by the department but, except as provided in subsection (2), shall not be greater than twice the estimated average liability of persons filing returns for quarterly periods or three (3) times the estimated average liability of persons required to file returns for monthly periods, determined in such manner as the department deems proper.
  2. In case of persons habitually delinquent in their obligations under this chapter, the amount of the security shall not be greater than three (3) times the average liability of persons filing returns for quarterly periods or five (5) times the average liability of persons required to file returns for monthly periods.
  3. The limitations herein provided apply regardless of the type of security placed with the department.
  4. The amount of the security may be increased or decreased by the department subject to the limitations herein provided.
    1. The department may sell the security at public auction if it becomes necessary to do so in order to recover any tax, interest or penalty due. Security in the form of a bearer bond issued by the United States or any state or local governmental unit which has a prevailing market price may, however, be sold by the department at a private sale at a price not lower than the prevailing market price thereof. (5) (a) The department may sell the security at public auction if it becomes necessary to do so in order to recover any tax, interest or penalty due. Security in the form of a bearer bond issued by the United States or any state or local governmental unit which has a prevailing market price may, however, be sold by the department at a private sale at a price not lower than the prevailing market price thereof.
    2. The department shall give notice of the date, time and place of the sale to the person who placed the security by certified mail addressed to him at his last known address as it appears in the records of the department, or delivery to such person.
    3. Delivery means handing it to such person or leaving it at his place of business with the person in charge thereof; or, if there is no one in charge, leaving it in a conspicuous place therein; or, if the place of business is closed or the person to be served has no place of business, leaving it at his dwelling house with some person of suitable age and discretion residing therein. Said notice, if by certified mail, shall be postmarked no later than ten (10) days prior to said sale; if by delivery, said notice shall be given no later than ten (10) days prior to said sale.
  5. Upon any sale any surplus above the amounts due shall be returned to the person who placed the security.

History. Enact. Acts 1960, ch. 5, Art. I, § 63; 1972, ch. 84, part I, § 3; 1976, ch. 155, § 20; 2005, ch. 85, § 437, effective June 20, 2005.

139.670. Withholding amount of tax liability by purchaser of business.

If any retailer liable for any amount under this chapter sells out his business or stock of goods, or otherwise quits business, his successors or assigns shall withhold sufficient of the purchase price to cover such amount until the former owner produces a receipt from the department showing that it has been paid or a certificate stating that no amount is due.

History. Enact. Acts 1960, ch. 5, Art. I, § 64, effective February 5, 1960; 2005, ch. 85, § 438, effective June 20, 2005.

NOTES TO DECISIONS

1. Liability for Failure to Withhold.

Where purchasers of a retail grocery store disregarded the successor liability portion of this section which required them to specifically withhold sufficient moneys from the purchase price to cover any tax liability of the seller until the seller produced proof of payment of seller’s tax liability, purchasers were personally liable for payment of the tax to the Revenue Cabinet, even though purchasers argued that because they still owed sufficient sums to the seller for the property, they had, in effect, satisfied this section. Revenue Cabinet v. Triple R Food A Rama, 890 S.W.2d 638, 1994 Ky. App. LEXIS 94 (Ky. Ct. App. 1994).

139.680. Procedure in case of failure to withhold.

  1. If the purchaser of a business or stock of goods fails to withhold the purchase price as required, he becomes personally liable for the payment of the amount required to be withheld by him to the extent of the purchase price, valued in money. Within sixty (60) days after receiving a written request from the purchaser for a certificate, or within sixty (60) days from the date the former owner’s records are made available for audit, whichever period expires the later, but in any event not later than ninety (90) days after receiving the request, the department shall either issue the certificate or mail notice to the purchaser at his address as it appears on the records of the department of the amount that must be paid as a condition to issuing the certificate.
  2. Failure of the department to mail the notice will release the purchaser from any further obligation to withhold the purchase price as above provided.
  3. The time within which the obligation of a successor may be enforced shall start to run at the time the retailer sells out his business or stock of goods or at the time that the determination against the retailer becomes final, whichever event occurs the later.

History. Enact. Acts 1960, ch. 5, Art. I, § 65, effective February 5, 1960; 2005, ch. 85, § 439, effective June 20, 2005.

NOTES TO DECISIONS

1. Liability For Failure to Withhold.

Where purchasers of a retail grocery store disregarded successor liability portion of KRS 139.670 which required them to specifically withhold sufficient moneys from the purchase price to cover any tax liability of the seller until the seller produced proof of payment of seller’s tax liability, purchasers were personally liable for payment of the tax to the Revenue Cabinet, even though purchasers argued that because they still owed sufficient sums to the seller for the property, they had, in effect, satisfied KRS 139.670 . Revenue Cabinet v. Triple R Food A Rama, 890 S.W.2d 638, 1994 Ky. App. LEXIS 94 (Ky. Ct. App. 1994).

139.690. Condition of refund on ground that use tax is not applicable. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 5, Art. I, § 66, effective February 5, 1960) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.700. Collection of tax by out-of-state retailer.

The department may, in its discretion, upon application authorize the collection of the tax imposed herein by any retailer not engaged in business within this state who, to the satisfaction of the department furnishes adequate security to insure collection and payment of the tax. Such retailer shall be issued a permit to collect such tax in such manner, and subject to such regulation and agreements as the department shall prescribe. When so authorized, it shall be the duty of such retailer to collect the tax upon all tangible personal property, digital property, or extended warranty services sold to his knowledge for use within this state, in the same manner and subject to the same requirements as a retailer engaged in business within this state.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 67, effective February 5, 1960; 2005, ch. 85, § 440, effective June 20, 2005; 2009, ch. 73, § 21, effective July 1, 2009; 2018 ch. 171, § 48, effective April 14, 2018; 2018 ch. 207, § 48, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Opinions of Attorney General.

Under this section, the Department of Revenue may, on the application of a nonresident retailer, authorize the retailer to collect the use tax on purchases made by Kentucky residents. OAG 70-367 .

139.710. Administration by department.

The department shall administer the provisions of this chapter and shall have all of the powers, rights, duties, and authority with respect to the assessment, collection, refunding, and administration of the taxes levied by this chapter, conferred generally upon the department by the Kentucky Revised Statutes including Chapters 131, 134, and 135.

History. Enact. Acts 1960, ch. 5, Art. I, § 68, effective February 5, 1960; 2005, ch. 85, § 441, effective June 20, 2005.

139.720. Records required to be kept — For how long.

  1. Every seller, every retailer, and every person storing, using and otherwise consuming in this state tangible personal property, digital property, or services included in KRS 139.200 purchased from a retailer shall keep such records, receipts, invoices, and other pertinent papers in such form as the department may require.
  2. Every such seller, retailer, or person who files the returns required under this chapter shall keep such records for not less than four (4) years from the making of such records unless the department in writing sooner authorizes their destruction.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 69, effective February 5, 1960; 2005, ch. 85, § 442, effective June 20, 2005; 2009, ch. 73, § 22, effective July 1, 2009; 2018 ch. 171, § 49, effective April 14, 2018; 2018 ch. 207, § 49, effective April 27, 2018; 2019 ch. 151, § 34, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 82 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 34 of that Act apply to transactions occurring on or after July 1, 2019.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

NOTES TO DECISIONS

Cited in:

Revenue Cabinet v. Moors Resort, Inc., 675 S.W.2d 859, 1984 Ky. App. LEXIS 562 (Ky. Ct. App. 1984).

139.730. Sales and tax reports.

In the administration of the sales and use tax, the department may require the filing of reports by any person or class of persons having in his or their possession or custody information relating to sales of tangible personal property, digital property, or an extended warranty service, the storage, use, or other consumption of which is subject to the tax. The report shall be filed at the time specified by the department and shall contain such information as the department may require.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 70, effective February 5, 1960; 1994, ch. 11, § 1, effective July 15, 1994; 2005, ch. 85, § 443, effective June 20, 2005; 2009, ch. 73, § 23, effective July 1, 2009; 2018 ch. 171, § 50, effective April 14, 2018; 2018 ch. 207, § 50, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 151, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

139.735. Restrictions on administrative regulations and policies.

  1. The department shall not promulgate any administrative regulation or policy, either written or unwritten, whose provisions are more stringent than KRS 139.270 regarding the acceptance of resale certificates, exemption certificates, Streamlined Sales and Use Tax Agreement Certificates of Exemption, and direct pay authorizations.
  2. It shall be mandatory upon the department during any audit process to honor resale certificates, exemption certificates, Streamlined Sales and Use Tax Agreement Certificates of Exemption, and direct pay authorizations when executed according to KRS 139.270 and any administrative regulation promulgated by the department concerning direct pay authorizations.

History. Enact. Acts 1988, ch. 135, § 7, effective July 15, 1988; 2003, ch. 124, § 26, effective July 1, 2004; 2005, ch. 85, § 444, effective June 20, 2005; 2008, ch. 95, § 15, effective August 1, 2008; 2011, ch. 33, § 6, effective July 1, 2011.

139.740. Requirements in action on debt arising out of sale of tangible personal property.

  1. No judgment shall be entered and no garnishment or attachment shall be permitted by any court in this Commonwealth in an action for the collection of a debt arising out of the sale of tangible personal property, digital property, or extended warranty services unless an affidavit containing a certificate of service is executed by the plaintiff to the effect that all use taxes due the Commonwealth have been paid.
  2. Prior to the filing of the affidavit, required under subsection (1) of this section, the plaintiff (including counterclaimants or crossclaimants) shall, by first-class mail, serve upon the department a copy of the affidavit. Within fifteen (15) days from the date of the filing of the affidavit the department may file a counteraffidavit. In such event no judgment shall be entered or garnishment or attachment issued until proof has been taken concerning the matters at issue in the affidavit and counteraffidavit.
  3. In the event the use tax levied by this chapter is found to be due and unpaid the plaintiff may elect to pay the tax to the department, and the amount of the tax paid by the plaintiff shall be recovered as a part of any judgment entered. If the plaintiff does not elect to pay the use tax found to be due and unpaid, judgment for the amount of the tax shall be awarded to the Commonwealth.
  4. Any judgment awarded to the Commonwealth under this section shall constitute a prior claim to any judgment obtained by the plaintiff.
  5. Tax as defined herein includes interest accrued thereon at the tax interest rate as defined in KRS 131.010(6).
  6. The provisions of this section shall not apply to a plaintiff holding a retail permit issued pursuant to this chapter.

HISTORY: Enact. Acts 1960, ch. 5, Art. I, § 71; 1976, ch. 155, § 22; 1982, ch. 452, § 21, effective July 1, 1982; 2005, ch. 85, § 445, effective June 20, 2005; 2009, ch. 73, § 24, effective July 1, 2009; 2018 ch. 171, § 51, effective April 14, 2018; 2018 ch. 207, § 51, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 152, the amendments made to this statute in that Act apply to transactions occurring on or after July 1, 2018.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

Opinions of Attorney General.

A sale of the property cannot take place nor can any judgment be entered until 15 days from the date of the filing of the affidavit with the clerk. OAG 61-52 .

If suit and affidavit are filed and the Department of Revenue files a counteraffidavit before the order of attachment or garnishment can issue, then no attachment or garnishment may issue until the controversy raised by the counteraffidavit has been determined. OAG 61-52 .

If suit and affidavit are filed, the clerk may issue the attachment of garnishment. OAG 61-52 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

139.750. Deliveryman’s duty to collect use tax — Exceptions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 233, § 31, effective June 17, 1978; 1996, ch. 344, § 5, effective July 15, 1996) was repealed by Acts 2003, ch. 124, § 45, effective July 1, 2004.

139.760. Revocation or suspension of permit — Prohibition of suit to delay or restrain collection of tax.

  1. Whenever any person fails to comply with any provisions of this chapter or any administrative regulation of the department relating to the provisions of this chapter, the department may revoke or suspend any one (1) or more of the permits held by the person.
  2. Whenever any person uses an automated business record falsification device, as described in KRS 517.130 , to violate any provision of this chapter or any administrative regulation of the department relating to the provisions of this chapter, the department shall revoke each permit held by the person for a period of ten (10) years.
  3. The department shall not issue a new permit after the revocation of a permit unless it is satisfied that the former holder of the permit will comply with the provisions of this chapter and the regulations relating thereto.
  4. No suit shall be maintained in any court to restrain or delay the collection or payment of any tax levied by this chapter.

History. Enact. Acts 1960, ch. 5, Art. I, § 74; 1964, ch. 141, § 39; 2005, ch. 85, § 446, effective June 20, 2005; 2014, ch. 9, § 2, effective July 15, 2014.

139.770. Refund or credit of taxes paid — Claims.

  1. The taxes paid pursuant to the provisions of this chapter shall be refunded or credited in the manner provided in KRS 134.580 .
  2. A claim for refund or credit shall be made on a form prescribed by the department and shall contain such information as the department may require.
  3. No taxpayer or certified service provider as provided by KRS 139.795 shall be entitled to a refund or credit of the taxes paid pursuant to the provisions of this chapter where the taxes have been collected from a purchaser as provided by KRS 139.210 and 139.340 , unless the amount of taxes collected from the purchaser are refunded to the purchaser by the taxpayer or certified service provider as provided by KRS 139.795 who paid the taxes to the State Treasury.
  4. Where applicable, the amount of any claim for refund or credit shall be reduced by the amount deducted by the taxpayer or certified service provider as provided by KRS 139.795 pursuant to KRS 139.570 at the time the taxes were paid to the State Treasury.

History. Enact. Acts 1978, ch. 233, § 31, effective June 17, 1978; 1996, ch. 344, § 5, effective July 15, 1996; 2003, ch. 124, § 26, effective July 1, 2004; 2005, ch. 85, § 447, effective June 20, 2005.

Compiler’s Notes.

Section 11 of Acts 1996, ch. 244 read, “The provisions of this Act shall apply for taxable years beginning after December 31, 1995.”

NOTES TO DECISIONS

  1. Procedural Requirements.
  2. Overpayment Is Required.
1. Procedural Requirements.

The remedy for filing a claim for a refund of taxes pursuant to KRS 134.580 is not conditioned upon satisfaction of the procedural requirements provided in KRS 131.110 for filing a protest of a tax assessment. KRS 131.110 (1) allows a taxpayer 30 (now 45) days within which to file such a protest. KRS 134.580 (3) and subsection (1) of this section, on the other hand, are concerned with requests for refunds of taxes already paid and provide that claims for refund must be made within four (4) years of the due date of the return or the date the money was paid into the treasury, whichever is later. Revenue Cabinet v. Castleton, Inc., 826 S.W.2d 334, 1992 Ky. App. LEXIS 67 (Ky. Ct. App. 1992).

2. Overpayment Is Required.

Under KRS 134.580 , an “overpayment” or “payment where no tax was due” must occur before a refund is authorized under KRS 139.770 , and, thus, a taxpayer is only entitled to a refund if he has overpaid his tax liability; therefore, although the court had held that a timely notice of assessment issued by the Commonwealth of Kentucky, Revenue Cabinet was deficient under KRS 131.081(8) and KRS 131.110(1) and that its subsequent notice was barred by the statute of limitations under KRS 139.620(1), it accepted the Cabinet’s alternative argument that the taxpayer was not entitled to a refund concerning the sales and use taxes it paid during a certain period because it did not “overpay” its taxes for that period, and it held that the Cabinet had the right to retain prior excess payments for that time period to the extent that they did not exceed the amount which might have been properly assessed and demanded. GTE South, Inc. v. Commonwealth, 2004 Ky. App. LEXIS 86 (Ky. Ct. App. 2004), rehearing denied, 2004 Ky. App. LEXIS 180 (Ky. Ct. App. 2004), rev’d, Revenue Cabinet v. GTE South, Inc., 238 S.W.3d 655, 2007 Ky. LEXIS 160 ( Ky. 2007 ) (reversed on grounds that the notice was sufficient).

139.771. Overcollection of sales or use taxes.

  1. For all sales and use tax transactions where the purchaser believes that tax has been charged in error, a cause of action against the retailer for the overcollected sales or use taxes does not accrue until the purchaser has provided notice to the retailer and the retailer has had sixty (60) days to respond. The notice to the retailer shall contain the information necessary to determine the validity of the inquiry.
  2. In connection with a purchaser’s inquiry to a retailer regarding overcollected sales or use taxes, a retailer shall be presumed to have a reasonable business practice, if in the collection of the sales or use tax the retailer:
    1. Uses either a certified service provider, certified automated system, or a proprietary system as provided by KRS 139.795 ; and
    2. Has remitted all taxes collected less any deductions, credits or collection allowances.
  3. Nothing in this section shall extend any person’s time to seek a refund of sales or use taxes collected or remitted to the state beyond the provisions of KRS 134.580 .

History. Enact. Acts 2003, ch. 124, § 30, effective July 1, 2004.

139.775. Mobile telecommunications services — Adoption of federal provisions — Notification of home service provider about errors — Correction and refund — Exhaustion of remedies.

  1. As it relates to the taxation under this chapter of mobile telecommunications services as defined in KRS 139.195 , the provisions of 4 U.S.C. secs. 116 to 126 are hereby adopted and incorporated by reference.
  2. If a communications services or mobile telecommunications services customer believes that a tax, charge, fee, or assignment of place of primary use or taxing jurisdiction on a bill is incorrect, the customer shall, within four (4) years of the date of the bill, notify the home service provider about the alleged error, in writing. This notification shall include the street address for the customer’s place of primary use, the account name and number for which the customer seeks a correction, a description of the alleged error, and any other information that the home service provider reasonably requires. Within sixty (60) days of receiving the customer’s notification, the home service provider shall either correct the error and refund or credit all taxes, charges, and fees incorrectly charged to the customer, or explain to the customer in writing why the bill was correct and why a refund or credit will not be made.
  3. A customer shall not have a cause of action against a home service provider for any erroneously collected taxes, charges, or fees until the customer has exhausted the procedure set forth in subsection (2) of this section.
  4. Nothing in this section shall extend any person’s time to seek a refund of sales or use taxes collected or remitted to the state beyond the provisions of KRS 134.580 .

History. Enact. Acts 2002, ch. 69, § 2, effective July 15, 2002; 2003, ch. 124, § 29, effective July 1, 2004.

Legislative Research Commission Notes.

(7/15/2002). The provisions of this statute created in 2002 Ky. Acts ch. 69, sec. 2, “take effect for customer service bills issued after August 1, 2002.” 2002 Ky. Acts ch. 69, sec. 6.

139.776. Multiple points of use exemption form. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 2003, ch. 124, § 24) was repealed by Acts 2007, ch. 141, § 29, effective July 1, 2007.

139.777. Direct mail sourcing.

    1. This section applies for purposes of uniformly sourcing: (1) (a) This section applies for purposes of uniformly sourcing:
      1. Advertising and promotional direct mail transactions;
      2. Other direct mail transactions; and
      3. Bundled transactions that include advertising and promotional direct mail if the primary purpose of the transaction is the sale of advertising and promotional direct mail.
    2. This section does not:
      1. Impose requirements regarding the taxation of advertising and promotional direct mail or other direct mail or the application of sales for resale or other exemptions; or
      2. Apply to any transaction that includes the development of billing information or the provision of any data processing services that is more than incidental, regardless of whether advertising and promotion direct mail is included in the same mailing.
    3. For a transaction characterized as a sale of services, this section applies only if the service is an integral part of the production and distribution of printed material that meets the definition of advertising and promotional direct mail or other direct mail.
    1. A purchaser of advertising and promotional direct mail may provide the retailer with: (2) (a) A purchaser of advertising and promotional direct mail may provide the retailer with:
      1. A direct pay permit;
      2. A fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption or other written statement approved, authorized, or accepted by the department; or
      3. Information to show the jurisdictions to which the advertising and promotional direct mail is to be delivered to recipients.
    2. If the purchaser provides the retailer with a direct pay permit, a fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption, or other written statement approved, authorized, or accepted by the department:
      1. The retailer, in the absence of bad faith, shall be relieved of all obligations to collect, pay, or remit the applicable tax involving other direct mail to which the direct pay permit, Streamlined Sales and Use Tax Agreement Certificate of Exemption, or written statement apply; and
      2. The purchaser shall source the sale to the jurisdictions to which the advertising and promotional direct mail is to be delivered to the recipients and shall pay or remit the applicable tax on a direct-pay basis.
    3. If the purchaser provides the retailer information showing the jurisdictions to which the advertising and promotional direct mail is delivered to recipients, the retailer shall source the sale and collect the tax according to the delivery information provided by the purchaser. In the absence of bad faith, the retailer is relieved of any further obligation to collect the tax on any transaction where the retailer has collected the tax pursuant to the delivery information provided by the purchaser.
    4. If the purchaser of advertising and promotional direct mail does not provide the retailer with a direct pay permit, a fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption, or other written statement approved, authorized, or accepted by the department or delivery information, as provided by subsection (2)(a) of this section, the retailer shall source the sale to the address from where the advertising and promotional direct mail was shipped.
    5. Nothing in this subsection shall prohibit the department from disallowing credit for tax paid in another jurisdiction on sales sourced according to this subsection if the advertising and promotional direct mail is delivered to recipients in this state.
    1. The purchaser of other direct mail may provide the retailer with: (3) (a) The purchaser of other direct mail may provide the retailer with:
      1. A direct pay permit; or
      2. A fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption or other written statement approved, authorized, or accepted by the department.
    2. If the purchaser provides the retailer a direct pay permit, a fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption, or other written statement approved, authorized, or accepted by the department:
      1. The retailer, in the absence of bad faith, shall be relieved of all obligations to collect, pay, or remit the applicable tax involving other direct mail to which the direct pay permit, Streamlined Sales and Use Tax Agreement Certificate of Exemption, or written statement apply; and
      2. The purchaser shall source the sale to the jurisdictions to which the other direct mail is to be delivered to the recipients and shall report and remit the applicable tax on a direct-pay basis.
    3. If the purchaser of other direct mail does not provide the retailer with a direct pay permit, a fully completed Streamlined Sales and Use Tax Agreement Certificate of Exemption, or other written statement approved, authorized, or accepted by the department as provided in paragraph (a) of this subsection, the retailer shall source the sale to the location indicated by an address for the purchaser that is available from the retailer’s business records that are maintained in the ordinary course of the retailer’s business when use of this address does not constitute bad faith.
  1. If both advertising and promotional direct mail and other direct mail are combined in a single mailing, the sale shall be sourced as other direct mail as provided in subsection (3) of this section.
  2. Nothing in this section shall limit a purchaser’s:
    1. Obligation for sales or use tax to any state to which the advertising and promotional direct mail or other direct mail is delivered;
    2. Right under local, state, federal, or constitutional law to a credit for sales or use taxes legally due and paid to other jurisdictions; or
    3. Right to a refund of sales or use taxes overpaid to any jurisdiction.

History. Enact. Acts 2003, ch. 124, § 25, effective July 1, 2004; 2011, ch. 33, § 7, effective July 1, 2011.

Legislative Research Commission Notes.

(7/1/2011). The Reviser of Statutes has corrected a manifest clerical or typographical error in subsection (2)(e) of this statute under the authority of KRS 7.136 .

139.778. Tangible personal property purchased out of state — Collection of tax at titling or first registration — Exemptions — Remittance to department.

  1. The county clerk shall collect any applicable sales and use tax for the following tangible personal property purchased out of state at the time the property is offered for titling or first registration:
    1. Recreational vehicles as defined in KRS 186.650 ;
    2. Manufactured homes as defined in KRS 186.650 ;
    3. Motorboats as defined in KRS 235.010 ;
    4. Vessels as defined in KRS 235.010 ; and
    5. Any other tangible personal property offered for titling or first registration in Kentucky.
  2. The tax shall be collected unless the owner:
    1. Presents a tax receipt from the seller verifying that the tax has been previously paid;
    2. Demonstrates that the transfer of the property is exempt under KRS 139.470(3); or
    3. Provides a properly executed resale certificate or certificate of exemption in accordance with KRS 139.270 .
  3. The tax collected by the county clerk shall be reported and remitted to the department on forms provided by the department.
  4. For services provided in collecting the tax, the county clerk shall deduct a fee of three percent (3%) of the tax collected and remit the balance to the department as provided in KRS 138.464 .

History. Enact. Acts 2006, ch. 252, Pt. XIV, § 1, effective January 1, 2007; 2018 ch. 207, § 161, effective April 27, 2018.

139.779. Tax receipts, interest, and penalties from sale of motor vehicle to be deposited in road fund — Exceptions.

All tax receipts, interest, and penalties resulting from the sale of a motor vehicle subject to sales tax under KRS 139.200 and not otherwise exempt from sales tax under KRS 139.470 shall be deposited in the road fund, unless the motor vehicle has been exempted from the motor vehicle usage tax under KRS 138.460(3) for nonhighway use. All tax receipts, interest, and penalties resulting from the sale of a motor vehicle, as defined in KRS 138.450 , which is purchased for nonhighway use shall continue to be deposited in the general fund.

History. Enact. Acts 2006, ch. 252, Pt. XXXVI, § 2, effective August 1, 2006.

Uniform Sales and Use Tax Administration Act

139.780. Short title.

KRS 139.780 to 139.795 may be cited as the Uniform Sales and Use Tax Administration Act.

History. Enact. Acts 2001, ch. 6, § 2, effective June 21, 2001.

139.781. Definitions for KRS 139.780 to 139.795.

As used in KRS 139.780 to 139.795 :

  1. “SSUTA agreement” means the streamlined sales and use tax agreement;
  2. “Certified automated system” means software certified jointly by the states that are signatories to the SSUTA agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction;
  3. “Certified service provider” means an agent certified jointly by the states that are signatories to the SSUTA agreement to perform all of the seller’s sales tax functions;
  4. “Governing board” means a group of representatives from each member state that has the authority and responsibility for the administration and operation of the SSUTA agreement;
  5. “Member state” means a state that is found to be in compliance with the SSUTA agreement and that has made the necessary changes to statutes, rules, regulations, or other authorities necessary to bring the state into compliance and those changes are currently in effect;
  6. “Model 1 seller” means a seller that has selected a certified service provider as its agent to perform all the seller’s sales and use tax functions, other than the seller’s obligation to remit the tax on its own purchases;
  7. “Model 2 seller” means a seller that has selected a certified service provider to perform a part of its sales and use tax functions, but retains responsibility for remitting the tax;
  8. “Model 3 seller” means a seller that:
    1. Has sales in at least five (5) member states;
    2. Has total annual sales of at least five hundred million dollars ($500,000,000);
    3. Has a proprietary system that calculates the amount of tax due each jurisdiction; and
    4. Has entered into a performance agreement with the member states that establishes a tax performance standard for the seller.
  9. “Person” means an individual, trust, estate, fiduciary, partnership, limited liability company, limited liability partnership, corporation, or any other legal entity;
  10. “Product-based exemption” means an exemption based on the description of the product, and not based on who purchases the product or how the purchaser intends to use the product;
  11. “Sales tax” means the tax levied under KRS 139.200 ;
  12. “Seller” means any person making sales, leases, or rentals of personal property or services;
  13. “State” means any state of the United States, the District of Columbia, and the Commonwealth of Puerto Rico;
  14. “Taxability matrix” means a downloadable preformatted table approved by the governing board that contains the member state’s interpretation as to the taxability of the terms found in the SSUTA agreement Appendix C, Library of Definitions and made available electronically on the member state’s Web site;
  15. “Use-based exemption” means an exemption based on a specific use of the product by the purchaser; and
  16. “Use tax” means the tax levied under KRS 139.310 .

For purposes of this subsection, a seller shall include an affiliated group of sellers using the same proprietary system;

History. Enact. Acts 2001, ch. 6, § 3, effective June 21, 2001; 2007, ch. 141, § 11, effective July 1, 2007; 2008, ch. 95, § 2, effective August 1, 2008.

139.783. Purpose of KRS 139.780 to 139.795.

It is the intent and purpose of the General Assembly in enacting KRS 139.780 to 139.795 to encourage and increase voluntary compliance with Kentucky’s sales and use tax law by entering into the SSUTA agreement with one (1) or more states to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance for all sellers and for all types of commerce.

History. Enact. Acts 2001, ch. 6, § 1, effective June 21, 2001; 2007, ch. 141, § 21, effective July 1, 2007.

139.785. Authority of department — Representation of state.

  1. The department is authorized and directed to enter into the SSUTA agreement with one (1) or more states to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance for all sellers and for all types of commerce. To further the SSUTA agreement, the department is authorized to act jointly with other states that are members of the SSUTA agreement to establish standards for certification of a certified service provider and certified automated system and establish performance standards for multistate sellers.
  2. The department is further authorized to take other actions reasonably required to implement the provisions set forth in KRS 139.780 to 139.795 . Other actions authorized by this section include but are not limited to the adoption of rules and regulations and the joint procurement, with other member states, of goods and services to further the cooperative agreement. Notwithstanding the provisions of KRS Chapter 13A, the department may issue educational bulletins to the extent necessary to enhance the understanding of and compliance with terms of the agreement.
  3. The commissioner of the Department of Revenue or the commissioner’s designee, the state budget director or the director’s designee, and two (2) legislators are authorized to represent this state before the other states that are signatories to the SSUTA agreement. One (1) member of the Senate shall be appointed by the President of the Senate, and one (1) member of the House of Representatives shall be appointed by the Speaker of the House of Representatives.

History. Enact. Acts 2001, ch. 6, § 4, effective June 21, 2001; 2003, ch. 124, § 31, effective July 1, 2004; 2005, ch. 85, § 448, effective June 20, 2005; 2007, ch. 141, § 22, effective July 1, 2007.

139.787. Effect of agreement on Kentucky law.

No provision of the SSUTA agreement authorized by KRS 139.780 to 139.795 in whole or in part invalidates or amends any provision of the law of this state. Adoption of the SSUTA agreement by the state does not amend or modify any law of this state. Implementation of any condition of the SSUTA agreement in this state, whether adopted before, during, or after membership of this state in the SSUTA agreement, shall be by action of this state.

History. Enact. Acts 2001, ch. 6, § 5, effective June 21, 2001; 2007, ch. 141, § 23, effective July 1, 2007.

139.789. Requirements for entering into agreement.

The department shall not enter into the SSUTA agreement unless the SSUTA agreement requires each state to abide by the following requirements:

  1. The SSUTA agreement shall set restrictions to achieve more uniform state rates through the following:
    1. Limiting the number of state rates;
    2. Limiting the application of maximums on the amount of state tax that is due on a transaction; and
    3. Limiting the application of thresholds on the application of state tax.
  2. The SSUTA agreement shall establish uniform standards for the following:
    1. The sourcing of transactions to taxing jurisdictions;
    2. The administration of exempt sales;
    3. The allowances a seller can take for bad debts; and
    4. Sales and use tax returns and remittances.
  3. The SSUTA agreement shall require states to develop and adopt uniform definitions of sales and use tax terms. The definitions shall enable a state to preserve its ability to make policy choices not inconsistent with the uniform definitions.
  4. The SSUTA agreement shall provide a central, electronic registration system that allows a seller to register to collect and remit sales and use taxes for all signatory states.
  5. The SSUTA agreement shall provide that registration with the central registration system and the collection of sales and use taxes in the signatory state will not be used as a factor in determining whether the seller has nexus with a state for any tax.
  6. The SSUTA agreement shall provide for a reduction of the burdens of complying with local sales and use taxes through the following:
    1. Restricting variances between the state and local tax bases;
    2. Requiring states to administer any sales and use taxes levied by local jurisdictions within the state so that sellers collecting and remitting these taxes will not have to register or file returns with, remit funds to, or be subject to independent audits from local taxing jurisdictions;
    3. Restricting the frequency of changes in the local sales and use tax rates and setting effective dates for the application of local jurisdictional boundary changes to local sales and use taxes; and
    4. Providing notice of changes in local sales and use tax rates and of changes in the boundaries of local taxing jurisdictions.
  7. The SSUTA agreement shall outline any monetary allowances that are to be provided by the states to sellers or certified service providers.
  8. The SSUTA agreement shall require each state to certify compliance with the terms of the agreement prior to joining and to maintain compliance under the laws of the member state, with all provisions of the SSUTA agreement while a member.
  9. The SSUTA agreement shall require each state to adopt a uniform policy for certified service providers that protects the privacy of consumers and maintains the confidentiality of tax information.
  10. The SSUTA agreement shall provide for the appointment of an advisory council of private sector representatives and an advisory council of non-member state representatives to consult with in the administration of the SSUTA agreement.

History. Enact. Acts 2001, ch. 6, § 6, effective June 21, 2001; 2005, ch. 85, § 449, effective June 20, 2005; 2007, ch. 141, § 24, effective July 1, 2007.

139.791. Cooperating sovereigns.

The SSUTA agreement authorized by KRS 139.780 to 139.795 is an accord among individual, cooperating sovereigns in furtherance of their governmental functions. The SSUTA agreement provides a mechanism among the member states to establish and maintain a cooperative, simplified system for the application and administration of sales and use taxes under the duly adopted law of each member state.

History. Enact. Acts 2001, ch. 6, § 7, effective June 21, 2001; 2007, ch. 141, § 25, effective July 1, 2007.

139.793. Applicability of agreement — Limitation of action.

  1. The SSUTA agreement authorized by KRS 139.780 to 139.795 binds and inures only to the benefit of this state and the other member states. No person, other than a member state, is an intended beneficiary of the SSUTA agreement. Any benefit to a person other than a state is established by the law of the state and the other member states and not by the terms of the SSUTA agreement.
  2. Consistent with subsection (1) of this section, no person shall have any cause of action or defense under the SSUTA agreement or by virtue of this state’s approval of the SSUTA agreement. No person may challenge, in any action brought under any provision of law, any action or inaction by any department, agency, or other instrumentality of this state, or any political subdivision of this state on the ground that the action or inaction is inconsistent with the SSUTA agreement.
  3. No law of this state, or the application thereof, may be declared invalid as to any person or circumstance on the ground that the provision or application is inconsistent with the SSUTA agreement.

History. Enact. Acts 2001, ch. 6, § 8, effective June 21, 2001; 2007, ch. 141, § 26, effective July 1, 2007.

139.794. Conditions for exemption from assessment for uncollected or unpaid sales or use tax.

  1. According to the provisions of the SSUTA agreement, a seller who registers under the terms of the SSUTA agreement to pay or to collect and remit applicable sales and use tax on sales made in Kentucky shall be exempt from assessment for uncollected or unpaid sales or use tax together with penalty and interest for sales made during the period the seller was not registered in Kentucky if:
    1. The seller was not registered in Kentucky in the twelve (12) month period preceding the effective date of Kentucky’s participation in the SSUTA agreement; and
    2. The seller registers in Kentucky within twelve (12) months of the effective date of Kentucky’s participation in the SSUTA agreement.
  2. The exemption is not available to a seller with respect to any matter or matters for which the seller received notice of the commencement of an audit and which audit is not yet finally resolved, including any related administrative and judicial processes.
  3. The exemption is not available for sales or use taxes already paid or remitted to the state or to taxes collected by the seller.
  4. The exemption is fully effective, absent the seller’s fraud or intentional misrepresentation of a material fact, if the seller remains registered and continues payment or collection and remittance of applicable sales or use taxes for a period of at least thirty-six (36) months. During this thirty-six (36) month period, the statute of limitations shall be suspended for the seller remaining in compliance with registration and payment requirements. Failure to meet these terms will result in a revocation of the exemption.
  5. This exemption shall apply to sales or use taxes due from a seller in its capacity as a seller and shall not apply to sales and use taxes due from a seller in its capacity as a buyer.

History. Enact. Acts 2005, ch. 154, § 4, effective June 20, 2005; 2007, ch. 141, § 27, effective July 1, 2007.

139.795. Certified service provider is agent of seller — Liability — Exemption for purchaser, seller, and certified service provider.

    1. A certified service provider is the agent of a seller, with whom the certified service provider has contracted, for the collection and remittance of sales and use taxes. (1) (a) A certified service provider is the agent of a seller, with whom the certified service provider has contracted, for the collection and remittance of sales and use taxes.
    2. The certified service provider is liable for sales and use tax due each member state on all sales transactions it processes for the seller, except when the liability for not collecting the sales or use taxes results from the certified service provider’s reliance on software certified by the state. Relief from liability shall not be granted if the certified service provider has incorrectly classified an item or transaction into a product-based exemption certified by the state, except when the item or transaction is classified based upon the individual listing of items or transactions within a product definition approved by the governing board or the member state.
    3. A person that is responsible for the certified automated system is responsible for the functioning of the system and is liable to the state for underpayments of tax attributable to errors in the functioning of the certified automated system.
    1. A seller that contracts with a certified service provider is not liable to the state for sales or use tax due on transactions processed by the certified service provider unless the seller misrepresented the type of items it sells or committed fraud; (2) (a) A seller that contracts with a certified service provider is not liable to the state for sales or use tax due on transactions processed by the certified service provider unless the seller misrepresented the type of items it sells or committed fraud;
    2. In the absence of probable cause to believe that the seller has committed fraud or made a material misrepresentation, the seller is not subject to audit on the transactions processed by the certified service provider; and
    3. A seller is subject to audit for transactions not processed by the certified service provider.
  1. The member states acting jointly may perform a system check of the seller and review the seller’s procedures to determine if the certified service provider’s system is functioning properly and the extent to which the seller’s transactions are being processed by the certified service provider.
    1. A model 2 seller shall be relieved of liability for not collecting sales and use taxes if the liability resulted from the model 2 seller’s reliance on software previously certified by the state. Relief from liability shall not be granted if the certified service provider has incorrectly classified an item or transaction into a product-based exemption certified by the state, except when the item or transaction is classified based upon the individual listing of items or transactions with a product definition approved by the governing board or the member state. (4) (a) A model 2 seller shall be relieved of liability for not collecting sales and use taxes if the liability resulted from the model 2 seller’s reliance on software previously certified by the state. Relief from liability shall not be granted if the certified service provider has incorrectly classified an item or transaction into a product-based exemption certified by the state, except when the item or transaction is classified based upon the individual listing of items or transactions with a product definition approved by the governing board or the member state.
    2. The department shall notify the certified service provider or model 2 seller if an item or transaction has been incorrectly classified as to its taxability.
    3. The certified service provider or a model 2 seller shall have ten (10) days to revise the classification after the receipt of notice.
    4. Upon expiration of the ten (10) days, the certified service provider or the model 2 seller shall be liable for the failure to collect the amount of sales or use taxes due and owing.
  2. A model 3 seller that has signed a performance agreement establishing a performance standard for that system is liable for the failure of the system to meet the performance standard.
  3. A purchaser, purchaser’s seller, or certified service provider shall not be subject to the additional tax, related penalties imposed under KRS 131.180 , or related interest provided under KRS 131.183 for having failed to pay the correct amount of sales or use tax on specific transactions if:
    1. The purchaser’s seller or certified service provider relied on erroneous data provided by the department on tax rates, boundaries, or taxing jurisdiction assignments; or
    2. The purchaser, purchaser’s seller, or purchaser’s certified service provider relied on erroneous data in the taxability matrix completed and made available to the public by the department. The relief prescribed in this paragraph for additional tax and related interest provided under KRS 131.183 shall be limited to the department’s erroneous classification in the taxability matrix as “taxable” or “exempt,” “included in sales price” or “excluded from sales price,” or “included in the definition” or “excluded in the definition.”
    1. If the department does not provide the seller with at least thirty (30) days’ notice from the enactment of a sales and use tax rate change to the effective date of the rate change, the seller shall be relieved of liability for failing to collect tax at the new rate if: (7) (a) If the department does not provide the seller with at least thirty (30) days’ notice from the enactment of a sales and use tax rate change to the effective date of the rate change, the seller shall be relieved of liability for failing to collect tax at the new rate if:
      1. The seller collected tax at the immediately preceding effective rate; and
      2. The seller’s failure to collect tax at the new rate does not extend beyond thirty (30) days after the date of enactment of the new rate.
    2. Notwithstanding paragraph (a) of this subsection, if the department establishes that the seller fraudulently failed to collect tax at the new rate or solicits purchasers based on the immediately preceding effective rate, the relief provided to the seller in paragraph (a) of this subsection shall not apply.
  4. A purchaser shall not be subject to the additional tax, related penalties imposed under KRS 131.180 , or related interest provided under KRS 131.183 for failing to pay the correct amount of sales or use tax on specific transactions if the purchaser holds a direct pay authorization and relied on erroneous data provided by the department on the tax rates, boundaries, or taxing jurisdiction assignments.

History. Enact. Acts 2001, ch. 6, § 9, effective June 21, 2001; 2007, ch. 141, § 12, effective July 1, 2007; 2008, ch. 95, § 3, effective August 1, 2008; 2011, ch. 33, § 8, effective July 1, 2011.

Legislative Research Commission Notes.

(7/1/2007). A manifest clerical or typographical error in this section has been corrected by the Reviser of Statutes under the authority of KRS 7.136 .

Penalties

139.980. Civil penalties.

Any person who violates any provision of this chapter shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 and interest upon the unpaid amount at the tax interest rate as defined in KRS 131.010(6) from the date prescribed for its payment until payment is actually made to the department.

History. Enact. Acts 1960, ch. 5, Art. I, §§ 75 to 79; 1972, ch. 84, part I, § 4; 1976, ch. 155, § 23; 1978, ch. 233, § 30, effective June 17, 1978; 1982, ch. 452, § 22, effective July 1, 1982; 1982, ch. 28, § 1, effective July 15, 1982; 1992, ch. 403, § 14, effective July 14, 1992; 2005, ch. 85, § 450, effective June 20, 2005.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provided: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

NOTES TO DECISIONS

1. Reasonable Cause Defense.

Where a corporation and a partnership both relied upon advice from their auditors, certified public accountants and attorneys in not filing consumer use tax returns, no penalty would be applied under subsection (2) of this section since a good faith reliance on the advice of impartial competent tax counsel, to whom all of the relevant facts have been revealed, constitutes reasonable cause for failure to file a use tax return. Genex/London, Inc. v. Kentucky Bd. of Tax Appeals, 622 S.W.2d 499, 1981 Ky. LEXIS 275 ( Ky. 1981 ).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

139.990. Criminal penalties.

  1. Any person who executes:
    1. A resale certificate for property in accordance with KRS 139.270 knowing at the time of purchase that such property is not to be resold by him in the regular course of business, for the purpose of evading the tax imposed under this chapter;
    2. An exemption certificate or a Streamlined Sales and Use Tax Agreement Certificate of Exemption for property in accordance with KRS 139.270 , knowing at the time of the purchase that he is not engaged in an occupation that would entitle him to exemption status or any person who does not intend to use the property in the prescribed manner; or
    3. A direct pay authorization for property not in accordance with an administrative regulation promulgated by the department governing direct pay authorizations;
  2. A person who engages in business as a seller in this state without a permit or permits as required by this chapter or after a permit has been suspended, and each officer of any corporation which is so engaged in business, shall be guilty of a Class B misdemeanor.
  3. Any person who violates any of the provisions of KRS 139.220 , 139.380 , or 139.700 shall be guilty of a Class B misdemeanor.
  4. Any person who violates any of the regulations promulgated by the department shall be guilty of a Class B misdemeanor.
  5. Any person, business, or motion picture production company falsifying expenditure reports, applications, or any other statements made in securing the tax credit afforded by KRS 139.538 shall be guilty of a Class D felony. Such motion picture production companies shall be denied any tax credit to which they would otherwise be entitled, and shall be prohibited from applying for any future credit afforded by KRS 139.538 .

shall be guilty of a Class B misdemeanor.

History. Enact. Acts 1960, ch. 5, Art. I, §§ 80 to 83, effective February 5, 1960; 1982, ch. 102, § 2, effective July 15, 1982; 1982, ch. 208, § 3, effective July 15, 1982; 1986, ch. 464, § 6, effective July 15, 1986; 1988, ch. 135, § 6, effective July 15, 1988; 1992, ch. 463, § 16, effective July 14, 1992; 2003, ch. 124, § 32, effective July 1, 2004; 2005, ch. 85, § 451, effective June 20, 2005; 2007, ch. 141, § 28, effective July 1, 2007; 2008, ch. 95, § 16, effective August 1, 2008; 2011, ch. 33, § 9, effective July 1, 2011.

CHAPTER 140 Inheritance and Estate Taxes

140.010. Levy of inheritance tax — Property affected — When tax attaches.

All real and personal property within the jurisdiction of this state and any interest therein belonging to inhabitants of this state, all tangible personal property wherever situated belonging to inhabitants of this state that has not acquired a situs for purposes of taxation outside of this state, all intangible property belonging to persons domiciled in this state except partnership property located in another state which is subject to an inheritance or estate tax in that state, all intangible property belonging to nonresidents that has acquired a business situs in this state, all real property or interest therein within this state and all tangible personal property that has acquired a situs in this state and is not taxable elsewhere belonging to persons who are not inhabitants of this state, which shall pass by will or by the laws regulating intestate succession, or by deed, grant, bargain, sale or gift made in contemplation of death or made or intended to take effect in possession or enjoyment at or after the death of the grantor or donor, absolutely or in trust, to any person or to any body politic or corporate, in trust or otherwise, or by reason whereof any person or body politic or corporate shall become beneficially entitled in possession or expectancy to any property or to the income thereof, is subject to a tax upon the fair cash value as of the date of the death of the grantor or donor of the property in excess of the exemptions granted and at the rates prescribed in this chapter. This tax shall be imposed when any such person or corporation becomes beneficially entitled in possession or expectancy to any property or the income thereof by any such transfer.

History. 4281a-12: amend. Acts 1970, ch. 21, § 1.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Construction.
  3. Nature of Tax.
  4. Retroactivity.
  5. Domicile.
  6. Situs.
  7. Procedure.
  8. Gift in Contemplation of Death.
  9. Trusts.
  10. Pensions.

11 Life Insurance.

12. Promissory Notes.

13. Joint Tenancy.

14. Contingent Interests.

15. Time of Fixed Value.

16. Transfer of Interest.

17. Contractual Obligation Bequest.

18. Compromise Claims.

1. Constitutionality.

The inheritance tax law is constitutional. Commonwealth ex rel. Scent v. Smith, 353 S.W.2d 557, 1962 Ky. LEXIS 24 ( Ky. 1962 ).

2. Construction.

An inheritance tax is an excise tax upon the privilege of receiving property from a decedent by reason of his death; the thing taxed is the privilege of transferring, and it is essential that the transfer be from the decedent to the beneficiary. Martin v. Storrs, 277 Ky. 199 , 126 S.W.2d 445, 1939 Ky. LEXIS 650 ( Ky. 1939 ).

The “fair cash value” of the property refers to the value of the property as of the date of death without any reduction by reason of taxes, liens, encumbrances, or otherwise. Lynch v. Kentucky Tax Com., 333 S.W.2d 257, 1960 Ky. LEXIS 182 ( Ky. 1960 ).

3. Nature of Tax.

An inheritance tax is grounded upon: The passage of title; by reason of death; from the decedent; to the beneficiary or beneficiaries. Department of Revenue v. Lanham's Adm'rs, 278 Ky. 419 , 128 S.W.2d 936, 1939 Ky. LEXIS 447 ( Ky. 1939 ).

4. Retroactivity.

This tax law cannot be given a retroactive effect and does not apply to transfers which took effect prior to its enactment. Commonwealth v. De Long, 311 S.W.2d 385, 1958 Ky. LEXIS 186 ( Ky. 1958 ).

5. Domicile.

Where aged man, who had lived in Kentucky for 80 years, moved to his daughter’s home in Washington, immediately following his wife’s death, taking with him his personal belongings and family servant, and also all of his stocks and bonds, it was held that he had transferred his domicile to Washington, as against contention that he was merely making a visit to his daughter. Staiar's Adm'r v. Commonwealth, 194 Ky. 316 , 239 S.W. 40, 1922 Ky. LEXIS 160 ( Ky. 1922 ) (decided under prior law).

6. Situs.

Under law which imposed a tax on the transfer of all property, “seized or possessed” by a resident of this state, the transfer of the interest of a decedent in a trust of which the decedent was the sole beneficiary was taxable, although the actual possession and control of the property was vested in New York trustees. Bingham’s Adm’r v. Commonwealth, 196 Ky. 318 , 244 S.W. 781, 1922 Ky. LEXIS 519 ( Ky. 1922 ), overruled, Citizens Fidelity Bank & Trust Co. v. Reeves, 259 S.W.2d 432, 1953 Ky. LEXIS 942 ( Ky. 1953 ), overruled in part, Citizens Fidelity Bank & Trust Co. v. Reeves, 259 S.W.2d 432, 1953 Ky. LEXIS 942 ( Ky. 1953 ), overruled on other grounds, Citizens Fidelity Bank & Trust Co. v. Reeves, 259 S.W.2d 432, 1953 Ky. LEXIS 942 (Ky. 1953) (decided under prior law).

The situs of corporate stock, for purpose of taxation, was at the residence of the owner and not at the home of the corporation. Zahn's Ex'r v. State Tax Com., 243 Ky. 167 , 47 S.W.2d 925, 1932 Ky. LEXIS 26 ( Ky. 1932 ); Havemeyer v. Coleman, 243 Ky. 194 , 47 S.W.2d 1050, 1932 Ky. LEXIS 70 ( Ky. 1932 ) (decided under prior law).

7. Procedure.

The method of procedure for the ascertainment and determination of the tax were controlled by the statute in force at the time of the institution of the proceedings. De Witt v. Commonwealth, 184 Ky. 437 , 212 S.W. 437, 1919 Ky. LEXIS 95 ( Ky. 1919 ) (decided under prior law).

The tax itself and the rights of the parties were controlled by the statute in force when the transfer took effect. De Witt v. Commonwealth, 184 Ky. 437 , 212 S.W. 437, 1919 Ky. LEXIS 95 ( Ky. 1919 ) (decided under prior law).

8. Gift in Contemplation of Death.

Where the finding of the Kentucky tax commission that a gift made within three (3) years of death was a gift in contemplation of death was supported by the statutory presumption which was not destroyed by the evidence in behalf of the estate, the trial court erred in setting aside the order of the commission which was supported by substantial evidence in the form of the presumption. Luckett v. Findley, 427 S.W.2d 240, 1968 Ky. LEXIS 672 ( Ky. 1968 ).

9. Trusts.

Under inter vivos trust agreements for the benefit of donor’s three (3) daughters and granddaughter, providing that the income from the corpus of the trust property be accumulated until donees were 25 years old, at which time they would receive the income for life with power of appointment at death, and upon failure to exercise power each donee’s share would go to her issue or heirs, the remainders were completed gifts inter vivos, unaffected by donor’s death; hence the remainder interests were not subject to inheritance tax under this section and KRS 140.040 had no applications. Allen's Ex'r v. Howard, 304 Ky. 280 , 200 S.W.2d 484, 1946 Ky. LEXIS 933 ( Ky. 1946 ).

After the establishment of the trust, the person establishing the trust must be left with no legal title in the property, no possible reversionary interest in it, or no right to possess or enjoy the property then or thereafter, if the estate tax is to be avoided. Bosworth v. Commonwealth, 313 Ky. 279 , 231 S.W.2d 36, 1950 Ky. LEXIS 872 ( Ky. 1950 ).

10. Pensions.

Where widow was entitled to pension on death of deceased and the deceased, at the time of his death, did not retain some form of control or some incident of ownership, such as the right to change the beneficiary, the pension was not taxable. Commonwealth, Dep't of Revenue v. American Nat'l Bank, 425 S.W.2d 281, 1968 Ky. LEXIS 412 ( Ky. 1968 ).

11 Life Insurance.

Where corporation took out insurance policy on life of its president, payable to the corporation, and president had no interest in or control over the policy, the proceeds of the policy were not subject to inheritance tax, since there was no transfer from the assured. Martin v. Storrs, 277 Ky. 199 , 126 S.W.2d 445, 1939 Ky. LEXIS 650 ( Ky. 1939 ).

12. Promissory Notes.

Where amount of bequest to insolvent maker of two (2) promissory notes, held as part of testator’s estate, exceeded amount of the notes and interest thereon, notes were subject to inheritance tax at full face value, including accrued interest since, at testator’s death, the notes became valuable to the maker-beneficiary, as a liability was liquidated making him solvent, and notes were also of value to other beneficiary of the estate, as the residue of the estate was increased by their amount. Gearhart's Ex'r v. Howard, 302 Ky. 709 , 196 S.W.2d 113, 1946 Ky. LEXIS 740 ( Ky. 1946 ).

13. Joint Tenancy.

The death of a joint tenant constitutes a change in property rights sufficient to bring the inheritance tax statutes into play. Revenue Cabinet v. Cox, 738 S.W.2d 114, 1987 Ky. App. LEXIS 516 (Ky. Ct. App. 1987).

14. Contingent Interests.

Where testator devised all of his property to his wife, with full power of use and disposition, but stated that it was his desire that such property as remained upon the wife’s death go to certain heirs, contingent interest of the heirs could not be collected until the death of the wife, since the amount they might receive could not be ascertained before that time. Commonwealth v. Cambron's Ex'x, 158 Ky. 577 , 165 S.W. 979, 1914 Ky. LEXIS 673 ( Ky. 1914 ) (decided under prior law).

15. Time of Fixed Value.

The taxable value of an estate was its value as of the date of the decedent’s death, regardless of subsequent depreciation or appreciation before distribution. Cochran's Ex'x v. Commonwealth, 241 Ky. 656 , 44 S.W.2d 603, 1931 Ky. LEXIS 147 ( Ky. 1931 ) (decided under prior law).

16. Transfer of Interest.

Where a resident of Illinois conveyed her property to a Kentucky trustee, reserving the income for life, and directing that at her death the corpus be distributed among her heirs at law according to the Kentucky laws of descent and distribution, and the trustee took possession of the property under the trust agreement, the amounts passing to the heirs upon the death of the creator of the trust were subject to Kentucky inheritance tax. Barclay's Trustee v. Commonwealth, 156 Ky. 455 , 161 S.W. 510, 1913 Ky. LEXIS 461 ( Ky. 1913 ) (decided under prior law).

Where decedent, prior to death, executed deed of real estate, conveying absolute title but reserving a life estate and the power to revoke the deed at any time before her death, the transfer took effect upon the delivery of the deed and not upon the grantor’s death, notwithstanding that she devised the property to the grantee in her will, and where the deed was delivered prior to the enactment of the inheritance tax law the transfer was not taxable. Commonwealth v. McCauley's Ex'r, 166 Ky. 450 , 179 S.W. 411, 1915 Ky. LEXIS 709 ( Ky. 1915 ) (decided under prior law).

Where decedent devised his entire estate to his wife, and she died before his estate was settled and distributed, leaving estate to children, there were two (2) taxable transfers, as against contention that widow never acquired a vested interest and therefore children took directly from the father. Commonwealth by Board v. Paynter's Adm'r, 222 Ky. 766 , 2 S.W.2d 664, 1927 Ky. LEXIS 957 ( Ky. 1927 ) (decided under prior law).

17. Contractual Obligation Bequest.

Amount bequeathed by decedent to nurse, in payment of salary due nurse for many years’ employment by decedent, was not taxable, where there was uncontradicted proof that nurse was employed at an agreed salary which had never been paid. In such case, the fact that the nurse could not have collected a substantial part of her salary, because of the statute of limitations, if the bequest had not been made, did not make the bequest taxable as to such portion. Reamer's Ex'r v. Coleman, 226 Ky. 301 , 10 S.W.2d 1095, 1928 Ky. LEXIS 91 ( Ky. 1928 ) (decided under prior law).

18. Compromise Claims.

Amount paid out of decedent’s estate in compromise of claim of woman who claimed to be decedent’s widow would not have been subject to inheritance tax, in absence of judgment which determined claimant to be the lawful widow. Commonwealth v. Fidelity & Columbia Trust Co., 171 Ky. 519 , 188 S.W. 658, 1916 Ky. LEXIS 399 ( Ky. 1916 ) (decided under prior law).

Where a disinherited heir contested the will, and the legatees paid him a portion of the estate in compromise of his claim to secure the withdrawal of the contest, the legatees could not have deducted the sum so paid in computing the taxable value of their distributable shares, but must have paid tax on the basis that the entire estate passed to them under the will. Cochran's Ex'x v. Commonwealth, 241 Ky. 656 , 44 S.W.2d 603, 1931 Ky. LEXIS 147 ( Ky. 1931 ) (decided under prior law).

Cited in:

Commonwealth v. Van Meter, 301 Ky. 132 , 190 S.W.2d 668, 1945 Ky. LEXIS 675 ( Ky. 1945 ); Hadley v. Marshall’s Ex’x, 306 Ky. 98 , 206 S.W.2d 194, 1947 Ky. LEXIS 956 (1947); Ream v. Department of Revenue, 314 Ky. 539 , 236 S.W.2d 462, 1951 Ky. LEXIS 688 ( Ky. 1951 ); Sanford v. Sanford’s Adm’r, 262 S.W.2d 827, 1953 Ky. LEXIS 1136 ( Ky. 1953 ); Department of Revenue v. Kentucky Trust Co., 313 S.W.2d 401, 1958 Ky. LEXIS 256 ( Ky. 1958 ); Kentucky Trust Co. v. Department of Revenue, 421 S.W.2d 854, 1967 Ky. LEXIS 87 ( Ky. 1967 ); Estate of McVey v. Dep’t of Revenue, Fin. & Admin. Cabinet, — S.W.3d —, 2013 Ky. App. LEXIS 171 (Ky. Ct. App. 2013).

Opinions of Attorney General.

Since the Kentucky law on inheritance taxation makes no specific exception for turnpike bonds, such bonds would be subject to inheritance tax in this state when transferred either by will or under the laws of intestate succession. OAG 71-280 .

A federal civil service retirement system annuity being received by the widow of a federal employee would not be subject to the Kentucky inheritance tax. OAG 72-411 .

Contingent interests are taxable at the death of the grantor. OAG 78-135 .

Notwithstanding the fact that remainderpersons have a contingent interest and may not come into possession for quite some time, such a contingent estate is taxable at the time of the testator’s death and not at the time of the death of the life tenant. OAG 78-135 .

Where the wife had a life estate in the money and the household furnishings and the children had a vested remainder, the value of the life estate and the vested remainder were taxable under the state’s inheritance tax law. OAG 78-135 .

Research References and Practice Aids

Kentucky Bench & Bar.

Baker v. Baker, Title Examination in Kentucky, 48 Ky. Bench & B. 12 (1984).

Gibson & Traughber, Death Taxes: Confusion Reigns, Volume 74, No. 6, November 2010, Ky. Bench & Bar 6.

Eardly & Ruml, My Old Kentucky Home or the Sunshine State? Residency and Estate Planning Issues for Kentucky “Snowbirds” in Florida, Volume 74, No. 6, November 2010, Ky. Bench & Bar 20.

Kentucky Law Journal.

Gilbert, Taxation — Inheritance Tax — Interest in Joint Tenancy Passing by Survivorship, 27 Ky. L.J. 474 (1939).

Sullivan, Appellate Court Interpretation of Kentucky Inheritance Tax Statutes, 35 Ky. L.J. 198 (1947).

Roberts, Personal Liabilities An Executor May Incur in Settling Estates in Kentucky, 46 Ky. L.J. 543 (1958).

Kentucky Death Taxes — Putting a Price on Inheritance, 58 Ky. L.J. 549 (1970).

Sturm, Powers of Appointment and the Kentucky Inheritance Tax — The Department of Revenue’s Administration of KRS 140.040 , 61 Ky. L.J. 900 (1973).

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

Treatises

Petrilli, Kentucky Family Law, Property Rights, § 14.8.

Lexis KY Tax P.I. 4,109 Death in the Commonwealth: Kentucky Repealed Its Estate Tax But Still Imposes an Inheritance Tax.

140.015. Exemption of benefits from federal government arising out of military service.

  1. The payment of any gratuity pay, death compensation or other award or benefit, by the federal government, to the surviving spouse or heirs of any person by reason or arising out of service by such person in the Armed Forces of the United States in time of war shall not be considered a taxable transfer within the meaning of this chapter, and the amount paid shall not be considered in determining the value of any taxable transfer.
  2. Payments made to a beneficiary of the retired serviceman’s family protection plan or survivor benefit plan shall not be considered a taxable transfer within the meaning of this chapter, and the amount paid shall not be considered in determining the value of any taxable transfer.

History. Enact. Acts 1944, ch. 34, § 2; 1980, ch. 403, § 1, effective July 15, 1980.

140.020. Taxation of transfers made in contemplation of death — Revocable trusts — Presumption of contemplation — When presumption does not apply.

  1. The terms of this chapter shall apply to any property or interest therein, of which the decedent has made a transfer by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after death, including a transfer under which the transferor has retained for his life or any period not ending before his death (a) the possession or enjoyment of, or the income from the property; or (b) the actual or contingent power to designate the persons who shall possess the property or the income therefrom, except in the case of a bona fide sale for an adequate and full consideration in money or money’s worth. It shall further apply to any property conveyed in trust over which the settlor has a power of revocation exercisable by will.
  2. Every transfer made within three (3) years prior to the death of the grantor, vendor or donor of a material part of his estate, or in the nature of a final disposition or distribution thereof, and without an adequate valuable consideration, shall be construed prima facie to have been made in contemplation of death within the meaning of this chapter. If a transfer was made more than three (3) years prior to the death of the decedent it shall be a question of fact, to be determined by the proper tribunal, whether the transfer was made in contemplation of death.
  3. There shall be no presumption of contemplation of death as to certificates of deposit jointly owned and all such certificates of deposit shall be taxed pursuant to KRS 140.050 .

History. 4281a-13, 4281a-17: amend. Acts 1942, ch. 204, § 2; 1978, ch. 170, § 1, effective June 17, 1978; 1982, ch. 387, § 6, effective July 15, 1982.

Legislative Research Commission Notes.

Although this section was included in Acts 1982 ch. 387 as being amended, the changed wording was deleted by House Floor Amendment.

NOTES TO DECISIONS

  1. Purpose.
  2. Construction.
  3. Gifts in Contemplation of Death.
  4. Presumption.
  5. —Bases.
  6. —Overcoming.
  7. Pension.
1. Purpose.

Purpose of provisions for taxing gifts in contemplation of death is to prevent evasion of tax by transfers which are merely substitutes for testamentary dispositions. Chase's Ex'x v. Commonwealth, 284 Ky. 471 , 145 S.W.2d 58, 1940 Ky. LEXIS 521 ( Ky. 1940 ).

2. Construction.

Gifts made in contemplation of death within the meaning of the inheritance tax act are gifts motivated by the thought of death, but this does not mean the donor must believe that death is imminent. Chase's Ex'x v. Commonwealth, 284 Ky. 471 , 145 S.W.2d 58, 1940 Ky. LEXIS 521 ( Ky. 1940 ).

3. Gifts in Contemplation of Death.

Determination whether gift was made in contemplation of death turns upon donor’s motive, as to which value of gift, age of donor and condition of his health are some of the circumstances to be considered. Chase's Ex'x v. Commonwealth, 284 Ky. 471 , 145 S.W.2d 58, 1940 Ky. LEXIS 521 ( Ky. 1940 ).

In order to render an inter vivos gift taxable it is not necessary that the donor be motivated alone by the thought of death. If contemplation of death is one of the motives, the transfer may be taxable though other motives are present. A desire to see a donee have a present enjoyment of the property and to see him established with a separate competency are not necessarily inconsistent with the transfer being in contemplation of death. In ascertaining the motives actuating the donor, facts may be considered such as his age and state of health at the time gift was made, his habits and propensities, the amount of the gift, the relationship of the donees, and other pertinent circumstances. Sellinger's Adm'r v. Reeves, 292 Ky. 114 , 166 S.W.2d 54, 1942 Ky. LEXIS 52 ( Ky. 1942 ).

Where wealthy man was more than 83 years of age at time gifts were made, he had just passed through a serious illness lasting more than a year and during that time several serious operations were performed, so that he probably knew that he was suffering from cancer, and the gifts were in equal amounts to his wife and daughters and constituted more than three-fifths (3/5) of his estate, the gifts were in contemplation of death. Sellinger's Adm'r v. Reeves, 292 Ky. 114 , 166 S.W.2d 54, 1942 Ky. LEXIS 52 ( Ky. 1942 ).

4. Presumption.

Persons claiming estate have burden of overcoming the presumption of contemplation of death existing where the transfer was made within three (3) years of death. Chase's Ex'x v. Commonwealth, 284 Ky. 471 , 145 S.W.2d 58, 1940 Ky. LEXIS 521 ( Ky. 1940 ).

The presumption that a gift made within three years of death is a rebuttable one, yet it will suffice to support an administrative finding that the gift was made in contemplation of death unless the evidence presented in opposition to it is so convincing that the fact finder may not reasonably reject it. Luckett v. Findley, 427 S.W.2d 240, 1968 Ky. LEXIS 672 ( Ky. 1968 ).

Where a gift was made less than three years before the donor’s death, the statute itself raises a presumption that the gift was made in contemplation of death. Luckett v. Findley, 427 S.W.2d 240, 1968 Ky. LEXIS 672 ( Ky. 1968 ).

5. —Bases.

The presumption created by the statute that a gift made within three years of death was made in contemplation of death is a reasonable one as it is based upon (1) probability, (2) procedural convenience, (3) fairness in assigning the burden of adducing evidence to the party possessing superior means of access to the proof, and (4) the fostering of social or economic policy. Luckett v. Findley, 427 S.W.2d 240, 1968 Ky. LEXIS 672 ( Ky. 1968 ).

6. —Overcoming.

Presumption that gifts of $30,000 out of net estate of $600,000, which were made to wife and daughters by 72-year-old donor who had not been in good health for some time, within four months prior to death, were made in contemplation of death, was not overcome by fact that it had been his custom for many years prior to his death to make gifts to wife and children and allegation that gifts in question were not material part of estate. Chase's Ex'x v. Commonwealth, 284 Ky. 471 , 145 S.W.2d 58, 1940 Ky. LEXIS 521 ( Ky. 1940 ).

Where husband, without consideration, transferred stock to his wife some two and one-half (21/2) years before his death, evidence that wife had helped him in his business; that they treated all activities as joint ventures; that, though he was about 74 years old and had been partly paralyzed for nine (9) years, he was confident of recovery; that he had continued active in business up until his death; and that the transfer could not have been made theretofore because of a lien on the stock; was sufficient to overcome presumption that the transfer was made in contemplation of death. Commonwealth v. Switow, 307 Ky. 432 , 211 S.W.2d 406, 1948 Ky. LEXIS 760 ( Ky. 1948 ).

7. Pension.

If the transferor, at the time of his death, did not retain some form of control of the property or some incident of ownership, such as the right to change the beneficiary, the pension is not taxable. Commonwealth, Dep't of Revenue v. American Nat'l Bank, 425 S.W.2d 281, 1968 Ky. LEXIS 412 ( Ky. 1968 ).

Cited in:

Martin v. Storrs, 277 Ky. 199 , 126 S.W.2d 445, 1939 Ky. LEXIS 650 ( Ky. 1939 ).

Opinions of Attorney General.

Where a pension plan provided that if the employee had not received 120 payments at his death the balance of the 120 payments was payable to his designated beneficiary or estate, the balance due at death is taxable. OAG 61-550 .

Where a profit-sharing plan provided that on an employee’s death his vested interest would be paid to his designated beneficiary, the interest is taxable and should be listed on the inheritance tax return. OAG 61-550 .

Research References and Practice Aids

Kentucky Bench & Bar.

Reeves, A Primer on Advanced Estate Planning, Vol. 58, No. 3, Summer 1994, Ky. Bench & Bar 13.

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.030. Taxation of contracts in contemplation of death — Proceeds of life insurance policies — Exemptions.

  1. If it appears, either from the will of the decedent or from extrinsic evidence, that an obligation of a contractual nature exists in favor of any person payable at or after death of the decedent, the sum so payable shall be treated for the purposes of this chapter as a taxable transfer, unless it affirmatively appears by competent evidence that a consideration substantially equivalent in value to the amount due under the contract was paid or furnished by or for the other party thereto during the life of the decedent.
  2. The proceeds payable under any life insurance policy on the death of the assured (other than a United States government life insurance policy or national service life insurance policy issued by or through the federal government), payable to the assured or his estate, shall be taxable as a part of the legacy as a distributable share of the beneficiary. The proceeds of an insurance policy payable to a designated beneficiary, including a testamentary or inter vivos trustee, other than the assured or his estate, shall be tax-free. The proceeds payable under any United States government life insurance policy or national service life insurance policy issued by or through the federal government, whether payable to a designated beneficiary or to the assured or his estate, and any pension or annuity payments made or to be made to the surviving spouse of an employee of a railroad or other carrier under the Federal Railroad Retirement Act of 1935 as amended, shall be tax-free, and shall not be considered in determining the value of any taxable transfer.

History. 4281a-16: amend. Acts 1944, ch. 34, § 1; 1948, ch. 96, § 7a; 1950, ch. 146; 1954, ch. 131, § 1; 1970, ch. 34, § 1; 1974, ch. 386, § 26.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Purpose.
  3. Construction.
  4. Insurance.
  5. —Policies Prior to Passage.
  6. —Policies in Trust.
1. Constitutionality.

This section does not impair the obligations of a contract or violate the due process clause of the 14th amendment to the federal constitution.Dumesnil v. Reeves, 283 Ky. 563 , 142 S.W.2d 132, 1940 Ky. LEXIS 370 ( Ky. 1940 ).

2. Purpose.

The purpose of this statute was to tax life insurance proceeds which actually pass through the assured’s estate by reason of his death or by reason of his testamentary disposition. Luckett v. First Nat'l Lincoln Bank, 409 S.W.2d 518, 1966 Ky. LEXIS 63 ( Ky. 1966 ).

3. Construction.

The words “of a designated beneficiary” were used to insure that the proceeds payable to such trustee would be exempt from taxation only if the trust had a pretestamentary designated beneficiary who was someone other than the assured or his estate. Luckett v. First Nat'l Lincoln Bank, 409 S.W.2d 518, 1966 Ky. LEXIS 63 ( Ky. 1966 ) (decision prior to 1970 amendment).

4. Insurance.

The proceeds of an insurance policy taken out by a corporation on the life of its chief officer, in which the officer had no interest and over which he had no control (the premiums being paid by the corporation), are not taxable. Department of Revenue v. Lanham's Adm'rs, 278 Ky. 419 , 128 S.W.2d 936, 1939 Ky. LEXIS 447 ( Ky. 1939 ); Martin v. Storrs, 277 Ky. 199 , 126 S.W.2d 445, 1939 Ky. LEXIS 650 ( Ky. 1939 ); De Leuil's Ex'x v. Department of Revenue, 278 Ky. 424 , 128 S.W.2d 938, 1939 Ky. LEXIS 448 (Ky. 1939).

5. —Policies Prior to Passage.

The Legislature did not intend to exempt from the operation of this section policies taken out prior to its passage. Dumesnil v. Reeves, 283 Ky. 563 , 142 S.W.2d 132, 1940 Ky. LEXIS 370 ( Ky. 1940 ).

6. —Policies in Trust.

Four (4) years prior to his death, decedent created a trust and assigned to it several life insurance policies which were made payable to the trustee. The trust instrument designated decedent’s children (eo nomine) as beneficiaries of the trust but no mention of them was made in the policies. Thus the proceeds of insurance policies were not taxable. Luckett v. First Nat'l Lincoln Bank, 409 S.W.2d 518, 1966 Ky. LEXIS 63 ( Ky. 1966 ).

Cited in:

Kentucky Trust Co. v. Department of Revenue, 421 S.W.2d 854, 1967 Ky. LEXIS 87 ( Ky. 1967 ); Kentucky Bd. of Tax Appeals v. Estate of Porter, 422 S.W.2d 895, 1968 Ky. LEXIS 501 ( Ky. 1968 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Fust, Common Challenges of the (Not So) Uncommon Estate Planning Client, Vol. 70, No. 1, January 2006, Ky. Bench & Bar 11.

Kentucky Law Journal.

Allphin, 1954 Kentucky Tax Legislation, 42 Ky. L.J. 76 (1954).

140.040. Taxation of transfers by power of appointment — When transfer deemed to take place — Date as of which value of property determined — Remainder interests — Rates and exemptions.

  1. Whenever any person shall exercise a power of appointment derived from any disposition of property (whether by will, deed, trust agreement, contract, insurance policy or other instrument) regardless of when made, such appointment shall be deemed a transfer taxable under the provisions of this chapter in the same manner as though the property to which such appointment relates belonged absolutely to the donee of such power and had been bequeathed or devised by such donee by will; and whenever any person possessing such a power of appointment so derived shall omit or fail to exercise the same in whole or in part, within the time provided therefor, a transfer taxable under the provisions of this chapter shall be deemed to take place to the person or persons receiving such property as a result of such omission or failure to the same extent that such property would have been subject to taxation if it had passed under the will of the donee of such power. The time at which such transfer shall be deemed to take place, for the purpose of taxation, shall be governed by the provisions of subsections (2) to (4) of this section.
  2. In the case of a power of appointment which passes to the donee thereof at the death of the donor, under any instrument, and if the donor dies on or after April 24, 1936, the transfer shall be deemed to take place, for the purpose of taxation, at the time of the death of the donor and the assessment be made at that time against the life interest of the donee and the remainder against the corpus. The value of the property to which the power of appointment relates shall be determined as of the date of the death of the donor and shall be taxed at the rates and be subject to the exemptions in effect at the death of the donor. The determination of the applicable rates and exemptions (in effect at the death of the donor) shall be governed by the relationship of the beneficiary to the donee of the power of appointment. In the event the payment of the tax at the death of the donor should operate to provide an exemption for any beneficiary of a donee not authorized by KRS 140.080 , then such exemption shall be retrospectively disallowed at the time of the death of the donee. It is further provided that the remainder interest passing under the donee’s power of appointment, whether exercised or not, shall be added to and made a part of the distributable share of the donee’s estate for the purpose of determining the exemption and rates applicable thereto.
  3. In all cases other than that described in subsection (2) the transfer shall be deemed to take place, for the purpose of taxation, at the time of the death of the donee. In such cases, the value of the property to which the power of appointment relates shall be determined as of the date of the death of the donee and shall be taxed at the rates and be subject to the exemptions in effect at the death of the donee. The determination of the applicable rates and exemptions (in effect at the death of the donee) shall be governed by the relationship of the beneficiary to the donee of the power of appointment.
  4. The provisions of subsection (2) shall not preclude the taxation, at the death of the donee, of any transfer made by means of a power of appointment if such transfer was not in fact reported to or a tax assessed thereon by the Department of Revenue within the period of limitation prescribed by KRS 140.160 . If the transfer by the power of appointment is not so reported or a tax assessed thereon, the period of limitation prescribed in KRS 140.160 shall not begin to run until the death of the donee of such power.
  5. The amendments to this section, adopted by the 1948 General Assembly, shall apply to all powers of appointment whether created before or after the effective date of said amendments. It is the declared intention of the General Assembly to impose a tax upon every transfer of property by means of a power of appointment, regardless of when or how created, and it is the declared intention of the General Assembly that the use of the power of appointment device shall not permit the transfer of property, to which such a power relates, to escape thereby the payment of state inheritance taxes.

History. 4281a-14: amend. Acts 1942, ch. 204, § 1; 1948, ch. 96, § 8; 2005, ch. 85, § 452, effective June 20, 2005.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Construction.
  3. Application.
  4. Time of Assessment.
  5. Limited or Exclusive Power.
  6. Deductions.
1. Constitutionality.

This section providing that transfers under powers of appointment will be deemed to occur, for inheritance tax purposes, either upon the death of the donor of the power or that of the donee, depending upon whether the donor died on or before April 24, 1936, the date when the state first began to tax transfers of appointive property at donor’s death provides a reasonable and constitutionally sound basis for the classification effected under it and does not deny equal protection of laws. Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ).

2. Construction.

Where in similar case Revenue Department mistakenly accepted the taxpayer’s interpretation of this section and taxed separately property that had been appointed under a power created before 1936, such action had no effect on the construction of this section providing for the imposition of inheritance tax on property passing by exercise of power of appointment for an administrative body cannot change a law by mistake. Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ).

3. Application.

This section applies only to powers of appointment created by will and not by deed, when the latter is not made in contemplation of death. Allen's Ex'r v. Howard, 304 Ky. 280 , 200 S.W.2d 484, 1946 Ky. LEXIS 933 ( Ky. 1946 ).

Under inter vivos trust agreements for the benefit of donor’s three (3) daughters and granddaughter, providing that the income from the corpus of the trust property be accumulated until donees were 25 years old, at which time they would receive the income for life with power of appointment at death, and upon failure to exercise power each donee’s share would go to her issue or heirs, the remainders were completed gifts inter vivos, unaffected by donor’s death; hence the remainder interests were not subject to inheritance tax under KRS 140.010 , and this section had no application. Allen's Ex'r v. Howard, 304 Ky. 280 , 200 S.W.2d 484, 1946 Ky. LEXIS 933 ( Ky. 1946 ).

4. Time of Assessment.

State may tax the transfer of property rights through a power of appointment either at the time of its creation or at the time of its exercise. Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ).

5. Limited or Exclusive Power.

It is immaterial for taxing purposes whether the power of appointment of donee is exclusive or limited. Commonwealth v. Fidelity & Columbia Trust Co., 285 Ky. 1 , 146 S.W.2d 3, 1940 Ky. LEXIS 589 ( Ky. 1 940 ).

6. Deductions.

There was no authority for deducting alleged “value of donee’s life interest outstanding after the death of donee” from the value of the appointive property when such property was aggregated with other property left to the appointee of donor’s separate estate for purposes of determining exemption rates applicable to the separate property. Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ).

Cited in:

Ream v. Department of Revenue, 314 Ky. 539 , 236 S.W.2d 462, 1951 Ky. LEXIS 688 ( Ky. 1951 ), overruled, Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ), overruled in part, Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ); Union Bank & Trust Co. v. Bassett, 253 S.W.2d 632, 1952 Ky. LEXIS 1124 ( Ky. 1952 ).

Research References and Practice Aids

Cross-References.

Appointment made by will in exercise of power, validity of, KRS 394.070 .

Devise or bequest operating as power of appointment, KRS 394.060 .

Kentucky Bench & Bar.

Reeves, A Primer on Advanced Estate Planning, Vol. 58, No. 3, Summer 1994, Ky. Bench & Bar 13.

Kentucky Law Journal.

Bush, Inheritance Tax Upon Failure to Exercise Special Power of Appointment, 28 Ky. L.J. 80 (1939).

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

140.050. Taxation of surviving owner of a joint interest.

Whenever any real or personal property is held jointly in the names of two (2) or more persons, or as tenants by the entirety, or is deposited in banks or other depositories jointly in the names of two (2) or more persons and is payable to either or to the survivor upon the death of the other, the right of the surviving tenant by the entirety or the surviving joint tenant or joint depositor to the immediate ownership or possession and enjoyment of the property shall be deemed a transfer of one-half (1/2) or other proper fraction thereof, taxable under the provisions of this chapter in the same manner as though the part of the property to which the transfer relates belonged to the tenants by the entirety, joint tenants or joint depositors as tenants in common, and had been bequeathed or devised to the surviving tenant by the entirety, joint tenant or joint depositor by the deceased tenant by the entirety, joint tenant or joint depositor.

History. 4281a-15.

NOTES TO DECISIONS

  1. In General.
  2. Constitutionality.
  3. Federal Estate Tax Compared.
  4. Transfer by Survivorship.
1. In General.

The death of a joint tenant constitutes a change in property rights sufficient to bring the inheritance tax statutes into play. Revenue Cabinet v. Cox, 738 S.W.2d 114, 1987 Ky. App. LEXIS 516 (Ky. Ct. App. 1987).

2. Constitutionality.

The relative contributions of the parties are immaterial to the question of constitutionality of a state inheritance tax. Revenue Cabinet v. Cox, 738 S.W.2d 114, 1987 Ky. App. LEXIS 516 (Ky. Ct. App. 1987).

3. Federal Estate Tax Compared.

Unlike the federal estate tax statute (26 USCS § 2040), the amount of each person’s contribution is not considered in imposing this commonwealth’s inheritance tax; rather, the account is taxed on an arbitrary fractional basis depending on the number of joint owners. Revenue Cabinet v. Cox, 738 S.W.2d 114, 1987 Ky. App. LEXIS 516 (Ky. Ct. App. 1987).

4. Transfer by Survivorship.

Under the former inheritance tax law, it was held that a transfer by survivorship was not taxable where the instrument creating the right was executed before the effective date of the law. Commonwealth v. Merritt's Ex'r, 210 Ky. 779 , 276 S.W. 802, 1925 Ky. LEXIS 775 ( Ky. 1925 ) (decided under prior law).

Cited in:

Martin v. Storrs, 277 Ky. 199 , 126 S.W.2d 445, 1939 Ky. LEXIS 650 ( Ky. 1939 ); Revenue Cabinet, Commonwealth v. Samani, 757 S.W.2d 199, 1988 Ky. App. LEXIS 64 (Ky. Ct. App. 1988).

Research References and Practice Aids

Cross-References.

Joint tenancy, disposition of share on death, KRS 381.120 .

Kentucky Law Journal.

Gilbert, Taxation — Inheritance Tax — Interest in Joint Tenancy Passing by Survivorship, 27 Ky. L.J. 474 (1939).

Francis, Should Husband and Wife Hold Real Property With Survivorship? 37 Ky. L.J. 122 (1948).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Treatises

Petrilli, Kentucky Family Law, Property Rights, § 14.8.

140.055. Taxation of surviving co-owner of government bond or similar evidence of indebtedness. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 96, § 9) was repealed by Acts 1990, ch. 142, § 5, effective July 13, 1990.

140.060. Exemption of transfers to educational, religious and charitable institutions, and to cities and public institutions.

All transfers to educational, religious or other institutions, societies, or associations, whose sole object and purpose are to carry on charitable, educational, or religious work, all transfers for or upon trust for any charitable, educational, or religious purpose, and all transfers to cities, and towns or public institutions in this state for public purposes shall be exempt from the tax imposed by this chapter. But no such corporation or association shall be entitled to such exemption if any officer, member, stockholder or employee thereof shall receive or may be lawfully entitled to receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting one or more of such purposes or as proper beneficiary of its strictly charitable purpose; or if the organization thereof, for any such avowed purpose, be a guise or pretense for directly or indirectly making any other pecuniary profit for such corporation or association, or for any of its members or employees, or if it be not in good faith organized or conducted exclusively for one or more of such purposes.

History. 4281a-18: amend. Acts 1942, ch. 204, § 3; 1954, ch. 55, § 1.

NOTES TO DECISIONS

  1. Religious Institutions.
  2. Charitable Institutions.
1. Religious Institutions.

Where death of decedent occurred before enactment of law exempting charitable bequests from tax, bequest to trustee for purpose of establishing home for aged persons who had been members of Methodist church for 25 years was subject to tax, as against contention that beneficiaries were not ascertainable until home was actually established, which did not occur until after law granting exemption was enacted. State Tax Com. v. Nettleton's Ex'r, 226 Ky. 393 , 11 S.W.2d 84, 1928 Ky. LEXIS 102 ( Ky. 1928 ) (decided under prior law).

2. Charitable Institutions.

Exemptions of charitable bequests were governed by law in effect at time of death of particular decedent. State Tax Com. v. Nettleton's Ex'r, 226 Ky. 393 , 11 S.W.2d 84, 1928 Ky. LEXIS 102 ( Ky. 1928 ) (decided under prior law).

A transfer to a society for the prevention of cruelty to animals was exempt under this section. Commonwealth v. Nelson's Adm'x, 235 Ky. 731 , 32 S.W.2d 19, 1930 Ky. LEXIS 436 ( Ky. 1930 ) (decided under prior law).

Cited in:

Mercer General Hospital, Inc. v. Hardin, 246 S.W.2d 1003, 1952 Ky. LEXIS 652 ( Ky. 1952 ); Lynch v. Kentucky Tax Com., 333 S.W.2d 257, 1960 Ky. LEXIS 182 ( Ky. 1960 ).

Opinions of Attorney General.

The Kentucky Historical Society qualifies as a “public institution” within the purpose of this section, and therefore, unencumbered transfers to it would be exempt from the tax imposed by this chapter. OAG 63-657 .

Since political parties are voluntary associations for political purposes being governed by their own usages and their own rules, and are not specifically mentioned in this section, they are not public institutions as that phrase is used in this section, and, therefore, are only entitled to a Class “C” exemption as provided for in KRS 140.070 . OAG 79-571 .

Research References and Practice Aids

Kentucky Bench & Bar.

Ratliff, Kentucky Probate — A Simple Overview, Volume 54, No. 1, Winter 1990 Ky. Bench & B. 16.

Kentucky Law Journal.

Allphin, 1954 Kentucky Tax Legislation, 43 Ky. L.J. 76 (1954).

140.063. Exemption of annuities or other payments under employees’ trusts — Retirement annuities — Individual retirement bonds, accounts, and annuities.

  1. There shall be excluded from taxation under KRS Chapter 140, to the extent attributable to employer’s contributions, the value of an annuity or other payment receivable by any beneficiary (other than the executor or equivalent) under:
    1. An employee’s trust (or under a contract purchased by an employee’s trust) forming a part of a pension, stock bonus, or profit-sharing plan which, at the time of the decedent’s separation from employment (whether by death or otherwise), or at the time of termination of the plan if earlier, met the requirements of Section 401(a) of the Internal Revenue Code; or
    2. A retirement annuity contract purchased by an employer (and not by an employee’s trust) pursuant to a plan which, at the time of decedent’s separation from employment (by death or otherwise), or at the time of termination of the plan if earlier, was a plan described in Section 403(a) of the Internal Revenue Code; or
    3. A retirement annuity contract purchased for an employee by an employer which is an organization referred to in Section 170(b)(1)(A)(ii) or (vi) of the Internal Revenue Code, or which is a religious organization (other than a trust), and which is exempt from tax under Section 501(a) of the Internal Revenue Code; or
    4. Chapter 73 of Title 10 of the United States Code.
  2. If amounts payable after the death of the decedent under a plan described in paragraph (a) or (b) of subsection (1) of this section, under a contract described in paragraph (c) of subsection (1) of this section, or under Chapter 73 of Title 10 of the United States Code are attributable to any extent to payments or contributions made by the decedent, no exclusion shall be allowed for that part of the value of such amounts in the proportion that the total payments or contributions made by the decedent bears to the total payments or contributions made. For purposes of this subsection, contributions or payments made by the decedent’s employer or former employer under a trust or plan described in paragraph (a) or (b) of subsection (1) of this section shall not be considered to be contributed by the decedent, and contributions or payments made by the decedent’s employer or former employer toward the purchase of an annuity contract described in paragraph (c) of subsection (1) of this section shall, to the extent excludable from gross income under Section 403(b) of the Internal Revenue Code, not be considered to be contributed by the decedent. This subsection shall apply to all decedents dying after December 31, 1953. For purposes of this subsection, contributions or payments on behalf of the decedent while he was an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code made under a trust or plan described in paragraph (a) or (b) of subsection (1) of this section shall, to the extent allowable as a deduction under Section 404 of the Internal Revenue Code, be considered to be made by a person other than the decedent and, to the extent not so allowable shall be considered to be contributions or payments made by the decedent. For purposes of this subsection, amounts payable under Chapter 73 of Title 10 of the United States Code are attributable to payments or contributions made by the decedent only to the extent of amounts deposited by him pursuant to Section 1438 or 1452(d) of such Title 10. This subsection shall apply to all decedents dying after January 1, 1972.
  3. There shall be excluded from taxation under KRS Chapter 140 the value of an annuity receivable by any beneficiary (other than the executor) under:
    1. An individual retirement account described in Section 408(a) of the Internal Revenue Code.
    2. An individual retirement annuity described in Section 408(b) of the Internal Revenue Code.
    3. A retirement bond described in Section 409(a) of the Internal Revenue Code.
  4. If any payment to an account described in paragraph (a) of subsection (3) of this section or for an annuity described in paragraph (b) of subsection (3) of this section or a bond described in paragraph (c) of subsection (3) of this section was not allowable as a deduction under Section 219 or 220 of the Internal Revenue Code and was not a rollover contribution described in Section 402(a)(5), 403(a)(4), Section 403(b)(8) (but only to the extent such contribution is attributable to a distribution from a contract described in subsection 408(c)(3)), 408(d)(3), or 409(b)(3)(C) of the Internal Revenue Code, the preceding sentence shall not apply to that portion of the value of the amount receivable under such account, annuity, or bond (as the case may be) which bears the same ratio to the total value of the amount so receivable as the total amount which was paid to or for such account, annuity, or bond and which was not allowable as a deduction under Section 219 or 220 of the Internal Revenue Code and was not such a rollover contribution bears to the total amount paid to or for such account, annuity, or bond. For purposes of this subsection, the term “annuity” means an annuity contract or other arrangement providing for a series of substantially equal periodic payments to be made to a beneficiary (other than the executor) for his life or over a period extending for at least thirty-six (36) months after the date of the decedent’s death.
  5. Except to the extent required by differences between KRS Chapter 140 and its application and the federal estate tax law and its application, the relevant Internal Revenue Code regulations and the relevant administrative and judicial interpretations of the federal estate tax law shall be as nearly as practicable adopted and followed in the application of this section.
  6. For the purposes of this section the term “Internal Revenue Code” shall mean the Internal Revenue Code as amended through December 31, 1980.

History. Enact. Acts 1974, ch. 141, § 1; 1982, ch. 387, § 7, effective July 15, 1982.

Compiler’s Notes.

Sections 170, 219, 220, 401 to 404, 408, 409 and 501 of the Internal Revenue Code, referred to in this section, are codified as 26 USCS §§ 170, 219, 220, 401 to 404, 408, 409 and 501.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

140.064. Exemption of $7,500 received by surviving spouse or surviving children from testator’s estate. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1984, ch. 399, § 1, effective July 13, 1984) was repealed by Acts 2000, ch. 151, § 7, effective July 14, 2000.

140.065. Estates of three million dollars or more subject only to estate tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 96, § 2; 1966, ch. 187, part V, § 1) was repealed by Acts 1978, ch. 233, § 6, effective June 17, 1978.

140.070. Inheritance tax rates.

The tax upon transfers of property as defined in the preceding sections of this chapter shall be at the following rates:

  1. Class A. In case the transfer is to or for the benefit of a parent, surviving spouse, child by blood, stepchild, child adopted during infancy, child adopted during adulthood who was reared by the decedent during infancy or a grandchild who is the issue of a child by blood, the issue of a stepchild, the issue of a child adopted during adulthood who was reared by the decedent during infancy, the issue of a child adopted during infancy, brother, sister, or brother or sister of the half blood, the tax, subject to the provisions of KRS 140.080 , shall be:
  2. Class B. In case the transfer is to or for the benefit of a nephew, niece, or a nephew or niece of the half blood, daughter-in-law, son-in-law, aunt or uncle, or a great-grandchild who is the grandchild of a child by blood, of a stepchild or of a child adopted during infancy, the tax, subject to the provisions of KRS 140.080 , shall be:
  3. Class C. In case the transfer is to or for the benefit of any educational, religious, or other institutions, societies, or associations, or to any cities, towns, or public institutions not exempted by KRS 140.060 , or to any person not included in either Class A or Class B, the tax, subject to the provisions of KRS 140.080 shall be:

On its value not exceeding $20,000 2% On its value exceeding $20,000, but not exceeding $30,000 3% On its value exceeding $30,000, but not exceeding $45,000 4% On its value exceeding $45,000, but not exceeding $60,000 5% On its value exceeding $60,000, but not exceeding $100,000 6% On its value exceeding $100,000, but not exceeding $200,000 7% On its value exceeding $200,000, but not exceeding $500,000 8% On its value exceeding $500,000 10%

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On its value not exceeding $10,000 4% On its value exceeding $10,000, but not exceeding $20,000 5% On its value exceeding $20,000, but not exceeding $30,000 6% On its value exceeding $30,000, but not exceeding $45,000 8% On its value exceeding $45,000, but not exceeding $60,000 10% On its value exceeding $60,000, but not exceeding $100,000 12% On its value exceeding $100,000, but not exceeding $200,000 14% On its value exceeding $200,000 16%

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On its value not exceeding $10,000 6% On its value exceeding $10,000, but not exceeding $20,000 8% On its value exceeding $20,000, but not exceeding $30,000 10% On its value exceeding $30,000, but not exceeding $45,000 12% On its value exceeding $45,000, but not exceeding $60,000 14% On its value exceeding $60,000 16%

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History. 4281a-19: amend. Acts 1948, ch. 96, § 1; 1978, ch. 138, § 1, effective June 17, 1978; 1990, ch. 31, § 1, effective July 13, 1990; 1990, ch. 142, § 1, effective July 13, 1990; 1995 (2nd Ex. Sess.), ch. 2, § 1, effective July 1, 1995.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Stepchildren.
  3. Wife.
1. Constitutionality.

Since the inheritance tax was an excise tax, the graduation of rates did not violate any constitutional provision requiring uniformity of property taxes. Booth's Ex'r v. Commonwealth, 130 Ky. 88 , 113 S.W. 61, 1908 Ky. LEXIS 247 ( Ky. 1908 ) (decided under prior law).

Classification of grandchildren into separate classes subject to different inheritance tax rates depending upon whether grandchild was issue of living or deceased child had no reasonable relation to the purpose of inheritance tax law to raise revenue and violated the Constitution. Kentucky Tax Com. v. Lincoln Bank & Trust Co., 245 S.W.2d 950, 1952 Ky. LEXIS 615 ( Ky. 1952 ) (decided under prior law).

2. Stepchildren.

Under law which did not include stepchildren in Class A, but which did include “any child to whom such decedent for not less than ten years prior to such transfer stood in the mutually acknowledged relation of a parent,” it was held that a stepchild who was six (6) years old when her mother married the decedent, and who thereafter was accepted and treated by decedent as his own child, was in Class A, the language of the law being held not restricted to bastard children. Conner v. Parsley, 192 Ky. 827 , 234 S.W. 972, 1921 Ky. LEXIS 171 ( Ky. 1921 ) (decided under prior law).

3. Wife.

Judgment, in action to settle decedent’s estate, determining that woman was lawful wife of decedent, was binding on the state in determining the tax rate applicable to the amount received by her from the estate, although the state was not a party to the action. Commonwealth v. Fidelity & Columbia Trust Co., 171 Ky. 519 , 188 S.W. 658, 1916 Ky. LEXIS 399 ( Ky. 1916 ) (decided under prior law).

Cited in:

Harrell v. Westover, 283 S.W.2d 197, 1955 Ky. LEXIS 292 ( Ky. 1955 ); Lynch v. Kentucky Tax Com., 333 S.W.2d 257, 1960 Ky. LEXIS 182 ( Ky. 1960 ); Estate of McVey v. Dep’t of Revenue, Fin. & Admin. Cabinet, — S.W.3d —, 2013 Ky. App. LEXIS 171 (Ky. Ct. App. 2013).

Opinions of Attorney General.

Great nieces and great nephews come under class C of this section as this class includes all persons not included in class A or class B and not exempted by KRS 140.060 . OAG 72-292 .

Research References and Practice Aids

Kentucky Bench & Bar.

Eardly & Ruml, My Old Kentucky Home or the Sunshine State? Residency and Estate Planning Issues for Kentucky “Snowbirds” in Florida, Volume 74, No. 6, November 2010, Ky. Bench & Bar 20.

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Treatises

Petrilli, Kentucky Family Law, Property Rights, § 14.8.

140.080. Exemptions of inheritable interests.

  1. The following exemptions chargeable against the lowest bracket or brackets of inheritable interests shall be free from any tax under the preceding provisions of this chapter:
    1. Surviving spouse, total inheritable interest. Effective as to decedents dying after August 1, 1985, notwithstanding anything in this chapter to the contrary, if the decedent’s personal representative (or trustee or transferee, absent a personal representative) shall so elect, the spouse’s inheritable interest shall include the entire value of any trust or life estate which is in a form that qualifies for the federal estate tax marital deductions under section 2056(b)(5) or 2056(b)(7) of the Internal Revenue Code of 1954, as amended through December 31, 1984, regardless of whether or not the federal estate tax marital deduction is elected by the decedent’s personal representative. To be valid, the election referred to in the sentence immediately preceding must be made in the form prescribed by the Department of Revenue and must be filed on or before the due date of the tax return (plus extensions) or with the first tax return filed, whichever last occurs;
    2. Class A beneficiaries as defined in KRS 140.070 , other than the surviving spouse, of estates of decedents dying prior to July 1, 1995, as follows:
      1. Infant child by blood or adoption, $20,000;
      2. Child by blood who has been declared mentally disabled by a court of competent jurisdiction, $20,000;
      3. Child adopted during infancy who has been declared mentally disabled by a court of competent jurisdiction, $20,000; or a
      4. Child adopted during adulthood who was reared by the decedent during infancy and who has been declared mentally disabled by a court of competent jurisdiction, $20,000;
      5. Parent, $5,000;
      6. Child by blood, $5,000;
      7. Stepchild, $5,000;
      8. Child adopted during infancy, $5,000;
      9. Child adopted during adulthood who was reared by the decedent during infancy, $5,000; or a
      10. Grandchild who is the issue of a child by blood, the issue of a stepchild, the issue of a child adopted during infancy or the issue of a child adopted during adulthood who was reared by the decedent during infancy, $5,000;
    3. Class A beneficiaries as defined in KRS 140.070 , other than the surviving spouse, of estates of decedents dying on or after July 1, 1995, shall be as follows:
      1. For decedents dying between July 1, 1995, and June 30, 1996, the greater of the exemption established pursuant to paragraph (1)(b) of this section or one-fourth (1/4) of each beneficiary’s inheritable interest;
      2. For decedents dying between July 1, 1996, and June 30, 1997, the greater of the exemption established pursuant to paragraph (1)(b) of this section or one-half (1/2) of each beneficiary’s inheritable interest;
      3. For decedents dying between July 1, 1997, and June 30, 1998, the greater of the exemption established pursuant to paragraph (1)(b) of this section or three-fourths (3/4) of each beneficiary’s inheritable interest; and
      4. For each decedent dying after June 30, 1998, each beneficiary’s total inheritable interest;
    4. All persons of Class B, under KRS 140.070, $1,000; and
    5. All persons of Class C, under KRS 140.070, $500.
  2. If the decedent was not a resident of this state, the exemption shall be the same proportion of the allowable exemption in the case of residents that the property taxable by this state bears to the whole property transferred by the decedent.

History. 4281a-20: amend. Acts 1948, ch. 96, § 3; 1960, ch. 117; 1976, ch. 77, part II, § 1; 1978, ch. 138, § 2, effective June 17, 1978; 1982, ch. 141, § 61, effective July 1, 1982; Acts 1985 (1st Ex. Sess.), ch. 6, part IV, § 12, effective August 1, 1985; 1986, ch. 458, § 1, effective July 15, 1986; 1990, ch. 31, § 2, effective July 13, 1990; 1995 (2nd Ex. Sess.), ch. 2, § 2, effective July 1, 1995; 2005, ch. 85, § 453, effective June 20, 2005.

Compiler’s Notes.

This section was amended by § 66 of Acts 1980, ch. 396, which would have taken effect July 1, 1982; however, Acts 1982, ch. 141, § 146, effective July 1, 1982, repealed Acts 1980, ch. 396.

Section 2056 (b) (5) or 2056 (b) (7) of the Internal Revenue Code of 1954 referred to in subdivision (1) (a) of this section is compiled as 26 USCS § 2056 (b) (5), (7).

Legislative Research Commission Notes.

1985 Acts, Ex. Sess., ch. 6, Part IV, Section 13, directed that the provisions of this section shall be effective for persons dying on or after 8/1/85.

NOTES TO DECISIONS

1. Law of Case.

The fact that the Court of Appeals on two (2) appeals involving the inheritance tax liability of an estate, had assumed that the tax sought to be imposed was correctly calculated, did not make such calculation the “law of the case” so as to prevent the lower court from correcting the calculation, where the method of calculation had not been discussed or decided on the two appeals. Commonwealth v. Wood, 299 Ky. 63 , 184 S.W.2d 221, 1944 Ky. LEXIS 1016 ( Ky. 1944 ) (decision prior to 1948 amendment).

Cited in:

Allen’s Ex’r v. Howard, 304 Ky. 280 , 200 S.W.2d 484, 1946 Ky. LEXIS 933 ( Ky. 1946 ); Revenue Cabinet v. Cox, 738 S.W.2d 114, 1987 Ky. App. LEXIS 516 (Ky. Ct. App. 1987); Davis v. Johnson, 295 S.W.3d 841, 2009 Ky. App. LEXIS 30 (Ky. Ct. App. 2009).

Research References and Practice Aids

Kentucky Bench & Bar.

Reeves, A Primer on Advanced Estate Planning, Vol. 58, No. 3, Summer 1994, Ky. Bench & Bar 13.

Fust, Common Challenges of the (Not So) Uncommon Estate Planning Client, Vol. 70, No. 1, January 2006, Ky. Bench & Bar 11.

Eardly & Ruml, My Old Kentucky Home or the Sunshine State? Residency and Estate Planning Issues for Kentucky “Snowbirds” in Florida, Volume 74, No. 6, November 2010, Ky. Bench & Bar 20.

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Comments, The Kentucky Divorce Statute: A Call for Reform, 66 Ky. L.J. 724 (1977-1978).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Bratt, Family Protection Under Kentucky’s Inheritance Laws: Is the Family Really Protected? 76 Ky. L.J. 387 (1987-88).

Northern Kentucky Law Review.

Schneider, A Kentucky Study of Will Provisions: Implications for Intestate Succession Law, 13 N. Ky. L. Rev. 409 (1987).

Treatises

Petrilli, Kentucky Family Law, Antenuptial Agreements, § 13.14.

140.090. Deductions allowed from distributive shares.

  1. In calculating the value of the distributive shares the following deductions and no others shall be allowed:
    1. Debts of the decedent, except debts secured by property not subject to the tax jurisdiction of Kentucky; and except debts barred by the statute of limitations;
    2. Taxes accrued and unpaid, except those on property not subject to the tax jurisdiction of Kentucky;
    3. Death duties paid to foreign countries;
    4. Federal estate taxes, in the proportion which the net estate in Kentucky subject to federal estate taxes bears to the total net estate everywhere subject to federal estate taxes; all calculations are subject to approval by the Department of Revenue;
    5. Drainage, street, or other special assessments due and unpaid which are a lien on said property;
    6. Funeral, monument, and cemetery lot maintenance expenses actually paid not exceeding in total five thousand dollars ($5,000);
    7. Commission of executors and administrators in the amount actually allowed and paid;
    8. Cost of administration, including attorney’s fees actually allowed and paid.
  2. Notwithstanding the provisions of KRS 404.040 , the debts of a deceased wife, subject to the exception in subsection (1)(a), shall be allowed in calculating the distributive shares of her estate for purposes of this chapter, provided such debts are paid from the proceeds of her estate.

History. 4281a-22: amend. Acts 1942, ch. 204, § 5; 1948, ch. 96, §§ 4, 12; 1974, ch. 86, § 1; 1976, ch. 155, § 25; 1990, ch. 142, § 2, effective July 13, 1990; 2005, ch. 85, § 454, effective June 20, 2005.

NOTES TO DECISIONS

  1. Construction.
  2. Deductions.
1. Construction.

“Debts of the decedent” are debts which have accrued and are unpaid at the instant of death, not a debt which accrues by reason of death. Lynch v. Kentucky Tax Com., 333 S.W.2d 257, 1960 Ky. LEXIS 182 ( Ky. 1960 ).

“Taxes accrued and unpaid” refers to obligations existing prior to death. Lynch v. Kentucky Tax Com., 333 S.W.2d 257, 1960 Ky. LEXIS 182 ( Ky. 1960 ).

2. Deductions.

The legislative intent is plain that the only deductions to be allowed are those mentioned in the statute. Lynch v. Kentucky Tax Com., 333 S.W.2d 257, 1960 Ky. LEXIS 182 ( Ky. 1960 ).

In a case in which an estate appealed from an order of the circuit court concerning an inheritance tax assessment, the department of revenue properly disallowed a deduction for inheritance taxes as a cost of administration; since the inheritance taxes were not owed prior to the decedent’s death, they were not debts of the decedent under KRS 140.090 . Estate of McVey v. Dep't of Revenue, Fin. & Admin. Cabinet, 2013 Ky. App. LEXIS 171 (Ky. Ct. App.), sub. op., 2013 Ky. App. Unpub. LEXIS 1008 (Ky. Ct. App. Dec. 13, 2013).

Research References and Practice Aids

Cross-References.

Claims against estate, order of payment, KRS 396.095 .

Memorial tablet, allowance of cost, KRS 395.370 .

140.095. Credit in case same property passes again within five years.

  1. As used in this section the word “transfer” means a taxable transfer under the provisions of KRS Chapter 140.
  2. Subject to the provisions of this section, any person to whom property is transferred shall be allowed a credit against the tax imposed by KRS 140.070 , if the property was transferred to the immediate decedent within five (5) years prior to the death of the immediate decedent and a tax paid on the prior transfer under the provisions of KRS Chapter 140. To be entitled to such tax credit, the person claiming it shall identify the property as having been so transferred and taxed or identify the property as having been acquired in exchange for property so transferred and taxed.
  3. The tax credit shall be computed by allocating to that part of the previously taxed property, which is the subject of the immediate transfer, the proportionate part of the tax paid on the prior transfer as the present value of the previously taxed property transferred to the immediate beneficiary or distributee bears to the total present value of all the property received by the immediate decedent from the prior decedent which is transferred to all the immediate beneficiaries or distributees. Provided, however, that the tax credit shall not exceed an amount equal to such proportion of the total tax due on all property transferred to the immediate beneficiary or distributee from the immediate decedent (computed before any tax credit is applied) as the present value of the previously taxed property transferred to the immediate beneficiary or distributee from the immediate decedent bears to the present value (including any exemption allowed) of all property transferred to the immediate beneficiary or distributee from the immediate decedent. If the estate of the immediate decedent consists in part of property not previously transferred and taxed as described in subsection (2), it shall be presumed for the purpose of this subsection, unless the contrary clearly appears, that each distributive share of the entire estate includes the same proportion of the previously taxed property as the entire value of each share bears to the aggregate value of all the entire shares.

History. Enact. Acts 1948, ch. 96, § 5.

140.100. Valuation of future and contingent estates — Taxation of life estates — Valuation of surviving spouse’s interest in trust or life estate.

  1. The Department of Insurance, on the application of the Department of Revenue, shall determine, and certify in duplicate to the department, the value of any future or contingent estate, income or interest therein, limited, contingent, dependent, or determinable upon the lives of persons in being, upon the facts contained in the application or other facts submitted by the department. No fee shall be charged by the Department of Insurance for this service. The certificate shall be competent evidence that the method of computation therein is correct.
  2. The value of every future, contingent, or limited estate, income, or interest for the purpose of this chapter shall be determined by the rules, methods, and standards of mortality and of value prescribed by the appropriate United States life mortality tables for ascertaining the value of life estates, annuities, and remainder interests except that the rate of interest assessed in computing the present value of all future interests and contingencies shall be four percent (4%) per annum.
  3. When an annuity or a life estate is terminated by the death of the annuitant or life tenant, and the tax upon such interest has not been fixed and determined, the value of the interest for the purpose of taxation shall be that amount of the annuity or income actually paid or payable to the annuitant or life tenant during the period for which the annuitant or life tenant was entitled to the annuity or was in possession of the life estate. The tax on such annuities and life interests shall be payable out of the corpus of the estate, unless otherwise provided under the terms of the will.
  4. Notwithstanding anything in this chapter to the contrary, the value of a surviving spouse’s interest in a trust or life estate which was exempt from Kentucky inheritance tax in the first spouse’s estate pursuant to an election made under KRS 140.080(1)(a) shall be deemed to be equal to the entire value of the property held in the trust or life estate, at the surviving spouse’s death, for Kentucky inheritance tax purposes in the surviving spouse’s estate.

History. 4281a-25, 4821a-26: amend. Acts 1986, ch. 458, § 2, effective July 15, 1986; 2005, ch. 85, § 455, effective June 20, 2005; 2010, ch. 24, § 110, effective July 15, 2010.

NOTES TO DECISIONS

  1. Trust.
  2. Interest.
  3. Time of Collection.
1. Trust.

The tax on a life interest in a trust fund should have been paid out of the corpus of the fund. Grainger's Ex'rs v. Pennebaker, 247 Ky. 324 , 56 S.W.2d 1007, 1932 Ky. LEXIS 873 ( Ky. 1932 ), limited, Whitman v. Lincoln Bank & Trust Co., 340 S.W.2d 608, 1960 Ky. LEXIS 59 ( Ky. 1960 ) (decided under prior law).

2. Interest.

Law providing for computing value of life estates at four percent interest, for inheritance tax purposes, did not prevent application of six percent (6%) rate in computing value of life estate for purpose of contribution to debts of decedent under law providing for contribution when devised estate was used for payment of testator’s debts. Dorn v. Fidelity & Columbia Trust Co., 204 Ky. 211 , 263 S.W. 681, 1924 Ky. LEXIS 399 ( Ky. 1924 ) (decided under prior law).

3. Time of Collection.

Where testator devised all of his property to his wife, with full power of use and disposition, but stated that it was his desire that such property as remained upon the wife’s death go to certain heirs, the tax on the contingent interest of the heirs could not be collected until the death of the wife, since the amount they might receive could not be ascertained before that time. Commonwealth v. Cambron's Ex'x, 158 Ky. 577 , 165 S.W. 979, 1914 Ky. LEXIS 673 ( Ky. 1914 ) (decided under prior law).

Cited in:

Department of Revenue v. Kentucky Trust Co., 313 S.W.2d 401, 1958 Ky. LEXIS 256 ( Ky. 1958 ).

Opinions of Attorney General.

Contingent interests are taxable at the death of the grantor. OAG 78-135 .

Where the wife had a life estate in the money and the household furnishings and the children had a vested remainder, the value of the life estate and the vested remainder were taxable under the state’s inheritance tax law. OAG 78-135 .

140.110. Taxation of contingent and defeasible estates.

  1. In the case of estates in expectancy which are contingent or defeasible, a tax shall be levied at the rate which, on the happening of the most probable contingencies or conditions named in the will, deed, trust agreement, contract, insurance policy, or other instrument, would be applicable under the provisions of this chapter. Moneys so collected shall be distributed as are other inheritance tax funds. If the property so taxed shall ultimately vest in possession in persons taxable at a lower rate, or in a person or a corporation exempt from taxation by this chapter, upon application by such beneficiary to the Department of Revenue for refund of any excess tax, the Department of Revenue, after investigation, shall certify to the Finance and Administration Cabinet the amount of such refund. The Finance and Administration Cabinet shall refund such excess payment of tax in the same manner as other refunds are made.
  2. Where an estate or interest can be divested by the act or omission of the legatee or devisee, it shall be taxed as if there were no possibility of divesting.

History. 4281a-23, 4281a-24: amend. Acts 1942, ch. 204, § 6; 1948, ch. 96, § 10; 2005, ch. 85, § 456, effective June 20, 2005.

NOTES TO DECISIONS

  1. Payment.
  2. Collection.
1. Payment.

Inheritance taxes should be paid from the part of the property devised and undevised going to each beneficiary, devisee or legatee. Louisville Trust Co. v. Walter, 306 Ky. 756 , 207 S.W.2d 328, 1948 Ky. LEXIS 549 ( Ky. 1948 ).

2. Collection.

Where testator devised all of his property to his wife, with full power of use and disposition, but stated that it was his desire that such property as remained upon the wife’s death go to certain heirs, it was held that the tax on the contingent interest of the heirs could not be collected until the death of the wife, since the amount they might receive could not be ascertained before that time. Commonwealth v. Cambron's Ex'x, 158 Ky. 577 , 165 S.W. 979, 1914 Ky. LEXIS 673 ( Ky. 1914 ) (decided under prior law).

Cited in:

Mercer General Hospital, Inc. v. Hardin, 246 S.W.2d 1003, 1952 Ky. LEXIS 652 ( Ky. 1952 ); Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ).

Opinions of Attorney General.

Contingent interests are taxable at the death of the grantor. OAG 78-135 .

Notwithstanding the fact that remainderpersons have a contingent interest and may not come into possession for quite some time, such a contingent estate is taxable at the time of the testator’s death and not at the time of the death of the life tenant. OAG 78-135 .

The crux of subsection (1) of this section is to tax estates in expectancy which are contingent and to provide a refund remedy if the interest that ultimately vests is subject to a lower tax rate; thus, the statutory provision contemplates that certain contingent interests may be partially or totally divested before the remainderperson comes into possession and, upon such divestment, the remainderperson may file for a refund to make the inheritance tax paid at the death of the grantor consistent with the property interest that is ultimately taken. OAG 78-135 .

Where the wife had a life estate in the money and the household furnishings and the children had a vested remainder, the value of the life estate and the vested remainder were taxable under the state’s inheritance tax law. OAG 78-135 .

Research References and Practice Aids

Cross-References.

Refund of taxes, KRS 134.580 , 134.590 .

Kentucky Bench & Bar.

Eldred, Should We Replace Fiction With Fact?, Volume 52, No. 3, Summer 1988 Ky. Bench & B. 21.

140.120. Taxation of gifts to fiduciaries.

If a testator bequeaths or devises property to one (1) or more personal representatives or trustees in lieu of their commissions or allowances, or makes them his legatees to an amount exceeding the commissions or allowances prescribed by law, the excess in value of property so bequeathed or devised above the amount of commissions or allowances prescribed by law in similar cases shall be taxable.

History. 4281a-27.

NOTES TO DECISIONS

Cited in:

Louisville Trust Co. v. Walter, 306 Ky. 756 , 207 S.W.2d 328, 1948 Ky. LEXIS 549 ( Ky. 1948 ).

140.130. Levy of estate tax — Computation — Payment — Administration.

  1. In addition to the inheritance tax hereinbefore imposed, an estate tax is hereby levied on all estates equal to the amount by which the credits for state death taxes allowable under the federal tax law exceeds the tax levied under KRS 140.010 , less the discount allowed under KRS 140.210 , if taken by the taxpayer. Said tax shall be payable at the same time and in the same manner as the inheritance taxes levied by this chapter.
  2. In the case of resident decedents and nonresident decedents over part of whose estates Kentucky has tax jurisdiction the estate tax shall be computed as follows:
    1. The ratio which that part of the net estate over which Kentucky has jurisdiction for estate tax purposes bears to the total net estate wherever located shall be ascertained.
    2. The total maximum offset for state succession taxes allowed under the provisions of the federal estate tax law shall be multiplied by the ascertained ratio to determine the offset allocable to this state.
    3. The estate tax levied by this section shall equal the amount, if any, by which the offset allocable to this state shall exceed the inheritance taxes under KRS 140.010 , less the discount allowed under KRS 140.210 , if taken by the taxpayer.
  3. All administrative provisions of this chapter, to the extent that they are applicable, shall be available for the enforcement of this section and KRS 140.140 .

History. 4281a-28, 4281a-30: amend. Acts 1942, ch. 204, § 7.

NOTES TO DECISIONS

Cited in:

Martin v. Storrs, 277 Ky. 199 , 126 S.W.2d 445, 1939 Ky. LEXIS 650 ( Ky. 1939 ); Commonwealth v. Van Meter, 301 Ky. 132 , 190 S.W.2d 668, 1945 Ky. LEXIS 675 ( Ky. 1945 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Reeves, A Primer on Advanced Estate Planning, Vol. 58, No. 3, Summer 1994, Ky. Bench & Bar 13.

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.140. Payment of estate tax under protest — Action to recover — Refund.

  1. No suit shall be maintained in any court to restrain or delay the collection or payment of the tax levied by KRS 140.130 . The aggrieved taxpayer shall pay the tax under protest as and when required, and may at any time within two (2) years from the date of such payment sue the state through the Finance and Administration Cabinet, in an action at law in any state or federal court having jurisdiction of the parties and subject matter, for the recovery of the tax paid with legal interest thereon from the date of payment.
  2. If it is finally determined that the tax or any part thereof was wrongfully collected for any reason the Finance and Administration Cabinet shall draw a warrant on the State Treasurer for the amount of tax adjudged to have been wrongfully collected, together with legal interest thereon. The State Treasurer shall pay the warrant at once out of the general fund, in preference to other warrants or claims against the state.
  3. A separate suit need not be filed for each individual payment made by any taxpayer, but a recovery may be had in one (1) suit for as many payments as have been made.

History. 4281a-31.

NOTES TO DECISIONS

1. Application.

This section does not relate to inheritance taxes imposed under KRS 140.010 ; it relates only to estate taxes imposed under KRS 140.130 . Commonwealth v. Van Meter, 301 Ky. 132 , 190 S.W.2d 668, 1945 Ky. LEXIS 675 ( Ky. 1945 ).

Research References and Practice Aids

Cross-References.

Refund of taxes, KRS 134.580 , 134.590 .

140.150. Levy of tax on domestic corporation shares owned by decedent of foreign domicile. [Repealed.]

Compiler’s Notes.

This section (4281a-32) was repealed by Acts 1966, ch. 187, part V, § 2.

140.151. Payment of taxes on farms or other closely held businesses. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 138, § 3, effective June 17, 1978; 1994, ch. 65, § 18, effective July 15, 1994) was repealed by Acts 2000, ch. 151, § 7, effective July 14, 2000.

140.152. Applicability of KRS 140.070, 140.080 and 140.151. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1978, ch. 138, § 4, effective June 17, 1978) was repealed by Acts 2000, ch. 151, § 7, effective July 14, 2000.

140.160. Supervision of collection of taxes by Department of Revenue — Limitation on actions to collect taxes.

  1. The Department of Revenue shall have full supervision of the collection of all taxes due under the provisions of this chapter, including the power to institute suit in this and other states. It may employ attorneys and other persons necessary to carry out the full intent and purpose of this chapter. The department shall furnish, upon application, blank forms covering information as may be necessary to determine the amount of tax due the state on the transfer of all property subject to tax.
  2. The department may cause personal representatives or beneficiaries to file all statements required by this chapter with the clerks of the proper courts and with the department, and may require them to furnish any additional information deemed necessary to support the computation of the amount of tax that should be paid by the estate. The personal representative, or the beneficiaries in the absence of a personal representative, shall compute the taxes imposed by this chapter on the tax return provided by the department when:
      1. A United States estate tax return is required to be filed under federal law and applicable regulations; and (a) 1. A United States estate tax return is required to be filed under federal law and applicable regulations; and
      2. The estate includes property over which Kentucky has jurisdiction for purposes of the taxes imposed by this chapter; or
    1. Any assets from the estate subject to the taxes imposed by this chapter pass to a beneficiary taxable under KRS 140.070 .
  3. Except as herein provided, no action to enforce the collection of the tax imposed by this chapter shall be commenced more than ten (10) years after the cause of action first accrued. In case the settlement of an estate is delayed because of litigation or other unavoidable cause, the delay shall suspend the limitation, prescribed by this subsection, until the cause of delay is removed. In the case of a fraudulent return or any other fraudulent representation affecting the amount of or the liability for the tax imposed by this chapter notwithstanding any provision of limitation provided elsewhere, the tax due by reason thereof may at any time be assessed and collected by the methods set out in this chapter, including action in a court of competent jurisdiction.

The tax return, when required, shall be filed with the department within eighteen (18) months after the death of the decedent or at the time payment of the tax is made pursuant to KRS 140.210 .

History. 4281a-33, 4281a-40, 4281a-51: amend. Acts 1948, ch. 96, § 6; 1962, ch. 93, § 1; 1976 (Ex. Sess.), ch. 14, § 156, effective January 2, 1978; 1992, ch. 403, § 15, effective July 14, 1992; 2000, ch. 151, § 1, effective July 14, 2000; 2005, ch. 85, § 457, effective June 20, 2005.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provided: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

NOTES TO DECISIONS

  1. Filing Inventory.
  2. Necessity of Appraiser.
1. Filing Inventory.

The personal representative must have filed an inventory within the time prescribed by law providing for return of inventory within two (2) months after representative qualified together with a statement of the names of the distributees and the filing of the inventory and statement could have been compelled by the county court by rule. Commonwealth v. Gaulbert's Adm'r, 134 Ky. 157 , 119 S.W. 779, 1909 Ky. LEXIS 365 ( Ky. 1909 ) (decided under prior law).

2. Necessity of Appraiser.

In an action by a revenue agent to secure the assessment of an omitted inheritance tax, the court in which the action was brought could have made an appraisal of the estate, and it was not necessary to have appointed an appraiser under the statutory procedure. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ) (decided under prior law).

Opinions of Attorney General.

Under subsection (3) of this section, the commonwealth is barred by limitations ten (10) years after the cause of action accrues or, stated differently, 111/2 years after the death of the decedent unless settlement of the estate is delayed by reason of litigation or other unavoidable cause of delay. OAG 60-703 .

Research References and Practice Aids

Cross-References.

Collection of taxes by Department of Revenue, KRS 134.547 , 135.050 , 135.060 .

Kentucky Bench & Bar.

Baker and Baker, Title Examination in Kentucky, 48 Ky. Bench & B. 12 (1984).

Gibson & Traughber, Death Taxes: Confusion Reigns, Volume 74, No. 6, November 2010, Ky. Bench & Bar 6.

140.165. Audits, appraisals and examinations — Finality of return and payment.

The department may make such audits, appraisals, and examinations of records according to KRS 131.130 to properly supervise the collection of all taxes due under the provisions of this chapter. A completed tax return with full payment attached shall be final one (1) year after receipt by the department unless an audit has been initiated with due notice to the personal representative, except:

  1. If any assets of the estate were not reported on the tax return filed with the department, or
  2. If any information was not revealed to the department which would affect the amount of tax due.

History. Enact. Acts 1962, ch. 93, § 4; 2005, ch. 85, § 458, effective June 20, 2005.

NOTES TO DECISIONS

Cited in:

Revenue Cabinet Commonwealth v. Estate of Young, 748 S.W.2d 167, 1988 Ky. App. LEXIS 61 (Ky. Ct. App. 1988).

140.170. Appraisal of estates — Appointment, duties and compensation of appraisers — Records.

  1. The District Court, upon the request of the personal representative or any interested party, shall appoint some competent person as appraiser of the estate. The appraiser shall give notice to all persons having an interest in the estate and to such other persons as the court may by order direct, and shall then appraise the property belonging to the estate. His report shall be filed with the court and a copy thereof with the Department of Revenue. He shall be paid for his services out of the funds of the estate, on the certification of the court, the amount to be fixed by that court. The total compensation of the appraiser shall not exceed one-tenth of one percent (0.1%) of the total appraised value of the estate for inheritance tax purposes, but there shall be a minimum allowance of five dollars ($5), together with the appraiser’s actual and necessary traveling expenses.
  2. After investigation, the department may change the value of the estate for inheritance taxes and advise the representatives of the estate of this changed valuation after the receipt of a completed tax return and full payment as shown by the tax return.
  3. No appraiser shall accept any fee or reward from a personal representative, trustee, legatee, next of kin or heir of the decedent, or from any other person liable to pay the tax or any portion thereof.
  4. No person shall willfully and knowingly subscribe to or make any false statement of fact, or knowingly subscribe to or exhibit any false paper or false report with intent to deceive any appraiser.
  5. The department shall keep a record of all returns, reports, and schedules attached thereto required by this chapter for twelve (12) years.

History. 4281a-12, 4281a-33, 4281a-38, 4281a-52: amend. Acts 1962, ch. 93, § 2; 1976 (Ex. Sess.), ch. 14, § 157, effective January 2, 1978; 2005, ch. 85, § 459, effective June 20, 2005.

NOTES TO DECISIONS

  1. Purpose of Assessment.
  2. Value of Estate.
  3. Appraiser.
  4. Appeal.
1. Purpose of Assessment.

The value at which property of the estate has been assessed for ad valorem tax purposes is not conclusive of its value for inheritance tax purposes. Sevier's Ex'x v. Commonwealth, 181 Ky. 49 , 203 S.W. 1070, 1918 Ky. LEXIS 498 ( Ky. 1918 ) (decided under prior law).

2. Value of Estate.

The taxable value of an estate is its value at the date of the decedent’s death, regardless of subsequent depreciation or appreciation before distribution. Cochran's Ex'x v. Commonwealth, 241 Ky. 656 , 44 S.W.2d 603, 1931 Ky. LEXIS 147 ( Ky. 1931 ) (decided under prior law).

3. Appraiser.

Appointment of appraiser was valid, although personal representative who had requested such appointment was removed before order of appointment was entered. Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ).

Appointment of appraiser within 90 days after death of decedent was valid. Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ) (decided under prior law).

4. Appeal.

The remedy by appeal is such protection to the taxpayer that if he does not avail himself of such remedy he cannot later claim a refund of an unconstitutional tax on the ground of involuntary payment. Talbot v. Charlton's Ex'r, 247 Ky. 568 , 57 S.W.2d 519, 1933 Ky. LEXIS 433 ( Ky. 1933 ) (decided under prior law).

Cited in:

Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ); Revenue Cabinet Commonwealth v. Estate of Young, 748 S.W.2d 167, 1988 Ky. App. LEXIS 61 (Ky. Ct. App. 1988).

Research References and Practice Aids

Cross-References.

Agreement to dispense with administration of estate, KRS 395.470 .

Kentucky Law Journal.

Comments, Access to Public Documents in Kentucky, 64 Ky. L.J. 165 (1975-76).

Treatises

Caldwell’s Kentucky Form Book, 5th Ed., Appraiser’s Inheritance Tax Report, Form 355.02.

Caldwell’s Kentucky Form Book, 5th Ed., Order Appointing Appraiser for Inheritance Tax Purposes, Form 355.01.

140.180. Reports by personal representatives and trustees.

If real property of a decedent is passed to another person so as to become subject to the tax, his personal representative or trustee shall inform the department thereof within six (6) months after his appointment, or if the fact is not known to him within that time, then within one (1) month after the fact becomes known to him.

History. 4281a-17, 4281a-34, 4281a-35: amend. Acts 1942, ch. 204, § 8; 1948, ch. 96, § 13, effective June 17, 1948; 2005, ch. 85, § 460, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Clerk to send commissioner of revenue copies of applications for appointment of personal representatives, and copies of inventories, KRS 395.015 , 395.250 .

140.190. Computation of and liability for taxes.

  1. All taxes imposed by this chapter shall be computed and paid on the fair cash value of the property transferred at the rates provided. All personal representatives, trustees, and beneficiaries shall be personally liable for the taxes until they are paid, but only to the extent that property from the estate come into their hands, and in no case shall the personal representative or trustee be liable for a greater sum than passes through his administration.
  2. The heir, devisee, or other donee shall be personally liable for the tax on real property, as well as the personal representative or trustee, and if the personal representative or trustee pays the tax he may, unless the tax is made an expense of administration by the will or other instrument, recover the tax from the heir, devisee, or other donee of the real property.

History. 4281a-21, 4281a-36, 4281a-37, 4281a-47: amend. Acts 1962, ch. 93, § 3; 2000, ch. 151, § 2, effective July 14, 2000.

NOTES TO DECISIONS

  1. Lien.
  2. Obligation to Pay Tax.
  3. Loss of Discount.
  4. Action to Collect.
  5. Limitations on Action.
  6. Appeal.
  7. Personal Representative.
  8. Failure to Appeal.
1. Lien.

This section provides that there shall be a lien on the property transferred which, as respects real estate, shall be valid as against a purchaser for value without any notice of lien being filed. Commonwealth by Marcum v. Smith, 375 S.W.2d 386, 1964 Ky. LEXIS 411 ( Ky. 1964 ).

2. Obligation to Pay Tax.

The obligation to pay the inheritance tax is placed as much upon the beneficiary as upon the executors of the estate. Motch's Ex'x v. Motch's Ex'rs, 306 Ky. 334 , 207 S.W.2d 759, 1948 Ky. LEXIS 556 ( Ky. 1948 ).

3. Loss of Discount.

Personal representatives of estate were not personally liable to beneficiary for amount of discount that was lost through failure to pay inheritance tax within nine (9) months, since beneficiary had privilege and obligation of paying the tax himself. Motch's Ex'x v. Motch's Ex'rs, 306 Ky. 334 , 207 S.W.2d 759, 1948 Ky. LEXIS 556 ( Ky. 1948 ).

4. Action to Collect.

It was held that an action to collect an inheritance tax must first have been brought against the personal representative, before proceeding against the heir or devisee. Ritcher v. Commonwealth, 180 Ky. 4 , 201 S.W. 456, 1918 Ky. LEXIS 6 ( Ky. 1918 ) (decided under prior law).

5. Limitations on Action.

Cause of action to collect an inheritance tax accrued 18 months after the death of the decedent, and must be brought within five (5) years after that time. Ritcher v. Commonwealth, 180 Ky. 4 , 201 S.W. 456, 1918 Ky. LEXIS 6 ( Ky. 1918 ) (decided under prior law).

6. Appeal.

Taxpayer had the right of appeal from the assessment made by the tax commission, both with regard to the value of the property and the taxability of any item. Talbot v. Charlton's Ex'r, 247 Ky. 568 , 57 S.W.2d 519, 1933 Ky. LEXIS 433 ( Ky. 1933 ) (decided under prior law).

7. Personal Representative.

Where, under inter vivos trust created by decedent, trustee was directed, on decedent’s death, to distribute trust funds among decedent’s heirs at law, administrator of decedent’s estate was not personally liable for taxes on such funds. Commonwealth v. Lee's Trustee, 183 Ky. 6 , 208 S.W. 8, 1919 Ky. LEXIS 432 ( Ky. 1919 ) (decided under prior law).

A personal representative was personally liable for the tax only on such portion of the estate as came into his hands for administration. Commonwealth v. Lee's Trustee, 183 Ky. 6 , 208 S.W. 8, 1919 Ky. LEXIS 432 ( Ky. 1919 ) (decided under prior law). See Ritcher v. Commonwealth, 180 Ky. 4 , 201 S.W. 456, 1918 Ky. LEXIS 6 ( Ky. 1918 ) (decided under prior law).

8. Failure to Appeal.

The remedy by appeal was such protection to the taxpayer that if he did not avail himself of such remedy he could not later claim a refund of an unconstitutional tax on the ground of involuntary payment. Talbot v. Charlton's Ex'r, 247 Ky. 568 , 57 S.W.2d 519, 1933 Ky. LEXIS 433 ( Ky. 1933 ) (decided under prior law).

Cited in:

Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ).

140.200. Action to remove tax lien. [Repealed.]

Compiler’s Notes.

This section (4281a-39) was repealed by Acts 1946, ch. 233, § 4.

140.210. Payment of taxes — Discount — Interest — Bond for payment.

  1. All taxes imposed by this chapter, unless otherwise provided in this chapter, shall be due at the death of the decedent and shall be payable to the Department of Revenue within eighteen (18) months thereafter. If they are paid within nine (9) months, a discount of five percent (5%) shall be allowed, and if they are paid within eighteen (18) months, no interest shall be charged and collected thereon. If the taxes due are not paid within eighteen (18) months, interest at the tax interest rate as defined in KRS 131.010(6) shall be paid from the expiration of the eighteen (18) months until payment is actually made to the department.
  2. In all cases where the personal representatives or trustees do not pay the taxes within eighteen (18) months from the death of the decedent, they shall be required to give bond, in the form and to the effect prescribed by the department, for the payment of the taxes and interest.

History. 4281a-36, 4281a-41, 4281a-42: amend. Acts 1976, ch. 155, § 26; 1992, ch. 338, § 6, effective August 1, 1992; 1992, ch. 403, § 16, effective August 1, 1992; 2005, ch. 85, § 461, effective June 20, 2005.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Legislative Research Commission Notes.

(7/14/92) This section was amended by two 1992 Acts. Where those Acts are not in conflict, they have been compiled together. Where a conflict exists, the Act which was last enacted by the General Assembly prevails, pursuant to KRS 446.250 .

NOTES TO DECISIONS

  1. Loss of Discount.
  2. Collection.
  3. —Due Date.
  4. Deductions.
  5. Time of Valuation.
  6. Interest.
  7. Refund.
  8. Litigation.
  9. —Limitations.
  10. Penalty.
1. Loss of Discount.

Personal representatives of estate were not personally liable to beneficiary for amount of discount that was lost through failure to pay inheritance tax within nine (9) months, since beneficiary had privilege and obligation of paying the tax himself. Motch's Ex'x v. Motch's Ex'rs, 306 Ky. 334 , 207 S.W.2d 759, 1948 Ky. LEXIS 556 ( Ky. 1948 ).

2. Collection.

An action to collect an inheritance tax could not have been brought before the expiration of 18 months following the death of the decedent, and in the case of some unavoidable cause of delay preventing payment of the tax by that time, it could not have been brought until the cause of delay had been removed. Commonwealth v. Gaulbert's Adm'r, 134 Ky. 157 , 119 S.W. 779, 1909 Ky. LEXIS 365 ( Ky. 1909 ); Ritcher v. Commonwealth, 180 Ky. 4 , 201 S.W. 456, 1918 Ky. LEXIS 6 ( Ky. 1918 ); Commonwealth v. Lee's Trustee, 183 Ky. 6 , 208 S.W. 8, 1919 Ky. LEXIS 432 ( Ky. 1919 ); Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ) (decided under prior law).

Where proceedings to appraise estate had not been completed, action to collect tax could not have been maintained, although more than 18 months had expired since death of decedent. Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ) (decided under prior law).

State’s right to tax vests on death of decedent, and subsequent enactments granting additional exemptions could not affect any tax that had so accrued. State Tax Com. v. Nettleton's Ex'r, 226 Ky. 393 , 11 S.W.2d 84, 1928 Ky. LEXIS 102 ( Ky. 1928 ) (decided under prior law).

Where proceedings to appraise the estate for tax purposes had not been completed at the expiration of 18 months after the death of the decedent, the personal representative was not required to execute bond for the amount of taxes that might have been found due. Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ) (decided under prior law).

3. —Due Date.

Tax on bequest to trustees for purpose of establishing home for aged Methodists was due as of death of decedent, as against contention that beneficiaries could not have been ascertained until home was actually established. State Tax Com. v. Nettleton's Ex'r, 226 Ky. 393 , 11 S.W.2d 84, 1928 Ky. LEXIS 102 ( Ky. 1928 ) (decided under prior law).

4. Deductions.

Since tax was due and payable at death of decedent, the right to deductions depended upon the law in force at the time of death, and subsequent enactments would not have operated retroactively. Commonwealth by Board v. Paynter's Adm'r, 222 Ky. 766 , 2 S.W.2d 664, 1927 Ky. LEXIS 957 ( Ky. 1927 ) (decided under prior law).

5. Time of Valuation.

The taxable value of an estate was its value at the date of the decedent’s death, regardless of subsequent depreciation or appreciation before distribution. Cochran's Ex'x v. Commonwealth, 241 Ky. 656 , 44 S.W.2d 603, 1931 Ky. LEXIS 147 ( Ky. 1931 ) (decided under prior law).

6. Interest.

Where tax was not paid until after expiration of 18 months following death of decedent, the payment being delayed because of necessary litigation, interest at six percent (6%) per annum was chargeable from the expiration of said 18 months, and not from the later date of the judgment under which the amount of tax due was finally determined. Bingham’s Adm’r v. Commonwealth, 196 Ky. 318 , 244 S.W. 781, 1922 Ky. LEXIS 519 ( Ky. 1922 ), overruled, Citizens Fidelity Bank & Trust Co. v. Reeves, 259 S.W.2d 432, 1953 Ky. LEXIS 942 ( Ky. 1953 ), overruled in part, Citizens Fidelity Bank & Trust Co. v. Reeves, 259 S.W.2d 432, 1953 Ky. LEXIS 942 ( Ky. 1953 ), overruled on other grounds, Citizens Fidelity Bank & Trust Co. v. Reeves, 259 S.W.2d 432, 1953 Ky. LEXIS 942 (Ky. 1953) (decided under prior law).

7. Refund.

Taxpayer who paid tax under protest was entitled to refund upon tax statute subsequently being held unconstitutional. Talbott v. Urquhart's Ex'rs, 250 Ky. 143 , 61 S.W.2d 1088, 1933 Ky. LEXIS 653 ( Ky. 1933 ) (decided under prior law).

8. Litigation.

Where, immediately following termination of litigation in which persons entitled to share in estate were determined, trustee of estate brought suit for purpose of having inheritance tax determined, the state could not have commenced a separate action against the trustee for the same purpose. Commonwealth v. Lee's Trustee, 183 Ky. 6 , 208 S.W. 8, 1919 Ky. LEXIS 432 ( Ky. 1919 ) (decided under prior law).

Where litigation was pending to determine what persons were entitled to share in estate, action to collect inheritance tax could not have been maintained until such litigation was terminated. Commonwealth v. Lee's Trustee, 183 Ky. 6 , 208 S.W. 8, 1919 Ky. LEXIS 432 ( Ky. 1919 ) (decided under prior law).

9. —Limitations.

Cause of action to collect an inheritance tax accrued 18 months after the death of the decedent must have been brought within five (5) years after that time. Ritcher v. Commonwealth, 180 Ky. 4 , 201 S.W. 456, 1918 Ky. LEXIS 6 ( Ky. 1918 ) (decided under prior law).

10. Penalty.

In an action to collect an inheritance tax, brought after the expiration of 18 months following the death of the decedent, the 20 percent penalty imposed by law providing for payment of penalty by party in default could have been collected. Commonwealth v. Gaulbert's Adm'r, 134 Ky. 157 , 119 S.W. 779, 1909 Ky. LEXIS 365 ( Ky. 1909 ) (decided under prior law). See Bosworth v. Commonwealth, 159 Ky. 771 , 169 S.W. 506, 1914 Ky. LEXIS 727 ( Ky. 1914 ) (decided under prior law).

Penalty where proceedings to appraise the estate for tax purposes had not been completed at the expiration of 18 months after the death of the decedent, the penalty for nonpayment did not attach at that time. Commonwealth v. Bingham's Adm'r, 187 Ky. 749 , 220 S.W. 727, 1920 Ky. LEXIS 200 ( Ky. 1920 ) (decided under prior law).

Where executrix made advance payment of estimated tax, which the Department of Revenue accepted, but the department then sought to recover additional tax on the ground the appraisal was too low, and there was an appeal to the Court of Appeals on the question of whether the department could seek additional tax after accepting the advance payment, and there was a second appeal later involving the question of valuation, executrix was properly relieved from ten percent (10%) penalty on amount of tax ultimately found due, on ground that litigation was necessary, particularly since the Department of Revenue, by stipulation during the litigation, had waived part of the penalty. Commonwealth v. Wood, 299 Ky. 63 , 184 S.W.2d 221, 1944 Ky. LEXIS 1016 ( Ky. 1944 ).

Research References and Practice Aids

Cross-References.

Tax receipts to be credited to general fund, KRS 47.010 .

Kentucky Bench & Bar.

Ratliff, Kentucky Probate — A Simple Overview, Volume 54, No. 1, Winter 1990 Ky. Bench & B. 16.

Reeves, A Primer on Advanced Estate Planning, Vol. 58, No. 3, Summer 1994, Ky. Bench & Bar 13.

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

140.220. Collection of taxes by personal representative or trustee — Sale of property for tax — Recovery of taxes from trust or life estate property.

  1. A personal representative or trustee holding property subject to any of the taxes levied by this chapter shall not deliver the property until he has collected the tax thereon.
  2. When a specific bequest of personal property other than money is subject to the tax and the legatee neglects or refuses to pay the tax upon demand, the personal representative or trustee may, upon such notice as the court having jurisdiction of the settlement of the estate may direct, be authorized to sell the property or, if it can be divided, such portion thereof as may be necessary. He shall deduct the tax from the proceeds of the sale, and account to the legatee for the balance, if any, of the proceeds, in lieu of the property.
  3. The personal representative or trustee shall collect the taxes due upon land or the proceeds of insurance policies that are subject to tax from the heirs or devisees entitled thereto, and he may be authorized to sell the land if they refuse or neglect to pay the tax.
  4. If any trust or life estate is subject to the taxes levied by this chapter by virtue of its inclusion in the decedent’s estate under KRS 140.100(4), unless the decedent directs otherwise in his will, the personal representative of the decedent’s estate shall be entitled to recover from the trust or life estate property that portion of the total taxes assessed against the decedent’s estate under this chapter equal to the gross value of such trust or life estate property at the decedent’s death divided by the value of the decedent’s entire gross estate, such values to be as finally determined for purposes of this chapter.

History. 4281a-47: amend. Acts 1986, ch. 458, § 3, effective July 15, 1986.

NOTES TO DECISIONS

Cited in:

Louisville Trust Co. v. Walter, 306 Ky. 756 , 207 S.W.2d 328, 1948 Ky. LEXIS 549 ( Ky. 1948 ); Bristow v. Taul’s Adm’x, 309 Ky. 585 , 218 S.W.2d 382, 1949 Ky. LEXIS 755 ( Ky. 1949 ).

Research References and Practice Aids

Kentucky Law Journal.

Roberts, Personal Liabilities An Executor May Incur in Settling Estates in Kentucky, 46 Ky. L.J. 543 (1958).

140.222. Deferred payment of inheritance tax — Interest — Time and method of election to defer — Liability for deferred payments.

  1. When the net tax due from a beneficiary’s distributive share exceeds five thousand dollars ($5,000), the beneficiary may elect to pay the inheritance tax in ten (10) equal installments. The first installment shall be due at the time the return is filed with succeeding payments due in annual installments beginning one (1) year after the return is filed.
  2. The portion of the tax deferred under this section shall be charged with interest at the tax interest rate as defined in KRS 131.010(6) commencing eighteen (18) months after the date of death.
  3. When the beneficiary elects to pay the tax on his share as provided in this section, such election must be made in writing and signed by the beneficiary and must be filed with the Department of Revenue at the time of filing the tax return for the decedent’s estate under KRS 140.160(2). The filing of the election together with payment of the first installment shall relieve the personal representative or trustee of the estate from further liability for the tax payments deferred under this section and the bond requirements of KRS 140.210 , subject to the final approval by the Department of Revenue of all other taxes due under this chapter.
  4. A beneficiary electing to defer the payment of taxes under this section shall be personally liable for the amount of deferred taxes until paid.
  5. The period of limitations for actions to enforce the collection of taxes imposed by this chapter as provided by KRS 140.160(3) shall be suspended for the period of time for deferred payment granted by this section.

History. Enact. Acts 1978, ch. 233, § 7, effective June 17, 1978; 1982, ch. 452, § 23, effective July 1, 1982; 2005, ch. 85, § 462, effective June 20, 2005.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.224. Bond to secure installment payment of inheritance tax.

  1. Where a beneficiary elects to pay the inheritance tax on the installment basis as provided in this chapter, such beneficiary may be required to post sufficient security at any time the department reasonably believes collection of the tax may be in jeopardy.
  2. Failure of a beneficiary to pay any installment due or to post the required security shall cause all installments to become immediately due and payable.

History. Enact. Acts 1978, ch. 233, § 42, effective June 17, 1978; 2005, ch. 85, § 463, effective June 20, 2005.

140.230. Deduction of taxes from interest less than fee — From legacy charged on real property.

  1. When any interest in property less than an estate in fee is devised or bequeathed to one or more beneficiaries with remainder to others, and the interest of one or more beneficiaries is subject to any of the taxes levied by this chapter, the personal representative shall deduct the tax upon such taxable interests from the whole property thus devised or bequeathed. Whenever property other than money is so devised or bequeathed he may, unless the taxes upon all the taxable interests are paid by the beneficiaries when due, be authorized to sell the property or such portion thereof as may be necessary, as provided in KRS 140.220 , and having deducted the unpaid taxes on the taxable interests from the proceeds of the sale, he shall account for the balance in lieu of the property sold, as in other cases.
  2. If a legacy subject to the tax is charged upon or payable out of real property, the heir or devisee, before paying the legacy, shall deduct the tax therefrom and pay it to the personal representative or trustee. The payment of this tax shall be enforced in the same manner as the payment of a tax on a direct legacy could be enforced.

History. 4281a-48, 4281a-49.

NOTES TO DECISIONS

  1. Life Estate and Remainder.
  2. Life Interest.
1. Life Estate and Remainder.

Where will devised residue of trust to nephew for life and at his death to the University of Louisville, inheritance tax payable by virtue of such bequest should be paid from the whole of the residue. Louisville Trust Co. v. Walter, 306 Ky. 756 , 207 S.W.2d 328, 1948 Ky. LEXIS 549 ( Ky. 1948 ).

Where the will created a life estate with remainder in trust, the tax on both interests is to be paid out of the corpus of the trust fund, whether the recipient of the residue is tax exempt or not. Mercer General Hospital, Inc. v. Hardin, 246 S.W.2d 1003, 1952 Ky. LEXIS 652 ( Ky. 1952 ).

2. Life Interest.

The tax on a life interest in a trust fund is to be paid out of the corpus of the fund. Grainger's Ex'rs v. Pennebaker, 247 Ky. 324 , 56 S.W.2d 1007, 1932 Ky. LEXIS 873 ( Ky. 1932 ), limited, Whitman v. Lincoln Bank & Trust Co., 340 S.W.2d 608, 1960 Ky. LEXIS 59 ( Ky. 1960 ) (decided under prior law).

Cited in:

Allen’s Ex’r v. Howard, 304 Ky. 280 , 200 S.W.2d 484, 1946 Ky. LEXIS 933 ( Ky. 1946 ); Ream v. Department of Revenue, 314 Ky. 539 , 236 S.W.2d 462, 1951 Ky. LEXIS 688 ( Ky. 1951 ); Union Bank & Trust Co. v. Bassett, 253 S.W.2d 632, 1952 Ky. LEXIS 1124 ( Ky. 1952 ).

140.240. Advance payment of tax. [Repealed.]

Compiler’s Notes.

This section (4281a-43: amend. Acts 1948, ch. 96, § 7) was repealed by Acts 2000, ch. 151, § 7, effective July 14, 2000.

140.250. Regulation of property in safe deposit boxes or held in trust or bailment. [Repealed.]

Compiler’s Notes.

This section (4128a-45, 4281a-46: amend. Acts 1970, ch. 280, § 1; 1986, ch. 496, § 21, effective August 1, 1986) was repealed by Acts 2000, ch. 151, § 7, effective July 14, 2000.

140.260. Payment of proceeds of insurance policy or annuity contract. [Repealed.]

Compiler’s Notes.

This section (4281a-45: amend. Acts 1948, ch. 96, § 11; 1954, ch. 131, § 2) was repealed by Acts 2000, ch. 151, § 7, effective July 14, 2000.

140.265. Payment of proceeds of profit sharing, stock bonus, thrift or pension plan. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1976, ch. 106, § 1; 1990, ch. 142, § 3, effective July 13, 1990) was repealed by Acts 2000, ch. 151, § 7, effective July 14, 2000.

140.270. Appraisal and taxation of estate of nonresident — Notification of state of domicile — Reciprocity.

  1. In the absence of administration in this state upon the estate of a nonresident, the Department of Revenue, at the request of a personal representative duly appointed and qualified in the state of the decedent’s domicile, or of a grantee under a conveyance made during the grantor’s lifetime, and upon satisfactory evidence furnished by the personal representative or grantee, or otherwise, may determine whether or not any property of the decedent within this state is subject to the provisions of this chapter. If so, the department may determine the amount of tax and adjust the same with the personal representative or grantee, and for that purpose may appoint an appraiser to appraise the property. The expense of appraisal shall be charged upon the property in addition to the tax. The department’s certificate of the amount of tax and its receipt for the amount therein certified may be filed with the county judge/executive of the county where the property is located, and when so filed shall be evidence of the payment of the tax to the extent of such certification. When the tax is not adjusted within six (6) months after the death of the decedent, the proper District Court, upon application of the department, shall appoint an administrator in this state.
  2. When evidence of ownership of intangible personal property belonging to a nonresident decedent is found to be physically located in this state, the Department of Revenue shall so inform the state official collecting death tax in the state of domicile of the decedent, if that state furnishes like information to the Department of Revenue of this state in a reciprocal manner.

History. 4281a-44, 4281a-45: amend. Acts 1976 (Ex. Sess.), ch. 14, § 158, effective January 2, 1978; 1978, ch. 384, § 284, effective June 17, 1978; 2005, ch. 85, § 464, effective June 20, 2005.

NOTES TO DECISIONS

1. Nonresident’s Personal Property.

Although at time of death of decedent there was no statutory procedure provided for assessing and collecting the tax upon personal property of a nonresident decedent who left no real estate in this state, such personal property remained subject to tax, and where necessary statutory procedure was provided by amendment before property was removed from this state the tax could have been collected under the amendment. De Witt v. Commonwealth, 184 Ky. 437 , 212 S.W. 437, 1919 Ky. LEXIS 95 ( Ky. 1919 ) (decided under prior law).

Research References and Practice Aids

Cross-References.

Exchange of tax information, KRS 131.190 .

140.275. Exclusion of intangible personal property held in trust, under reciprocal agreements with other states.

  1. It is hereby declared to be the legislative policy that Kentucky shall not be a party to interstate double taxation under the terms of the Kentucky inheritance and estate tax laws. Pursuant to this policy, the commissioner of the Department of Revenue is hereby authorized to omit from the property subject to tax under those laws, any intangible personal property of a nonresident decedent (having a domicile in the United States) held in trust by a Kentucky trustee if the jurisdiction (state, territory or District of Columbia) in which the decedent was domiciled grants similar immunity to residents of Kentucky, but only in the event the personal representative shall present evidence that the tax has been or will be paid to the other jurisdiction. If another state, territory, or the District of Columbia of the United States constitutionally imposes a tax on the transfer of estates or of the distributive shares thereof, but grants immunity from the tax in respect of any intangible property of its resident decedents held in trust by a Kentucky trustee, then the commissioner of the Department of Revenue is hereby authorized to exclude from the property subject to tax under the Kentucky inheritance and estate tax laws, the intangible personal property of a Kentucky resident held in trust in that jurisdiction but only in the event the personal representative shall present evidence that the tax has been or will be paid to the other jurisdiction.
  2. It is expressly provided, however, in view of the uncertainty now prevailing with respect to the correct interpretation of the Constitution of the United States regarding the jurisdiction of the several states, that the provisions of this section shall be inoperative under the second alternative until and unless an agreement, approved as to legality by the Attorney General, between the commissioner of the Department of Revenue as agent for Kentucky and the appropriate administrative official of such other state, shall have been executed and an original copy thereof filed with the Kentucky Department of Revenue.
  3. This section is intended to apply retroactively to all estates of decedents on or after April 25, 1936, which are subject to Kentucky inheritance tax laws.

History. Enact. Acts 1942, ch. 204, § 9; 2005, ch. 85, § 465, effective June 20, 2005.

NOTES TO DECISIONS

1. Application.

This section applies only to property held in trust. Lynch v. Kentucky Tax Com., 333 S.W.2d 257, 1960 Ky. LEXIS 182 ( Ky. 1960 ).

Cited in:

Ream v. Department of Revenue, 314 Ky. 539 , 236 S.W.2d 462, 1951 Ky. LEXIS 688 ( Ky. 1951 ), overruled, Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ), overruled in part, Kentucky Board of Tax Appeals v. Citizens Fidelity Bank & Trust Co., 525 S.W.2d 68, 1975 Ky. LEXIS 101 ( Ky. 1975 ).

140.280. Suits here by other states to collect taxes due — Reciprocity.

The official or agency charged with the administration of the death tax laws of the domiciliary state shall be deemed a creditor of the decedent, and may sue in the courts of this state and enforce such claims for taxes, penalties and interest due to that state or political subdivision, if the laws of that state contain a provision whereby this state is given reasonable assurance of the collection of its death taxes, interest and penalties from the estates of decedents dying domiciled in this state.

History. 4281a-50.

140.285. Agreement with taxing authorities of other states.

  1. When the Department of Revenue claims that a decedent was domiciled in Kentucky at the time of death and the taxing authorities of another state or states make a similar claim with respect to their state or states, the commissioner of the Department of Revenue may enter into a written agreement with such taxing authorities and the executor, administrator or trustee, fixing the sum acceptable to the department in full settlement of the inheritance or estate taxes imposable under this chapter. Such agreement shall also fix the sum acceptable to such other state or states in full settlement of the death taxes imposable by such state or states.
  2. If the aggregate amount payable under such agreement to the states involved is less than the maximum sum allowable as a credit to the estate against the federal estate tax imposed thereon, then the executor, administrator or trustee shall also pay to the State of Kentucky as an estate tax so much of the difference between such aggregate amount and the amount of such credit as the amount payable to Kentucky under the agreement bears to such aggregate amount.

History. Enact. Acts 1960, ch. 186, Art. VI, § 1, effective June 16, 1960; 2005, ch. 85, § 466, effective June 20, 2005.

NOTES TO DECISIONS

Cited in:

Kupper v. Fiscal Court of Jefferson County, 346 S.W.2d 766, 1961 Ky. LEXIS 337 ( Ky. 1961 ).

140.290. Refund of tax when debts are proved after deduction of tax.

Whenever debts are proved against the estate of a decedent after the payment of legacies or distribution of property from which the tax has been deducted or upon which it has been paid, and a refund is made by the legatee, devisee, heir or next of kin, a proportion of the tax so deducted or paid shall be repaid to him, by the personal representative or trustee if the tax has not been paid to the Department of Revenue, or by the department if it has been so paid.

History. 4281a-9; 2005, ch. 85, § 467, effective June 20, 2005.

140.300. Definitions for KRS 140.310 to 140.360.

As used in KRS 140.310 to 140.360 , these words shall have the following meaning:

  1. “Agricultural land” means that real estate which is defined in KRS 132.010(9).
  2. “Horticultural land” means that real estate which is defined in KRS 132.010(10).
  3. “Agricultural or horticultural value” means the value as defined in KRS 132.010(11).
  4. “Qualified real estate” means real property which:
    1. Is either horticultural or agricultural land;
    2. Has been used for agricultural or horticultural purposes for five (5) years prior to the death of the owner of the real estate or a joint owner thereof; and
    3. Fair cash value exceeds fifty percent (50%) of the gross taxable estate of decedent for Kentucky inheritance tax purposes.
  5. “Qualified person” means the spouse of a deceased owner of agricultural or horticultural land; the children, adopted children, and stepchildren of that deceased owner; the spouses and issue of that deceased owner’s children, adopted children, and stepchildren, and is a person who proposes to devote the real property to agricultural or horticultural purposes for at least five (5) years after the death of the decedent in whose estate the agricultural or horticultural land is subject to assessment.

History. Enact. Acts 1978, ch. 138, § 5, effective July 1, 1978; 1990, ch. 142, § 4, effective July 13, 1990.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Qualified Person.
1. Constitutionality.

Subdivision (4)(c) of this section, which established subclasses within the general classification of farmers, did not violate 14th Amendment of the United States Constitution.Revenue Cabinet Commonwealth v. Estate of Marshall, 746 S.W.2d 408, 1988 Ky. App. LEXIS 39 (Ky. Ct. App. 1988).

Subdivision (4)(c) of this section did not violate Ky. Const., §§ 2, 171, and 172A because each class is taxed equally. Revenue Cabinet Commonwealth v. Estate of Marshall, 746 S.W.2d 408, 1988 Ky. App. LEXIS 39 (Ky. Ct. App. 1988).

2. Qualified Person.

Although parties stipulated that farm inherited by decedent’s niece “qualified as real estate,” as defined in this section, because niece was decedent’s niece by marriage, she was not a “qualified person” within the meaning of subsection (5) of this section and KRS 140.310(1); therefore, the Revenue Cabinet correctly assessed the farm for inheritance tax purposes at its fair cash value instead of at its agricultural or horticultural value. Revenue Cabinet v. Estate of Field, 864 S.W.2d 930, 1993 Ky. App. LEXIS 147 (Ky. Ct. App. 1993).

Research References and Practice Aids

Kentucky Law Journal.

Bratt, Material Participation and the Valuation of Farm Land for Estate Tax Purposes Under the Tax Reform Act of 1976, 66 Ky. L.J. 848 (1977-78).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.310. Assessment of agricultural or horticultural land for inheritance tax purposes.

  1. Agricultural or horticultural land may be assessed at its agricultural or horticultural value in a decedent’s estate for Kentucky inheritance tax purposes if the agricultural or horticultural land is qualified real estate and is passing to a qualified person or persons.
  2. Agricultural or horticultural land which comprises a portion of the assets of a corporation or partnership, and which is wholly owned by the decedent or by the decedent and qualified persons, the balance of the assets of said corporation or partnership being personal property entirely related to the use of agricultural or horticultural land, may be assessed at its agricultural or horticultural value in a decedent’s estate for Kentucky inheritance tax purposes for the agricultural or horticultural rate for qualified real estate, if the stock in said corporation or partnership interest passes to a qualified person or persons.

History. Enact. Acts 1978, ch. 138, § 6, effective July 1, 1978; 1980, ch. 402, § 1, effective July 15, 1980; 1986, ch. 8, § 1, effective July 15, 1986.

NOTES TO DECISIONS

  1. Application of Ky. Const., § 172A.
  2. Qualified Real Estate or Person.
1. Application of Ky. Const., § 172A.

Court of appeals reversed a Circuit Court judgment which held that the portion of this rule which limits entitlement to an agricultural assessment to “qualified persons” is invalid because it conflicts with Ky. Const., § 172A. Ad valorem taxes are clearly distinguishable from inheritance taxes: the former are direct taxes on property based upon the value of the property, while the latter are taxes imposed not on property, but upon the privilege or right of succession thereto. Because the case involved an inheritance, or exise tax, Ky. Const., § 172A, which limits the applicability of Ky. Const., §§ 171, 172 and 174 and which deals exclusively with ad valorem taxes, did not apply. Revenue Cabinet v. Estate of Field, 864 S.W.2d 930, 1993 Ky. App. LEXIS 147 (Ky. Ct. App. 1993).

2. Qualified Real Estate or Person.

Although parties stipulated that farm inherited by decedent’s niece “qualified as real estate,” as defined in this section, because niece was decedent’s niece by marriage, she was not a “qualified person” within the meaning of KRS 140.300(5) and subsection (1) of this section; therefore, the Revenue Cabinet correctly assessed the farm for inheritance tax purposes at its fair cash value instead of at its agricultural or horticultural value. Revenue Cabinet v. Estate of Field, 864 S.W.2d 930, 1993 Ky. App. LEXIS 147 (Ky. Ct. App. 1993).

Cited in:

Revenue Cabinet Commonwealth v. Estate of Marshall, 746 S.W.2d 408, 1988 Ky. App. LEXIS 39 (Ky. Ct. App. 1988).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.320. Taxation of land converted from agricultural use.

If, within five (5) years after the death of the decedent, a qualified person sells, conveys, or otherwise transfers the ownership, directly or indirectly, of the qualified real estate to any person or persons other than another qualified person who is a joint owner or the qualified real estate is converted to a use other than agricultural or horticultural use, then the qualified persons to whom the property passed at the death of the decedent in whose estate the agricultural or horticultural value was reported shall cause to be paid, pursuant to administrative regulations promulgated by the Department of Revenue, the additional inheritance tax that would have been due on the decedent’s estate if fair market value had been used to compute the tax due on the estate rather than the agricultural or horticultural value, along with interest at the tax interest rate as defined in KRS 131.010(6).

History. Enact. Acts 1978, ch. 138, § 7, effective July 1, 1978; 1992, ch. 338, §§ 7, 10, effective August 1, 1992; 2005, ch. 85, § 468, effective June 20, 2005.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.330. Land presumed assessed at agricultural value — Procedure when not so assessed.

In the event the qualified real estate is reported for inheritance tax purposes at its agricultural or horticultural value and that real estate has been assessed at its agricultural or horticultural value for ad valorem tax purposes, then that assessment shall be presumed to be its agricultural or horticultural value for inheritance tax purposes. If, however, the real estate has not been so assessed for ad valorem tax purposes, then the agricultural or horticultural value shall be determined pursuant to KRS Chapter 132 and such regulations as may be promulgated by the Department of Revenue to determine horticultural or agricultural value for inheritance tax purposes.

History. Enact. Acts 1978, ch. 138, § 8, effective July 1, 1978; 1980, ch. 402, § 2, effective July 15, 1980; 2005, ch. 85, § 469, effective June 20, 2005.

Legislative Research Commission Notes.

Although this section is included in Acts 1980, ch. 402, the proposed change was deleted by floor amendment.

NOTES TO DECISIONS

1. Rebuttal of Presumption.

The presumption in this section that the agricultural assessment for ad valorem purposes is conclusive for inheritance tax purposes may be rebutted by substantial evidence of probative value. Revenue Cabinet Commonwealth v. Estate of Young, 748 S.W.2d 167, 1988 Ky. App. LEXIS 61 (Ky. Ct. App. 1988).

Opinions of Attorney General.

Where the General Assembly by § 3 of Acts 1980, ch. 402 repealed the June 30, 1980 expiration date of KRS 140.330 to 140.360 that had been provided for by § 12 of Acts 1978, ch. 138 but the repealing legislation was not to take effect until July 15, 1980, these sections would be construed so as to remain in effect during the fifteen day interval since the legislature intended to continue the effectiveness of the original sections by the deletion of the expiration date and to do otherwise would lead to an absurd or impracticable construction. OAG 80-336 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.340. Reporting of qualified real estate at agricultural or horticultural value.

The person responsible for filing the inheritance tax return for a decedent’s estate and who elects to report qualified real estate at its agricultural or horticultural value shall in addition report the fair market value of the qualified real estate.

History. Enact. Acts 1978, ch. 138, § 9, effective July 1, 1978.

Opinions of Attorney General.

Where the General Assembly by § 3 of Acts 1980, ch. 402 repealed the June 30, 1980 expiration date of KRS 140.330 to 140.360 that had been provided for by § 12 of Acts 1978, ch. 138 but the repealing legislation was not to take effect until July 15, 1980, these sections would be construed so as to remain in effect during the fifteen day interval since the legislature intended to continue the effectiveness of the original sections by the deletion of the expiration date and to do otherwise would lead to an absurd or impracticable construction. OAG 80-336 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.350. Issuance of tax waivers — Liens — Procedure.

At such time as the Department of Revenue accepts the agricultural or horticultural value on qualified real estate comprising a portion of a decedent’s estate and issues tax waivers thereon, it shall cause to be filed in the office of the county clerk of the county where the real estate or the greater portion thereof is located, on a form prescribed by the Department of Revenue, a lien which on its face shall expire in five (5) years and the lien shall secure the payment of any additional tax which may become due as the result of the qualified real estate being sold to others than qualified persons or the qualified real estate being converted to other than a qualified use.

If additional taxes are due as the result of the real estate being transferred to other than a qualified person or its use is converted to other than agricultural or horticultural use, and the additional tax is not paid after assessment of the tax, within the time prescribed by the regulations of the Department of Revenue, then the Department of Revenue may proceed to enforce the lien in accordance with law.

History. Enact. Acts 1978, ch. 138, § 10, effective July 1, 1978; 2005, ch. 85, § 470, effective June 20, 2005.

Opinions of Attorney General.

Where the General Assembly by § 3 of Acts 1980, ch. 402 repealed the June 30, 1980 expiration date of KRS 140.330 to 140.360 that had been provided for by § 12 of Acts 1978, ch. 138 but the repealing legislation was not to take effect until July 15, 1980, these sections would be construed so as to remain in effect during the fifteen day interval since the legislature intended to continue the effectiveness of the original sections by the deletion of the expiration date and to do otherwise would lead to an absurd or impracticable construction. OAG 80-336 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

140.360. Limit on reduction of taxable value.

No gross estate shall be reduced by more than $500,000 as a result of the provisions of KRS 140.300 to 140.360 .

History. Enact. Acts 1978, ch. 138, § 11, effective July 1, 1978.

Opinions of Attorney General.

Where the General Assembly by § 3 of Acts 1980, ch. 402 repealed the June 30, 1980 expiration date of KRS 140.330 to 140.360 that had been provided for by § 12 of Acts 1978, ch. 138 but the repealing legislation was not to take effect until July 15, 1980, these sections would be construed so as to remain in effect during the fifteen day interval since the legislature intended to continue the effectiveness of the original sections by the deletion of the expiration date and to do otherwise would lead to an absurd or impracticable construction. OAG 80-336 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Penalties

140.990. Penalties.

  1. Any person charged with a duty in this chapter who fails or refuses to perform that duty shall be fined not less than five dollars ($5) nor more than one hundred dollars ($100).
  2. Any person who violates KRS 140.170(3) shall be fined not less than two hundred dollars ($200) nor more than five hundred dollars ($500), or imprisoned in the county jail for sixty (60) days, or both, and in addition the court shall dismiss him from service as an appraiser.
  3. Any person who violates KRS 140.170(4) shall be fined not less than fifty dollars ($50) nor more than five hundred dollars ($500), or imprisoned in the county jail for not more than twelve (12) months, or both.

History. 4281a-12, 4281a-46, 4281a-52; 2000, ch. 151, § 6, effective July 14, 2000.

140.991. Civil penalties for violation of chapter.

Any personal representative or other person who violates any of the provisions of this chapter shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 .

History. Enact. Acts 1992, ch. 403, § 17, effective July 14, 1992; 1994, ch. 65, § 19, effective July 15, 1994.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

CHAPTER 141 Income Taxes

141.010. Definitions for chapter — Taxable years beginning on or after January 1, 2018.

As used in this chapter, for taxable years beginning on or after January 1, 2018:

  1. “Adjusted gross income,” in the case of taxpayers other than corporations, means the amount calculated in KRS 141.019 ;
  2. “Captive real estate investment trust” means a real estate investment trust as defined in Section 856 of the Internal Revenue Code that meets the following requirements:
      1. The shares or other ownership interests of the real estate investment trust are not regularly traded on an established securities market; or (a) 1. The shares or other ownership interests of the real estate investment trust are not regularly traded on an established securities market; or
      2. The real estate investment trust does not have enough shareholders or owners to be required to register with the Securities and Exchange Commission;
      1. The maximum amount of stock or other ownership interest that is owned or constructively owned by a corporation equals or exceeds: (b) 1. The maximum amount of stock or other ownership interest that is owned or constructively owned by a corporation equals or exceeds:
        1. Twenty-five percent (25%), if the corporation does not occupy property owned, constructively owned, or controlled by the real estate investment trust; or
        2. Ten percent (10%), if the corporation occupies property owned, constructively owned, or controlled by the real estate investment trust.
      2. For the purposes of this paragraph:
        1. “Corporation” means a corporation taxable under KRS 141.040 , and includes an affiliated group as defined in KRS 141.200 , that is required to file a consolidated return pursuant to KRS 141.200 ; and
        2. “Owned or constructively owned” means owning shares or having an ownership interest in the real estate investment trust, or owning an interest in an entity that owns shares or has an ownership interest in the real estate investment trust. Constructive ownership shall be determined by looking across multiple layers of a multilayer pass-through structure; and
    1. The real estate investment trust is not owned by another real estate investment trust;
  3. “Commissioner” means the commissioner of the department;
  4. “Corporation” has the same meaning as in Section 7701(a)(3) of the Internal Revenue Code;
  5. “Department” means the Department of Revenue;
  6. “Dependent” means those persons defined as dependents in the Internal Revenue Code;
  7. “Doing business in this state” includes but is not limited to:
    1. Being organized under the laws of this state;
    2. Having a commercial domicile in this state;
    3. Owning or leasing property in this state;
    4. Having one (1) or more individuals performing services in this state;
    5. Maintaining an interest in a pass-through entity doing business in this state;
    6. Deriving income from or attributable to sources within this state, including deriving income directly or indirectly from a trust doing business in this state, or deriving income directly or indirectly from a single-member limited liability company that is doing business in this state and is disregarded as an entity separate from its single member for federal income tax purposes; or
    7. Directing activities at Kentucky customers for the purpose of selling them goods or services.
  8. “Employee” has the same meaning as in Section 3401(c) of the Internal Revenue Code;
  9. “Employer” has the same meaning as in Section 3401(d) of the Internal Revenue Code;
  10. “Fiduciary” has the same meaning as in Section 7701(a)(6) of the Internal Revenue Code;
  11. “Financial institution” means:
    1. A national bank organized as a body corporate and existing or in the process of organizing as a national bank association pursuant to the provisions of the National Bank Act, 12 U.S.C. secs. 21 et seq., in effect on December 31, 1997, exclusive of any amendments made subsequent to that date;
    2. Any bank or trust company incorporated or organized under the laws of any state, except a banker’s bank organized under KRS 286.3-135 ;
    3. Any corporation organized under the provisions of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any corporation organized after December 31, 1997, that meets the requirements of 12 U.S.C. secs. 611 to 631, in effect on December 31, 1997; or
    4. Any agency or branch of a foreign depository as defined in 12 U.S.C. sec. 3101 , in effect on December 31, 1997, exclusive of any amendments made subsequent to that date, or any agency or branch of a foreign depository established after December 31, 1997, that meets the requirements of 12 U.S.C. sec. 3101 in effect on December 31, 1997;
  12. “Fiscal year” has the same meaning as in Section 7701(a)(24) of the Internal Revenue Code;
  13. “Gross income”:
    1. In the case of taxpayers other than corporations, has the same meaning as in Section 61 of the Internal Revenue Code; and
    2. In the case of corporations, means the amount calculated in KRS 141.039 ;
  14. “Individual” means a natural person;
  15. “Internal Revenue Code” means:
    1. For taxable years beginning on or after January 1, 2018, but before January 1, 2019, the Internal Revenue Code in effect on December 31, 2017, including the provisions contained in Pub. L. No. 115-97 apply to the same taxable year as the provisions apply for federal purposes, exclusive of any amendments made subsequent to that date, other than amendments that extend provisions in effect on December 31, 2017, that would otherwise terminate; and
    2. For taxable years beginning on or after January 1, 2019, the Internal Revenue Code in effect on December 31, 2018, exclusive of any amendments made subsequent to that date, other than amendments that extend provisions in effect on December 31, 2018, that would otherwise terminate;
  16. “Limited liability pass-through entity” means any pass-through entity that affords any of its partners, members, shareholders, or owners, through function of the laws of this state or laws recognized by this state, protection from general liability for actions of the entity;
  17. “Modified gross income” means the greater of:
    1. Adjusted gross income as defined in 26 U.S.C. sec. 62 , including any amendments in effect on December 31 of the taxable year, and adjusted as follows:
      1. Include interest income derived from obligations of sister states and political subdivisions thereof; and
      2. Include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or
    2. Adjusted gross income as defined in subsection (1) of this section and adjusted to include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2);
  18. “Net income”:
    1. In the case of taxpayers other than corporations, means the amount calculated in KRS 141.019 ; and
    2. In the case of corporations, means the amount calculated in KRS 141.039 ;
  19. “Nonresident” means any individual not a resident of this state;
  20. “Number of withholding exemptions claimed” means the number of withholding exemptions claimed in a withholding exemption certificate in effect under KRS 141.325 , except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero;
  21. “Part-year resident” means any individual that has established or abandoned Kentucky residency during the calendar year;
  22. “Pass-through entity” means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity recognized by the laws of this state that is not taxed for federal purposes at the entity level, but instead passes to each partner, member, shareholder, or owner their proportionate share of income, deductions, gains, losses, credits, and any other similar attributes;
  23. “Payroll period” has the same meaning as in Section 3401(b) of the Internal Revenue Code;
  24. “Person” has the same meaning as in Section 7701(a)(1) of the Internal Revenue Code;
  25. “Resident” means an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in the aggregate more than one hundred eighty-three (183) days of the taxable year in this state;
  26. “S corporation” has the same meaning as in Section 1361(a) of the Internal Revenue Code;
  27. “State” means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States;
  28. “Taxable net income”:
    1. In the case of corporations that are taxable in this state, means “net income” as defined in subsection (18) of this section;
    2. In the case of corporations that are taxable in this state and taxable in another state, means “net income” as defined in subsection (18) of this section and as allocated and apportioned under KRS 141.120 ;
    3. For homeowners’ associations as defined in Section 528(c) of the Internal Revenue Code, means “taxable income” as defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the provisions of subsection (15) of this section, the Internal Revenue Code sections referred to in this paragraph shall be those code sections in effect for the applicable tax year; and
    4. For a corporation that meets the requirements established under Section 856 of the Internal Revenue Code to be a real estate investment trust, means “real estate investment trust taxable income” as defined in Section 857(b)(2) of the Internal Revenue Code, except that a captive real estate investment trust shall not be allowed any deduction for dividends paid;
  29. “Taxable year” means the calendar year or fiscal year ending during such calendar year, upon the basis of which net income is computed, and in the case of a return made for a fractional part of a year under the provisions of this chapter or under administrative regulations prescribed by the commissioner, “taxable year” means the period for which the return is made; and
  30. “Wages” has the same meaning as in Section 3401(a) of the Internal Revenue Code and includes other income subject to withholding as provided in Section 3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code.

The total ownership interest of a corporation shall be determined by aggregating all interests owned or constructively owned by a corporation; and

Nothing in this subsection shall be interpreted in a manner that goes beyond the limitations imposed and protections provided by the United States Constitution or Pub. L. No. 86-272;

History. 4281b-1, 4281b-2, 4281b-5; Acts 1948, ch. 93, § 1; 1952, ch. 194, § 1, 2; 1954, ch. 79, § 1; 1956 (4th Ex. Sess.), ch. 4, § 1; 1960, ch. 5, Art. III, § 1; 1962, ch. 124, § 1; 1966, ch. 176, part I, § 1; 1968, ch. 40, part II, § 1; 1970, ch. 216, § 3; 1972, ch. 62, part III, § 1; 1974, ch. 163, § 2; 1976, ch. 155, § 7; 1978, ch. 233, § 10, effective June 17, 1978; 1980, ch. 176, § 1, effective July 15, 1980; 1982, ch. 105, § 1, effective March 24, 1982; 1982, ch. 166, § 15, effective July 15, 1982; 1984, ch. 378, § 1, effective July 1, 1984; 1985 (1st Ex. Sess.), ch. 6, Pt. V, § 14, effective July 29, 1985; 1986, ch. 459, § 3, effective July 15, 1986; 1988, ch. 174, § 1, effective July 15, 1988; 1990, ch. 163, § 8, effective July 13, 1990; 1990, ch. 242, § 2, effective July 13, 1990; 1990, ch. 303, § 1, effective July 1, 1990; 1990, ch. 476, Pt. VII D, § 630, effective April 11, 1990; 1992, ch. 165, § 1, effective July 14, 1992; 1994, ch. 45, § 1, effective July 15, 1994; 1995 (2nd Ex. Sess.), ch. 1, § 1, effective April 28, 1995; 1996, ch. 69, § 1, effective July 15, 1996; 1998, ch. 1, § 1, effective July 15, 1998; 1998, ch. 365, § 1, effective July 15, 1998; 1998, ch. 402, § 3, effective April 7, 1998; 1998, ch. 496, § 63, effective April 10, 1998; 1998, ch. 509, § 8, effective July 15, 1998; 1998, ch. 550, § 1, effective July 15, 1998; 1998, ch. 586, § 8, effective July 15, 1998; 2000, ch. 337, § 1, effective July 14, 2000; 2000, ch. 533, § 1, effective April 26, 2000; 2001, ch. 67, § 1, effective March 15, 2001; 2002, ch. 206, § 1, effective July 15, 2002; 2002, ch. 367, § 1, effective July 15, 2002; 2004, ch. 135, § 1, effective July 13, 2004; 2005, ch. 85, § 471, effective June 20, 2005; 2005, ch. 168, § 3, effective March 18, 2005; 2005, ch. 173, Part XVIII, § 1, effective March 20, 2005; 2006, ch. 149, § 202, effective July 12, 2006; 2006, ch. 251, § 13, effective July 12, 2006; 2006, ch. 252, Pt. XXVIII, § 16, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 1, effective June 28, 2006; 2007, ch. 52, § 2, effective June 26, 2007; 2007, ch. 137, § 42, effective June 26, 2007; 2009, ch. 1 (1st Ex. Sess.), § 105, effective June 26, 2009; repealed and reenact., 2010, ch. 51, § 42, effective June 15, 2010; 2010 (1st. Ex. Sess.), ch. 2, § 3, effective June 4, 2010; 2011, ch. 54, § 1, effective March 16, 2011; 2014, ch. 102, § 2, effective July 15, 2014; 2016 ch. 138, § 3, effective April 27, 2016; 2016 ch. 113, § 2, effective July 15, 2016; repealed and reenacted by 2018 ch. 171, § 53, effective April 14, 2018; repealed and reenact., Acts 2018, ch. 207, § 53, effective April 27, 2018; 2019 ch. 151, § 35, effective June 27, 2019.

Compiler’s Notes.

References to specific sections of the Internal Revenue Code, appearing throughout this section, are compiled in Title 26 of the U.S. Code under the same section number as that referred to herein, e.g. section 7701 of the Internal Revenue Code is compiled as 26 USCS § 7701.

The Railroad Retirement Act of 1937, referred to in subdivision (10)(b), was compiled as former 45 USCS § 228a et seq.; Public Law 89-699, also referred to therein, was compiled as former 45 USCS §§ 228b, 228c, 228e, 228o and 26 USCS §§ 3201, 3211, 3221. See now Railroad Retirement Act of 1974, classified to 45 USCS §§ 231 et seq.

Public Law 86-272 referred to in subsection (25) is compiled as 15 USCS §§ 381-384, 391.

Section 4 of Acts 1980, ch. 176, read: “The provisions of this Act [§§ 141.010 , 141.011 , 141.040 ] shall apply to taxable years beginning after December 31, 1979 unless otherwise stated.”

Section 3 of Acts 1994, ch. 45, provided that the 1994 amendment to this section, except as otherwise provided, “shall apply for taxable years beginning after December 31, 1993.”

Section 2 of Acts 1996, ch. 69 read: “The provisions of this Act apply to taxable years beginning after December 31, 1995.”

Section 2 of Acts 1998, ch. 1, stated: “The provisions of this Act apply to tax years beginning after December 31, 1996.”

Section 4 of Acts 1998, ch. 402, stated: “The amendment contained in Section 3 of this Act shall apply retroactively to taxable years beginning after December 31, 1996.”

Section 10 of Acts 1998, ch. 509, and Section 2 of Acts 1998, ch. 550, provided that the 1998 amendments to this section made by those Acts apply to tax years “beginning after December 31, 1997.”

Section 4 of Acts 2000, ch. 533, effective April 26, 2000, read: “The amendments contained in Section 1 of this Act [this section] shall retroactively apply to tax years beginning after December 31, 1998.”

Section 2 of Chapter 67 of the Acts of the 2001 Regular Session read: “The provisions of this Act apply retroactively for taxable years beginning after December 31, 1999.”

The Patient Protection And Affordable Care Act of 2010, Pub. L. No. 111-148 referred to in subsection (10)(k) is compiled as 42 USCS §§ 18001 et seq. The Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152 is found as amendments throughout Titles 20, 26 and 42 of the USCS. Relevant provisions may be found at 26 USCS § 36B and 42 USCS § 300gg-14.

Legislative Research Commission Notes.

(6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 35 of that Act apply to taxable years beginning on or after January 1, 2019.

(4/27/2018) This statute was repealed and reenacted by 2018 Ky. Acts ch. 171, sec. 53 and ch. 2017. sec. 53. which are nearly identical and have been codified together.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

(7/15/2014). 2014 Ky. Acts ch. 102, sec. 40 provides that the amendments to this statute made in 2014 Ky. Acts ch. 102, sec. 2, shall apply to tax years beginning on or after January 1, 2014.

(3/16/2011). 2011 Ky. Acts ch. 54, sec. 2, provides that the amendments to KRS 141.010 in 2011 Ky. Acts ch. 54, sec. 1, “apply for taxable years beginning on or after January 1, 2011.”

(6/26/2007). 2007 Ky. Acts ch. 52, sec. 3, provides that the amendments to KRS 141.010 in 2007 Ky. Acts ch. 52, sec. 2, “shall apply to tax years beginning on or after January 1, 2007.”

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(6/28/2006). Under the authority of KRS 7.136 , a manifest clerical or typographical error has been corrected. In the first sentence of 2006 (1st Extra. Sess.) Ky. Acts ch 2, sec. 11, the citation to KRS 141.010(24)(b) to (h) has been changed to KRS 141.010(24)(b)2. to 8. to conform to other amendments citing this statute elsewhere in the Act.

(4/25/2006). 2006 Ky. Acts ch. 252, Pt. XXVIII, sec. 18 provides that “The amendment in Section 16 of this Part is applicable for tax years beginning after December 31, 2001.”

(3/20/2005). 2005 Ky. Acts ch. 173, Part XVIII, § 2, provides that changes made to subsection (11)(a) of this section are effective for taxable years beginning after December 1, 2004.

(7/13/2004). The amendments made to subsection (10)(r) and (12)( l ) of this statute in 2004 Ky. Acts ch. 135, sec. 1, “shall apply for taxable years beginning after December 31, 2003.” 2004 Ky. Acts ch. 135, sec. 4.

(7/15/2002). The change of dates in subsection (3) of this statute from December 31, 1999, to December 31, 2001, applies to “taxable years beginning after December 31, 2001.” 2002 Ky. Acts ch. 367, sec. 4.

(7/15/2002). The amendments made to subsections (10)(k), (11), and (13) of this statute in 2002 Ky. Acts ch. 206, sec. 1, “shall apply for taxable years beginning after December 31, 2001.” 2002 Ky. Acts ch. 206, sec. 2.

(7/14/2000). The change of dates in subsection (3) of this statute from December 1, 1997, to December 31, 1999, applies to “taxable years beginning after December 31, 1999.” 2000 Ky. Acts ch. 337, sec. 4.

(4/26/2000). The exclusions set forth in subsection (10)(p) and (q) and subsection (12)(i) to (k) of this statute took effect April 26, 2000, and “retroactively apply to tax years beginning after December 31, 1998.” 2000 Ky. Acts ch. 533, secs. 4 and 5.

(4/28/95). The exclusion set forth in subsection (10)(i) of this statute applies “to income received after December 31, 1994,” pursuant to 1995 (2d Extra.) Ky. Acts ch. 1, sec. 11.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Reasonable Classification.
  3. Nature of Tax.
  4. Out-of-State Income.
  5. In-State Income.
  6. Dividends.
  7. Federal Income Tax Law.
  8. Deduction for State Taxes.
  9. Taxable Net Income.
  10. Uniformity.
  11. Source Test.
  12. Gross Income.
  13. Net Income.
  14. Income Averaging.
  15. Net Operating Loss.
  16. Corporations.
  17. —Unitary Multi-corporate Groups.
  18. Deductions of Club Fees by Members of Discriminatory Clubs.
1. Constitutionality.

The income tax law is constitutional and does not violate Ky. Const., §§ 171, 172. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ).

Fact that foreign corporation income from intangibles is taxed upon basis different from that on nonresident individual does not make law unconstitutional. Square D Co. v. Kentucky Bd. of Tax Appeals, 415 S.W.2d 594, 1967 Ky. LEXIS 323 ( Ky. 1967 ).

KRS 141.010(10)(c) did not violate the dormant Commerce Clause, U.S. Const. art. I, § 8, cl. 3, by including in taxable income interest from only out-of-state municipal bonds, since the tax scheme favored a traditional government function without any differential treatment favoring local entities over substantially similar out-of-state interests; also, in addition to exercising its regulatory taxation authority, the state also participated in the market for public bonds to finance public projects and services, and the state was not prohibited from favoring its own bonds in the competitive market. Dep't of Revenue v. Davis, 553 U.S. 328, 128 S. Ct. 1801, 170 L. Ed. 2d 685, 2008 U.S. LEXIS 4312 (U.S. 2008).

2. Reasonable Classification.

Although an income tax is a tax against the individual, and not a property tax, within the meaning of the provisions of Ky. Const., §§ 171 and 172 requiring that property taxes be uniform, nevertheless the income tax is limited by the principle of reasonable classification, and no individual can be singled out and compelled to pay a tax, irrespective of its nature, in an amount other than that exacted from other individuals of the same class. Martin v. Gage, 281 Ky. 95 , 134 S.W.2d 966, 1939 Ky. LEXIS 7 ( Ky. 1939 ).

3. Nature of Tax.

The income tax is not a property tax, but an excise tax, and is therefore not subject to the provisions of Ky. Const., §§ 170, 171 and 172. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ).

In determining validity of income tax, the decision depends upon real nature and practical operation of tax, and not upon mere definitions or nomenclature. Martin v. Gage, 281 Ky. 95 , 134 S.W.2d 966, 1939 Ky. LEXIS 7 ( Ky. 1939 ).

4. Out-of-State Income.

Income derived from sources outside of Kentucky prior to the date on which the person becomes a resident of Kentucky is not subject to the Kentucky income tax. Martin v. Gage, 281 Ky. 95 , 134 S.W.2d 966, 1939 Ky. LEXIS 7 ( Ky. 1939 ).

The Commonwealth cannot tax, either directly or indirectly, separable income of a foreign corporation (whether characterized as “business” or “non-business”) which was not produced in some recognizable sense by business activities in this state. Square D Co. v. Kentucky Bd. of Tax Appeals, 415 S.W.2d 594, 1967 Ky. LEXIS 323 ( Ky. 1967 ).

Where an Indiana corporation operating both within and outside Kentucky had a subsidiary corporation which operated only in Ohio, which was formed solely to maximize deferral of the parent company’s federal income taxes and whose expenses were completely paid by the Indiana parent, the Department of Revenue properly determined that the parent and subsidiary were unitary in nature and that their incomes should be combined for apportionment purposes in assessing corporate income tax. Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ).

A practical, functional analysis of an out-of-state tax is necessary to determine if it is deductible under subdivision (13) of this section. Revenue Cabinet v. General Motors Corp., 794 S.W.2d 178, 1990 Ky. App. LEXIS 118 (Ky. Ct. App. 1990).

The portion of out-of-state tax based on income was nondeductible pursuant to subdivision (13) of this section, while the remainder was deductible. Revenue Cabinet v. General Motors Corp., 794 S.W.2d 178, 1990 Ky. App. LEXIS 118 (Ky. Ct. App. 1990).

5. In-State Income.

If there is no business income from activity outside the state of Kentucky as found under subsection (14) of this section, then KRS 141.120 (2) and (3) would have no effect for there would be nothing to allocate and apportion under the scheme as outlined in KRS 141.120 , even though the corporation in question may come within the provisions of KRS 141.120(3) by merely paying a franchise tax to another state just because the corporation is incorporated in that other state. Clinton Shirt Corp. v. Kentucky Board of Tax Appeals, 583 S.W.2d 84, 1978 Ky. App. LEXIS 679 (Ky. Ct. App. 1978).

6. Dividends.

Liquidating dividend, which was profit derived from sale of corporation’s capital assets, was taxable income on its receipt by stockholder, even though capital assets had been held more than two (2) years. Reeves v. Turner, 289 Ky. 426 , 158 S.W.2d 978, 1942 Ky. LEXIS 565 ( Ky. 1942 ).

7. Federal Income Tax Law.

The federal accumulated earnings tax was a penalty tax rather than a federal income tax and was therefore not deductible for the purpose of determining the net taxable income subject to the Kentucky corporate income tax. Kentucky Dep't of Revenue v. W. M. Cissell Mfg. Co., 495 S.W.2d 181, 1973 Ky. LEXIS 396 ( Ky. 1973 ).

When appellee worker filed an action against appellant transportation company under the Federal Employers Liability Act (FELA), 45 U.S.C.S. §§ 51-60, the jury returned a verdict in his favor and awarded damages; while damages for future lost wages in FELA claims were exempt from taxation under 26 U.S.C.S. § 104(a)(2) and KRS 141.010(9), the trial court was not required to give the jury a non-taxability instruction. The jury did not inflate the award of damages for future wage loss in the mistaken belief that it would be taxed. CSX Transp., Inc. v. Moody, 313 S.W.3d 72, 2010 Ky. LEXIS 113 ( Ky. 2010 ).

8. Deduction for State Taxes.

Where a multi-state corporation paid taxes in Indiana on amounts received as commissions, fees, interests and dividends, such tax was properly disallowed as a deduction under subsection (13) because it was computed by reference to gross income. Kroger Co. v. Department of Revenue, 556 S.W.2d 156, 1977 Ky. App. LEXIS 807 (Ky. Ct. App. 1977).

Where a multi-state corporation paid taxes in Indiana, such taxes were deductible in arriving at net income as defined by subsection (13) since the Indiana tax, which required merchants to pay a tax on the gross receipts from the sale of goods even where the goods were sold at cost without any gain to the merchant, was not computed in relation to gross income but was the equivalent of a sales tax. Kroger Co. v. Department of Revenue, 556 S.W.2d 156, 1977 Ky. App. LEXIS 807 (Ky. Ct. App. 1977).

It is the method of computation in any particular year which determines whether another state’s franchise tax should be considered as an income tax in determining its deductibility under this section. Armco, Inc. v. Revenue Cabinet Commonwealth, 748 S.W.2d 372, 1988 Ky. LEXIS 14 ( Ky. 1988 ).

The intent of subdivision (13) of this section is to deny a deduction for a tax which is in the nature of an income tax; therefore, where another state’s franchise tax is computed on the basis of net worth rather than upon net income, the tax is deductible. Armco, Inc. v. Revenue Cabinet Commonwealth, 748 S.W.2d 372, 1988 Ky. LEXIS 14 ( Ky. 1988 ).

9. Taxable Net Income.

Where a subsidiary corporation located in Kentucky did not maintain or control the New York office of the parent corporation and no proof was offered that the subsidiary did business in any state other than New York or Kentucky, the taxable net income of the subsidiary would be defined by this section and could not be allocated or apportioned under KRS 141.120 . Clinton Shirt Corp. v. Kentucky Board of Tax Appeals, 583 S.W.2d 84, 1978 Ky. App. LEXIS 679 (Ky. Ct. App. 1978).

10. Uniformity.

Where testimony showed that only in cases where the Department of Revenue found that separate accounting was inaccurate would the formulary apportionment method be used, such a method of allocating income was clearly contrary to the plain meaning of the preamble of KRS 141.120(10) and to the mandate of uniformity in the act. Ruby Constr. Co. v. Department of Revenue, 578 S.W.2d 248, 1978 Ky. App. LEXIS 668 (Ky. Ct. App. 1978).

11. Source Test.

The statutory law has changed greatly since Square D Co. v. Kentucky Bd. of Tax Appeals, 415 S.W.2d 594, 1967 Ky. LEXIS 323 ( Ky. 1967 ), was decided and the source test, which held that income must have an identifiable source within the Commonwealth in order to be taxable, is no longer justified. Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ).

12. Gross Income.

Subdivision (12) of this section has specifically accepted certain provisions of the Internal Revenue Code defining gross income and the allowable deductions from gross income, but did not adopt the federal income tax treatment of domestic international sales corporations provided for in the Internal Revenue Code. Armco, Inc. v. Revenue Cabinet Commonwealth, 748 S.W.2d 372, 1988 Ky. LEXIS 14 ( Ky. 1988 ).

Taxpayer was properly assessed income tax on his severance pay where the United States Supreme Court had interpreted severance pay to qualify as wages, and wages incontrovertibly constituted income under both Kentucky statutory law and federal income-tax law. Moreover, the benefits afforded the taxpayer under the separation agreement were clearly for labor performed in the Commonwealth of Kentucky. Ridge v. Commonwealth, 606 S.W.3d 634, 2019 Ky. App. LEXIS 150 (Ky. Ct. App. 2019).

13. Net Income.

A Real estate investment trust’s (REIT) claimed deduction for dividends paid to shareholders on its Kentucky corporate income tax returns was proper because the federal dividends-paid deduction used to reduce a REIT’s taxable income for federal purposes was the functional equivalent of an allowable deduction from gross income under KRS 141.010(13). Commonwealth v. AutoZone Dev. Corp., 2007 Ky. App. LEXIS 401 (Ky. Ct. App.), sub. op., 2007 Ky. App. Unpub. LEXIS 1130 (Ky. Ct. App. Oct. 12, 2007).

Taxable income, as utilized in the Internal Revenue Code 26 USCS § 63(a), and net income, as used in KRS 141.010(13), are virtually the same. Commonwealth v. AutoZone Dev. Corp., 2007 Ky. App. LEXIS 401 (Ky. Ct. App.), sub. op., 2007 Ky. App. Unpub. LEXIS 1130 (Ky. Ct. App. Oct. 12, 2007).

14. Income Averaging.

By eliminating the exclusion of section 172 of the Internal Revenue Code from subdivision (13) of this section, the Legislature intended to allow corporations the benefit of income averaging for state tax purposes. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

15. Net Operating Loss.

A net operating loss incurred by corporate taxpayers can be carried back for state tax purposes to the first available income year which began after January 1, 1980, regardless of what year the loss was required to be carried back on the federal return. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

A specific Kentucky net operating loss (KNOL) is created under state law by implication, and to calculate one’s KNOL, the adjustments to income and deductions allowed under Kentucky law should be used; the KNOL then is the difference between Kentucky gross income and Kentucky deductions after applying the apportionment factor of KRS 141.120 when a multi-state corporation is involved. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

The Legislature, by specifying allowable adjustments to income and adjustments to deductions, has created a unique definition of net income, and in order to calculate a corporate net operating loss it is therefore necessary to give credence to these adjustments. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

16. Corporations.
17. —Unitary Multi-corporate Groups.

Although KRS 141.200 has separate corporate filing requirements it does not require that each component corporation of the unitary group must file separately, but requires that each unitary corporation file a separate corporate income tax return as it differentiates between simple corporations and unitary corporations, and requires a return for both classes of corporate taxpayers. GTE v. Revenue Cabinet, 889 S.W.2d 788, 1994 Ky. LEXIS 148 ( Ky. 1994 ).

18. Deductions of Club Fees by Members of Discriminatory Clubs.

KRS 141.010(11)(d) grants the Kentucky Commission on Human Rights (KCHR) authority to investigate and to determine whether private clubs discriminate because of race; if they do, KCHR must inform the Kentucky Revenue Cabinet so that members of such club will be denied tax deductions for club fees. Commonwealth v. Pendennis Club, Inc., 153 S.W.3d 784, 2004 Ky. LEXIS 285 ( Ky. 2004 ).

Cited in:

Martin v. Gage, 281 Ky. 95 , 134 S.W.2d 966, 1939 Ky. LEXIS 7 , 126 A.L.R. 449 ( Ky. 1939 ); Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ); Oates v. Ballard, 299 Ky. 661 , 186 S.W.2d 650, 1945 Ky. LEXIS 491 , 159 A.L.R. 98 ( Ky. 1945 ); Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ); Fontaine v. Department of Finance, 249 S.W.2d 799, 1952 Ky. LEXIS 872 ( Ky. 1952 ); Collins v. Kentucky Tax Com., 261 S.W.2d 303, 1953 Ky. LEXIS 1006 ( Ky. 1953 ); Maxwell v. Commonwealth, 263 S.W.2d 489, 1953 Ky. LEXIS 1149 ( Ky. 1953 ); Clayton & Lambert Mfg. Co. v. Kentucky State Tax Com., 265 S.W.2d 449, 1954 Ky. LEXIS 7 29 ( Ky. 1954 ); Allphin v. Louisville & N. R. Co., 290 S.W.2d 787, 1956 Ky. LEXIS 341 ( Ky. 1956 ); McDonald v. Luckett, 307 S.W.2d 924, 1957 Ky. LEXIS 125 ( Ky. 1957 ); George v. Scent, 346 S.W.2d 784, 1961 Ky. LEXIS 341 ( Ky. 1961 ); Brown v. Department of Revenue, 558 S.W.2d 635, 1977 Ky. App. LEXIS 854 (Ky. Ct. App. 1977); Department of Revenue v. Refiners Oil Corp., 612 S.W.2d 337, 1981 Ky. LEXIS 215 ( Ky. 1981 ); Corning Glass Works v. Department of Revenue, 616 S.W.2d 789, 1981 Ky. App. LEXIS 241 (Ky. Ct. App. 1981).

Opinions of Attorney General.

Contributions to the Kentucky Health, Education, and Welfare Research and Demonstration Program, Inc., are allowable as a deduction on an individual’s Kentucky income tax return. OAG 61-229 .

Where bonds were issued by a city to purchase an industrial building to be leased to a business, the interest from the bonds was exempt from Kentucky state income tax. OAG 63-398 .

Where bonds were issued by a city to purchase an industrial building to be leased to a business, the revenue bonds and the interest thereon were exempt from all state, county, school and municipal taxes, including the state income tax. OAG 63-398 .

For Kentucky income taxes, contributions to the Kentucky Historical Society would be deductible on the same basis and subject to the same limitations and rulings as are applicable to the deductions allowable in connection with the federal income tax. OAG 63-657 .

A sleeping room available to a hotel employee on an optional basis was not furnished as a condition of employment and the free use of the room is additional compensation, the value of which must be included as income. OAG 63-739 .

Under subsection (3) of this section, the Internal Revenue Code in effect December 31, 1965 determines the maximum deduction for contributions to self-retirement plan, which as determined by the code then in existence, is $1,250. OAG 69-78 (opinion prior to 1970 amendment).

Where the unpaid balance of a loan passes as a gift at the death of the donor, such balance should be included as part of the donor’s estate subject to inheritance tax. OAG 72-520 .

Under the 1982 amendment to this section, the Economic Recovery Tax Act (ERTA) of 1981 is effective for Kentucky at the dates specified in the act which includes the accelerated depreciation provisions effective for assets purchased after December 31, 1980; other changes in the Internal Revenue Code from the prior reference date of December 31, 1979, (established by House Bill 299 of the 1980 Legislative Session) apply to Kentucky only for taxable years beginning after December 31, 1981. Thus, an individual taxpayer may claim identical depreciation for both Kentucky and federal income tax purposes on those assets acquired after December 31, 1980, but corporations—except subchapter S corporations—are required to apply a statutory reduction factor to the ERTA accelerated depreciation. OAG 82-398 .

Both KRS 344.130 and subsections (11)(d) and (13)(f) of this section deal with private clubs, and both statutes involve the Commission on Human Rights, but neither statute is repugnant to the other, and each can and should be given its independent effect. OAG 91-197 .

KRS 344.130 does not prevent the Commission on Human Rights from determining whether private clubs are affording full and equal membership called for under this section. OAG 91-197 .

KRS 344.130 exempts private clubs from compliance with KRS 344.120 , which makes it unlawful practice to deny an individual the full and equal enjoyment of the club, on the basis of race, color, religion or national origin, but subsections (11)(d) and (13)(f) of this section did not alter this exemption for private clubs, rather, it expressed the separate and independent intention that no income tax deduction would be allowed for amounts paid by taxpayers to private clubs which engage in discriminatory membership practices. OAG 91-197 .

The Legislature intended that it should be the Kentucky Commission on Human Rights which determines whether a club, organization or establishment does not afford full and equal membership based on race, color, religion, national origin or sex, and KRS 344.130 does not prohibit the Commission from making such determinations for this limited purpose. OAG 91-197 .

Research References and Practice Aids

Cross-References.

Appeal from tax assessment or ruling, KRS 131.110 .

Collection of public claims by action, KRS Ch. 135.

Collection of taxes by Department of Revenue, KRS 134.547 , 135.050 , 135.060 .

Department of Revenue, KRS Chapter 131.

Excise measured by income tax for schools, KRS 160.621 .

Extension of time for filing tax reports or returns, KRS 131.170 .

Failure to make tax reports, penalties, KRS 131.180 , 131.990 .

Interest on bonds of housing authorities not taxable, KRS 80.560 .

Payment, collection and refund of taxes, KRS Ch. 134.

Residence, determination if for taxation, KRS 132.010 , 132.190 .

Returns to be preserved for five years, KRS 131.185 .

Kentucky Bench & Bar.

Fust, Common Challenges of the (Not So) Uncommon Estate Planning Client, Vol. 70, No. 1, January 2006, Ky. Bench & Bar 11.

Eardly & Ruml, My Old Kentucky Home or the Sunshine State? Residency and Estate Planning Issues for Kentucky “Snowbirds” in Florida, Volume 74, No. 6, November 2010, Ky. Bench & Bar 20.

Kentucky Law Journal.

Freeland, Constitutional Law — Taxation As Income of Officer’s Salary Exempt from Diminution During Term of Office, 26 Ky. L.J. 253 (1938).

Lockyer and Martin, Kentucky Income Tax Discriminations, 39 Ky. L.J. 377 (1951).

Lewis, Kostas, and Carnes, Consolidation — Complete or Functional — of City and County Governments in Kentucky, 42 Ky. L.J. 295 (1954).

Lockyer, Kentucky Income Tax Compared With Federal Income Tax, 42 Ky. L.J. 368 (1954).

Allphin, 1954 Kentucky Tax Legislation, 43 Ky. L.J. 76 (1954).

Lockyer, The Legal Nature of the State Income Tax, 43 Ky. L.J. 215 (1955).

Lockyer, History of the Kentucky Income Tax, 43 Ky. L.J. 461 (1955).

Martin, Some Recent Kentucky Tax Cases of Economic Significance, 44 Ky. L.J. 29 (1955).

Matthews, Dower, Principal, and Income Perpetutities, and Intestate Succession, 45 Ky. L.J. 111 (1956).

Luckett, Taxation, 45 Ky. L.J. 136 (1956).

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

Note, Historic Preservation — An Individual’s Perspective, 67 Ky. L.J. 1018 (1978-1979).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Rutledge & Vestal, Making the Obvious Choice Malpractice: LLPs and the Lawyer Liability Time Bomb in Kentucky’s 2005 Tax Modernization., 94 Ky. L.J. 17 (2005/2006).

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

Note: Giving Up Your Tax Refund to Keep It: Tax Prepayment in the Context of the Bankruptcy Estate, 100 Ky. L.J. 895 (2011/2012).

141.0101. Depreciation methods and transitional rules.

    1. The provisions of subsections (2) to (11) of this section shall apply to taxable years beginning before January 1, 1994. (1) (a) The provisions of subsections (2) to (11) of this section shall apply to taxable years beginning before January 1, 1994.
    2. The provisions of subsections (12) to (15) of this section shall apply to taxable years beginning after December 31, 1993.
    3. The provisions of subsection (16) of this section apply to property placed in service after September 10, 2001.
  1. For property placed in service prior to January 1, 1990, in lieu of the depreciation and expense deductions allowed under Internal Revenue Code Sections 168 and 179, a deduction for a reasonable allowance for depreciation, exhaustion, wear and tear, and obsolescence of property used in a trade or business shall be allowed and computed as set out in subsections (3) to (11) of this section. For property placed in service after December 31, 1989, the depreciation and expense deductions allowed under Sections 168 and 179 of the Internal Revenue Code shall be allowed.
  2. Effective August 1, 1985, “reasonable allowance” as used in subsection (2) of this section shall mean depreciation computed in accordance with Section 167 of the Internal Revenue Code and related regulations in effect on December 31, 1980, for all property placed in service on or after January 1, 1981, except as provided in subsections (6) to (8) of this section.
  3. Depreciation of property placed in service prior to January 1, 1981, shall be computed under Section 167 of the Internal Revenue Code, and the method elected thereunder at the time the property was first placed in service or as changed with the approval of the Commissioner of Internal Revenue Service or as required by changes in federal regulations.
  4. Taxpayers other than corporations shall be allowed to deduct as depreciation on recovery property placed in service before August 1, 1985, an amount calculated under Section 168 of the Internal Revenue Code subject to the provisions of subsections (6) and (8) of this section. Corporations with a taxable year beginning on or after July 1, 1984, and before August 1, 1985, shall calculate a deduction for depreciation on recovery property placed in service prior to August 1, 1985, using either of the following alternative methods:
    1. Dividing the total of the deductions allowed under Internal Revenue Code Section 168 by one and four tenths (1.4); and
    2. Calculating the deduction that would be allowed or allowable under the provisions of Section 167 of the Internal Revenue Code.
  5. Recovery property placed in service on or after January 1, 1981, and before August 1, 1985, and subject to transition under subsection (8) of this section, shall be subject to depreciation under Section 167 of the Internal Revenue Code, restricted to the straight line method therein provided over the remaining useful life of such assets.
  6. Depreciation of property placed in service on or after August 1, 1985, shall be computed under Section 167 of the Internal Revenue Code.
  7. Transition from Section 168 of the Internal Revenue Code, Accelerated Cost Recovery System (ACRS) depreciation, to the depreciation allowed or allowable under this section shall be reported in the first taxable year beginning on or after August 1, 1985. To implement the transition, the following adjustments shall be made:
    1. Taxpayers other than corporations shall use the adjusted Kentucky basis for property placed in service on or after January 1, 1981. “Adjusted Kentucky basis” means the basis used for determining depreciation under Section 168 of the Internal Revenue Code less the allowed or allowable depreciation and adjustment for election to expense an asset (Section 179 of the Internal Revenue Code);
    2. Corporations shall adjust the federal unadjusted basis by increasing such basis by the ACRS depreciation not allowed as a deduction in determining Kentucky net income for tax years beginning after June 30, 1984, less allowed or allowable ACRS depreciation for federal income tax purposes. Corporations will not be permitted to adjust the basis by the ACRS depreciation not allowed for Kentucky income tax purposes in tax years beginning on or before June 30, 1984.
  8. A taxpayer may elect to treat the cost of property placed in service on or before July 31, 1985, as an expense as provided in Section 179 of the Internal Revenue Code in effect on December 31, 1981, except that the aggregate cost which may be expensed for corporations shall not exceed five thousand dollars ($5,000). A taxpayer may elect to treat the cost of property placed in service on or after August 1, 1985, as an expense as provided in Section 179 of the Internal Revenue Code in effect on December 31, 1980. Computations, limitations, definitions, exceptions, and other provisions of Section 179 of the Internal Revenue Code and related regulations shall be construed to govern the computation of the allowable deduction.
  9. Upon the sale, exchange, or disposition of any depreciable property placed in service on or after January 1, 1981, capital gains or losses and the amount of ordinary income determined under the provisions of the Internal Revenue Code shall be computed for Kentucky income tax purposes as follows:
    1. Compute the Kentucky unadjusted basis which is the cost of the asset reduced by any basis adjustment made by the taxpayer under Section 48(q)(1) of the Internal Revenue Code and any expense allowed and utilized under Section 179 of the Internal Revenue Code (First Year Expense) in determining Kentucky net income in prior years, and
    2. Compute the adjusted basis by subtracting the depreciation allowed or allowable for Kentucky income tax purposes from the unadjusted basis, except corporations will not be permitted to adjust the basis of assets by the ACRS depreciation not allowed for Kentucky income tax purposes in the tax years beginning on or before June 30, 1984, and
    3. Compute the gain or loss by subtracting the adjusted basis from the value received from the disposition of the depreciable property, and
    4. Compute the recapture of depreciation required under Sections 1245 through 1256 of the Internal Revenue Code and related regulations, and
    5. Unless otherwise provided in this subsection the provisions of the Internal Revenue Code and related regulations governing the determination of capital gains or losses shall apply for Kentucky income tax purposes.
  10. Unless otherwise provided by this chapter, the basis of property placed in service prior to January 1, 1990, for purposes of Kentucky income tax shall be the basis, adjusted or unadjusted, required to be used under Section 167 of the Internal Revenue Code in effect on December 31, 1980.
  11. As used in this subsection to subsection (14) of this section:
    1. “Transition property” means any property placed in service before the first day of the first taxable year beginning after December 31, 1993, and owned by the taxpayer on the first day of the first taxable year beginning after December 31, 1993.
    2. “Adjusted Kentucky basis” means the amount computed in accordance with the provisions of paragraph (b) of subsection (10) of this section for transition property.
    3. “Adjusted federal basis” means the original cost, or, in the case of Section 338 property, the adjusted grossed-up basis of transition property less:
      1. Any basis adjustments required by the Internal Revenue Code for credits; and
      2. The total accumulated depreciation and election to expense deductions allowed or allowable for federal income tax purposes.
    4. “Section 338 property” means property to which an adjusted grossed-up basis has been allocated pursuant to a valid election made by a purchasing corporation under the provisions of Section 338 of the Internal Revenue Code.
    5. “Transition amount” means the net difference between the adjusted Kentucky basis and the adjusted federal basis of all transition property determined as of the first day of the first taxable year beginning after December 31, 1993.
  12. For taxable years beginning after December 31, 1993, the amounts of depreciation and election to expense deductions, allowed or allowable, the basis of assets, adjusted or unadjusted, and the gain or loss from the sale or other disposition of assets shall be the same for Kentucky income tax purposes as determined under Chapter 1 of the Internal Revenue Code.
  13. For taxable years beginning after December 31, 1993, the transition amount computed in accordance with the provisions of paragraph (e) of subsection (12) of this section shall be reported by the taxpayer as follows:
    1. In the first taxable year beginning after December 31, 1993, and the eleven (11) succeeding taxable years, the taxpayer shall include in gross income one-twelfth (1/12) of the transition amount if:
      1. The adjusted federal basis of transition property exceeds the adjusted Kentucky basis of transition property;
      2. The transition amount exceeds five million dollars ($5,000,000);
      3. The transition amount includes property for which an election was made under Section 338 of the Internal Revenue Code; and
      4. The taxpayer elects the provisions of this paragraph with the filing of an amended income tax return for the first taxable year beginning after December 31, 1993.
    2. In the first taxable year beginning after December 31, 1993 and the three (3) succeeding taxable years, if the transition amount exceeds one hundred thousand dollars ($100,000), or if the transition amount does not exceed one hundred thousand dollars ($100,000) and the taxpayer elects the provision of this paragraph with the filing of the income tax return for the first taxable year beginning after December 31, 1993, the taxpayer shall:
      1. Deduct from gross income twenty-five percent (25%) of the transition amount if the adjusted Kentucky basis of transition property exceeds the adjusted federal basis of transition property; or
      2. Add to gross income twenty-five percent (25%) of the transition amount if the adjusted federal basis of transition property exceeds the adjusted Kentucky basis of transition property.
    3. In the first taxable year beginning after December 31, 1993, if the transition amount does not exceed one hundred thousand dollars ($100,000) and the taxpayer does not elect the provisions of paragraph (b) of this subsection, the taxpayer shall:
      1. Deduct from gross income the total transition amount if the adjusted Kentucky basis of transition property exceeds the adjusted federal basis of transition property; or
      2. Add to gross income the total transition amount if the adjusted federal basis of transition property exceeds the adjusted Kentucky basis of transition property.
  14. Notwithstanding any other provision of this section to the contrary, any qualified farming operation, as defined in KRS 141.410 , shall be allowed to compute the depreciation deduction for new buildings and equipment purchased to enable participation in a networking project, as defined in KRS 141.410 , on an accelerated basis at two (2) times the rate that would otherwise be permitted under the provisions of this section. The accumulated depreciation allowed under this subsection shall not exceed the taxpayer’s basis in such property.
    1. For property placed in service after September 10, 2001, only the depreciation deduction allowed under Section 168 of the Internal Revenue Code in effect on December 31, 2001, exclusive of any amendments made subsequent to that date, shall be allowed. (16) (a) For property placed in service after September 10, 2001, only the depreciation deduction allowed under Section 168 of the Internal Revenue Code in effect on December 31, 2001, exclusive of any amendments made subsequent to that date, shall be allowed.
    2. For property placed in service after September 10, 2001, but prior to January 1, 2020, only the expense deduction allowed under Section 179 of the Internal Revenue Code in effect on December 31, 2001, exclusive of any amendments made subsequent to that date, shall be allowed.
    3. For property placed in service on or after January 1, 2020, only the expense deduction allowed under Section 179 of the Internal Revenue Code in effect on December 31, 2003, exclusive of any amendments made subsequent to that date, shall be allowed, except that the phase-out provisions of Section 179 of the Internal Revenue Code, limiting the qualifying investment in property, shall not apply.

History. Enact. Acts 1985 (1st Ex. Sess.), ch. 6, part V, § 16, effective July 29, 1985; 1990, ch. 476, Pt. VII D, § 631, effective April 11, 1990; 1994, ch. 45, § 2, effective July 15, 1994; 1994, ch. 56, § 1, effective July 15, 1994; 1994, ch. 390, § 15, effective July 15, 1994; 1996, ch. 232, § 1, effective July 15, 1996; 2014, ch. 102, § 3, effective July 15, 2014; 2019 ch. 151, § 36, effective June 27, 2019; 2020 ch. 91, § 28, effective April 15, 2020.

Compiler’s Notes.

Sections 48(q)(1), 167, 168, 179, 338, and 1245-1256 of the Internal Revenue Code referred to in this section are compiled as 26 USCS §§ 48(q)(1), 167, 168, 179, 338 and 1245-1256.

Legislative Research Commission Notes.

(6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 36 of that Act apply to taxable years beginning on or after January 1, 2019.

(7/15/2014). 2014 Ky. Acts ch. 102, sec. 40 provides that the amendments to this statute made in 2014 Ky. Acts ch. 102, sec. 3, shall apply to tax years beginning on or after January 1, 2014.

1985 (1st Ex. Sess.) Ky. Acts ch. 6, Part V, Section 17, directs that the provisions of this section shall apply to taxable years ending after July 31, 1985, unless otherwise provided.

NOTES TO DECISIONS

Cited in:

Revenue Cabinet v. General Motors Corp., 794 S.W.2d 178, 1990 Ky. App. LEXIS 118 (Ky. Ct. App. 1990).

141.0105. Adjustment of exclusion amount for retirement distributions for tax years after 1998. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1995 (2nd Ex. Sess.), ch. 1, § 10, effective April 28, 1995) was repealed by Act 2005, ch. 168, § 158, effective January 1, 2006.

141.011. Casualty losses — Net operating losses.

  1. Notwithstanding any other provision of this chapter, the net operating loss carryback-carryforward deduction, including casualty loss, allowed under Section 172 of the Internal Revenue Code shall apply only to such losses incurred in taxable years beginning after December 31, 1979, and no such loss shall be carried back to taxable years beginning before January 1, 1980. Any casualty loss carryforward authorized by this section as it existed before January 1, 1980, may be carried forward as an itemized deduction until it has been fully deducted.
  2. The net operating loss carryback deduction shall not be allowed for losses incurred for taxable years beginning on or after January 1, 2005.
  3. For taxable years when the tax due under KRS 141.040 is based on the alternative minimum calculation provided in KRS 141.040 , any net operating loss carryforward deduction that is utilized for the taxable year shall be the amount of taxable net income before the net operating loss deduction, that exceeds the taxable net income equivalent. For purposes of this subsection, “taxable net income equivalent” means the amount of taxable net income that would generate an income tax equal to the alternative minimum calculation liability computed under KRS 141.040.
  4. For taxable years beginning on or after January 1, 2005, and before December 31, 2006, the net operating loss carryforward deduction of a corporation shall be reduced by the amount of distributive share income, loss, and deduction distributed to an individual or general partnership as defined in KRS 141.206 .
  5. For taxable years beginning on or after January 1, 2005, but prior to January 1, 2019, the portion of a net operating loss that is not used to offset the income of an affiliate according to the limits in KRS 141.200(11) shall be available for carryforward, subject to the limitations contained in this section.

History. Enact. Acts 1978, ch. 50, §§ 1, 4, effective June 17, 1978; 1980, ch. 176, § 2, effective July 15, 1980; 2005, ch. 168, § 4, effective March 18, 2005; 2006, ch. 252, Pt. XIII, § 2, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 12, effective June 28, 2006; 2018 ch. 207, § 123, effective April 27, 2018.

Compiler’s Notes.

Section 172 of the Internal Revenue Code, referred to herein, is compiled as 26 USCS § 172.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

NOTES TO DECISIONS

  1. Application.
  2. Kentucky Net Operating Loss.
1. Application.

A net operating loss incurred by corporate taxpayers can be carried back for state tax purposes to the first available income year which began after January 1, 1980, regardless of what year the loss was required to be carried back on the federal return. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

2. Kentucky Net Operating Loss.

A specific Kentucky net operating loss (KNOL) is created under state law by implication, and to calculate one’s KNOL, the adjustments to income and deductions allowed under Kentucky law should be used; the KNOL then is the difference between Kentucky gross income and Kentucky deductions after applying the apportionment factor of KRS 141.120 when a multi-state corporation is involved. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

The Legislature, by specifying allowable adjustments to income and adjustments to deductions, has created a unique definition of net income, and in order to calculate a corporate net operating loss it is therefore necessary to give credence to these adjustments. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

141.012. Corporation may carry forward and deduct net operating loss for first year of operations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 124, § 8; 1966, ch. 176, part I, § 2; 1970, ch. 216, § 4; 1984, ch. 111, § 78, effective July 13, 1984; 1985 (1st Ex. Sess.), ch. 6, part V, § 15, effective July 29, 1985), was repealed by Acts 2006, ch. 6, § 25, effective March 6, 2006.

141.013. Deduction of first year depreciation allowance. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1964, ch. 140, § 1) was repealed by Acts 1974, ch. 163, § 8.

141.014. Disposition of receipts under chapter.

Receipts derived from taxes assessed and collected under the provisions of this chapter shall be appropriated for general fund purposes.

History. Enact. Acts 1962, ch. 124, § 9.

141.015. Definitions for short form return provisions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 234, §§ 1, 2) was repealed by Acts 1954, ch. 79, § 35.

141.016. Reporting federal adjusted gross income attributed to husband and wife — Allocation of income and business deductions between husband and wife.

  1. If the federal adjusted gross income of husband or wife is entered on a separate federal return, their Kentucky adjusted gross incomes may be entered on their separate Kentucky tax returns or their joint Kentucky tax return as they so elect.
  2. If the federal adjusted gross income of husband and wife is entered on a joint federal return, or if neither files a federal return:
    1. Their adjusted gross income shall be entered on their joint Kentucky tax return; or
    2. Separate adjusted gross incomes may be entered on their separate Kentucky tax returns if they so elect.
  3. Where husband and wife have not separately reported and claimed items of income and adjustments of income for federal income tax purposes, and have not elected to file a joint Kentucky income tax return, such items allowable for Kentucky income tax purposes shall be allocated and adjusted as follows:
    1. Income shall be allocated to the spouse who earned the income or with respect to whose property the income is attributable;
    2. Allowable deductions with respect to trade, business, or production of income shall be allocated to the spouse to whom attributable.

History. Enact. Acts 1990, ch. 476, Pt. VII D, § 639, effective April 11, 1990.

141.017. Deductions allowed by this chapter limited to amounts directly or indirectly subject to taxation under this chapter — No item to be deducted more than once.

    1. All deductions allowed by this chapter shall be limited to amounts directly or indirectly allocable to income subject to taxation under the provisions of this chapter. (1)   (a)   All deductions allowed by this chapter shall be limited to amounts directly or indirectly allocable to income subject to taxation under the provisions of this chapter.
    2. Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under this chapter shall not be allowed.
  1. Nothing in this chapter shall be construed to permit the same item to be deducted more than once.

HISTORY: 2018 ch. 171, § 54, effective April 14, 2018; 2018 ch. 207, § 54, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was created by 2018 Ky. Acts ch. 171, sec. 54 and ch. 207, sec. 54, which are identical and have been codified together.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

141.018. Department’s authority to interpret and carry out provisions of certain income tax changes made by the 2005 Regular Session and 2006 First Extraordinary Session of the General Assembly — Authority to promulgate administrative regulations to explain or implement changes.

Consistent with the provisions of 2005 Ky. Acts ch. 168 and the provisions of 2006 (1st Extra. Sess.) Ky. Acts ch. 2, the Department of Revenue shall have the authority to interpret and carry out the provisions and intent of amendments made by the 2005 Regular Session of the General Assembly and the 2006 First Extraordinary Session of the General Assembly relative to the imposition of the tax assessed under this chapter on individuals, entities taxable as individuals, entities taxable under KRS 141.040 and 141.0401 , the passed-through income of entities taxable under KRS 141.040 and 141.0401 , entities considered not taxable or exempt from tax, any other entity or taxable unit, and any related item of income, deduction, or credit, and shall promulgate administrative regulations necessary to explain or implement this section.

History. Enact. Acts 2005, ch. 168, § 152, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 70, effective June 28, 2006.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, sec. 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.019. Calculation of adjusted gross income and net income — Taxable years beginning on or after January 1, 2018, in the case of taxpayers other than corporations.

For taxable years beginning on or after January 1, 2018, in the case of taxpayers other than corporations:

  1. Adjusted gross income shall be calculated by subtracting from the gross income of those taxpayers the deductions allowed individuals by Section 62 of the Internal Revenue Code and adjusting as follows:
    1. Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States;
    2. Exclude income from supplemental annuities provided by the Railroad Retirement Act of 1937 as amended and which are subject to federal income tax by Pub. L. No. 89-699;
    3. Include interest income derived from obligations of sister states and political subdivisions thereof;
    4. Exclude employee pension contributions picked up as provided for in KRS 6.505 , 16.545 , 21.360 , 61.523 , 61.560 , 65.155 , 67A.320 , 67A.510 , 78.610 , and 161.540 upon a ruling by the Internal Revenue Service or the federal courts that these contributions shall not be included as gross income until such time as the contributions are distributed or made available to the employee;
    5. Exclude Social Security and railroad retirement benefits subject to federal income tax;
    6. Exclude any money received because of a settlement or judgment in a lawsuit brought against a manufacturer or distributor of “Agent Orange” for damages resulting from exposure to Agent Orange by a member or veteran of the Armed Forces of the United States or any dependent of such person who served in Vietnam;
      1. a. For taxable years beginning after December 31, 2005, but before January 1, 2018, exclude up to forty-one thousand one hundred ten dollars ($41,110) of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans; and (g) 1. a. For taxable years beginning after December 31, 2005, but before January 1, 2018, exclude up to forty-one thousand one hundred ten dollars ($41,110) of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans; and
      2. As used in this paragraph:
        1. “Annuity contract” has the same meaning as set forth in Section 1035 of the Internal Revenue Code;
        2. “Distributions” includes but is not limited to any lump-sum distribution from pension or profit-sharing plans qualifying for the income tax averaging provisions of Section 402 of the Internal Revenue Code; any distribution from an individual retirement account as defined in Section 408 of the Internal Revenue Code; and any disability pension distribution; and
        3. “Pension plans, profit-sharing plans, retirement plans, or employee savings plans” means any trust or other entity created or organized under a written retirement plan and forming part of a stock bonus, pension, or profit-sharing plan of a public or private employer for the exclusive benefit of employees or their beneficiaries and includes plans qualified or unqualified under Section 401 of the Internal Revenue Code and individual retirement accounts as defined in Section 408 of the Internal Revenue Code;
      b. For taxable years beginning on or after January 1, 2018, exclude up to thirty-one thousand one hundred ten dollars ($31,110) of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans.
      1. a. Exclude the portion of the distributive share of a shareholder’s net income from an S corporation subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 ; and (h) 1. a. Exclude the portion of the distributive share of a shareholder’s net income from an S corporation subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 ; and
      2. The shareholder’s basis of stock held in an S corporation where the S corporation or its qualified subchapter S subsidiary is subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 shall be the same as the basis for federal income tax purposes;
      b. Exclude the portion of the distributive share of a shareholder’s net income from an S corporation related to a qualified subchapter S subsidiary subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300.
    7. Exclude income received for services performed as a precinct worker for election training or for working at election booths in state, county, and local primaries or regular or special elections;
    8. Exclude any capital gains income attributable to property taken by eminent domain;
      1. Exclude all income from all sources for members of the Armed Forces who are on active duty and who are killed in the line of duty, for the year during which the death occurred and the year prior to the year during which the death occurred. (k) 1. Exclude all income from all sources for members of the Armed Forces who are on active duty and who are killed in the line of duty, for the year during which the death occurred and the year prior to the year during which the death occurred.
      2. For the purposes of this paragraph, “all income from all sources” shall include all federal and state death benefits payable to the estate or any beneficiaries;
    9. Exclude all military pay received by members of the Armed Forces while on active duty;
      1. Include the amount deducted for depreciation under 26 U.S.C. sec. 167 or 168; and (m) 1. Include the amount deducted for depreciation under 26 U.S.C. sec. 167 or 168; and
      2. Exclude the amounts allowed by KRS 141.0101 for depreciation;
    10. Include the amount deducted under 26 U.S.C. sec. 199 A; and
    11. Ignore any change in the cost basis of the surviving spouse’s share of property owned by a Kentucky community property trust occurring for federal income tax purposes as a result of the death of the predeceasing spouse; and
  2. Net income shall be calculated by subtracting from adjusted gross income all the deductions allowed individuals by Chapter 1 of the Internal Revenue Code, as modified by KRS 141.0101 , except:
    1. Any deduction allowed by 26 U.S.C. sec. 164 for taxes;
    2. Any deduction allowed by 26 U.S.C. sec. 165 for losses, except wagering losses allowed under Section 165(d) of the Internal Revenue Code;
    3. Any deduction allowed by 26 U.S.C. sec. 213 for medical care expenses;
    4. Any deduction allowed by 26 U.S.C. sec. 217 for moving expenses;
    5. Any deduction allowed by 26 U.S.C. sec. 67 for any other miscellaneous deduction;
    6. Any deduction allowed by the Internal Revenue Code for amounts allowable under KRS 140.090(1)(h) in calculating the value of the distributive shares of the estate of a decedent, unless there is filed with the income return a statement that the deduction has not been claimed under KRS 140.090(1)(h);
    7. Any deduction allowed by 26 U.S.C. sec. 151 for personal exemptions and any other deductions in lieu thereof;
    8. Any deduction allowed for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained; and
    9. A taxpayer may elect to claim the standard deduction allowed by KRS 141.081 instead of itemized deductions allowed pursuant to 26 U.S.C. sec. 63 and as modified by this section.

HISTORY: 2018 ch. 171, § 55, effective April 14, 2018; 2018 ch. 207, § 55, effective April 27, 2018; 2019 ch. 151, § 37, effective June 27, 2019; 2020 ch. 25, § 5, effective July 15, 2020.

141.020. Levy of income tax on individuals — Rate of normal tax — Tax credits — Income of nonresidents subject to tax — Election to pay tax imposed by KRS 141.023.

  1. An annual tax shall be paid for each taxable year by every resident individual of this state upon his entire net income as defined in this chapter. The tax shall be determined by applying the rates in subsection (2) of this section to net income and subtracting allowable tax credits provided in subsection (3) of this section.
    1. For taxable years beginning on or after January 1, 2018, the tax shall be five percent (5%) of net income. (2) (a) For taxable years beginning on or after January 1, 2018, the tax shall be five percent (5%) of net income.
    2. For taxable years beginning after December 31, 2004, and before January 1, 2018, the tax shall be determined by applying the following rates to net income:
      1. Two percent (2%) of the amount of net income up to three thousand dollars ($3,000);
      2. Three percent (3%) of the amount of net income over three thousand dollars ($3,000) and up to four thousand dollars ($4,000);
      3. Four percent (4%) of the amount of net income over four thousand dollars ($4,000) and up to five thousand dollars ($5,000);
      4. Five percent (5%) of the amount of net income over five thousand dollars ($5,000) and up to eight thousand dollars ($8,000);
      5. Five and eight-tenths percent (5.8%) of the amount of net income over eight thousand dollars ($8,000) and up to seventy-five thousand dollars ($75,000); and
      6. Six percent (6%) of the amount of net income over seventy-five thousand dollars ($75,000).
    1. The following tax credits, when applicable, shall be deducted from the result obtained under subsection (2) of this section to arrive at the annual tax: (3) (a) The following tax credits, when applicable, shall be deducted from the result obtained under subsection (2) of this section to arrive at the annual tax:
        1. For taxable years beginning before January 1, 2014, twenty dollars ($20) for an unmarried individual; and 1. a. For taxable years beginning before January 1, 2014, twenty dollars ($20) for an unmarried individual; and
        2. For taxable years beginning on or after January 1, 2014, and before January 1, 2018, ten dollars ($10) for an unmarried individual;
        1. For taxable years beginning before January 1, 2014, twenty dollars ($20) for a married individual filing a separate return and an additional twenty dollars ($20) for the spouse of taxpayer if a separate return is made by the taxpayer and if the spouse, for the calendar year in which the taxable year of the taxpayer begins, had no Kentucky gross income and is not the dependent of another taxpayer; or forty dollars ($40) for married persons filing a joint return, provided neither spouse is the dependent of another taxpayer. The determination of marital status for the purpose of this section shall be made in the manner prescribed in Section 153 of the Internal Revenue Code; and 2. a. For taxable years beginning before January 1, 2014, twenty dollars ($20) for a married individual filing a separate return and an additional twenty dollars ($20) for the spouse of taxpayer if a separate return is made by the taxpayer and if the spouse, for the calendar year in which the taxable year of the taxpayer begins, had no Kentucky gross income and is not the dependent of another taxpayer; or forty dollars ($40) for married persons filing a joint return, provided neither spouse is the dependent of another taxpayer. The determination of marital status for the purpose of this section shall be made in the manner prescribed in Section 153 of the Internal Revenue Code; and
        2. For taxable years beginning on or after January 1, 2014, and before January 1, 2018, ten dollars ($10) for a married individual filing a separate return and an additional ten dollars ($10) for the spouse of a taxpayer if a separate return is made by the taxpayer and if the spouse, for the calendar year in which the taxable year of the taxpayer begins, had no Kentucky gross income and is not the dependent of another taxpayer; or twenty dollars ($20) for married persons filing a joint return, provided neither spouse is the dependent of another taxpayer. The determination of marital status for the purpose of this section shall be made in the manner prescribed in Section 153 of the Internal Revenue Code;
        1. For taxable years beginning before January 1, 2014, twenty dollars ($20) credit for each dependent. No credit shall be allowed for any dependent who has made a joint return with his or her spouse; and 3. a. For taxable years beginning before January 1, 2014, twenty dollars ($20) credit for each dependent. No credit shall be allowed for any dependent who has made a joint return with his or her spouse; and
        2. For taxable years beginning on or after January 1, 2014, and before January 1, 2018, ten dollars ($10) credit for each dependent. No credit shall be allowed for any dependent who has made a joint return with his or her spouse;
      1. An additional forty dollars ($40) credit if the taxpayer has attained the age of sixty-five (65) before the close of the taxable year;
      2. An additional forty dollars ($40) credit for taxpayer’s spouse if a separate return is made by the taxpayer and if the taxpayer’s spouse has attained the age of sixty-five (65) before the close of the taxable year, and, for the calendar year in which the taxable year of the taxpayer begins, has no Kentucky gross income and is not the dependent of another taxpayer;
      3. An additional forty dollars ($40) credit if the taxpayer is blind at the close of the taxable year;
      4. An additional forty dollars ($40) credit for taxpayer’s spouse if a separate return is made by the taxpayer and if the taxpayer’s spouse is blind, and, for the calendar year in which the taxable year of the taxpayer begins, has no Kentucky gross income and is not the dependent of another taxpayer;
      5. In the case of a fiduciary, other than an estate, the allowable tax credit shall be two dollars ($2);
      6. In the case of an estate, the allowable tax credit shall be ten dollars ($10); and
      7. An additional twenty dollars ($20) credit shall be allowed if the taxpayer is a member of the Kentucky National Guard at the close of the taxable year.
    2. In the case of nonresidents, the tax credits allowable under this subsection shall be the portion of the credits that are represented by the ratio of the taxpayer’s Kentucky adjusted gross income as determined by KRS 141.019 to the taxpayer’s adjusted gross income as defined in Section 62 of the Internal Revenue Code. However, in the case of a married nonresident taxpayer with income from Kentucky sources, whose spouse has no income from Kentucky sources, the taxpayer shall determine allowable tax credit(s) by either:
      1. The method contained above applied to the taxpayer’s tax credit(s), excluding credits for a spouse and dependents; or
      2. Prorating the taxpayer’s tax credit(s) plus the tax credits for the taxpayer’s spouse and dependents by the ratio of the taxpayer’s Kentucky adjusted gross income as determined by KRS 141.019 to the total joint federal adjusted gross income of the taxpayer and the taxpayer’s spouse.
    3. In the case of a part-year resident, the tax credits allowable under this subsection shall be the portion of the credits represented by the ratio of the taxpayer’s Kentucky adjusted gross income as determined by KRS 141.019 to the taxpayer’s adjusted gross income as defined in Section 62 of the Internal Revenue Code.
  2. An annual tax shall be paid for each taxable year as specified in this section upon the entire net income except as herein provided, from all tangible property located in this state, from all intangible property that has acquired a business situs in this state, and from business, trade, profession, occupation, or other activities carried on in this state, by natural persons not residents of this state. A nonresident individual shall be taxable only upon the amount of income received by the individual from labor performed, business done, or from other activities in this state, from tangible property located in this state, and from intangible property which has acquired a business situs in this state; provided, however, that the situs of intangible personal property shall be at the residence of the real or beneficial owner and not at the residence of a trustee having custody or possession thereof. The remainder of the income received by such nonresident shall be deemed nontaxable by this state.
  3. Subject to the provisions of KRS 141.081 , any individual may elect to pay the annual tax imposed by KRS 141.023 in lieu of the tax levied under this section.
  4. A part-year resident is subject to taxation, as prescribed in subsection (1) of this section, during that portion of the taxable year that the individual is a resident and, as prescribed in subsection (4) of this section, during that portion of the taxable year when the individual is a nonresident.

HISTORY: 4281b-14: amend. Acts 1946, ch. 234, § 6; 1948, ch. 93, § 2; 1952, ch. 124, § 1; 1954, ch. 79, § 2; 1956 (4th Ex. Sess.), ch. 4, § 2; 1958, ch. 3, § 1; 1960, ch. 5, Art. III, § 2; 1962, ch. 124, § 2; 1964, ch. 76, § 1; 1966, ch. 176, part I, § 3; 1970, ch. 216, § 5; 1972, ch. 84, part II, § 2; 1974, ch. 362, § 1; 1976, ch. 77, part I, § 1; 1990, ch. 476, Pt. VII D, § 632, effective April 11, 1990; 2005, ch. 168, § 5, effective March 18, 2005; 2013, ch. 119, § 16, effective June 25, 2013; 2018 ch. 171, § 57, effective April 14, 2018; 2018 ch. 207, § 57, effective April 27, 2018.

Compiler's Notes.

Sections 62 and 153 of the Internal Revenue Code, referred to in this section, are compiled as 26 USCS §§ 62 and 153, respectively.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Application.
  3. Classification and Selection.
  4. Income and License Tax.
  5. Out-of-State Income.
  6. Income from Bonds.
1. Constitutionality.

The fact that federal law prohibited states from levying an income tax on the salaries of federal office holders at the time the Kentucky income tax law was enacted did not make the law unconstitutional. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ).

2. Application.

The income tax applies to salaries received by all public officers. Martin v. Wolfford, 269 Ky. 411 , 107 S.W.2d 267, 1937 Ky. LEXIS 605 ( Ky. 1937 ).

3. Classification and Selection.

In dividing persons into classes and imposing different rates on different classes the legislature must act reasonably and not arbitrarily. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ).

The same considerations that control the matter of classification and selection of subjects for occupational, franchise and license taxes are applicable to the classification and selection of subjects for income taxes. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ).

4. Income and License Tax.

A person may be compelled to pay an income tax on the income received from a business, although he is also required to pay a franchise or license tax for the privilege of engaging in such business. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ).

5. Out-of-State Income.

Income derived from sources outside of Kentucky prior to the date on which the person becomes a resident of Kentucky is not subject to the Kentucky income tax. Martin v. Gage, 281 Ky. 95 , 134 S.W.2d 966, 1939 Ky. LEXIS 7 ( Ky. 1939 ).

6. Income from Bonds.

Bond taxation system in Kentucky that exempted interest income derived from bonds issued by the Commonwealth but required taxes paid on interest income derived from bonds issued by a sister state, set forth under KRS 141.020 , 141.030 , and 141.040 did not violate the dormant Commerce Clause as the tax exemption for in-state municipal bond interest favored a traditional government function without any differential treatment favoring local entities over substantially similar out-of-state interests; further, in addition to exercising its regulatory taxation authority, the Commonwealth also participated in the market for public bonds to finance public projects and services and it was not prohibited from favoring its own bonds in the competitive market. Dep't of Revenue v. Davis, 553 U.S. 328, 128 S. Ct. 1801, 170 L. Ed. 2d 685, 2008 U.S. LEXIS 4312 (U.S. 2008).

Cited in:

Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ); Fontaine v. Department of Finance, 249 S.W.2d 799, 1952 Ky. LEXIS 872 ( Ky. 1952 ); Collins v. Kentucky Tax Com., 261 S.W.2d 303, 1953 Ky. LEXIS 1006 ( Ky. 1953 ); Maxwell v. Commonwealth, 263 S.W.2d 489, 1953 Ky. LEXIS 1149 ( Ky. 1953 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Eardly & Ruml, My Old Kentucky Home or the Sunshine State? Residency and Estate Planning Issues for Kentucky “Snowbirds” in Florida, Volume 74, No. 6, November 2010, Ky. Bench & Bar 20.

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Rutledge & Vestal, Making the Obvious Choice Malpractice: LLPs and the Lawyer Liability Time Bomb in Kentucky’s 2005 Tax Modernization., 94 Ky. L.J. 17 (2005/2006).

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

141.0201. Artistic charitable contributions deduction for individuals.

  1. Notwithstanding any statutory provisions to the contrary, a deduction shall be allowed individuals against adjusted gross income in arriving at net income for “qualified artistic charitable contributions” in an amount equal to the fair market value of the property contributed as determined at the time of such contribution.
  2. For purposes of this chapter, “qualified artistic charitable contribution” shall mean a charitable contribution of any literary, musical, artistic or scholarly composition, any letter or memorandum, or similar property, but only if:
    1. Such property was created by the personal efforts of the taxpayer no less than one (1) year prior to such contribution;
    2. The taxpayer has received a written appraisal of the fair market value of such property by a person qualified to make such an appraisal (other than the taxpayer, donee, or any related person within the meaning of Section 168(e)(4)(D) of the Internal Revenue Code), and the appraisal is made within one (1) year of the date of such contribution;
    3. The taxpayer attaches to his income tax return for the taxable year in which such contribution was made a copy of such appraisal;
    4. The donee is an organization described in Section 170(b)(1)(A) of the Internal Revenue Code;
    5. The use of such property by the donee is related to the purpose or function constituting the basis for the donee’s exemption under Section 501 of the Internal Revenue Code, or in the case of a governmental unit, to a public purpose; and
    6. The taxpayer receives from the donee a written statement representing that the donee’s use of the property will be in accordance with paragraph (e) of this subsection.
  3. The aggregate amount of qualified artistic charitable contributions allowable to any taxpayer as a deduction under this section for any taxable year shall not exceed the artistic adjusted gross income of the taxpayer for such taxable year. For purposes of this subsection, the term “artistic adjusted gross income” means that portion of the adjusted gross income of the taxpayer for the taxable year attributable to:
    1. Income with respect to property described in subsection (2) of this section that is created by the taxpayer; and
    2. Income from teaching, lecturing, performing or similar activity with respect to such property or to similar property created by individuals other than the taxpayer.
  4. The provisions of this section shall not apply in the case of any charitable contribution of any letter, memorandum, or similar property which was written, prepared or produced by or for an individual while such individual was an officer or employee of the United States or any state, or political subdivision thereof, if the writing, preparation, or production of such property was related to, or arose out of the performance of such individual’s duties as such an officer or employee.
  5. The provisions of this section shall be effective for tax years beginning on or after January 1, 1987.

History. Enact. Acts 1986, ch. 247, § 1, effective July 15, 1986.

Compiler’s Notes.

Sections 168, 170 and 501 of the Internal Revenue Code, referred to in this section, are codified as 26 USCS §§ 168, 170 and 501, respectively.

141.0202. Deduction of leasehold interest of property contributed as living quarters for homeless persons. [Repealed]

HISTORY: Enact. Acts 1990, ch. 303, § 2, effective July 1, 1990; repealed by 2018 ch. 171, § 140, effective April 14, 2018; repealed by 2018 ch. 207, § 148, effective April 27, 2018.

141.0205. Priority of application and use of tax credits.

If a taxpayer is entitled to more than one (1) of the tax credits allowed against the tax imposed by KRS 141.020 , 141.040 , and 141.0401 , the priority of application and use of the credits shall be determined as follows:

  1. The nonrefundable business incentive credits against the tax imposed by KRS 141.020 shall be taken in the following order:
    1. The limited liability entity tax credit permitted by KRS 141.0401 ;
    2. The economic development credits computed under KRS 141.347 , 141.381 , 141.384 , 141.3841 , 141.400 , 141.401 , 141.403 , 141.407 , 141.415 , 154.12-207 , and 154.12-2088 ;
    3. The qualified farming operation credit permitted by KRS 141.412 ;
    4. The certified rehabilitation credit permitted by KRS 171.397(1)(a);
    5. The health insurance credit permitted by KRS 141.062 ;
    6. The tax paid to other states credit permitted by KRS 141.070 ;
    7. The credit for hiring the unemployed permitted by KRS 141.065 ;
    8. The recycling or composting equipment credit permitted by KRS 141.390 ;
    9. The tax credit for cash contributions in investment funds permitted by KRS 154.20-263 in effect prior to July 15, 2002, and the credit permitted by KRS 154.20-258 ;
    10. The research facilities credit permitted by KRS 141.395 ;
    11. The employer High School Equivalency Diploma program incentive credit permitted under KRS 151B.402 ;
    12. The voluntary environmental remediation credit permitted by KRS 141.418 ;
    13. The biodiesel and renewable diesel credit permitted by KRS 141.423 ;
    14. The clean coal incentive credit permitted by KRS 141.428 ;
    15. The ethanol credit permitted by KRS 141.4242 ;
    16. The cellulosic ethanol credit permitted by KRS 141.4244 ;
    17. The energy efficiency credits permitted by KRS 141.436 ;
    18. The railroad maintenance and improvement credit permitted by KRS 141.385 ;
    19. The Endow Kentucky credit permitted by KRS 141.438 ;
    20. The New Markets Development Program credit permitted by KRS 141.434 ;
    21. The distilled spirits credit permitted by KRS 141.389 ;
    22. The angel investor credit permitted by KRS 141.396 ;
    23. The film industry credit permitted by KRS 141.383 for applications approved on or after April 27, 2018;
    24. The inventory credit permitted by KRS 141.408 ; and
    25. The renewable chemical production credit permitted by KRS 141.4231 .
  2. After the application of the nonrefundable credits in subsection (1) of this section, the nonrefundable personal tax credits against the tax imposed by KRS 141.020 shall be taken in the following order:
    1. The individual credits permitted by KRS 141.020 (3);
    2. The credit permitted by KRS 141.066 ;
    3. The tuition credit permitted by KRS 141.069 ;
    4. The household and dependent care credit permitted by KRS 141.067 ; and
    5. The income gap credit permitted by KRS 141.066 .
  3. After the application of the nonrefundable credits provided for in subsection (2) of this section, the refundable credits against the tax imposed by KRS 141.020 shall be taken in the following order:
    1. The individual withholding tax credit permitted by KRS 141.350 ;
    2. The individual estimated tax payment credit permitted by KRS 141.305 ;
    3. The certified rehabilitation credit permitted by KRS 171.3961 and 171.397(1)(b); and
    4. The film industry tax credit permitted by KRS 141.383 for applications approved prior to April 27, 2018.
  4. The nonrefundable credit permitted by KRS 141.0401 shall be applied against the tax imposed by KRS 141.040 .
  5. The following nonrefundable credits shall be applied against the sum of the tax imposed by KRS 141.040 after subtracting the credit provided for in subsection (4) of this section, and the tax imposed by KRS 141.040 1 in the following order:
    1. The economic development credits computed under KRS 141.347 , 141.381 , 141.384 , 141.3841 , 141.400 , 141.401 , 141.403 , 141.407 , 141.415 , 154.12-207 , and 154.12-2088 ;
    2. The qualified farming operation credit permitted by KRS 141.412 ;
    3. The certified rehabilitation credit permitted by KRS 171.397(1)(a);
    4. The health insurance credit permitted by KRS 141.062 ;
    5. The unemployment credit permitted by KRS 141.065 ;
    6. The recycling or composting equipment credit permitted by KRS 141.390 ;
    7. The coal conversion credit permitted by KRS 141.041 ;
    8. The enterprise zone credit permitted by KRS 154.45-090 , for taxable periods ending prior to January 1, 2008;
    9. The tax credit for cash contributions to investment funds permitted by KRS 154.20-263 in effect prior to July 15, 2002, and the credit permitted by KRS 154.20-258 ;
    10. The research facilities credit permitted by KRS 141.395 ;
    11. The employer High School Equivalency Diploma program incentive credit permitted by KRS 151B.402 ;
    12. The voluntary environmental remediation credit permitted by KRS 141.418 ;
    13. The biodiesel and renewable diesel credit permitted by KRS 141.423 ;
    14. The clean coal incentive credit permitted by KRS 141.428 ;
    15. The ethanol credit permitted by KRS 141.4242 ;
    16. The cellulosic ethanol credit permitted by KRS 141.4244 ;
    17. The energy efficiency credits permitted by KRS 141.436 ;
    18. The ENERGY STAR home or ENERGY STAR manufactured home credit permitted by KRS 141.437 ;
    19. The railroad maintenance and improvement credit permitted by KRS 141.385 ;
    20. The railroad expansion credit permitted by KRS 141.386 ;
    21. The Endow Kentucky credit permitted by KRS 141.438 ;
    22. The New Markets Development Program credit permitted by KRS 141.434 ;
    23. The distilled spirits credit permitted by KRS 141.389 ;
    24. The film industry credit permitted by KRS 141.383 for applications approved on or after April 27, 2018;
    25. The inventory credit permitted by KRS 141.408 ; and
    26. The renewable chemical production tax credit permitted by KRS 141.4231 .
  6. After the application of the nonrefundable credits in subsection (5) of this section, the refundable credits shall be taken in the following order:
    1. The corporation estimated tax payment credit permitted by KRS 141.044 ;
    2. The certified rehabilitation credit permitted by KRS 171.3961 and 171.397(1)(b); and
    3. The film industry tax credit permitted by KRS 141.383 for applications approved prior to April 27, 2018.

HISTORY: Enact. Acts 1994, ch. 57, § 1, effective July 15, 1994; 1998, ch. 414, § 20, effective July 15, 1998; 1998, ch. 499, § 6, effective July 15, 1998; 2000, ch. 320, § 2, effective July 14, 2000; 2002, ch. 230, § 7, effective July 15, 2002; 2005, ch. 168, § 6, effective March 18, 2005; 2006, ch. 6, § 13, effective March 6, 2006; 2006 (1st Ex. Sess.), ch. 2, § 2, effective June 28, 2006; 2007, ch. 91, § 7, effective March 23, 2007; 2007 (2nd Ex. Sess.), ch. 1, § 27, effective August 30, 2007; 2008, ch. 139, § 14, effective July 15, 2008; 2009 (1st Ex. Sess.), ch. 1, § 30, effective June 26, 2009; repealed and reenact., Acts 2010, ch. 5, § 14, effective February 25, 2010; Acts 2010 (1st Ex. Sess.), ch. 2, § 15, effective June 4, 2010; 2013, ch. 59, § 46, effective June 25, 2013; 2013, ch. 131, § 33, effective June 25, 2013; 2014, ch. 102, § 17, effective July 15, 2014; 2017 ch. 63, § 10, effective June 29, 2017; 2018 ch. 171, § 105, effective April 14, 2018; 2018 ch. 207, § 105, effective April 27, 2018; 2018 ch. 199, § 5, effective July 14, 2018; 2019 ch. 146, § 9, effective June 27, 2019; 2019 ch. 151, § 79, effective June 27, 2019; 2020 ch. 91, § 20, effective April 15, 2020.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/6/2006). 2006 Ky. Acts ch. 6, § 30, provides that this section applies retroactively for taxable years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(7/15/1994). This statute applies “to taxable years beginning after December 31, 1993.” 1994 Ky. Acts ch. 57, sec. 4.

141.021. Federal and local government annuities excluded from gross income — Taxability after December 31, 1997.

Notwithstanding the provisions of KRS 141.010 , federal retirement annuities, and local government retirement annuities paid pursuant to KRS 67A.320 , 67A.340 , 67A.360 to 67A.690 , 79.080 , 90.400 , 90.410 , 95.290 , 95.520 to 95.620 , 95.621 to 95.629 , 95.767 to 95.784 , 95.851 to 95.884 , or 96.180 , shall be excluded from gross income. Except federal retirement annuities and local government retirement annuities accrued or accruing on or after January 1, 1998, shall be subject to the tax imposed by KRS 141.020 , to the extent provided in KRS 141.019 and 141.0215 .

History. Enact. Acts 1972, ch. 119, § 1; 1974, ch. 314, § 2; 1976, ch. 121, § 1; 1978, ch. 343, § 1, effective June 17, 1978; 1990, ch. 305, § 1, effective July 13, 1990; 1995 (2nd Ex. Sess.), ch. 1, § 9, effective April 28, 1995; 2019 ch. 151, § 38, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 38 of that Act apply to taxable years beginning on or after January 1, 2019.

NOTES TO DECISIONS

1. Pension Benefits.

There are real and substantial distinctions between public and private employment sufficient to justify the separate classification of governmental pensioners and private industry pensioners under Ky. Const., § 59(15) for purposes of Kentucky income taxation of their pension benefits. Commonwealth Revenue Cabinet v. Cope, 875 S.W.2d 87, 1994 Ky. LEXIS 15 (Ky.), cert. denied, 513 U.S. 931, 115 S. Ct. 324, 130 L. Ed. 2d 284, 1994 U.S. LEXIS 7146 (U.S. 1994).

Opinions of Attorney General.

The effect of the present Kentucky law dealing with the taxation of state and federal retirement benefits is to completely exempt state benefits and, for the most part, tax federal benefits; consequently, Kentucky’s method of taxation violates federal law. OAG 89-54 .

Research References and Practice Aids

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

141.0215. Inclusion in gross income of government retirement payments after December 31, 1997 — Computation.

  1. Notwithstanding the provisions of KRS 141.010(1), for tax years commencing on or after January 1, 1998, the amount of all previously untaxed distributions from a retirement plan paid pursuant to KRS Chapters 6, 16, 21, 61, 67A, 78, 90, 95, 96, 161, and 164, and the amount of all previously untaxed distributions paid from a retirement plan by the federal government, which are excluded from gross income pursuant to KRS 141.021 , shall be included in gross income as follows:
    1. Multiply the total annual government retirement payments by a fraction whose numerator is the number of full or partial years of service performed for the governmental unit making the retirement payments after January 1, 1998, and whose denominator is the total number of full or partial years of service performed for the governmental unit making retirement payments, including purchased service credit. Purchased service credits shall be included in the numerator of the fraction only if the services for which credits are being purchased were provided after January 1, 1998.
    2. The resulting number shall be the amount included in gross income.
  2. Any taxpayer receiving government retirement payments from more than one (1) governmental unit shall separately determine the payment amount attributable to each unit to be included in gross income, using the formula set forth in subsection (1) of this section.

History. Enact. Acts 1995 (2nd Ex. Sess.), ch. 1, § 2, effective April 28, 1995; 2019 ch. 151, § 39, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 39 of that Act apply to taxable years beginning on or after January 1, 2019.

(6/27/2019). Although 2019 Ky. Acts ch. 151, sec. 39, contained a citation to “141.010(12)” in subsection (1) of this statute, it is clear from the context and from the history of KRS 141.010 that “141.010(1 )” was intended, and this manifest clerical or typographical error was corrected in codification under the authority of KRS 7.136 .

141.022. Deduction allowed individuals and fiduciaries for 1956. [Repealed.]

Compiler’s Notes.

This section (Acts 1956 (4th Ex. Sess.), ch. 4, § 17) was repealed by Acts 1962, ch. 210, § 50.

141.023. Optional tax tables.

To facilitate tax computation and tax return preparation, the Department of Revenue may develop optional tax tables and specify the classes of taxpayers eligible to utilize the tables in the preparation of their returns.

History. Enact. Acts 1976, ch. 77, part I, § 2; 1990, ch. 476, Pt. VII D, § 633, effective April 11, 1990; 2005, ch. 85, § 472, effective June 20, 2005.

Compiler’s Notes.

Section 8, part I of Acts 1976, ch. 77, read: “The provisions of Part I of this Act shall apply to taxable years beginning after December 31, 1975.”

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

141.025. Optional short form tax. [Repealed.]

Compiler’s Notes.

This section (Acts 1946, ch. 234, § 3; 1954, ch. 79, § 3; 1956 (4th Ex. Sess.), ch. 4, § 3; 1960, ch. 5, Art. III, § 3) was repealed by Acts 1976, ch. 77, part I, § 7. For present law see KRS 141.023 .

141.030. Levy of income tax on estates, trusts and fiduciaries — Liability of fiduciaries.

  1. The tax imposed by KRS 141.020 upon individuals shall apply to estates and trusts and to all fiduciaries. This tax shall be paid annually upon the net income of estates and of any property held in trust at the rates specified in KRS 141.020 .
  2. The fiduciary shall be responsible for making the return of income for the person for whom he acts, whether the income is taxable to the fiduciary or to the beneficiaries of the income.

History. 4281b-29: amend. Acts 1950, ch. 172; 1954, ch. 79, § 4.

NOTES TO DECISIONS

  1. Trust Law.
  2. Income from Bonds.
1. Trust Law.

In computing the distributive share of beneficiary of trust estate, the general Kentucky law governing the administration of trusts, which is concerned with the respective rights and obligations as they exist between the trustee, the beneficiary and the remainderman, has no application, the court being concerned only with the interpretation of the income tax laws of this state as expressed by the statutes passed by the general assembly. Maxwell v. Commonwealth, 263 S.W.2d 489, 1953 Ky. LEXIS 1149 ( Ky. 1953 ).

2. Income from Bonds.

Bond taxation system in Kentucky that exempted interest income derived from bonds issued by the Commonwealth but required taxes paid on interest income derived from bonds issued by a sister state, set forth under KRS 141.020 , 141.030 , and 141.040 did not violate the dormant Commerce Clause as the tax exemption for in-state municipal bond interest favored a traditional government function without any differential treatment favoring local entities over substantially similar out-of-state interests; further, in addition to exercising its regulatory taxation authority, the Commonwealth also participated in the market for public bonds to finance public projects and services and it was not prohibited from favoring its own bonds in the competitive market. Dep't of Revenue v. Davis, 553 U.S. 328, 128 S. Ct. 1801, 170 L. Ed. 2d 685, 2008 U.S. LEXIS 4312 (U.S. 2008).

Cited in:

Oates v. Ballard, 299 Ky. 661 , 186 S.W.2d 650, 1945 Ky. LEXIS 491 , 159 A.L.R. 98 ( Ky. 1945 ); Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ); McCaslin v. Hamilton, 726 S.W.2d 713, 1987 Ky. App. LEXIS 461 (Ky. Ct. App. 1987).

141.039. Calculation of gross income and net income — Taxable years beginning on or after January 1, 2018, in the case of corporations.

For taxable years beginning on or after January 1, 2018, in the case of corporations:

  1. Gross income shall be calculated by adjusting federal gross income as defined in Section 61 of the Internal Revenue Code as follows:
    1. Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States;
    2. Exclude all dividend income;
    3. Include interest income derived from obligations of sister states and political subdivisions thereof;
    4. Exclude fifty percent (50%) of gross income derived from any disposal of coal covered by Section 631(c) of the Internal Revenue Code if the corporation does not claim any deduction for percentage depletion, or for expenditures attributable to the making and administering of the contract under which such disposition occurs or to the preservation of the economic interests retained under such contract;
    5. Include the amount calculated under KRS 141.205 ;
    6. Ignore the provisions of Section 281 of the Internal Revenue Code in computing gross income;
    7. Include the amount of deprecation deduction calculated under 26 U.S.C. sec. 167 or 168; and
  2. Net income shall be calculated by subtracting from gross income:
    1. The deduction for depreciation allowed by KRS 141.0101 ;
    2. Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families;
    3. All the deductions from gross income allowed corporations by Chapter 1 of the Internal Revenue Code, as modified by KRS 141.0101 , except:
      1. Any deduction for a state tax which is computed, in whole or in part, by reference to gross or net income and which is paid or accrued to any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or to any foreign country or political subdivision thereof;
      2. The deductions contained in Sections 243, 245, and 247 of the Internal Revenue Code;
      3. The provisions of Section 281 of the Internal Revenue Code shall be ignored in computing net income;
      4. Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under the provisions of this chapter, and nothing in this chapter shall be construed to permit the same item to be deducted more than once;
      5. Any deduction for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained;
      6. Any deduction prohibited by KRS 141.205 ; and
      7. Any dividends-paid deduction of any captive real estate investment trust; and
      1. A deferred tax deduction in an amount computed in accordance with this paragraph. (d) 1. A deferred tax deduction in an amount computed in accordance with this paragraph.
      2. For purposes of this paragraph:
        1. “Net deferred tax asset” means that deferred tax assets exceed the deferred tax liabilities of the combined group, as computed in accordance with accounting principles generally accepted in the United States of America; and
        2. “Net deferred tax liability” means deferred tax liabilities that exceed the deferred tax assets of a combined group as defined in KRS 141.202 , as computed in accordance with accounting principles generally accepted in the United States of America.
      3. Only publicly traded companies, including affiliated corporations participating in the filing of a publicly traded company’s financial statements prepared in accordance with accounting principles generally accepted in the United States of America, as of January 1, 2019, shall be eligible for this deduction.
      4. If the provisions of KRS 141.202 result in an aggregate increase to the member’s net deferred tax liability, an aggregate decrease to the member’s net deferred tax asset, or an aggregate change from a net deferred tax asset to a net deferred tax liability, the combined group shall be entitled to a deduction, as determined in this paragraph.
      5. For ten (10) years beginning with the combined group’s first taxable year beginning on or after January 1, 2024, a combined group shall be entitled to a deduction from the combined group’s entire net income equal to one-tenth (1/10) of the amount necessary to offset the increase in the net deferred tax liability, decrease in the net deferred tax asset, or aggregate change from a net deferred tax asset to a net deferred tax liability. The increase in the net deferred tax liability, decrease in the net deferred tax asset, or the aggregate change from a net deferred tax asset to a net deferred tax liability shall be computed based on the change that would result from the imposition of the combined reporting requirement under KRS 141.202, but for the deduction provided under this paragraph as of June 27, 2019.
      6. The deferred tax impact determined in subparagraph 5. of this paragraph shall be converted to the annual deferred tax deduction amount, as follows:
        1. The deferred tax impact determined in subparagraph 5. of this paragraph shall be divided by the tax rate determined under KRS 141.040 ;
        2. The resulting amount shall be further divided by the apportionment factor determined by KRS 141.120 or 141.121 that was used by the combined group in the calculation of the deferred tax assets and deferred tax liabilities as described in subparagraph 5. of this paragraph; and
        3. The resulting amount represents the total net deferred tax deduction available over the ten (10) year period as described in subparagraph 5. of this paragraph.
      7. The deduction calculated under this paragraph shall not be adjusted as a result of any events happening subsequent to the calculation, including but not limited to any disposition or abandonment of assets. The deduction shall be calculated without regard to the federal tax effect and shall not alter the tax basis of any asset. If the deduction under this section is greater than the combined group’s entire Kentucky net income, any excess deduction shall be carried forward and applied as a deduction to the combined group’s entire net income in future taxable years until fully utilized.
      8. Any combined group intending to claim a deduction under this paragraph shall file a statement with the department on or before July 1, 2019. The statement shall specify the total amount of the deduction which the combined group claims on the form, including calculations and other information supporting the total amounts of the deduction as required by the department. No deduction shall be allowed under this paragraph for any taxable year, except to the extent claimed on the timely filed statement in accordance with this paragraph.

HISTORY: 2018 ch. 171, § 56, effective April 14, 2018; 2018 ch. 207, § 56, effective April 27, 2018; 2019 ch. 196, § 4, effective June 27, 2019; 2020 ch. 91, § 7, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 7 of that Act apply to taxable years beginning on or after January 1, 2019.

(6/27/2019). Under the authority of KRS 7.136(1), the Reviser of Statutes has rearranged the subdivisions in subsection (2)(d)2. of this statute to place the definitions in alphabetical order. No words in the definitions were changed in this process.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

141.040. Corporation income tax — Exemptions — Rate.

  1. Every corporation doing business in this state, except those corporations listed in paragraphs (a) and (b) of this subsection, shall pay for each taxable year a tax to be computed by the taxpayer on taxable net income at the rates specified in this section:
    1. For taxable years beginning prior to January 1, 2021:
      1. Financial institutions, as defined in KRS 136.500 , except bankers banks organized under KRS 286.3-135 ;
      2. Savings and loan associations organized under the laws of this state and under the laws of the United States and making loans to members only;
      3. Banks for cooperatives;
      4. Production credit associations;
      5. Insurance companies, including farmers’ or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
      6. Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
      7. Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit; and
      8. Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:
        1. The property consists of the final printed product, or copy from which the printed product is produced; and
        2. The corporation has no individuals receiving compensation in this state as provided in KRS 141.120(8)(b); and.
    2. For taxable years beginning on or after January 1, 2021:
      1. Insurance companies, including farmers’ or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
      2. Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
      3. Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit; and
      4. Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:
        1. The property consists of the final printed product, or copy from which the printed product is produced; and
        2. The corporation has no individuals receiving compensation in this state as provided in KRS 141.120(8)(b).
  2. For taxable years beginning on or after January 1, 2018, the rate of five percent (5%) of taxable net income shall apply.
  3. For taxable years beginning on or after January 1, 2007, and before January 1, 2018, the following rates shall apply:
    1. Four percent (4%) of the first fifty thousand dollars ($50,000) of taxable net income;
    2. Five percent (5%) of taxable net income over fifty thousand dollars ($50,000) up to one hundred thousand dollars ($100,000); and
    3. Six percent (6%) of taxable net income over one hundred thousand dollars ($100,000).
    1. An S corporation shall pay income tax on the same items of income and in the same manner as required for federal purposes, except to the extent required by differences between this chapter and the federal income tax law and regulations. (4) (a) An S corporation shall pay income tax on the same items of income and in the same manner as required for federal purposes, except to the extent required by differences between this chapter and the federal income tax law and regulations.
      1. If the S corporation is required under Section 1363(d) of the Internal Revenue Code to submit installments of tax on the recapture of LIFO benefits, installments to pay the Kentucky tax due shall be paid on or before the due date of the S corporation’s return, as extended, if applicable. (b) 1. If the S corporation is required under Section 1363(d) of the Internal Revenue Code to submit installments of tax on the recapture of LIFO benefits, installments to pay the Kentucky tax due shall be paid on or before the due date of the S corporation’s return, as extended, if applicable.
      2. Notwithstanding KRS 141.170(3), no interest shall be assessed on the installment payment for the period of extension.
    2. If the S corporation is required under Section 1374 or 1375 of the Internal Revenue Code to pay tax on built-in gains or on passive investment income, the amount of tax imposed by this subsection shall be computed by applying the highest rate of tax for the taxable year.

HISTORY: 4281b-14, 4281b-14a: amend. Acts 1948, ch. 93, § 3; 1952, ch. 124, § 2; 1954, ch. 79, § 5; 1956 (4th Ex. Sess.), ch. 4, § 4; 1966, ch. 176, part I, § 4; 1966, ch. 255, § 137; 1970, ch. 14, § 5; 1972, ch. 62, part III, § 2; 1972, ch. 121, § 4; 1976, ch. 155, § 8; 1980, ch. 176, § 3, effective July 15, 1980; 1985 (1st Ex. Sess.), ch. 6, Pt. III, § 18, effective July 29, 1985; 1986, ch. 459, § 4, effective July 15, 1986; 1988, ch. 111, § 1, effective July 15, 1988; 1988, ch. 332, § 1, effective July 15, 1988; 1990, ch. 476, Pt. VII C, § 629, effective April 11, 1990; 1990, ch. 262, § 6, effective July 13, 1990; 1996, ch. 254, § 32, effective July 15, 1996; 2005, ch. 168, § 7, effective March 18, 2005; 2006, ch. 251, §§ 46 and 47, effective April 25, 2006; 2006, ch. 252, Pt. XIII, § 1, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 3, effective June 28, 2006; 2018 ch. 171, § 58, effective April 14, 2018; 2018 ch. 207, § 58, effective April 27, 2018; 2019 ch. 196, § 12, effective June 27, 2019.

Compiler’s Notes.

Section 3 of Acts 1988, ch. 332 read: “This Act shall be effective for tax years beginning after December 31, 1987.”

Section 501 of the Internal Revenue Code, referred to in (1)(f), may be found as 26 USCS § 501.

The Investment Company Act of 1940, referred to in (8)(b), may be found as 15 USCS § 80a-1 et seq.

Section 527 of the Internal Revenue Code, referred to in (8)(e) and (9), may be found as 26 USCS § 527.

Section 1363(d) of the Internal Revenue Code, referred to in (14)(b)1., may be found as 26 USCS § 1363(d).

Sections 1374 and 1375 of the Internal Revenue Code, referred to in (14)(c), may be found as 26 USCS §§ 1374, 1375.

Legislative Research Commission Notes.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 40 (HB 354) and ch. 196, sec. 12 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 40, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 40, was not codified.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

(7/12/2006). 2006 Ky. Acts ch. 247 instructs the Reviser of Statutes to adjust KRS references throughout the statutes to conform with the 2006 renumbering of the Financial Services Code, KRS Chapter 286. Such an adjustment has been made in this statute.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Construction.
  3. Income from Bonds.
  4. Source.
  5. Foreign Corporation.
  6. Liability of Shareholders.
  7. Municipalities.
  8. Subsidiaries.
  9. Dividends.
1. Constitutionality.

Imposition of income tax on foreign municipalities as to income received from business enterprises in this state, while exempting Kentucky municipalities from the tax, does not violate the Fourteenth Amendment to the federal Constitution.Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

The exemption of banks and trust companies is not arbitrary or unreasonable, and does not render the income tax law unconstitutional. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ), appeal denied, Reynolds Metals Co. v. Martin, 302 U.S. 646, 58 S. Ct. 146, 82 L. Ed. 502, 1937 U.S. LEXIS 585 (1937) (decided under prior law).

2. Construction.

The phrase “tax . . . . . computed upon the entire net income . . . . . derived from . . . . . sources in the state” as used in this section does not include the receipt of dividends by a foreign corporation where the stock is held solely as an investment or otherwise and has no fair relationship to business done by the foreign corporation or its property located in the state. Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ) (decided under prior law).

The generic word, “sources,” in this section cannot stand alone, but must be restricted in meaning to relate to that income derived from “business done,” or “action taken,” or “property located” in Kentucky. Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ) (decided under prior law).

An income tax is a tax on the profits arising from appellants’ business activities and consequently is not a tax upon the use of waters lying within the territory of Kentucky. American Commercial Barge Line Co. v. Marcum, 360 S.W.2d 134, 1962 Ky. LEXIS 210 ( Ky. 1962 ) (decided under prior law).

3. Income from Bonds.

Bond taxation system in Kentucky that exempted interest income derived from bonds issued by the Commonwealth but required taxes paid on interest income derived from bonds issued by a sister state, set forth under KRS 141.020 , 141.030 , and 141.040 did not violate the dormant Commerce Clause as the tax exemption for in-state municipal bond interest favored a traditional government function without any differential treatment favoring local entities over substantially similar out-of-state interests; further, in addition to exercising its regulatory taxation authority, the Commonwealth also participated in the market for public bonds to finance public projects and services and it was not prohibited from favoring its own bonds in the competitive market. Dep't of Revenue v. Davis, 553 U.S. 328, 128 S. Ct. 1801, 170 L. Ed. 2d 685, 2008 U.S. LEXIS 4312 (U.S. 2008).

4. Source.

The leasing contract which was negotiated and executed in a foreign state is the “source” of the income and it is not subject to Kentucky income taxation for the taxation proposed has no relation to a subject within the taxing government. Kentucky Tax Com. v. American Refrigerator Transit Co., 294 S.W.2d 554, 1956 Ky. LEXIS 138 ( Ky. 1956 ) (decided under prior law).

The statutory law has changed greatly since Square D Co. v. Kentucky Bd. of Tax Appeals, 415 S.W.2d 594, 1967 Ky. LEXIS 323 ( Ky. 1967 ) was decided and the source test, which held that income must have an identifiable source within the Commonwealth in order to be taxable, is no longer justified. Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ).

5. Foreign Corporation.

A foreign corporation which owns property in this state which it rents to others is “doing business in this state,” and the income from such rentals is taxable. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

Foreign religious, charitable or educational corporations, not dispensing any benefits within this state, are not exempt from Kentucky income tax. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

A foreign municipality operating a business enterprise in this state is regarded as a private corporation with respect to such operations. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

The city of Cincinnati, in its ownership and leasing of a railroad line in this state, is a “foreign corporation doing business in this state,” and is subject to Kentucky income tax on the income received from the rental of the railroad line. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

Where Delaware corporation, holding a patent on radio tubes, entered into a contract in New York with another Delaware corporation, which had its principal office and manufacturing plant in Kentucky, under which contract the manufacturing corporation was licensed to manufacture tubes under the patent in consideration of the payment of royalties, the patent-holding corporation was not liable for income taxes on the royalties received on tubes manufactured in Kentucky, since it was not doing business in Kentucky, the patent did not constitute property located in Kentucky, and the source of the income was the contract, which was not in this state but in New York. Commonwealth ex rel. Luckett v. Radio Corp. of America, 299 Ky. 44 , 184 S.W.2d 250, 1944 Ky. LEXIS 1029 ( Ky. 1944 ) (decided under prior law).

Where an Indiana corporation operating both within and outside Kentucky had a subsidiary corporation which operated only in Ohio, which was formed solely to maximize deferral of the parent company’s federal income taxes and whose expenses were completely paid by the Indiana parent, the Department of Revenue properly determined that the parent and subsidiary were unitary in nature and that their incomes should be combined for apportionment purposes in assessing corporate income tax. Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ) (decided under prior law).

Where an Indiana corporation operating both within and outside Kentucky had a subsidiary corporation which operated only in Ohio, which was formed solely to maximize deferral of the parent company’s federal income taxes and whose expenses were completely paid by the Indiana parent, the Department of Revenue properly determined that the parent and subsidiary were unitary in nature and that their incomes should be combined for apportionment purposes in assessing corporate income tax. Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ).

KRS 141.206(5) subjected the corporations to taxation, was not void for vagueness, did not violate the Commerce Clause or U.S. Const. amend. XIV, and contained the proper apportionment formula that would not result in extraterritorial values being taxed. Revenue Cabinet v. Asworth Corp., 2009 Ky. App. LEXIS 229 (Ky. Ct. App. Nov. 20, 2009), cert. denied, 562 U.S. 1200, 131 S. Ct. 1046, 178 L. Ed. 2d 865, 2011 U.S. LEXIS 1056 (U.S. 2011).

6. Liability of Shareholders.

Under this section, there can be no such thing as an “electing” small business corporation and, therefore, none of the provisions of subchapter S of the Internal Revenue Code is applicable to the individual income tax liability of a subchapter S corporation shareholder. Brown v. Department of Revenue, 558 S.W.2d 635, 1977 Ky. App. LEXIS 854 (Ky. Ct. App. 1977).

7. Municipalities.

A Kentucky municipality is not subject to income tax on the income from public utilities operated by it in this state, even though utility service is furnished to persons other than residents of the city. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

Although a foreign municipality is not organized and conducted primarily for pecuniary profit, the profit from any business enterprise conducted by it in this state is subject to income tax. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

8. Subsidiaries.

Where Kentucky corporation operating theaters in Kentucky and Indiana owned all of the stock of an Indiana corporation operating theaters in Indiana, and the Indiana corporation was merely an adjunct or agency of the Kentucky corporation, dividends received by the Kentucky corporation on the stock of the Indiana corporation were not taxable in Kentucky. Kentucky Tax Com. v. Fourth Ave. Amusement Co., 293 Ky. 668 , 170 S.W.2d 42, 1943 Ky. LEXIS 699 ( Ky. 1943 ) (decided under prior law).

9. Dividends.

This section does not impose the tax upon dividends received from stock of a Kentucky corporation which are paid to a foreign corporation holding the stock solely as an investment and without relation to business which the foreign corporation does in Kentucky. Virginia-Carolina Chemical Co. v. Commonwealth, 302 Ky. 173 , 194 S.W.2d 180, 1946 Ky. LEXIS 629 ( Ky. 1946 ) (decided under prior law).

Cited in:

Tennessee Gas & Transmission Co. v. Commonwealth, 308 Ky. 571 , 215 S.W.2d 102, 1948 Ky. LEXIS 979 ( Ky. 1948 ); Square D Co. v. Kentucky Bd. of Tax Appeals, 415 S.W.2d 594, 1967 Ky. LEXIS 323 ( Ky. 1967 ); Ruby Constr. Co. v. Department of Revenue, 578 S.W.2d 248, 1978 Ky. App. LEXIS 668 (Ky. Ct. App. 1978); Corning Glass Works v. Department of Revenue, 616 S.W.2d 789, 1981 Ky. App. LEXIS 241 (Ky. Ct. App. 1981).

Opinions of Attorney General.

Transaction involving transfer of notes secured by mortgages on single-family dwellings located in Kentucky from nonresident corporation to nonresident bank must be included as a factor in computing the corporation’s Kentucky corporate income tax liability, unless the corporation is exempt from the Kentucky corporation income tax as provided in subdivisions (1)(a) to (1)(h) of this section. OAG 82-264 .

Research References and Practice Aids

Cross-References.

Corporate property to be taxed at same rate as property of individuals, Ky. Const., § 174.

Kentucky Law Journal.

Milner, Allocation of Corporate Income for Purposes of the Kentucky Income Tax, 40 Ky. L.J. 374 (1952).

Rutledge & Vestal, Making the Obvious Choice Malpractice: LLPs and the Lawyer Liability Time Bomb in Kentucky’s 2005 Tax Modernization., 94 Ky. L.J. 17 (2005/2006).

Note: Common Sense and the Commerce Clause: Why Elimination of the Physical Presence Test for Taxation Defies Both, 100 Ky. L.J. 707 (2011/2012).

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

141.0401. Limited liability entity tax — Exemptions — Rate.

  1. As used in this section:
    1. “Kentucky gross receipts” means an amount equal to the computation of the numerator of the apportionment fraction under KRS 141.120 , any administrative regulations related to the computation of the sales factor, and KRS 141.121 and includes the proportionate share of Kentucky gross receipts of all wholly or partially owned limited liability pass-through entities, including all layers of a multi-layered pass-through structure;
    2. “Gross receipts from all sources” means an amount equal to the computation of the denominator of the apportionment fraction under KRS 141.120 , any administrative regulations related to the computation of the sales factor, and KRS 141.121 and includes the proportionate share of gross receipts from all sources of all wholly or partially owned limited liability pass-through entities, including all layers of a multi-layered pass-through structure;
    3. “Affiliated group” has the same meaning as in KRS 141.201 ;
    4. “Cost of goods sold” means:
      1. Amounts that are:
        1. Allowable as cost of goods sold pursuant to the Internal Revenue Code and any guidelines issued by the Internal Revenue Service relating to cost of goods sold, unless modified by this paragraph; and
        2. Incurred in acquiring or producing the tangible product generating the Kentucky gross receipts.
      2. For manufacturing, producing, reselling, retailing, or wholesaling activities, cost of goods sold shall only include costs directly incurred in acquiring or producing the tangible product. In determining cost of goods sold:
        1. Labor costs shall be limited to direct labor costs as defined in paragraph (f) of this subsection;
        2. Bulk delivery costs as defined in paragraph (g) of this subsection may be included; and
        3. Costs allowable under Section 263A of the Internal Revenue Code may be included only to the extent the costs are incurred in acquiring or producing the tangible product generating the Kentucky gross receipts. Notwithstanding the foregoing, indirect labor costs allowable under Section 263A shall not be included;
      3. For any activity other than manufacturing, producing, reselling, retailing, or wholesaling, no costs shall be included in cost of goods sold.
      1. “Kentucky gross profits” means Kentucky gross receipts reduced by returns and allowances attributable to Kentucky gross receipts, less the cost of goods sold attributable to Kentucky gross receipts. If the amount of returns and allowances attributable to Kentucky gross receipts and the cost of goods sold attributable to Kentucky gross receipts is zero, then “Kentucky gross profits” means Kentucky gross receipts; and (e) 1. “Kentucky gross profits” means Kentucky gross receipts reduced by returns and allowances attributable to Kentucky gross receipts, less the cost of goods sold attributable to Kentucky gross receipts. If the amount of returns and allowances attributable to Kentucky gross receipts and the cost of goods sold attributable to Kentucky gross receipts is zero, then “Kentucky gross profits” means Kentucky gross receipts; and
      2. “Gross profits from all sources” means gross receipts from all sources reduced by returns and allowances attributable to gross receipts from all sources, less the cost of goods sold attributable to gross receipts from all sources. If the amount of returns and allowances attributable to gross receipts from all sources and the cost of goods sold attributable to gross receipts from all sources is zero, then gross profits from all sources means gross receipts from all sources;
    5. “Direct labor” means labor that is incorporated into the tangible product sold or is an integral part of the manufacturing process;
    6. “Bulk delivery costs” means the cost of delivering the product to the consumer if:
      1. The tangible product is delivered in bulk and requires specialized equipment that generally precludes commercial shipping; and
      2. The tangible product is taxable under KRS 138.220 ;
    7. “Manufacturing” and “producing” means:
      1. Manufacturing, producing, constructing, or assembling components to produce a significantly different or enhanced end tangible product;
      2. Mining or severing natural resources from the earth; or
      3. Growing or raising agricultural or horticultural products or animals;
    8. “Real property” means land and anything growing on, attached to, or erected on it, excluding anything that may be severed without injury to the land;
    9. “Reselling,” “retailing,” and “wholesaling” mean the sale of a tangible product;
    10. “Tangible personal property” means property, other than real property, that has physical form and characteristics; and
    11. “Tangible product” means real property and tangible personal property;
    1. For taxable years beginning on or after January 1, 2007, an annual limited liability entity tax shall be paid by every corporation and every limited liability pass-through entity doing business in Kentucky on all Kentucky gross receipts or Kentucky gross profits except as provided in this subsection. A small business exclusion from this tax shall be provided based on the reduction contained in this subsection. The tax shall be the greater of the amount computed under paragraph (b) of this subsection or one hundred seventy-five dollars ($175), regardless of the application of any tax credits provided under this chapter or any other provisions of the Kentucky Revised Statutes for which the business entity may qualify. (2) (a) For taxable years beginning on or after January 1, 2007, an annual limited liability entity tax shall be paid by every corporation and every limited liability pass-through entity doing business in Kentucky on all Kentucky gross receipts or Kentucky gross profits except as provided in this subsection. A small business exclusion from this tax shall be provided based on the reduction contained in this subsection. The tax shall be the greater of the amount computed under paragraph (b) of this subsection or one hundred seventy-five dollars ($175), regardless of the application of any tax credits provided under this chapter or any other provisions of the Kentucky Revised Statutes for which the business entity may qualify.
    2. The limited liability entity tax shall be the lesser of subparagraph 1. or 2. of this paragraph:
        1. If the corporation’s or limited liability pass-through entity’s gross receipts from all sources are three million dollars ($3,000,000) or less, the limited liability entity tax shall be one hundred seventy-five dollars ($175); 1. a. If the corporation’s or limited liability pass-through entity’s gross receipts from all sources are three million dollars ($3,000,000) or less, the limited liability entity tax shall be one hundred seventy-five dollars ($175);
        2. If the corporation’s or limited liability pass-through entity’s gross receipts from all sources are greater than three million dollars ($3,000,000) but less than six million dollars ($6,000,000), the limited liability entity tax shall be nine and one-half cents ($0.095) per one hundred dollars ($100) of the corporation’s or limited liability pass-through entity’s Kentucky gross receipts reduced by an amount equal to two thousand eight hundred fifty dollars ($2,850) multiplied by a fraction, the numerator of which is six million dollars ($6,000,000) less the amount of the corporation’s or limited liability pass-through entity’s Kentucky gross receipts for the taxable year, and the denominator of which is three million dollars ($3,000,000), but in no case shall the result be less than one hundred seventy-five dollars ($175);
        3. If the corporation’s or limited liability pass-through entity’s gross receipts from all sources are equal to or greater than six million dollars ($6,000,000), the limited liability entity tax shall be nine and one-half cents ($0.095) per one hundred dollars ($100) of the corporation’s or limited liability pass-through entity’s Kentucky gross receipts.
        1. If the corporation’s or limited liability pass-through entity’s gross profits from all sources are three million dollars ($3,000,000) or less, the limited liability entity tax shall be one hundred seventy-five dollars ($175); 2. a. If the corporation’s or limited liability pass-through entity’s gross profits from all sources are three million dollars ($3,000,000) or less, the limited liability entity tax shall be one hundred seventy-five dollars ($175);
        2. If the corporation’s or limited liability pass-through entity’s gross profits from all sources are at least three million dollars ($3,000,000) but less than six million dollars ($6,000,000), the limited liability entity tax shall be seventy-five cents ($0.75) per one hundred dollars ($100) of the corporation’s or limited liability pass-through entity’s Kentucky gross profits, reduced by an amount equal to twenty-two thousand five hundred dollars ($22,500) multiplied by a fraction, the numerator of which is six million dollars ($6,000,000) less the amount of the corporation’s or limited liability pass-through entity’s Kentucky gross profits, and the denominator of which is three million dollars ($3,000,000), but in no case shall the result be less than one hundred seventy-five dollars ($175);
        3. If the corporation’s or limited liability pass-through entity’s gross profits from all sources are equal to or greater than six million dollars ($6,000,000), the limited liability entity tax shall be seventy-five cents ($0.75) per one hundred dollars ($100) of all of the corporation’s or limited liability pass-through entity’s Kentucky gross profits.
    3. A credit shall be allowed against the tax imposed under paragraph (a) of this subsection for the current year to a corporation or limited liability pass-through entity that owns an interest in a limited liability pass-through entity. The credit shall be the proportionate share of tax calculated under this subsection by the lower-level pass-through entity, as determined after the amount of tax calculated by the pass-through entity has been reduced by the minimum tax of one hundred seventy-five dollars ($175). The credit shall apply across multiple layers of a multi-layered pass-through entity structure. The credit at each layer shall include the credit from each lower layer, after reduction for the minimum tax of one hundred seventy-five dollars ($175) at each layer.
    4. The department may promulgate administrative regulations to establish a method for calculating the cost of goods sold attributable to Kentucky.
  2. A nonrefundable credit based on the tax calculated under subsection (2) of this section shall be allowed against the tax imposed by KRS 141.020 or 141.040 . The credit amount shall be determined as follows:
    1. The credit allowed a corporation subject to the tax imposed by KRS 141.040 shall be equal to the amount of tax calculated under subsection (2) of this section for the current year after subtraction of any credits identified in KRS 141.020 5, reduced by the minimum tax of one hundred seventy-five dollars ($175), plus any credit determined in paragraph (b) of this subsection for tax paid by wholly or partially owned limited liability pass-through entities. The amount of credit allowed to a corporation based on the amount of tax paid under subsection (2) of this section for the current year shall be applied to the income tax due from the corporation’s activities in this state. Any remaining credit from the corporation shall be disallowed.
    2. The credit allowed members, shareholders, or partners of a limited liability pass-through entity shall be the members’, shareholders’, or partners’ proportionate share of the tax calculated under subsection (2) of this section for the current year after subtraction of any credits identified in KRS 141.0205 , as determined after the amount of tax paid has been reduced by the minimum tax of one hundred seventy-five dollars ($175). The credit allowed to members, shareholders, or partners of a limited liability pass-through entity shall be applied to income tax assessed on income from the limited liability pass-through entity. Any remaining credit from the limited liability pass-through entity shall be disallowed.
  3. Each taxpayer subject to the tax imposed in this section shall file a return, on forms prepared by the department, on or before the fifteenth day of the fourth month following the close of the taxpayer’s taxable year. Any tax remaining due after making the payments required in KRS 141.044 shall be paid by the original due date of the return.
  4. The department shall prescribe forms and promulgate administrative regulations as needed to administer the provisions of this section.
  5. The tax imposed by subsection (2) of this section shall not apply to:
    1. For taxable years beginning prior to January 1, 2021:
      1. Financial institutions, as defined in KRS 136.500 , except banker’s banks organized under KRS 287.135 or 286.3-135 ;
      2. Savings and loan associations organized under the laws of this state and under the laws of the United States and making loans to members only;
      3. Banks for cooperatives;
      4. Production credit associations;
      5. Insurance companies, including farmers’ or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
      6. Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
      7. Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit;
      8. Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:
        1. The property consists of the final printed product, or copy from which the printed product is produced; and
        2. The corporation has no individuals receiving compensation in this state as provided in KRS 141.901 ;
      9. Public service corporations subject to tax under KRS 136.120 ;
      10. Open-end registered investment companies organized under the laws of this state and registered under the Investment Company Act of 1940;
      11. Any property or facility which has been certified as a fluidized bed energy production facility as defined in KRS 211.390 ;
      12. An alcohol production facility as defined in KRS 247.910 ;
      13. Real estate investment trusts as defined in Section 856 of the Internal Revenue Code;
      14. Regulated investment companies as defined in Section 851 of the Internal Revenue Code;
      15. Real estate mortgage investment conduits as defined in Section 860D of the Internal Revenue Code;
      16. Personal service corporations as defined in Section 269A(b)(1) of the Internal Revenue Code;
      17. Cooperatives described in Sections 521 and 1381 of the Internal Revenue Code, including farmers’ agricultural and other cooperatives organized or recognized under KRS Chapter 272, advertising cooperatives, purchasing cooperatives, homeowners associations including those described in Section 528 of the Internal Revenue Code, political organizations as defined in Section 527 of the Internal Revenue Code, and rural electric and rural telephone cooperatives; or
      18. Publicly traded partnerships as defined by Section 7704(b) of the Internal Revenue Code that are treated as partnerships for federal tax purposes under Section 7704(c) of the Internal Revenue Code, or their publicly traded partnership affiliates. “Publicly traded partnership affiliates” shall include any limited liability company or limited partnership for which at least eighty percent (80%) of the limited liability company member interests or limited partner interests are owned directly or indirectly by the publicly traded partnership; and
    2. For taxable years beginning on or after January 1, 2021:
      1. Insurance companies, including farmers’ or other mutual hail, cyclone, windstorm, or fire insurance companies, insurers, and reciprocal underwriters;
      2. Corporations or other entities exempt under Section 501 of the Internal Revenue Code;
      3. Religious, educational, charitable, or like corporations not organized or conducted for pecuniary profit;
      4. Corporations whose only owned or leased property located in this state is located at the premises of a printer with which it has contracted for printing, provided that:
        1. The property consists of the final printed product, or copy from which the printed product is produced; and
        2. The corporation has no individuals receiving compensation in this state as provided in KRS 141.901 ;
      5. Public service corporations subject to tax under KRS 136.120 ;
      6. Open-end registered investment companies organized under the laws of this state and registered under the Investment Company Act of 1940;
      7. Any property or facility which has been certified as a fluidized bed energy production facility as defined in KRS 211.390 ;
      8. An alcohol production facility as defined in KRS 247.910 ;
      9. Real estate investment trusts as defined in Section 856 of the Internal Revenue Code;
      10. Regulated investment companies as defined in Section 851 of the Internal Revenue Code;
      11. Real estate mortgage investment conduits as defined in Section 860D of the Internal Revenue Code;
      12. Personal service corporations as defined in Section 269A(b)(1) of the Internal Revenue Code;
      13. Cooperatives described in Sections 521 and 1381 of the Internal Revenue Code, including farmers’ agricultural and other cooperatives organized or recognized under KRS Chapter 272, advertising cooperatives, purchasing cooperatives, homeowners associations including those described in Section 528 of the Internal Revenue Code, political organizations as defined in Section 527 of the Internal Revenue Code, and rural electric and rural telephone cooperatives; or
      14. Publicly traded partnerships as defined by Section 7704(b) of the Internal Revenue Code that are treated as partnerships for federal tax purposes under Section 7704(c) of the Internal Revenue Code, or their publicly traded partnership affiliates. “Publicly traded partnership affiliates” shall include any limited liability company or limited partnership for which at least eighty percent (80%) of the limited liability company member interests or limited partner interests are owned directly or indirectly by the publicly traded partnership.
    1. As used in this subsection, “qualified exempt organization” means an entity listed in subsection (6)(a) and (b) of this section and shall not include any entity whose exempt status has been disallowed by the Internal Revenue Service. (7) (a) As used in this subsection, “qualified exempt organization” means an entity listed in subsection (6)(a) and (b) of this section and shall not include any entity whose exempt status has been disallowed by the Internal Revenue Service.
    2. Notwithstanding any other provisions of this section, any limited liability pass-through entity that is owned in whole or in part by a qualified exempt organization shall, in calculating its Kentucky gross receipts or Kentucky gross profits, exclude the proportionate share of its Kentucky gross receipts or Kentucky gross profits attributable to the ownership interest of the qualified exempt organization.
    3. Any limited liability pass-through entity that reduces Kentucky gross receipts or Kentucky gross profits in accordance with paragraph (b) of this subsection shall disregard the ownership interest of the qualified exempt organization in determining the amount of credit available under subsection (3) of this section.
    4. The Department of Revenue may promulgate an administrative regulation to further define “qualified exempt organization” to include an entity for which exemption is constitutionally or legally required, or to exclude any entity created primarily for tax avoidance purposes with no legitimate business purpose.
  6. The credit permitted by subsection (3) of this section shall flow through multiple layers of limited liability pass-through entities and shall be claimed by the taxpayer who ultimately pays the tax on the income of the limited liability pass-through entity.

As used in this paragraph, “guidelines issued by the Internal Revenue Service” includes regulations, private letter rulings, or any other guidance issued by the Internal Revenue Service that may be relied upon by taxpayers under reliance standards established by the Internal Revenue Service;

In determining eligibility for the reductions contained in this paragraph, a member of an affiliated group shall consider the total gross receipts and the total gross profits from all sources of the entire affiliated group, including eliminating entries for transactions among the group.

HISTORY: Enact. Acts 2006 (1st Ex. Sess.), ch. 2, § 4, effective June 28, 2006; 2008, ch. 18, § 1, effective July 15, 2008; 2018 ch. 171, § 77, effective April 14, 2018; 2018 ch. 207, § 77, effective April 27, 2018; 2019 ch. 196, § 13, effective June 27, 2019; 2020 ch. 91, § 8, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 8 of that Act apply to taxable years beginning on or after January 1, 2019.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 41 (HB 354) and ch. 196, sec. 13 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 41, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 41, was not codified.

(7/15/2008). 2008 Ky. Acts ch. 18, sec. 4 provides that the amendments made to this section by that Act “shall apply to taxable periods beginning after December 31, 2007.”

(6/28/2006). 2006 (1st Extra. Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

141.0405. Coal incentive tax credit for electric power generation and alternative fuel or gasification facilities — Procedure for claiming credit — Priority of application. [Repealed]

HISTORY: Enact. Acts 2000, ch. 320, § 1, effective July 14, 2000; 2005, ch. 85, § 473, effective June 20, 2005; 2006 (1st Ex. Sess.), ch. 2, § 14, effective June 28, 2006; 2007 (2nd Ex. Sess.), ch. 1, § 18, effective August 30, 2007; 2010, ch. 24, § 111, effective July 15, 2010; repealed by 2018 ch. 29, § 5, effective July 14, 2018; repealed by 2018 ch. 171, § 140, effective April 14, 2018; repealed by 2018 ch. 207, § 148, effective April 27, 2018.

141.0406. Time frame for claiming coal incentive tax credit allowed under KRS 141.0405. [Repealed]

HISTORY: Enact. Acts 2000, ch. 320, § 3, effective July 14, 2000; 2007 (2nd Ex. Sess.), ch. 1, § 19, effective August 30, 2007; repealed by 2018 ch. 171, § 140, effective April 14, 2018; repealed by 2018 ch. 207, § 148, effective April 27, 2018.

141.041. Tax credit for corporations for installing, modifying or utilizing coal for manufacturing or heating.

  1. There shall be allowed a credit against the tax imposed on any corporation subject to taxation under KRS 141.040 and 141.0401 , and which, on or after January 1, 1984, installs, modifies, and utilizes facilities located in Kentucky for generating steam or hot water for space-heating or materials processing or for providing direct heat for industrial processes in the following ways:
    1. Replacement of an existing heat-generating facility not capable of using coal as a fuel with one in which coal can be used;
    2. Erection of a heat-generating facility additional to any existing heat-generating facility or facilities and capable of using coal as a fuel;
    3. Refurbishment for coal utilization of heat-generating facilities which were at one time capable of using coal but which had been altered to allow use of other fuels;
    4. Alteration of an existing heat-generating facility not capable of utilizing coal in such ways as to allow the use of coal;
    5. Substitution of coal for other fuels in any heat-generating facility which on January 1, 1984, was in existence and capable of utilizing coal and other fuels. Substitution means the increased heat input in BTU from coal matched by equal decreases of heat input in equivalent measures to BTU from other fuels, based upon relative fuel usage in the calendar year preceding the year in which the substitution occurred.
  2. The amount of the allowable credit shall be equal to four and one-half percent (4.5%) of the purchase price of the coal subject to taxation under KRS Chapter 143 consumed or substituted in each eligible heating facility as described in subsection (1) of this section, minus any transporting cost included in the purchase price.
  3. The credit shall be allowed for ten (10) years consecutive from the date of the initial installation, modification, or utilization of any heat-generating facility installed or modified on and after January 1, 1984, as defined in subsection (1)(a), (b), (c), and (d) of this section or ten (10) years consecutive from the filing of a fuel-switching credit claim in subsection (1)(e) of this section.
  4. The credit allowable under this section shall be applied against both the taxpayer’s income tax liability and the taxpayer’s tax liability under the limited liability entity tax imposed by KRS 141.0401 , with the ordering of the credits as provided in KRS 141.0205 , and no part of the credit shall be applicable to the tax imposed by KRS 141.040 or 141.0401 for any other taxable year.
  5. A corporation claiming the credit under this section must submit proof of the installation, modification, utilization or substitution as required by regulations issued by the Department of Revenue prior to the claiming of such credit.

History. Enact. Acts 1984, ch. 411, § 1, effective July 13, 1984; 1994, ch. 57, § 2, effective July 15, 1994; 2005, ch. 85, § 474, effective June 20, 2005; 2006 (1st Ex. Sess.), ch. 2, § 15, effective June 28, 2006.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(7/15/94). The changes to this statute from 1994 Ky. Acts ch. 57 apply “to taxable years beginning after December 31, 1993.” 1994 Ky. Acts ch. 57, sec. 4.

141.042. Declaration of estimated corporation and limited liability pass-through entity tax. [Repealed]

History. Enact. Acts 1960, ch. 186, Art. III, § 2; 1966, ch. 24, part II, § 1; 1966, ch. 176, part II, § 1; 1972, ch. 84, part II, § 3; 1972, ch. 203, § 17; 2005, ch. 85, § 475, effective June 20, 2005; 2006, ch. 6, § 14, effective March 6, 2006; 2006 (1st Ex. Sess.), ch. 2, § 5, effective June 28, 2006; repealed by 2019 ch. 151, § 80, effective June 27, 2019.

141.044. Payment of estimated tax by corporations and pass-through entities — Refund of taxes — Administrative regulations.

  1. For taxable years beginning on or after January 1, 2019, every corporation and limited liability pass-through entity subject to taxation under KRS 141.040 and 141.0401 shall make estimated tax payments if the taxes imposed by KRS 141.040 and 141.0401 for the taxable year can reasonably be expected to exceed five thousand dollars ($5,000).
  2. Estimated tax payments for the taxes imposed under KRS 141.040 and 141.040 1 shall be made at the same time and calculated in the same manner as estimated tax payments for federal income tax purposes under 26 U.S.C. sec. 6655 , except:
    1. The estimated liabilities for the taxes imposed under KRS 141.040 and 141.0401 shall be used to make the estimated payments;
    2. Any provisions in 26 U.S.C. sec. 6655 that apply for federal tax purposes but do not apply to the taxes imposed under KRS 141.040 and 141.0401 ;
    3. The addition to tax identified by 26 U.S.C. sec. 6655(a) shall instead be considered a penalty under KRS 131.180 ;
    4. The tax interest rate identified under KRS 131.183 shall be used to determine the underpayment rate instead of the rate under 26 U.S.C. sec. 6621 ;
    5. Any waiver of penalties shall be performed as provided in KRS 131.175 ; and
      1. A refund of taxes collected under this section shall include interest at the tax interest rate as defined in KRS 131.010(6). (f) 1. A refund of taxes collected under this section shall include interest at the tax interest rate as defined in KRS 131.010(6).
      2. Interest shall not begin to accrue until ninety (90) days after the latest of:
        1. The due date of the return;
        2. The date the return was filed;
        3. The date the tax was paid;
        4. The last day prescribed by law for filing the return; or
        5. The date an amended return claiming a refund is filed.
      3. No refund shall be made of any estimated tax paid unless a return is filed as required by this chapter.
  3. The department may promulgate administrative regulations to implement this section.

History. Enact. Acts 1960, ch. 186, Art. III, § 3; 1966, ch. 24, part II, § 2; 1966, ch. 176, part II, § 2; 1976, ch. 155, § 9; 1982, ch. 452, § 24, effective July 1, 1982; 2008, ch. 132, § 9, effective April 24, 2008; repealed and reenact., Acts 2009, ch. 86, § 8, effective March 24, 2009; 2019 ch. 151, § 42, effective June 27, 2019; 2020 ch. 91, § 9, effective April 15, 2020.

Compiler’s Notes.

Section 17 of Acts 1976, ch. 155, provided that the provisions of the 1976 amendment to this section should apply to taxable years beginning after December 31, 1975.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 9 of that Act apply to taxable years beginning on or after January 1, 2019.

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 15, provides that “the provisions of Sections 7 to 10 of this Act shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that “The intent of the General Assembly in repealing and reenacting KRS 136.392 , 138.195 , 141.160 , 160.6156 , 160.6157 , 160.6158 , 131.183 , 141.044 , 141.235 , 134.580 , 393.060 , and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides “To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood.”

(4/24/2008). 2008 Ky. Acts chs. 80 and 132, sec. 15 provides that the amendments made to this statute by that Act “shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act (April 24, 2008) and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

141.046. Underpayment of estimated corporation tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 186, Art. III, § 4) was repealed by Acts 1970, ch. 216, § 13.

141.050. Federal interpretations applicable, when — Taxpayer record — Subpoenas — Forms — Regulations.

  1. Except to the extent required by differences between this chapter and its application and the federal income tax law and its application, the administrative and judicial interpretations of the federal income tax law, computations of gross income and deductions therefrom, accounting methods, and accounting procedures, for purposes of this chapter shall be as nearly as practicable identical with those required for federal income tax purposes. Changes to federal income tax law made after the Internal Revenue Code reference date contained in KRS 141.010 shall not apply for purposes of this chapter unless adopted by the General Assembly.
  2. Every person subject to the provisions of this chapter shall keep records, render under oath statements, make returns, and comply with the rules and administrative regulations as the department from time to time may promulgate. Whenever the department judges it necessary, it may require a person, by notice served upon him or her, to make a return, render under oath statements, or keep records, as the department deems sufficient to show whether or not the person is liable for tax, and the extent of the liability.
  3. The commissioner or his or her authorized agent or representative, for the purpose of ascertaining the correctness of any return or for the purposes of making an estimate of the taxable income of any taxpayers, may require the attendance of the taxpayer or of any other person having knowledge in the premises.
  4. The department shall promulgate rules and regulations necessary to effectively carry out the provisions of this chapter.

HISTORY: 4281b-23: amend. Acts 1954, ch. 79, § 6; 1966, ch. 176, part I, § 5; 2002, ch. 234, § 2, effective July 15, 2002; 2002, ch. 316, § 4, effective July 15, 2002; 2005, ch. 85, § 476, effective June 20, 2005; 2016 ch. 82, § 33, effective July 15, 2016; 2018 ch. 171, § 76, effective April 14, 2018; 2018 ch. 207, § 76, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

NOTES TO DECISIONS

  1. Federal Tax Law.
  2. Liquidating Dividend.
  3. Dividend.
1. Federal Tax Law.

This section requires the application of interpretation of the federal income tax law by the federal authorities only in cases where an identical or similar situation arises under the state law. Churchill Downs-Latonia, Inc. v. Reeves, 297 Ky. 835 , 181 S.W.2d 398, 1944 Ky. LEXIS 813 ( Ky. 1944 ).

This section contemplated only the adoption of interpretations of federal law in those cases where the same or a similar situation arose under the state law or where the provisions of the federal and state laws were similar. Commonwealth ex rel. Allphin v. Borders, 267 S.W.2d 940, 1954 Ky. LEXIS 880 ( Ky. 1954 ).

Only federal laws and computations of income not inconsistent with state laws or regulations must be applied. Koehler v. Commonwealth, 432 S.W.2d 397, 1968 Ky. LEXIS 325 ( Ky. 1968 ).

Since Kentucky does not have a statute defining “dividends,” the Department of Revenue must apply 26 USCS § 301 under authority of this section in determining whether a distribution from a corporation is a dividend, return of capital, or capital gain, and the provisions of KRS 271A.225 (now repealed) and KRS 271A.230 (now repealed) are irrelevant to this determination. Department of Revenue v. Refiners Oil Corp., 612 S.W.2d 337, 1981 Ky. LEXIS 215 ( Ky. 1981 ).

2. Liquidating Dividend.

The power of the Legislature to define that accumulated profits, when distributed as a liquidating dividend, shall be income when received by stockholder, cannot be denied, regardless of vitally different provisions of the federal income tax law. Reeves v. Turner, 289 Ky. 426 , 158 S.W.2d 978, 1942 Ky. LEXIS 565 ( Ky. 1942 ).

3. Dividend.

The Department of Revenue properly assessed as not being dividends those portions of the cash distributions to corporation that represented return of capital and capital gains by applying the provisions of 26 USCS § 301 as required by subsection (1) of this section; since there are no statutes defining “dividend” in Kentucky. Department of Revenue v. Refiners Oil Corp., 612 S.W.2d 337, 1981 Ky. LEXIS 215 ( Ky. 1981 ).

Cited in:

Martin v. Gage, 281 Ky. 95 , 134 S.W.2d 966, 1939 Ky. LEXIS 7 , 126 A.L.R. 449 ( Ky. 1939 ); Oates v. Ballard, 299 Ky. 661 , 186 S.W.2d 650, 1945 Ky. LEXIS 491 , 159 A.L.R. 98 ( Ky. 1945 ); Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ); Commonwealth ex rel. Allphin v. Sandmann, 280 S.W.2d 155, 1955 Ky. LEXIS 131 ( Ky. 1955 ); Kroger Co. v. Department of Revenue, 556 S.W.2d 156, 1977 Ky. App. LEXIS 807 (Ky. Ct. App. 1977); Brown v. Department of Revenue, 558 S.W.2d 635, 1977 Ky. App. LEXIS 854 (Ky. Ct. App. 1977); Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

Research References and Practice Aids

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

141.055. Forms and rules and regulations for short form returns. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 234, § 11) was repealed by Acts 1954, ch. 79, § 35.

141.060. Tax credits allowed individuals. [Repealed.]

Compiler’s Notes.

This section (4281 b-13, 4281b-14: amend. Acts 1946, ch. 234, § 4; 1948, ch. 93, § 4; 1954, ch. 79, § 7) was repealed by Acts 1956 (4th Ex. Sess.), ch. 4, § 18.

141.062. Premiums paid for health insurance to be treated as income tax credit.

  1. The amount of premiums paid for health insurance shall be treated as an income tax credit for state income tax purposes, and as a credit against the limited liability entity tax imposed by KRS 141.0401 , with the ordering of the credits as provided in KRS 141.0205 , as follows:
    1. Twenty percent (20%) of the first year premium;
    2. Fifteen percent (15%) of the second year premium;
    3. Ten percent (10%) of the third year premium; and
    4. Five percent (5%) of the fourth year premium.
  2. No employer or employee shall be eligible for the income tax credits enumerated in this section unless:
    1. Premiums are paid into the trust prior to July 1, 1992;
    2. Fifty (50) or fewer employees are employed;
    3. No health insurance benefits have been provided by the employer during the three (3) years preceding the date premiums are initially paid to the trust;
    4. Employers maintain participation in the trust for all full-time and part-time employees for a period of four (4) continuous years; and
    5. Employers pay at least fifty percent (50%) of the premium.

History. Enact. Acts 1990, ch. 482, § 21, effective July 13, 1990; 2006 (1st Ex. Sess.), ch. 2, § 16, effective June 28, 2006.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

141.063. Skills training investment credits allowed by KRS 154.12-204 to 154.12-208 — Application to income tax obligations — Annual report.

  1. As used in this section,  unless the context requires otherwise:
    1. “Approved company”  has the same meaning as in KRS 154.12-204 ;
    2. “Corporation” has the  same meaning as in KRS 154.12-204 ;
    3. “Occupational upgrade training”  has the same meaning as in KRS 154.12-204;
    4. “Qualified company” has  the same meaning as in KRS 154.12-204;
    5. “Skills training investment credit” has the same meaning as in KRS 154.12-204; and
    6. “Skills upgrade training”  has the same meaning as in KRS 154.12-204.
  2. For taxable years beginning on or after  July 1, 2022, the corporation shall not accept applications for the  skills training investment credits allowed by KRS 154.12-204 to 154.12-208 .
  3. The amount of skills training investment  credit awarded by the corporation under KRS 154.12-204 to 154.12-208 shall  be credited on the tax return of the approved company in the year  the corporation’s closeout of approved training costs were  incurred. The skills training investment credits allowed shall only  be used by the approved company that has been awarded the credits  in accordance with KRS 154.12-204 to 154.12-208 . The skills training investment  credits shall be applied to the income tax imposed by KRS 141.020 or 141.040 . The credit may also be applied  to the limited liability entity tax imposed by KRS 141.040 1, with the order of the credits as provided in KRS 141.0205 . These credits shall be in  addition to all other tax credits granted under the laws of the Commonwealth.
  4. The skills training investment credit  may be carried forward for three (3) successive fiscal years by the  approved company if the amount allowable as credits exceeds the income  tax liability of the approved company in the tax year during which  the final closeout of the approved training costs were incurred. Any  excess credits shall not be refundable or carried forward beyond the  third fiscal year.
  5. A qualified company shall not be entitled  to receive the grant-in-aid under KRS 154.12-207 or skills  training investment credits if the qualified company requires the employee to reimburse the employer or otherwise pay for any costs  or expenses incurred in connection with the occupational upgrade training or skills upgrade training.
  6. To the extent that any expenditures  of a qualified company constitute approved costs and are the basis for the skills upgrade or occupational upgrade training under KRS 154.12-207 , these expenditures shall only be eligible as the basis  for either grants-in-aid or skills training investment credits.
  7. By October 1 of each year, the Department  of Revenue shall certify to the corporation the amount of any skills  training investment credits taken pursuant to KRS 154.12-207 on tax returns filed during the fiscal year ending June 30 of that  year.
  8. The Department of Revenue may promulgate  administrative regulations in accordance with KRS Chapter 13A to adopt  forms and procedures for the reporting of the credit authorized in KRS 154.12-204 to 154.12-208 .
    1. In order for the General Assembly to  evaluate the fulfillment of the purposes of this section, the department  shall submit the following information, related to each taxable year that a grant-in-aid under KRS 154.12-207 or skills training  investment credit is claimed on any income tax return filed: (9) (a) In order for the General Assembly to  evaluate the fulfillment of the purposes of this section, the department  shall submit the following information, related to each taxable year that a grant-in-aid under KRS 154.12-207 or skills training  investment credit is claimed on any income tax return filed:
      1. The cumulative amount of tax credits  by taxable year claimed by entity type, including:
        1. Person;
        2. Corporation;
        3. Limited liability company;
        4. Partnership;
        5. Limited partnership;
        6. Sole proprietorship;
        7. Holding company;
        8. Joint stock company;
        9. Professional services corporation; or
        10. Any other legal entity through which  business is conducted;
      2. The number of returns filed claiming  a tax credit for each taxable year by entity type;
      3. In the case of a taxpayer other than  a corporation, based on the mailing address of the return, the total  amount of credits claimed by county;
      4. In the case of a taxpayer other than  a corporation, based on ranges of adjusted gross income of no larger  than five thousand dollars ($5,000), the total amount of credit claimed  for each adjusted gross income range by taxable year; and
      5. In the case of a corporation, based on  ranges of net income no larger than fifty thousand dollars ($50,000),  the total amount of credit claimed for each net income range.
    2. The report required by paragraph (a)  of this subsection shall be submitted to the Interim Joint Committee  on Appropriations and Revenue beginning no later than November 1,  2018, and no later than each November 1 thereafter, as long as the  skills training investment credit is claimed on any return processed  by the department.

HISTORY: 2018 ch. 199, § 4, effective July 14, 2018.

141.065. Credit allowed for hiring person classified as unemployed.

  1. For the purposes of this section, “code” or “Internal Revenue Code” means the Internal Revenue Code in effect as of December 31, 1981.
  2. There shall be allowed as a credit for any taxpayer against the tax imposed by KRS 141.020 or 141.040 and 141.0401 for any taxable year, with the ordering of the credits as provided in KRS 141.020 5, an amount equal to one hundred dollars ($100) for each person hired by the taxpayer, if that person has been classified as unemployed by the Office of Unemployment Insurance of the Department of Workforce Investment in the Education and Workforce Development Cabinet and has been so classified for at least sixty (60) days prior to his employment by the taxpayer, and if further that person has remained in the employ of the taxpayer for at least one hundred eighty (180) consecutive days during the taxable year in which the taxpayer claims the credit.
  3. No credit shall be allowed to any taxpayer for any person hired under any of the following circumstances:
    1. A person for whom the taxpayer receives federally funded payments for on-the-job training;
    2. For any person who bears any of the relationships to the taxpayer described in paragraphs (1) through (8) of Section 152(a) of the Internal Revenue Code, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than fifty percent (50%) in value of the outstanding stock of the corporation as determined with the application of Section 267(c) of the code;
    3. If the taxpayer is an estate or trust, to any person who is a grantor, beneficiary, or fiduciary of the estate or trust, or is an individual who bears any of the relationships described in paragraphs (1) through (8) of Section 152(a) of the code to a grantor, beneficiary, or fiduciary of the estate or trust; or
    4. To any person who is a dependent of the taxpayer as described in code Section 152(a)(9), or, if the taxpayer is an estate or trust, of a grantor, beneficiary, or fiduciary of the estate or trust.
  4. For purposes of this section, all employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by a single employer. In no instance shall the credit, if any, allowable by subsection (2) of this section for any employee qualified thereunder be claimed more than once for any taxable year by such a controlled group of corporations. For purposes of this subsection, the term “controlled group of corporations” has the meaning given to that term by code Section 1563(a), except that “more than fifty percent (50%)” shall be substituted for “at least eighty percent (80%)” each place it appears in code Section 1563(a)(1), and the determination shall be made without regard to subsections (a)(4) and (e)(3)(c) of code Section 1563.
  5. For purposes of this section, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and in no instance shall the credit, if any, allowable by subsection (2) of this section for any employee qualified thereunder be claimed more than once for any taxable year.
  6. No credit shall be allowed under subsection (2) of this section to any organization which is exempt from income tax by this chapter.
  7. In the case of a pass-through entity, the amount of the credit determined under this section for any taxable year shall be applied at the entity level against the limited liability entity tax imposed by KRS 141.0401 and shall also be apportioned pro rata among the members, partners, or shareholders of the limited liability entity on the last day of the taxable year, and any person to whom an amount is so apportioned shall be allowed, subject to code Section 53, a credit under subsection (2) of this section for that amount.
  8. In the case of an estate or trust, the amount of the credit determined under this section for any taxable year shall be apportioned between the estate or trust and the beneficiaries on the basis of income of the estate or trust allocable to each, and any beneficiary to whom any amount has been apportioned under this subsection shall be allowed, subject to code Section 53, a credit under subsection (2) of this section for that amount.
  9. In no event shall the credit allowed, pursuant to this section, for any taxable year exceed the tax liability of the taxpayer for the taxable year.

History. Enact. Acts 1982, ch. 431, § 1, effective July 15, 1982; 1984, ch. 111, §§ 79, 177, effective July 13, 1984; 1998, ch. 426, § 100, effective July 15, 1998; 2000, ch. 14, § 9, effective July 14, 2000; 2005, ch. 99, § 117, effective June 20, 2005; 2006 (1st Ex. Sess.), ch. 2, § 17, effective June 28, 2006; 2009, ch. 11, § 11, effective June 25, 2009; 2019 ch. 146, § 10, effective June 27, 2019.

Compiler’s Notes.

The Internal Revenue Code, referred to herein, is compiled as Title 26, USCS. Sections 53, 152, 267 and 1563(a) are compiled as 26 USCS §§ 53, 152, 267 and § 1563(a), respectively.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

141.066. Definitions — Nonrefundable low income, family size, and income gap tax credits.

  1. As used in this section:
    1. “Federal poverty level” means the Health and Human Services poverty guidelines updated periodically in the Federal Register by the United States Department of Health and Human Services under the authority of 42 U.S.C. sec. 9902(2) and available on June 30 of the taxable year;
    2. “Qualifying dependent” means a qualifying child as defined in the Internal Revenue Code, Section 152(c), and includes a child who lives in the household but cannot be claimed as a dependent if the provisions of Internal Revenue Code Section 152(e)(2) and 152(e)(4) apply;
    3. “Qualifying individual” means an individual whose filing status is single or married filing separately if during the taxable year the individual’s spouse is not a member of the household;
    4. “Qualifying married couple” means a husband and wife living together who file a joint return or separately on a combined return. “Marital status” shall have the same meaning as defined in Section 7703 of the Internal Revenue Code; and
    5. “Threshold amount” means:
      1. For a qualifying individual with no qualifying dependent children, the federal poverty level established for a family unit size of one (1):
      2. For a qualifying individual with one (1) qualifying dependent child or a qualifying married couple with no qualifying dependent children, the federal poverty level established for a family unit size of two (2);
      3. For a qualifying individual with two (2) qualifying dependent children or a qualifying married couple with one (1) qualifying dependent child, the federal poverty level established for a family unit size of three (3);
      4. For a qualifying individual with (3) or more qualifying dependent children or a qualifying married couple with two (2) or more qualifying dependent children, the federal poverty level established for a family unit size of four (4).
    1. For taxable years beginning before January 1, 2005, a resident individual whose adjusted gross income does not exceed the amounts set out in paragraph (c) of this subsection shall be eligible for a nonrefundable “low income” tax credit. The credit shall be applied against the taxpayer’s tax liability calculated under KRS 141.020 , and shall be taken in the order established by KRS 141.020 5. (2) (a) For taxable years beginning before January 1, 2005, a resident individual whose adjusted gross income does not exceed the amounts set out in paragraph (c) of this subsection shall be eligible for a nonrefundable “low income” tax credit. The credit shall be applied against the taxpayer’s tax liability calculated under KRS 141.020, and shall be taken in the order established by KRS 141.0205 .
    2. For a husband and wife filing jointly, the “low income” tax credit shall be computed on the basis of their joint adjusted gross income and shall be applied against their joint tax liability. For a husband and wife living together, whether filing separate returns or filing separately on a combined return, the “low income” credit shall be computed on the basis of their combined adjusted gross income, except that a separately computed gross income of less than zero shall be treated as zero, and shall be applied against their combined tax liability.
    3. The “low income” tax credit shall be computed as follows:
    1. For taxable years beginning after December 31, 2004, qualifying taxpayers whose modified gross income is below one hundred thirty-three percent (133%) of the threshold amount shall be entitled to a nonrefundable family size tax credit. The family size tax credit shall be applied against the taxpayer’s tax liability calculated under KRS 141.020 . The family size tax credit shall not reduce the taxpayer’s tax liability below zero. (3) (a) For taxable years beginning after December 31, 2004, qualifying taxpayers whose modified gross income is below one hundred thirty-three percent (133%) of the threshold amount shall be entitled to a nonrefundable family size tax credit. The family size tax credit shall be applied against the taxpayer’s tax liability calculated under KRS 141.020 . The family size tax credit shall not reduce the taxpayer’s tax liability below zero.
    2. For qualifying taxpayers whose modified gross income is equal to or below one hundred percent (100%) of the threshold amount, the family size tax credit shall be equal to the taxpayer’s tax liability.
    3. For qualifying taxpayers whose modified gross income exceeds the threshold amount but is below one hundred thirty-three percent (133%) of the threshold amount, the family size tax credit shall be equal to the amount of the taxpayer’s individual income tax liability multiplied by a percentage as follows:
      1. If modified gross income is above one hundred percent (100%) but less than or equal to one hundred four percent (104%) of the threshold amount, the credit percentage shall be ninety percent (90%);
      2. If modified gross income is above one hundred four percent (104%) but less than or equal to one hundred eight percent (108%) of the threshold amount, the credit percentage shall be eighty percent (80%);
      3. If modified gross income is above one hundred eight percent (108%) but less than or equal to one hundred twelve percent (112%) of the threshold amount, the credit percentage shall be seventy percent (70%);
      4. If modified gross income is above one hundred twelve percent (112%) but less than or equal to one hundred sixteen percent (116%) of the threshold amount, the credit percentage shall be sixty percent (60%);
      5. If modified gross income is above one hundred sixteen percent (116%) but less than or equal to one hundred twenty percent (120%) of the threshold amount, the credit percentage shall be fifty percent (50%);
      6. If modified gross income is above one hundred twenty percent (120%) but less than or equal to one hundred twenty-four percent (124%) of the threshold amount, the credit percentage shall be forty percent (40%);
      7. If modified gross income is above one hundred twenty-four percent (124%) but less than or equal to one hundred twenty-seven percent (127%) of the threshold amount, the credit percentage shall be thirty percent (30%);
      8. If modified gross income is above one hundred twenty-seven percent (127%) but less than or equal to one hundred thirty percent (130%) of the threshold amount, the credit percentage shall be twenty percent (20%);
      9. If modified gross income is above one hundred thirty percent (130%) but less than or equal to one hundred thirty-three percent (133%) of the threshold amount, the credit percentage shall be ten percent (10%);
      10. If modified gross income is above one hundred thirty-three percent (133%) of the threshold amount, the credit percentage shall be zero.
    4. For taxable years beginning on or after January 1, 2019, but before January 1, 2021, in addition to the credit calculated under paragraphs (a), (b), and (c) of this subsection, the income gap credit shall be allowed:
      1. If modified gross income is above one hundred percent (100%) but less than or equal to one hundred four percent (104%) of the threshold amount, the credit shall be in an amount equal to:
        1. Eleven dollars ($11) for a family size of one (1);
        2. Seven dollars ($7) for a family size of two (2); and
        3. Three dollars ($3) for a family size of three (3);
      2. If modified gross income is above one hundred four percent (104%) but less than or equal to one hundred eight percent (108%) of the threshold amount, the credit shall be in an amount equal to:
        1. Twenty dollars ($20) for a family size of one (1);
        2. Thirteen dollars ($13) for a family size of two (2); and
        3. Six dollars ($6) for a family size of three (3);
      3. If modified gross income is above one hundred eight percent (108%) but less than or equal to one hundred twelve percent (112%) of the threshold amount, the credit shall be in an amount equal to:
        1. Twenty-nine dollars ($29) for a family size of one (1);
        2. Eighteen dollars ($18) for a family size of two (2); and
        3. Six dollars ($6) for a family size of three (3);
      4. If modified gross income is above one hundred twelve percent (112%) but less than or equal to one hundred sixteen percent (116%) of the threshold amount, the credit shall be in an amount equal to:
        1. Thirty-seven dollars ($37) for a family size of one (1);
        2. Twenty-two dollars ($22) for a family size of two (2); and
        3. Six dollars ($6) for a family size of three (3);
      5. If modified gross income is above one hundred sixteen percent (116%) but less than or equal to one hundred twenty percent (120%) of the threshold amount, the credit shall be in an amount equal to:
        1. Forty-five dollars ($45) for a family size of one (1);
        2. Twenty-four dollars ($24) for a family size of two (2); and
        3. Four dollars ($4) for a family size of three (3);
      6. If modified gross income is above one hundred twenty percent (120%) but less than or equal to one hundred twenty-four percent (124%) of the threshold amount, the credit shall be in an amount equal to:
        1. Fifty-one dollars ($51) for a family size of one (1); and
        2. Twenty-six dollars ($26) for a family size of two (2);
      7. If modified gross income is above one hundred twenty-four percent (124%) but less than or equal to one hundred twenty-seven percent (127%) of the threshold amount, the credit shall be in an amount equal to:
        1. Fifty-eight dollars ($58) for a family size of one (1); and
        2. Twenty-seven dollars ($27) for a family size of two (2);
      8. If modified gross income is above one hundred twenty-seven percent (127%) but less than or equal to one hundred thirty percent (130%) of the threshold amount, the credit shall be in an amount equal to:
        1. Sixty-four dollars ($64) for a family size of one (1); and
        2. Twenty-eight dollars ($28) for a family size of two (2); and
      9. If modified gross income is above one hundred thirty percent (130%) but less than or equal to one hundred thirty-three percent (133%) of the threshold amount, the credit shall be in an amount equal to:
        1. Sixty-nine dollars ($69) for a family size of one (1); and
        2. Twenty-eight dollars ($28) for a family size of two (2).
  2. For a qualifying married couple filing jointly, the family size tax credit shall be computed on the basis of their joint modified gross income and shall be applied against their joint tax liability. For a qualifying married couple living together, whether filing separate returns or filing separately on a combined return, the family size tax credit shall be computed on the basis of their combined modified gross income, except that a separately computed modified gross income of less than zero shall be treated as zero, and shall be applied against their combined tax liability.

PERCENT OF TAX AMOUNT OF ADJUSTED LIABILITY ALLOWED AS GROSS INCOME LOW INCOME TAX CREDIT not over $5,000 100% over $ 5,000 but not over $10,000 50% over $10,000 but not over $15,000 25% over $15,000 but not over $20,000 15% over $20,000 but not over $25,000 5% over $25,000 -0-

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History. Enact. Acts 1990, ch. 476, Pt. VII D, § 638, effective April 11, 1990; 1992, ch. 52, § 1, effective July 14, 1992; 1992, ch. 105, § 72, effective July 14, 1992; 1994, ch. 57, § 3, effective July 15, 1994; 2005, ch. 168, § 9, effective March 18, 2005; 2019 ch. 151, § 43, effective June 27, 2019.

Compiler’s Notes.

Sections 152 and 7703 of the Internal Revenue Code referenced in this section are compiled as 26 USCS §§ 152 and 7703, respectively.

Legislative Research Commission Notes.

(6/27/2019). Section 88 of 2019 Ky. Acts 151 reads as follows: “It is the intent of the General Assembly to study the long-term impact of the income tax on certain family-size households and to extend the provisions of Section 43 of this Act [this statute] or find a permanent alternative to those provisions.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(7/15/1994). The changes to this statute from 1994 Ky. Acts ch. 57 apply “to taxable years beginning after December 31, 1993.” 1994 Ky. Acts ch. 57, sec. 4.

141.067. Household and dependent care service credit.

A resident individual may deduct from the tax computed under the provisions of KRS 141.020 a credit for household and dependent care services necessary for gainful employment. The credit shall be twenty percent (20%) of the federal credit allowed under Section 21 of the Internal Revenue Code.

History. Enact. Acts 1990, ch. 476, Pt. VII D, § 637, effective April 11, 1990.

Compiler’s Notes.

Section 21 of the Internal Revenue Code referred to in this section is compiled as 26 USCS § 21.

141.068. Definitions — Determination of tax credits under KRS 154.20-258.

  1. As used in this section, unless the context requires otherwise:
    1. “Authority” means the Kentucky Economic Development Finance Authority as created pursuant to KRS 154.20-010 ;
    2. “Investor” has the same meaning as set forth in KRS 154.20-254 ;
    3. “Investment fund” has the same meaning as set forth in KRS 154.20-254 ;
    4. “Investment fund manager” has the same meaning as set forth in KRS 154.20-254; and
    5. “Tax credit” means the credits provided for in KRS 154.20-258 .
    1. An investor which is an individual or a corporation shall be entitled to the credit certified by the authority under KRS 154.20-258 against the tax due computed as provided by KRS 141.020 or 141.040 , respectively, and against the tax imposed by KRS 141.040 1, with the ordering of credits as provided in KRS 141.0205 . (2) (a) An investor which is an individual or a corporation shall be entitled to the credit certified by the authority under KRS 154.20-258 against the tax due computed as provided by KRS 141.020 or 141.040, respectively, and against the tax imposed by KRS 141.0401 , with the ordering of credits as provided in KRS 141.0205 .
    2. The amount of the certified tax credit that may be claimed in any tax year of the investor shall be determined in accordance with the provisions of KRS 154.20-258.
    1. In the case of an investor that is a pass-through entity not subject to the tax imposed by KRS 141.040 , the amount of the tax credit certified by the authority under KRS 154.20-258 shall be taken by the pass-through entity against the limited liability entity tax imposed by KRS 141.0401 , and shall also be apportioned among the partners, members, or shareholders at the same ratio as the partners’, members’, or shareholders’ distributive shares of income are determined for the tax year during which the amount of the credit is certified by the authority. (3) (a) In the case of an investor that is a pass-through entity not subject to the tax imposed by KRS 141.040 , the amount of the tax credit certified by the authority under KRS 154.20-258 shall be taken by the pass-through entity against the limited liability entity tax imposed by KRS 141.0401 , and shall also be apportioned among the partners, members, or shareholders at the same ratio as the partners’, members’, or shareholders’ distributive shares of income are determined for the tax year during which the amount of the credit is certified by the authority.
    2. The amount of the tax credit apportioned to each partner, member, or shareholder that may be claimed in any tax year of the partner, member, or shareholder shall be determined in accordance with the provisions of KRS 154.20-258.
    1. In the case of an investor that is a trust not subject to the tax imposed by KRS 141.040 , the amount of the tax credit certified by the authority under KRS 154.20-258 shall be apportioned to the trust and the beneficiaries on the basis of the income of the trust allocable to each for the tax year during which the tax credit is certified by the authority. (4) (a) In the case of an investor that is a trust not subject to the tax imposed by KRS 141.040 , the amount of the tax credit certified by the authority under KRS 154.20-258 shall be apportioned to the trust and the beneficiaries on the basis of the income of the trust allocable to each for the tax year during which the tax credit is certified by the authority.
    2. The amount of tax credit apportioned to each trust or beneficiary that may be claimed in any tax year of the trust or beneficiary shall be determined in accordance with the provisions of KRS 154.20-258.
  2. The Department of Revenue shall promulgate administrative regulations under KRS Chapter 13A to adopt procedures for the administration of the credits authorized by KRS 154.20-258 .
  3. In order for the General Assembly to evaluate the fulfillment of the purposes stated in KRS 154.20-250 , the department shall work jointly with the Cabinet for Economic Development to provide a report detailing each investment fund agreement entered into by the cabinet. The report shall be submitted to the Interim Joint Committee on Appropriations and Revenue on or before May 1, 2019, and contain the following information:
    1. The date the agreement was entered into by the cabinet with the investment fund manager;
    2. The name of the investment fund manager and the name of the investment fund;
    3. The primary business location of the investment fund;
    4. The total number of investment funds, the number of investors for each fund, the amount of committed cash contributions to each investment fund, and the total qualified investments made by each investment fund, including initial and subsequent investments, for each small business;
    5. A list detailing each investor within each investment fund, the amount of investment made by each investor, and the amount of tax credit awarded each investor;
    6. Whether the authority has suspended the availability of any credits, terminated any agreements, or pursued any other remedy because the investment fund manager failed to comply with the agreement;
    7. By taxable year, the amount of tax credit claimed by each investor by type of tax, including income tax, any taxes imposed on financial institutions, or insurance taxes;
    8. The number of small businesses that are active, inactive, or closed that have received investments from an investment fund;
    9. The number and location of each new small business established or expanded;
    10. The number and location of each new job created;
    11. The number of new products and technologies created; and
    12. The total amount of tax credit awarded for each fiscal year.
  4. If either the department or the Cabinet for Economic Development does not currently have the data to fulfill the reporting requirement of subsection (6) of this section, the department and the cabinet shall work jointly to obtain the data in an expedient manner to provide the report on or before the May 1, 2019, report date.

HISTORY: Enact. Acts 1998, ch. 414, § 16, effective July 15, 1998; 2002, ch. 230, § 6, effective July 15, 2002; 2005, ch. 85, § 477, effective June 20, 2005; 2005, ch. 168, § 10, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 18, effective June 28, 2006; 2016 ch. 82, § 34, effective July 15, 2016; 2018 ch. 171, § 96, effective April 14, 2018; 2018 ch. 207, § 96, effective April 27, 2018.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.069. Credit allowed for tuition at eligible educational institution.

  1. As used in this section, “eligible Kentucky education institution” means an institution as defined by Section 25A of the Internal Revenue Code that is located within the Commonwealth of Kentucky.
  2. For taxable years beginning after December 31, 2004, an individual may deduct from the tax computed under KRS 141.020 a nonrefundable credit for qualified tuition and related expenses required for enrollment or attendance of the taxpayer, taxpayer’s spouse or any dependent at an eligible Kentucky educational institution. The credit shall be twenty-five percent (25%) of the federal credit allowable under Section 25A of the Internal Revenue Code.
  3. The credit allowed in subsection (2) of this section shall not be allowed for expenses for graduate level course study.
  4. If the taxpayer is a married individual within the meaning of Section 7703 of the Internal Revenue Code, the credit shall apply only if the taxpayer and the taxpayer’s spouse file a joint return or file separately on a combined form. The credit shall not be allowed if the taxpayer and the taxpayer’s spouse file separate returns.
  5. Any unused credit may be carried forward five (5) years.

History. Enact. Acts 2005, ch. 168, § 8, effective March 18, 2005.

Compiler’s Notes.

Sections 25A and 7703 of the Internal Revenue Code referenced in this section are compiled as 26 USCS §§ 25A and 7703, respectively.

Legislative Research Commission Notes.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.070. Credits allowed individuals for tax paid to other states.

  1. Whenever an individual who is a resident of this state has become liable for income tax to another state upon all or any part of his net income for the taxable year, derived from sources without this state and subject to taxation under this chapter, the amount of income tax payable by him under this chapter shall be credited on his return with the income tax so paid by him to the other state, upon his producing to the proper assessing officer satisfactory evidence of the fact of such payment, except that application of such credits shall not operate to reduce the tax payable under this chapter to an amount less than would have been payable were the income from the other state ignored.
  2. An individual who is not a resident of this state shall not be liable for any income tax under KRS 141.020(4) if the laws of the state of which such individual was a resident at the time such income was earned in this state contained a reciprocal provision under which nonresidents were exempted from gross or net income taxes to such state, if the state of residence of such nonresident individual allowed a similar exemption to resident individuals of this state. The exemption authorized by this subsection shall in no manner preclude the Department of Revenue from requiring any information reports pursuant to KRS 141.150(2).
  3. As used in this section, “state” means a state of the United States, the District of Columbia, the commonwealth of Puerto Rico, or any territory or possession of the United States.

History. 4281b-15, 4281b-16: amend. Acts 1952, ch. 194, § 3; 1958, ch. 3, § 2; 1960, ch. 5, Art. III, § 4; 1966, ch. 255, § 138; 1974, ch. 163, § 3; 2005, ch. 85, § 478, effective June 20, 2005; 2018 ch. 207, § 118, effective April 27, 2018.

Compiler’s Notes.

Section 9 of Acts 1974, ch. 163 provided that the provisions of the 1974 amendment to this section shall apply to taxable years beginning after December 31, 1973.

Legislative Research Commission Notes.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

NOTES TO DECISIONS

Cited in:

Martin v. Gage, 281 Ky. 95 , 134 S.W.2d 966, 1939 Ky. LEXIS 7 , 126 A.L.R. 449 ( Ky. 1939 ).

Opinions of Attorney General.

Since the state of Tennessee has no individual income tax on salaries or wages, the reciprocity provisions of the statute do not apply to income earned by Tennessee residents in Kentucky and such income would be subject to Kentucky income tax. OAG 69-624 .

Research References and Practice Aids

Kentucky Bench & Bar.

Eardly & Ruml, My Old Kentucky Home or the Sunshine State? Residency and Estate Planning Issues for Kentucky “Snowbirds” in Florida, Volume 74, No. 6, November 2010, Ky. Bench & Bar 20.

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

141.071. Definition — Right to designate portion of tax to political party.

  1. The term “political party” shall, for the purposes of this section and KRS 141.072 and 141.073 , mean those parties who met the requirements of KRS 118.015 on January 1 of the taxable year.
  2. Every individual whose income tax liability for the taxable year is as great or greater than amounts permitted to be designated under this section, may designate that the tax paid or portion thereof be paid, as provided under this section and KRS 141.072 , to a political party. Amounts of individual tax liability permitted to be so designated are as follows: for the 1982 taxable year, one dollar and fifty cents ($1.50); for the 1983 taxable year, one dollar and seventy-five cents ($1.75); and for the 1984 taxable year and for every year thereafter, two dollars ($2). In the case of a joint return, each spouse shall, for the purposes of this section, be considered to have an equal tax liability and may each designate amounts as provided in this section, provided that the joint tax liability is at least as great as amounts jointly so designated. Such designation shall not increase or decrease the income tax liability of any taxpayer nor shall it reduce the overpayment of any taxpayer.

History. Enact. Acts 1976, ch. 264, §§ 1, 2; 1982, ch. 167, § 1, effective January 1, 1983.

Compiler’s Notes.

Section 5 of Acts 1976, ch. 264, provided that the provisions of this section should apply to taxable years beginning after December 31, 1975.

Opinions of Attorney General.

In order for a political party to be listed on the individual income tax form for the purpose of a political party fund checkoff, the party must meet the requirements of KRS 118.015 on January 1 of the taxable year. OAG 77-153 .

141.072. Designation of party — Certification and remittance to state and county party organizations.

The designation for a political party shall appear on the face of the individual income tax return. Fifty cents ($0.50) of any designation pursuant to KRS 141.071 shall be reserved for remittance to the appropriate official of the local governing authority of the designated political party within the taxpayer’s resident county. The remainder of the designation shall be reserved for remittance to the appropriate official of the state governing authority of the designated political party. The commissioner of the Department of Revenue shall annually certify by December 1 all such designated amounts to be paid by the State Treasurer, and the Treasurer shall annually remit by the following January 1 such funds to the appropriate official of the state and local governing authorities of the designated political party.

History. Enact. Acts 1976, ch. 264, § 3; 1982, ch. 167, § 2, effective January 1, 1983; 2005, ch. 85, § 479, effective June 20, 2005.

Compiler’s Notes.

Section 5 of Acts 1976, ch. 264, provided that the provisions of this section should apply to taxable years beginning after December 31, 1975.

141.073. Rules and regulations.

The Department of Revenue shall promulgate such rules and regulations as may be necessary to effectively administer the provisions of KRS 141.071 and 141.072 .

History. Enact. Acts 1976, ch. 264, § 4; 2005, ch. 85, § 480, effective June 20, 2005.

Compiler’s Notes.

Section 5 of Acts 1976, ch. 264, provided that the provisions of this section should apply to taxable years beginning after December 31, 1975.

141.075. Year in which deductions and credits shall be taken. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 194, § 4) was repealed by Acts 1954, ch. 79, § 35.

141.080. Deductions allowed from gross income, to all taxpayers. [Repealed.]

Compiler’s Notes.

This section (4281b-3: Acts 1948, ch. 93, § 5; 1952, ch. 194, §§ 5-7) was repealed by Acts 1954, ch. 79, § 3.

141.081. Optional standard deduction for individuals — Exception.

  1. An individual, at his election, may deduct from his adjusted gross income a standard deduction of:
    1. Six hundred and fifty dollars ($650) for taxable years beginning before December 31, 1996;
    2. Nine hundred dollars ($900) for taxable years beginning after December 31, 1996, but before December 31, 1997;
    3. One thousand two hundred dollars ($1,200) for taxable years beginning after December 31, 1997, but before December 31, 1998;
    4. One thousand five hundred dollars ($1,500) for taxable years beginning after December 31, 1998, but before December 31, 1999;
    5. One thousand seven hundred dollars ($1,700) for taxable years beginning after December 31, 1999, but before December 31, 2000; and
    6. The amount calculated under subsection (2) of this section for taxable years beginning after December 31, 2000.
    1. For taxable years beginning after December 31, 2000, and each taxable year thereafter, the standard deduction for the current taxable year shall be equal to the standard deduction for the prior taxable year multiplied by the greater of: (2) (a) For taxable years beginning after December 31, 2000, and each taxable year thereafter, the standard deduction for the current taxable year shall be equal to the standard deduction for the prior taxable year multiplied by the greater of:
      1. The average of the monthly CPI-U figures for the twelve (12) consecutive months ending in and including the July six (6) months prior to the January beginning the current tax year, divided by the average of the monthly CPI-U figures for the twelve (12) months ending in and including the July eighteen (18) months prior to the January beginning the current tax year; or
      2. One (1).
    2. As used in this subsection, a tax year shall be the twelve (12) month period beginning in January and ending in December.
    3. As used in this subsection, “CPI-U” means the nonseasonally adjusted United States city average of the Consumer Price Index for all urban consumers for all items, as released by the federal Bureau of Labor Statistics.
  2. The standard deduction provided for in this section shall be in lieu of all deductions and shall not be allowed in the case of a taxable year of less than twelve (12) months on account of a change in the accounting period or in the case of a fiduciary.
  3. In the case of a husband and wife living together, the standard deduction provided for in this section shall not be allowed to either if the net income of one (1) of the spouses is determined without regard to the standard deduction. The determination of marital status shall be made in the manner prescribed in Section 153 of the Internal Revenue Code.

History. Enact. Acts 1946, ch. 234, § 7; 1954, ch. 79, § 8; 1956 (4th Ex. Sess.), ch. 4, § 5; 1976, ch. 77, part I, § 3; 1996, ch. 265, § 1, effective July 15, 1996.

Compiler’s Notes.

Section 8, part I of Acts 1976, ch. 77, read: “The provisions of Part I of this Act shall apply to taxable years beginning after December 31, 1975.”

Section 153 of the Internal Revenue Code, referred to in subsection (3), is compiled as 26 USCS § 153.

Research References and Practice Aids

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

141.082. Election to take standard deduction. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 234, § 8; 1954, ch. 79, § 9; 1956 (4th Ex. Sess.), ch. 4, § 6) was repealed by Acts 1976, ch. 77, part I, § 7.

141.083. Standard deduction in case of married persons. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 234, § 9) was repealed by Acts 1954, ch. 79, § 35.

141.084. Standard deduction allowable only for full year. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 234, § 10) was repealed by Acts 1954, ch. 79, § 35.

141.085. Refund of tax paid on wartime military service income; option to deduct such income from future gross income. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 24, §§ 2, 3) was repealed by Acts 1954, ch. 79, § 35.

141.090. Deductions not allowed from gross income. [Repealed.]

Compiler’s Notes.

This section (4281b-3, 4281b-4: amend. 1952, ch. 194, § 8, effective June 19, 1952) was repealed by Acts 1954, ch. 79, § 35.

141.095. Alimony payments, when to be included in gross income of wife and not that of husband. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 93, § 8) was repealed by Acts 1954, ch. 79, § 35.

141.096. Income from trust for benefit of divorced or separated wife, when to be included in gross income of wife; purpose to treat alimony payments as under Federal law. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 93, § 9) was repealed by Acts 1954, ch. 79, § 35.

141.100. Gains or losses from sale or exchange of property. [Repealed.]

Compiler’s Notes.

This section (4281b-2, 4281b-6, 4281b-7: amend. 1948, ch. 93, § 6) was repealed by Acts 1954, ch. 79, § 35.

141.110. Partnership incomes. [Repealed.]

Compiler’s Notes.

This section (4281b-31) was repealed by Acts 1954, ch. 79, § 35.

141.120. Division of income of interstate business for tax purposes — Apportionment.

This section applies to taxable years beginning on or after January 1, 2018.

  1. As used in this section:
    1. “Apportionable income” means:
      1. All income that is apportionable under the Constitution  of the United States and is not allocated under this section, including:
        1. Income arising from transactions and activity in the  regular course of the taxpayer’s trade or business; and
        2. Income arising from tangible and intangible  property if the acquisition, management, employment, development,  or disposition of the property is or was related to the operation  of the taxpayer’s trade or business; and
      2. Any income that would be allocable to  this state under the Constitution of the United States, but that is  apportioned rather than allocated pursuant to this section;
    2. “Commercial domicile” means  the principal place from which the trade or business of the taxpayer  is directed or managed;
    3. “Financial organization”  means any bank, trust company, savings bank, industrial bank, land  bank, safe deposit company, private banker, savings and loan association,  cooperative bank, small loan company, sales finance company, investment  company, or any similar type of entity;
    4. “Non-apportionable income”  means all income other than apportionable income;
    5. “Receipts” means all gross  receipts of the taxpayer that are not allocated under this section,  and that are received from transactions and activity in the regular  course of the taxpayer’s trade or business, except that receipts  of a taxpayer from:
      1. Hedging transactions; and
      2. The maturity, redemption, sale, exchange,  loan, or other disposition of cash or securities;
    6. “This state” means the  Commonwealth of Kentucky.
  2. Any taxpayer having income from business  activity which is taxable both within and without this state, other  than activity as a provider as defined in KRS 136.602 ,  a financial organization, or a public service company, shall allocate  and apportion net income as provided in this section.
  3. For purposes of allocation and apportionment  of income under this section, a taxpayer is taxable in another state  if:
    1. In that state the taxpayer is subject  to a net income tax, a franchise tax measured by net income, a franchise  tax for the privilege of doing business, or a corporate stock tax;  or
    2. That state has jurisdiction to subject  the taxpayer to a net income tax regardless of whether, in fact, the  state does or does not do so.
  4. Rents and royalties from real or tangible  personal property, capital gains, interest, or patent or copyright  royalties, to the extent that they constitute nonapportionable income,  shall be allocated as provided in subsections (5) to (8) of this section.
    1. Net rents and royalties from real property  located in this state are allocable to this state. (5) (a) Net rents and royalties from real property  located in this state are allocable to this state.
    2. Net rents and royalties from tangible  personal property are allocable to this state:
      1. If and to the extent that the property  is utilized in this state; or
      2. In their entirety if the taxpayer’s  commercial domicile is in this state and the taxpayer is not organized  under the laws of or taxable in the state in which the property is  utilized.
    3. The extent of utilization of tangible  personal property in a state is determined by multiplying the rents  and royalties by a fraction the numerator of which is the number of  days of physical location of the property in this state during the  rental or royalty period in the taxable year and the denominator of  which is the number of days of physical location of the property everywhere  during all rental or royalty periods in the taxable year. If the physical  location of the property during all rental or royalty periods is unknown  or unascertainable by the taxpayer, tangible personal property is  utilized in the state in which the property was located at the time  the rental or royalty payer obtained possession.
    1. Capital gains and losses from sales of  real property located in this state are allocable to this state. (6) (a) Capital gains and losses from sales of  real property located in this state are allocable to this state.
    2. Capital gains and losses from sales of  tangible personal property are allocable to this state if:
      1. The property had a situs in this state  at the time of the sale; or
      2. The taxpayer’s commercial domicile  is in this state and the taxpayer is not taxable in the state in which  the property had a situs.
    3. Capital gains and losses from sales of  intangible personal property are allocable to this state if the taxpayer’s  commercial domicile is in this state.
  5. Interest is allocable to this state if  the taxpayer’s commercial domicile is in this state.
    1. Patent and copyright royalties are allocable  to this state: (8) (a) Patent and copyright royalties are allocable  to this state:
      1. If and to the extent that the patent  or copyright is utilized by the payer in this state; or
      2. If and to the extent that the patent  or copyright is utilized by the payer in a state in which the taxpayer  is not taxable and the taxpayer’s commercial domicile is in  this state.
    2. A patent is utilized in a state to the  extent that it is employed in production, fabrication, manufacturing,  or other processing in the state or to the extent that a patented  product is produced in the state. If the basis of receipts from patent  royalties does not permit allocation to states or if the accounting  procedures do not reflect states of utilization, the patent is utilized  in the state in which the taxpayer’s commercial domicile is  located.
  6. All apportionable income shall be apportioned  to this state by multiplying the income by a fraction the numerator  of which is the total receipts of the taxpayer in this state during  the taxable year and the denominator of which is the total receipts  of the taxpayer everywhere during the taxable year.
  7. Receipts from the sale of tangible personal  property are in this state if:
    1. The property is delivered or shipped  to a purchaser, other than the United States government, within this  state regardless of the f.o.b. point or other conditions of the sale;  or
    2. The property is shipped from an office,  store, warehouse, factory, or other place of storage in this state  and the purchaser is the United States government.
    1. Receipts, other than receipts described  in subsection (10) of this section, are in this state if the taxpayer’s  market for the sales is in this state. The taxpayer’s market  for sales is in this state: (11) (a) Receipts, other than receipts described  in subsection (10) of this section, are in this state if the taxpayer’s  market for the sales is in this state. The taxpayer’s market  for sales is in this state:
      1. In the case of sale, rental, lease, or  license of real property, if and to the extent the property is located  in this state;
      2. In the case of rental, lease, or license  of tangible personal property, if and to the extent the property is  located in this state;
      3. In the case of sale of a service, if  and to the extent the service is delivered to a location in this state;  and
      4. In the case of intangible property:
        1. That is rented, leased, or licensed,  if and to the extent the property is used in this state, provided  that intangible property utilized in marketing a good or service to  a consumer is used in this state if that good or service is purchased  by a consumer who is in this state; and
        2. That is sold, if and to the extent the  property is used in this state, provided that:
          1. A contract right, government license,  or similar intangible property that authorizes the holder to conduct  a business activity in a specific geographic area is used in this  state if the geographic area includes all or part of this state;
          2. Receipts from intangible property sales  that are contingent on the productivity, use, or disposition of the  intangible property shall be treated as receipts from the rental,  lease, or licensing of the intangible property under subdivision a.  of this subparagraph; and
          3. All other receipts from a sale of intangible  property shall be excluded from the numerator and denominator of the  receipts factor.
    2. If the state or states of assignment  under paragraph (a) of this subsection cannot be determined, the state  or states of assignment shall be reasonably approximated.
    3. If the taxpayer is not taxable in a state  to which a receipt is assigned under paragraph (a) or (b) of this  subsection, or if the state of assignment cannot be determined under  paragraph (a) of this subsection or reasonably approximated under  paragraph (b) of this subsection, the receipt shall be excluded from  the denominator of the receipts factor.
    4. The department may promulgate administrative  regulations necessary to carry out the purposes of this section.
    1. If the allocation and apportionment provisions  of this section do not fairly represent the extent of the taxpayer’s  business activity in this state, the taxpayer may petition for or  the department may require, in respect to all or any part of the taxpayer’s  business activity, if reasonable: (12) (a) If the allocation and apportionment provisions  of this section do not fairly represent the extent of the taxpayer’s  business activity in this state, the taxpayer may petition for or  the department may require, in respect to all or any part of the taxpayer’s  business activity, if reasonable:
      1. Separate accounting;
      2. The inclusion of one (1) or more additional  factors which will fairly represent the taxpayer’s business  activity in this state; or
      3. The employment of any other method to  effectuate an equitable allocation and apportionment of the taxpayer’s  income.
      1. If the allocation and apportionment provisions  of this section do not fairly represent the extent of business activity  in this state of taxpayers engaged in a particular industry or in  a particular transaction or activity, the department may, in addition  to the authority provided in paragraph (a) of this subsection, promulgate  administrative regulations for determining alternative allocation  and apportionment methods for those taxpayers. (b) 1. If the allocation and apportionment provisions  of this section do not fairly represent the extent of business activity  in this state of taxpayers engaged in a particular industry or in  a particular transaction or activity, the department may, in addition  to the authority provided in paragraph (a) of this subsection, promulgate  administrative regulations for determining alternative allocation  and apportionment methods for those taxpayers.
      2. An administrative regulation promulgated  pursuant to this paragraph shall be applied uniformly, except that  with respect to any taxpayer to whom the administrative regulation  applies, the taxpayer may petition for or the department may require  adjustment according to paragraph (a) of this subsection.
      1. The party petitioning for or the department  requiring the use of any method to effectuate an equitable allocation  and apportionment of the taxpayer’s income pursuant to paragraph  (a) of the subsection shall prove by clear and convincing evidence: (c) 1. The party petitioning for or the department  requiring the use of any method to effectuate an equitable allocation  and apportionment of the taxpayer’s income pursuant to paragraph  (a) of the subsection shall prove by clear and convincing evidence:
        1. That the allocation and apportionment  provisions of this section do not fairly represent the extent of the  taxpayer’s business activity in this state; and
        2. That the alternative to the provisions  is reasonable.
      2. The same burden of proof shall apply  whether the taxpayer is petitioning for, or the department is requiring,  the use of any reasonable method to effectuate an equitable allocation  and apportionment of the taxpayer’s income. Notwithstanding  the previous sentence, if the department can show that in any two  (2) of the prior five (5) taxable years, the taxpayer had used an  allocation or apportionment method at variance with its allocation  or apportionment method or methods used for the other taxable years,  then the department shall not bear the burden of proof in imposing  a different method provided by paragraph (a) of this subsection.
    2. If the department requires any method  to effectuate an equitable allocation and apportionment of the taxpayer’s  income, the department cannot impose any civil or criminal penalty  with reference to the tax due that is attributable to the taxpayer’s  reasonable reliance solely on the allocation and apportionment provisions  of this subsection.
    3. A taxpayer that has received written  permission from the department to use a reasonable method to effectuate  an equitable allocation and apportionment of the taxpayer’s  income shall not have that permission revoked with respect to transactions  and activities that have already occurred unless there has been a  material change in, or a material misrepresentation of, the facts  provided by the taxpayer upon which the department reasonably relied.

shall be excluded; and

History. 4281b-32: amend. Acts 1950, ch. 73, § 1; 1954, ch. 79, § 10; 1962, ch. 124, § 3; 1966, ch. 176, part I, § 6; 1974, ch. 137, § 4; 1974, ch. 163, § 4; 1976, ch. 155, § 10; 1984, ch. 264, § 6, effective July 13, 1984; 1985 (1st Ex. Sess.), ch. 6, part VII, § 19, effective July 29, 1985; 1992, ch. 165, § 2, effective July 14, 1992; 1996, ch. 239, § 1, effective July 15, 1996; 2000, ch. 543, § 2, effective July 1, 2000; 2005, ch. 85, § 481, effective June 20, 2005; 2005, ch. 168, § 11, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 6, effective June 28, 2006; 2008, ch. 18, § 2, effective July 15, 2008; repealed and reenacted by 2018 ch. 171, § 60, effective April 14, 2018; repealed and reenacted by 2018 ch. 207, § 60, effective April 27, 2018.

Compiler’s Notes.

KRS 154.655(2), referred to in subdivision (9)(b)2. of this section, was renumbered as KRS 155.45-010(2) in 1992 by the Reviser of Statutes under the authority of KRS 7.136 and 7.140 .

Section 4 of Acts 1984, ch. 264 read: “The provisions of this Act shall apply to taxable years beginning after December 31, 1983.”

Section 3 of Acts 1996, ch. 239 read, “The provisions of this Act shall be effective for tax years ending on or after December 31, 1995.”

Legislative Research Commission Notes.

(4/27/2018). This statute was repealed and reenacted by 2018 Ky. Acts ch. 171, sec. 60 and ch. 207, sec. 60, which are nearly identical and have been codified together.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

(7/15/2008). 2008 Ky. Acts ch. 18, sec. 4 provides that the amendments made to this section by that Act “shall apply to taxable periods beginning after December 31, 2007.”

(6/28/2006). 2005 Ky. Acts ch. 85, sec. 701, instructs the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in that Act, as it confirms the reorganization of the Finance and Administration Cabinet. Such a correction has been made in this section.

(6/28/2006). 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Purpose.
  3. Construction.
  4. Burden of Proof.
  5. Three Factor Formula.
  6. Doing Business.
  7. Corporations.
  8. —Foreign Corporation.
  9. —Subsidiaries.
  10. —Unitary Multi-corporate Groups.
  11. Business Income.
  12. Capital Gains.
  13. Fire Insurance.
  14. Kentucky Net Operating Loss.
  15. Sales Within State.
  16. Stock.
  17. Total Transactions.
  18. Arbitrary Allocation.
  19. Allocation Unnecessary.
  20. Uniformity.
  21. —Basis for Not Applying.
  22. Unitary Business.
1. Constitutionality.

The procedure set forth in this section is both fair and reasonable, and not in violation of either the commerce or due process clauses of the United States Constitution. Liquid Transporters, Inc. v. Revenue Cabinet, 721 S.W.2d 722, 1986 Ky. App. LEXIS 1473 (Ky. Ct. App. 1986).

2. Purpose.

The purpose of this section is to adopt a formula to determine the business income attributable to activity in Kentucky; to include the compensation of the employees in the formula of the company for whom service was performed promotes this purpose. Cincinnati, N. O. & T. P. R. Co. v. Kentucky Dep't of Revenue, 684 S.W.2d 303, 1984 Ky. App. LEXIS 583 (Ky. Ct. App. 1984).

3. Construction.

The phrase “tax . . . . . computed upon the entire net income . . . . . derived from . . . . . sources in this state” as used in this section does not include the receipt of dividends by a foreign corporation where the stock is held solely as an investment or otherwise and has no fair relationship to business done by the foreign corporation or its property located in the state. Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ) (decided under prior law).

The word “negotiated” as used in this section has reference to the activities that induced, brought about or created the sale, rather than to steps involved in consummating or completing the sales transactions. Allphin v. Glenmore Distilleries Co., 270 S.W.2d 168, 1954 Ky. LEXIS 1023 ( Ky. 1954 ) (decided under prior law).

Federal income taxes levied on nonbusiness income constitute “related expenses” within the meaning of this section. Allphin v. Joseph E. Seagram & Sons, Inc., 294 S.W.2d 515, 1956 Ky. LEXIS 122 ( Ky. 1956 ).

This section, read as a whole, clearly means that if receipts from sales are used in any formula the receipts must be assigned to the place of chief negotiation of the sales. Kentucky Tax Com. v. American Tobacco Co., 370 S.W.2d 590, 1963 Ky. LEXIS 77 ( Ky. 1963 ).

4. Burden of Proof.

Not all income of a multi-state or multi-national corporation is necessarily subject to taxation by Kentucky, but the burden is on the corporation to show that the questioned income was not derived from the regular course of business under this section. Corning Glass Works v. Department of Revenue, 616 S.W.2d 789, 1981 Ky. App. LEXIS 241 (Ky. Ct. App. 1981).

5. Three Factor Formula.

Generally the three factor formula set out in subsection (8) of this section is used to compute income attributable to Kentucky, and it is only where this three factor formula distorts or unfairly represents such income that another formula will be used. Ruby Constr. Co. v. Department of Revenue, 578 S.W.2d 248, 1978 Ky. App. LEXIS 668 (Ky. Ct. App. 1978).

Where corporation was assessed, as business income subject to Kentucky taxation, for income derived from capital gains, interest and foreign royalties and none of these specific items had anything to do with the corporation’s business activities in Kentucky, the corporation must pay a fraction of all of its business income to Kentucky after considering the value that the corporation’s property, payroll and sales in Kentucky have in relation to the total value of the corporation’s property, payroll and sales for the entire multi-state or multi-national operation, as apportioned through the formula provided under this section, since the prior rule that taxable net income have an identifiable source within Kentucky to be taxed is no longer the law. Corning Glass Works v. Department of Revenue, 616 S.W.2d 789, 1981 Ky. App. LEXIS 241 (Ky. Ct. App. 1981).

Plain language of KRS 141.205(5)(a) compelled a finding that the legislature intended for the amount of tax owed under this section to be calculated using the formula found therein; accordingly, the circuit court erred by applying instead the formula found in KRS 141.120(8). Revenue Cabinet v. Asworth Corp., 2009 Ky. App. LEXIS 229 (Ky. Ct. App. Nov. 20, 2009), cert. denied, 562 U.S. 1200, 131 S. Ct. 1046, 178 L. Ed. 2d 865, 2011 U.S. LEXIS 1056 (U.S. 2011).

6. Doing Business.

A foreign corporation which derives a rental from property owned by it in this state is doing business in this state. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

7. Corporations.
8. —Foreign Corporation.

Where foreign corporation owned railroad line and terminals in Kentucky, Ohio and Tennessee, which it leased to an operating corporation, it was proper to allocate the income taxable in Kentucky by averaging the ratio of the mileage in Kentucky to the total mileage, and the ratio of the value of the property located in Kentucky to the total value. Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ) (decided under prior law).

Where Delaware corporation, holding a patent on radio tubes, entered into a contract in New York with another Delaware corporation, which had its principal office and manufacturing plant in Kentucky, under which contract the manufacturing corporation was licensed to manufacture tubes under the patent in consideration of the payment of royalties, the patent-holding corporation was not liable for income taxes on the royalties received on tubes manufactured in Kentucky, since it was not doing business in Kentucky, the patent did not constitute property located in Kentucky, and the source of the income was the contract, which was not in this state but in New York. Commonwealth ex rel. Luckett v. Radio Corp. of America, 299 Ky. 44 , 184 S.W.2d 250, 1944 Ky. LEXIS 1029 ( Ky. 1944 ) (decided under prior law).

Where a foreign corporation which was doing business in Kentucky, but which had its principal place of business outside Kentucky, owned shares of capital stock of a Kentucky corporation purely as an investment, having no connection with its regular business within this state, or with business between it and the Kentucky corporation, and the certificates of such stock were held in New York, the amounts received as dividends therefrom were not taxable in Kentucky as such income was not received from “sources in this state,” or from “doing business” within this state under this section and KRS 141.040 . Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ) (decided under prior law).

Where a corporation maintained its executive and accounting offices in Louisville, and its production plant and warehouse in Daviess County, Kentucky, and had district or regional sales offices in 29 states, with salesmen in 16 additional states who were responsible to one of the district or regional offices, and the orders procured by the salesman in those 45 states were sent to the Louisville office and there processed and transmitted to the plant in Daviess County for shipment, the receipts from sales procured by sales representatives operating out of offices, agencies or places of business maintained by the corporation outside Kentucky were not assignable to Kentucky. Allphin v. Glenmore Distilleries Co., 270 S.W.2d 168, 1954 Ky. LEXIS 1023 ( Ky. 1954 ) (decided under prior law).

9. —Subsidiaries.

Where Kentucky corporation operating theaters in Kentucky and Indiana owned all of the stock of an Indiana corporation operating theaters in Indiana, and the Indiana corporation was merely an adjunct or agency of the Kentucky corporation, dividends received by the Kentucky corporation on the stock of the Indiana corporation were not taxable in Kentucky. Kentucky Tax Com. v. Fourth Ave. Amusement Co., 293 Ky. 668 , 170 S.W.2d 42, 1943 Ky. LEXIS 699 ( Ky. 1943 ) (decided under prior law).

Dividends received by corporation from wholly owned subsidiaries operating businesses similar to that of the parent in foreign countries are not taxable by Kentucky unless the foreign activities were so integrated and interrelated with those in Kentucky that the sources cannot be reasonably and separately identified. Square D Co. v. Kentucky Bd. of Tax Appeals, 415 S.W.2d 594, 1967 Ky. LEXIS 323 ( Ky. 1967 ).

Where an Indiana corporation operating both within and outside Kentucky had a subsidiary corporation which operated only in Ohio, which was formed solely to maximize deferral of the parent company’s federal income taxes and whose expenses were completely paid by the Indiana parent, the Department of Revenue properly determined that the parent and subsidiary were unitary in nature and that their incomes should be combined for apportionment purposes in assessing corporate income tax. Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ).

The statutory law has changed greatly since Square D Co. v. Kentucky Bd. of Tax Appeals, 415 S.W.2d 594, 1967 Ky. LEXIS 323 ( Ky. 1967 ), was decided and the source test, which held that income must have an identifiable source within the Commonwealth in order to be taxable, is no longer justified. Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ).

10. —Unitary Multi-corporate Groups.

Where this section was interpreted by the Revenue Cabinet from 1972 to 1988 as authority to allow unitary multi-corporate groups such as GTE and subsidiaries to combine their income and file a joint tax return, and where, in 1988, the Revenue Cabinet effectively halted the filing of joint returns by establishing an internal policy, such policy could not be applied either retroactively or prospectively to add to or detract from this section and that this section provided the GTE unitary group a statutory right to file a combined income tax return. GTE v. Revenue Cabinet, 889 S.W.2d 788, 1994 Ky. LEXIS 148 ( Ky. 1994 ).

Amendments under KRS 141.120 and 141.200 , which barred related corporations from filing combined tax returns under the unitary business concept and barred refunds where such corporations withdrew their prior separate state tax returns and substituted combined returns, were made to clarify the law regarding combined returns under the unitary business plan and to exercise the legislature’s revenue raising power. Because the amendments furthered a legitimate government interest and were rationally related to that purpose, the corporations’ due process rights were not violated by the retroactive application of the amendments, and they were not entitled to refunds. Miller v. Johnson Controls, Inc., 296 S.W.3d 392, 2009 Ky. LEXIS 196 ( Ky. 2009 ), cert. denied, 560 U.S. 935, 130 S. Ct. 3324, 176 L. Ed. 2d 1240, 2010 U.S. LEXIS 4206 (U.S. 2010).

11. Business Income.

This section does not limit business income to the income from taxpayers’ trade; thus where investments are an integral part of regular business operation, such investments constitute business income within the meaning of subdivision (1)(a) of this section. Cincinnati, N. O. & T. P. R. Co. v. Kentucky Dep't of Revenue, 684 S.W.2d 303, 1984 Ky. App. LEXIS 583 (Ky. Ct. App. 1984).

12. Capital Gains.

Where a Delaware corporation having its principal place of business in Kentucky sold certain tangible assets having a situs in another state and realized a capital gain on which it paid a capital gains tax to the United States, all the income taxes paid to the United States, on the gain realized from the sale of property held two (2) years or more, could be deducted and not merely the taxes paid on income derived from business activities within Kentucky. Clayton & Lambert Mfg. Co. v. Kentucky State Tax Com., 265 S.W.2d 449, 1954 Ky. LEXIS 729 ( Ky. 1954 ).

13. Fire Insurance.

Proceeds of fire insurance policy do not constitute gross income under this section. Independent Loose Leaf Warehouse, Inc. v. Howard, 305 Ky. 500 , 204 S.W.2d 810, 1947 Ky. LEXIS 849 ( Ky. 1947 ) (decided under prior law).

14. Kentucky Net Operating Loss.

A specific Kentucky net operating loss (KNOL) is created under state law by implication, and to calculate one’s KNOL, the adjustments to income and deductions allowed under Kentucky law should be used; the KNOL then is the difference between Kentucky gross income and Kentucky deductions after applying the apportionment factor of this section when a multi-state corporation is involved. Revenue Cabinet Commonwealth v. Southwire Co., 777 S.W.2d 598, 1989 Ky. App. LEXIS 52 (Ky. Ct. App. 1989).

15. Sales Within State.

Kentucky company’s “dock sales” of products to nonresident parent company, delivered to the parent in Kentucky and shipped to other states on trucks provided by the parent, could not be assigned as Kentucky sales for the purposes of determining the resident company’s liability for Kentucky corporate income taxes; such a “destination” rather than a “place of delivery” rule has been uniformly adopted by other states. Revenue Cabinet v. Rohm & Haas Ky., 929 S.W.2d 741, 1996 Ky. App. LEXIS 150 (Ky. Ct. App. 1996).

16. Stock.

This section does not impose the tax upon dividends received from stock of a Kentucky corporation which are paid to a foreign corporation holding the stock solely as an investment and without relation to business which the foreign corporation does in Kentucky. Virginia-Carolina Chemical Co. v. Commonwealth, 302 Ky. 173 , 194 S.W.2d 180, 1946 Ky. LEXIS 629 ( Ky. 1946 ) (decided under prior law).

17. Total Transactions.

It is not the contract negotiation that controls, but the total of the transactions which give rise to the receipts. Tennessee Gas & Transmission Co. v. Commonwealth, 308 Ky. 571 , 215 S.W.2d 102, 1948 Ky. LEXIS 979 ( Ky. 1948 ) (decided under prior law).

18. Arbitrary Allocation.

Where application of formula showed income allocated to Kentucky to be in the sum of $11,493.46 while the actual net profits derived from the two (2) Kentucky stores was $2,423.47, difference is sufficient to show that the formula results in an arbitrary allocation. Charles C. Parks Co. v. Allphin, 295 S.W.2d 562, 1956 Ky. LEXIS 168 ( Ky. 1956 ).

19. Allocation Unnecessary.

Where subsidiary corporation located in Kentucky did not maintain or control the New York office of the parent corporation and no proof was offered that the subsidiary did business in any state other than New York or Kentucky, the taxable net income of the subsidiary would be defined by KRS 141.010 and could not be allocated or apportioned under this section. Clinton Shirt Corp. v. Kentucky Board of Tax Appeals, 583 S.W.2d 84, 1978 Ky. App. LEXIS 679 (Ky. Ct. App. 1978).

If there is no business income from activity outside the state of Kentucky as found under KRS 141.010(14)(a) (now 14(b)), then subsections (2) and (3) of this section would have no effect for there would be nothing to allocate and apportion under the scheme as outlined herein, even though the corporation in question may come within the provisions of subsection (3) of this section by merely paying a franchise tax to another state just because the corporation is incorporated in that other state. Clinton Shirt Corp. v. Kentucky Board of Tax Appeals, 583 S.W.2d 84, 1978 Ky. App. LEXIS 679 (Ky. Ct. App. 1978).

20. Uniformity.

Where testimony showed that only in cases where the Department of Revenue clearly contrary to the plain meaning of the preamble of subsection (10) of this section and to the mandate of uniformity in the act. Ruby Constr. Co. v. Department of Revenue, 578 S.W.2d 248, 1978 Ky. App. LEXIS 668 (Ky. Ct. App. 1978).

The mandate of uniformity requires that the commissioner affirmatively find that the formulary method of allocation fails to fairly represent business activity within this state before he makes use of the relief provision in subsection (9) of this section and therefore regulation IC-16 which provided that the formulary method be used only when separate accounting proved to unfairly represent business activity was invalid in that it was inconsistent with the statute, was clearly unreasonable, and was inappropriate to carry out the ends specified in the statute which it was intended to implement. Ruby Constr. Co. v. Department of Revenue, 578 S.W.2d 248, 1978 Ky. App. LEXIS 668 (Ky. Ct. App. 1978).

21. —Basis for Not Applying.

While the finding that a business is multiform may well be a significant factor in determining the propriety of the application of subsection (9) of this section, it cannot provide the conclusive basis for such finding; even the wide latitude granted the commissioner of revenue by KRS 13.082 (now repealed) is not sufficient to support a finding based upon a distinction that is not mentioned in the act. Ruby Constr. Co. v. Department of Revenue, 578 S.W.2d 248, 1978 Ky. App. LEXIS 668 (Ky. Ct. App. 1978).

22. Unitary Business.

Under the doctrine of contemporaneous construction, the use of a combined reporting method by a unitary business is provided for in this section. GTE v. Revenue Cabinet, 889 S.W.2d 788, 1994 Ky. LEXIS 148 ( Ky. 1994 ).

Cited in:

Allphin v. Louisville & N. R. Co., 290 S.W.2d 787, 1956 Ky. LEXIS 341 ( Ky. 1956 ); Luckett v. Coca-Cola Bottling Co., 310 S.W.2d 795, 1958 Ky. LEXIS 412 ( Ky. 1958 ); Luckett v. Heaven Hill Distilleries, Inc., 336 S.W.2d 584, 1960 Ky. LEXIS 345 ( Ky. 1960 ); Kroger Co. v. Department of Revenue, 556 S.W.2d 156, 1977 Ky. App. LEXIS 807 (Ky. Ct. App. 1977).

Opinions of Attorney General.

Transaction involving transfer of notes secured by mortgages on single-family dwellings located in Kentucky from nonresident corporation to nonresident bank must be included as a factor in computing the corporation’s Kentucky corporate income tax liability, unless the corporation is exempt from the Kentucky corporation income tax as provided in KRS 141.040(1)(a) to (1)(h). OAG 82-264 .

Research References and Practice Aids

Kentucky Law Journal.

Martin, Some Recent Kentucky Tax Cases of Economic Significance, 44 Ky. L.J. 29 (1955).

Kentucky Law Survey, Vasek and Bradley, Kentucky Taxation, 68 Ky. L.J. 777 (1979-1980).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

141.121. Special rules for apportioning business income — Management of a treasury function — Passenger airlines — Qualified air freight forwarders — Administrative regulations regarding sourcing of receipts.

  1. As used in this section:
    1. “Affiliated airline” means an airline:
      1. For which a qualified air freight forwarder facilitates air transportation; and
      2. That is in the same affiliated group as a qualified air freight forwarder;
    2. “Affiliated group” has the same meaning as in KRS 141.201 ;
    3. “Kentucky revenue passenger miles” means the total revenue passenger miles within the borders of Kentucky for all flight stages that either originate or terminate in this state;
    4. “Passenger airline” means a person or corporation engaged primarily in the carriage by aircraft of passengers in interstate commerce;
    5. “Provider” means any corporation engaged in the business of providing:
      1. Communications service as defined in KRS 136.602 ;
      2. Cable service as defined in KRS 136.602 ; or
      3. Internet access as defined in 47 U.S.C. sec. 151 ;
    6. “Qualified air freight forwarder” means a person that:
      1. Is engaged primarily in the facilitation of the transportation of property by air;
      2. Does not itself operate aircraft; and
      3. Is in the same affiliated group as an affiliated airline; and
    7. “Revenue passenger miles” means miles calculated in accordance with 14 C.F.R. Part 241.
    1. For purposes of apportioning business income to this state for taxable years beginning prior to January 1, 2018: (2) (a) For purposes of apportioning business income to this state for taxable years beginning prior to January 1, 2018:
      1. Passenger airlines shall determine the property, payroll, and sales factors as follows:
        1. Except as modified by this subdivision, the property factor shall be determined as provided in KRS 141.901 . Aircraft operated by a passenger airline shall be included in both the numerator and denominator of the property factor. Aircraft shall be included in the numerator of the property factor by determining the product of:
          1. The total average value of the aircraft operated by the passenger airline; and
          2. A fraction, the numerator of which is the Kentucky revenue passenger miles of the passenger airline for the taxable year and the denominator of which is the total revenue passenger miles of the passenger airline for the taxable year;
        2. Except as modified by this subdivision, the payroll factor shall be determined as provided in KRS 141.901 . Compensation paid during the tax period by a passenger airline to flight personnel shall be included in the numerator of the payroll factor by determining the product of:
          1. The total amount paid during the taxable year to flight personnel; and
          2. A fraction, the numerator of which is the Kentucky revenue passenger miles of the passenger airline for the taxable year and the denominator of which is the total revenue passenger miles of the passenger airline for the taxable year; and
        3. Except as modified by this subdivision, the sales factor shall be determined as provided in KRS 141.901. Transportation revenues shall be included in the numerator of the sales factor by determining the product of:
          1. The total transportation revenues of the passenger airline for the taxable year; and
          2. A fraction, the numerator of which is the Kentucky revenue passenger miles for the taxable year and the denominator of which is the total revenue passenger miles for the taxable year; and
      2. Qualified air freight forwarders shall determine the property, payroll, and sales factors as follows:
        1. The property factor shall be determined as provided in KRS 141.901;
        2. The payroll factor shall be determined as provided in KRS 141.901; and
        3. Except as modified by this subparagraph, the sales factor shall be determined as provided in KRS 141.901. Freight forwarding revenues shall be included in the numerator of the sales factor by determining the product of:
          1. The total freight forwarding revenues of the qualified air freight forwarder for the taxable year; and
          2. A fraction, the numerator of which is miles operated in Kentucky by the affiliated airline and the denominator of which is the total miles operated by the affiliated airline.
    2. For purposes of apportioning income to this state for taxable years beginning on or after January 1, 2018, except as modified by this paragraph, the apportionment fraction shall be determined as provided in KRS 141.120 , except that:
      1. Transportation revenues shall be determined to be in this state by multiplying the total transportation revenues by a fraction, the numerator of which is the Kentucky revenue passenger miles for the taxable year and the denominator of which is the total revenue passenger miles for the taxable year; and
      2. Freight forwarding revenues shall be determined to be in this state by multiplying the total freight forwarding revenues by a fraction, the numerator of which is miles operated in Kentucky by the affiliated airline and the denominator of which is the total miles operated by the affiliated airline.
  2. For purposes of apportioning income to this state for taxable years beginning on or after January 1, 2018, the apportionment fraction for a provider shall continue to be calculated using a three (3) factor formula as provided in KRS 141.901 .
    1. A corporation may elect the allocation and apportionment methods for the corporation’s apportionable income provided for in paragraphs (b) and (c) of this subsection. The election, if made, shall be irrevocable for a period of five (5) years. (4) (a) A corporation may elect the allocation and apportionment methods for the corporation’s apportionable income provided for in paragraphs (b) and (c) of this subsection. The election, if made, shall be irrevocable for a period of five (5) years.
    2. All business income derived directly or indirectly from the sale of management, distribution, or administration services to or on behalf of regulated investment companies, as defined under the Internal Revenue Code of 1986, as amended, including trustees, and sponsors or participants of employee benefit plans which have accounts in a regulated investment company, shall be apportioned to this state only to the extent that shareholders of the investment company are domiciled in this state as follows:
      1. Total apportionable income shall be multiplied by a fraction, the numerator of which shall be Kentucky receipts from the services for the tax period and the denominator of which shall be the total receipts everywhere from the services for the tax period;
      2. For purposes of subparagraph 1. of this paragraph, Kentucky receipts shall be determined by multiplying total receipts for the taxable year from each separate investment company for which the services are performed by a fraction. The numerator of the fraction shall be the average of the number of shares owned by the investment company’s shareholders domiciled in this state at the beginning of and at the end of the investment company’s taxable year, and the denominator of the fraction shall be the average of the number of the shares owned by the investment company shareholders everywhere at the beginning of and at the end of the investment company’s taxable year; and
      3. Nonapportionable income shall be allocated to this state as provided in KRS 141.120 .
    3. All apportionable income derived directly or indirectly from the sale of securities brokerage services by a business which operates within the boundaries of any area of the Commonwealth, which on June 30, 1992, was designated as a Kentucky Enterprise Zone, as described in KRS 154.655(2) before that statute was renumbered in 1992, shall be apportioned to this state only to the extent that customers of the securities brokerage firm are domiciled in this state. The portion of business income apportioned to Kentucky shall be determined by multiplying the total business income from the sale of these services by a fraction determined in the following manner:
      1. The numerator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by customers domiciled in Kentucky for the brokerage firm’s taxable year;
      2. The denominator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by all of the brokerage firm’s customers for that year; and
      3. Nonapportionable income shall be allocated to this state as provided in KRS 141.120 .
  3. Public service companies and financial organizations required by KRS 141.010 to allocate and apportion net income shall allocate and apportion that income as follows:
    1. Nonapportionable income shall be allocated to this state as provided in KRS 141.120 ;
    2. Apportionable income shall be apportioned to this state as provided by KRS 141.120 . Receipts shall be determined as provided by administrative regulations promulgated by the department; and
    3. An affiliated group required to file a consolidated return under KRS 141.201 that includes a public service company, a provider of communications services or multichannel video programming services as defined in KRS 136.602 , or a financial organization shall determine the amount of receipts as provided by administrative regulations promulgated by the department.
  4. A corporation:
    1. That owns an interest in a limited liability pass-through entity; or
    2. That owns an interest in a general partnership;
  5. The department shall promulgate administrative regulations to detail the sourcing of the following receipts related to financial institutions:
    1. Receipts from the lease of real property;
    2. Receipts from the lease of tangible personal property;
    3. Interest, fees, and penalties imposed in connection with loans secured by real property;
    4. Interest, fees, and penalties imposed in connection with loans not secured by real property;
    5. Net gains from the sale of loans;
    6. Receipts from fees, interest, and penalties charged to card holders;
    7. Net gains from the sale of credit card receivables;
    8. Card issuer’s reimbursement fees;
    9. Receipts from merchant discount;
    10. Receipts from ATM fees;
    11. Receipts from loan servicing fees;
    12. Receipts from other services;
    13. Receipts from the financial institution’s investment assets and activity and trading assets and activity; and
    14. All other receipts.

shall include the proportionate share of receipts of the limited liability pass-through entity or general partnership when apportioning income. The phrases “an interest in a limited liability pass-through entity” and “an interest in a general partnership” shall extend to each level of multiple-tiered pass-through entities.

HISTORY: Enact. Acts 2008, ch. 18, § 3, effective July 15, 2008; 2012, ch. 101, § 2, effective April 11, 2012; 2018 ch. 171, § 78, effective April 14, 2018; 2018 ch. 207, § 78, effective April 27, 2018; 2019 ch. 151, § 44, effective June 27, 2019; 2020 ch. 91, § 10, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 10 of that Act apply to taxable years beginning on or after January 1, 2019.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

(4/11/2012). 2012 Ky. Acts ch. 101, sec. 3, provides that this statute, as amended by 2012 Ky. Acts ch. 101, sec. 2, “applies to taxable years beginning on or after January 1, 2010.”

(7/15/2008). 2008 Ky. Acts ch. 18, sec. 4 provides that this section “shall apply to taxable periods beginning after December 31, 2007.”

141.124. Separate accounting by corporation authorized, when — Appeal. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 290, § 1; 1964, ch. 141, § 30) was repealed by Acts 1966, ch. 176, part I, § 14.

141.125. Distribution of voting stock in subsidiary corporation; when not recognized as gain to distributee. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1952, ch. 225) was repealed by Acts 1954, ch. 79, § 35.

141.130. Liability for tax on discontinuation of business.

If any corporation or pass-through entity dissolves or withdraws from this state during any taxable year, or if any corporation in any manner surrenders or loses its charter during any taxable year, the dissolution, withdrawal, or loss or surrender of charter shall not defeat the filing of returns and the assessment and collection of income taxes for the period of that taxable year during which the corporation or pass-through entity had an income in this state.

History. 4281b-35: amend. 2005, ch. 168, § 12, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 19, effective June 28, 2006.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.140. Accounting period for computation of income.

  1. If the taxpayer makes, or is required to make, a federal income tax return, the taxpayer’s income shall be computed for the purposes of this chapter on the basis of the same calendar or fiscal year required by the federal government, and the taxpayer shall employ the same methods of accounting required for federal income tax purposes.
  2. If a return is made by an individual for a period of less than one (1) year, the net income, computed on the basis of the period for which a separate return is made, shall be placed on an annual basis by multiplying the amount thereof by the number of days in the year and dividing by the number of days included in the period for which the separate return is made. The tax payable shall be such part of the tax computed on the annual basis as the number of days in the period is of the number of days in the year.
  3. If a return is made by a corporation for a period of less than one (1) year, the taxable net income, computed on the basis of the period for which a return is made, shall be placed on an annual basis by multiplying the amount thereof by the number of days in the year and dividing by the number of days included in the period for which the return is made. The tax payable shall be such part of the tax computed on the annual basis as the number of days in the period is of the number of days in the year.

History. 4281b-8: amend. Acts 1954, ch. 79, § 11; 1956 (4th Ex. Sess.), ch. 4, § 7; 2005, ch. 168, § 13, effective March 18, 2005.

Legislative Research Commission Notes.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

NOTES TO DECISIONS

1. Federal Income Tax.

It was not the intention of the legislature to permit the deduction of income taxes paid to the United States which should have been, according to the ordinary and usual course of business, paid in a year prior to the effective date of the state taxing act. Reeves v. Turner, 289 Ky. 426 , 158 S.W.2d 978, 1942 Ky. LEXIS 565 ( Ky. 1942 ).

141.150. Reports of income payments to others.

  1. Every corporation subject to the jurisdiction of this state, unless excused by the department, shall render a correct report of its payments of dividends to residents of this state, stating the name and address of each shareholder, the number of shares owned by him, and the amount of dividends paid to him.
  2. Every person subject to the jurisdiction of this state, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries and employers, making payment to another person, domiciled in this state, of interest, rent, premiums, annuities, compensations, remunerations, emoluments or other fixed or determinable gains, profits and income not subject to withholding provisions contained in KRS 141.310 of six hundred dollars ($600) or more in any taxable year, shall render a true and accurate report to the department of the payments made. Every person subject to the jurisdiction of this state, in whatever capacity acting, making payment of wages to another person domiciled in this state, shall render a true and accurate report to the department of the payments made. In the case of such payments made by the state and its political subdivisions, the officers or employees having information as to such payments designated by the department by the regulations hereinafter provided for shall make such reports. The reports shall be made under the regulations and in the form and manner and to the extent prescribed by the department, and shall set forth the amount of the gains, wages, profits and income, and the name and address of the recipient of the payments. The department may also require any person to make information reports respecting nonresidents it believes to be subject to income tax.
  3. The reports contemplated by this section may be required, regardless of amounts, in the case of payments of dividends or interest upon bonds, mortgages, deeds of trust or other similar obligations of corporations. When necessary to make effective the provisions of this section, the name and address of the recipient of the income shall be furnished upon demand of the person paying the income. The provisions of this section shall not apply to the payment of interest on obligations of the United States or of this state, or the political subdivisions thereof.

History. 4281b-9: amend. Acts 1954, ch. 79, § 12; 1956 (4th Ex. Sess.), ch. 4, § 8; 1986, ch. 496, § 22, effective August 1, 1986; 2005, ch. 85, § 482, effective June 20, 2005.

Legislative Research Commission Notes.

(1988). A technical correction has been made in this section by the Reviser of Statutes pursuant to KRS 7.136 .

NOTES TO DECISIONS

1. Dividends of Nonresidents.

The Legislature intended to tax dividends received by residents of this state and none other. Atlantic C. L. R. Co. v. Commonwealth, 302 Ky. 36 , 193 S.W.2d 749, 1946 Ky. LEXIS 597 ( Ky. 1946 ).

Research References and Practice Aids

Cross-References.

Failure to make tax reports, penalties, KRS 131.180 , 131.990 .

141.160. When returns for income tax are due — Forms — Copy of federal return may be required — Returns for cooperatives.

  1. All returns of income for the preceding taxable year shall be made by April 15 in each year, except returns made on the basis of a fiscal year, which shall be made by the fifteenth day of the fourth month following the close of the fiscal year. Blank forms for returns of income shall be supplied by the department.
  2. Whenever, in the opinion of the department, it is necessary to examine the federal income tax return or a copy thereof of any taxpayer in order to audit his return, the department may compel the taxpayer to produce for inspection a copy of his federal return and all statements and schedules in support thereof. The department may also require copies of reports of adjustments made by the federal government.
  3. Notwithstanding subsection (1) of this section, all returns of income for the preceding taxable year made by cooperatives as described in Sections 521 and 1381 of the Internal Revenue Code or by KRS Chapter 272 shall be made by September 15 in each year, except returns made on the basis of a fiscal year, which shall be made by the fifteenth day of the ninth month following the close of the fiscal year.

History. 4281b-10, 4281b-22, 4281b-24; Acts 1954, ch. 79, § 13, effective June 17, 1954; 2005, ch. 85, § 483, effective June 20, 2005; 2008, ch. 132, § 3, effective April 24, 2008; repealed and reenact., Acts 2009, ch. 86, § 3, effective March 24, 2009.

Legislative Research Commission Notes.

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that “The intent of the General Assembly in repealing and reenacting KRS 136.392 , 138.195 , 141.160 , 160.6156 , 160.6157 , 160.6158 , 131.183 , 141.044 , 141.235 , 134.580 , 393.060 , and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides “To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood.”

NOTES TO DECISIONS

Cited in:

Fidelity & Columbia Trust Co. v. Reeves, 287 Ky. 522 , 154 S.W.2d 337, 1941 Ky. LEXIS 579 ( Ky. 1941 ).

Research References and Practice Aids

Cross-References.

Failure to make tax returns, penalties, KRS 131.180 , 131.990 .

Tax return information confidential, provisions for exchange, KRS 131.190 .

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

141.170. Extension of time for filing returns.

  1. The department may grant any taxpayer other than a corporation a reasonable extension of time for filing an income tax return whenever good cause exists, and shall keep a record of every extension. Except in the case of an individual who is abroad, no extension shall be granted for more than six (6) months. In the case of an individual who is abroad, the extension shall not be granted for more than one (1) year.
  2. A corporation may be granted an extension of not more than seven (7) months for filing its income tax return, provided the corporation, on or before the date prescribed for payment of the tax, requests the extension and pays the amount properly estimated as its tax.
  3. If the time for filing a return is extended, the taxpayer shall pay, as part of the tax, an amount equal to the tax interest rate as defined in KRS 131.010(6) on the tax shown due on the return, but not previously paid, from the time the tax was due until the return is actually filed with the department.

History. 4281b-21, 4281b-25: amend. Acts 1950, ch. 189, § 1; 1972, ch. 84, part II, § 4; 1982, ch. 387, § 8, effective July 15, 1982; 1986, ch. 459, § 5, effective July 15, 1986; 1990, ch. 29, § 1, effective July 1, 1990; 1996, ch. 344, § 3, effective July 15, 1996; 2005, ch. 85, § 484, effective June 20, 2005; 2019 ch. 151, § 45, effective June 27, 2019.

Compiler’s Notes.

Section 11 of Acts 1996, ch. 344 read, “The provisions of this act shall apply for taxable years beginning after December 31, 1995.”

Legislative Research Commission Notes.

(7/13/90) The amendment to this section made by House Bill 255, 1990 Ky. Acts ch. 29, was made effective for taxable years beginning on or after July 1, 1990.

NOTES TO DECISIONS

Cited in:

Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ); Curd v. Commonwealth, 312 Ky. 457 , 227 S.W.2d 1003, 1950 Ky. LEXIS 677 ( Ky. 1950 ); Kupper v. Fiscal Court of Jefferson County, 346 S.W.2d 766, 1961 Ky. LEXIS 337 ( Ky. 1961 ).

Research References and Practice Aids

Cross-References.

Collection of taxes by Department of Revenue, KRS 134.547 , 135.050 , 135.060 .

Extension of time for filing tax reports or returns, KRS 131.170 .

Failure to make tax reports, penalties, KRS 131.180 , 131.990 .

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

141.175. Extension for members of Armed Forces serving in combat zones.

  1. As used in this section and KRS 141.019 and 141.900 :
    1. “Active duty” means the day the person assembles at his or her armory or other designated place until the day he or she returns there and has been properly relieved, including:
      1. Fractional parts of a day which count as a full day; and
      2. All days of active duty for training and inactive duty training; and
    2. “Armed Forces” means the military forces of the United States and the Commonwealth, including the:
      1. Army;
      2. Navy;
      3. Air Force;
      4. Marine Corps;
      5. Coast Guard;
      6. Any Reserve branch of the Army, Navy, Air Force, Marine Corps, or Coast Guard; and
      7. National Guard.
    1. Members of the Armed Forces called to active duty who are required by law to file an income tax return and pay income taxes to the state of Kentucky shall be allowed an extension to file the return and pay the taxes, which would otherwise become due during the period of service, if the member serves in an area designated as a combat zone by presidential proclamation. (2) (a) Members of the Armed Forces called to active duty who are required by law to file an income tax return and pay income taxes to the state of Kentucky shall be allowed an extension to file the return and pay the taxes, which would otherwise become due during the period of service, if the member serves in an area designated as a combat zone by presidential proclamation.
    2. The extension referred to in paragraph (a) of this subsection shall expire twelve (12) months after the service.
    3. No penalty shall accrue by reason of the extension.

History. Enact. Acts 2002, ch. 109, § 2, effective July 15, 2002; 2019 ch. 151, § 46, effective June 27, 2019.

Legislative Research Commission Notes.

(6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 46 of that Act apply to taxable years beginning on or after January 1, 2019.

141.180. Individuals required to make return — Verification.

  1. For taxable years beginning before January 1, 2005:
    1. Every individual, except as otherwise provided in this subsection, having for the taxable year an adjusted gross income which exceeds five thousand dollars ($5,000), if single, or if married and not living with husband or wife and every married individual living with husband or wife whose adjusted gross income combined with the adjusted gross income of his or her spouse exceeds five thousand dollars ($5,000) shall make to the department a return stating specifically the items which he claims as deductions and tax credits allowed by this chapter.
    2. Any individual who is blind or who has attained the age of sixty-five (65) before the close of the taxable year shall be required to make a return only if the taxpayer has for the taxable year an adjusted gross income which exceeds five thousand dollars ($5,000). Every married individual living with husband or wife shall, if both spouses have attained the age of sixty-five (65), be required to make a return if the combined adjusted gross income of both spouses exceeds five thousand four hundred dollars ($5,400). If the individual is unable to make his or her own return, the return shall be made by a duly authorized agent.
    3. Any individual, who is both sixty-five (65) or over and blind before the close of the taxable year, shall make a return if the taxpayer has for the taxable year an adjusted gross income which exceeds five thousand dollars ($5,000).
    4. Notwithstanding any other provision of this subsection, an individual, having for the taxable year gross income from self-employment of five thousand dollars ($5,000) or more, shall make a return.
    5. Any nonresident individual with gross income from Kentucky sources and a total gross income of five thousand dollars ($5,000) or over shall make a return.
  2. For taxable years beginning after December 31, 2004:
    1. Except as otherwise provided in this subsection, every individual having for the taxable year a modified gross income exceeding the threshold amount determined under KRS 141.066 , and every married couple living together with a combined modified gross income exceeding the threshold amount determined under KRS 141.066 , shall file a return with the department stating specifically the items claimed as deductions and tax credits allowed by this chapter. If the individual is unable to file a return, the return shall be made by a duly authorized agent.
    2. Notwithstanding any other provision of this subsection, an individual having, for the taxable year, gross income from self-employment exceeding the threshold amount determined under KRS 141.066 shall file a return.
    3. Any nonresident individual with gross income from Kentucky sources and a total gross income exceeding the threshold amount determined under KRS 141.066 shall file a return.
  3. A husband and wife not living together shall make separate returns. A husband and wife living together may make a joint return, or may make separate returns. However, if separate returns are made, neither spouse shall report income nor claim deductions properly attributable to the other.
  4. Notwithstanding any other provisions of KRS Chapters 131 and 141, a husband or a wife who is jointly and severally liable for taxes levied under KRS 141.020 , applicable penalties, and interest shall be relieved of liability for tax, interest, penalties, and other amounts if:
    1. The spouse has been relieved of liability for federal income tax, interest, penalties, and other amounts for the same taxable year by the Internal Revenue Service under Section 6015 of the Internal Revenue Code, to be effective as of the date that the Internal Revenue Service approved the relief; or
    2. It is shown that the spouse would have qualified for relief under the provisions of Section 6015 of the Internal Revenue Code for the same taxable year if there had been a federal income tax liability, to be effective as of the date that the department approved the relief.
  5. Notwithstanding KRS 134.580 , any relief granted pursuant to paragraphs (a) and (b) of subsection (4) of this section shall not result in a tax overpayment to the spouse requesting relief for payments made before the relief was approved.
  6. Each individual return shall be verified by a declaration that it is made under the penalties of perjury.

HISTORY: 4281b-13, 4281b-17: amend. Acts 1946, ch. 234, § 5; 1952, ch. 124, § 4; 1956 (4th Ex. Sess.), ch. 4, § 9; 1958, ch. 3, § 3; 1960, ch. 5, Art. III, § 5; 1976, ch. 77, part I, § 4; 1978, ch. 233, § 11, effective June 17, 1978; 1990, ch. 476, Pt. VII D, § 634, effective April 11, 1990; 1994, ch. 12, § 1, effective July 15, 1994; 2000, ch. 337, § 2, effective July 14, 2000; 2005, ch. 85, § 485, effective June 20, 2005; 2005, ch. 168, § 14, effective March 18, 2005; 2015 ch. 67, § 12, effective June 24, 2015.

Compiler’s Notes.

Section 8, part I of Acts 1976, ch. 77, read: “The provisions of Part I of this Act shall apply to taxable years beginning after December 31, 1975.”

Section 40 of Acts 1978, ch. 233 reads: “The provisions of sections eight (8) through seventeen (17) of this Act shall apply to taxable years beginning after December 31, 1977.”

Section 4 of Acts 2000, ch. 337, effective July 14, 2000, read: “Sections 1 and 2 of this Act shall apply to taxable years beginning after December 31, 1999.”

Section 6015 of the Internal Revenue Code referenced in this section is compiled as 26 USCS § 6015.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(7/14/2000). The change in the Internal Revenue Code cites in subsection (7)(a) and (b) from Section 6013e to Section 6015 “apply to taxable years beginning after December 31, 1999.” 2000 Ky. Acts ch. 337, sec. 4.

NOTES TO DECISIONS

1. Constitutionality.

The part of the income tax law which required that the incomes of husband and wife be aggregated for the purpose of computing the tax was held unconstitutional by the Franklin Circuit Court, and no appeal was taken from that part of the judgment, but such holding did not require that the balance of the income tax law be held unconstitutional. Reynolds Metal Co. v. Martin, 269 Ky. 378 , 107 S.W.2d 251, 1937 Ky. LEXIS 604 ( Ky. 1937 ).

Cited in:

Kentucky Bar Ass’n v. Bodell, 829 S.W.2d 427, 1992 Ky. LEXIS 81 ( Ky. 1992 ).

Opinions of Attorney General.

In the situation where a husband and wife have been divorced after filing a joint income tax return and a check payable to them jointly has been cashed, by one former spouse, on the forged endorsement of the other without his or her knowledge, when the check has been mailed to the proper address of one or both payees, and is actually received by one of the payees, the refund by the state has become effective, and the state has done all it is required to do. OAG 79-223 .

Research References and Practice Aids

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Treatises

Petrilli, Kentucky Family Law, Business Transactions, § 15.10.

141.190. Returns of fiduciaries.

  1. Every fiduciary, except a receiver appointed by authority of law in possession of part only of the property of an individual, shall make under oath a return for any of the following individuals, estates, or trusts for which he acts, setting forth therein such information as may be prescribed by the department:
    1. Every individual having an adjusted gross income for the taxable year which exceeds five thousand dollars ($5,000);
    2. Every estate the gross income of which for the taxable year is twelve hundred dollars ($1,200) or over;
    3. Every trust the gross income of which for the taxable year is one hundred dollars ($100) or over.
  2. Any fiduciary required to make a return under this chapter shall be subject to all the provisions of this chapter that apply to individuals.

History. 4281b-30: amend. Acts 1952, ch. 194, § 9; 1954, ch. 79, § 14; 1958, ch. 3, § 4; 1960, ch. 5, Art. III, § 6; 1976, ch. 77, part I, § 5; 1990, ch. 476, Pt. VII D, § 635, effective April 11, 1990; 2005, ch. 85, § 486, effective June 20, 2005.

Compiler’s Notes.

Section 8, part I of Acts 1976, ch. 77, read: “The provisions of Part I of this Act shall apply to taxable years beginning after December 31, 1975.”

141.200. Corporation returns — Requirement of affiliated groups to file consolidated returns.

  1. Subsections (2) to (7) of this section shall apply for taxable periods ending before January 1, 2005, and election periods beginning prior to January 1, 2005.
  2. As used in subsections (2) to (7) of this section, unless the context requires otherwise:
    1. “Affiliated group” means affiliated group as defined in Section 1504(a) of the Internal Revenue Code and related regulations;
    2. “Consolidated return” means a Kentucky corporation income tax return filed by members of an affiliated group in accordance with this section. The determinations and computations required by this chapter shall be made in accordance with the provisions of Section 1502 of the Internal Revenue Code and related regulations, except as required by differences between this chapter and the Internal Revenue Code. Corporations exempt from taxation under KRS 141.040 shall not be included in the return;
    3. “Separate return” means a Kentucky corporation income tax return in which only the transactions and activities of a single corporation are considered in making all determinations and computations necessary to calculate taxable net income, tax due, and credits allowed in accordance with the provisions of this chapter;
    4. “Corporation” means “corporation” as defined in Section 7701(a)(3) of the Internal Revenue Code; and
    5. “Election period” means the ninety-six (96) month period provided for in subsection (4)(d) of this section.
  3. Every corporation doing business in this state, except those exempt from taxation under KRS 141.040 , shall, for each taxable year, file a separate return unless the corporation was, for any part of the taxable year, a member of an affiliated group electing to file a consolidated return in accordance with subsection (4) of this section.
    1. An affiliated group, whether or not filing a federal consolidated return, may elect to file a consolidated return which includes all members of the affiliated group. (4) (a) An affiliated group, whether or not filing a federal consolidated return, may elect to file a consolidated return which includes all members of the affiliated group.
    2. An affiliated group electing to file a consolidated return under paragraph (a) of this subsection shall be treated for all purposes as a single corporation under the provisions of this chapter. All transactions between corporations included in the consolidated return shall be eliminated in computing net income and in determining the property, payroll, and sales factors in accordance with KRS 141.901 . The gross receipts received by a public service company that is a member of an affiliated group shall be excluded from the calculation of the alternative minimum calculation under the provisions of KRS 141.040 . For purposes of this paragraph, “public service company” has the same meaning as provided in KRS 136.120 .
    3. Any election made in accordance with paragraph (a) of this subsection shall be made on a form prescribed by the department and shall be submitted to the department on or before the due date of the return including extensions for the first taxable year for which the election is made.
    4. Notwithstanding subsections (9) to (15) of this section, any election to file a consolidated return pursuant to paragraph (a) of this subsection shall be binding on both the department and the affiliated group for a period beginning with the first month of the first taxable year for which the election is made and ending with the conclusion of the taxable year in which the ninety-sixth consecutive calendar month expires.
    5. For each taxable year for which an affiliated group has made an election in accordance with paragraph (a) of this subsection, the consolidated return shall include all corporations which are members of the affiliated group.
  4. Each corporation included as part of an affiliated group filing a consolidated return shall be jointly and severally liable for the income tax liability computed on the consolidated return, except that any corporation which was not a member of the affiliated group for the entire taxable year shall be jointly and severally liable only for that portion of the Kentucky consolidated income tax liability attributable to that portion of the year that the corporation was a member of the affiliated group.
  5. Every corporation return or report required by this chapter shall be executed by one (1) of the following officers of the corporation: the president, vice president, secretary, treasurer, assistant secretary, assistant treasurer, or chief accounting officer. The Department of Revenue may require a further or supplemental report of further information and data necessary for computation of the tax.
  6. In the case of a corporation doing business in this state that carries on transactions with stockholders or with other corporations related by stock ownership, by interlocking directorates, or by some other method, the department shall require information necessary to make possible accurate assessment of the income derived by the corporation from sources within this state. To make possible such assessment, the department may require the corporation to file supplementary returns showing information respecting the business of any or all individuals and corporations related by one (1) or more of these methods to the corporation. The department may require the return to show in detail the record of transactions between the corporation and any or all other related corporations or individuals.
  7. Subsections (9) to (14) of this section shall apply for taxable years beginning on or after January 1, 2005, but prior to January 1, 2019.
  8. As used in subsections (9) to (14) of this section:
      1. For taxable years beginning after December 31, 2004, and before January 1, 2007, “affiliated group” means one (1) or more chains of includible corporations connected through stock ownership, membership interest, or partnership interest with a common parent corporation which is an includible corporation if: (a) 1. For taxable years beginning after December 31, 2004, and before January 1, 2007, “affiliated group” means one (1) or more chains of includible corporations connected through stock ownership, membership interest, or partnership interest with a common parent corporation which is an includible corporation if:
        1. The common parent owns directly an ownership interest meeting the requirements of subparagraph 2. of this paragraph in at least one (1) other includible corporation; and
        2. An ownership interest meeting the requirements of subparagraph 2. of this paragraph in each of the includible corporations, excluding the common parent, is owned directly by one (1) or more of the other corporations.
      2. The ownership interest of any corporation meets the requirements of this paragraph if the ownership interest encompasses at least eighty percent (80%) of the voting power of all classes of ownership interests and has a value equal to at least eighty percent (80%) of the total value of all ownership interests;
      1. For taxable years beginning after December 31, 2006, but prior to January 1, 2019, “affiliated group” means one (1) or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation if: (b) 1. For taxable years beginning after December 31, 2006, but prior to January 1, 2019, “affiliated group” means one (1) or more chains of includible corporations connected through stock ownership with a common parent corporation which is an includible corporation if:
        1. The common parent owns directly stock meeting the requirements of subparagraph 2. of this paragraph in at least one (1) other includible corporation; and
        2. Stock meeting the requirements of subparagraph 2. of this paragraph in each of the includible corporations, excluding the common parent, is owned directly by one (1) or more of the other corporations.
      2. The stock of any corporation meets the requirements of this paragraph if the stock encompasses at least eighty percent (80%) of the voting power of all classes of stock and has a value equal to at least eighty percent (80%) of the total value of all stock;
    1. “Common parent corporation” means the member of an affiliated group that meets the ownership requirement of paragraph (a)1. or (b)1. of this subsection;
    2. “Foreign corporation” means a corporation that is organized under the laws of a country other than the United States and is related to a member of an affiliated group through stock ownership;
    3. “Includible corporation” means any corporation that is doing business in this state except:
      1. Corporations exempt from corporation income tax under KRS 141.040 ;
      2. Foreign corporations;
      3. Corporations with respect to which an election under Section 936 of the Internal Revenue Code is in effect for the taxable year;
      4. Real estate investment trusts as defined in Section 856 of the Internal Revenue Code;
      5. Regulated investment companies as defined in Section 851 of the Internal Revenue Code;
      6. A domestic international sales company as defined in Section 992(a)(1) of the Internal Revenue Code;
      7. Any corporation that realizes a net operating loss whose apportionment fraction under KRS 141.120 is de minimis;
      8. Any corporation for which the apportionment fraction under KRS 141.120 is zero; and
      9. For taxable years beginning prior to January 1, 2006, and taxable years beginning on or after January 1, 2007, an S corporation as defined in Section 1361(a) of the Internal Revenue Code;
    4. “Ownership interest” means stock, a membership interest in a limited liability company, or a partnership interest in a limited partnership or limited liability partnership;
    5. “Consolidated return” means a Kentucky corporation income tax return filed by members of an affiliated group in accordance with this section. The determinations and computations required by this chapter shall be made in accordance with the provisions of the Internal Revenue Code and related regulations, except as required by differences between this chapter and the Internal Revenue Code;
    6. “Separate return” means a Kentucky corporation income tax return in which only the transactions and activities of a single corporation are considered in making all determinations and computations necessary to calculate taxable net income, tax due, and credits allowed in accordance with the provisions of this chapter; and
    7. “Stock” means stock in a corporation, or a membership interest in a limited liability company that has elected to be treated as a corporation for federal tax purposes.
  9. Every corporation doing business in this state except those exempt from taxation under KRS 141.040 shall, for each taxable year, file a separate return unless the corporation was, for any part of the taxable year:
    1. An includible corporation in an affiliated group;
    2. A common parent corporation doing business in this state;
    3. A qualified subchapter S Subsidiary that is included in the return filed by the Subchapter S parent corporation;
    4. A qualified real estate investment trust subsidiary that is included in the return filed by the real estate investment trust parent; or
    5. A disregarded entity that is included in the return filed by its parent entity.
    1. An affiliated group, whether or not filing a federal consolidated return, shall file a consolidated return which includes all includible corporations. (11) (a) An affiliated group, whether or not filing a federal consolidated return, shall file a consolidated return which includes all includible corporations.
    2. An affiliated group required to file a consolidated return under this subsection shall be treated for all purposes as a single corporation under the provisions of this chapter. All transactions between corporations included in the consolidated return shall be eliminated in computing net income and in determining the property, payroll, and sales factors in accordance with KRS 141.901 or the apportionment fraction in accordance with KRS 141.120 .
    3. For taxable years beginning on or after January 1, 2005, and before January 1, 2019, includible corporations that have incurred a net operating loss shall not deduct an amount that exceeds, in the aggregate, fifty percent (50%) of the income realized by the remaining includible corporations that did not realize a net operating loss. The portion of any net operating loss limited by the application of this subsection shall be available for carryforward in accordance with KRS 141.011 . The department shall promulgate administrative regulations to establish the manner and extent to which net operating losses attributable to tax periods ending prior to January 1, 2005, may offset income of affiliated groups.
    4. The gross receipts received by a public service company that is a member of an affiliated group shall be excluded from the calculation of the alternative minimum calculation under KRS 141.040 . For purposes of this paragraph, “public service company” has the same meaning as provided in KRS 136.120 .
  10. Each includible corporation included as part of an affiliated group filing a consolidated return shall be jointly and severally liable for the income tax liability computed on the consolidated return, except that any includible corporation which was not a member of the affiliated group for the entire taxable year shall be jointly and severally liable only for that portion of the Kentucky consolidated income tax liability attributable to that portion of the year that the corporation was a member of the affiliated group.
  11. Every corporation return or report required by this chapter shall be executed by one (1) of the following officers or management of the corporation: the president, vice president, secretary, treasurer, assistant secretary, assistant treasurer, chief accounting officer, manager, member, or partner. The department may require a further or supplemental report of further information and data necessary for computation of the tax.
  12. In the case of a corporation doing business in this state that carries on transactions with stockholders, members or partners, or with other corporations related by ownership, by interlocking directorates, or by some other method, the department shall require that information necessary to make possible an accurate assessment of the income derived by the corporation from sources within this state be provided. To make possible this assessment, the department may require the corporation to file supplementary returns showing information respecting the business of any or all individuals and corporations related by one (1) or more of these methods to the corporation. The department may require the return to show in detail the record of transactions between the corporation and any or all other related corporations or individuals.
  13. This section shall not be construed to limit or otherwise impair the department’s authority under KRS 141.205 .

HISTORY: 4281a-18, 4281a-19, 4281a-20: amend Acts 1966, ch. 176, part I, § 7; 1986, ch. 496, § 23, effective August 1, 1986; 1996, ch. 239, § 2, effective July 15, 1996; 2000, ch. 543, § 1, effective July 1, 2000; 2005, ch. 85, § 487, effective June 20, 2005; 2005, ch. 168, § 15, effective March 18, 2005; 2006, ch. 6, § 15, effective March 6, 2006; 2006, ch. 252, Pt. XIII, § 3, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 7, effective June 28, 2006; 2018 ch. 171, § 79, effective April 14, 2018; 2018 ch. 207, § 79, effective April 27, 2018.

Compiler’s Notes.

Sections 1504(a) and 1502 of the Internal Revenue Code, referred to in (2)(a) and (b), respectively, may be found as 26 USCS §§ 1504(a) and 1502.

Section 7701(a)(3) of the Internal Revenue Code, referred to in (2)(d), may be found as 26 USCS § 7701(a)(3).

Section 936 of the Internal Revenue Code, referred to in (9)(e)3., may be found as 26 USCS § 936.

Section 856 of the Internal Revenue Code, referred to in (9)(e)4., may be found as 26 USCS § 856.

Section 851 of the Internal Revenue Code, referred to in (9)(e)5., may be found as 26 USCS § 851.

Section 992(a)(1) of the Internal Revenue Code, referred to in (9)(e)6., may be found as 26 USCS § 992(a)(1).

Section 1361(a) of the Internal Revenue Code, referred to in (9)(e)9., may be found as 26 USCS § 1361(a).

Section 3 of Acts 1996, ch. 239 read, “The provisions of this Act shall be effective for tax years ending on or after December 31, 1995.”

Section 3 of Acts 2000, ch. 543, effective July 1, 2000, read: “The provisions of subsection (7) of Section 1 of this Act [this section] shall apply retroactively for taxable years ending on or after December 31, 1995. The provisions of subsections (8) to (11) of Section 1 of this Act shall apply retroactively for all taxable years ending before December 31, 1995.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 153, the revisions made to this statute in that Act apply to taxable years beginning on or after January 1, 2018.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/6/2006). 2006 Ky. Acts ch. 6, § 31, provides that this section applies retroactively for taxable years beginning on or after January 1, 2006.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

NOTES TO DECISIONS

1. Unitary Corporation.

Although this section has separate corporate filing requirements it does not require that each component corporation of the unitary group must file separately, but requires that each unitary corporation file a separate corporate income tax return as it differentiates between simple corporations and unitary corporations, and requires a return for both classes of corporate taxpayers. GTE v. Revenue Cabinet, 889 S.W.2d 788, 1994 Ky. LEXIS 148 ( Ky. 1994 ).

Amendments under KRS 141.120 and 141.200 , which barred related corporations from filing combined tax returns under the unitary business concept and barred refunds where such corporations withdrew their prior separate state tax returns and substituted combined returns, were made to clarify the law regarding combined returns under the unitary business plan and to exercise the legislature’s revenue raising power. Because the amendments furthered a legitimate government interest and were rationally related to that purpose, the corporations’ due process rights were not violated by the retroactive application of the amendments, and they were not entitled to refunds. Miller v. Johnson Controls, Inc., 296 S.W.3d 392, 2009 Ky. LEXIS 196 ( Ky. 2009 ), cert. denied, 560 U.S. 935, 130 S. Ct. 3324, 176 L. Ed. 2d 1240, 2010 U.S. LEXIS 4206 (U.S. 2010).

Opinions of Attorney General.

The list of persons authorized by this section to execute returns or reports is exclusive and no other agent of the corporation can execute such documents on behalf of the corporation. OAG 62-290 .

141.201. Corporation returns — Election of affiliated groups to file consolidated returns — Taxable years beginning on or after January 1, 2019.

  1. This section shall apply to taxable years beginning on or after January 1, 2019.
  2. As used in this section:
    1. “Affiliated group” means affiliated group as defined in Section 1504(a) of the Internal Revenue Code and related regulations;
    2. “Consolidated return” means a Kentucky corporation income tax return filed by members of an affiliated group in accordance with this section;
    3. “Separate return” means a Kentucky corporation income tax return in which only the transactions and activities of a single corporation are considered in making all determinations and computations necessary to calculate taxable net income, tax due, and credits allowed in accordance with this chapter;
    4. “Corporation” means “corporation” as defined in Section 7701(a)(3) of the Internal Revenue Code; and
    5. “Election period” means the forty-eight (48) month period provided for in subsection (4)(d) of this section.
  3. Every corporation doing business in this state, except those corporations listed as exempt from taxation under KRS 141.040(1)(a) and (b), shall, for each taxable year:
      1. File a combined report, if the corporation is a member of unitary business group as provided in KRS 141.202 ; or (a) 1. File a combined report, if the corporation is a member of unitary business group as provided in KRS 141.202 ; or
      2. Make an election to file a consolidated return with all members of the affiliated group as provided in this section; or
    1. File a separate return, if paragraph (a) of this subsection does not apply.
    1. An affiliated group, whether or not filing a federal consolidated return, may elect to file a consolidated return which includes all members of the affiliated group. (4) (a) An affiliated group, whether or not filing a federal consolidated return, may elect to file a consolidated return which includes all members of the affiliated group.
      1. An affiliated group electing to file a consolidated return under paragraph (a) of this subsection shall be treated for all purposes as a single corporation under this chapter. (b) 1. An affiliated group electing to file a consolidated return under paragraph (a) of this subsection shall be treated for all purposes as a single corporation under this chapter.
      2. The determinations and computations required by this chapter shall be made in accordance with Section 1502 of the Internal Revenue Code and related regulations, except as required by differences between this chapter and the Internal Revenue Code.
      3. Corporations listed as exempt from taxation under KRS 141.040(1)(a) and (b) shall not be included in the return.
      4. All transactions between corporations included in the consolidated return shall be eliminated in computing net income as provided in KRS 141.039(2), and determining the apportionment fraction in accordance with KRS 141.120 .
    2. Any election made in accordance with paragraph (a) of this subsection shall be made on a form prescribed by the department and shall be submitted to the department on or before the due date of the return, including extensions, for the first taxable year for which the election is made.
    3. Any election to file a consolidated return pursuant to paragraph (a) of this subsection shall be binding on both the department and the affiliated group for a period beginning with the first month of the first taxable year for which the election is made and ending with the conclusion of the taxable year in which the forty-eighth consecutive calendar month expires.
    4. For each taxable year for which an affiliated group has made an election provided in paragraph (a) of this subsection, the consolidated return shall include all corporations which are members of the affiliated group.
  4. Each corporation included as part of an affiliated group filing a consolidated return shall be jointly and severally liable for the income tax liability computed on the consolidated return, except that any corporation which was not a member of the affiliated group for the entire taxable year shall be jointly and severally liable only for that portion of the Kentucky consolidated income tax liability attributable to that portion of the year that the corporation was a member of the affiliated group.
  5. Every corporation return or report required by this chapter shall be executed by one (1) of the following officers of the corporation: the president, vice president, secretary, treasurer, assistant secretary, assistant treasurer, or chief accounting officer. The department may require a further or supplemental report of further information and data necessary for computation of the tax.
  6. In the case of a corporation doing business in this state that carries on transactions with stockholders or with other corporations related by stock ownership, by interlocking directorates, or by some other method, the department shall require information necessary to make possible accurate assessment of the income derived by the corporation from sources within this state. To make possible this assessment, the department may require the corporation to file supplementary returns showing information respecting the business of any or all individuals and corporations related by one (1) or more of these methods to the corporation. The department may require the return to show in detail the record of transactions between the corporation and any or all other related corporations or individuals.

HISTORY: 2018 ch. 207, § 119, effective April 27, 2018; 2019 ch. 151, § 47, effective June 27, 2019; 2020 ch. 91, § 11, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 11 of that Act apply to taxable years beginning on or after January 1, 2019.

(6/27/2019). Section 83 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 4 7 of that Act apply to taxable years beginning on or after January 1, 2019.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 154, the provisions created for this statute in that Act apply to taxable years be- ginning on or after January 1, 2019.

141.202. Requirement of taxpayer engaged in a unitary business with one or more other corporations to file a combined report — Administrative regulations — Taxable years beginning on or after January 1, 2019.

  1. This section shall apply to taxable years beginning on or after January 1, 2019.
  2. As used in this section:
    1. “Combined group” means the group of all corporations whose income and apportionment factors are required to be taken into account as provided in subsection (3) of this section in determining the taxpayer’s share of the net income or loss apportionable to this state. A combined group shall include only corporations, the voting stock of which is more than fifty percent (50%) owned, directly or indirectly, by a common owner or owners;
    2. “Corporation” has the same meaning as in KRS 141.010 , including an organization of any kind treated as a corporation for tax purposes under KRS 141.040 , wherever located, which if it were doing business in this state would be a taxpayer, and the business conducted by a pass-through entity which is directly or indirectly held by a corporation shall be considered the business of the corporation to the extent of the corporation’s distributive share of the pass-through entity income, inclusive of guaranteed payments;
    3. “Doing business in a tax haven” means being engaged in activity sufficient for that tax haven jurisdiction to impose a tax under United States constitutional standards;
      1. “Tax haven” means a jurisdiction that, during the taxable year has no or nominal effective tax on the relevant income and: (d) 1. “Tax haven” means a jurisdiction that, during the taxable year has no or nominal effective tax on the relevant income and:
        1. Has laws or practices that prevent effective exchange of information for tax purposes with other governments on taxpayers benefitting from the tax regime;
        2. Has a tax regime which lacks transparency. A tax regime lacks transparency if the details of legislative, legal, or administrative provisions are not open and apparent or are not consistently applied among similarly situated taxpayers, or if the information needed by tax authorities to determine a taxpayer’s correct tax liability, such as accounting records and underlying documentation, is not adequately available;
        3. Facilitates the establishment of foreign-owned entities without the need for a local substantive presence or prohibits these entities from having any commercial impact on the local economy;
        4. Explicitly or implicitly excludes the jurisdiction’s resident taxpayers from taking advantage of the tax regime’s benefits or prohibits enterprises that benefit from the regime from operating in the jurisdiction’s domestic market; or
        5. Has created a tax regime which is favorable for tax avoidance, based upon an overall assessment of relevant factors, including whether the jurisdiction has a significant untaxed offshore financial or other services sector relative to its overall economy.
      2. “Tax haven” does not include a jurisdiction that has entered into a comprehensive income tax treaty with the United States, which the Secretary of the Treasury has determined is satisfactory for purposes of Section 1(h)(11)(C)(i)(II) of the Internal Revenue Code;
    4. “Taxpayer” means any corporation subject to the tax imposed under this chapter;
    5. “Unitary business” means a single economic enterprise that is made up either of separate parts of a single corporation or of a commonly controlled group of corporations that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. For purposes of this section, the term “unitary business” shall be broadly construed, to the extent permitted by the United States Constitution; and
    6. “United States” means the fifty (50) states of the United States, the District of Columbia, and United States’ territories and possessions.
    1. Except as provided in KRS 141.201 , a taxpayer engaged in a unitary business with one (1) or more other corporations shall file a combined report which includes the income, determined under subsection (5) of this section, and the apportionment fraction, determined under KRS 141.120 and paragraph (d) of this subsection, of all corporations that are members of the unitary business, and any other information as required by the department. The combined report shall be filed on a waters-edge basis under subsection (8) of this section. (3) (a) Except as provided in KRS 141.201 , a taxpayer engaged in a unitary business with one (1) or more other corporations shall file a combined report which includes the income, determined under subsection (5) of this section, and the apportionment fraction, determined under KRS 141.120 and paragraph (d) of this subsection, of all corporations that are members of the unitary business, and any other information as required by the department. The combined report shall be filed on a waters-edge basis under subsection (8) of this section.
    2. The department may, by administrative regulation, require that the combined report include the income and associated apportionment factors of any corporations that are not included as provided by paragraph (a) of this subsection, but that are members of a unitary business, in order to reflect proper apportionment of income of the entire unitary businesses. Authority to require combination by administrative regulation under this paragraph includes authority to require combination of corporations that are not, or would not be combined, if the corporation were doing business in this state.
    3. In addition, if the department determines that the reported income or loss of a taxpayer engaged in a unitary business with any corporation not included as provided by paragraph (a) of this subsection represents an avoidance or evasion of tax by the taxpayer, the department may, on a case-by-case basis, require all or any part of the income and associated apportionment factors of the corporation be included in the taxpayer’s combined report.
    4. With respect to the inclusion of associated apportionment factors as provided in paragraph (a) of this subsection, the department may require the inclusion of any one (1) or more additional factors which will fairly represent the taxpayer’s business activity in this state, or the employment of any other method to effectuate a proper reflection of the total amount of income subject to apportionment and an equitable allocation and apportionment of the taxpayer’s income.
    5. A unitary business shall consider the combined gross receipts and combined income from all sources of all members under subsection (8) of this section, including eliminating entries for transactions among the members under subsection (8)(e) of this section.
    6. Notwithstanding paragraphs (a) to (e) of this subsection, a consolidated return may be filed as provided in KRS 141.201 if the taxpayer makes an election according to KRS 141.201.
  3. The use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Each taxpayer member is responsible for tax based on its taxable income or loss apportioned or allocated to this state, which shall include, in addition to the other types of income, the taxpayer member’s share of apportionable income of the combined group, where apportionable income of the combined group is calculated as a summation of the individual net incomes of all members of the combined group. A member’s net income is determined by removing all but apportionable income, expense, and loss from that member’s total income as provided in subsection (5) of this section.
    1. Each taxpayer member is responsible for tax based on its taxable income or loss apportioned or allocated to this state, which shall include: (5) (a) Each taxpayer member is responsible for tax based on its taxable income or loss apportioned or allocated to this state, which shall include:
      1. Its share of any income apportionable to this state of each of the combined groups of which it is a member, determined under subsection (6) of this section;
      2. Its share of any income apportionable to this state of a distinct business activity conducted within and without the state wholly by the taxpayer member, determined under KRS 141.120 ;
      3. Its income from a business conducted wholly by the taxpayer member entirely within the state;
      4. Its income sourced to this state from the sale or exchange of capital or assets, and from involuntary conversions, as determined under subsection (8)(g) of this section;
      5. Its nonapportionable income or loss allocable to this state, determined under KRS 141.120 ;
      6. Its income or loss allocated or apportioned in an earlier year, required to be taken into account as state source income during the income year, other than a net operating loss; and
      7. Its net operating loss carryover.
    2. No tax credit or post-apportionment deduction earned by one (1) member of the group, but not fully used by or allowed to that member, may be used in whole or in part by another member of the group or applied in whole or in part against the total income of the combined group, except as provided in paragraph (c) of this subsection.
    3. If the taxable income computed pursuant to KRS 141.039 results in a net loss for a taxpayer member of the combined group, that taxpayer member has a Kentucky net operating loss, subject to the net operating loss limitations and carry forward provisions of KRS 141.011 . No prior year net operating loss carryforward shall be available to entities that were not doing business in this state in the year in which the loss was incurred. A Kentucky net operating loss carryover incurred by a taxpayer member of a combined group shall be deducted from income or loss apportioned to this state pursuant to this section as follows:
      1. For taxable years beginning on or after the first day of the initial taxable year for which a combined unitary tax return is required under this section, if the computation of a combined group’s Kentucky net income before apportionment to this state results in a net operating loss, a taxpayer member of the group may carry over its share of the net operating loss as apportioned to this state, as calculated under this section and in accordance with KRS 141.120 or 141.121 , and it shall be deductible from a taxpayer member’s apportioned net income derived from the unitary business in a future tax year to the extent that the carryover and deduction is otherwise consistent with KRS 141.011 ;
      2. Where a taxpayer member of a combined group has a Kentucky net operating loss carryover derived from a loss incurred by a combined group in a tax year beginning on or after the first day of the initial tax year for which a combined unitary tax return is required under this section, then the taxpayer member may share the net operating loss carryover with other taxpayer members of the combined group if the other taxpayer members were members of the combined group in the tax year that the loss was incurred. Any amount of net operating loss carryover that is deducted by another taxpayer member of the combined group shall reduce the amount of net operating loss carryover that may be carried over by the taxpayer member that originally incurred the loss;
      3. Where a taxpayer member of a combined group has a net operating loss carryover derived from a loss incurred in a tax year prior to the initial tax year for which a combined unitary tax return is required under this section, the carryover shall remain available to be deducted by that taxpayer member and any other taxpayer members of the combined group, but in no case shall the deduction reduce any taxpayer member’s Kentucky apportioned taxable income by more than fifty percent (50%) in any taxable year, other than the taxpayer member that originally incurred the net operating loss, in which case no limitation is provided except as provided by Section 172 of the Internal Revenue Code. Any net operating loss carryover that is not utilized in a particular taxable year shall be carried over by the taxpayer member that generated the loss and utilized in the future consistent with the limitations of this subparagraph; or
      4. Where a taxpayer member of a combined group has a net operating loss carryover derived from a loss incurred in a tax year during which the taxpayer member was not a taxpayer member of the combined group, the carryover shall remain available to be deducted by that taxpayer member or other taxpayer members, but in no case shall the deduction reduce any taxpayer member’s Kentucky apportioned taxable income by more than fifty percent (50%) in any taxable year, other than the taxpayer member that originally incurred the net operating loss, in which case no limitation is provided except as provided by Section 172 of the Internal Revenue Code. Any net operating loss carryover that is not utilized in a particular taxable year, shall be carried over by the taxpayer member that generated the loss and utilized in the future consistent with the limitations of this subparagraph.
  4. The taxpayer’s share of the business income apportionable to this state of each combined group of which it is a member shall be the product of:
    1. The apportionable income of the combined group, determined under subsection (7) of this section; and
    2. The taxpayer member’s apportionment fraction, determined under KRS 141.120 , including in the sales factor numerator the taxpayer’s sales associated with the combined group’s unitary business in this state, and including in the denominator the sales of all members of the combined group, including the taxpayer, which sales are associated with the combined group’s unitary business wherever located. The sales of a pass-through entity shall be included in the determination of the partner’s apportionment percentage in proportion to a ratio, the numerator of which is the amount of the partner’s distributive share of the pass-through entity’s unitary income included in the income of the combined group as provided in subsection (8) of this section and the denominator of which is the amount of pass-through entity’s total unitary income.
  5. The apportionable income of a combined group is determined as follows:
    1. The total income of the combined group is the sum of the income of each member of the combined group determined under federal income tax laws, as adjusted for state purposes, as if the member were not consolidated for federal purposes; and
    2. From the total income of the combined group determined under subsection (8) of this section, subtract any income and add any expense or loss, other than the apportionable income, expense, or loss of the combined group.
  6. To determine the total income of the combined group, taxpayer members shall take into account all or a portion of the income and apportionment factor of only the following members otherwise included in the combined group as provided in subsection (3) of this section:
    1. The entire income and apportionment percentage of any member, incorporated in the United States or formed under the laws of any state, the District of Columbia, or any territory or possession of the United States, that earns less than eighty percent (80%) of its income from sources outside of the United States, the District of Columbia, or any territory or possession of the United States;
    2. Any member that earns more than twenty percent (20%) of its income, directly or indirectly, from intangible property or service related activities that are deductible against the apportionable income of other members of the combined group, to the extent of that income and the apportionment factor related to that income. If a non-United States corporation is includible as a member in the combined group, to the extent that the non-United States corporation’s income is excluded from United States taxation pursuant to the provisions of a comprehensive income tax treaty, the income or loss is not includible in the combined group’s net income or loss. The member’s expenses or apportionment factors attributable to income that is excluded from United States taxation pursuant to the provisions of a comprehensive income tax treaty are not to be included in the combined report;
    3. The entire income and apportionment factor of any member that is doing business in a tax haven. If the member’s business activity within a tax haven is entirely outside the scope of the laws, provisions, and practices that cause the jurisdiction to meet the definition established in subsection (2)(d) of this section, the activity of the member shall be treated as not having been conducted in a tax haven;
    4. If a unitary business includes income from a pass-through entity, the income to be included in the total income of the combined group shall be the member of the combined group’s direct and indirect distributive share of the pass-through entity’s unitary income;
    5. Income from an intercompany transaction between members of the same combined group shall be deferred in a manner similar to 26 C.F.R. 1.1502-13. Upon the occurrence of any of the following events, deferred income resulting from an intercompany transaction between members of a combined group shall be restored to the income of the seller, and shall be apportionable income earned immediately before the event:
      1. The object of a deferred intercompany transaction is:
        1. Resold by the buyer to an entity that is not a member of the combined group;
        2. Resold by the buyer to an entity that is a member of the combined group for use outside the unitary business in which the buyer and seller are engaged; or
        3. Converted by the buyer to a use outside the unitary business in which the buyer and seller are engaged; or
      2. The buyer and seller are no longer members of the same combined group, regardless of whether the members remain unitary;
    6. A charitable expense incurred by a member of a combined group shall, to the extent allowable as a deduction provided by Section 170 of the Internal Revenue Code, be subtracted first from the apportionable income of the combined group, subject to the income limitations of that section applied to the entire apportionable income of the group, and any remaining amount shall then be treated as a nonapportionable expense allocable to the member that incurred the expense, subject to the income limitations of that section applied to the nonapportionable income of that specific member. Any charitable deduction disallowed under this paragraph, but allowed as a carryover deduction in a subsequent year, shall be treated as originally incurred in the subsequent year by the same member, and this paragraph shall apply in the subsequent year in determining the allowable deduction in that year;
    7. Gain or loss from the sale or exchange of capital assets, property described by Section 1231(a)(3) of the Internal Revenue Code, and property subject to an involuntary conversion shall be removed from the total separate net income of each member of a combined group and shall be apportioned and allocated as follows:
      1. For each class of gain or loss, including short-term capital, long-term capital, Internal Revenue Code Section 1231, and involuntary conversions, all members’ gain and loss for the class shall be combined, without netting between the classes, and each class of net gain or loss separately apportioned to each member using the member’s apportionment percentage determined under subsection (6) of this section;
      2. Each taxpayer member shall then net its apportioned business gain or loss for all classes, including any apportioned gain and loss from other combined groups, against the taxpayer member’s nonapportionable gain and loss for all classes allocated to this state, using the rules of Sections 1231 and 1222 of the Internal Revenue Code, without regard to any of the taxpayer member’s gains or losses from the sale or exchange of capital assets, Internal Revenue Code Section 1231 property, and involuntary conversions which are nonapportionable items allocated to another state;
      3. Any resulting state source income or loss, if the loss is not subject to the limitations of Section 1211 of the Internal Revenue Code, of a taxpayer member produced by the application of subparagraphs 1. and 2. of this paragraph shall then be applied to all other state source income or loss of that member; and
      4. Any resulting state source loss of a member that is subject to the limitations of Section 1211 of the Internal Revenue Code shall be carried forward by that member, and shall be treated as state source short-term capital loss incurred by that member for the year for which the carryover applies; and
    8. Any expense of one (1) member of the unitary group which is directly or indirectly attributable to the nonapportionable or exempt income of another member of the unitary group shall be allocated to that other member as corresponding nonapportionable or exempt expense, as appropriate.
    1. As a filing convenience, and without changing the respective liability of the group members, members of a combined reporting group shall annually designate one (1) taxpayer member of the combined group to file a single return in the form and manner prescribed by the department, in lieu of filing their own respective returns. (9) (a) As a filing convenience, and without changing the respective liability of the group members, members of a combined reporting group shall annually designate one (1) taxpayer member of the combined group to file a single return in the form and manner prescribed by the department, in lieu of filing their own respective returns.
    2. The taxpayer member designated to file the single return shall consent to act as surety with respect to the tax liability of all other taxpayers properly included in the combined report, and shall agree to act as agent on behalf of those taxpayers for the taxable year for matters relating to the combined report. If for any reason the surety is unwilling or unable to perform its responsibilities, tax liability may be assessed against the taxpayer members.

HISTORY: 2018 ch. 207, § 120, effective April 27, 2018; 2019 ch. 196, § 5, effective June 27, 2019; 2020 ch. 91, § 12, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 12 of that Act apply to taxable years beginning on or after January 1, 2019.

(6/27/2019). This statute was amended in 2019 Ky. Acts ch. 151, sec. 48 (HB 354) and ch. 196, sec. 5 (HB 458). Although HB 354 was enacted, 2019 Ky. Acts ch. 196, sec. 16 (HB 458) repealed certain sections of that prior Act, including Section 48, and directed the Reviser of Statutes to not codify them. Therefore, the amendment to this statute in 2019 Ky. Acts ch. 151, sec. 48, was not codified.

(4/27/2018). Pursuant to 2018 Ky. Acts ch. 207, sec. 154, the provisions created for this statute in that Act apply to taxable years beginning on or after January 1, 2019.

141.205. Disallowance of certain deductions for affiliated entities or related parties.

  1. As used in this section:
    1. “Intangible property” means franchises, patents, patent applications, trade names, trademarks, service marks, copyrights, trade secrets, and similar types of intangible assets;
    2. “Intangible expenses” includes the following only to the extent that the amounts are allowed as deductions or costs in determining taxable net income before the application of any net operating loss deduction provided under Chapter 1 of the Internal Revenue Code:
      1. Expenses, losses, and costs for, related to, or in connection directly or indirectly with the direct or indirect acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of intangible property;
      2. Losses related to, or incurred in connection directly or indirectly with, factoring transactions or discounting transactions;
      3. Royalty, patent, technical, and copyright fees;
      4. Licensing fees; and
      5. Other similar expenses and costs;
    3. “Intangible interest expense” means only those amounts which are directly or indirectly allowed as deductions under Section 163 of the Internal Revenue Code for purposes of determining taxable income under that code, to the extent that the amounts are directly or indirectly for, related to, or connected to the direct or indirect acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of intangible property;
    4. “Management fees” includes but is not limited to expenses and costs paid for services pertaining to accounts receivable and payable, employee benefit plans, insurance, legal, payroll, data processing, purchasing, tax, financial and securities, accounting, reporting and compliance services or similar services, only to the extent that the amounts are allowed as a deduction or cost in determining taxable net income before application of the net operating loss deduction for the taxable year provided under Chapter 1 of the Internal Revenue Code;
    5. “Affiliated group” has the same meaning as in KRS 141.201 ;
    6. “Foreign corporation” means a corporation that is organized under the laws of a country other than the United States and that would be a related member if it were a domestic corporation;
    7. “Related member” means a person that, with respect to the entity during all or any portion of the taxable year, is:
      1. A person or entity that has, directly or indirectly, at least fifty percent (50%) of the equity ownership interest in the taxpayer, as determined under Section 318 of the Internal Revenue Code;
      2. A component member as defined in Section 1563(b) of the Internal Revenue Code;
      3. A person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code; or
      4. A person that, notwithstanding its form of organization, bears the same relationship to the taxpayer as a person described in subparagraphs 1. to 3. of this paragraph;
    8. “Recipient” means a related member or foreign corporation to whom the item of income that corresponds to the intangible interest expense, the intangible expense, or the management fees, is paid;
    9. “Unrelated party” means a person that has no direct, indirect, beneficial or constructive ownership interest in the recipient; and in which the recipient has no direct, indirect, beneficial or constructive ownership interest;
    10. “Disclosure” means that the entity shall provide the following information to the Department of Revenue with its tax return regarding a related party transaction:
      1. The name of the recipient;
      2. The state or country of domicile of the recipient;
      3. The amount paid to the recipient; and
      4. A description of the nature of the payment made to the recipient;
    11. “Other related party transaction” means a transaction which:
      1. Is undertaken by an entity which was not required to file a consolidated return under KRS 141.201 ;
      2. Is undertaken by an entity, directly or indirectly, with one (1) or more of its stockholders, members, partners, or affiliated entities; and
      3. Is not within the scope of subsections (2) and (3) of this section;
    12. “Related party costs” means intangible expense, intangible interest expense, management fees and any costs or expenses associated with other related party transactions; and
    13. “Entity” means any taxpayer other than a natural person.
  2. An entity subject to the tax imposed by this chapter shall not be allowed to deduct an intangible expense, an intangible interest expense, or a management fee directly or indirectly paid, accrued or incurred to, or in connection directly or indirectly with one (1) or more direct or indirect transactions with one (1) or more related members or with a foreign corporation as defined in subsection (1) of this section, or with an entity that would be included in the affiliated group based upon ownership interest if it were organized as a corporation.
  3. The disallowance of deductions provided by subsection (2) of this section shall not apply if:
    1. The entity and the recipient are both included in the same consolidated Kentucky corporation income tax return for the relevant taxable year; or
    2. The entity makes a disclosure, and establishes by a preponderance of the evidence that:
      1. The payment made to the recipient was subject to, in its state or country of commercial domicile, a net income tax, or a franchise tax measured by, in whole or in part, net income. If the recipient is a foreign corporation, the foreign nation shall have in force a comprehensive income tax treaty with the United States; and
      2. The recipient is engaged in substantial business activities separate and apart from the acquisition, use, licensing, management, ownership, sale, exchange, or any other disposition of intangible property, or in the financing of related members, as evidenced by the maintenance of permanent office space and full-time employees dedicated to the maintenance and protection of intangible property; and
      3. The transaction giving rise to the intangible interest expense, intangible expense, or management fees between the entity and the recipient was made at a commercially reasonable rate and at terms comparable to an arm’s-length transaction; or
    3. The entity makes a disclosure, and establishes by preponderance of the evidence that the recipient regularly engages in transactions with one (1) or more unrelated parties on terms identical to that of the subject transaction; or
    4. The entity and the Department of Revenue agree in writing to the application or use of an alternative method of apportionment under KRS 141.120 .
  4. An entity subject to the tax imposed by this chapter may deduct expenses or costs associated with an other related party transaction only in an amount equal to the amount which would have resulted if the other related party transaction had been carried out at arm’s length. In any dispute between the department and the entity with respect to the amount which would have resulted if the transaction had been carried out at arm’s length, the entity shall bear the burden of establishing the amount by a preponderance of the evidence.
  5. Nothing in this section shall be deemed to prohibit an entity from deducting a related party cost in an amount permitted by this section, provided that the entity has incurred related party costs equal to or greater than the amounts permitted by this section.
  6. If it is determined by the department that the amount of a deduction claimed by an entity with respect to a related party cost is greater than the amount permitted by this section, the net income of the entity shall be adjusted to reflect the amount of the related party cost permitted by this section.
  7. For tax periods ending before January 1, 2005, in the case of entities not required to file a consolidated or combined return under subsection (1) of this section that carried on transactions with stockholders or affiliated entities directly or indirectly, the department shall adjust the net income of such entities to an amount that would result if such transactions were carried on at arm’s length.

HISTORY: Enact. Acts 1954, ch. 79, § 15; 1960, ch. 186, Art. III, § 1; 1962, ch. 124, § 4; 1966, ch. 176, part I, § 8; 1968, ch. 40, part II, § 2; 1970, ch. 216, § 6; 1972, ch. 62, part III, § 3; 1974, ch. 163, § 5; 1976, ch. 155, § 11; 2005, ch. 85, § 488, effective June 20, 2005; 2005, ch. 168, § 16, effective March 18, 2005; 2006, ch. 6, § 16, effective March 6, 2006; 2006 (1st Ex. Sess.), ch. 2, § 8, effective June 28, 2006; 2013, ch. 119, § 17, effective June 25, 2013; 2018 ch. 171, § 80, effective April 14, 2018; 2018 ch. 207, § 80, effective April 27, 2018; 2020 ch. 91, § 13, effective April 15, 2020.

Compiler's Notes.

Section 17 of Acts 1976, ch. 155, provided that the provisions of the 1976 amendment to this section should apply to taxable years beginning after December 31, 1975.

Sections 318 and 1563(b), (e) of the Internal Revenue Code referenced in this section are compiled as 26 USCS §§ 318 and 1563(b), (e), respectively.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 13 of that Act apply to taxable years beginning on or after January 1, 2019.

(6/25/2013). 2013 Ky. Acts ch. 119, sec. 25, provides that the amendments to this statute in 2013 Ky. Acts ch. 119, sec. 17, apply to taxable years beginning on or after January 1, 2014.

(6/25/2013). A reference to “subsections (2) to (5)” in subsection (1)(k)3. of this statute has been changed in codification to “subsections (2) and (3)” under KRS 7.136(1)(e) and (h). In 2013 Ky. Acts ch. 119, sec. 17, subsections (4) and (5) were stricken from this statute and subsequent subsections renumbered, but the internal reference in the existing language was overlooked.

(6/28/2006). 2006 (1st Extra. Sess.) Ky. Acts ch. 2, sec. 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(6/28/2006). 2005 Ky. Acts ch. 85, sec. 701, instructs the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in that Act, as it confirms the reorganization of the Finance and Administration Cabinet. Such a correction has been made in this section.

(3/6/2006). 2006 Ky. Acts ch. 6, sec. 30, provides that this section applies retroactively for taxable years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

  1. Arm's Length.
  2. Adjustment Mandatory.
1. Arm's Length.

“Arm’s length” transaction is one which compares favorably with usual course of action taken in conduct of business with trade generally. Marcum v. Kentucky & I. T. R. Co., 363 S.W.2d 98, 1962 Ky. LEXIS 269 ( Ky. 1962 ).

Where stockholders paid an amount for services of corporation sufficient to insure that corporation would not operate at a loss, but under contract between corporation and stockholders and the accounting method used it was equally assured that corporation would not operate at a profit such transactions were not carried on at arm’s length between corporation and its stockholders; therefore, Department of Revenue could determine the net income of the corporation as provided under former subsection (5) of this section. Marcum v. Kentucky & I. T. R. Co., 363 S.W.2d 98, 1962 Ky. LEXIS 269 ( Ky. 1962 ) (decision prior to 1974 amendment).

2. Adjustment Mandatory.

This section mandatorily directs the department to adjust the net income to an amount that would result if transactions were carried on at arm’s length. Marcum v. Kentucky & I. T. R. Co., 363 S.W.2d 98, 1962 Ky. LEXIS 269 ( Ky. 1962 ).

Cited in:

Department of Revenue v. Early & Daniel Co., 628 S.W.2d 630, 1982 Ky. LEXIS 235 ( Ky. 1982 ).

141.206. Filing of returns by pass-through entities — Withholding requirements on owners of pass-through entities — Apportionment issues for pass-through entities — Composite returns.

  1. Every pass-through entity doing business in this state shall, on or before the fifteenth day of the fourth month following the close of its annual accounting period, file a copy of its federal tax return with the form prescribed and furnished by the department.
    1. Pass-through entities shall calculate net income in the same manner as in the case of an individual under KRS 141.019 and the adjustment required under Sections 703(a) and 1363(b) of the Internal Revenue Code. (2) (a) Pass-through entities shall calculate net income in the same manner as in the case of an individual under KRS 141.019 and the adjustment required under Sections 703(a) and 1363(b) of the Internal Revenue Code.
    2. Computation of net income under this section and the computation of the partner’s, member’s, or shareholder’s distributive share shall be computed as nearly as practicable identical with those required for federal income tax purposes except to the extent required by differences between this chapter and the federal income tax law and regulations.
  2. Individuals, estates, trusts, or corporations doing business in this state as a partner, member, or shareholder in a pass-through entity shall be liable for income tax only in their individual, fiduciary, or corporate capacities, and no income tax shall be assessed against the net income of any pass-through entity, except as required:
    1. For S corporations under KRS 141.040 ; and
    2. For a partnership level audit under KRS 141.211 .
    1. Every pass-through entity required to file a return under subsection (1) of this section, except publicly traded partnerships as described in KRS 141.040 1(6)(a)18. and (b)14., shall withhold Kentucky income tax on the distributive share, whether distributed or undistributed, of each: (4) (a) Every pass-through entity required to file a return under subsection (1) of this section, except publicly traded partnerships as described in KRS 141.040 1(6)(a)18. and (b)14., shall withhold Kentucky income tax on the distributive share, whether distributed or undistributed, of each:
      1. Nonresident individual partner, member, or shareholder; and
      2. Corporate partner or member that is doing business in Kentucky only through its ownership interest in a pass-through entity.
    2. Withholding shall be at the maximum rate provided in KRS 141.020 or 141.040.
    1. Effective for taxable years beginning after December 31, 2018, every pass-through entity required to withhold Kentucky income tax as provided by subsection (4) of this section shall pay estimated tax for the taxable year if: (5) (a) Effective for taxable years beginning after December 31, 2018, every pass-through entity required to withhold Kentucky income tax as provided by subsection (4) of this section shall pay estimated tax for the taxable year if:
      1. For a nonresident individual partner, member, or shareholder, the estimated tax liability can reasonably be expected to exceed five hundred dollars ($500); or
      2. For a corporate partner or member that is doing business in Kentucky only through its ownership interest in a pass-through entity, the estimated tax liability can reasonably be expected to exceed five thousand dollars ($5,000).
    2. The payment of estimated tax shall contain the information and shall be filed as provided in KRS 141.207 .
    1. If a pass-through entity demonstrates to the department that a partner, member, or shareholder has filed an appropriate tax return for the prior year with the department, then the pass-through entity shall not be required to withhold on that partner, member, or shareholder for the current year unless the exemption from withholding has been revoked pursuant to paragraph (b) of this subsection. (6) (a) If a pass-through entity demonstrates to the department that a partner, member, or shareholder has filed an appropriate tax return for the prior year with the department, then the pass-through entity shall not be required to withhold on that partner, member, or shareholder for the current year unless the exemption from withholding has been revoked pursuant to paragraph (b) of this subsection.
      1. An exemption from withholding shall be considered revoked if the partner, member, or shareholder does not file and pay all taxes due in a timely manner. (b) 1. An exemption from withholding shall be considered revoked if the partner, member, or shareholder does not file and pay all taxes due in a timely manner.
      2. An exemption so revoked shall be reinstated only with permission of the department.
      3. If a partner, member, or shareholder who has been exempted from withholding does not file a return or pay the tax due, the department may require the pass-through entity to pay to the department the amount that should have been withheld, up to the amount of the partner’s, member’s, or shareholder’s ownership interest in the entity.
      4. The pass-through entity shall be entitled to recover a payment made pursuant to this paragraph from the partner, member, or shareholder on whose behalf the payment was made.
  3. In determining the tax under this chapter, a resident individual, estate, or trust that is a partner, member, or shareholder in a pass-through entity shall take into account the partner’s, member’s, or shareholder’s total distributive share of the pass-through entity’s items of income, loss, deduction, and credit.
  4. In determining the tax under this chapter, a nonresident individual, estate, or trust that is a partner, member, or shareholder in a pass-through entity required to file a return under subsection (1) of this section shall take into account:
      1. If the pass-through entity is doing business only in this state, the partner’s, member’s, or shareholder’s total distributive share of the pass-through entity’s items of income, loss, and deduction; or (a) 1. If the pass-through entity is doing business only in this state, the partner’s, member’s, or shareholder’s total distributive share of the pass-through entity’s items of income, loss, and deduction; or
      2. If the pass-through entity is doing business both within and without this state, the partner’s, member’s, or shareholder’s distributive share of the pass-through entity’s items of income, loss, and deduction multiplied by the apportionment fraction of the pass-through entity as prescribed in subsection (11) of this section; and
    1. The partner’s, member’s, or shareholder’s total distributive share of credits of the pass-through entity.
  5. A corporation that is subject to tax under KRS 141.040 and is a partner or member in a pass-through entity shall take into account the corporation’s distributive share of the pass-through entity’s items of income, loss, and deduction and:
      1. For taxable years beginning on or after January 1, 2007, but prior to January 1, 2018, shall include the proportionate share of the sales, property, and payroll of the limited liability pass-through entity or general partnership in computing its own apportionment factor; and (a) 1. For taxable years beginning on or after January 1, 2007, but prior to January 1, 2018, shall include the proportionate share of the sales, property, and payroll of the limited liability pass-through entity or general partnership in computing its own apportionment factor; and
      2. For taxable years beginning on or after January 1, 2018, shall include the proportionate share of the sales of the limited liability pass-through entity or general partnership in computing its own apportionment factor; and
    1. Credits from the partnership.
    1. If a pass-through entity is doing business both within and without this state, the pass-through entity shall compute and furnish to each partner, member, or shareholder the numerator and denominator of each factor of the apportionment fraction determined in accordance with subsection (11) of this section. (10) (a) If a pass-through entity is doing business both within and without this state, the pass-through entity shall compute and furnish to each partner, member, or shareholder the numerator and denominator of each factor of the apportionment fraction determined in accordance with subsection (11) of this section.
    2. For purposes of determining an apportionment fraction under paragraph (a) of this subsection, if the pass-through entity is:
      1. Doing business both within and without this state; and
      2. A partner or member in another pass-through entity;
    3. The phrases “a partner or member in another pass-through entity” and “doing business both within and without this state” shall extend to each level of multiple-tiered pass-through entities.
    4. The attribution to the pass-through entity of the pro rata share of property, payroll and sales from its role as a partner or member in another pass-through entity will also apply when determining the pass-through entity’s ultimate apportionment factor for property, payroll and sales as required under subsection (11) of this section.
    1. For taxable years beginning prior to January 1, 2018, a pass-through entity doing business within and without the state shall compute an apportionment fraction, the numerator of which is the property factor, representing twenty-five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, with each factor determined in the same manner as provided in KRS 141.901 , and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2). (11) (a) For taxable years beginning prior to January 1, 2018, a pass-through entity doing business within and without the state shall compute an apportionment fraction, the numerator of which is the property factor, representing twenty-five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, with each factor determined in the same manner as provided in KRS 141.901 , and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2).
    2. For taxable years beginning on or after January 1, 2018, a pass-through entity doing business within and without the state shall compute an apportionment fraction as provided in KRS 141.120 .
  6. Resident individuals, estates, or trusts that are partners in a partnership, members of a limited liability company electing partnership tax treatment for federal income tax purposes, owners of single member limited liability companies, or shareholders in an S corporation which does not do business in this state are subject to tax under KRS 141.020 on federal net income, gain, deduction, or loss passed through the partnership, limited liability company, or S corporation.
  7. An S corporation election made in accordance with Section 1362 of the Internal Revenue Code for federal tax purposes is a binding election for Kentucky tax purposes.
    1. Nonresident individuals shall not be taxable on investment income distributed by a qualified investment partnership. For purposes of this subsection, a “qualified investment partnership” means a pass-through entity that, during the taxable year, holds only investments that produce income that would not be taxable to a nonresident individual if held or owned individually. (14) (a) Nonresident individuals shall not be taxable on investment income distributed by a qualified investment partnership. For purposes of this subsection, a “qualified investment partnership” means a pass-through entity that, during the taxable year, holds only investments that produce income that would not be taxable to a nonresident individual if held or owned individually.
    2. A qualified investment partnership shall be subject to all other provisions relating to a pass-through entity under this section and shall not be subject to the tax imposed under KRS 141.040 or 141.0401 .
      1. A pass-through entity may file a composite income tax return on behalf of electing nonresident individual partners, members, or shareholders. (15) (a) 1. A pass-through entity may file a composite income tax return on behalf of electing nonresident individual partners, members, or shareholders.
      2. The pass-through entity shall report and pay on the composite income tax return income tax at the highest marginal rate provided in this chapter on any portion of the partners’, members’, or shareholders’ pro rata or distributive shares of income of the pass-through entity from doing business in this state or deriving income from sources within this state. Payments made pursuant to subsection (5) of this section shall be credited against any tax due.
      3. The pass-through entity filing a composite return shall still make estimated tax payments if required to do so by subsection (5) of this section, and shall remain subject to any penalty under KRS 141.044 and 141.305 for any underpayment of estimated tax determined under KRS 141.044 or 141.305 .
      4. The partners’, members’, or shareholders’ pro rata or distributive share of income shall include all items of income or deduction used to compute adjusted gross income on the Kentucky return that is passed through to the partner, member, or shareholder by the pass-through entity, including but not limited to interest, dividend, capital gains and losses, guaranteed payments, and rents.
    1. A nonresident individual partner, member, or shareholder whose only source of income within this state is distributive share income from one (1) or more pass-through entities may elect to be included in a composite return filed pursuant to this section.
    2. A nonresident individual partner, member, or shareholder that has been included in a composite return may file an individual income tax return and shall receive credit for tax paid on the partner’s behalf by the pass-through entity.
    3. A pass-through entity shall deliver to the department a return upon a form prescribed by the department showing the total amounts paid or credited to its electing nonresident individual partners, members, or shareholders, the amount paid in accordance with this subsection, and any other information the department may require. A pass-through entity shall furnish to its nonresident partner, member, or shareholder annually, but not later than the fifteenth day of the fourth month after the end of its taxable year, a record of the amount of tax paid on behalf of the partner, member, or shareholder on a form prescribed by the department.

then the pass-through entity shall be deemed to own the pro rata share of the property owned or leased by the other pass-through entity, and shall also include its pro rata share of the other pass-through entity’s payroll and sales.

HISTORY: Enact. Acts 1954, ch. 79, § 17, effective June 17, 1954; 1988, ch. 332, § 2; 2002, ch. 230, § 8, effective July 15, 2002; 2005, ch. 85, § 489, effective June 20, 2005; 2005, ch. 168, § 17, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 9, effective June 28, 2006; 2010 (1st Ex. Sess.), ch. 2, § 4, effective June 4, 2010; 2018 ch. 171, § 81, effective April 14, 2018; 2018 ch. 207, § 81, effective April 27, 2018; 2019 ch. 151, § 49, effective June 27, 2019; 2019 ch. 196, § 15, effective June 27, 2019; 2020 ch. 91, § 14, effective April 15, 2020.

Compiler’s Notes.

Section 3 of Acts 1988, ch. 332 read: “This Act shall be effective for tax years beginning after December 31, 1987.”

Section 7704(b) and (c) of the Internal Revenue Code, referred to in (1), may be found as 26 USCS § 7704(b) and (c).

Sections 703(a) and 1363(b) of the Internal Revenue Code, referred to in (3), may be found as 26 USCS §§ 703(a) and 1363(b).

Section 1362 of the Internal Revenue Code, referred to in (11), may be found as 26 USCS § 1362.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 14 of that Act apply to taxable years beginning on or after January 1, 2019.

(6/27/2019). Although 2019 Ky. Acts ch. 151, sec. 49, contained a citation to “subsection (6)(a)18. of this section” in subsection (4)(a) of this statute, it is clear from the context that “subsection (6)(a)18. of Section 41 of this Act” (codified as KRS 141.0401 ) was intended, and this manifest clerical or typographical error was corrected in codification under the authority of KRS 7.136 .

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

NOTES TO DECISIONS

  1. Constitutionality.
  2. Apportionment.
1. Constitutionality.

KRS 141.206(5) subjected the corporations to taxation, was not void for vagueness, did not violate the Commerce Clause or U.S. Const. amend. XIV, and contained the proper apportionment formula that would not result in extraterritorial values being taxed. Revenue Cabinet v. Asworth Corp., 2009 Ky. App. LEXIS 229 (Ky. Ct. App. Nov. 20, 2009), cert. denied, 562 U.S. 1200, 131 S. Ct. 1046, 178 L. Ed. 2d 865, 2011 U.S. LEXIS 1056 (U.S. 2011).

2. Apportionment.

Plain language of KRS 141.205(5)(a) compelled a finding that the legislature intended for the amount of tax owed under this section to be calculated using the formula found therein; accordingly, the circuit court erred by applying instead the formula found in KRS 141.120(8). Revenue Cabinet v. Asworth Corp., 2009 Ky. App. LEXIS 229 (Ky. Ct. App. Nov. 20, 2009), cert. denied, 562 U.S. 1200, 131 S. Ct. 1046, 178 L. Ed. 2d 865, 2011 U.S. LEXIS 1056 (U.S. 2011).

141.207. Payment of estimated tax required by KRS 141.206.

  1. The payment of estimated tax required by KRS 141.206 shall contain the following information:
    1. For a nonresident individual partner, member, or shareholder, the amount of estimated tax calculated under KRS 141.020 and 141.305 for the taxable year; and
    2. For a corporate partner or member that is doing business in Kentucky only through its ownership interest in a pass-through entity, the amount of estimated tax calculated under KRS 141.040 and 141.044 for the taxable year.
  2. The payment of estimated tax shall be made in installments by the pass-through entity in the same manner and at the same times as provided by:
    1. KRS 141.305 , for a nonresident individual partner, member, or shareholder; and
    2. KRS 141.044 , for a corporate partner or member.
  3. A pass-through entity required to make a payment of estimated tax shall be subject to the penalty provisions for any underpayment of estimated tax.

HISTORY: Enact. Acts 2010 (1st. Ex. Sess.), ch. 2, § 5, effective June 4, 2010; 2018 ch. 171, § 82, effective April 14, 2018; 2018 ch. 207, § 82, effective April 27, 2018; 2019 ch. 151, § 50, effective June 27, 2019.

141.208. Treatment of limited liability companies.

  1. For the purposes of this section, “limited liability company” shall mean any company subject to the provisions of KRS Chapter 275.
  2. For taxable years beginning after December 31, 2004, and before January 1, 2007, a limited liability company shall file a Kentucky corporate income tax return and determine its Kentucky income tax liability as provided in KRS 141.040 regardless of the tax treatment elected for federal income tax purposes. For all other taxable years, a limited liability company shall be treated for Kentucky income tax purposes in the same manner as its tax treatment elected for federal income tax purposes. All other income tax issues not expressly addressed by the provisions of this chapter shall be treated in the same manner as the issues are treated for federal income tax purposes.

History. Enact. Acts 1994, ch. 389, § 109, effective July 15, 1994; 1998, ch. 341, § 1, effective July 15, 1998; 2005, ch. 168, § 19, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 10, effective June 28, 2006.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

Research References and Practice Aids

Kentucky Bench & Bar.

MacDonald and Seiffert, The Kentucky Limited Liability Company Act: An Analysis Of Applications In Its Second Year, Vol. 60, No. 1, Winter 1996, Ky. Bench & Bar 20.

Fassler and Lavelle, Taxation Of Kentucky Limited Liability Companies, Vol. 60, No. 1, Winter 1996, Ky. Bench & Bar 41.

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

141.210. Auditing of returns — Assessment of additional tax.

  1. As soon as practicable after each return is received, the department shall examine and audit it.
      1. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the additional tax shall be assessed and a notice of assessment mailed to the taxpayer by the department within four (4) years from the date the return was filed, except as otherwise provided in this subsection. (2) (a) 1. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the additional tax shall be assessed and a notice of assessment mailed to the taxpayer by the department within four (4) years from the date the return was filed, except as otherwise provided in this subsection.
      2. In the case of a failure to file a return or of a fraudulent return the additional tax may be assessed at any time.
      3. In the case of a return where a taxpayer other than a corporation understates his net income or omits an amount properly includable in net income or both which understatement or omission or both is in excess of twenty-five percent (25%) of the amount of net income stated in the return the additional tax may be assessed at any time within six (6) years after the return was filed.
      4. In the case of a return where a corporation understates its taxable net income or omits an amount properly includable in taxable net income or both, which understatement or omission or both is in excess of twenty-five percent (25%) of the amount of taxable net income stated in the return, the additional tax may be assessed at any time within six (6) years after the return was filed.
      5. In the case of an assessment of additional tax relating directly to adjustments resulting from a final federal adjustment, as defined in KRS 141.211 , the additional tax may be assessed before the expiration of the times provided in KRS 141.211 .
      6. In the case of the assessment of additional tax resulting from a decrease of a net operating loss deduction or a capital loss deduction, resulting from the carryback of a loss which occurs in a taxable year beginning after December 31, 1993, the additional tax may be assessed at any time before the expiration of the times provided for in this subsection for assessing additional tax for the taxable year which resulted in the net operating loss or capital loss carryback.
    1. The times provided in this subsection may be extended by agreement between the taxpayer and the department.
    2. For the purposes of this subsection, a return filed before the last day prescribed by law for filing the return shall be considered as filed on the last day.
    3. Any extension granted for filing the return shall also be considered as extending the last day prescribed by law for filing the return.
  2. If any additional tax is assessed on account of any income which has been returned for taxation by any other taxpayer, the department, with the consent of the other taxpayer, his personal representatives, or heirs, shall reduce the amount of the additional tax assessed for each year by the amount of the income tax paid for that year by the other taxpayer on account of the income in question.

History. 4281-12, 4281b-26: repealed in part Acts 1944, ch. 173, § 9; 1948, ch. 93, § 7; 1952, ch. 194, § 10; 1954, ch. 79, § 16; 1956 (4th Ex. Sess.), ch. 4, § 10; 1966, ch. 176, part I, § 9; 1970, ch. 216, § 7; 1974, ch. 163, § 6; 1994, ch. 106, § 2, effective July 15, 1994; 2005, ch. 85, § 490, effective June 20, 2005; 2018 ch. 171, § 114, effective April 14, 2018; 2018 ch. 207, § 114, effective April 27, 2018; 2020 ch. 91, § 58, effective April 15, 2020.

Compiler’s Notes.

Section 4 of Acts 1994, ch. 106 provided that unless otherwise provided, the provisions of paragraph (d) of subsection (2) of this section and paragraph (b) of subsection (2) of KRS 141.235 shall apply for additional tax assessed and for claims for refunds or credit filed on or after July 15, 1994.

Section 9 of Acts 1974, ch. 163 provided that the provisions of the 1974 amendment to this section shall apply to the taxable years beginning after December 31, 1973.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which are in conflict. Under KRS 446.250 , Acts ch. 207, which was last enacted by the General Assembly, prevails.

NOTES TO DECISIONS

1. Incomplete Reports.

Where state income tax reports made by distillery recited that they were made on accrual basis, but one item of income actually was reported on a cash basis, and the cash income on this item was less than one third (1/3) of the accrued income from this item, the reports were “incomplete” within the meaning of this statute, particularly in view of Department of Revenue’s regulation providing that omissions and understatements of income in material amounts, through accident or design will make such return incomplete. Therefore the three (3) year (now four (4) year) limitation provided for in this section was not available to taxpayer as a defense. Old Lewis Hunter Distillery Co. v. Kentucky Tax Com., 302 Ky. 68 , 193 S.W.2d 464, 1945 Ky. LEXIS 759 ( Ky. 1945 ).

Cited in:

Collins v. Kentucky Tax Com., 261 S.W.2d 303, 1953 Ky. LEXIS 1006 ( Ky. 1953 ); Ballard County v. Citizens State Bank, 261 S.W.2d 420, 1953 Ky. LEXIS 1011 ( Ky. 1953 ); Hahn v. Allphin, 282 S.W.2d 824, 1955 Ky. LEXIS 263 ( Ky. 1955 ).

Research References and Practice Aids

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

141.211. Audits performed and additional tax assessed at the partnership level.

  1. As used in this section:
    1. “Administrative adjustment request” means an administrative adjustment request filed by a partnership under Section 6227 of the Internal Revenue Code;
    2. “Audited partnership” means a partnership subject to a partnership level audit resulting in a federal adjustment;
    3. “Corporate partner” means a partner that is subject to tax under KRS 141.040 ;
    4. “Direct partner” means a partner that holds an interest directly in a partnership or pass-through entity;
    5. “Exempt partner” means a partner that is exempt from taxation under KRS 141.040 (a) or (b);
      1. “Federal adjustment” means a change to an item or amount determined under the Internal Revenue Code that is used by a taxpayer to compute income tax owed to the Commonwealth, whether that change results from action by the: (f) 1. “Federal adjustment” means a change to an item or amount determined under the Internal Revenue Code that is used by a taxpayer to compute income tax owed to the Commonwealth, whether that change results from action by the:
        1. Internal Revenue Service, including a partnership level audit; or
        2. Filing of an amended federal return, federal refund claim, or an administrative adjustment request by the taxpayer.
      2. A federal adjustment is positive to the extent that it increases net income or taxable net income and is negative to the extent that it decreases net income or taxable net income;
    6. “Federal adjustments report” includes methods or forms required by the department for use by a taxpayer to report final federal adjustments, including an amended income tax return, information return, or a uniform multistate report;
    7. “Federal partnership representative” means the person:
      1. The partnership designates for the taxable year as the partnership’s representative; or
      2. The Internal Revenue Service has appointed to act as the federal partnership representative, under Section 6223(a) of the Internal Revenue Code;
    8. “Final determination date” means the following:
        1. Except as provided in subparagraphs 2. and 3. of this paragraph, if the federal adjustment arises from any action by the Internal Revenue Service, the final determination date is the first day on which no federal adjustments arising from that action remain to be finally determined, whether by Internal Revenue Service decision with respect to which all rights of appeal have been waived or exhausted, by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted. 1. a. Except as provided in subparagraphs 2. and 3. of this paragraph, if the federal adjustment arises from any action by the Internal Revenue Service, the final determination date is the first day on which no federal adjustments arising from that action remain to be finally determined, whether by Internal Revenue Service decision with respect to which all rights of appeal have been waived or exhausted, by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted.
        2. For agreements required to be signed by the Internal Revenue Service and the taxpayer, the final determination date is the date upon which the last party signed the agreement;
      1. For federal adjustments arising from any action by the Internal Revenue Service, if the taxpayer filed as a member of a consolidated return under KRS 141.201 or a combined report under KRS 141.202 , the final determination date means the first day on which no related federal adjustments arising from that action remain to be finally determined, as described in subparagraph 1. of this paragraph, for the entire group; and
      2. If the federal adjustment results from filing an amended federal return, a federal refund claim, or an administrative adjustment request, or if it is a federal adjustment reported on an amended federal return or other similar report filed under Section 6225(c) of the Internal Revenue Code, the final determination date means the day on which the amended return, refund claim, administrative adjustment request, or other similar report was filed;
    9. “Final federal adjustment” means a federal adjustment after the final determination date for that federal adjustment has passed;
    10. “Indirect partner” means a partner in a partnership or pass-through entity and that partnership or pass-through entity holds an interest directly, or through another indirect partner, in a partnership or pass-through entity;
    11. “Nonresident partner” means an individual, trust, or estate partner that is not a resident partner;
    12. “Partner” means a person that holds an interest directly or indirectly in a partnership or other pass-through entity;
    13. “Partnership” means an entity subject to the provisions of Subchapter K of Chapter 1 of the Internal Revenue Code;
    14. “Partnership level audit” means an examination by the Internal Revenue Service at the partnership level under Subchapter C of Chapter 63 of the Internal Revenue Code, as enacted by Pub. L. No. 114-74, which results in a federal adjustment;
    15. “Pass-through entity” means an entity, other than a partnership, that is not subject to tax under KRS 141.040;
      1. “Reallocation adjustment” means a federal adjustment resulting from a partnership level audit or an administrative adjustment request that changes the shares of one (1) or more items of partnership income, gain, loss, expense, or credit allocated to direct partners. (q) 1. “Reallocation adjustment” means a federal adjustment resulting from a partnership level audit or an administrative adjustment request that changes the shares of one (1) or more items of partnership income, gain, loss, expense, or credit allocated to direct partners.
      2. A positive reallocation adjustment means the portion of a reallocation adjustment that would increase federal income for one (1) or more direct partners.
      3. A negative reallocation adjustment means the portion of a reallocation adjustment that would decrease federal income for one (1) or more direct partners;
    16. “Resident partner” means an individual, trust, or estate partner that is a resident for the relevant taxable year;
    17. “Reviewed year” means the taxable year of a partnership that is subject to a partnership level audit from which federal adjustments arise;
    18. “Taxpayer” has the same meaning as in KRS 131.010 and includes:
        1. A partnership subject to a partnership level audit; or 1. a. A partnership subject to a partnership level audit; or
        2. A partnership that has made an administrative adjustment request; and
      1. A tiered partner of the partnership described in subparagraph 1. of this paragraph; and
    19. “Tiered partner” means any partner that is a partnership or pass-through entity.
  2. Except in the case of final federal adjustments that are required to be reported by a partnership and its partners under subsection (3) of this section, and final federal adjustments required to be reported for federal purposes under Section 6225(a)(2) of the Internal Revenue Code, a taxpayer shall report and pay any income tax due with respect to final federal adjustments arising from any action:
    1. By the Internal Revenue Service; or
    2. Reported by the taxpayer on a timely filed amended federal income tax return, including a return or other similar report filed under Section 6225(c)(2) of the Internal Revenue Code, or federal claim for refund;
    1. Except for adjustments required to be reported for federal purposes under Section 6225(a)(2) of the Internal Revenue Code, and the distributive share of adjustments that have been reported as required under subsection (2) of this section, partnerships and partners shall report final federal adjustments arising from a partnership level audit or an administrative adjustment request and make payments as under this subsection. (3) (a) Except for adjustments required to be reported for federal purposes under Section 6225(a)(2) of the Internal Revenue Code, and the distributive share of adjustments that have been reported as required under subsection (2) of this section, partnerships and partners shall report final federal adjustments arising from a partnership level audit or an administrative adjustment request and make payments as under this subsection.
      1. With respect to an action required or allowed to be taken by a partnership under this subsection and a proceeding under KRS 131.110 with respect to that action, the state partnership representative for the reviewed year shall have the sole authority to act on behalf of the partnership, and the partnership’s direct partners and indirect partners shall be bound by those actions. (b) 1. With respect to an action required or allowed to be taken by a partnership under this subsection and a proceeding under KRS 131.110 with respect to that action, the state partnership representative for the reviewed year shall have the sole authority to act on behalf of the partnership, and the partnership’s direct partners and indirect partners shall be bound by those actions.
      2. The state partnership representative for the reviewed year is the partnership’s federal partnership representative unless the partnership designates in writing another person as its state partnership representative.
      3. The department may establish reasonable qualifications and procedures for designating a person, other than the federal partnership representative, to be the state partnership representative.
    2. Final federal adjustments subject to the requirements of this subsection, except for those subject to a properly made election under subsection (4) of this section, shall be reported as follows:
      1. No later than ninety (90) days after the final determination date, the partnership shall:
        1. File with the department a completed federal adjustments report, including all information required by the department;
        2. Notify each of its direct partners of their distributive share of the final federal adjustments, including all information required by the department; and
        3. File an amended composite return for direct partners or an amended withholding return for direct partners as required under KRS 141.206 and pay the additional amount of tax that would have been due had the final federal adjustments been reported properly as required; and
      2. No later than one hundred eighty (180) days after the final determination date, each direct partner that is taxed under KRS 141.020 or 141.040 shall:
        1. File a federal adjustments report reporting their distributive share of the adjustments reported to them under subparagraph 1.b. of this paragraph; and
        2. Pay any additional amount of tax due as if final federal adjustments had been properly reported, plus any penalty due under KRS 131.180 and interest due under KRS 131.183 and minus any credit for related amounts paid or withheld and remitted on behalf of the direct partner under subparagraph 1.c. of this paragraph.
  3. An audited partnership making an election under this subsection shall:
    1. No later than ninety (90) days after the final determination date, file a completed federal adjustments report, including all information required by the department, and notify the department that it is making the election under this subsection; and
    2. No later than one hundred eighty (180) days after the final determination date, pay an amount, determined as follows, in lieu of taxes owed by its direct and indirect partners:
      1. Exclude from final federal adjustments the distributive share of these adjustments reported to a direct exempt partner not subject to tax under KRS 141.040 (1)(a) or (b);
      2. For the total distributive shares of the remaining final federal adjustments reported to direct corporate partners subject to tax under KRS 141.040 , apportion and allocate the adjustments under KRS 141.206 and multiply the resulting amount by the highest tax rate for the taxable year under KRS 141.040;
      3. For the total distributive shares of the remaining final federal adjustments reported to nonresident direct partners subject to tax under KRS 141.020 , determine the amount of the adjustments under KRS 141.206 based on what would be subject to tax as Kentucky-sourced income for a nonresident partner, and multiply the resulting amount by the highest tax rate for the taxable year under KRS 141.020 ;
      4. For the total distributive shares of the remaining final federal adjustments reported to tiered partners, determine the amount of the adjustments which is of a type that it would be subject to tax under KRS 141.206, less any amount that the audited partnership can determine to the department’s satisfaction that is not subject to tax, and multiply that amount by the highest tax rate under KRS 141.020 or 141.040;
      5. For the total distributive shares of the remaining final federal adjustments reported to resident direct partners subject to tax under KRS 141.020, multiply that amount by the highest tax rate under KRS 141.020; and
      6. Add the amounts determined in subparagraphs 2. to 5. of this paragraph, and remit the amount along with penalty due under KRS 131.180 and interest due under KRS 131.183 .
  4. The election under subsection (4) of this section shall not apply to:
    1. The distributive share of final audit adjustments that under KRS 141.202 that are included in the unitary business income of any direct or indirect corporate partner, provided that the audited partnership can reasonably determine this;
    2. Any final federal adjustments resulting from an administrative adjustment request; or
    3. Any audited partnership not otherwise subject to any reporting or payment obligation to this state.
    1. The direct and indirect partners of an audited partnership that are tiered partners and all of the partners of those tiered partners that are subject to tax under KRS 141.020 and 141.040 are subject to the reporting and payment requirements of subsection (3) of this section and the tiered partners are entitled to make the elections provided in subsection (4) of this section. (6) (a) The direct and indirect partners of an audited partnership that are tiered partners and all of the partners of those tiered partners that are subject to tax under KRS 141.020 and 141.040 are subject to the reporting and payment requirements of subsection (3) of this section and the tiered partners are entitled to make the elections provided in subsection (4) of this section.
    2. The tiered partners or their partners shall make the required reports and payments no later than ninety (90) days after the time for filing and furnishing statements to tiered partners and the partners under Section 6226 of the Internal Revenue Code and the regulations thereunder.
    3. The department may promulgate administrative regulations to establish procedures and interim time periods for:
      1. The reports and payments required by tiered partners and their partners;
      2. Making the elections under this section;
      3. The procedures related to the modified reporting and payment method under subsection (7) of this section; or
      4. A de minimis amount upon which a taxpayer shall not be required to comply with this section.
    1. Under procedures promulgated under KRS Chapter 13A by the department, an audited partnership or a tiered partner may enter into an agreement with the department to utilize an alternative reporting and payment method, including applicable time requirements for any other provision of this section, if the audited partnership or tiered partner demonstrates that the requested method will reasonably provide for the reporting and payment of taxes, penalties, and interest due under the provisions of this section. (7) (a) Under procedures promulgated under KRS Chapter 13A by the department, an audited partnership or a tiered partner may enter into an agreement with the department to utilize an alternative reporting and payment method, including applicable time requirements for any other provision of this section, if the audited partnership or tiered partner demonstrates that the requested method will reasonably provide for the reporting and payment of taxes, penalties, and interest due under the provisions of this section.
    2. Application for approval of an alternative reporting and payment method shall be made by the audited partnership or tiered partner within the times established under subsection (4) or (6) of this section, as appropriate.
    1. The election made under subsection (4) or (7) of this section is irrevocable, unless the department, in its discretion, determines otherwise. (8) (a) The election made under subsection (4) or (7) of this section is irrevocable, unless the department, in its discretion, determines otherwise.
    2. If properly reported and paid by the audited partnership or tiered partner, the amount determined under subsection (4) or (6) of this section shall be treated as paid in lieu of taxes owed by its direct and indirect partners, to the extent applicable, on the same final federal adjustments.
    3. The direct partners or indirect partners may not take any deduction or credit for this amount or claim a refund of the amount in this state.
    4. Nothing in this subsection shall preclude a direct resident partner from claiming a credit against taxes paid to this state under KRS Chapter 141, any amounts paid by the audited partnership or tiered partner on the resident partner’s behalf to another state or local tax jurisdiction under KRS 141.070 .
  5. Nothing in this section prevents the department from assessing a direct partner or an indirect partner for taxes they owe, using the best information available, in the event that a partnership or tiered partner fails to timely make any report or payment required by this section for any reason.
  6. The department shall assess additional tax, interest, and penalties resulting from any final federal adjustments arising from an audit by the Internal Revenue Service including a partnership level audit, reported by the taxpayer on an amended federal income tax return, or as part of an administrative adjustment request by the following dates:
    1. If a taxpayer files with the department a federal adjustments report or an amended Kentucky tax return as required within the periods under this section, the department may assess any amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from those federal adjustments if the department issues a notice of the assessment to the taxpayer no later than the expiration of the one (1) year period following the date of filing with the department of the federal adjustments report; or
    2. If the taxpayer fails to file the federal adjustments report within the periods specified in subsection (2) or (3) of this section, as appropriate, or the federal adjustments report filed by the taxpayer omits final federal adjustments or understates the correct amount of tax owed, the department may assess any amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from the final federal adjustments, and absent fraud, if the department issues a notice of the assessment to the taxpayer no later than the expiration of the six (6) year period following the final determination date.
    1. A taxpayer may make estimated payments to the department, following the applicable process under KRS 141.207 , of the tax expected to result from a pending Internal Revenue Service audit, prior to the due date of the federal adjustments report, without having to file the report with the department. (11) (a) A taxpayer may make estimated payments to the department, following the applicable process under KRS 141.207 , of the tax expected to result from a pending Internal Revenue Service audit, prior to the due date of the federal adjustments report, without having to file the report with the department.
    2. The estimated tax payments shall be credited against any tax liability ultimately found to be due and will limit the accrual of further statutory interest on that amount.
    3. If the estimated tax payments exceed the final tax liability and statutory interest ultimately determined to be due, the taxpayer is entitled to a refund or credit for the excess, provided the taxpayer filed a federal adjustments report or claim for refund or credit of tax under this section no later than one (1) year following the final determination date.
    1. Except for final federal adjustments required to be reported for federal purposes under Section 6225(a)(2) of this Internal Revenue Code, a taxpayer may file a claim for refund or credit of tax arising from federal adjustments made by the Internal Revenue Service on or before the later of: (12) (a) Except for final federal adjustments required to be reported for federal purposes under Section 6225(a)(2) of this Internal Revenue Code, a taxpayer may file a claim for refund or credit of tax arising from federal adjustments made by the Internal Revenue Service on or before the later of:
      1. The expiration of the last day for filing a claim for refund or credit under KRS 134.580 ; or
      2. One (1) year from the date a federal adjustments report under subsection (2) or (3) of this section, as applicable, was due to the department.
    2. The federal adjustments report shall serve as the means for the taxpayer to report additional tax due, report a claim for refund or credit of tax, and make other adjustments, including any net operating loss, resulting from adjustments to the taxpayer’s federal taxable income.
    1. Unless otherwise agreed in writing by the taxpayer and the department, any adjustments by the department or by the taxpayer made after the expiration of the time allowed under KRS 141.210 is limited to changes to the taxpayer’s tax liability arising from federal adjustments. (13) (a) Unless otherwise agreed in writing by the taxpayer and the department, any adjustments by the department or by the taxpayer made after the expiration of the time allowed under KRS 141.210 is limited to changes to the taxpayer’s tax liability arising from federal adjustments.
    2. The time periods provided for in this section may be extended, upon written agreement between the taxpayer and the department, based on the complexity of the federal adjustment or the number of direct partners or tiered partners.
    3. The time period shall be automatically extended, upon written notice to the department, by sixty (60) days for an audited partnership or tiered partner which has ten thousand (10,000) or more direct partners.
    4. Any extension granted under this subsection for filing the federal adjustments report extends the last day prescribed by law for assessing any additional tax arising from the adjustments to federal taxable income and the period for filing a claim for refund or credit of taxes.

by filing a federal adjustments report with the department for the reviewed year and, if applicable, paying the additional tax owed by the taxpayer no later than one hundred eighty (180) days after the final determination date.

HISTORY: 2020 ch. 91, § 57, effective April 15, 2020.

141.215. Deferred filing of returns and payment of taxes.

Members of the Army, Navy, Marines, Air Force, or Public Health Service of the United States government who serve in an area designated as a combat zone by presidential proclamation who are required by law to file an income tax return and pay income taxes to the State of Kentucky shall not be required to file the return and pay the taxes, which would otherwise become due during the period of service, until twelve (12) months after the service.

History. Enact. Acts 1952, ch. 194, § 12; 1974, ch. 163, § 7; 1976, ch. 155, § 12; 1991 (lst Ex. Sess.), ch. 2, § 1, effective February 15, 1991; 2002, ch. 109, § 1, effective July 15, 2002.

Compiler’s Notes.

Section 17 of Acts 1976, ch. 155, provided that the provisions of the 1976 amendment to this section should apply to taxable years beginning after December 31, 1975.

Opinions of Attorney General.

The national emergency referred to in this section was terminated on the 31st day of January, 1955. OAG 61-621 .

Persons on active duty with the military may defer filing state income tax returns until permanent termination of service or 12 months after the termination of the national emergency in Vietnam, whichever is the earliest. OAG 73-341 .

Research References and Practice Aids

Kentucky Law Journal.

Whiteside and Moss, Federal-State Income Tax Relationships — Conformity of Kentucky’s Personal Income Tax with the Federal Model, 61 Ky. L.J. 462 (1973).

Cooper, Uninsured Motorist Coverage — Charting the Kentucky Course, 62 Ky. L.J. 467 (1973-74).

141.220. Payment of tax — When due.

The full amount of the unpaid tax payable by any taxpayer, as appears from the face of the return, shall be paid to the department at the time prescribed for filing the income tax return, determined without regard to any extension of time for filing the return.

History. 4281b-28, 4281b-33, 4281b-34: amend. Acts 1950, ch. 189, § 2; 1952, ch. 194, § 11; 1954, ch. 79, § 18; 1996, ch. 344, § 4, effective July 15, 1996; 2005, ch. 85, § 491, effective June 20, 2005.

NOTES TO DECISIONS

Cited in:

Martin v. Wolfford, 269 Ky. 411 , 107 S.W.2d 267, 1937 Ky. LEXIS 605 ( Ky. 1937 ); Cincinnati v. Commonwealth, 292 Ky. 597 , 167 S.W.2d 709, 1942 Ky. LEXIS 147 ( Ky. 1942 ).

141.225. Extension of time for paying taxes by persons in military service. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 170, § 3) was repealed by Acts 1950, ch. 176, § 1.

141.230. Payment under protest; action to recover tax paid; refund. [Repealed.]

Compiler’s Notes.

This section (4281b-36) was repealed by Acts 1954, ch. 79, § 35.

141.235. Action interfering with collection or payment prohibited — Limitation on refund of taxes.

  1. No suit shall be maintained in any court to restrain or delay the collection or payment of the tax levied by this chapter.
  2. Any tax collected pursuant to the provisions of this chapter may be refunded or credited in accordance with the provisions of KRS 134.580 , except that:
    1. In any case where the assessment period contained in KRS 141.210 has been extended by an agreement between the taxpayer and the department, the limitation contained in this subsection shall be extended accordingly.
    2. If the claim for refund or credit relates directly to adjustments resulting from a federal audit, the taxpayer shall file a claim for refund or credit within the time provided in KRS 141.211 .
    3. If the claim for refund or credit relates to an overpayment attributable to a net operating loss carryback or capital loss carryback, resulting from a loss which occurs in a taxable year beginning after December 31, 1993, the claim for refund or credit shall be filed within the times prescribed in this subsection for the taxable year of the net operating loss or capital loss which results in the carryback.
  3. Overpayments as defined in KRS 134.580 of taxes collected pursuant to KRS 141.305 , 141.310 , or 141.315 shall be refunded or credited with interest at the tax interest rate as defined in KRS 131.010(6). Effective for refunds issued after April 24, 2008, the interest shall not begin to accrue until ninety (90) days after the latest of:
    1. The due date of the return;
    2. The date the return was filed;
    3. The date the tax was paid;
    4. The last day prescribed by law for filing the return; or
    5. The date an amended return claiming a refund is filed.
  4. Exclusive authority to refund or credit overpayments of taxes collected pursuant to this chapter is vested in the commissioner or his authorized agent. Amounts directed to be refunded shall be paid out of the general fund.

For the purposes of this subsection and subsection (3) of this section, a return filed before the last day prescribed by law for filing the return shall be considered as filed on the last day.

History. Enact. Acts 1948, ch. 93, § 10; 1954, ch. 79, § 19; 1962, ch. 124, § 5; 1966, ch. 176, part I, § 10; 1970, ch. 216, § 8; 1972, ch. 203, § 18; 1976, ch. 155, § 13; 1982, ch. 452, § 25, effective July 1, 1982; 1994, ch. 106, § 3, effective July 15, 1994; 1996, ch. 344, § 6, effective July 15, 1996; 2005, ch. 85, § 492, effective June 20, 2005; 2008, ch. 132, § 10, effective April 24, 2008; repealed and reenact., Acts 2009, ch. 86, § 9, effective March 24, 2009; 2019 ch. 151, § 51, effective June 27, 2019; 2020 ch. 91, § 59, effective April 15, 2020.

Compiler’s Notes.

Section 56 of Acts 1972, ch. 203, read: “Nothing in this act shall be construed to effect any substantive change in the statute law of Kentucky and if any substantive change appears to be effected it shall be disregarded and the law as it existed prior to the effective date of this act shall be given full force and effect.”

Section 17 of Acts 1976, ch. 155, provided that the provisions of the 1976 amendment to this section should apply to taxable years beginning after December 31, 1975.

Section 4 of Acts 1994, ch. 106 provided that unless otherwise provided, the provisions of paragraph (d) of subsection (2) of KRS 141.210 and paragraph (b) of subsection (2) of this section shall apply for additional tax assessed and for claims for refunds or credit filed on or after July 15, 1994.

Section 11 of Acts 1996, ch. 344 read: “The provisions of this Act shall apply for taxable years beginning after December 31, 1995.”

Legislative Research Commission Notes.

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 15, provides that “the provisions of Sections 7 to 10 of this Act shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 17, provides that “The intent of the General Assembly in repealing and reenacting KRS 136.392 , 138.195 , 141.160 , 160.6156 , 160.6157 , 160.6158 , 131.183 , 141.044 , 141.235 , 134.580 , 393.060 , and 157.621 in Sections 1 to 12 of this Act is to affirm the amendments made to these sections in 2008 Ky. Acts ch. 132. The provisions in Sections 1 to 12 of this Act shall apply retroactively to April 24, 2008.”

(3/24/2009). 2009 Ky. Acts ch. 86, sec. 18, provides “To the extent that any provision included in this Act is considered new language, the provisions of KRS 446.145 requiring such new language to be underlined are notwithstood.”

(4/24/2008). 2008 Ky. Acts chs. 80 and 132, sec. 15 provides that the amendments made to this statute by that Act “shall apply retroactively to all outstanding refund claims for taxable years ending prior to the effective date of this Act (April 24, 2008) and shall apply to all claims for those taxable years pending in any judicial or administrative forum.”

NOTES TO DECISIONS

1. Application.

The application of this section is limited and concerns overpayment of taxes where no tax was due and is not extendable to apply to situations where the constitutionality of a statute or a tax scheme is at issue. Revenue Cabinet v. Gossum, 887 S.W.2d 329, 1994 Ky. LEXIS 85 ( Ky. 1994 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

141.240. Constitutionality of 1946 amendments to income tax law. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 234, § 12) was repealed by Acts 1954, ch. 79, § 35.

141.250. Temporary change in tax rates on corporate and individual incomes, marital tax credit, and persons required to file returns. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 121, § 1) was repealed by Acts 1952, ch. 124, § 6.

141.260. Administration and enforcement of KRS 141.250. [Repealed.]

Compiler’s Notes.

This sections (Enact. Acts 1950, ch. 121, § 2) was repealed by Acts 1952, ch. 124, § 6.

141.270. Disposition of tax revenue. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1950, ch. 121, § 2) was repealed by Acts 1952, ch. 124, § 6.

141.300. Declaration of estimated tax. [Repealed]

History. Enact. Acts 1954, ch. 79, § 20; 1956 (4th Ex. Sess.), ch. 4, § 11; 1958, ch. 3, § 5; 1960, ch. 5, Art. III, § 7; 1976, ch. 77, part I, § 6; 1976, ch. 155, § 14; 1982, ch. 141, § 62, effective July 1, 1982; 1990, ch. 476, Pt. VII D, § 636, effective April 11, 1990; 1992, ch. 338, § 26, effective July 14, 1992; 1996, ch. 363, § 1, effective July 15, 1996; 2005, ch. 85, § 493, effective June 20, 2005; repealed by 2019 ch. 151, § 80, effective June 27, 2019.

141.305. Estimated income tax payments — Administrative regulations.

  1. For taxable years beginning on or after January 1, 2019, every individual shall make estimated income tax payments if his or her:
    1. Gross income from sources other than wages upon which Kentucky income tax will be withheld can reasonably be expected to exceed five thousand dollars ($5,000) for the taxable year; or
    2. Adjusted gross income can reasonably be expected to be an amount not less than the amount for which a return is required under KRS 141.180 .
  2. No estimated tax shall be required if the estimated tax liability can reasonably be expected to be five hundred dollars ($500) or less.
  3. Estimated tax payment for the tax imposed under KRS 141.020 shall be made at the same time and calculated in the same manner as an estimated tax payment for federal income tax purposes under 26 U.S.C. sec. 6654 , except:
    1. The estimated tax liability for the tax imposed under KRS 141.020 shall be used to make the estimated payment;
    2. Any provisions in 26 U.S.C. sec. 6654 that apply for federal tax purposes but do not apply to the taxes imposed under KRS 141.020 shall not be included;
    3. The addition to tax identified by 26 U.S.C. sec. 6654(a) shall instead be considered a penalty under KRS 131.180 ;
    4. The tax interest rate identified under KRS 131.183 shall be used to determine the underpayment rate instead of the rate under 26 U.S.C. sec. 6621 ; and
    5. Any waiver of penalties shall be performed as provided in  KRS 131.175 .
  4. The department may promulgate administrative regulations to implement this section.

History. Enact. Acts 1954, ch. 79, § 21; 1972, ch. 84, Part II, § 5; 1976, ch. 155, § 15; 1978, ch. 233, § 12, effective June 17, 1978; 1990, ch. 29, § 3, effective July 1, 1990; 1992, ch. 403, § 18, effective July 14, 1992; 2005, ch. 85, § 494, effective June 20, 2005; 2019 ch. 151, § 52, effective June 27, 2019.

Compiler’s Notes.

Section 8 of Acts 1972, ch. 84, Part II provided that the provisions of the 1972 amendment to this section shall apply to taxable years beginning after December 31, 1971.

Section 40 of Acts 1978, ch. 233 read: “The provisions of sections eight (8) through seventeen (17) of this Act shall apply to taxable years beginning after December 31, 1977.”

Section 26 of Acts 1992, ch. 403, provided: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Legislative Research Commission Notes.

(7/13/90) The amendment to this section made by House Bill 255, 1990 Ky. Acts ch. 29, was made effective for taxable years beginning on or after July 1, 1990.

141.310. Withholding of tax from wages paid by employer.

  1. Every employer making payment of wages on or after January 1, 1971, shall deduct and withhold upon the wages a tax determined under KRS 141.315 or by the tables authorized by KRS 141.370 .
  2. If wages are paid with respect to a period which is not a payroll period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days, including Sundays and holidays, equal to the number of days in the period with respect to which the wages are paid.
  3. If wages are paid by an employer without regard to any payroll period or other period, the amount to be deducted and withheld shall be that applicable in the case of a miscellaneous payroll period containing a number of days equal to the number of days, including Sundays and holidays, which have elapsed since the date of the last payment of wages by the employer during the calendar year, or the date of commencement of employment with the employer during the year, or January 1 of the year, whichever is the later.
  4. In determining the amount to be deducted and withheld under this section, the wages may, at the election of the employer, be computed to the nearest dollar.
  5. The tables mentioned in subsection (1) of this section shall consider the standard deduction.
  6. The department may permit the use of accounting machines to calculate the proper amount to be deducted from wages when the calculation produces substantially the same result as set forth in the tables authorized by KRS 141.370 . Prior approval of the calculation shall be secured from the department at least thirty (30) days before the first payroll period for which it is to be used.
  7. The department may, by administrative regulations, authorize employers:
    1. To estimate the wages which will be paid to any employee in any quarter of the calendar year;
    2. To determine the amount to be deducted and withheld upon each payment of wages to the employee during the quarter as if the appropriate average of the wages estimated constituted the actual wages paid; and
    3. To deduct and withhold upon any payment of wages to the employee during the quarter the amount necessary to adjust the amount actually deducted and withheld upon the wages of the employee during the quarter to the amount that would be required to be deducted and withheld during the quarter if the payroll period of the employee was quarterly.
  8. The department may provide by regulation, under the conditions and to the extent it deems proper, for withholding in addition to that otherwise required under this section and KRS 141.315 in cases in which the employer and the employee agree to the additional withholding. The additional withholding shall for all purposes be considered tax required to be deducted and withheld under this chapter.
  9. Effective January 1, 1992, any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the job assessment fee provided in KRS 154.24-110 may offset a portion of the fee against the Kentucky income tax required to be withheld from the employee under this section. The amount of the offset shall be four-fifths (4/5) of the amount of the assessment fee withheld from the employee or the Commonwealth’s contribution of KRS 154.24-110 (3) applies. If the provisions in KRS 154.24-150 (3) or (4) apply, the offset, the offset shall be one hundred percent (100%) of the assessment.
  10. Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees an assessment provided in KRS 154.22-070 or KRS 154.28-110 may offset the fee against the Kentucky income tax required to be withheld from the employee under this section.
  11. Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the job assessment fee provided in KRS 154.26-100 may offset a portion of the fee against the Kentucky income tax required to be withheld from the employee under this section. The amount of the offset shall be four-fifths (4/5) of the amount of the assessment fee withheld from the employee, or if the agreement under KRS 154.26-090 (1)(f)2. is consummated, the offset shall be one hundred percent (100%) of the assessment fee.
  12. Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the job development assessment fee provided in KRS 154.23-055 may offset a portion of the fee against the Kentucky income tax required to be withheld from the employee under this section. The amount of the offset shall be equal to the Commonwealth’s contribution as determined by KRS 154.23-055 (1) to (3).
  13. Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees the job development assessment fee provided in KRS 154.32-090 may offset the state portion of the assessment against the Kentucky income tax required to be withheld from the employee under this section.
  14. Any employer required by this section to withhold Kentucky income tax may be required to post a bond with the department. The bond shall be a corporate surety bond or cash. The amount of the bond shall be determined by the department, but shall not exceed fifty thousand dollars ($50,000).
  15. Any employer required by this section to withhold Kentucky income tax who assesses and withholds from employees an assessment provided in KRS 154.27-080 may offset the assessment against the Kentucky income tax required to be withheld from the employee under this section.
  16. The Commonwealth may bring an action for a restraining order or a temporary or permanent injunction to restrain or enjoin the operation of an employer’s business until the bond is posted or the tax required to be withheld is paid or both. The action may be brought in the Franklin Circuit Court or in the Circuit Court having jurisdiction of the defendant.

History. Enact. Acts 1954, ch. 79, § 22; 1956 (4th Ex. Sess.), ch. 4, § 12; 1970, ch. 216, § 9; 1972, ch. 84, part II, § 6; 1978, ch. 233, § 13, effective June 17, 1978; 1992, ch. 358, § 16, effective July 14, 1992; 1992, ch. 359, § 12, effective July 14, 1992; 1992, ch. 360, § 14, effective July 14, 1992; 1996, ch. 194, § 4, effective July 15, 1996; 2000, ch. 300, § 2, effective July 14, 2000; 2000, ch. 528, § 18, effective July 14, 2000; 2001, ch. 133, § 8, effective June 21, 2001; 2002, ch. 338, § 42, effective July 15, 2002; 2004, ch. 18, § 5, effective July 13, 2004; 2004, ch. 105, § 21, effective July 13, 2004; 2005, ch. 85, § 495, effective June 20, 2005; 2005, ch. 168, § 21, effective March 18, 2005; 2007 (2nd Ex. Sess.), ch. 1, § 13, effective August 30, 2007; 2009 (1st Ex. Sess.), ch. 1, § 52, effective June 26, 2009.

Compiler’s Notes.

The provisions of the 1972 amendment to this section apply to taxable years beginning after December 31, 1971.

Section 40 of Acts 1978, ch. 233 read: “The provisions of sections eight (8) through seventeen (17) of this Act shall apply to taxable years beginning after December 31, 1977.”

Legislative Research Commission Notes.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(7/14/2000). This section was amended by 2000 Ky. Acts chs. 300 and 528. Where these Acts are not in conflict, they have been codified together. Where a conflict exists, Acts ch. 528, which was last enacted by the General Assembly, prevails under KRS 446.250 .

(7/15/96). Under KRS 7.136(1)(h), KRS 154.26-090 (1)(d)2.b. has been substituted in subsection (11) of this statute for a reference to KRS 156.24-090(1)(d)2.b. that appears in 1996 Ky. Acts ch. 194, sec. 4. Materials in the bill folder for Senate Bill 219 (which became 1996 Ky. Acts ch. 194) and the minutes of the Senate committee to which this bill was referred show that the former reference was intended to have been incorporated into that committee’s committee substitute. The citation given in the Acts text does not exist, and it is clear that the erroneous citation resulted from a typographical error in preparing the committee substitute.

NOTES TO DECISIONS

  1. In General.
  2. Liability of Corporate Officer.
1. In General.

Attorney was ordered permanently disbarred where he failed to pay over $39,000 in employee withholding taxes for several tax periods and was found liable to the Commonwealth of Kentucky Finance and Administration Cabinet in a civil complaint pursuant to KRS 135.050 and KRS 141.310(14). Ky. Bar Ass'n v. McDaniel, 205 S.W.3d 201, 2006 Ky. LEXIS 288 ( Ky. 2006 ).

2. Liability of Corporate Officer.

A corporate officer acting as the taxpayer for withholding tax purposes, was personally liable for penalties and interest due for the late payment of taxes. Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

Research References and Practice Aids

Northern Kentucky Law Review.

Kentucky Survey Issue: Article: Personal Liability Regarding Taxation of Kentucky Corporations: Responsible Person Obligations Under the IRC and the KRS, 38 N. Ky. L. Rev. 285 (2011).

141.315. Department to promulgate regulations governing certain types of wage payments.

If payment of wages is made to an employee by an employer:

  1. With respect to a payroll period or other period, any part of which is included in a payroll period or other period with respect to which wages are also paid to such employee by such employer, or
  2. Without regard to any payroll period or other period, but on or prior to the expiration of a payroll period or other period with respect to which wages are also paid to such employee by such employer; or
  3. With respect to a period beginning in one (1) and ending in another calendar year; or
  4. Through an agent, fiduciary, or other person who also has the control, receipt, custody, or disposal of, or pays, the wages payable by another employer to such employee, the manner of withholding and the amount to be deducted and withheld under KRS 141.310 shall be determined in accordance with regulations promulgated by the department under which the withholding exemption allowed to the employee in any calendar year shall approximate the withholding exemption allowable with respect to an annual payroll period.

History. Enact. Acts 1954, ch. 79, § 23, effective June 17, 1954; 2005, ch. 85, § 496, effective June 20, 2005.

Research References and Practice Aids

Cross-References.

Administrative regulations, adoption and effective date, KRS 13A.330 .

141.320. Remuneration paid by an employer deemed wages.

If the remuneration paid by an employer to an employee for services performed during one-half (1/2) or more of any payroll period of not more than thirty-one (31) consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half (1/2) of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages.

History. Enact. Acts 1954, ch. 79, § 24, effective June 17, 1954.

141.325. Withholding exemptions — Certificates.

  1. An employee receiving wages shall on any day be entitled to the following withholding exemptions:
    1. For taxable years beginning prior to January 1, 2018:
      1. One (1) exemption for himself;
      2. One (1) exemption for each dependent for whom he would be entitled to a tax credit under the provisions of KRS 141.020 ;
      3. If the employee is married, the exemption to which his spouse is entitled, or would be entitled if such spouse were an employee, under subparagraph 1. of this paragraph, but only if such spouse does not have in effect a withholding exemption certificate claiming such exemption; and
    2. Such other withholding exemptions as the department may prescribe by regulation.
  2. Every employee shall, before the date of commencement of employment, furnish his or her employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he or she claims, which in no event shall exceed the number to which he is entitled.
  3. Withholding exemption certificates shall take effect as of the beginning of the first payroll period ending, or the first payment of wages made without regard to a payroll period, on or after the date on which such certificate is so furnished.
  4. A withholding exemption certificate which takes effect under this section shall continue in effect with respect to the employer until another such certificate takes effect under this section. If a withholding exemption certificate is furnished to take the place of an existing certificate, the employer, at his option, may continue the old certificate in force with respect to all wages paid on or before the first status determination date, January 1 or July 1, which occurs at least thirty (30) days after the date on which such new certificate is furnished.
  5. If, on any day during the calendar year, the number of withholding exemptions to which the employee may reasonably be expected to be entitled at the beginning of his next taxable year is different from the number to which the employee is entitled on such day, the employee shall in such cases and at such time as the department may prescribe, furnish the employer with a withholding exemption certificate relating to the number of exemptions which he claims with respect to such next taxable year, which shall in no event exceed the number to which he may reasonably be expected to be so entitled. Exemption certificates issued pursuant to this subsection shall not take effect with respect to any payment of wages made in the calendar year in which the certificate is furnished.
  6. If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is less than the number of withholding exemptions claimed by the employee on the withholding exemption certificate then in effect with respect to him, the employee shall, within ten (10) days thereafter, furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day. If, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is greater than the number of withholding exemptions claimed, the employee may furnish the employer with a new withholding exemption certificate relating to the number of withholding exemptions which the employee then claims, which shall in no event exceed the number to which he is entitled on such day.
  7. Withholding exemption certificates shall be in the form and contain the information required by the department.

HISTORY: Enact. Acts 1954, ch. 79, § 25; 1956 (4th Ex. Sess.), ch. 4, § 13; 1978, ch. 233, § 14, effective June 17, 1978; 2005, ch. 85, § 497, effective June 20, 2005; 2013, ch. 119, § 23, effective June 25, 2013; 2018 ch. 171, § 83, effective April 14, 2018; 2018 ch. 207, § 83, effective April 27, 2018.

Compiler’s Notes.

Section 40 of Acts 1978, ch. 233 read: “The provisions of sections eight (8) through seventeen (17) of this Act shall apply to taxable years beginning after December 31, 1977.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

141.330. Employers to file quarterly returns and make payments — Liability — Actions — Lien on property of employer.

  1. Every employer required to deduct and withhold tax under KRS 141.310 and 141.315 shall, for the quarterly period beginning on the first day of January of each year, and for each quarterly period thereafter, on or before the last day of the month following the close of each quarterly period make a return and report to the department the tax required to be withheld under KRS 141.310 and 141.315 , unless the employer is permitted or required to report monthly or annually. Such employer shall, on or before the last day of the month following the close of each quarterly period, pay over to the department the tax required to be withheld under KRS 141.310 and 141.315; Provided, however, That the department may, by regulations, require employers to remit the tax withheld under KRS 141.310 and 141.315 within a reasonable time after the payroll period or other period. A return shall be filed by every employer making payment of wages even though no tax has been withheld.
  2. If the department, in any case, has reason to believe that the collection of the tax provided for in subsection (1) of this section is in jeopardy, it may require the employer to make such return and pay such tax at any time.
  3. Every employer, who fails to withhold or pay to the department any sums required by this chapter to be withheld and paid, shall be personally and individually liable therefor to the Commonwealth; and any sum or sums withheld in accordance with the provisions of KRS 141.310 and 141.315 shall be deemed to be held in trust for the Commonwealth.
  4. The Commonwealth shall have a lien upon all the property of any employer who fails to withhold or pay over to the department sums required to be withheld under KRS 141.310 and 141.315 . If the employer withholds but fails to pay the amounts withheld to the department, the lien shall accrue as of the date the amounts withheld were required to be paid to the department. If the employer fails to withhold, the lien shall accrue at the time the liability of the employer becomes fixed.

History. Enact. Acts 1954, ch. 79, § 26; 1956 (4th Ex. Sess.), ch. 4, § 14; 1962, ch. 124, § 6; 1966, ch. 176, part I, § 11; 1970, ch. 216, § 11; 2005, ch. 85, § 498, effective June 20, 2005.

Legislative Research Commission Notes.

This section as amended by Acts 1970, ch. 216 applies to taxable years beginning on or after January 1, 1971.

Opinions of Attorney General.

Direct legislative command requires the Department of Revenue to assess a penalty for failure to file a quarterly report of withholding taxes when no tax is due to be paid. OAG 61-1002 .

Where water district withheld taxes from wages of employee, but never reported or remitted such taxes and new commissioners were subsequently appointed for the district, the new commissioners, as agents of the employer district were responsible for insuring that all obligations were fulfilled, even though they did not hold office during the years in question and if the new commissioners willfully failed to remit the moneys presently, they could be subject to those penalties contained in former KRS 141.990(11); additionally, if the former water district commissioners could be shown to have willfully failed to report and remit the taxes withheld, they could be subject to such penalties as the agents of the employer who controlled the payment of wages. OAG 83-314 .

141.335. Annual withholding statement to be furnished employee.

  1. Every person required to deduct and withhold from an employee a tax under KRS 141.310 or 141.315 , or who would have been required to deduct and withhold a tax under KRS 141.310 or 141.315 if the employee had claimed no more than one (1) withholding exemption, shall furnish to each such employee in respect of the remuneration paid by such person to such employee during the calendar year, on or before January 31 of the succeeding year, or, if his employment is terminated before the close of such calendar year, on the day on which the last payment of remuneration is made, a written statement showing the following:
    1. the name of such person;
    2. the name of the employee and his social security account number;
    3. the total amount of wages as defined in KRS 141.010 ; and
    4. the total amount deducted and withheld as tax under KRS 141.310 and 141.315.
  2. The statement required to be furnished by this section in respect of any wages shall be furnished at such other times, shall contain such other information, and shall be in such form as the department may by regulations prescribe. A duplicate of such statement if made and filed in accordance with regulations prescribed by the department shall constitute the return required to be made in respect of such wages under KRS 141.150 .
  3. The department may promulgate regulations providing for reasonable extensions of time, not in excess of thirty (30) days, to employers required to furnish statements under this section.

History. Enact. Acts 1954, ch. 79, § 27, effective June 17, 1954; 2005, ch. 85, § 499, effective June 20, 2005.

141.340. Liability of employer for tax payment — Corporate officers, managers of limited liability companies, and partners of registered limited liability partnerships personally liable.

  1. An employer shall be liable for the payment of the tax required to be deducted and withheld under KRS 141.310 and 141.315 , and shall not be liable to any person for the amount of any such payment.
  2. The president, vice president, secretary, treasurer or any other person holding an equivalent corporate office of any corporation subject to KRS 141.310 or 141.315 shall be personally and individually liable, both jointly and severally, for any tax required to be withheld under this chapter from wages paid to one (1) or more employees of any such corporation, and neither the corporate dissolution or withdrawal of the corporation from the state nor the cessation of holding any such corporate office shall discharge the foregoing liability of any such person; provided that the personal and individual liability shall apply to each or every person holding such corporate office at the time such tax becomes or became obligated. No person shall be personally and individually liable under this subsection who had no authority to collect, truthfully account for, or pay over any tax imposed by this chapter at the time that taxes imposed by this chapter become or became due. “Taxes” as used in this section shall include interest accrued at the rate provided by KRS 131.138, all applicable penalties and fees imposed under KRS 131.180 , 131.410 to 131.445 , and 131.990 .
  3. Notwithstanding any other provisions of this chapter, KRS 275.150 , 362.1-306(3) or predecessor law, or 362.2-404(3) to the contrary, the managers of a limited liability company, the partners of a limited liability partnership, or the general partners of a limited liability limited partnership or any other person holding any equivalent office of a limited liability company, limited liability partnership, or limited liability limited partnership subject to KRS 141.310 or 141.315 shall be personally and individually liable, both jointly and severally, for any tax required to be withheld under this chapter from wages paid to one (1) or more employees of any such limited liability company, limited liability partnership, or limited liability limited partnership. Dissolution, withdrawal of the limited liability company, limited liability partnership, or limited liability limited partnership from the state, or the cessation of holding any office shall not discharge the liability of any person. The personal and individual liability shall apply to each and every manager of a limited liability company, partner in a limited liability partnership, and general partner of a limited liability limited partnership at the time the taxes become or became due. No person shall be personally and individually liable under this subsection who had no authority to collect, truthfully account for, or pay over any tax imposed by this chapter at the time that the taxes imposed by this chapter become or became due. “Taxes” as used in this section shall include interest accrued at the rate provided by KRS 131.183 , all applicable penalties imposed under this chapter, and all applicable penalties and fees imposed under KRS 131.180 , 131.410 to 131.445 , and 131.990 .

History. Enact. Acts 1954, ch. 79, § 28, effective June 17, 1954; 1978, ch. 233, § 15, effective June 17, 1978; 2002, ch. 366, § 17, effective January 1, 2003; 2006, ch. 149, § 203, effective July 12, 2006.

Compiler’s Notes.

Section 40 of Acts 1978, ch. 233 read: “The provisions of sections eight (8) through seventeen (17) of this Act shall apply to taxable years beginning after December 31, 1977.”

Legislative Research Commission Notes.

(1/1/2003). The amendments to subsection (3) of this statute made in 2002 Ky. Acts ch. 366, sec. 17, “apply retroactively to July 15, 1994.” 2002 Ky. Acts ch. 366, sec. 19.

NOTES TO DECISIONS

1. Liable for Penalties and Interest.

A corporate officer acting as the taxpayer for withholding tax purposes, was personally liable for penalties and interest due for the late payment of taxes. Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

Research References and Practice Aids

Northern Kentucky Law Review.

Kentucky Survey Issue: Article: Personal Liability Regarding Taxation of Kentucky Corporations: Responsible Person Obligations Under the IRC and the KRS, 38 N. Ky. L. Rev. 285 (2011).

141.345. Refund or credit in case of overpayment.

  1. Where there has been an overpayment of tax under KRS 141.310 or 141.315 , refund or credit shall be made to the employer only to the extent that the amount of such overpayment was not deducted and withheld under KRS 141.310 or 141.315 by the employer.
  2. Unless written application for refund or credit is received by the department from the employer within four (4) years from the date the overpayment was made, no refund or credit shall be allowed.

History. Enact. Acts 1954, ch. 79, § 29; 1966, ch. 176, part I, § 12; 2005, ch. 85, § 500, effective June 20, 2005.

141.347. Computation of income tax credit.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” shall have the same meaning as set forth in KRS 154.22-010 ;
    2. “Economic development project” shall have the same meaning as set forth in KRS 154.22-010 ;
    3. “Tax credit” means the “tax credit” allowed in KRS 154.22-010 to 154.22-070 ;
    4. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 ; and
    5. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 .
  2. An approved company shall determine the tax credit as provided in this section.
  3. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project;
      2. Using the method chosen under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the net tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.22-050 .
    1. Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to tax under KRS 141.040 or a trust not subject to tax under KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020 . (4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to tax under KRS 141.040 or a trust not subject to tax under KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020 .
    2. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    3. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.22-050 .
    4. If the tax computed in this section exceeds the credit, the excess shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 or 141.0401 for filing the returns.
    5. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  4. Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
  5. If the economic development project is a totally separate facility:
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for the purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  6. If the economic development project is an expansion to a previously existing facility:
    1. Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility, and the net income attributable to the economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic development project by a formula approved by the Department of Revenue; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the economic development project for the purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic development project by a formula approved by the Department of Revenue.
  7. If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the economic development project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the economic development project using an alternative method approved by the Department of Revenue.
  8. The Department of Revenue may issue administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.22-020 to 154.22-070 and the allowable income tax credit which an approved company may retain under KRS 154.22-020 to 154.22-070 .

HISTORY: Enact. Acts 1988, ch. 392, § 21, effective April 8, 1988; 1992, ch. 105, § 55, effective July 14, 1992; 1992, ch. 360, § 13, effective July 14, 1992; 1994, ch. 390, § 36, effective July 15, 1994; 1996, ch. 194, § 5, effective July 15, 1996; 2005, ch. 168, § 20, effective March 18, 2005; 2005, ch. 85, § 501, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 4, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 20, effective June 28, 2006; 2018 ch. 171, § 84, effective April 14, 2018; 2018 ch. 207, § 84, effective April 27, 2018.

Compiler’s Notes.

Section 40 of Acts 1994, ch. 390, provides that the 1994 amendment to this section “shall apply to taxable periods beginning after December 31, 1993.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

(7/14/92) This section was amended by 1992 Ky. Acts ch. 105, sec. 55, and ch. 360, sec. 13. The changes made by ch. 105 are purely technical in nature to make internal references conform to renumbering effectuated by other sections of that Act, while the changes made by ch. 360 are substantive in nature. Notwithstanding ch. 105, sec. 79, the changes of ch. 360 prevail. Cf. KRS 7.123 .

141.350. Credit of amount withheld against tax imposed by KRS 141.020 for same taxable year.

The amount deducted and withheld as tax under KRS 141.310 and 141.315 during any calendar year upon the wages of any individual and the amount of credit described in KRS 154.22-070 (2), 154.23-055 , 154.24-110 , 154.24-150 (3) and (4), 154.26-100 (2), 154.27-080 , 154.28-110 , or 154.32-090 shall be allowed as a credit to the recipient of the income against the tax imposed by KRS 141.020 , for taxable years beginning in the calendar year. If more than one (1) taxable year begins in the calendar year, the amount shall be allowed as a credit against the tax for the last taxable year so beginning.

History. Enact. Acts 1954, ch. 79, § 30, effective June 17, 1954; 1978, ch. 384, § 27, effective June 17, 1978; 1988, ch. 392, § 22, effective April 8, 1988; 1992, ch. 105, § 71, effective July 14, 1992; 1992, ch. 358, § 18, effective July 14, 1992; 1992, ch. 359, § 14, effective July 14, 1992; 1994, ch. 450, § 35, effective July 15, 1994; 1996, ch. 194, § 6, effective July 15, 1996; 2000, ch. 300, § 3, effective July 14, 2000; 2000, ch. 528, § 19, effective July 14, 2000; 2007 (2nd Ex. Sess.), ch. 1, § 14, effective August 30, 2007; 2009 (1st Ex. Sess.), ch. 1, § 53, effective June 26, 2009.

141.355. Crediting of overpayment and refund of balance — Withholding in excess of tax imposed by KRS 141.020, when considered overpayment.

  1. Where there has been an overpayment of any tax imposed under KRS 141.020 , 141.310 , or 141.315 , the amount of such overpayment shall be credited against any income tax or installment thereof then due from the taxpayer, and any balance shall be refunded in the manner provided in KRS 141.235 .
  2. Where the amount of the tax withheld at the source under KRS 141.310 or 141.315 exceeds the taxes imposed by KRS 141.020 against which the tax so withheld may be credited under KRS 141.350 , the amount of such excess shall be considered an overpayment.

History. Enact. Acts 1954, ch. 79, § 31, effective June 17, 1954.

141.360. Tables for determining tax to be withheld. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1958, ch. 3, § 6; 1960, ch. 5, Art. III, § 8) was repealed by Acts 1970, ch. 216, § 13.

141.370. Tables for determining tax to be withheld.

The tax levied under KRS 141.020 and required to be withheld under KRS 141.310 , unless determined by KRS 141.315 , shall be withheld in accordance with the tables provided by the department. The department shall annually publish withholding tables for use in determining the amount of tax to be withheld under KRS 141.310 and 141.315 . The tables shall reflect the tax computed under KRS 141.020 for the midpoint of each income range using the standard deduction allowed under KRS 141.081 . The withholding tables shall be available in an on-line format.

History. Enact. Acts 1970, ch. 216, § 10; 2005, ch. 168, § 22, effective March 18, 2005; 2005, ch. 85, § 502, effective June 20, 2005.

Legislative Research Commission Notes.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

This section as enacted by Acts 1970, ch. 216 applies to taxable years beginning on or after January 1, 1971.

141.375. Definitions relating to qualifying energy property. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1984, ch. 209, § 1, effective July 13, 1984) was repealed by Acts 2005, ch. 168, § 157, effective June 1, 2005.

141.380. Tax credit for expenditures for qualifying energy property installed by taxpayer. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1984, ch. 209, § 2, effective July 13, 1984; 1990, ch. 325, § 25, effective July 13, 1990; 2005, ch. 85, § 503, effective June 20, 2005) was repealed by Acts 2005, ch. 168, § 157, effective June 1, 2005.

Legislative Research Commission Notes.

(6/01/2005). Under KRS 446.260 , the repeal of this section in 2005 Ky. Acts ch. 168 prevails over its amendment in 2005 Ky. Acts ch. 85.

141.381. Nonrefundable tax credit for entities participating in the Metropolitan College.

  1. As used in this section:
    1. “Corporation” means the Bluegrass State Skills Corporation established by KRS 154.12-205 ;
    2. “Educational institution” means a regionally accredited college, university, or technical school;
    3. “Metropolitan College” means a nonprofit consortium that includes educational institutions located within the Commonwealth and the qualified taxpayer as members. The purpose of Metropolitan College shall be to provide postsecondary educational opportunities to employees of the qualified taxpayer as part of a combined work and postsecondary education program;
    4. “Other educational expenses” means the same kinds of educational expenses that were permitted under the Metropolitan College Consortium Agreement approved November 5, 2005; and
    5. “Qualified taxpayer” means any taxpayer who, on June 26, 2009, is a party to the Metropolitan College Consortium Agreement approved November 5, 2005.
  2. To be eligible for the tax credit provided by this section, a qualified taxpayer shall be a partner in Metropolitan College.
  3. A qualified taxpayer shall be allowed a nonrefundable credit against the tax imposed by KRS 141.020 or 141.040 , and KRS 141.0401 , for each taxable year beginning on or after July 1, 2010, in the amount of fifty percent (50%) of the actual costs incurred by the qualified taxpayer for:
    1. Tuition paid to an educational institution for a student participating in the Metropolitan College; and
    2. Other educational expenses paid on behalf of a student participating in the Metropolitan College;
  4. To claim the credit each year, the qualified taxpayer shall, on an annual basis, submit to the corporation information listing each employee of the qualified taxpayer for whom tuition or other educational expenses were paid, the amount paid on behalf of each employee, and the amount of credit the qualified company is eligible to claim. The corporation shall review the information provided by the qualified company, and shall notify the department and the qualified company of the amount of credit the qualified company is eligible to claim.
  5. The credit allowed by this section for any taxable year shall not exceed the tax liability of the taxpayer for the taxable year. Any credit not used may be carried forward to subsequent years.
  6. The qualified company shall provide to the corporation and the department any information and documentation requested for the purpose of monitoring the credit established by this section.
  7. The approved company shall maintain records and submit information as required by the corporation and the department. The corporation may share information provided by the approved company with the department for the purpose of monitoring the credit established by this section.
  8. The corporation may, through the promulgation of administrative regulations in accordance with KRS Chapter 13A, establish additional standards or requirements for the administration of this section.
  9. The credit established by this section shall expire on April 15, 2027, unless extended by the General Assembly.

on behalf of employees of the qualified corporation, for up to two thousand eight hundred (2,800) employees each year.

HISTORY: Enact. Acts 2009 (1st. Ex. Sess.), ch. 1, § 19, effective June 26, 2009; 2012, ch. 157, § 1, effective July 12, 2012; 2015 ch. 30, § 2, effective July 1, 2015.

141.382. Refundable or transferable tax credit for qualified rehabilitation expenses for certified historic structure meeting the requirements of KRS 171.396 and 171.397.

  1. As used in this section:
    1. “Certified historic structure” means the same as defined in KRS 171.396 ;
    2. “Qualified rehabilitation expense” means the same as defined in KRS 171.396 ; and
    3. “Substantial rehabilitation” means the same as defined in KRS 171.396.
  2. A refundable or transferable credit in the amount determined in KRS 171.397 shall be allowed against the taxes imposed by KRS 136.505 or 141.020 or 141.040 and 141.040 1, with the ordering of credits provided in KRS 141.0205 , for qualified rehabilitation expenses incurred by the taxpayer and used for substantial rehabilitation to a certified historic structure.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 32, effective June 26, 2009.

141.383. Refundable tax credit for motion picture or entertainment production expenses authorized by KRS 148.542 to 148.546.

  1. As used in this section:
    1. “Above-the-line production crew” means the same as defined in KRS 148.542 ;
    2. “Approved company” means the same as defined in KRS 148.542 ;
    3. “Below-the-line production crew” means the same as defined in KRS 148.542;
    4. “Cabinet” means the same as defined in KRS 148.542;
    5. “Office” means the same as defined in KRS 148.542;
    6. “Qualifying expenditure” means the same as defined in KRS 148.542;
    7. “Qualifying payroll expenditure” means the same as defined in KRS 148.542;
    8. “Secretary” means the same as defined in KRS 148.542; and
    9. “Tax incentive agreement” means the same as defined in KRS 148.542.
    1. There is hereby created a tax credit against the tax imposed under KRS 141.020 or 141.040 and 141.040 1, with the ordering of credits as provided in KRS 141.0205 . (2) (a) There is hereby created a tax credit against the tax imposed under KRS 141.020 or 141.040 and 141.0401 , with the ordering of credits as provided in KRS 141.0205 .
    2. The incentive available under paragraph (a) of this section is:
      1. A refundable credit for applications approved prior to April 27, 2018; and
      2. A nonrefundable and nontransferable credit for applications approved on or after April 27, 2018.
      1. Beginning on April 27, 2018, the total tax incentive approved under KRS 148.544 shall be limited to one hundred million dollars ($100,000,000) for calendar year 2018 and each calendar year thereafter. (c) 1. Beginning on April 27, 2018, the total tax incentive approved under KRS 148.544 shall be limited to one hundred million dollars ($100,000,000) for calendar year 2018 and each calendar year thereafter.
      2. On April 27, 2018, if applications have been approved during the 2018 calendar year which exceed the amount in subparagraph 1. of this paragraph, the Kentucky Film Office shall immediately cease in approving any further applications for tax incentives.
  2. An approved company may receive a refundable tax credit on and after July 1, 2010, but only for applications approved prior to April 27, 2018, if:
    1. The cabinet has received notification from the office that the approved company has satisfied all requirements of KRS 148.542 to 148.546 ; and
    2. The approved company has provided a detailed cost report and sufficient documentation to the office, which has been forwarded by the office to the cabinet, that:
      1. The purchases of qualifying expenditures were made after the execution of the tax incentive agreement; and
      2. The approved company has withheld income tax as required by KRS 141.310 on all qualified payroll expenditures.
  3. Interest shall not be allowed or paid on any refundable credits provided under this section.
  4. The cabinet shall promulgate administrative regulations in accordance with KRS Chapter 13A to administer this section.
  5. On or before September 1, 2010, and on or before each September 1 thereafter, for the immediately preceding fiscal year, the cabinet shall report to the office the names of the approved companies and the amounts of refundable income tax credit claimed.

HISTORY: Enact. Acts 2009 (1st. Ex. Sess.), ch. 1, § 47, effective June 26, 2009; 2014, ch. 102, § 13, effective July 15, 2014; 2018 ch. 171, § 85, effective April 14, 2018; 2018 ch. 207, § 85, effective April 27, 2018; 2020 ch. 91, § 15, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 15 of that Act apply to taxable years beginning on or after January 1, 2019.

141.384. Nonrefundable tax credit for small businesses.

  1. As used in this section, “small business” has the same meaning as in KRS 154.60-010 .
    1. For taxable years beginning after December 31, 2010, a small business may be eligible for a nonrefundable credit of up to one hundred percent (100%) of the Kentucky income tax imposed under KRS 141.020 or 141.040 , and the limited liability entity tax imposed under KRS 141.0401 . (2) (a) For taxable years beginning after December 31, 2010, a small business may be eligible for a nonrefundable credit of up to one hundred percent (100%) of the Kentucky income tax imposed under KRS 141.020 or 141.040 , and the limited liability entity tax imposed under KRS 141.0401 .
    2. A small business that is subject to the tax imposed by KRS 141.020 or 141.040 and that has tax credits approved under Subchapter 60 of KRS Chapter 154 shall apply the credits against the income tax imposed by KRS 141.020 or 141.040 and against the limited liability entity tax imposed by KRS 141.0401, with the ordering of credits as provided in KRS 141.0205 .
    3. A small business that is a pass-through entity not subject to the tax imposed by KRS 141.040 and that has tax credits approved under Subchapter 60 of KRS Chapter 154 shall apply the credits against the limited liability entity tax imposed by KRS 141.0401, and shall also distribute the amount of the approved tax credits to each partner, member, or shareholder based on the partner’s, member’s, or shareholder’s distributive share of income as determined for the year during which the tax credits are approved, with the ordering of credits as provided in KRS 141.0205 .

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 68, effective June 26, 2009; 2010 (1st Ex. Sess.), ch. 2, § 13, effective June 4, 2010; 2014, ch. 128, § 4, effective July 15, 2014.

141.3841. Selling farmers tax credit.

  1. The selling farmers tax credit permitted by KRS 154.60-040 :
    1. Shall be nonrefundable and nontransferable; and
    2. May be claimed against the taxes imposed in KRS 141.020 or 141.040 and 141.040 1, with the ordering of the credit as provided in KRS 141.0205 .
    1. The maximum amount of credit that may be claimed by a selling farmer in each taxable year is limited to: (2) (a) The maximum amount of credit that may be claimed by a selling farmer in each taxable year is limited to:
      1. No more than the total amount of credit approved by the Kentucky Economic Development Finance Authority;
      2. Twenty-five thousand dollars ($25,000) in any taxable year; and
      3. No more than one hundred thousand dollars ($100,000) total tax credit over the lifetime of the selling farmer.
    2. The credit shall be first claimed on the tax return for the taxable year during which the credit was approved.
    3. Any unused credit in a taxable year may be carried forward for up to five (5) taxable years and, if not utilized within the five (5) year period, shall be lost.
  2. In order for the General Assembly to evaluate the fulfillment of the purpose stated in KRS 154.60-040 , the department shall provide the following information, on a cumulative basis, for each selling farmer, for each taxable year:
    1. The location, by county, of the agricultural assets sold to a beginning farmer and approved for a tax credit under KRS 154.60-040 ;
    2. The total amount of tax credit approved by the Kentucky Economic Development Finance Authority for each selling farmer;
    3. The amount of tax credit claimed for each selling farmer in each taxable year; and
      1. In the case of all taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of tax credits claimed and the number of returns claiming a tax credit for each adjusted gross income range; and (d) 1. In the case of all taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of tax credits claimed and the number of returns claiming a tax credit for each adjusted gross income range; and
      2. In the case of all corporations, based on ranges of net income no larger than fifty thousand dollars ($50,000) for the taxable year, the total amount of tax credit claimed and the number of returns claiming a tax credit for each net income range.
  3. The report required by subsection (3) of this section shall be submitted to the Interim Joint Committee on Appropriations and Revenue beginning no later than November 1, 2021, and no later than each November 1 thereafter, as long as the credit is claimed on any return processed by the department.

HISTORY: 2020 ch. 91, § 19, effective April 15, 2020.

141.385. Nonrefundable tax credit for railroad improvement.

  1. As used in this section:
    1. “Class II railroad” means a railroad company classified as a Class II carrier by the federal Surface Transportation Board;
    2. “Class III railroad” means a railroad company classified as a Class III carrier by the federal Surface Transportation Board;
    3. “Qualified expenditures” means expenditures, whether or not otherwise chargeable to a capital account, that are made to maintain or improve railroads located in Kentucky, including roadbeds, bridges, and related structures, that are owned or leased as of January 1, 2008, by a Class II or Class III railroad; and
    4. “Eligible taxpayer” means:
      1. The owner of any Class II railroad or Class III railroad located in Kentucky; or
      2. Any person who transports property using the rail facilities of a Class II railroad or Class III railroad located in Kentucky or furnishes railroad-related property or services to a Class II railroad or Class III railroad located in Kentucky, but only with respect to miles of railroad track assigned to the person by a Class II railroad or Class III railroad for purposes of subsection (3) of this section.
  2. For taxable years beginning after December 31, 2009, an eligible taxpayer shall be entitled to a nonrefundable credit against the taxes imposed by KRS 141.020 or 141.040 , and 141.0401 with the ordering of credits as directed in KRS 141.020 5, in an amount equal to fifty percent (50%) of the qualified expenditures paid or incurred by the taxpayer during the taxable year.
  3. The credit allowed under subsection (2) of this section shall not exceed the product of:
    1. Three thousand five hundred dollars ($3,500) multiplied by:
    2. The sum of:
      1. The number of miles of railroad track in Kentucky owned or leased by the eligible taxpayer as of the close of the taxable year; and
      2. The number of miles of railroad track in Kentucky assigned for purposes of this section to the eligible taxpayer by a Class II railroad or Class III railroad which owns or leases the railroad track as of the close of the taxable year.
  4. A mile of railroad track may be taken into account by a qualified taxpayer other than the owner only if the mile of railroad track is assigned to the person by the owner for purposes of this section. Any mile that is so assigned shall not be taken into account by the owner for purposes of this section.
  5. With respect to any assignment of a mile of railroad track under subsection (4) of this section:
    1. The assignment may be made only once per taxable year of the Class II railroad or Class III railroad and shall be treated as made as of the close of the taxable year;
    2. The mile shall not be taken into account under this section by the railroad for such taxable year; and
    3. The assignment shall be taken into account for the taxable year of the assignee, which includes the date that the assignment is treated as effective.
  6. If a credit is taken as provided for in subsection (2) of this section, the basis of the track shall be reduced by the amount of credit taken.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 69, effective June 26, 2009.

141.386. Nonrefundable tax credit for railroad expansion or upgrade to accommodate transportation of fossil energy resources or biomass resources.

  1. As used in this section:
    1. “Fossil energy resources” means reserves of coal, oil shale, and natural gas; and
    2. “Biomass resources” means agricultural materials that may be used for production of transportation fuels such as biodiesel or ethanol or that may themselves be used as a fuel, alone or in combination with a fossil fuel, for generation of electricity.
  2. For taxable years beginning after December 31, 2009:
    1. A corporation that owns fossil energy resources subject to tax under KRS 143.020 or 143A.020 or biomass resources and transports these resources using rail facilities; or
    2. A railway company subject to tax under KRS 136.120 that serves a corporation that owns fossil energy resources subject to tax under KRS 143.020 or 143A.020 or biomass resources;
    1. The credit shall be equal to twenty-five percent (25%) of the expenditures paid or incurred by the corporation or railway company to expand or upgrade railroad track, including roadbeds, bridges, and related track structures, to accommodate the transport of fossil energy resources or biomass resources. (3) (a) The credit shall be equal to twenty-five percent (25%) of the expenditures paid or incurred by the corporation or railway company to expand or upgrade railroad track, including roadbeds, bridges, and related track structures, to accommodate the transport of fossil energy resources or biomass resources.
    2. The credit amount approved for a calendar year for all taxpayers under this section shall be limited to one million dollars ($1,000,000).
    3. If the total amount of approved credit exceeds one million dollars ($1,000,000), the department shall determine the amount of credit each corporation and railway company receives by multiplying one million dollars ($1,000,000) by a fraction, the numerator of which is the amount of approved credit for a corporation or railway company and the denominator of which is the total approved credit for all corporations and railway companies.
  3. Each corporation or railway company eligible for the credit provided under this section shall file a railroad expansion tax credit claim on forms prescribed by the department by the fifteenth day of the first month following the close of the preceding calendar year. The department shall determine the amount of the approved credit and issue a credit certificate to the corporation or railway company by the fifteenth day of the third month following the close of the calendar year.

shall be entitled to a nonrefundable tax credit against the taxes imposed under KRS 141.040 and 141.0401 , with the ordering of credits as directed by KRS 141.0205 , in an amount certified by the department pursuant to subsection (4) of this section.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 70, effective June 26, 2009.

141.387. No carry forward permitted for tax credits provided by KRS 141.385 and 141.386 — Claims for credits.

  1. The tax credits established by KRS 141.385 and 141.386 shall not be carried forward to a return for any other period.
  2. If an expenditure by a taxpayer qualifies for credits under more than one (1) of the provisions of KRS 141.385 and 141.386 , the taxpayer may claim credit under one (1) section only.

History. Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 71, effective June 26, 2009.

141.388. Nonrefundable tax credit for new home purchases. [Repealed]

HISTORY: Enact. Acts 2009 (1st Ex. Sess.), ch. 1, § 104, effective June 26, 2009; 2010 (1st Ex. Sess.), ch. 2, § 6, effective June 4, 2010; repealed by 2018 ch. 171, § 140, effective April 14, 2018; repealed by 2018 ch. 207, § 148, effective April 27, 2018.

141.389. Nonrefundable and nontransferable distilled spirits ad valorem tax credit — Credit to be used only for capital improvement at licensed distiller’s premises — Administrative regulations — Annual report.

    1. There shall be allowed a nonrefundable and nontransferable credit to each taxpayer paying the distilled spirits ad valorem tax as follows: (1) (a) There shall be allowed a nonrefundable and nontransferable credit to each taxpayer paying the distilled spirits ad valorem tax as follows:
      1. For taxable years beginning on or after January 1, 2015, and before December 31, 2015, the credit shall be equal to twenty percent (20%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis;
      2. For taxable years beginning on or after January 1, 2016, and before December 31, 2016, the credit shall be equal to forty percent (40%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis;
      3. For taxable years beginning on or after January 1, 2017, and before December 31, 2017, the credit shall be equal to sixty percent (60%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis;
      4. For taxable years beginning on or after January 1, 2018, and before December 31, 2018, the credit shall be equal to eighty percent (80%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis; and
      5. For taxable years beginning on or after January 1, 2019, the credit shall be equal to one hundred percent (100%) of the tax assessed under KRS 132.160 and paid under KRS 132.180 on a timely basis.
    2. The credit shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.040 1, with the ordering of the credits as provided in KRS 141.0205 .
  1. The amount of distilled spirits credit allowed under subsection (1) of this section shall be used only for capital improvements at the premises of the distiller licensed pursuant to KRS Chapter 243. As used in this subsection, “capital improvement” means any costs associated with:
    1. Construction, replacement, or remodeling of warehouses or facilities;
    2. Purchases of barrels and pallets used for the storage and aging of distilled spirits in maturing warehouses;
    3. Acquisition, construction, or installation of equipment for the use in the manufacture, bottling, or shipment of distilled spirits;
    4. Addition or replacement of access roads or parking facilities; and
    5. Construction, replacement, or remodeling of facilities to market or promote tourism, including but not limited to a visitor’s center.
  2. The distilled spirits credit allowed under subsection (1) of this section:
    1. May be accumulated for multiple taxable years;
    2. Shall be claimed on the return of the taxpayer filed for the taxable year during which the credits were used pursuant to subsection (2) of this section; and
    3. Shall not include:
      1. Any delinquent tax paid to the Commonwealth; or
      2. Any interest, fees, or penalty paid to the Commonwealth.
    1. Before the distilled spirits credit shall be allowed on any return, the capital improvements required by subsection (2) of this section shall be completed and specifically associated with the credit allowed on the return. (4) (a) Before the distilled spirits credit shall be allowed on any return, the capital improvements required by subsection (2) of this section shall be completed and specifically associated with the credit allowed on the return.
    2. The amount of distilled spirits credit allowed shall be recaptured if the capital improvement associated with the credit is sold or otherwise disposed of prior to the exhaustion of the useful life of the asset for Kentucky depreciation purposes.
    3. If the allowed credit is associated with multiple capital improvements, and not all capital improvements are sold or otherwise disposed of, the distilled spirits credit shall be prorated based on the cost of the capital improvement sold over the total cost of all improvements associated with the credit.
  3. If the taxpayer is a pass-through entity, the taxpayer may apply the credit against the limited liability entity tax imposed by KRS 141.0401 , and shall pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.
  4. The department may promulgate an administrative regulation pursuant to KRS Chapter 13A to implement the allowable credit under this section, require the filing of forms designed by the department, and require specific information for the evaluation of the credit taken by any taxpayer.
  5. No later than September 1, 2016, and annually thereafter, the department shall report to the Interim Joint Committee on Appropriations and Revenue:
    1. The name of each taxpayer taking the credit permitted by subsection (1) of this section;
    2. The amount of credit taken by that taxpayer; and
    3. The type of capital improvement made for which the credit is claimed.

HISTORY: Enact. Acts 2014, ch. 102, § 16, effective July 15, 2014; 2018 ch. 171, § 103, effective April 14, 2018; 2018 ch. 207, § 103, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

141.390. Tax credit for recycling or composting equipment — Report.

  1. As used in this section:
    1. “Postconsumer waste” means any product generated by a business or consumer which has served its intended end use, and which has been separated from solid waste for the purposes of collection, recycling, composting, and disposition and which does not include secondary waste material or demolition waste;
    2. “Recycling equipment” means any machinery or apparatus used exclusively to process postconsumer waste material and manufacturing machinery used exclusively to produce finished products composed of substantial postconsumer waste materials;
    3. “Composting equipment” means equipment used in a process by which biological decomposition of organic solid waste is carried out under controlled aerobic conditions, and which stabilizes the organic fraction into a material which can easily and safely be stored, handled, and used in a environmentally acceptable manner;
    4. “Recapture period” means:
      1. For qualified equipment with a useful life of five (5) or more years, the period from the date the equipment is purchased to five (5) full years from that date; or
      2. For qualified equipment with a useful life of less than five (5) years, the period from the date the equipment is purchased to three (3) full years from that date;
    5. “Useful life” means the period determined under Section 168 of the Internal Revenue Code; and
    6. “Major recycling project” means a project location where the taxpayer:
      1. Invests more than ten million dollars ($10,000,000) in recycling or composting equipment to be used exclusively in this state;
      2. Has more than four hundred (400) full-time employees with an average hourly wage of more than three hundred percent (300%) of the federal minimum wage; and
      3. Has plant and equipment with a total cost of more than five hundred million dollars ($500,000,000).
      1. A taxpayer that purchases recycling or composting equipment to be used exclusively within this state for recycling or composting postconsumer waste materials shall be entitled to a credit against the: (2) (a) 1. A taxpayer that purchases recycling or composting equipment to be used exclusively within this state for recycling or composting postconsumer waste materials shall be entitled to a credit against the:
        1. Income taxes under KRS 141.020 or 141.040 ; and
        2. Limited liability entity tax under KRS 141.0401 ; with the ordering of the credits under KRS 141.020 5.
      2. The total tax credit shall be an amount equal to fifty percent (50%) of the installed cost of the recycling or composting equipment.
      3. The amount of credit claimed in the taxable year during which the recycling equipment is purchased shall not exceed:
        1. Ten percent (10%) of the amount of the total credit allowable; or
        2. Twenty-five percent (25%) of the total of each tax liability which would be otherwise due for that taxable year.
      4. The amount of credit claimed in a taxable year subsequent to the taxable year during which the recycling equipment is purchased shall not exceed twenty-five percent (25%) of the total of each tax liability, which would be otherwise due for that taxable year.
      1. For taxable years beginning after December 31, 2019, a taxpayer that has a major recycling project containing recycling or composting equipment to be used exclusively within this state for recycling or composting postconsumer waste material shall be entitled to a credit against the: (b) 1. For taxable years beginning after December 31, 2019, a taxpayer that has a major recycling project containing recycling or composting equipment to be used exclusively within this state for recycling or composting postconsumer waste material shall be entitled to a credit against the:
        1. Income taxes under KRS 141.020 or 141.040 ; and
        2. Limited liability entity tax under KRS 141.0401 ;
      2. The total tax credit shall be an amount equal to twenty-five percent (25%) of the installed cost of the recycling or composting equipment.
      3. The credit described in this paragraph shall be limited to a period of thirty (30) years commencing with the approval of the recycling credit application.
      4. The amount of credit claimed in the taxable year during which the recycling equipment is purchased shall not exceed seventy-five percent (75%) of the total of each tax liability which would be otherwise due for that taxable year.
      5. The amount of credit claimed in a taxable year subsequent to the taxable year during which the recycling equipment is purchased shall not exceed seventy-five percent (75%) of the total of each tax liability, which would be otherwise due for that taxable year.
    1. A taxpayer with one (1) or more major recycling projects shall be entitled to a total credit including the amount computed in paragraph (a) of this subsection plus the amount of credit computed in paragraph (b) of this subsection, except that the total amount of credits under paragraphs (a) and (b) of this subsection claimed in a taxable year shall not exceed seventy-five percent (75%) of the total of each tax liability which would be otherwise due for that taxable year.
    2. A taxpayer shall not be permitted to utilize a credit computed under paragraph (a) of this subsection and a credit computed under paragraph (b) of this subsection on the same recycling or composting equipment.
    1. Application for a tax credit shall be made to the department on or before the first day of the seventh month following the close of the taxable year in which the recycling or composting equipment is purchased or placed in service. (3) (a) Application for a tax credit shall be made to the department on or before the first day of the seventh month following the close of the taxable year in which the recycling or composting equipment is purchased or placed in service.
    2. The application shall include a description of each item of recycling equipment purchased, the date of purchase and the installed cost of the recycling equipment, a statement of where the recycling equipment is to be used, and any other information as the department may require to fulfill the reporting requirements under subsection (8) of this section.
    3. The department shall review all applications received to determine whether expenditures for which credits are required meet the requirements of this section and shall advise the taxpayer of the amount of credit for which the taxpayer is eligible under this section.
    1. Except as provided in subsection (6) of this section, if a taxpayer that receives a tax credit under this section sells, transfers, or otherwise disposes of the qualifying recycling or composting equipment before the end of the recapture period, the tax credit shall be redetermined under subsection (5) of this section. (4) (a) Except as provided in subsection (6) of this section, if a taxpayer that receives a tax credit under this section sells, transfers, or otherwise disposes of the qualifying recycling or composting equipment before the end of the recapture period, the tax credit shall be redetermined under subsection (5) of this section.
    2. If the total credit taken in prior taxable years exceeds the redetermined credit, the difference shall be added to the taxpayer’s tax liability under this chapter for the taxable year in which the sale, transfer, or disposition occurs.
    3. If the redetermined credit exceeds the total credit already taken in prior taxable years, the taxpayer shall be entitled to use the difference to reduce the taxpayer’s tax liability under this chapter for the taxable year in which the sale, transfer, or disposition occurs.
  2. The total tax credit allowable under subsection (2) of this section for equipment that is sold, transferred, or otherwise disposed of before the end of the recapture period shall be adjusted as follows:
    1. For equipment with a useful life of five (5) or more years that is sold, transferred, or otherwise disposed of:
      1. One (1) year or less after the purchase, no credit shall be allowed.
      2. Between one (1) year and two (2) years after the purchase, twenty percent (20%) of the total allowable credit shall be allowed.
      3. Between two (2) and three (3) years after the purchase, forty percent (40%) of the total allowable credit shall be allowed.
      4. Between three (3) and four (4) years after the purchase, sixty percent (60%) of the total allowable credit shall be allowed.
      5. Between four (4) and five (5) years after the purchase, eighty percent (80%) of the total allowable credit shall be allowed.
    2. For equipment with a useful life of less than five (5) years that is sold, transferred, or otherwise disposed of:
      1. One (1) year or less after the purchase, no credit shall be allowed.
      2. Between one (1) year and two (2) years after the purchase, thirty-three percent (33%) of the total allowable credit shall be allowed.
      3. Between two (2) and three (3) years after the purchase, sixty-seven percent (67%) of the total allowable credit shall be allowed.
  3. Subsections (4) and (5) of this section shall not apply to transfers due to death, or transfers due merely to a change in business ownership or organization as long as the equipment continues to be used exclusively in recycling or composting, or transactions to which Section 381(a) of the Internal Revenue Code applies.
  4. The department may promulgate administrative regulations to carry out the provisions of this section.
    1. The purpose of expanding the tax credit for a major recycling project is to encourage more recycling and composting by businesses within the Commonwealth. (8) (a) The purpose of expanding the tax credit for a major recycling project is to encourage more recycling and composting by businesses within the Commonwealth.
    2. In order for the General Assembly to evaluate the fulfillment of the purpose stated in paragraph (a) of this subsection, the department shall provide the following information on a cumulative basis for each taxable year to provide a historical impact of the tax credit to the Commonwealth:
      1. A narrative for each major recycling project approved for a tax credit, describing:
        1. The taxpayer claiming the tax credit;
        2. The industry sector within which the taxpayer operates in this state, including the NAICS code for the taxpayer; and
        3. The type of recycling or composting equipment purchased by the taxpayer;
      2. The location, by county, of the major recycling project;
      3. The installed cost of the recycling or composting equipment;
      4. The total amount of tax credit approved for the major recycling project;
      5. The amount of tax credit allowed for the major recycling project for each taxable year; and
        1. In the case of all taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of tax credits claimed and the number of returns claiming a tax credit for each adjusted gross income range; and 6. a. In the case of all taxpayers other than corporations, based on ranges of adjusted gross income of no larger than five thousand dollars ($5,000) for the taxable year, the total amount of tax credits claimed and the number of returns claiming a tax credit for each adjusted gross income range; and
        2. In the case of all corporations, based on ranges of net income no larger than fifty thousand dollars ($50,000) for the taxable year, the total amount of tax credit claimed and the number of returns claiming a tax credit for each net income range.
    3. The report required by paragraph (b) of this subsection shall be submitted to the Interim Joint Committee on Appropriations and Revenue beginning no later than November 1, 2021, and no later than each November 1 thereafter, as long as the credit is claimed on any return processed by the department.

with the ordering of the credits under KRS 141.0205 .

HISTORY: Enact. Acts 1991 (1st Ex. Sess.), ch. 12, § 63, effective February 26, 1991; 2005, ch. 168, § 23, effective March 18, 2005; 2005, ch. 85, § 504, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 5, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 21, effective June 28, 2006; 2018 ch. 171, § 86, effective April 14, 2018; 2018 ch. 207, § 86, effective April 27, 2018; 2019 ch. 151, § 53, effective June 27, 2019.

Compiler’s Notes.

Section 168 of the Internal Revenue Code referenced in subdivision (1)(e) is compiled as 26 USCS § 168. Section 381(a) of the Internal Revenue Code referenced in subdivision (6) is compiled as 26 USCS § 381(a).

Legislative Research Commission Notes.

(6/27/2019). Section 84 of 2019 Ky. Acts ch. 151 states that the amendments to this statute made in Section 53 of that Act apply to taxable years beginning on or after January 1, 2021.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.392. Tax credit for donated edible agricultural products. [Repealed]

HISTORY: Enact. Acts 2013, ch. 131, § 32, effective June 25, 2013; repealed by 2018 ch. 171, § 140, effective April 14, 2018; repealed by 2018 ch. 207, § 148, effective April 27, 2018.

141.395. Tax credit for construction of research facilities.

  1. As used in this section:
    1. “Construction of research facilities” means constructing, remodeling, and equipping facilities in this state or expanding existing facilities in this state for qualified research and includes only tangible, depreciable property, and does not include any amounts paid or incurred for replacement property; and
    2. “Qualified research” means qualified research as defined in Section 41 of the Internal Revenue Code.
  2. A nonrefundable credit in the amount determined in subsection (3) of this section is permitted against the tax assessed by both KRS 141.020 or 141.040 and 141.0401 , with the ordering of credits as provided in KRS 141.020 5, for the construction of research facilities. Any unused credit may be carried forward ten (10) years.
  3. The credit allowed in subsection (2) of this section shall equal five percent (5%) of the qualified costs of construction of research facilities.

History. Enact. Acts 2002, ch. 230, § 5, effective July 15, 2002; 2006 (1st Ex. Sess.), ch. 2, § 22, effective June 28, 2006.

Compiler’s notes.

Section 41 of the Internal Revenue Code referenced in subdivision (1)(b) is compiled as 26 USCS § 41.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

141.396. Nonrefundable angel investor tax credit against individual income tax — Carry forward — Transfer of credit — Recapture of credit — Data reporting requirements.

  1. As used in this section:
    1. “Authority” has the same meaning as in KRS 154.20-230 ;
    2. “Qualified investor” has the same meaning as in KRS 154.20-230 ;
    3. “Qualified small business” has the same meaning as in KRS 154.20-230; and
    4. “Taxpayer” means an individual subject to the tax imposed by KRS 141.020 , who has either:
      1. Received a credit from the authority pursuant to KRS 154.20-236 ; or
      2. Received a credit through a valid transfer allowed under this section from a qualified investor that was originally awarded the credit.
  2. For taxable years beginning on or after January 1, 2015, there is hereby created the angel investor tax credit. The credit shall be nonrefundable, and shall apply against the tax imposed by KRS 141.020 . The ordering of the credit shall be as provided in KRS 141.020 5.
  3. A qualified investor may seek a credit by applying to the authority pursuant to KRS 154.20-236 .
  4. The maximum amount of credit that may be claimed by a taxpayer in any taxable year shall not exceed fifty percent (50%) of the total amount of credit awarded or transferred to the taxpayer.
  5. Any amount of credit that a taxpayer is unable to utilize during a taxable year may be carried forward for use in a succeeding taxable year for a period not to exceed fifteen (15) years. Any amount of credit not used within fifteen (15) years shall be lost. No amount of credit may be carried back by any taxpayer.
  6. The credit shall not apply to any liability a taxpayer may have for interest, penalties, past due taxes, or any other additions to the taxpayer’s tax liability. The holder of the credit shall assume any and all liabilities and responsibilities of the credit.
  7. A credit may be transferred by a qualified investor to any individual taxpayer. A qualified investor making a transfer shall give written notice to the department and shall provide any other information required by the department, in the manner prescribed by the department. Any transferred credit shall be subject to the original timeframes and requirements established by this section and KRS 154.20-230 to 154.20-240 as if held by the qualified investor.
  8. To receive the credit, a taxpayer shall claim the credit on his or her return in the manner prescribed by the department.
  9. The department shall recapture any portion, or the full amount, of a credit upon notification from the authority that a recapture is required pursuant to KRS 154.20-240 .
  10. In order for the General Assembly to evaluate the fulfillment of the purposes stated in KRS 154.20-232 , the department and the Cabinet for Economic Development shall work jointly to submit the following information to the Interim Joint Committee on Appropriations and Revenue on or before May 1, 2019, related to each taxable year that an angel investor credit is claimed on a return:
    1. The number of qualified small businesses certified by the authority;
    2. The demographics of each qualified small business, including:
      1. The net worth of the qualified small business;
      2. The qualified activity the qualified small business is actively and principally engaged in within the Commonwealth;
      3. The number of employees of the qualified small business;
      4. The location of the assets, operations, and employees of the qualified small business; and
      5. The aggregate amount of qualified investments received by the qualified small business;
    3. A list detailing each qualified investor certified by the authority, the amount of investment made by each qualified investor, the date each qualified investment is made by the qualified investor, and the amount of tax credit awarded each investor;
    4. By taxable year, the amount of tax credit claimed by each investor and the amount of credit available to be claimed in future taxable years;
    5. The number of qualified small businesses that are active, inactive, or closed that have received qualified investments;
    6. The number of qualified small businesses that have established a location in the Commonwealth and the number that have expanded operations, the number and location of each new job created, a description of each development of new products and technologies in the Commonwealth, and the field of operation for that growth, including knowledge-based, high-tech, or research and development; and
    7. The total amount of tax credit awarded for each fiscal year.
  11. If either the department or the Cabinet for Economic Development does not currently have the data to fulfill the reporting requirement of subsection (10) of this section, the department and the cabinet shall work jointly to obtain the data in an expedient manner to provide the report on or before the May 1, 2019, report date.

History. Enact. Acts 2014, ch. 102, § 28, effective July 15, 2014; 2018 ch. 171, § 98, effective April 14, 2018; 2018 ch. 207, § 97, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

141.400. Tax credit for company approved for economic development project under KRS 154.28-010 to 154.28-100.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” shall have the same meaning as set forth in KRS 154.28-010 ;
    2. “Economic development project” shall have the same meaning as set forth in KRS 154.28-010 ;
    3. “Tax credit” means the “tax credit” allowed in KRS 154.28-090 ;
    4. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 ; and
    5. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 .
  2. An approved company shall determine the income tax credit as provided in this section.
  3. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project;
      2. Using the same method used under subparagraph 2. of paragraph (a) of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross receipts or Kentucky gross profits from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the net tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.28-090 .
    1. Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to tax under KRS 141.040 , or a trust not subject to tax under KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020 . (4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to tax under KRS 141.040, or a trust not subject to tax under KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020 .
    2. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    3. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.28-090 .
    4. If the tax computed in this section exceeds the credit, the excess shall be paid by the pass-through entity or trust at the times provided by KRS 141.0401 or 141.160 for filing the returns.
    5. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  4. Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
  5. If the economic development project is a totally separate facility:
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  6. If the economic development project is an expansion to a previously existing facility:
    1. Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic development project by a formula approved by the Department of Revenue; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the economic development project for the purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic development project by a formula approved by the Department of Revenue.
  7. If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the economic development project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the economic development project using an alternative method approved by the Department of Revenue.
  8. The Department of Revenue may issue administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.22-020 to 154.22-070 and KRS 154.28-010 to 154.28-090 and this section and the allowable tax credit which an approved company may retain under KRS 154.22-020 to 154.22-070 and KRS 154.28-010 to 154.28-090 and this section.

HISTORY: Enact. Acts 1992, ch. 363, § 11, effective July 14, 1992; 1994, ch. 390, § 37, effective July 15, 1994; 1996, ch. 194, § 7, effective July 15, 1996; 2005, ch. 168, § 24, effective March 18 2005; 2005, ch. 85, § 505, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 6, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 23, effective June 28, 2006; 2018 ch. 171, § 87, effective April 14, 2018; 2018 ch. 207, § 87, effective April 27, 2018.

Compiler’s Notes.

Section 40 of Acts 1994, ch. 390, provided that the 1994 amendment to this section “shall apply to taxable periods beginning after December 31, 1993.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.401. Tax credit and income tax for companies with economic development projects in qualified zones — Computation of net income — Administrative regulations.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” shall have the same meaning as set forth in KRS 154.23-010 ;
    2. “Economic development project” shall have the same meaning as set forth in KRS 154.23-010 ;
    3. “Tax credit” means the “tax credit” allowed under KRS 154.23-005 to 154.23-079 ;
    4. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 ; and
    5. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 .
  2. An approved company shall determine the tax credit as provided in this section.
  3. An approved company that is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project;
      2. Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.23-005 to 154.23-079 .
  4. Notwithstanding any other provisions of this chapter, an approved company that is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020 , as follows:
    1. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made in this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    2. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.23-005 to 154.23-079 .
    3. If the tax computed in this section exceeds the credit, the excess shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.
    4. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  5. Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
  6. If the economic development project is a totally separate facility:
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for the purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  7. If the economic development project is an expansion to a previously existing facility:
    1. Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility, and the net income attributable to the economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic development project by a formula approved by the Department of Revenue; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the economic development project for the purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic development project by a formula approved by the Department of Revenue.
  8. If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the economic development project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the economic development project using an alternative method approved by the Department of Revenue.
  9. The Department of Revenue may issue administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.23-005 to 154.23-079 and the allowable income tax credit that an approved company may retain under KRS 154.23-005 to 154.23-079 .

HISTORY: Enact. Acts 2000, ch. 528, § 17, effective July 14, 2000; 2005, ch. 168, § 25, effective March 18, 2005; 2005, ch. 85, § 506, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 7, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 24, effective June 28, 2006; 2018 ch. 171, § 88, effective April 14, 2018; 2018 ch. 207, § 88, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.402. Taxing provisions governing approved companies under Subchapter 25 of KRS Chapter 154.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” shall have the same meaning as set forth in KRS 154.25-010 ;
    2. “Jobs retention project” shall have the same meaning as set forth in KRS 154.25-010 ;
    3. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 ;
    4. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 ; and
    5. “Tax credit” means the tax credit allowed in KRS 154.25-030 .
  2. An approved company shall determine the income tax credit as provided in this section.
  3. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 (1) shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010 , including income from the jobs retention project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, including income from the jobs retention project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the jobs retention project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, excluding net income attributable to the jobs retention project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, excluding net income attributable to the jobs retention project;
      2. Using the same method used under subparagraph 2. of paragraph (a) of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the jobs retention project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the net tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.25-030 .
    1. Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to a jobs retention project at the rates provided in KRS 141.020(2). (4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to a jobs retention project at the rates provided in KRS 141.020(2).
    2. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    3. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.25-030 .
    4. If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.
    5. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  4. Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and (6) (a) Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  5. If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the jobs retention project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the jobs retention project using an alternative method approved by the Department of Revenue.
  6. The Department of Revenue may promulgate administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of this section and KRS 154.25-010 to 154.25-050 and the allowable income tax credit which an approved company may retain under this section and KRS 154.25-010 to 154.25-050 .

HISTORY: Enact. Acts 2007, ch. 91, § 6, effective March 23, 2007; 2019 ch. 151, § 54, effective June 27, 2019.

Compiler’s Notes.

Chapter 171 of the 2018 Legislative Session repealed this section, however Chapter 207 of the same session restored the section.

Legislative Research Commission Notes.

(3/23/2007). In subsection (8) of Ky. Acts ch. 91, sec. 6, it appears from context and on advice of the drafter that two references to “this Act” should have been to “this section and Sections 1 to 5 of this Act.” The Reviser of Statutes has made these changes pursuant to KRS 7.136 .

141.403. Tax credit for company approved under KRS 154.26-010 to 154.26-100 — Administrative regulations.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” shall have the same meaning as set forth in KRS 154.26-010 ;
    2. “Economic revitalization project” shall have the same meaning as set forth in KRS 154.26-010 ;
    3. “Tax credit” means the tax credit allowed in KRS 154.26-090 ;
    4. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 ; and
    5. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 .
  2. An approved company shall determine the income tax credit as provided in this section.
  3. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic revitalization project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic revitalization project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the economic revitalization project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic revitalization project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic revitalization project;
      2. Using the same method used under subparagraph 2. of paragraph (a) of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the economic revitalization project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the net tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.26-090 .
    1. Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed KRS 141.040 shall be subject to income tax on the net income attributable to an economic revitalization project at the rates provided in KRS 141.020 . (4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed KRS 141.040 shall be subject to income tax on the net income attributable to an economic revitalization project at the rates provided in KRS 141.020 .
    2. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    3. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.26-090 .
    4. If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.
    5. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  4. Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
  5. If the economic revitalization project is a totally separate facility:
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  6. If the economic revitalization project is an expansion to a previously existing facility:
    1. Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the economic revitalization project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic revitalization project by a formula approved by the Department of Revenue; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility. Kentucky gross receipts or Kentucky gross profits attributable to the economic revitalization project for purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic revitalization project pursuant to a formula approved by the Department of Revenue.
  7. If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the economic revitalization project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the economic revitalization project using an alternative method approved by the Department of Revenue.
  8. The Department of Revenue may issue administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.26-010 to 154.26-100 and the allowable income tax credit which an approved company may retain under KRS 154.26-010 to 154.26-100 .

HISTORY: Enact. Acts 1992, ch. 359, § 13, effective July 14, 1992; 1994, ch. 390, § 38, effective July 15, 1994; 1996, ch. 194, § 8, effective July 15, 1996; 2005, ch. 168, § 26, effective March 18, 2005; 2005, ch. 85, § 507, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 8, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 25, effective June 28, 2006; 2018 ch. 171, § 89, effective April 14, 2018; 2018 ch. 207, § 89, effective April 27, 2018.

Compiler’s Notes.

Section 40 of Acts 1994, ch. 390, provided that the 1994 amendment to this section “shall apply to taxable periods beginning after December 31, 1993.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.405. Tax credit for company approved for occupational or skills upgrade training program under KRS 154.12-2084 to 154.12-2089 — Administrative regulations.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” has the same meaning as set forth in KRS 154.12-2084 ;
    2. “Skills training investment credit” has the same meaning as set forth in KRS 154.12-2084 ;
    3. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 ; and
    4. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 .
  2. An approved company shall determine the tax credit as provided in this section.
    1. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall: (3) (a) An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 on Kentucky gross profits or Kentucky gross receipts; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this subsection;
    2. The amount of the skills training investment credit that the Bluegrass State Skills Corporation has given final approval for under KRS 154.12-2088 (6) shall be applied against the net tax computed under paragraph (a)3. of this subsection; and
    3. The skills training investment credit payment shall not exceed the amount of the final approval awarded by the Bluegrass State Skills Corporation under KRS 154.12-2088 (6).
    1. In the case of an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 , the amount of the tax credit awarded by the Bluegrass State Skills Corporation in KRS 154.12-2088 (6) shall be taken against the tax imposed by KRS 141.0401 by the approved company, and shall also be apportioned among the partners, members, or shareholders thereof at the same ratio as the partners’, members’, or shareholders’ distributive shares of income are determined for the tax year during which the final authorization resolution is adopted by the Bluegrass State Skills Corporation in KRS 154.12-2088 (6). (4) (a) In the case of an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 , the amount of the tax credit awarded by the Bluegrass State Skills Corporation in KRS 154.12-2088(6) shall be taken against the tax imposed by KRS 141.0401 by the approved company, and shall also be apportioned among the partners, members, or shareholders thereof at the same ratio as the partners’, members’, or shareholders’ distributive shares of income are determined for the tax year during which the final authorization resolution is adopted by the Bluegrass State Skills Corporation in KRS 154.12-2088(6).
    2. The amount of the tax credit apportioned to each partner, member, or shareholder that may be claimed in any tax year of the partner, member, or shareholder shall be determined in accordance with the provisions of KRS 154.12-2086 .
    1. In the case of an approved company that is a trust not subject to the tax imposed by KRS 141.040 , the amount of the tax credit awarded by the Bluegrass State Skills Corporation in KRS 154.12-2088 (6) shall be apportioned to the trust and the beneficiaries on the basis of the income of the trust allocable to each for the tax year during which the final authorizing resolution is adopted by the Bluegrass State Skills Corporation in KRS 154.12-2088 (6). (5) (a) In the case of an approved company that is a trust not subject to the tax imposed by KRS 141.040 , the amount of the tax credit awarded by the Bluegrass State Skills Corporation in KRS 154.12-2088(6) shall be apportioned to the trust and the beneficiaries on the basis of the income of the trust allocable to each for the tax year during which the final authorizing resolution is adopted by the Bluegrass State Skills Corporation in KRS 154.12-2088(6).
    2. The amount of tax credit apportioned to each trust or beneficiary that may be claimed in any tax year of the trust or beneficiary shall be determined in accordance with the provisions of KRS 154.12-2086 .
  3. The Department of Revenue may promulgate administrative regulations in accordance with KRS Chapter 13A adopting forms and procedures for the reporting of the credit allowed in KRS 154.12-2084 to 154.12-2089 .

HISTORY: Enact. Acts 1998, ch. 499, § 5, effective July 15, 1998; 2000, ch. 300, § 4, effective July 14, 2000; 2005, ch. 168, § 27, effective March 18, 2005; 2005, ch. 85, § 508, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 9, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 26, effective June 28, 2006; 2018 ch. 171, § 90, effective April 14, 2018; 2018 ch. 207, § 90, effective April 27, 2018.

Compiler’s Notes.

Section 26 of Acts 2000, ch. 300, effective July 14, 2000, read: “Subsections (4) and (5) of Section 4 [this section] and subsections (2) and (3) of Section 7 of this Act shall apply to taxable years beginning after December 31, 1999.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.407. Determination of allowable income tax credit approved company may retain.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” shall have the same meaning as set forth in KRS 154.24-010 ;
    2. “Economic development project” shall have the same meaning as economic development project as set forth in KRS 154.24-010 ;
    3. “Tax credit” means the tax credit allowed in KRS 154.24-020 to 154.24-150 ;
    4. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 ; and
    5. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 .
  2. An approved company shall determine the tax credit as provided in this section.
  3. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the economic development project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to the economic development project;
      2. Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the net tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.24-020 to 154.24-150 .
    1. Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or a trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020 . (4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or a trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to an economic development project at the rates provided in KRS 141.020 .
    2. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    3. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.24-020 to 154.24-150 .
    4. If the tax computed herein exceeds the credit, the excess shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.
    5. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  4. Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
  5. If the economic development project is a totally separate facility:
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for the purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  6. If the economic development project is an expansion to a previously existing facility:
    1. Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the economic development project by a formula approved by the Department of Revenue; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the economic development project for the purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic development project by a formula approved by the Department of Revenue.
  7. If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the economic development project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the economic development project using an alternative method approved by the Department of Revenue.
  8. The Department of Revenue may promulgate administrative regulations and require the filing of forms designed by the Department of Revenue to reflect the intent of KRS 154.24-010 to 154.24-150 and the allowable income tax credit which an approved company may retain under KRS 154.24-010 to 154.24-150 .

HISTORY: Enact. Acts 1992, ch. 358, § 17, effective July 14, 1992; 1994, ch. 390, § 39, effective July 15, 1994; 1996, ch. 194, § 9, effective July 15, 1996; 2005, ch. 168, § 28, effective March 18, 2005; 2005, ch. 85, § 509, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 10, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 27, effective June 28, 2006; 2018 ch. 171, § 91, effective April 14, 2018; 2018 ch. 207, § 91, effective April 27, 2018.

Compiler’s Notes.

Section 40 of Acts 1994, ch. 390, provided that the 1994 amendment to this section “shall apply to taxable periods beginning after December 31, 1993.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.408. Inventory tax credit — Applies on or after January 1, 2018 — Pass-through entities, allowable credit — Annual report.

  1. There shall be allowed a nonrefundable and nontransferable credit against the tax imposed by KRS 141.020 or 141.040 and 141.040 1, with the ordering of the credits as provided in KRS 141.0205 , for any taxpayer that, on or after January 1, 2018, timely pays an ad valorem tax to the Commonwealth or any political subdivision thereof for property described in KRS 132.020(1)(e) or 132.099 .
  2. The credit allowed under subsection (1) of this section shall be in an amount equal to:
    1. Twenty-five percent (25%) of the ad valorem taxes timely paid for taxable years beginning on or after January 1, 2018, and before January 1, 2019;
    2. Fifty percent (50%) of the ad valorem taxes timely paid for taxable years beginning on or after January 1, 2019, and before January 1, 2020;
    3. Seventy-five percent (75%) of the ad valorem taxes timely paid for taxable years beginning on or after January 1, 2020, and before January 1, 2021; and
    4. One hundred percent (100%) of the ad valorem taxes timely paid, for taxable years beginning on or after January 1, 2021.
  3. If the taxpayer is a pass-through entity, the taxpayer may apply the credit against the limited liability entity tax imposed by KRS 141.0401 , and shall pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.
  4. No later than October 1, 2019, and annually thereafter, the department shall report to the Interim Joint Committee on Appropriations and Revenue:
    1. The name of each taxpayer taking the credit permitted by subsection (1) of this section;
    2. The location of the property upon which the credit was allowed; and
    3. The amount of credit taken by that taxpayer.

HISTORY: 2018 ch. 171, § 115, effective April 14, 2018; 2018 ch. 207, § 115, effective April 27, 2018; 2019 ch. 151, § 55, effective June 27, 2019.

Legislative Research Commission Notes.

(4/27/2018). This statute was created by 2018 Ky. Acts ch. 171, sec. 115 and ch. 207, sec. 115, which are nearly identical and have been codified together.

141.410. Definitions for KRS 141.410 to 141.414.

As used in KRS 141.410 to 141.414 , unless the context requires otherwise:

  1. “Approved costs” means the costs incurred during the taxable year by a qualified farming operation for training and improving the skills of managers and employees involved in a networking project.
  2. “Business network” means a formalized, collaborative mechanism organized by and operating among three (3) or more qualified farming operations, industrial entities, business enterprises, or private sector firms for the purposes of, but not limited to: pooling expertise; improving responses to changing technology or markets; lowering the risks to individual entities of accelerated modernization; encouraging new technology investments, new market development, and employee skills improvement; and developing a system of collective intelligence among participating entities.
  3. “Food producing facilities” means establishments that manufacture or process foods and beverages for human consumption, and which are included under the three (3) digit NAICS code three hundred eleven (311).
  4. “Networking project” means a project by which farmers and other entities involved in the production of food join together to form a network approved by the Cabinet for Economic Development for the purpose of producing or expanding the production of crops or livestock necessary for the establishment or expansion of secondary food-producing facilities in Kentucky.
  5. “Qualified farming operation” means an individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, or institution, engaged in farming in Kentucky that provides raw materials for food-producing facilities in Kentucky, and that purchases new buildings or equipment, or that incurs training expenses, to support its participation in a networking project.
  6. “NAICS code” means the classification system grouping business operations or enterprises as published in the North American Industry Classification System United States Manual published by Convergence Working Group and the United States Office of Management and Budget, 2002 edition.
  7. “Kentucky gross receipts” means Kentucky gross receipts as defined in KRS 141.0401 .
  8. “Kentucky gross profits” means Kentucky gross profits as defined in KRS 141.0401 .

History. Enact. Acts 1994, ch. 390, § 16, effective July 15, 1994; 2005, ch. 168, § 29, effective March 18, 2005; 2006, ch. 252, Pt. XIII, § 11, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 28, effective June 28, 2006.

Compiler’s Notes.

Section 40 of Acts 1994, ch. 390, provided that this section “shall apply to taxable periods beginning after December 31, 1993.”

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.412. Tax credit for qualified farming operation.

  1. A qualified farming operation shall be entitled to a nonrefundable credit against the Kentucky income tax liability established pursuant to the provisions of this chapter on any income of the qualified farming operation generated by or arising out of the qualified farming operation’s participation in a networking project, and against the limited liability entity tax imposed by KRS 141.0401 on any Kentucky gross profits or Kentucky gross receipts of the qualified farming operation generated by or arising out of the qualified farming operation’s participation in a networking project. The credits shall be applied as provided in KRS 141.0205 . The annual credit shall be available for the first five (5) years that the farming operation is involved in the networking project. The annual credit shall be equal to the approved costs incurred by the qualified farming operation during the tax year and shall not exceed the income, Kentucky gross profits or Kentucky gross receipts, as the case may be, of the qualified farming operation generated by or arising out of the qualified farming operation’s participation in a networking project.
  2. Any credit not used in the tax year in which it first becomes available may be carried forward to the next succeeding five (5) tax years until the credit has been fully used. The aggregate credit used in any tax year shall not exceed the income, Kentucky gross profits or Kentucky gross receipts, as the case may be, of the qualified farming operation generated by or arising out of the qualified farming operation’s participation in a networking project in that tax year.

History. Enact. Acts 1994, ch. 390, § 17, effective July 15, 1994; 2006 (1st Ex. Sess.), ch. 2, § 29, effective June 28, 2006.

Compiler’s Notes.

Section 40 of Acts 1994, ch. 390, provided that this section “shall apply to taxable periods beginning after December 31, 1993.”

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

141.414. Computation of tax and credit.

  1. A qualified farming operation which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the qualified farming operation’s participation in a networking project. (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from the qualified farming operation’s participation in a networking project.
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the qualified farming operation’s participation in a networking project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph;
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 applies on net income or taxable net income, excluding net income attributable to the qualified farming operation’s participation in a networking project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 applies on net income or taxable net income, excluding net income attributable to the qualified farming operation’s participation in a networking project;
      2. Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the qualified farming operation’s participation in a networking project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph; and
    1. Be entitled to a tax credit in the amount by which the tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection. The credit shall not exceed the farming operation’s approved costs, as defined in KRS 141.410 .
  2. Notwithstanding any other provisions of this chapter, a qualified farming operation which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to its participation in a networking project at the rates provided in KRS 141.020 , and the amount of the tax credit shall be the same as the amount of the tax computed in this subsection. The credit shall not exceed the farming operation’s approved costs, as defined in KRS 141.410 . If the tax computed in this subsection exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.
  3. Notwithstanding any other provisions of this chapter, the net income subject to tax and the tax credit determined under subsection (2) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
  4. If the networking entity is a separate facility:
    1. Net income attributable to the project for the purposes of subsections (1), (2), and (3) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the project and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for the purposes of subsection (1) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  5. If the networking project is an expansion to a previously existing farming operation:
    1. Net income attributable to the entire operation shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the farming operation’s participation in the networking project and overhead expenses apportioned to the networking project, and the net income attributable to the networking project for the purposes of subsections (1), (2), and (3) of this section shall be determined by apportioning the separate accounting net income of the entire networking project to the networking project by a formula approved by the Department of Revenue; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the economic development project for the purposes of subsection (1) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the economic development project by a formula approved by the Department of Revenue.
  6. If an approved company can show to the satisfaction of the Department of Revenue that the nature of the operations and activities of the approved farming operation are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the networking project, the approved farming operation shall determine net income, Kentucky gross receipts, or Kentucky gross profits from its participation in the networking project using an alternative method approved by the Department of Revenue.
  7. The Department of Revenue may promulgate administrative regulations pursuant to KRS Chapter 13A and require the filing of forms designed by the Department of Revenue necessary to effectuate KRS 141.0101 and KRS 141.410 to 141.414 and the allowable income tax credit which an approved farming operation may retain under the provisions of KRS 141.412 and this section.

HISTORY: Enact. Acts 1994, ch. 390, § 18, effective July 15, 1994; 2005, ch. 168, § 30, effective March 18 2005; 2005, ch. 85, § 510, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 12, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 30, effective June 28, 2006; 2018 ch. 171, § 92, effective April 14, 2018; 2018 ch. 207, § 92, effective April 27, 2018.

Compiler’s Notes.

Section 40 of Acts 1994, ch. 390, provided that this section “shall apply to taxable periods beginning after December 31, 1993.”

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.415. Computation of income tax and credit for approved company.

  1. As used in this section, unless the context requires otherwise:
    1. “Approved company” means the same as defined in KRS 154.32-010 or 154.34-010 ;
    2. “Economic development project” means the same as defined in KRS 154.32-010 ;
    3. “Reinvestment project” means the same as defined in KRS 154.34-010 ;
    4. “Tax credit” means the tax credit allowed in KRS 154.34-120 or the credit allowed in KRS 154.32-070 , as the case may be;
    5. “Kentucky gross receipts” means the same as defined in KRS 141.0401 ; and
    6. “Kentucky gross profits” means the same as defined in KRS 141.0401 .
  2. An approved company shall determine the income tax credit as provided in this section.
  3. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from a reinvestment project or economic development project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, including income from a reinvestment project or economic development project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 including Kentucky gross profits or Kentucky gross receipts from the reinvestment project or economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to a reinvestment project or economic development project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income or taxable net income, excluding net income attributable to a reinvestment project or economic development project;
      2. Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, including Kentucky gross profits or Kentucky gross receipts from the reinvestment project or economic development project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.32-070 or 154.34-120 , as the case may be.
    1. Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to a reinvestment project or economic development project at the rates provided in KRS 141.020 . (4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to a reinvestment project or economic development project at the rates provided in KRS 141.020 .
    2. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust, and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    3. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.32-070 or 154.34-120 , as the case may be.
    4. If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.
    5. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  4. Notwithstanding any other provisions of this chapter, the net income subject to tax, the tax credit, and the estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
  5. If the reinvestment project or economic development project is a totally separate facility:
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for the purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  6. If the reinvestment project or economic development project is an expansion to a previously existing facility:
    1. Net income attributable to the entire facility shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under KRS Chapter 141 directly attributable to the facility and overhead expenses apportioned to the facility, and the net income attributable to the reinvestment project or economic development project for the purposes of subsections (3), (4), and (5) of this section shall be determined by apportioning the separate accounting net income of the entire facility to the reinvestment project or economic development project by a formula approved by the department; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the entire facility shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility, and Kentucky gross receipts or Kentucky gross profits attributable to the reinvestment project or economic development project for the purposes of subsection (3) of this section shall be determined by apportioning the separate accounting Kentucky gross receipts or Kentucky gross profits of the entire facility to the reinvestment project or economic development project by a formula approved by the department.
  7. If an approved company can show to the satisfaction of the department that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the reinvestment project or economic development project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the reinvestment project or economic development project using an alternative method approved by the department.
  8. The department may promulgate administrative regulations and require the filing of forms designed by the department to reflect the intent of KRS 154.34-010 to 154.34-100 and Subchapter 32 of KRS Chapter 154, and the allowable income tax credit which an approved company may retain under KRS 154.34-010 to 154.34-100 or Subchapter 32 of KRS Chapter 154.

HISTORY: Enact. Acts 2003, ch. 148, § 11, effective June 24, 2003; 2005, ch. 168, § 31, effective March 18, 2005; 2005, ch. 85, § 511, effective June 20, 2005; 2006, ch. 252, Pt. XIII, § 13, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 31, effective June 28, 2006; 2009 (1st Ex. Sess.), ch. 1, § 31, effective June 26, 2009; 2018 ch. 171, § 93, effective April 14, 2018; 2018 ch. 207, § 93, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was amended by 2018 Ky. Acts chs. 171 and 207, which do not appear to be in conflict and have been codified together.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.416. Credit on license tax liability for approved company. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 2003, ch. 148, § 12, effective June 24, 2003; 2005, ch. 85, § 512, effective June 20, 2005) was repealed by 2009 (1st Ex. Sess.), ch. 1, § 114, effective June 26, 2009.

141.418. Nonrefundable credit for voluntary environmental remediation.

  1. As used in this section:
    1. “Hazardous substances” shall have the meaning provided in KRS 224.1-400 ;
    2. “Pollutant or contaminant” shall have the meaning provided in KRS 224.1-400 ;
    3. “Petroleum” and “petroleum products” shall have the meaning provided in KRS 224.60-115 ;
    4. “Release” shall have the meaning as provided in either or both KRS 224.1-400 and 224.60-115 ;
    5. “Qualifying voluntary environmental remediation property” means real property subject to the provisions of KRS 224.1-400, 224.1-405 , or 224.60-135 where the Energy and Environment Cabinet has made a determination that:
      1. All releases of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property occurred prior to the property owner’s acquisition of the property;
      2. The property owner made all appropriate inquiry into previous ownership and uses of the property in accordance with generally accepted practices;
      3. The property owner or a responsible party has provided all legally required notices with respect to hazardous substances, pollutants, contaminants, petroleum, or petroleum products found at the property;
      4. The property owner is in compliance with all land use restrictions and does not impede the effectiveness or integrity of any institutional control;
      5. The property owner complied with any information request or administrative subpoena under KRS Chapter 224; and
      6. The property owner is not affiliated with any person who is potentially liable for the release of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property pursuant to KRS 224.1-400, 224.1-405 , or 224.60-135 , through:
        1. Direct or indirect familial relationship;
        2. Any contractual, corporate, or financial relationship, excluding relationships created by instruments conveying or financing title or by contracts for sale of goods or services; or
        3. Reorganization of a business entity that was potentially liable;
    6. “Expenditures” means payment for work to characterize the extent of contamination and to remediate the contamination at a qualifying voluntary environmental remediation property; and
    7. “Taxpayer” means an individual subject to tax under KRS 141.020 or a corporation subject to tax under KRS 141.040 .
    1. There shall be allowed a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 for taxable years beginning after December 31, 2004, and against the tax imposed by KRS 141.040 1 for taxable years beginning after December 31, 2006, for taxpayer expenditures made at a qualifying voluntary environmental remediation property in order to correct the effect of a release of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property pursuant to KRS 224.1-400 , 224.1-405 , or 224.60-135 , consistent with a corrective action plan approved by the Energy and Environment Cabinet pursuant to KRS 224.1-400 , 224.1-405 , or 224.60-135 , and provided the cleanup was not financed through a public grant program or the petroleum storage tank environmental assurance fund. (2) (a) There shall be allowed a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 for taxable years beginning after December 31, 2004, and against the tax imposed by KRS 141.0401 for taxable years beginning after December 31, 2006, for taxpayer expenditures made at a qualifying voluntary environmental remediation property in order to correct the effect of a release of hazardous substances, pollutants, contaminants, petroleum, or petroleum products on the property pursuant to KRS 224.1-400, 224.1-405, or 224.60-135, consistent with a corrective action plan approved by the Energy and Environment Cabinet pursuant to KRS 224.1-400, 224.1-405, or 224.60-135, and provided the cleanup was not financed through a public grant program or the petroleum storage tank environmental assurance fund.
    2. The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401 , with the ordering of the credits as provided in KRS 141.0205 .
  2. The maximum total credit for each taxpayer shall not exceed one hundred fifty thousand dollars ($150,000). For purposes of this section, an affiliated group of taxpayers required to file a consolidated return under KRS 141.200 shall be treated as one (1) taxpayer.
  3. A taxpayer claiming a credit under this section shall submit receipts to the Energy and Environment Cabinet in proof of the expenditures claimed. The Energy and Environment Cabinet shall verify the receipts. After the receipts are verified, the Finance and Administration Cabinet shall notify the taxpayer of eligibility for the credit.
  4. The credit may be first claimed on the income tax return of the taxpayer filed in the taxable year during which the credit was certified. The amount of the allowable credit for any taxable year shall be twenty-five percent (25%) of the maximum credit approved. The credit may be carried forward for ten (10) successive taxable years.
  5. If the taxpayer is a pass-through entity, the taxpayer shall apply the credit against the limited liability entity tax imposed by KRS 141.0401 , and shall also pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.

History. Enact. Acts 2005, ch. 168, § 140, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 32, effective June 28, 2006; 2007, ch. 100, § 4, effective June 26, 2007; 2010, ch. 24, § 112, effective July 15, 2010.

Compiler’s Notes.

This section is set out above to reflect changes to references throughout the section due to the renumbering of KRS ch. 224.01 to 224.1 by the state reviser effective 2013.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.420. Taxable income of individuals from pass through entities — Allowable credits from pass through entities — Determining basis in ownership interest. [Repealed]

HISTORY: Enact. Acts 2005, ch. 168, § 18, effective March 18, 2005; 2006, ch. 6, § 17, effective March 6, 2006; 2006, ch. 252, Pt. XIII, § 14, effective April 25, 2006; 2006 (1st Ex. Sess.), ch. 2, § 11, effective June 28, 2006; repealed by 2018 ch. 171, § 140, effective April 14, 2018; repealed by 2018 ch. 207, § 148, effective April 27, 2018.

141.421. Tax incentives for alternative fuel, gasification, and renewable energy facilities.

  1. As used in this section:
    1. “Approved company” has the same meaning as in KRS 154.27-010 ;
    2. “Eligible project” has the same meaning as in KRS 154.27-010 ;
    3. “Kentucky gross receipts” has the same meaning as in KRS 141.0401 ;
    4. “Kentucky gross profits” has the same meaning as in KRS 141.0401 ; and
    5. “Tax credit” means the tax credit allowed in KRS 154.27-080 .
  2. An approved company shall compute the income tax credit as provided in this section.
  3. An approved company which is an individual sole proprietorship subject to tax under KRS 141.020 or a corporation or pass-through entity treated as a corporation for federal income tax purposes subject to tax under KRS 141.040 (1) shall:
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010 , including income from the eligible project; (a) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, including income from the eligible project;
      2. Compute the limited liability entity tax imposed under KRS 141.0401 , including Kentucky gross profits or Kentucky gross receipts from the eligible project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401 (3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
      1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, excluding net income attributable to the eligible project; (b) 1. Compute the tax due at the applicable tax rates as provided by KRS 141.020 or 141.040 on net income as defined by KRS 141.010 or taxable net income as defined by KRS 141.010, excluding net income attributable to the eligible project;
      2. Using the same method used under paragraph (a)2. of this subsection, compute the limited liability entity tax imposed under KRS 141.0401, excluding Kentucky gross profits or Kentucky gross receipts from the eligible project; and
      3. Add the amounts computed under subparagraphs 1. and 2. of this paragraph and, if applicable, subtract the credit permitted by KRS 141.0401(3) from that sum. The resulting amount shall be the net tax for purposes of this paragraph.
    1. The tax credit shall be the amount by which the net tax computed under paragraph (a)3. of this subsection exceeds the tax computed under paragraph (b)3. of this subsection; however, the credit shall not exceed the limits set forth in KRS 154.27-020 .
    1. Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to an eligible project at the rates provided in KRS 141.020(2). (4) (a) Notwithstanding any other provisions of this chapter, an approved company which is a pass-through entity not subject to the tax imposed by KRS 141.040 or trust not subject to the tax imposed by KRS 141.040 shall be subject to income tax on the net income attributable to an eligible project at the rates provided in KRS 141.020(2).
    2. The amount of the tax credit shall be determined as provided in subsection (3) of this section. Upon the annual election of the approved company, in lieu of the tax credit, an amount shall be applied as an estimated tax payment equal to the tax computed in this section. Any estimated tax payment made pursuant to this paragraph shall be in satisfaction of the tax liability of the partners, members, shareholders, or beneficiaries of the pass-through entity or trust and shall be paid on behalf of the partners, members, shareholders, or beneficiaries.
    3. The tax credit or estimated payment shall not exceed the limits set forth in KRS 154.27-020 .
    4. If the tax computed in this section exceeds the tax credit, the difference shall be paid by the pass-through entity or trust at the times provided by KRS 141.160 for filing the returns.
    5. Any estimated tax payment made by the pass-through entity or trust in satisfaction of the tax liability of partners, members, shareholders, or beneficiaries shall not be treated as taxable income subject to Kentucky income tax by the partner, member, shareholder, or beneficiary.
  4. Notwithstanding any other provisions of this chapter, the net income subject to tax, tax credit, and estimated tax payment determined under subsection (4) of this section shall be excluded in determining each partner’s, member’s, shareholder’s, or beneficiary’s distributive share of net income or credit of a pass-through entity or trust.
    1. Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility; and (6) (a) Net income attributable to the project for the purposes of subsections (3), (4), and (5) of this section shall be determined under the separate accounting method reflecting only the gross income, deductions, expenses, gains, and losses allowed under this chapter directly attributable to the facility and overhead expenses apportioned to the facility; and
    2. Kentucky gross receipts or Kentucky gross profits attributable to the project for purposes of subsection (3) of this section shall be determined under the separate accounting method reflecting only the Kentucky gross receipts or Kentucky gross profits directly attributable to the facility.
  5. If an approved company can show to the satisfaction of the department that the nature of the operations and activities of the approved company are such that it is not practical to use the separate accounting method to determine the net income, Kentucky gross receipts, or Kentucky gross profits from the facility at which the eligible project is located, the approved company shall determine net income, Kentucky gross receipts, or Kentucky gross profits from the eligible project using an alternative method approved by the department.
  6. The department may promulgate administrative regulations and require the filing of forms designed by the department to reflect the intent of this section and KRS 154.27-080 and the allowable income tax credit which an approved company may retain under this section and KRS 154.27-080 .

History. 2018 ch. 207, § 149, effective July 14, 2018; Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 12, effective August 30, 2007; 2019 ch. 151, § 56, effective June 27, 2019.

Compiler’s Notes.

Chapter 171 of the 2018 Legislative Session repealed this section, however Chapter 207 of the same session restored the section.

Alternative Fuel Producer Tax Credits

141.422. Definitions for KRS 141.422 to 141.425.

As used in KRS 141.422 to 141.425 :

  1. “Annual biodiesel and renewable diesel tax credit cap” means:
    1. For calendar years beginning prior to January 1, 2008, one million five hundred thousand dollars ($1,500,000);
    2. For the calendar year beginning on January 1, 2008, five million dollars ($5,000,000);
    3. For calendar years beginning on or after January 1, 2009, but before January 1, 2021, ten million dollars ($10,000,000);
  2. “Annual biodiesel, renewable diesel, and renewable chemical production tax credit cap” means, for calendar years beginning on or after January 1, 2021, ten million dollars ($10,000,000);
  3. “Annual cellulosic ethanol tax credit cap” means five million dollars ($5,000,000), unless the annual cellulosic ethanol tax credit cap is modified pursuant to KRS 141.4248 , in which case the cap established by KRS 141.4248 shall be the annual cellulosic ethanol tax credit cap for that year. Any adjustments to the annual cellulosic ethanol tax credit cap made pursuant to KRS 141.4248 shall be made on an annual basis and shall not carry forward to subsequent years;
  4. “Annual ethanol tax credit cap” means five million dollars ($5,000,000), unless the annual credit cap is modified pursuant to KRS 141.4248 , in which case the cap established by KRS 141.4248 shall be the annual ethanol tax credit cap for that year. Any adjustments to the annual ethanol tax credit cap made pursuant to KRS 141.4248 shall be made on an annual basis and shall not carry forward to subsequent years;
  5. “Biodiesel” means a renewable, biodegradeable, mono alkyl ester combustible liquid that is derived from agriculture crops, agriculture plant oils, agriculture residues, animal fats, or waste products that meets current American Society for Testing and Materials specification D6751 for biodiesel fuel (B100) blend stock distillate fuels;
  6. “Biodiesel producer” means an entity that manufactures biodiesel at a location in this Commonwealth;
  7. “Cellulosic ethanol” means ethyl alcohol for use as motor fuel that meets the current American Society for Testing and Materials specification D4806 for ethanol that is produced from cellulosic biomass materials of any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, including:
    1. Plant wastes from industrial processes such as sawdust and paper pulp;
    2. Energy crops grown specifically for fuel production such as switchgrass; or
    3. Agricultural plant residues such as corn stover, rice hulls, sugarcane, and cereal straws;
  8. “Cellulosic ethanol producer” means an entity that uses cellulosic biomass materials to manufacture cellulosic ethanol at a location in this Commonwealth;
  9. “Blended biodiesel” means a blend of biodiesel with petroleum diesel so that the percentage of biodiesel in the blend is at least two percent (2%) (B2 or greater);
  10. “Ethanol” means ethyl alcohol produced from corn, soybeans, or wheat for use as a motor fuel that meets the current American Society for Testing and Materials specification D4806 for ethanol;
  11. “Ethanol-based tax credits” means the cellulosic ethanol tax credit provided for in KRS 141.4244 and the ethanol tax credit provided for in KRS 141.4242 ;
  12. “Ethanol producer” means an entity that uses corn, soybeans, or wheat to manufacture ethanol at a location in this Commonwealth;
  13. “Renewable diesel” means a renewable, biodegradeable, non-ester combustible liquid that:
    1. Is derived from biomass resources as defined in KRS 152.715 ; and
    2. Meets the current American Society for Testing and Materials Specification D396 for fuel oils intended for use in various types of fuel-oil-burning equipment; D975 for diesel fuel oils suitable for various types of diesel fuel engines; or D1655 for aviation turbine fuels; and
  14. “Renewable diesel producer” means an entity that manufactures renewable diesel at a location in this Commonwealth.

History. Enact. Acts 2005, ch. 168, § 136, effective March 18, 2005; 2007 (2nd Ex. Sess.), ch. 1, § 20, effective August 30, 2007; 2020 ch. 91, § 26, effective April 15, 2020.

Legislative Research Commission Notes.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.423. Nonrefundable credit for biodiesel producer, biodiesel blender, or renewable diesel producer.

    1. A biodiesel producer, biodiesel blender, or renewable diesel producer shall be entitled to a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and KRS 141.0401 in an amount certified by the department under subsection (4) of this section. (1) (a) A biodiesel producer, biodiesel blender, or renewable diesel producer shall be entitled to a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and KRS 141.0401 in an amount certified by the department under subsection (4) of this section.
    2. The credit rate shall be:
      1. One dollar ($1) per biodiesel gallon produced by a biodiesel producer;
      2. One dollar ($1) per gallon of biodiesel used in the blending process by a biodiesel blender; and
      3. One dollar ($1) per gallon of renewable diesel produced by a renewable diesel producer;
    3. For calendar years beginning prior to January 1, 2021, if the total amount of approved credit for all biodiesel producers, biodiesel blenders, and renewable diesel producers exceeds the annual biodiesel and renewable diesel tax credit cap, the department shall determine the amount of credit each biodiesel producer, biodiesel blender, and renewable diesel producer receives by multiplying the annual biodiesel and renewable diesel tax credit cap by a fraction, the numerator of which is the amount of approved credit for the biodiesel producer, biodiesel blender, and renewable diesel producer and the denominator of which is the total approved credit for all biodiesel producers, biodiesel blenders, and renewable diesel producers.
    4. For calendar years beginning on or after January 1, 2021, if the total amount of approved credit for all biodiesel producers, biodiesel blenders, renewable diesel producers, and renewable chemical producers exceeds the annual biodiesel, renewable diesel, and renewable chemical production tax credit cap, the department shall determine the amount of credit each biodiesel producer, biodiesel blender, renewable diesel producer, and renewable chemical producer receives by multiplying the annual biodiesel, renewable diesel, and renewable chemical production tax credit cap by a fraction, the numerator of which is the amount of approved credit for the each producer and the denominator of which is the total approved credit for all producers.
    5. The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of credits as provided in KRS 141.0205 .
  1. Re-blending of blended biodiesel shall not qualify for the credit provided under this section.
  2. The credit allowed in subsection (1) of this section shall not be carried forward to a return for any other period.
    1. Each biodiesel producer, biodiesel blender, and renewable diesel producer eligible for the credit provided under subsection (1) of this section shall file a tax credit claim for biodiesel gallons produced or blended in this state or for renewable diesel produced in this state on forms prescribed by the department by the fifteenth day of the first month following the close of the preceding calendar year. (4) (a) Each biodiesel producer, biodiesel blender, and renewable diesel producer eligible for the credit provided under subsection (1) of this section shall file a tax credit claim for biodiesel gallons produced or blended in this state or for renewable diesel produced in this state on forms prescribed by the department by the fifteenth day of the first month following the close of the preceding calendar year.
    2. The department shall determine the amount of the approved credit based on the amount of biodiesel produced, biodiesel blended, renewable diesel produced, or renewable chemical produced in this state during the preceding calendar year and issue a credit certificate to the biodiesel producer, biodiesel blender, renewable diesel producer, or renewable chemical producer by the fifteenth day of the fourth month following the close of the calendar year.
  3. In the case of a biodiesel producer, biodiesel blender, renewable diesel producer, or renewable chemical producer that has a fiscal year end for purposes of computing the tax imposed by KRS 141.020 , 141.040 , and 141.0401 , the amount of approved credit shall be claimed on the return filed for the first fiscal year ending after the close of the preceding calendar year.

unless the total amount of approved credit for all biodiesel producers, biodiesel blenders, and renewable diesel producers exceeds the annual biodiesel and renewable diesel tax credit cap for calendar years beginning prior to January 1, 2021, or the annual biodiesel, renewable diesel, and renewable chemical production tax credit cap for calendar years beginning on or after January 1, 2021.

History. Enact. Acts 2005, ch. 168, § 137, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 33, effective June 28, 2006; 2007 (2nd Ex. Sess.), ch. 1, § 21, effective August 30, 2007; 2020 ch. 91, § 27, effective April 15, 2020.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.4231. Renewable chemical production tax credit.

    1. An eligible business that: (1) (a) An eligible business that:
      1. Has entered into an agreement under KRS 246.700(3);
      2. Receives certification from the Department of Agriculture of the preliminary tax credit under KRS 246.700(6); and
      3. Receives authorization from the department regarding the amount of tax credit that is allowed;
    2. For taxable years beginning on or after January 1, 2021, the renewable chemical production tax credit shall be nonrefundable, nontransferable, and allowed against taxes imposed by KRS 141.020 or 141.040 and 141.040 1, with the ordering of the credits as provided in KRS 141.0205 .
      1. Any amount of credit that a taxpayer is unable to utilize during a taxable year may be carried forward for use in a succeeding taxable year for a period not to exceed three (3) taxable years. (c) 1. Any amount of credit that a taxpayer is unable to utilize during a taxable year may be carried forward for use in a succeeding taxable year for a period not to exceed three (3) taxable years.
      2. Any amount of credit not used within the three (3) taxable years shall be lost.
      3. No amount of credit may be carried back to a prior taxable year by any taxpayer.
  1. If the eligible business is a pass-through entity, the eligible business may apply the credit against the limited liability entity tax imposed by KRS 141.0401 , and shall pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through.
  2. If the Department of Agriculture rescinds any tax credit under KRS 246.700(9), the repayment of any tax credit by the taxpayer shall be:
    1. Considered a tax payment due and payable to the Kentucky State Treasurer; and
    2. Collected by the department in the same manner as failure to pay the tax shown due or required to be shown due with the filing of that return.
    1. In order for the General Assembly to evaluate the Renewable Chemical Tax Credit Program, the department, in cooperation with the Department of Agriculture, shall submit to the Interim Joint Committee on Appropriations and Revenue a cumulative report describing the activities of the program by taxable year. (4) (a) In order for the General Assembly to evaluate the Renewable Chemical Tax Credit Program, the department, in cooperation with the Department of Agriculture, shall submit to the Interim Joint Committee on Appropriations and Revenue a cumulative report describing the activities of the program by taxable year.
    2. The report shall include:
      1. The aggregate number of pounds, by each type of renewable chemicals produced in this state, for all successful tax credit applicants under the program;
      2. The aggregate gross receipts from sales, by each type of renewable chemicals produced in this state, for all successful tax credit applicants under the program;
      3. The number of employees located in this state of all successful tax credit applicants during the calendar year immediately preceding the calendar year for which the successful applicants first applied for a tax credit under the program;
      4. The number of employees located in this state of all successful tax credit applicants during each calendar year that the tax credit is claimed;
      5. The number of tax credit certificates and aggregate amount of tax credits awarded under the program for each calendar year; and
      6. For each eligible business issued a renewable chemical production tax credit during each taxable year:
        1. The county within which the eligible business is producing the renewable chemical;
        2. The amount of the tax credit claimed by the eligible business;
        3. The manner in which the eligible business first qualified as an eligible business, whether by organizing, expanding, or locating in this state;
        4. The amount of renewable chemical production tax credit claimed during each taxable year; and
        5. Any repayment of incentives by the business, if the business does not meet the requirements of the agreement.

may claim the renewable chemical production tax credit in an amount equal to the amount authorized by the department as provided in KRS 141.423 .

HISTORY: 2020 ch. 91, § 25, effective April 15, 2020.

141.424. Biodiesel credit distribution for pass-through entities.

  1. In the case of a biodiesel producer, biodiesel blender, or renewable diesel producer which is a pass-through entity not subject to tax under KRS 141.040 , the amount of approved credit shall be applied against the tax imposed by KRS 141.0401 at the entity level, and shall also be distributed to each partner, member, shareholder, or beneficiary based on the partner’s, member’s, shareholder’s, or beneficiary’s distributive share of the income of the pass-through entity. Each biodiesel producer, biodiesel blender, or renewable diesel producer shall notify the department electronically of all partners, members, shareholders, or beneficiaries who may claim any amount of the approved credit. Failure to provide information to the department in a manner prescribed by administrative regulation may constitute the forfeiture of available credits to all partners, members, shareholders, or beneficiaries in the pass-through entity.
  2. An agricultural cooperative association organized under KRS Chapter 272 or 272A may elect to apportion pro rata any amount of the approved credit among the members of the association and, if a limited cooperative association, among patron members only, on the basis of the quantity or value of business done with or for such members for the taxable year. The agricultural cooperative association shall notify the department electronically of all members who may claim any amount of the approved credit if the election is made.

History. Enact. Acts 2005, ch. 168, § 138, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 34, effective June 28, 2006; 2007 (2nd Ex. Sess.), ch. 1, § 22, effective August 30, 2007; 2012, ch. 160, § 134, effective July 12, 2012.

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts ch. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.4242. Nonrefundable credit for producers of ethanol.

    1. For taxable years beginning after December 31, 2007, an ethanol producer shall be eligible for a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401 in an amount certified by the department under subsection (3) of this section. The credit rate shall be one dollar ($1) per ethanol gallon produced, unless the total amount of approved credit for all ethanol producers exceeds the annual ethanol tax credit cap. If the total amount of approved credit for all ethanol producers exceeds the annual ethanol tax credit cap, the department shall determine the amount of credit each ethanol producer receives by multiplying the annual ethanol tax credit cap by a fraction, the numerator of which is the amount of approved credit for the ethanol producer and the denominator of which is the total approved credit for all ethanol producers. (1) (a) For taxable years beginning after December 31, 2007, an ethanol producer shall be eligible for a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401 in an amount certified by the department under subsection (3) of this section. The credit rate shall be one dollar ($1) per ethanol gallon produced, unless the total amount of approved credit for all ethanol producers exceeds the annual ethanol tax credit cap. If the total amount of approved credit for all ethanol producers exceeds the annual ethanol tax credit cap, the department shall determine the amount of credit each ethanol producer receives by multiplying the annual ethanol tax credit cap by a fraction, the numerator of which is the amount of approved credit for the ethanol producer and the denominator of which is the total approved credit for all ethanol producers.
    2. The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of credits as provided in KRS 141.0205 .
  1. The credit provided under subsection (1) of this section shall not be carried forward to a return for any other period.
  2. Each ethanol producer eligible for the credit provided under subsection (1) of this section shall file an ethanol tax credit claim for ethanol gallons produced in this state on forms prescribed by the department by January 15 following the close of the preceding calendar year. The department shall determine the amount of the approved credit based on the amount of ethanol produced in this state during the preceding calendar year and shall issue a credit certificate to the ethanol producer by April 15 following the close of the preceding calendar year.
  3. In the case of an ethanol producer that has a fiscal year end for purposes of computing the tax imposed by KRS 141.020 , 141.040 , and 141.0401 , the amount of approved credit provided under subsection (1) of this section shall be claimed on the return filed for the first fiscal year ending after the close of the preceding calendar year.

History. Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 24, effective August 30, 2007.

NOTES TO DECISIONS

1. Denial.

Substantial evidence supported the trial court’s finding that denial of the energy company’s application for a tax credit under KRS 141.4242(3) was arbitrary and capricious. The evidence showed that the required reporting form was not effective as a regulation until the day it was due and it was not officially published until after the application was due. Commonwealth v. Commonwealth Agri-Energy, LLC, 2012 Ky. App. LEXIS 242 (Ky. Ct. App.), sub. op., 2012 Ky. App. Unpub. LEXIS 1036 (Ky. Ct. App. Nov. 16, 2012).

141.4244. Nonrefundable credit for producers of cellulosic ethanol.

    1. For taxable years beginning after December 31, 2007, a cellulosic ethanol producer shall be eligible for a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401 in an amount certified by the department under subsection (3) of this section. The credit rate shall be one dollar ($1) per cellulosic ethanol gallon produced, unless the total amount of approved credit for all cellulosic ethanol producers exceeds the annual cellulosic ethanol tax credit cap. If the total amount of approved credit for all cellulosic ethanol producers exceeds the annual cellulosic ethanol tax credit cap, the department shall determine the amount of credit each cellulosic ethanol producer receives by multiplying the annual cellulosic ethanol tax credit cap by a fraction, the numerator of which is the amount of approved credit for the cellulosic ethanol producer and the denominator of which is the total approved credit for all cellulosic ethanol producers. (1) (a) For taxable years beginning after December 31, 2007, a cellulosic ethanol producer shall be eligible for a nonrefundable tax credit against the taxes imposed by KRS 141.020 or 141.040 and 141.0401 in an amount certified by the department under subsection (3) of this section. The credit rate shall be one dollar ($1) per cellulosic ethanol gallon produced, unless the total amount of approved credit for all cellulosic ethanol producers exceeds the annual cellulosic ethanol tax credit cap. If the total amount of approved credit for all cellulosic ethanol producers exceeds the annual cellulosic ethanol tax credit cap, the department shall determine the amount of credit each cellulosic ethanol producer receives by multiplying the annual cellulosic ethanol tax credit cap by a fraction, the numerator of which is the amount of approved credit for the cellulosic ethanol producer and the denominator of which is the total approved credit for all cellulosic ethanol producers.
    2. The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of credits as provided in KRS 141.0205 .
  1. The credit provided under subsection (1) of this section shall not be carried forward to a return for any other period.
  2. Each cellulosic ethanol producer eligible for the credit provided under subsection (1) of this section shall file a cellulosic ethanol tax credit claim for cellulosic ethanol gallons produced in this state on forms prescribed by the department by January 15 following the close of the preceding calendar year. The department shall determine the amount of the approved credit based on the amount of cellulosic ethanol produced in this state during the preceding calendar year and shall issue a credit certificate to the cellulosic ethanol producer by April 15 following the close of the preceding calendar year.
  3. In the case of a cellulosic ethanol producer that has a fiscal year end for purposes of computing the tax imposed by KRS 141.020 , 141.040 , and 141.0401 , the amount of approved credit provided under subsection (1) of this section shall be claimed on the return filed for the first fiscal year ending after the close of the preceding calendar year.

History. Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 23, effective August 30, 2007.

141.4246. Ethanol or cellulosic ethanol credit distribution for pass-through entities.

  1. An ethanol producer or a cellulosic ethanol producer that is a pass-through entity not subject to tax under KRS 141.040 shall apply the amount of approved credit against the tax imposed by KRS 141.0401 at the entity level, and shall also distribute the amount of the approved credit to each partner, member, shareholder, or beneficiary based on the partner’s, member’s, shareholder’s, or beneficiary’s distributive share of the income of the pass-through entity.
  2. Each ethanol producer or cellulosic ethanol producer shall notify the department electronically of all partners, members, shareholders, or beneficiaries who may claim any amount of the approved credit. Failure to provide information to the department in a manner prescribed by administrative regulation may result in the forfeiture of available credits to all partners, members, shareholders, or beneficiaries in the pass-through entity.
  3. An agricultural cooperative association organized under KRS Chapter 272 or 272A may elect to apportion pro rata any amount of the approved credit among the members of the association and, if a limited cooperative association, among patron members only, on the basis of the quantity or value of business done with or for such members for the taxable year. The agricultural cooperative association shall notify the department electronically of all members who may claim any amount of the approved credit if the election is made.
  4. Failure to provide information to the department in a manner prescribed by administrative regulation may result in the forfeiture of available credits to all partners, members, shareholders, or beneficiaries in the pass-through entity or agricultural cooperative association.

History. Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 25, effective August 30, 2007; 2012, ch. 160, § 135, effective July 12, 2012.

141.4248. Transfer of unused ethanol or cellulosic ethanol tax credit caps established by KRS 141.4242 and 141.4244.

    1. If, in any calendar year, all approved applications for credit filed pursuant to KRS 141.4242 and 141.4244 do not completely use the annual cellulosic ethanol tax credit cap established by KRS 141.4244 or annual ethanol tax credit cap established by KRS 141.4242 , as the case may be; and (1) (a) If, in any calendar year, all approved applications for credit filed pursuant to KRS 141.4242 and 141.4244 do not completely use the annual cellulosic ethanol tax credit cap established by KRS 141.4244 or annual ethanol tax credit cap established by KRS 141.4242, as the case may be; and
    2. The other ethanol-based tax credit program has total approved applications for credit that exceed the annual cap established for that program;
  1. The amount of credit cap transferred from one (1) program to the other shall not exceed the amount necessary for all approved applicants to receive the one dollar ($1) per gallon credit provided for in KRS 141.4242 or 141.4244 , as the case may be.
  2. Any unused cap remaining for any calendar year after both programs have been fully funded shall not be available to be used in any other year.

then the unused cap may be transferred to the other ethanol-based tax credit program.

History. Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 26, effective August 30, 2007.

141.425. Authorization for administrative regulations to administer biodiesel credit.

The department may promulgate administrative regulations necessary to administer KRS 141.422 to 141.424 .

History. Enact. Acts 2005, ch. 168, § 139, effective March 18, 2005.

Legislative Research Commission Notes.

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

(3/18/2005). 2005 Ky. Acts ch. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.428. Kentucky Clean Coal Incentive Act — Definitions — Tax credit — Administrative regulations.

  1. As used in this section:
    1. “Clean coal facility” means an electric generation facility beginning commercial operation on or after January 1, 2005, at a cost greater than one hundred fifty million dollars ($150,000,000) that is located in the Commonwealth of Kentucky and is certified by the Energy and Environment Cabinet as reducing emissions of pollutants released during generation of electricity through the use of clean coal equipment and technologies;
    2. “Clean coal equipment” means equipment purchased and installed for commercial use in a clean coal facility to aid in reducing the level of pollutants released during the generation of electricity from eligible coal;
    3. “Clean coal technologies” means technologies incorporated for use within a clean coal facility to lower emissions of pollutants released during the generation of electricity from eligible coal;
    4. “Eligible coal” means coal that is subject to the tax imposed under KRS 143.020 ;
    5. “Ton” means a unit of weight equivalent to two thousand (2,000) pounds; and
    6. “Taxpayer” means taxpayer as defined in KRS 131.010(4).
  2. Effective for tax years ending on or after December 31, 2006, a nonrefundable, nontransferable credit shall be allowed for:
    1. Any electric power company subject to tax under KRS 136.120 and certified as a clean coal facility or any taxpayer that owns or operates a clean coal facility and purchases eligible coal that is used by the taxpayer in a certified clean coal facility; or
    2. A parent company of an entity identified in paragraph (a) of this subsection if the subsidiary is wholly owned.
    1. The credit may be taken against the taxes imposed by: (3) (a) The credit may be taken against the taxes imposed by:
      1. KRS 136.120 ; or
      2. KRS 141.020 or 141.040 , and 141.040 1.
    2. The credit shall not be carried forward and must be used on the tax return filed for the period during which the eligible coal was purchased. The Energy and Environment Cabinet must approve and certify use of the clean coal equipment and technologies within a clean coal facility before any taxpayer may claim the credit.
    3. The credit allowed under paragraph (a) of this subsection shall be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401 , with the ordering of credits as provided in KRS 141.0205 .
  3. The amount of the allowable credit shall be two dollars ($2) per ton of eligible coal purchased that is used to generate electric power at a certified clean coal facility.
  4. Each taxpayer eligible for the credit provided under subsection (2) of this section shall file a clean coal incentive credit claim on forms prescribed by the department. At the time of filing for the credit, the taxpayer shall submit an electronic report verifying the tons of coal subject to the tax imposed by KRS 143.020 purchased for each year in which the credit is claimed. The department shall determine the amount of the approved credit and issue a credit certificate to the taxpayer.
  5. Corporations and pass-through entities subject to the tax imposed under KRS 141.040 or 141.040 1 shall be eligible to apply, subject to the conditions imposed under this section, the approved credit against its liability for the taxes, in consecutive order as follows:
    1. The credit shall first be applied against both the tax imposed by KRS 141.0401 and the tax imposed by KRS 141.020 or 141.040, with the ordering of credits as provided in KRS 141.0205 ;
    2. The credit shall then be applied to the tax imposed by KRS 136.120 .
  6. If the taxpayer is a pass-through entity not subject to tax under KRS 141.040 , the amount of approved credit shall be applied against the tax imposed by KRS 141.0401 at the entity level, and shall also be distributed to each partner, member, or shareholder based on the partner’s, member’s, or shareholder’s distributive share of the income of the pass-through entity. The credit shall be claimed in the same manner as specified in subsection (6) of this section. Each pass-through entity shall notify the department electronically of all partners, members, or shareholders who may claim any amount of the approved credit. Failure to provide information to the department in a manner prescribed by regulation may constitute the forfeiture of available credits to all partners, members, or shareholders associated with the pass-through entity.
  7. The taxpayer shall maintain all records associated with the credit for a period of five (5) years. Acceptable verification of eligible coal purchased shall include invoices that indicate the tons of eligible coal purchased from a Kentucky supplier of coal and proof of remittance for that purchase.
  8. The department shall develop the forms required under this section, specifying the procedure for claiming the credit, and applying the credit against the taxpayer’s liability in the order provided under subsections (6) and (7) of this section.
  9. The Office of Energy Policy within the Energy and Environment Cabinet and the department shall promulgate administrative regulations necessary to administer this section.
  10. This section shall be known as the Kentucky Clean Coal Incentive Act.

The credit shall meet the entirety of the taxpayer’s liability under the first tax listed in consecutive order before applying any remaining credit to the next tax listed. The taxpayer’s total liability under each preceding tax must be fully met before the remaining credit can be applied to the subsequent tax listed in consecutive order.

History. Enact. Acts 2005, ch. 168, § 142, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 35, effective June 28, 2006; 2007 (2nd Ex. Sess.), ch. 1, § 28, effective August 30, 2007; 2010, ch. 24, § 113, effective July 15, 2010; 2018 ch. 29, § 6, effective July 14, 2018; 2019 ch. 151, § 57, effective June 27, 2019.

Legislative Research Commission Notes.

(4/27/2018). KRS 141.0405 was repealed in 2018 Ky. Acts chs. 171 and 207, but a conforming amendment was not made to this statute to address the reference it contains to KRS 141.0405 . The Reviser of Statutes has determined that making such a conforming change during the 2018 codification exceeds the permissible correction of manifest clerical or typographical errors under KRS 7.136(1)(h). Therefore, the reference to KRS 141.0405 remains unchanged and would have to be changed pursuant to future legislative action.

(4/27/2018). KRS 136.070 was repealed in 2018 Ky. Acts chs. 171 and 207, but a conforming amendment was not made to this statute to address the reference it contains to KRS 136.070 . The Reviser of Statutes has determined that making such a conforming change during the 2018 codification exceeds the permissible correction of manifest clerical or typographical errors under KRS 7.136(1)(h). Therefore, the reference to KRS 136.070 remains unchanged and would have to be changed pursuant to future legislative action.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). 2005 Ky. Acts ch. 168, § 165, provides that this section shall apply to tax years beginning on or after January 1, 2005.

141.430. Calculation of income tax credit for approved companies — Administrative regulations. [Repealed]

HISTORY: Enact. Acts 2005, ch. 168, § 149, effective March 18, 2005; 2006 (1st Ex. Sess.), ch. 2, § 36, effective June 28, 2006; 2007 (2nd Ex. Sess.), ch. 1, § 44, effective August 30, 2007; 2010 (1st Ex. Sess.), ch. 2, § 19, effective June 4, 2010; repealed by 2018 ch. 199, § 37, effective July 14, 2018.

New Markets Development Program Tax Credit

141.432. Definitions for KRS 141.432 to 141.434.

As used in KRS 141.432 to 141.434 , unless the context requires otherwise:

  1. “Applicable percentage” means zero percent (0%) for each of the first two (2) credit allowance dates, seven percent (7%) for the third credit allowance date, and eight percent (8%) for the next four (4) credit allowance dates;
  2. “Credit allowance date” means, with respect to any qualified equity investment:
    1. The date on which the investment is initially made; and
    2. Each of the six (6) anniversary dates of that date thereafter;
  3. “Long-term debt security” means any debt instrument issued by a qualified community development entity, at par value or a premium, with an original maturity date of at least seven (7) years from the date of its issuance, with no acceleration of repayment, amortization, or prepayment features prior to its original maturity date. The qualified community development entity that issues the debt instrument may not make cash interest payments on the debt instrument during the period commencing with its issuance and ending on its final credit allowance date in excess of the cumulative operating income, as defined in the regulations promulgated under 26 U.S.C. sec. 45 D, of the qualified community development entity for that same period, which shall be calculated prior to giving effect to the expense of the cash interest payments. The foregoing shall in no way limit the holder’s ability to accelerate payments on the debt instrument in situations where the qualified community development entity has defaulted on covenants designed to ensure compliance with KRS 141.432 to 141.434 or 26 U.S.C. sec. 45 D;
  4. “Purchase price” means the amount paid to a qualified community development entity that issues a qualified equity investment for the qualified equity investment;
  5. “Qualified active low-income community business” has the same meaning given that term in 26 U.S.C. sec. 45 D. A business shall be considered a qualified active low-income community business for the duration of the qualified community development entity’s investment in, or loan to, the business if the entity reasonably expects, at the time it makes the investment or loan, that the business will continue to satisfy the requirements for being a qualified active low-income community business throughout the entire period of the investment or loan. The term excludes any business that derives or projects to derive fifteen percent (15%) or more of its annual revenue from the rental or sale of real estate. This exclusion does not apply to a business that is controlled by, or under common control with, another business if the second business:
    1. Does not derive or project to derive fifteen percent (15%) or more of its annual revenue from the rental or sale of real estate; and
    2. Is the primary tenant of the real estate leased from the first business;
  6. “Qualified community development entity” has the same meaning given that term in 26 U.S.C. sec. 45 D; provided that the entity has entered into, or is controlled by an entity that has entered into, an allocation agreement with the Community Development Financial Institutions Fund of the United States Treasury Department with respect to credits authorized by 26 U.S.C. sec. 45 D, which includes the Commonwealth of Kentucky within the service area set forth in such allocation agreement;
  7. “Qualified equity investment” means any equity investment in, or long-term debt security issued by, a qualified community development entity that:
    1. Is acquired after June 4, 2010, at its original issuance solely in exchange for cash;
      1. In the case of a qualified equity investment issued prior to January 1, 2014, has at least eighty-five percent (85%) of its cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth by the second anniversary of the initial credit allowance date; and (b) 1. In the case of a qualified equity investment issued prior to January 1, 2014, has at least eighty-five percent (85%) of its cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth by the second anniversary of the initial credit allowance date; and
      2. In the case of a qualified equity investment issued on or after January 1, 2014, has at least one hundred percent (100%) of its cash purchase price used by the issuer to make qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth by the first anniversary of the initial credit allowance date; and
    2. Is designated by the issuer as a qualified equity investment under this subsection and is certified by the department as not exceeding the limitation contained in KRS 141.434 . This term shall include any qualified equity investment that does not meet the provisions of paragraph (a) of this subsection if the investment was a qualified equity investment in the hands of a prior holder. The qualified community development entity shall keep sufficiently detailed books and records with respect to the investments made with the proceeds of the qualified equity investments to allow the direct tracing of the proceeds into qualified low-income community investments in qualified active low-income community businesses in the Commonwealth;
  8. “Qualified low-income community investment” means any capital or equity investment in, or loan to, any qualified active low-income community business made after June 4, 2010. With respect to any one (1) qualified active low-income community business, the maximum amount of qualified low-income community investments that may be made in the business, on a collective basis with all of its affiliates, with the proceeds of qualified equity investments that have been certified under KRS 141.433 shall be ten million dollars ($10,000,000) whether made by one (1) or several qualified community development entities;
  9. “Tax credit” means a nonrefundable credit against the taxes imposed by KRS 141.020 , 141.040 , 141.040 1, 136.320 , 136.330 , 136.340 , 136.350 , 136.370 , 136.390 , or 304.3-270 . For the credit against the taxes imposed by KRS 141.020 , 141.040, or 141.0401 , the ordering of the credits shall be as provided in KRS 141.0205 . An insurance company claiming a tax credit against the insurance premium tax is not required to pay additional retaliatory tax levied pursuant to KRS 304.3-270 ; and
  10. “Taxpayer” means any individual or entity subject to the tax imposed by KRS 141.020 , 141.040 , 141.040 1, 136.320 , 136.330 , 136.340 , 136.350 , 136.370 , 136.390 , or 304.3-270 .

History. Enact. Acts 2010 (1st Ex. Sess.), ch. 2, § 16, effective June 4, 2010; 2014, ch. 102, § 29, effective July 15, 2014.

141.433. Application for New Markets Development Program tax credit.

  1. A qualified community development entity that seeks to have an equity investment or long-term debt security certified as a qualified equity investment and eligible for the tax credit permitted by KRS 141.434 shall apply to the department. The qualified community development entity shall submit an application on a form that the department provides that shall include but not be limited to:
    1. The name, address, tax identification number, and evidence of the certification of the entity as a qualified community development entity;
    2. A copy of an allocation agreement executed by the entity or its controlling entity and the Community Development Financial Institutions Fund, which includes the Commonwealth of Kentucky in its service area;
    3. A certificate executed by an executive officer of the entity attesting that the allocation agreement remains in effect and has not been revoked or canceled by the Community Development Financial Institutions Fund;
    4. A description of the proposed amount, structure, and purchaser of the equity investment or long-term debt security;
    5. The name and tax identification number of any person or entity eligible to utilize tax credits as a result of the issuance of the qualified equity investment;
    6. Information regarding the proposed use of proceeds from the issuance of the qualified equity investment;
    7. A nonrefundable application fee in an amount set by the department. This fee shall be paid to the department and shall be required of each application submitted; and
    8. In the case of applications submitted on or after January 1, 2014, the refundable performance fee required by subsection (8) of this section.
  2. The department shall review applications in the order in which they are received. Within thirty (30) days after receipt of a completed application containing the information necessary for the department to certify a potential qualified equity investment, including the payment of the application fee, the department shall approve or deny the application. If the department intends to deny the application, it shall inform the qualified community development entity, by written notice sent via certified mail and any other such means deemed feasible by the department, of the grounds for the denial. Upon receipt of the notice of intended denial by the qualified community development entity:
    1. If the qualified community development entity provides any additional information required by the department or otherwise completes its application within fifteen (15) days, the application shall be considered completed as of the original date of submission, however the department shall have an additional thirty (30) days to either approve or deny the application as completed; or
    2. If the qualified community development entity fails to provide the information or complete its application within the fifteen (15) day period, the application shall be deemed denied and must be resubmitted in full with a new submission date.
  3. If the application is deemed complete, the department shall certify the proposed equity investment or long-term debt security as a qualified equity investment and eligible for tax credits under KRS 141.432 to 141.434 , subject to the annual cap limitations contained in KRS 141.434 . The department shall provide written notice sent via certified mail and any other means deemed feasible by the department, of the certification to the qualified community development entity. The notice shall include the names of those taxpayers who are eligible to claim the credits and their respective credit amounts. If the names of the persons or entities that are eligible to claim the credits change due to a transfer of a qualified equity investment or a change in an allocation pursuant to KRS 141.434, the qualified community development entity shall notify the department of such change.
  4. Within ninety (90) days after receipt of the notice of certification, the qualified community development entity shall issue the qualified equity investment and receive cash in the amount of the certified purchase price. The qualified community development entity shall provide the department with evidence of the receipt of the cash investment within ten (10) business days after receipt. If the qualified community development entity does not receive the cash investment and issue the qualified equity investment within ninety (90) days following receipt of the certification notice, the certification shall lapse, and the entity may not issue the qualified equity investment without reapplying to the department for certification. A certification that lapses shall revert back to the department and may be reissued only in accordance with the application process outlined in this section.
  5. The department shall certify qualified equity investments in the order applications are received by the department. Applications received on the same day shall be deemed to have been received simultaneously. For applications received on the same day and deemed complete, the department shall certify, consistent with remaining tax credit capacity, qualified equity investments in proportionate percentages based upon the ratio of the amount of qualified equity investment requested in an application to the total amount of qualified equity investments requested in all applications received on the same day. If a pending request cannot be fully certified because of the limitations contained in KRS 141.434 , the department shall certify the portion that may be certified unless the qualified community development entity elects to withdraw its request rather than receive partial credit.
    1. The department may recapture any portion of a tax credit allowed under this section if: (6) (a) The department may recapture any portion of a tax credit allowed under this section if:
      1. Any amount of federal tax credit that might be available with respect to the qualified equity investment that generated the tax credit under this section is recaptured under 26 U.S.C. sec. 45 D. In such case, the department’s recapture shall be proportionate to the federal recapture with respect to the qualified equity investment;
      2. The qualified community development entity redeems or makes a principal repayment with respect to the qualified equity investment that generated the tax credit prior to the final credit allowance date of the qualified equity investment. In such case, the department’s recapture shall be proportionate to the amount of the redemption or repayment with respect to the qualified equity investment; or
      3. The qualified community development entity fails to invest:
        1. In the case of a qualified equity investment issued prior to January 1, 2014, at least eighty-five percent (85%) of the purchase price of the qualified equity investment in qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth within twenty-four (24) months of the issuance of the qualified equity investment and maintain this level of investment in qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth until the last credit allowance date for the qualified equity investment; and
        2. In the case of a qualified equity investment issued on or after January 1, 2014, at least one hundred percent (100%) of the purchase price of the qualified equity investment in qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth within twelve (12) months of the issuance of the qualified equity investment and maintain this level of investment in qualified low-income community investments in qualified active low-income community businesses located in the Commonwealth until the last credit allowance date for the qualified equity investment. In this case, the department’s recapture shall be proportionate to the amount of the redemption or repayment with respect to the qualified equity investment.
    2. The department shall provide written notice sent via certified mail or other means deemed feasible by the department, to the qualified community development entity of any proposed recapture of tax credits pursuant to this subsection. The entity shall have ninety (90) days to cure any deficiency indicated in the department’s original recapture notice and avoid such recapture. If the entity fails or is unable to cure the deficiency within the ninety (90) day period, the department shall provide the entity and the taxpayer from whom the credit is to be recaptured with a final order of recapture. Any tax credit for which a final recapture order has been issued shall be recaptured by the department from the taxpayer who claimed the tax credit on a tax return.
  6. The department shall through administrative regulations promulgated in accordance with KRS Chapter 13A provide rules to implement the provisions of KRS 141.432 to 141.434 , and to administer the allocation of tax credits issued for qualified equity investments.
    1. On or after January 1, 2014, a qualified community development entity that seeks to have an equity investment or long-term debt security certified as a qualified equity investment and eligible for the tax credit permitted by KRS 141.434 shall, as part of the application, pay a refundable performance fee in an amount equal to one-half of one percent (0.5%) of the amount of the equity investment or long-term debt security requested to be certified as a qualified equity investment, not to exceed five hundred thousand dollars ($500,000). (8) (a) On or after January 1, 2014, a qualified community development entity that seeks to have an equity investment or long-term debt security certified as a qualified equity investment and eligible for the tax credit permitted by KRS 141.434 shall, as part of the application, pay a refundable performance fee in an amount equal to one-half of one percent (0.5%) of the amount of the equity investment or long-term debt security requested to be certified as a qualified equity investment, not to exceed five hundred thousand dollars ($500,000).
    2. This fee shall be in the nature of a security deposit to ensure compliance on the part of a qualified community development entity. The fee shall be paid to the department and deposited in the New Markets performance guarantee account established by this subsection, and retained there as private funds until compliance with the provisions of this subsection has been established or as otherwise provided by this subsection.
    3. The fee may be refunded to the qualified community development entity that submitted it as follows:
      1. In the case of any application that is ultimately denied pursuant to subsection (2) of this section, the department shall refund the full amount of the fee submitted with the denied application;
      2. In the case of any qualified equity investment that is certified in an amount that is less than the amount requested, due to the limitations contained in KRS 141.434 and pursuant to subsection (5) of this section, the department shall refund a portion of the fee so that only an amount equal to one-half of one percent (0.5%) of the actual certified amount, not to exceed five hundred thousand dollars ($500,000), is retained; and
      3. In the case of any qualified equity investment that is certified as eligible for tax credits, the qualified community development entity may request a refund of the fee no sooner than thirty (30) days after having met all the requirements of this subsection. The refund request shall be made in writing to the department. The department shall review the refund request within thirty (30) days, and shall either comply with the request and issue the refund of the fee, without interest, if the qualified community development entity has met all the requirements of this subsection, or give written notice to the qualified community development entity that it is noncompliant and subject to possible forfeiture of the fee as provided in this subsection.
    4. The qualified community development entity shall forfeit the fee to the Commonwealth as follows:
      1. The entire amount of the fee shall be forfeited if the qualified community development entity and its subsidiary qualified community development entities fail to issue the total amount of qualified equity investment certified by the department and receive cash in exchange therefor within ninety (90) days after receipt of the notice of certification; and
      2. A portion of the fee shall be forfeited if the qualified community development entity, or any subsidiary qualified community development entity, that issues a qualified equity investment certified by the department fails to meet the percentage investment requirement under subsection (6) of this section by the first credit allowance date of the qualified equity investment. The forfeiture shall be proportionate to the amount of the qualified equity investment that is not invested as required by subsection (6) of this section. Forfeiture of the fee under this subparagraph shall be subject to the ninety (90) day cure period allowed under subsection (6) of this section.
    5. The amount of the fee that is forfeited pursuant to this subsection shall be transferred from the New Markets performance guarantee account and deposited into the general fund.
      1. The New Markets performance guarantee account is hereby established as a fiduciary fund within the State Treasury, to be administered by the department solely for the purposes set out in this subsection. (f) 1. The New Markets performance guarantee account is hereby established as a fiduciary fund within the State Treasury, to be administered by the department solely for the purposes set out in this subsection.
      2. Notwithstanding KRS 45.229 , moneys in the account shall not lapse but shall be retained in the account at all times except as provided by this subsection.

For purposes of calculating the amount of qualified low-income community investments held by a qualified community development entity, an investment shall be considered held by the qualified community development entity even if the investment has been sold or repaid; provided that the qualified community development entity reinvests an amount equal to the capital returned to or recovered from the original investment, exclusive of any profits realized, in another qualified active low-income community business in this state within twelve (12) months of the receipt of the capital. A qualified community development entity shall not be required to reinvest capital returned from qualified low-income community investments after the sixth anniversary of the issuance of the qualified equity investment, the proceeds of which were used to make the qualified low-income community investment, and the qualified low-income community investment shall be considered held by the issuer through the qualified equity investment’s final credit allowance date.

History. Enact. Acts 2010 (1st Ex. Sess.), ch. 2, § 17, effective June 4, 2010; 2014, ch. 102, § 30, effective July 15, 2014.

141.434. New Markets Development Program tax credit.

  1. There is hereby created a Kentucky New Markets Development Program tax credit.
  2. A person or entity that makes a qualified equity investment earns a vested right to the tax credit created by subsection (1) of this section. The amount of the credit shall be equal to thirty-nine percent (39%) of the purchase price of the qualified equity investment made by the person or entity claiming the credit. The tax credit may be utilized as follows:
    1. The holder of the qualified equity investment on a particular credit allowance date of the qualified equity investment, whether it be the original purchaser or subsequent holder of the qualified equity investment, may utilize a portion of the tax credit against its tax liability for the taxable year that includes the credit allowance date equal to the applicable percentage for the credit allowance date multiplied by the purchase price paid for the qualified equity investment;
    2. Any tax credit that a taxpayer may not utilize during a particular year may be carried forward for use in any subsequent tax year; and
    3. An insurance company claiming a tax credit against the insurance premium tax is not required to pay additional retaliatory tax levied pursuant to KRS 304.3-270 .
  3. No tax credit claimed under this section may be sold or transferred. Tax credits that a partnership, limited liability company, S corporation, or other pass-through entity claims may be allocated to the partners, members, or shareholders of the entity for their direct use in accordance with the provisions of any agreement among the partners, members, or shareholders.
  4. The total amount of tax credits that may be awarded by the department pursuant to KRS 141.432 to 141.434 shall be limited to ten million dollars ($10,000,000) in each fiscal year. Once the department has certified a cumulative amount of qualified equity investments that can result in the utilization of this total amount of tax credits in a fiscal year, the department may not certify any more qualified equity investments. This limitation on qualified equity investments shall be based on scheduled utilization of tax credits without regard to the potential for taxpayers to carry forward tax credits to subsequent tax years.

History. Enact. Acts 2010 (1st Ex. Sess.), ch. 2, § 18, effective June 4, 2010; 2014, ch. 102, § 31, effective July 15, 2014.

Energy Efficiency Products and Homes Tax Credit

141.435. Definitions for KRS 141.435 to 141.437.

As used in KRS 141.435 to 141.437 :

  1. “Active solar space-heating system” means a system that:
    1. Consists of solar energy collectors that collect and absorb solar radiation combined with electric fans or pumps to transfer and distribute that solar heat;
    2. May include an energy storage space-heating system to provide heat when the sun is not shining; and
    3. Is installed by a certified installer;
  2. “Certified installer” means an installer who has satisfied the professional certification standards established by the North American Board of Certified Energy Practitioners (NABCEP) and who has been certified as a NABCEP Certified Solar PV Installer or a NABCEP Certified Solar Thermal Installer;
  3. “Combined active solar space-heating and water-heating system” means a system that meets the requirements of both an active solar space-heating system and a solar water-heating system and is installed by a certified installer;
  4. “Commonwealth” means the Commonwealth of Kentucky;
  5. “Dwelling unit” includes a manufactured home as defined in KRS 100.348 ;
  6. “Energy-efficient interior lighting system” means an interior lighting system that meets the maximum reduction in lighting power density requirements for the federal energy efficient commercial building deduction under 26 U.S.C. sec. 179 D, as in effect December 31, 2007;
  7. “Energy-efficient heating, cooling, ventilation, or hot water system” means a heating, cooling, ventilation, or hot water system that meets the requirements for the federal energy-efficient commercial building deduction under 26 U.S.C. sec. 179 D, as in effect December 31, 2007;
  8. “Energy-efficient windows and storm doors” means windows and storm doors that are:
    1. ENERGY STAR-labeled; and
    2. Certified by the National Fenestration Rating Council as meeting the North-Central U.S. climate zone performance standards for U-factor (nonsolar heat conductance), solar heat gain coefficient, air leakage, visible-light transmittance, and condensation resistance;
  9. “ENERGY STAR” shall have the same meaning as in KRS 56.770 ;
  10. “Installed cost” means the following, less any discounts, rebates, sales tax, installation-assistance credits, name-referral allowances, or other similar reductions:
    1. The purchase cost of equipment, components, and associated design; and
    2. Labor costs properly allocable to the on-site preparation, assembly, and original installation of the property, including piping or wiring to interconnect such property to the dwelling unit or commercial property;
  11. “Passive solar space-heating system” means a system that:
    1. Takes advantage of the warmth of the sun through the use of design features such as large south-facing windows and materials in the floors or walls that absorb warmth during the day and release that warmth at night;
    2. Includes one (1) or more of the following designs:
      1. Direct gain which stores and slowly releases heat energy collected from the sun shining directly into the building and warming materials such as tile or concrete;
      2. Indirect gain which uses materials that are located between the sun and the living space such as a wall to hold, store, and release heat; or
      3. Isolated gain which collects warmer air from an area that is remote from the living space, such as a sunroom attached to a house, and the warmer air flows naturally to the rest of the house; and
    3. Meets the guidelines and technical requirements for passive solar design established by administrative regulation pursuant to KRS 141.436(7);
  12. “Qualified energy property” means the following property that meets the performance, quality, and certification standards of and that would have been eligible for the federal tax credit for residential energy property expenditures under 26 U.S.C. sec. 25 C, as it existed on December 31, 2007:
    1. An electric heat pump water heater;
    2. An electric heat pump;
    3. A closed loop geothermal heat pump;
    4. An open loop geothermal heat pump;
    5. A direct expansion (DX) geothermal heat pump;
    6. A central air conditioner;
    7. A natural gas, propane, or oil furnace or hot water heater;
    8. A hot water boiler including outdoor wood-fired boiler units; or
    9. An advanced main air circulating fan;
  13. “Solar photovoltaic system” means a system for electricity generation that:
    1. Includes solar photovoltaic panels, structural attachments, electrical wiring, inverters for converting direct current output to alternating current, and appropriate controls and safety measures for output monitoring;
    2. Meets the requirements of Article 690 of the National Electrical Code;
    3. Uses solar photovoltaic panels and inverters that are rated and listed by Underwriters Laboratories; and
    4. Is installed by a certified installer;
  14. “Solar water-heating system” means a system that:
    1. Uses solar-thermal energy to heat water;
      1. Is an indirect pressurized glycol system that uses propylene glycol; or (b) 1. Is an indirect pressurized glycol system that uses propylene glycol; or
      2. Is an indirect drainback system that uses distilled water or propylene glycol;
    2. Uses OG-100 solar thermal collectors that are:
      1. Certified by the Solar Rating and Certification Corporation; and
      2. Covered by a manufacturer’s warranty of not less than five (5) years;
    3. Is installed by a certified installer; and
    4. Is warranted by the certified installer for a period of not less than two (2) years;
  15. “Upgraded insulation” means insulation with the following R-value ratings:
    1. Attic insulation rated R-38 or higher;
    2. Exterior wall, crawl space, and basement exterior wall insulation rated R-13 or higher; and
    3. Floor insulation rated R-19 or higher; and
  16. “Wind turbine” or “wind machine” means a turbine or machine used for generating electricity that:
    1. Is certified as meeting the United States Wind Industry Consensus Standards developed by the American Wind Energy Association in partnership with the United States Department of Energy;
    2. Is covered by a manufacturer’s warranty of not less than five (5) years;
    3. Is in compliance with all relevant building codes, height restriction variances, other special code requirements, and zoning ordinances;
    4. Has been installed in accordance with all building codes and all permits were received prior to the start of construction and installation;
    5. Is in compliance with all applicable Federal Aviation Administration regulations;
    6. Meets all requirements of Article 705 of the National Electrical Code for electrical components and installations; and
    7. Is rated and listed by Underwriters Laboratories.

History. Enact. Acts 2008, ch. 139, § 11, effective July 15, 2008; repealed and reenact., Acts 2010, ch. 5, § 11, effective February 25, 2010.

Legislative Research Commission Notes.

(2/25/2010). 2010 Ky. Acts ch. 5, sec. 28, provides that the repeal and reenactment of this section in that Act “shall apply retroactively to July 15, 2008.”

(7/15/2008). 2008 Ky. Acts ch. 139, sec. 26, provides this section “shall apply to taxable periods beginning after December 31, 2008.”

141.436. Tax credit for installation of energy efficiency products for residential and commercial property — Administrative regulations — Reports.

    1. For taxable periods beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 , and KRS 141.0401 , with the ordering of credits as provided in KRS 141.020 5. The credit shall apply if one (1) or more of the items listed in paragraph (b) of this subsection is installed during the taxable year in a dwelling unit located in the Commonwealth that is owned by the taxpayer and used by the taxpayer as: (1) (a) For taxable periods beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 , and KRS 141.0401 , with the ordering of credits as provided in KRS 141.0205 . The credit shall apply if one (1) or more of the items listed in paragraph (b) of this subsection is installed during the taxable year in a dwelling unit located in the Commonwealth that is owned by the taxpayer and used by the taxpayer as:
      1. The taxpayer’s principal place of residence; or
      2. A single-family or multifamily residential rental unit.
    2. The tax credit shall equal thirty percent (30%) of the installed costs of:
      1. Upgraded insulation, not to exceed one hundred dollars ($100);
      2. Energy-efficient windows and storm doors, not to exceed two hundred fifty dollars ($250); or
      3. Qualified energy property, not to exceed two hundred fifty dollars ($250).
    3. In no case shall the total credits provided under this subsection exceed five hundred dollars ($500) per taxpayer.
    1. For taxable years beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 , and KRS 141.0401 , with the ordering of credits as provided in KRS 141.020 5, if one (1) or more of the items listed in paragraph (b) of this subsection is installed during the taxable year on a dwelling unit located in the Commonwealth, or on property located in the Commonwealth that is owned and used by the taxpayer as commercial property. (2) (a) For taxable years beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 , and KRS 141.0401 , with the ordering of credits as provided in KRS 141.0205 , if one (1) or more of the items listed in paragraph (b) of this subsection is installed during the taxable year on a dwelling unit located in the Commonwealth, or on property located in the Commonwealth that is owned and used by the taxpayer as commercial property.
    2. The tax credit shall equal:
      1. Thirty percent (30%) of the installed costs of:
        1. An active solar space-heating system;
        2. A passive solar space-heating system;
        3. A combined active solar space-heating and water-heating system;
        4. A solar water-heating system; and
        5. A wind turbine or wind machine; or
      2. Three dollars ($3) per watt direct current (DC) of rated capacity of a solar photovoltaic system.
    3. In no case shall the total tax credits provided in this subsection exceed:
      1. Five hundred dollars ($500) per taxpayer if installed on a dwelling unit located in the Commonwealth that is owned by the taxpayer and used by the taxpayer as:
        1. The taxpayer’s principal place of residence; or
        2. A single-family residential rental unit; or
      2. One thousand dollars ($1,000) per taxpayer if installed on property located in the Commonwealth that is owned and used by the taxpayer as:
        1. A multifamily residential rental unit; or
        2. Commercial property;
    1. For taxable years beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 , and KRS 141.0401 , with the ordering of credits as provided in KRS 141.020 5, if one (1) or more of the following is installed during the taxable year on property located in the Commonwealth that is owned and used by the taxpayer as commercial property: (3) (a) For taxable years beginning after December 31, 2008, and beginning before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed under KRS 141.020 or 141.040 , and KRS 141.0401 , with the ordering of credits as provided in KRS 141.0205 , if one (1) or more of the following is installed during the taxable year on property located in the Commonwealth that is owned and used by the taxpayer as commercial property:
      1. An energy-efficient interior lighting system; and
      2. An energy-efficient heating, cooling, ventilation, or hot water system.
    2. The tax credit shall equal thirty percent (30%) of the installed costs of:
      1. An energy-efficient interior lighting system, not to exceed five hundred dollars ($500) per taxpayer; and
      2. An energy-efficient heating, cooling, ventilation, or hot water system, not to exceed five hundred dollars ($500) per taxpayer.
    3. In no case shall the total tax credits provided in this subsection exceed one thousand dollars ($1,000) per taxpayer.
    4. For purposes of the tax credit provided by this subsection, “commercial property” shall not include single-family or multifamily residential units.
  1. The tax credits provided under this section shall apply in the tax year in which the installation is completed. If the credit cannot be taken in full in the year in which the installation is completed, the tax credit may be carried forward one (1) year.
  2. The department may request copies of invoices, purchase receipts, installation contracts, proof of installer’s NABCEP certification, and any other information that the department determines necessary to verify credits taken.
  3. If the taxpayer has taken the ENERGY STAR home or the ENERGY STAR manufactured home tax credit provided under KRS 141.437 , the tax credits provided under this section shall not apply.
  4. The department shall establish, by administrative regulation, the guidelines and technical requirements for items that are eligible for the tax credits provided under subsection (2) of this section, including but not limited to requirements for capacity, siting, plumbing, collector mountings, and pressurization. The department shall enlist the assistance, cooperation, and recommendations of the Office of Energy Policy and the Kentucky Pollution Prevention Center at the University of Louisville in determining those guidelines and technical requirements and may enlist their assistance in evaluating the eligibility of credits taken under this section.
  5. On or before December 1, 2010, and on or before every December 1 thereafter, the department shall report to the Legislative Research Commission the total number and gross amount of each type of tax credit claimed on returns processed during the fiscal year ending prior to the December reporting date.

HISTORY: Enact. Acts 2008, ch. 139, § 12, effective July 15, 2008; repealed and reenact., Acts 2010, ch. 5, § 12, effective February 25, 2010; 2010, ch. 24, § 114, effective July 15, 2010; 2018 ch. 29, § 7, effective July 14, 2018.

Legislative Research Commission Notes.

(2/25/2010). 2010 Ky. Acts ch. 5, sec. 28, provides that the repeal and reenactment of this section in that Act “shall apply retroactively to July 15, 2008.”

(7/15/2008). 2008 Ky. Acts ch. 139, sec. 26, provides this section “shall apply to taxable periods beginning after December 31, 2008.”

141.437. Tax credit for construction of ENERGY STAR home or sale of ENERGY STAR manufactured home — Required verification — Reports.

  1. As used in this section:
    1. “ENERGY STAR home” means any single-family residence that qualifies for and receives the ENERGY STAR label under the ENERGY STAR Program administered by the United States Environmental Protection Agency; and
    2. “ENERGY STAR manufactured home” means a manufactured home as defined in KRS 100.348 that meets the ENERGY STAR label under the ENERGY STAR Program administered by the United States Environmental Protection Agency.
  2. For taxable years beginning after December 31, 2008, and before January 1, 2016, there is hereby created a nonrefundable credit against the tax imposed by KRS 141.040 , and KRS 141.0401 , with the ordering of credits as provided in KRS 141.0205 if a taxpayer:
    1. Builds a new ENERGY STAR home located in the Commonwealth for use as a principal place of residence; or
    2. Sells a new ENERGY STAR manufactured home to a buyer who uses that home as a principal place of residence in the Commonwealth.
  3. The tax credit shall equal:
    1. Eight hundred dollars ($800) if the taxpayer builds an ENERGY STAR home; or
    2. Four hundred dollars ($400) if the taxpayer sells an ENERGY STAR manufactured home.
  4. The tax credit provided under this section shall apply in the tax year in which the taxpayer completes construction of the ENERGY STAR home or sells the ENERGY STAR manufactured home.
  5. The tax credit provided in this section shall not apply if:
    1. The tax credit has been previously taken by another taxpayer on the same ENERGY STAR home or ENERGY STAR manufactured home; or
    2. The taxpayer has taken the energy efficiency tax credits provided in KRS 141.436 .
  6. The department may request verification of the ENERGY STAR label placed on the home, documentation that the buyer is using the home as a principal place of residence, and any other information that the department determines is necessary to verify the tax credits taken.
  7. On or before December 1, 2010, and on or before every December 1 thereafter, the department shall report to the Legislative Research Commission the total number and gross amount of each type of credit claimed on returns processed during the fiscal year ending prior to the December reporting period.

History. Enact. Acts 2008, ch. 139, § 13, effective July 15, 2008; repealed and reenact., Acts 2010, ch. 5, § 13, effective February 25, 2010.

Compiler’s notes.

The Energy Star Program was established pursuant to 42 USCS § 6294a. Federal regulations pertaining to the Energy Star Program are found at 10 CFR Part 430.

Legislative Research Commission Notes.

(2/25/2010). 2010 Ky. Acts ch. 5, sec. 28, provides that the repeal and reenactment of this section in that Act “shall apply retroactively to July 15, 2008.”

(7/15/2008). 2008 Ky. Acts ch. 139, sec. 26, provides this section “shall apply to taxable periods beginning after December 31, 2008.”

141.438. Endow Kentucky tax credit.

  1. For taxable years beginning on or after January 1, 2011, there is hereby established the Endow Kentucky tax credit.
  2. A taxpayer providing an endowment gift to a permanent endowment fund of a qualified community foundation, or county-specific component fund, or affiliate community foundation, which has been certified under KRS 147A.325 , and meeting the requirements of subsection (7) of this section, may claim a credit against the taxes imposed by KRS 141.020 or 141.040 and 141.040 1. The ordering of the credit shall be as provided in KRS 141.0205 .
  3. The credit shall be equal to twenty percent (20%) of the value of the endowment gift provided by the taxpayer, not to exceed ten thousand dollars ($10,000).
  4. The credit shall be nonrefundable, but any amount of credit that a taxpayer is not able to utilize during a particular taxable year may be carried forward for use in a subsequent taxable year, for a period not to exceed five (5) years.
  5. No tax credit claimed under this section may be sold or transferred. If the taxpayer is a pass-through entity not subject to tax under KRS 141.040 , the amount of approved credit shall be applied against the tax imposed by KRS 141.0401 at the entity level, and shall also be distributed to each partner, member, or shareholder based on the partner’s, member’s, or shareholder’s distributive share of the income of the pass-through entity.
  6. The total amount of tax credit that may be awarded under this section shall be limited to:
    1. Five hundred thousand dollars ($500,000) in each fiscal year beginning on or before July 1, 2015; and
    2. One million dollars ($1,000,000) in each fiscal year beginning on or after July 1, 2016.
  7. A taxpayer pursuing a tax credit under this section shall:
    1. File an application for preliminary authorization of the tax credit with the department;
    2. After receiving preliminary authorization from the department, provide an endowment gift to a qualified community foundation, county-specific component fund, or affiliate community foundation which has been certified under KRS 147A.325 within thirty (30) days of the date of the notice of authorization for the tax credit from the department; and
    3. Within ten (10) days of making the gift, report to the department proof of the endowment gift.
    1. The department shall: (8) (a) The department shall:
      1. Create the application required to be filed by the taxpayer seeking preliminary approval for the tax credit; and
      2. Publish on its Web site the amount of total credit allocated to date, the date the last processed application for preliminary approval was received, and the remaining credit available.
      1. Upon receipt of an application for preliminary approval submitted under subsection (7) of this section, the department shall review the application and, if approved, the department shall issue a notice of preliminary approval to the requesting taxpayer. (b) 1. Upon receipt of an application for preliminary approval submitted under subsection (7) of this section, the department shall review the application and, if approved, the department shall issue a notice of preliminary approval to the requesting taxpayer.
      2. The notice of preliminary approval shall include the amount of credit, shall notify the taxpayer that the proposed gift must be made within thirty (30) days of the date reflected on the notice of authorization, and that the taxpayer must notify the department that the gift has been made, in the form and format determined by the department, within ten (10) days of making the gift.
      3. Upon preliminary approval of an application for credit, the department shall reduce the outstanding available credit cap amount to reflect the preliminary approved credit.
    2. Upon timely receipt of notification from a taxpayer preliminarily approved for a credit that the investment has been timely made, the department shall verify the information provided and, if the information is accurate, the department shall issue a final tax credit letter to the taxpayer.
    3. If a taxpayer fails to make the required investment or provide proof of the investment to the department within the time frames established by this subsection and subsection (7) of this section, the department shall void the preliminary approval and shall restore the allocated amounts to the tax credit cap.

History. Enact. Acts 2010 (1st Ex. Sess.), ch. 2, § 14, effective June 4, 2010; 2014, ch. 138, § 7, effective July 15, 2014.

Refund Designations

141.440. Designation of income tax refund to child victims’ trust fund.

  1. Effective for the tax year beginning January 1, 1984, and until the State Treasurer certifies that the assets in the child victims’ trust fund exceed twenty million dollars ($20,000,000), any individual, or individuals in the case of joint return, who is entitled to a tax refund sufficient to make a designation under this section may designate that two dollars ($2) or four dollars ($4) or any amount of the refund be credited to the child victims’ trust fund.
  2. The tax designation authorized in this section shall be clearly and unambiguously printed on the first page of the state individual income tax return.
  3. The proceeds derived from the tax designation shall be credited to the child victims’ trust fund to be allocated and distributed as provided in KRS 15.900 to 15.940 .

History. Enact. Acts 1984, ch. 382, § 14, effective July 13, 1984; 1986, ch. 439, § 3, effective July 15, 1986.

Research References and Practice Aids

Northern Kentucky Law Review.

Armstrong & Gillig, Responding to Child Sexual Abuse and Exploitation: The Kentucky Approach, 16 N. Ky. L. Rev. 17 (1988).

141.441. Designation of income tax refund to local history trust fund.

  1. Effective for taxable years beginning January 1, 2015, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the local history trust fund created under KRS 171.325 may designate an amount, not to exceed the amount of the refund, to be paid to the trust fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The instructions accompanying the individual income tax return shall include a description of the local history trust fund and the purposes for which the funds from the income tax checkoff may be used.
  3. The commissioner shall, by July 1, 2016, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the local history trust fund created by KRS 171.325 .

History. Enact. Acts 2014, ch. 102, § 15, effective July 15, 2014.

141.442. Tax refund designations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 269, § 1, effective July 15, 1988; 1990, ch. 168, § 1, effective July 13, 1990; 2005, ch. 85, § 513, effective June 20, 2005) was repealed by Act 2005, ch. 27, § 5, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). Under KRS 446.260 , the repeal of this section in 2005 Ky. Acts ch. 27 prevails over its amendment in 2005 Ky. Acts ch. 85.

141.4425. Designation of income tax refund to Kentucky YMCA Youth Association.

  1. Effective for taxable years beginning on or after January 1, 2019, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the Kentucky YMCA Youth Assembly program may designate an amount, not to exceed the amount of the refund, to be paid to the Kentucky YMCA Youth Association. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.
  3. The instructions accompanying the individual income tax return shall include a description of the Kentucky YMCA Youth Assembly and the purposes for which the funds from the income tax checkoff may be used.
  4. The department shall, by July 1, 2020, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the Kentucky YMCA Youth Association.
  5. The funds transferred to the Kentucky YMCA Youth Association under subsection (4) of this section shall be used exclusively in support of the Kentucky YMCA Youth Assembly program.

HISTORY: 2019 ch. 196, § 3, effective June 27, 2019.

141.443. Designation of income tax refund to Special Olympics Kentucky.

  1. Effective for taxable years beginning January 1, 2016, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to Special Olympics Kentucky may designate an amount, not to exceed the amount of the refund, to be paid to Special Olympics Kentucky. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax return.
  3. The instructions accompanying the individual income tax return shall include a description of Special Olympics Kentucky, and the purposes for which the funds from the income tax refund designation may be used.
  4. The commissioner shall, by December 1, 2017, and by December 1 of each year thereafter, transfer the funds designated by taxpayers under this section to Special Olympics Kentucky.

HISTORY: 2015 ch. 96, § 1, effective June 24, 2015.

141.444. Designation of income tax refund to veterans’ program trust fund.

A taxpayer required to file a return pursuant to KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the veterans’ program trust fund established by KRS 40.460(2)(b), may designate an amount, not to exceed the amount of the refund, to be paid to the veterans’ program trust fund. The designation shall not increase or decrease the amount of the income tax liability of a taxpayer, but it shall reduce the income tax refund of the taxpayer by the amount designated.

History. Enact. Acts 1992, ch. 58, § 1, effective July 14, 1992.

141.445. Designation of income tax refund to pediatric cancer research trust fund.

  1. Effective for taxable years beginning on or after January 1, 2016, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the pediatric cancer research trust fund created under KRS 211.595 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.
  3. The instructions accompanying the individual income tax return shall include a description of the pediatric cancer research trust fund and the purposes for which the funds from the income tax checkoff may be used.
  4. The commissioner of the department shall, by July 1, 2017, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the pediatric cancer research trust fund created by KRS 211.595 .

HISTORY: 2015 ch. 96, § 2, effective June 24, 2015; 2015 ch. 108, § 1, effective June 24, 2015.

Legislative Research Commission Notes.

(6/24/2015). This statute was created with identical text in 2015 Ky. Acts chs. 96 and 108, which were companion bills. These Acts have been codified together.

141.446. Designation of income tax refund to breast cancer research and education trust fund.

  1. Effective for taxable years beginning January 1, 2005, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the breast cancer research and education trust fund created under KRS 211.580 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.
  3. The instructions accompanying the individual income tax return shall include a description of the breast cancer research and education trust fund and the purposes for which the funds from the income tax checkoff may be used.
  4. The commissioner of the Department of Revenue shall, by July 1, 2006, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the breast cancer research and education trust fund created by KRS 211.580 .

History. Enact. Acts 2005, ch. 27, § 1, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

141.447. Designation of income tax refund to rape crisis center trust fund.

  1. Effective for taxable years beginning on or after January 1, 2016, any taxpayer required to file a return under KRS 141.180 , who is entitled to an income tax refund and who desires to contribute to the rape crisis center trust fund created by KRS 211.603 , may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form. The instructions accompanying the individual income tax return shall include a description of the rape crisis center trust fund and the purposes for which the funds may be used.
  3. The department shall, by July 1, 2017, and annually thereafter, transfer the funds designated by taxpayers under this section to the rape crisis center trust fund created by KRS 211.603 .

HISTORY: 2015 ch. 108, § 5, effective June 24, 2015.

141.448. Designation of income tax refund to farms to food banks trust fund.

  1. Effective for taxable years beginning on or after January 1, 2013, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the farms to food banks trust fund created under KRS 247.985 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.
  3. The instructions accompanying the individual income tax return shall include a description of the farms to food banks trust fund and the purposes for which the funds from the income tax checkoff may be used.
  4. The commissioner of the Department of Revenue shall, by July 1, 2014, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the farms to food banks trust fund created by KRS 247.985 .

History. Enact. Acts 2012, ch. 159, § 1, effective July 12, 2012.

Legislative Research Commission Notes.

(7/12/2012). 2005 Ky. Acts ch. 85, sec. 701, instructs the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in the Act, as it confirms the reorganization of the Finance and Administration Cabinet. A reference to the “secretary of the Revenue Cabinet” that appeared in 2012 Ky. Acts ch. 159, sec. 1, has been changed during codification to read, “commissioner of the Department of Revenue.”

141.449. Designation of income tax refund to Kentucky CASA network fund.

  1. Effective for taxable years beginning on or after January 1, 2019, any taxpayer required to file a return under KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the Kentucky CASA network fund created by KRS 620.512 may designate an amount, not to exceed the amount of the refund, to be paid to the fund. A designation made under this section shall not affect the income tax liability of the taxpayer, but it shall reduce the income tax refund by the amount designated.
  2. The tax refund designation authorized by this section shall be printed on the face of the Kentucky individual income tax form.
  3. The instructions accompanying the individual income tax return shall include a description of the Kentucky CASA network fund and the purposes for which the funds from the income tax checkoff may be used.
  4. The department shall, by July 1, 2020, and by July 1 of each year thereafter, transfer the funds designated by taxpayers under this section to the Kentucky CASA network fund created by KRS 620.512 .

HISTORY: 2018 ch. 62, § 1, effective July 14, 2018.

Nongame Species and Habitat Acquisition Programs

141.450. Public policy.

The General Assembly declares that it is the public policy of the Commonwealth of Kentucky to set aside and preserve, for the benefit of present and future generations, certain areas of unusual natural significance as laboratories for scientific research, as reservoirs of natural materials not all of the uses of which are now known, as habitats for plant and animal species and biotic communities, as living museums of the native landscape where people may observe nature’s web of life and our natural heritage, as places of historic and natural interest and scenic beauty, and as reminders of the vital human dependence upon fresh air, clean water, and unspoiled natural areas. KRS 141.455 to 141.475 are enacted to provide a means by which the protection of nongame species and the acquisition of land or interests in land and the protection, maintenance, and use of the land, may be financed in part through a voluntary check-off designation on state income tax return forms.

History. Enact. Acts 1980, ch. 121, § 1, effective July 15, 1980.

Compiler’s Notes.

Section 9 of Acts 1980, ch. 121, read: “This Act [KRS 141.450 to 141.480 , 150.165 ] shall apply to individual income tax return forms filed for taxable years beginning after December 31, 1979.”

141.455. Designation of income tax refund to nongame species protection and natural areas acquisition programs.

Each taxpayer required to file a return pursuant to KRS 141.180 who is entitled to an income tax refund and who desires to contribute to the nongame species protection and natural areas acquisition programs of the Commonwealth may designate as provided in this section an amount, not to exceed the amount of the refund, to be paid to such programs. In the case of a joint return, each spouse may also designate that a portion of the refund shall be paid to said programs. Such designation shall not increase or decrease the income tax liability of any taxpayer, but it shall reduce the income tax refund of such taxpayer or spouse by the amount or amounts designated.

History. Enact. Acts 1980, ch. 121, § 2, effective July 15, 1980; 1994, ch. 72, § 1, effective July 15, 1994.

Compiler’s Notes.

For application of this section, see compiler’s notes, KRS 141.450 .

141.460. Space on form for designation.

  1. The Department of Revenue shall print on the face of the Kentucky individual income tax form a space for a taxpayer to designate that a contribution be made to the Kentucky Nature and Wildlife Fund from that taxpayer’s income tax refund. The space for designating the contribution shall be in substantially the following form:
  2. The Department of Revenue shall print in the instructions accompanying the individual income tax form a description of the purposes for which the Kentucky Nature and Wildlife Fund was established and the use of moneys from the income tax check-off.

KENTUCKY NATURE AND WILDLIFE FUND. I wish to contribute

$2 _________ $5 _________ $10 _________ $ _________

of my TAX REFUND TO THE KENTUCKY NATURE AND WILDLIFE FUND.

History. Enact. Acts 1980, ch. 121, § 3, effective July 15, 1980; 1994, ch. 72, § 2, effective July 15, 1994; 2005, ch. 85, § 514, effective June 20, 2005.

Compiler’s Notes.

For application of this section, see compiler’s notes, KRS 141.450 .

141.465. Apportionment of funds — Funds to be placed in interest-bearing account.

The commissioner of the Department of Revenue shall transfer fifty percent (50%) of the funds designated in KRS 141.460 to the nongame fish and wildlife fund created by KRS 150.165 and fifty percent (50%) to the Kentucky nature preserves fund created by KRS 146.520 and shall reduce the amount of the income tax refund by the amount designated. Moneys in each fund shall be placed in an interest-bearing account.

History. Enact. Acts 1980, ch. 121, § 4, effective July 15, 1980; 1994, ch. 72, § 3, effective July 15, 1994; 2005, ch. 85, § 515, effective June 20, 2005.

Compiler’s Notes.

For application of this section, see compiler’s notes, KRS 141.450 .

141.470. Use of funds apportioned to the nature preserves fund.

The Office of Kentucky Nature Preserves shall maintain a separate account showing all remittances to, and disbursements from, the Kentucky nature preserves fund made from contributions under KRS 141.455 . Contributions remitted to the Kentucky nature preserves fund under KRS 141.465 shall be disbursed by the Office of Kentucky Nature Preserves for the acquisition of land or interests in land as provided in KRS 146.465 and for the protection, maintenance, and use of the land, and for no other purpose.

HISTORY: Enact. Acts 1980, ch. 121, § 6, effective July 15, 1980; 2018 ch. 29, § 8, effective July 14, 2018.

Compiler’s Notes.

For application of this section, see compiler’s notes, KRS 141.450 .

141.475. Rules and regulations.

The Department of Revenue shall promulgate such rules and regulations as may be necessary to effectively administer the provisions of KRS 141.455 to 141.470 .

History. Enact. Acts 1980, ch. 121, § 7, effective July 15, 1980; 2005, ch. 85, § 516, effective June 20, 2005.

Compiler’s Notes.

For application of this section, see compiler’s notes, KRS 141.450 .

141.480. Designation provisions void, when.

In the event of the enactment by the General Assembly of an act authorizing the collection of the state individual income tax, levied under KRS Chapter 141, by the federal government, the provisions of KRS 141.450 to 141.475 shall be void and shall stand repealed if the provisions of such act prevent such collection.

History. Enact. Acts 1980, ch. 121, § 8, effective July 15, 1980.

Compiler’s Notes.

For application of this section, see compiler’s notes, KRS 141.450 .

141.900. Definitions for KRS Chapter 141 — Taxable years beginning prior to January 1, 2018.

The definitions in this section are the same as the definitions appearing in KRS 141.010 prior to its repeal and reenactment in Section 53 of 2018 Ky. Acts chs. 171 and 207. For taxable years beginning prior to January 1, 2018, as used in this chapter, unless the context requires otherwise:

  1. “Commissioner” means the commissioner of the department;
  2. “Department” means the Department of Revenue;
  3. “Internal Revenue Code” means the Internal Revenue Code in effect on December 31, 2015, exclusive of any amendments made subsequent to that date, other than amendments that extend provisions in effect on December 31, 2015, that would otherwise terminate, and as modified by KRS 141.0101 ;
  4. “Dependent” means those persons defined as dependents in the Internal Revenue Code;
  5. “Fiduciary” means “fiduciary” as defined in Section 7701(a)(6) of the Internal Revenue Code;
  6. “Fiscal year” means “fiscal year” as defined in Section 7701(a)(24) of the Internal Revenue Code;
  7. “Individual” means a natural person;
  8. “Modified gross income” means the greater of:
    1. Adjusted gross income as defined in Section 62 of the Internal Revenue Code of 1986, including any subsequent amendments in effect on December 31 of the taxable year, and adjusted as follows:
      1. Include interest income derived from obligations of sister states and political subdivisions thereof; and
      2. Include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2); or
    2. Adjusted gross income as defined in subsection (10) of this section and adjusted to include lump-sum pension distributions taxed under the special transition rules of Pub. L. No. 104-188, sec. 1401(c)(2);
  9. “Gross income,” in the case of taxpayers other than corporations, means “gross income” as defined in Section 61 of the Internal Revenue Code;
  10. “Adjusted gross income,” in the case of taxpayers other than corporations, means gross income as defined in subsection (9) of this section minus the deductions allowed individuals by Section 62 of the Internal Revenue Code and as modified by KRS 141.0101 and adjusted as follows, except that deductions shall be limited to amounts allocable to income subject to taxation under the provisions of this chapter, and except that nothing in this chapter shall be construed to permit the same item to be deducted more than once:
    1. Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States and Kentucky;
    2. Exclude income from supplemental annuities provided by the Railroad Retirement Act of 1937 as amended and which are subject to federal income tax by Public Law 89-699;
    3. Include interest income derived from obligations of sister states and political subdivisions thereof;
    4. Exclude employee pension contributions picked up as provided for in KRS 6.505 , 16.545 , 21.360 , 61.523 , 61.560 , 65.155 , 67A.320 , 67A.510 , 78.610 , and 161.540 upon a ruling by the Internal Revenue Service or the federal courts that these contributions shall not be included as gross income until such time as the contributions are distributed or made available to the employee;
    5. Exclude Social Security and railroad retirement benefits subject to federal income tax;
    6. Include, for taxable years ending before January 1, 1991, all overpayments of federal income tax refunded or credited for taxable years;
    7. Deduct, for taxable years ending before January 1, 1991, federal income tax paid for taxable years ending before January 1, 1990;
    8. Exclude any money received because of a settlement or judgment in a lawsuit brought against a manufacturer or distributor of “Agent Orange” for damages resulting from exposure to Agent Orange by a member or veteran of the Armed Forces of the United States or any dependent of such person who served in Vietnam;
      1. For taxable years ending prior to December 31, 2005, exclude the applicable amount of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans. The “applicable amount” shall be: (i) 1. For taxable years ending prior to December 31, 2005, exclude the applicable amount of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans. The “applicable amount” shall be:
        1. Twenty-five percent (25%), but not more than six thousand two hundred fifty dollars ($6,250), for taxable years beginning after December 31, 1994, and before January 1, 1996;
        2. Fifty percent (50%), but not more than twelve thousand five hundred dollars ($12,500), for taxable years beginning after December 31, 1995, and before January 1, 1997;
        3. Seventy-five percent (75%), but not more than eighteen thousand seven hundred fifty dollars ($18,750), for taxable years beginning after December 31, 1996, and before January 1, 1998; and
        4. One hundred percent (100%), but not more than thirty-five thousand dollars ($35,000), for taxable years beginning after December 31, 1997.
      2. For taxable years beginning after December 31, 2005, exclude up to forty-one thousand one hundred ten dollars ($41,110) of total distributions from pension plans, annuity contracts, profit-sharing plans, retirement plans, or employee savings plans.
      3. As used in this paragraph:
        1. “Distributions” includes but is not limited to any lump-sum distribution from pension or profit-sharing plans qualifying for the income tax averaging provisions of Section 402 of the Internal Revenue Code; any distribution from an individual retirement account as defined in Section 408 of the Internal Revenue Code; and any disability pension distribution;
        2. “Annuity contract” has the same meaning as set forth in Section 1035 of the Internal Revenue Code; and
        3. “Pension plans, profit-sharing plans, retirement plans, or employee savings plans” means any trust or other entity created or organized under a written retirement plan and forming part of a stock bonus, pension, or profit-sharing plan of a public or private employer for the exclusive benefit of employees or their beneficiaries and includes plans qualified or unqualified under Section 401 of the Internal Revenue Code and individual retirement accounts as defined in Section 408 of the Internal Revenue Code;
      1. a. Exclude the portion of the distributive share of a shareholder’s net income from an S corporation subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 ; and (j) 1. a. Exclude the portion of the distributive share of a shareholder’s net income from an S corporation subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 ; and
      2. The shareholder’s basis of stock held in a S corporation where the S corporation or its qualified subchapter S subsidiary is subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300 shall be the same as the basis for federal income tax purposes;
      b. Exclude the portion of the distributive share of a shareholder’s net income from an S corporation related to a qualified subchapter S subsidiary subject to the franchise tax imposed under KRS 136.505 or the capital stock tax imposed under KRS 136.300.
    9. Exclude, to the extent not already excluded from gross income, any amounts paid for health insurance, or the value of any voucher or similar instrument used to provide health insurance, which constitutes medical care coverage for the taxpayer, the taxpayer’s spouse, and dependents, or for any person authorized to be provided excludable coverage by the taxpayer pursuant to the federal Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, or the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, during the taxable year. Any amounts paid by the taxpayer for health insurance that are excluded pursuant to this paragraph shall not be allowed as a deduction in computing the taxpayer’s net income under subsection (11) of this section;
    10. Exclude income received for services performed as a precinct worker for election training or for working at election booths in state, county, and local primary, regular, or special elections;
    11. Exclude any amount paid during the taxable year for insurance for long-term care as defined in KRS 304.14-600 ;
    12. Exclude any capital gains income attributable to property taken by eminent domain;
    13. Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the Master Settlement Agreement, signed on November 22, 1998;
    14. Exclude any amount received from the secondary settlement fund, referred to as “Phase II,” established by tobacco companies to compensate tobacco farmers and quota owners for anticipated financial losses caused by the national tobacco settlement;
    15. Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a reduction in the quantity of tobacco quota allotted;
    16. Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in;
    17. Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner;
    18. Exclude all income from all sources for active duty and reserve members and officers of the Armed Forces of the United States or National Guard who are killed in the line of duty, for the year during which the death occurred and the year prior to the year during which the death occurred. For the purposes of this paragraph, “all income from all sources” shall include all federal and state death benefits payable to the estate or any beneficiaries; and
    19. For taxable years beginning on or after January 1, 2010, exclude all military pay received by active duty members of the Armed Forces of the United States, members of reserve components of the Armed Forces of the United States, and members of the National Guard, including compensation for state active duty as described in KRS 38.205 ;
  11. “Net income,” in the case of taxpayers other than corporations, means adjusted gross income as defined in subsection (10) of this section, minus:
    1. The deduction allowed by KRS 141.0202 as it existed prior to January 1, 2018;
    2. Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families;
    3. For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years beginning before 2010; and
      1. All the deductions allowed individuals by Chapter 1 of the Internal Revenue Code as modified by KRS 141.0101 except: (d) 1. All the deductions allowed individuals by Chapter 1 of the Internal Revenue Code as modified by KRS 141.0101 except:
        1. Any deduction allowed by the Internal Revenue Code for state or foreign taxes measured by gross or net income, including state and local general sales taxes allowed in lieu of state and local income taxes under the provisions of Section 164(b)(5) of the Internal Revenue Code;
        2. Any deduction allowed by the Internal Revenue Code for amounts allowable under KRS 140.090(1)(h) in calculating the value of the distributive shares of the estate of a decedent, unless there is filed with the income return a statement that such deduction has not been claimed under KRS 140.090(1)(h);
        3. The deduction for personal exemptions allowed under Section 151 of the Internal Revenue Code and any other deductions in lieu thereof;
        4. For taxable years beginning on or after January 1, 2010, the domestic production activities deduction allowed under Section 199 of the Internal Revenue Code;
        5. Any deduction for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained;
        6. Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under this chapter;
        7. The itemized deduction limitation established in 26 U.S.C. sec. 68 shall be determined using the applicable amount from 26 U.S.C. sec. 68 as it existed on December 31, 2006; and
        8. A taxpayer may elect to claim the standard deduction allowed by KRS 141.081 instead of itemized deductions allowed pursuant to 26 U.S.C. sec. 63 and as modified by this section; and
      2. Nothing in this chapter shall be construed to permit the same item to be deducted more than once;
  12. “Gross income,” in the case of corporations, means “gross income” as defined in Section 61 of the Internal Revenue Code and as modified by KRS 141.0101 and adjusted as follows:
    1. Exclude income that is exempt from state taxation by the Kentucky Constitution and the Constitution and statutory laws of the United States;
    2. Exclude all dividend income received after December 31, 1969;
    3. Include interest income derived from obligations of sister states and political subdivisions thereof;
    4. Exclude fifty percent (50%) of gross income derived from any disposal of coal covered by Section 631(c) of the Internal Revenue Code if the corporation does not claim any deduction for percentage depletion, or for expenditures attributable to the making and administering of the contract under which such disposition occurs or to the preservation of the economic interests retained under such contract;
    5. Include the amount calculated under KRS 141.205 ;
    6. Ignore the provisions of Section 281 of the Internal Revenue Code in computing gross income;
    7. Exclude income from “safe harbor leases” (Section 168(f)(8) of the Internal Revenue Code);
    8. Exclude any amount received by a producer of tobacco or a tobacco quota owner from the multistate settlement with the tobacco industry, known as the Master Settlement Agreement, signed on November 22, 1998;
    9. Exclude any amount received from the secondary settlement fund, referred to as “Phase II,” established by tobacco companies to compensate tobacco farmers and quota owners for anticipated financial losses caused by the national tobacco settlement;
    10. Exclude any amount received from funds of the Commodity Credit Corporation for the Tobacco Loss Assistance Program as a result of a reduction in the quantity of tobacco quota allotted;
    11. Exclude any amount received as a result of a tobacco quota buydown program that all quota owners and growers are eligible to participate in;
    12. For taxable years beginning after December 31, 2004, and before January 1, 2007, exclude the distributive share income or loss received from a corporation defined in subsection (24)(b) of this section whose income has been subject to the tax imposed by KRS 141.040 . The exclusion provided in this paragraph shall also apply to a taxable year that begins prior to January 1, 2005, if the tax imposed by KRS 141.040 is paid on the distributive share income by a corporation defined in subparagraphs 2. to 8. of subsection (24)(b) of this section with a return filed for a period of less than twelve (12) months that begins on or after January 1, 2005, and ends on or before December 31, 2005. This paragraph shall not be used to delay payment of the tax imposed by KRS 141.040; and
    13. Exclude state Phase II payments received by a producer of tobacco or a tobacco quota owner;
  13. “Net income,” in the case of corporations, means “gross income” as defined in subsection (12) of this section minus:
    1. The deduction allowed by KRS 141.0202 as it existed prior to January 1, 2018;
    2. Any amount paid for vouchers or similar instruments that provide health insurance coverage to employees or their families;
    3. For taxable years beginning on or after January 1, 2010, the amount of domestic production activities deduction calculated at six percent (6%) as allowed in Section 199(a)(2) of the Internal Revenue Code for taxable years beginning before 2010; and
    4. All the deductions from gross income allowed corporations by Chapter 1 of the Internal Revenue Code and as modified by KRS 141.0101 , except:
      1. Any deduction for a state tax which is computed, in whole or in part, by reference to gross or net income and which is paid or accrued to any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or to any foreign country or political subdivision thereof;
      2. The deductions contained in Sections 243, 245, and 247 of the Internal Revenue Code;
      3. The provisions of Section 281 of the Internal Revenue Code shall be ignored in computing net income;
      4. Any deduction directly or indirectly allocable to income which is either exempt from taxation or otherwise not taxed under the provisions of this chapter, and nothing in this chapter shall be construed to permit the same item to be deducted more than once;
      5. Exclude expenses related to “safe harbor leases” (Section 168(f)(8) of the Internal Revenue Code);
      6. Any deduction for amounts paid to any club, organization, or establishment which has been determined by the courts or an agency established by the General Assembly and charged with enforcing the civil rights laws of the Commonwealth, not to afford full and equal membership and full and equal enjoyment of its goods, services, facilities, privileges, advantages, or accommodations to any person because of race, color, religion, national origin, or sex, except nothing shall be construed to deny a deduction for amounts paid to any religious or denominational club, group, or establishment or any organization operated solely for charitable or educational purposes which restricts membership to persons of the same religion or denomination in order to promote the religious principles for which it is established and maintained;
      7. Any deduction prohibited by KRS 141.205 ;
      8. Any dividends-paid deduction of any captive real estate investment trust; and
      9. For taxable years beginning on or after January 1, 2010, the domestic production activities deduction allowed under Section 199 of the Internal Revenue Code;
    1. “Taxable net income,” in the case of corporations that are taxable in this state, means “net income” as defined in subsection (13) of this section; (14) (a) “Taxable net income,” in the case of corporations that are taxable in this state, means “net income” as defined in subsection (13) of this section;
    2. “Taxable net income,” in the case of corporations that are taxable in this state and taxable in another state, means “net income” as defined in subsection (13) of this section and as allocated and apportioned under KRS 141.901 . A corporation is taxable in another state if, in any state other than Kentucky, the corporation is required to file a return for or pay a net income tax, franchise tax measured by net income, franchise tax for the privilege of doing business, or corporate stock tax;
    3. “Taxable net income,” in the case of homeowners’ associations as defined in Section 528(c) of the Internal Revenue Code, means “taxable income” as defined in Section 528(d) of the Internal Revenue Code. Notwithstanding the provisions of subsection (3) of this section, the Internal Revenue Code sections referred to in this paragraph shall be those code sections in effect for the applicable tax year; and
    4. “Taxable net income,” in the case of a corporation that meets the requirements established under Section 856 of the Internal Revenue Code to be a real estate investment trust, means “real estate investment trust taxable income” as defined in Section 857(b)(2) of the Internal Revenue Code, except that a captive real estate investment trust shall not be allowed any deduction for dividends paid;
  14. “Person” means “person” as defined in Section 7701(a)(1) of the Internal Revenue Code;
  15. “Taxable year” means the calendar year or fiscal year ending during such calendar year, upon the basis of which net income is computed, and in the case of a return made for a fractional part of a year under the provisions of this chapter or under regulations prescribed by the commissioner, “taxable year” means the period for which the return is made;
  16. “Resident” means an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in the aggregate more than one hundred eighty-three (183) days of the taxable year in this state;
  17. “Nonresident” means any individual not a resident of this state;
  18. “Employer” means “employer” as defined in Section 3401(d) of the Internal Revenue Code;
  19. “Employee” means “employee” as defined in Section 3401(c) of the Internal Revenue Code;
  20. “Number of withholding exemptions claimed” means the number of withholding exemptions claimed in a withholding exemption certificate in effect under KRS 141.325 , except that if no such certificate is in effect, the number of withholding exemptions claimed shall be considered to be zero (0);
  21. “Wages” means “wages” as defined in Section 3401(a) of the Internal Revenue Code and includes other income subject to withholding as provided in Section 3401(f) and Section 3402(k), (o), (p), (q), and (s) of the Internal Revenue Code;
  22. “Payroll period” means “payroll period” as defined in Section 3401(b) of the Internal Revenue Code;
    1. For taxable years beginning before January 1, 2005, and after December 31, 2006, “corporation” means “corporation” as defined in Section 7701(a)(3) of the Internal Revenue Code; and (24) (a) For taxable years beginning before January 1, 2005, and after December 31, 2006, “corporation” means “corporation” as defined in Section 7701(a)(3) of the Internal Revenue Code; and
    2. For taxable years beginning after December 31, 2004, and before January 1, 2007, “corporations” means:
      1. “Corporations” as defined in Section 7701(a)(3) of the Internal Revenue Code;
      2. S corporations as defined in Section 1361(a) of the Internal Revenue Code;
      3. A foreign limited liability company as defined in KRS 275.015 ;
      4. A limited liability company as defined in KRS 275.015 ;
      5. A professional limited liability company as defined in KRS 275.015;
      6. A foreign limited partnership as defined in KRS 362.2-102(9);
      7. A limited partnership as defined in KRS 362.2-102(14);
      8. A limited liability partnership as defined in KRS 362.155(7) or in 362.1-101(7) or (8);
      9. A real estate investment trust as defined in Section 856 of the Internal Revenue Code;
      10. A regulated investment company as defined in Section 851 of the Internal Revenue Code;
      11. A real estate mortgage investment conduit as defined in Section 860D of the Internal Revenue Code;
      12. A financial asset securitization investment trust as defined in Section 860L of the Internal Revenue Code; and
      13. Other similar entities created with limited liability for their partners, members, or shareholders.
  23. “Doing business in this state” includes but is not limited to:
    1. Being organized under the laws of this state;
    2. Having a commercial domicile in this state;
    3. Owning or leasing property in this state;
    4. Having one (1) or more individuals performing services in this state;
    5. Maintaining an interest in a pass-through entity doing business in this state;
    6. Deriving income from or attributable to sources within this state, including deriving income directly or indirectly from a trust doing business in this state, or deriving income directly or indirectly from a single-member limited liability company that is doing business in this state and is disregarded as an entity separate from its single member for federal income tax purposes; or
    7. Directing activities at Kentucky customers for the purpose of selling them goods or services.
  24. “Pass-through entity” means any partnership, S corporation, limited liability company, limited liability partnership, limited partnership, or similar entity recognized by the laws of this state that is not taxed for federal purposes at the entity level, but instead passes to each partner, member, shareholder, or owner their proportionate share of income, deductions, gains, losses, credits, and any other similar attributes;
  25. “S corporation” means “S corporation” as defined in Section 1361(a) of the Internal Revenue Code;
  26. “Limited liability pass-through entity” means any pass-through entity that affords any of its partners, members, shareholders, or owners, through function of the laws of this state or laws recognized by this state, protection from general liability for actions of the entity; and
  27. “Captive real estate investment trust” means a real estate investment trust as defined in Section 856 of the Internal Revenue Code that meets the following requirements:
      1. The shares or other ownership interests of the real estate investment trust are not regularly traded on an established securities market; or (a) 1. The shares or other ownership interests of the real estate investment trust are not regularly traded on an established securities market; or
      2. The real estate investment trust does not have enough shareholders or owners to be required to register with the Securities and Exchange Commission; and
      1. The maximum amount of stock or other ownership interest that is owned or constructively owned by a corporation equals or exceeds: (b) 1. The maximum amount of stock or other ownership interest that is owned or constructively owned by a corporation equals or exceeds:
        1. Twenty-five percent (25%), if the corporation does not occupy property owned, constructively owned, or controlled by the real estate investment trust; or
        2. Ten percent (10%), if the corporation occupies property owned, constructively owned, or controlled by the real estate investment trust.
      2. For the purposes of this paragraph:
        1. “Corporation” means a corporation taxable under KRS 141.040 , and includes an affiliated group as defined in KRS 141.200 , that is required to file a consolidated return pursuant to the provisions of KRS 141.200 ; and
        2. “Owned or constructively owned” means owning shares or having an ownership interest in the real estate investment trust, or owning an interest in an entity that owns shares or has an ownership interest in the real estate investment trust. Constructive ownership shall be determined by looking across multiple layers of a multilayer pass-through structure; and
    1. The real estate investment trust is not owned by another real estate investment trust.

For purposes of this paragraph, “corporation” shall not include any publicly traded partnership as defined by Section 7704(b) of the Internal Revenue Code that is treated as a partnership for federal tax purposes under Section 7704(c) of the Internal Revenue Code or its publicly traded partnership affiliates. As used in this paragraph, “publicly traded partnership affiliates” shall include any limited liability company or limited partnership for which at least eighty percent (80%) of the limited liability company member interests or limited partner interests are owned directly or indirectly by the publicly traded partnership;

Nothing in this subsection shall be interpreted in a manner that goes beyond the limitations imposed and protections provided by the United States Constitution or Pub. L. No. 86-272;

The total ownership interest of a corporation shall be determined by aggregating all interests owned or constructively owned by a corporation;

HISTORY: 2018 ch. 171, § 52, effective April 14, 2018; 2018 ch. 207, § 52, effective April 27, 2018; 2020 ch. 91, § 16, effective April 15, 2020.

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 16 of that Act apply to taxable years beginning on or after January 1, 2019.

(4/27/2018). KRS 141.0202 was repealed in 2018 Ky. Acts chs. 171 and 207, but a conforming amendment was not made to this statute to address the reference it contains to KRS 141.0202 . The Reviser of Statutes has determined that making such a conforming change during the 2018 codification exceeds the permissible correction of manifest clerical or typographical errors under KRS 7.136(1)(h). Therefore, the reference to KRS 141.0202 remains unchanged and would have to be changed pursuant to future legislative action.

141.901. Division of income of interstate business for tax purposes — Apportionment — Taxable years beginning prior to January 1, 2018.

The provisions of this section are the same as appeared in KRS 141.120 prior to its repeal and reenactment in Section 60 of 2018 Ky. Acts chs. 171 and 207. This section applies to all corporations for taxable years beginning prior to January 1, 2018, and to a provider, as defined in KRS 141.121 , for taxable years beginning on or after January 1, 2018.

  1. As used in this section, unless the context requires otherwise:
    1. “Business income” means income arising from transactions and activity in the regular course of a trade or business of the corporation and includes income from tangible and intangible property if the acquisition, management, or disposition of the property constitutes integral parts of the corporation’s regular trade or business operations;
    2. “Commercial domicile” means the principal place from which the trade or business of the corporation is managed;
    3. “Compensation” means wages, salaries, commissions, and any other form of remuneration paid or payable to employees for personal services;
    4. “Financial organization” means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank, investment company, or any type of insurance company;
    5. “Nonbusiness income” means all income other than business income;
    6. “Public service company” means any business entity subject to taxation under KRS 136.120 ;
    7. “Sales” means all gross receipts of the corporation not allocated under subsections (3) to (7) of this section, except as provided by KRS 141.121 ; and
    8. “State” means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof.
  2. Any corporation which is required by KRS 141.900 to allocate and apportion its net income shall allocate and apportion its net income as provided in this section.
  3. Rents and royalties from real property, intangible or tangible personal property, capital gains and losses, interest, or patent or copyright royalties, to the extent that they constitute nonbusiness income, shall be allocated as provided in subsections (4) to (7) of this section.
    1. Net rents and royalties from real property located in this state are allocable to this state. (4)   (a)   Net rents and royalties from real property located in this state are allocable to this state.
    2. Net rents and royalties from tangible personal property are allocable to this state if and to the extent that the property is utilized in this state; or in their entirety if the corporation’s commercial domicile is in this state and the corporation is not organized under the laws of or taxable in the state in which the property is utilized.
    3. The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the corporation, the tangible personalty is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession.
    4. Net rents and royalties from intangible personal property located in this state are allocable to this state. For purposes of this section, royalties from property leased in Kentucky shall be considered as royalties from intangible personal property.
    1. Capital gains and losses from sales or other dispositions of real property located in this state are allocable to this state. (5)   (a)   Capital gains and losses from sales or other dispositions of real property located in this state are allocable to this state.
    2. Capital gains and losses from sales or other dispositions of tangible personal property are allocable to this state if the property had a situs in this state at the time of the sale, or the corporation’s commercial domicile is in this state and the corporation is not taxable in the state in which the property had a situs.
    3. Capital gains and losses from sales or other dispositions of intangible personal property are allocable to this state if the corporation’s commercial domicile is in this state.
  4. Interest is allocable to this state if the corporation’s commercial domicile is in this state.
    1. Patent and copyright royalties are allocable to this state if and to the extent that the patent or copyright is utilized by the payer in this state; or if and to the extent that the patent or copyright is utilized by the payer in a state in which the corporation is not taxable and the corporation’s commercial domicile is in this state. (7)   (a)   Patent and copyright royalties are allocable to this state if and to the extent that the patent or copyright is utilized by the payer in this state; or if and to the extent that the patent or copyright is utilized by the payer in a state in which the corporation is not taxable and the corporation’s commercial domicile is in this state.
    2. A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state or to the extent that a patented product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the patent is utilized in the state in which the corporation’s commercial domicile is located.
    3. A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the corporation’s commercial domicile is located.
    1. Except as provided in subsection (9) of this section, all business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor, representing twenty-five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2). (8)   (a)   Except as provided in subsection (9) of this section, all business income shall be apportioned to this state by multiplying the income by a fraction, the numerator of which is the property factor, representing twenty-five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2).
    2. 1.   The property factor is a fraction, the numerator of which is the average value of the corporation’s real and tangible personal property owned or rented and used in this state during the tax period and the denominator of which is the average value of all the corporation’s real and tangible personal property owned or rented and used during the tax period; provided, however, that property which has been certified as a pollution control facility as defined in KRS 224.1-300 shall be excluded from the property factor. 2. Property owned is valued at its original cost. If the original cost of any property is not determinable or is nominal or zero (0) the property shall be valued by the department pursuant to administrative regulations promulgated by the department. Property rented is valued at eight (8) times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the corporation less any annual rental rate received by the corporation from subrentals, provided that the rental and subrentals are reasonable. If the department determines that the annual rental or subrental rate is unreasonable, or if a nominal or zero (0) rate is charged, the department may determine and apply the rental rate as will reasonably reflect the value of the property rented by the corporation. 3. The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the department may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the property.
    3. The payroll factor is a fraction, the numerator of which is the total amount paid or payable in this state during the tax period by the corporation for compensation, and the denominator of which is the total compensation paid or payable by the corporation everywhere during the tax period. Compensation is paid or payable in this state if:
      1. The individual’s service is performed entirely within the state;
      2. The individual’s service is performed both within and without the state, but the service performed without the state is incidental to the individual’s service within the state; or
      3. Some of the service is performed in the state and the base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the state, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual’s residence is in this state.
    4. 1.   The sales factor is a fraction, the numerator of which is the total sales of the corporation in this state during the tax period, and the denominator of which is the total sales of the corporation everywhere during the tax period. 2. Sales of tangible personal property are in this state if:
      1. The property is delivered or shipped to a purchaser, other than the United States government, or to the designee of the purchaser within this state regardless of the f.o.b. point or other conditions of the sale; or
      2. The property is shipped from an office, store, warehouse, factory, or other place of storage in this state and the purchaser is the United States government. 3. Sales, other than sales of tangible personal property, are in this state if the income-producing activity is performed in this state; or the income-producing activity is performed both in and outside this state and a greater proportion of the income-producing activity is performed in this state than in any other state, based on costs of performance.
    1. If the allocation and apportionment provisions of this section do not fairly represent the extent of the corporation’s business activity in this state, the corporation may petition for or the department may require, in respect to all or any part of the corporation’s business activity, if reasonable: (9)   (a)   If the allocation and apportionment provisions of this section do not fairly represent the extent of the corporation’s business activity in this state, the corporation may petition for or the department may require, in respect to all or any part of the corporation’s business activity, if reasonable:
      1. Separate accounting;
      2. The exclusion of any one (1) or more of the factors;
      3. The inclusion of one (1) or more additional factors which will fairly represent the corporation’s business activity in this state; or
      4. The employment of any other method to effectuate an equitable allocation and apportionment of income.
    2. A corporation may elect the allocation and apportionment methods for the corporation’s business income provided for in subparagraphs 1. and 2. of this paragraph. The election, if made, shall be irrevocable for a period of five years.
      1. All business income derived directly or indirectly from the sale of management, distribution, or administration services to or on behalf of regulated investment companies, as defined under the Internal Revenue Code of 1986, as amended, including trustees, and sponsors or participants of employee benefit plans which have accounts in a regulated investment company, shall be apportioned to this state only to the extent that shareholders of the investment company are domiciled in this state as follows:
        1. Total business income shall be multiplied by a fraction, the numerator of which shall be Kentucky receipts from the services for the tax period and the denominator of which shall be the total receipts everywhere from the services for the tax period;
        2. For purposes of subdivision a. of this subparagraph, Kentucky receipts shall be determined by multiplying total receipts for the tax period from each separate investment company for which the services are performed by a fraction. The numerator of the fraction shall be the average of the number of shares owned by the investment company’s shareholders domiciled in this state at the beginning of and at the end of the investment company’s taxable year, and the denominator of the fraction shall be the average of the number of the shares owned by the investment company shareholders everywhere at the beginning of and at the end of the investment company’s taxable year; and
        3. Nonbusiness income shall be allocated to this state as provided in subsections (4) to (7) of this section.
      2. All business income derived directly or indirectly from the sale of securities brokerage services by a business which operates within the boundaries of any area of the Commonwealth, which on June 30, 1992, was designated as a Kentucky Enterprise Zone, as described in KRS 154.655(2) before that statute was renumbered in 1992, shall be apportioned to this state only to the extent that customers of the securities brokerage firm are domiciled in this state. The portion of business income apportioned to Kentucky shall be determined by multiplying the total business income from the sale of these services by a fraction determined in the following manner:
        1. The numerator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by customers domiciled in Kentucky for the brokerage firm’s taxable year;
        2. The denominator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by all of the brokerage firm’s customers for that year; and
        3. Nonbusiness income shall be allocated to this state as provided in subsections (4) to (7) of this section.
  5. Public service companies and financial organizations required by KRS 141.900 to allocate and apportion net income shall allocate and apportion such income as follows:
    1. Nonbusiness income shall be allocated to this state as provided in subsections (4) to (7) of this section;
    2. Business income shall be apportioned to this state by multiplying the business income by a fraction, the numerator of which is the property factor, representing twenty-five percent (25%) of the fraction, plus the payroll factor, representing twenty-five percent (25%) of the fraction, plus the sales factor, representing fifty percent (50%) of the fraction, and the denominator of which is four (4), reduced by the number of factors, if any, having no denominator, provided that if the sales factor has no denominator, then the denominator shall be reduced by two (2). The payroll factor shall be determined as provided in subsection (8)(c) of this section. The property factor and sales factor shall be determined as provided by administrative regulations promulgated by the department.
    3. An affiliated group electing to file a consolidated return under KRS 141.200(4) or required to file a consolidated return under KRS 141.200(11) that includes a public service company, a provider of communications services or multichannel video programming services as defined in KRS 136.602 , or a financial organization shall determine the amount of payroll to be included in the apportionment factor as provided in subsection (8)(c) of this section. The amount of property and sales of the public service company, provider of communications services or multichannel video programming services as defined in KRS 136.602 , or financial organization to be included in the apportionment factors of the affiliated group shall be determined in accordance with administrative regulations promulgated by the department under paragraph (b) of this subsection.
  6. For taxable years beginning on or after January 1, 2007, a corporation that:
    1. Owns an interest in a limited liability pass-through entity; or
    2. Owns an interest in a general partnership organized or formed as a general partnership after January 1, 2006;

shall include the proportionate share of sales, property, and payroll of the limited liability pass-through entity or general partnership when apportioning income, and shall include the proportionate share of sales in calculating the tax due pursuant to KRS 141.0401 . The phrases “an interest in a limited liability pass-through entity” and “an interest in a general partnership organized or formed as a general partnership after January 1, 2006,” shall extend to each level of multiple-tiered pass-through entities.

HISTORY: 2018 ch. 171, § 59, effective April 14, 2018; 2018 ch. 207, § 59, effective April 27, 2018.

Legislative Research Commission Notes.

(4/27/2018). This statute was created by 2018 Ky. Acts ch. 171, sec. 59 and ch. 207, sec. 59, which are nearly identical and have been codified together.

Interest and Penalties

141.985. Interest on tax not paid by date due — Addition to tax provided in KRS 141.305 and 141.044 to be considered a penalty.

  1. Except for the addition to tax required when an underpayment of estimated tax occurs under KRS 141.044 and 141.305 , any tax imposed by this chapter, whether assessed by the department, or the taxpayer, or any installment or portion of the tax is not paid on or before the date prescribed for its payment, there shall be collected, as a part of the tax, interest upon the unpaid amount at the tax interest rate as defined in KRS 131.010(6) from the date prescribed for its payment until payment is actually made to the department.
  2. Interest shall be assessed, collected, and paid in the same manner as if it were a deficiency.
  3. For purposes of this section, any addition to tax provided in KRS 141.044 and 141.305 shall be considered a penalty.

History. Enact. Acts 1978, ch. 233, § 17, effective June 17, 1978; 1982, ch. 452, § 26, effective July 1, 1982; 2005, ch. 85, § 517, effective June 20, 2005; 2019 ch. 151, § 58, effective June 27, 2019; 2020 ch. 91, § 17, effective April 15, 2020.

Compiler’s Notes.

Section 40 of Acts 1978, ch. 233, read: “The provisions of sections eight (8) through seventeen (17) of this Act shall apply to taxable years beginning after December 31, 1977.”

Legislative Research Commission Notes.

(4/15/2020). 2020 Ky. Acts ch. 91, sec. 76 provides that the changes made to this statute in Section 17 of that Act apply to taxable years beginning on or after January 1, 2019.

NOTES TO DECISIONS

  1. Liability of Corporate Officer.
  2. Taxpayers.
1. Liability of Corporate Officer.

A corporate officer acting as the taxpayer for withholding tax purposes, was personally liable for penalties and interest due for the late payment of taxes. Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

2. Taxpayers.

The term “taxpayer” as used in this chapter must follow the definition in KRS 131.010 and KRS 134.010 . Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

141.990. Penalties.

  1. Any individual, fiduciary, corporation, employer, or other person who violates any of the provisions of this chapter shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 .
  2. Every tax imposed by this chapter, and all increases, interest, and penalties thereon, shall become, from the time it is due and payable, a personal debt to the state from the taxpayer or other person liable therefor.
  3. In addition to the penalties herein prescribed, any taxpayer or employer, who willfully fails to make a return or willfully makes a false return, or who willfully fails to pay taxes owing or collected, with intent to evade payment of the tax or amount collected, or any part thereof, shall be guilty of a Class D felony.
  4. Any person who willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under this chapter of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not the falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document, shall be guilty of a Class D felony.
  5. A return for the purpose of this section shall mean and include any return, declaration, or form prescribed by the department and required to be filed with the department by the provisions of this chapter, or by the rules and regulations of the department or by written request for information to the taxpayer by the department.

History. 4281b-21: amend. Acts 1950, ch. 189, §§ 3 and 4, effective March 25, 1950; 1956 (4th Ex. Sess.), ch. 4, § 16; 1960, ch. 5, Art. III, § 9; 1962, ch. 124, § 7; 1966, ch. 176, part I, § 13; 1970, ch. 216, § 12; 1972, ch. 84, part II, § 7; 1976, ch. 155, § 16; 1978, ch. 233, § 16, effective June 17, 1978; 1990, ch. 29, § 2, effective July 1, 1990; 1992, ch. 338, § 27, effective July 14, 1992; 1992, ch. 403, § 19, effective July 14, 1992; 1992, ch. 463, § 17, effective July 14, 1992; 2005, ch. 168, § 32, effective March 18, 2005; 2005, ch. 85, § 518, effective June 20, 2005; 2006, ch. 6, § 18, effective March 6, 2006; 2006 (1st Extra. Sess.), ch. 2, § 71, effective June 28, 2006; 2019 ch. 151, § 59, effective June 27, 2019.

Compiler’s Notes.

Original KRS 141.990 (4281b-21) was repealed by Acts 1950, ch. 189, § 3.

The provisions of the 1972 amendment to this section shall apply to taxable years beginning after December 31, 1971.

Section 17 of Acts 1976, ch. 155, provided that the provisions of the 1976 amendment to this section shall apply to taxable years beginning after December 31, 1975.

Section 40 of Acts 1978, ch. 233 reads: “The provisions of sections eight (8) through seventeen (17) of this Act shall apply to taxable years beginning after December 31, 1977.”

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

Legislative Research Commission Notes.

(6/28/2006). 2006 (1st Extra Sess.) Ky. Acts ch. 2, § 73, provides that “unless a provision of this Act specifically applies to an earlier tax year, the provisions of this Act shall apply to taxable years beginning on or after January 1, 2007.”

(3/18/2005). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been codified together.

(7/13/90). The amendment to this section made by House Bill 255, 1990 Ky. Acts ch. 29, was made effective for taxable years beginning on or after July 1, 1990.

NOTES TO DECISIONS

  1. Failure to File.
  2. Liability of Corporate Officer.
  3. Taxpayer.
  4. Bankruptcy Proceedings.
  5. Predeprivation Remedies.
1. Failure to File.

Penalty provided by city ordinance for failure to file an occupational license tax return within the time due was not void for excessiveness, since it was no greater than penalties authorized by Congress for failure to file a tax return pursuant to 26 USCS, § 6651(a), or by subsection (1) of this section for failure to file an income tax return, and it was substantially less than the penalty approved by the Court of Appeals in Davis v. Becker, 309 Ky. 775 , 219 S.W.2d 6, 1949 Ky. LEXIS 810 (Ky. App. 1949). Louisville v. Fischer Packing Co., 520 S.W.2d 744, 1975 Ky. LEXIS 171 ( Ky. 1975 ).

2. Liability of Corporate Officer.

A corporate officer acting as the taxpayer for withholding tax purposes, was personally liable for penalties and interest due for the late payment of taxes. Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

3. Taxpayer.

The term “taxpayer” as used in this chapter must follow the definition in KRS 131.010 and KRS 134.010 . Koppel v. Revenue Cabinet, Commonwealth, 777 S.W.2d 938, 1989 Ky. App. LEXIS 136 (Ky. Ct. App. 1989).

4. Bankruptcy Proceedings.

Debt for state withholding taxes was nondischargeable, under bankruptcy proceedings; however, under federal law the penalties due on the nondischargeable withholding taxes, owed to the Kentucky Revenue Cabinet, pursuant to KRS 131.440 and this section, were dischargeable. Hardin v. United States, 140 B.R. 158, 1992 Bankr. LEXIS 704 (Bankr. E.D. Ky. 1992 ).

5. Predeprivation Remedies.

Because the statutory scheme of Kentucky is pointedly designed to coerce taxpayers into remitting taxes before challenging any liability to avoid potential economic disadvantage, this state does not offer meaningful, adequate predeprivation remedies for purposes of federal law. Revenue Cabinet v. Gossum, 887 S.W.2d 329, 1994 Ky. LEXIS 85 ( Ky. 1994 ), limited, Dawson v. Birenbaum, 968 S.W.2d 663, 1998 Ky. LEXIS 56 ( Ky. 1998 ).

Cited in:

Hahn v. Allphin, 282 S.W.2d 824, 1955 Ky. LEXIS 263 ( Ky. 1955 ); Ky. Bar Ass’n v. McDaniel, 205 S.W.3d 201, 2006 Ky. LEXIS 288 ( Ky. 2006 ).

Opinions of Attorney General.

Direct legislative command requires the Department of Revenue to assess a penalty for failure to file a quarterly report of withholding taxes when no tax is due to be paid. OAG 61-1002 .

Where water district withheld taxes from wages of employee, but never reported or remitted such taxes and new commissioners were subsequently appointed for the district, the new commissioners, as agents of the employer district were responsible for insuring that all obligations were fulfilled, even though they did not hold office during the years in question and if the new commissioners willfully failed to remit the moneys presently, they could be subject to those penalties contained in former subsection (11) of this section; additionally, if the former water district commissioners could be shown to have willfully failed to report and remit the taxes withheld, they could be subject to such penalties as the agents of the employer who controlled the payment of wages. OAG 83-314 .

CHAPTER 142 Miscellaneous Taxes

142.010. State taxes on legal processes and instruments — Distribution of amount collected.

  1. The following taxes shall be paid:
    1. A tax of four dollars and fifty cents ($4.50) on each marriage license;
    2. A tax of four dollars ($4) on each power of attorney to convey real or personal property;
    3. A tax of four dollars ($4) on each mortgage, financing statement, or security agreement and on each notation of a security interest on a certificate of title under KRS 186A.190 ;
    4. A tax of four dollars ($4) on each conveyance of real property; and
    5. A tax of four dollars ($4) on each lien or conveyance of coal, oil, gas, or other mineral right or privilege.
  2. The tax imposed by this section shall be collected by each county clerk as a prerequisite to the issuance of a marriage license or the original filing of an instrument subject to the tax. Subsequent assignment of the original instrument shall not be cause for additional taxation under this section. This section shall not be construed to require any tax upon a deed of release of a lien retained in a deed or mortgage.
  3. Taxes imposed under this section shall be reported and paid to the Department of Revenue by each county clerk within ten (10) days following the end of the calendar month in which instruments subject to tax are filed or marriage licenses issued. Each remittance shall be accompanied by a summary report on a form prescribed by the department.
  4. Any county clerk who violates any of the provisions of this section shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 . In every case, any tax not paid on or before the due date shall bear interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.
  5. One dollar ($1) of the amount collected under each paragraph of subsection (1) of this section shall be placed in an agency fund in the Department for Libraries and Archives to be used exclusively for the purpose of preserving and retaining public records by continuing the local records grant program active in the Department for Libraries and Archives. The budgeted amount of funds allocated to the grant program in the fiscal year 2005-2006 departmental budget shall not be reduced in future years, and shall be increased annually by this additional revenue to be used exclusively for the grants program.

History. 4238: amend. Acts 1948, ch. 61, § 6; 1960, ch. 12; 1976 (Ex. Sess.), ch. 14, § 159; 1978, ch. 233, § 21, effective June 17, 1978; 1980, ch. 145, § 1, effective July 15, 1980; 1982, ch. 452, § 27, effective July 1, 1982; 1982, ch. 375, § 4, effective July 15, 1982; 1984, ch. 172, § 2, effective July 13, 1984; 1986, ch. 52, § 1, effective July 15, 1986; 1992, ch. 403, § 20, effective July 14, 1992; 2000, ch. 408, § 177, effective July 1, 2001; 2005, ch. 85, § 519, effective June 20, 2005; 2006, ch. 255, § 12, effective January 1, 2007.

Compiler's Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

NOTES TO DECISIONS

  1. Payment.
  2. Collection.
  3. Civil Suit Tax.
  4. Conditional Sales Contract.
  5. Cross-appeal.
  6. Recording of Mortgage.
1. Payment.

The person who requests the service or the performance of the transaction on which the tax is imposed is to pay the tax. Grieb v. National Bond & Inv. Co., 264 Ky. 289 , 94 S.W.2d 612, 1936 Ky. LEXIS 300 ( Ky. 1936 ).

2. Collection.

The officer who renders the service or performs the transaction is to collect the tax. Grieb v. National Bond & Inv. Co., 264 Ky. 289 , 94 S.W.2d 612, 1936 Ky. LEXIS 300 ( Ky. 1936 ).

3. Civil Suit Tax.

The fact that plaintiff avoided payment of second tax on action by filing amended petition in first action, after dismissal, instead of filing new action, was not grounds for reversing judgment for plaintiff. Chicago, B. & Q. R. Co. v. Blakemore, 250 Ky. 604 , 63 S.W.2d 770, 1933 Ky. LEXIS 741 ( Ky. 1933 ).

4. Conditional Sales Contract.

A conditional sales contract is subject to the tax imposed by this section. Grieb v. National Bond & Inv. Co., 264 Ky. 289 , 94 S.W.2d 612, 1936 Ky. LEXIS 300 ( Ky. 1936 ).

5. Cross-appeal.

There is no tax on a cross-appeal in the Court of Appeals. Marion County v. Spaulding, 143 Ky. 289 , 136 S.W. 235, 1911 Ky. LEXIS 389 ( Ky. 1911 ).

6. Recording of Mortgage.

Production credit association was not exempt from the excise tax imposed by this section each time it recorded a mortgage by reason of KRS 136.290 inasmuch as it was not the property aspect of the mortgage which was being taxed, but the transaction of the recording of the mortgage. Department of Revenue v. Cumberland Production Credit Asso., 551 S.W.2d 836, 1977 Ky. App. LEXIS 713 (Ky. Ct. App. 1977).

Opinions of Attorney General.

The proper fee to be charged by the clerk for receiving and recording an assignment of a lien note is $3.25. OAG 62-973 .

The tax provided for under subsection (1)(d) is not due in connection with the filing of a continuation statement. OAG 67-29 .

In the absence of a written demand as set out in paragraph (b) of subsection (2) of KRS 43.050 an audit by the auditor of public accounts of local officials in their handling of fines, forfeitures, and legal process taxes is permissive only. OAG 67-320 .

The conveyance of easements for telephone lines and the conveyance of cemetery lots are both subject to the tax imposed by this section. OAG 69-261 .

There is no exemption for the transfer of interest in lands either by way of easement or deed to governmental agencies. OAG 69-313 .

The exemptions of KRS 136.300 apply to the tax imposed by this section. OAG 72-512 .

This section deals with transactions affecting the property interests, real or personal, of affected parties to the transactions. OAG 72-512 .

The tax of $1.00 applies only to original financing statements and not to continuation statements. OAG 74-465 .

The tax imposed by this section is in addition to required filing fees and must be collected in addition to such fees by the secretary whenever, in the circumstances described in subsection (1) of former KRS 355.9-401, financing statements are filed under former KRS 355.9-402 and 355.9-403. OAG 75-624 .

A continuation statement is not included in the definition of a financing statement, and is not subject to the $1.00 (now $3.00) tax imposed by former subsection (1)(b) of this section on original financing statements involving more than $200, nor the $1.00 for filing and noting a statement of release which has already been paid and is not to be included in calculating the fee for filing a continuation statement. OAG 79-147 .

The taxes imposed by this section and KRS 142.050 are not to be levied on certain federal instrumentalities, including: Federal Land Banks, Production Credit Associations, the Farmers Home Administration, and federal savings and loan associations. OAG 80-270 .

A local savings and loan association is not exempt from the legal process tax imposed by this section, since the federal statutes do not exempt those financial institutions insured by the Federal Savings and Loan Insurance Corporation. OAG 81-323 .

The state deed tax imposed pursuant to this section and the real estate transfer tax imposed pursuant to KRS 142.050 are irrevocable and not conditioned upon the deed being recorded; accordingly, a grantee who tenders a deed and land purchase contract to the county clerk and who then retrieves them prior to recordation cannot receive a refund of either tax. OAG 81-392 .

When recording the transfer of notes secured by mortgages on single-family dwellings located within the Commonwealth of Kentucky, the county clerk must collect a state tax of one dollar ($1) (now three dollars ($3)) on each note effectively transferred pursuant to the provisions of former subdivision (1)(b) of this section, as such transfers constitute conveyances of personal property. OAG 82-264 .

The language “any conveyance of real or personal property” was obviously designed to embrace any transfer of a property interest to another, regardless of its precise nature and legal or equitable effect. OAG 85-66 .

A deed of assignment of a real estate mortgage is a conveyance of real property in the sense envisioned in this section, since the words “any conveyance,” as used in this section, are broad enough to cover conveyances of real and personal property that do not amount to an absolute conveyance of title or a conveyance of legal title. OAG 85-66 .

Where a deed of trust, involving real and/or personal property, or a deed of assignment, as a conveyance of real and/or personal property for the benefit of creditors, is filed with the county clerk for record, the state tax of three dollars ($3) must be collected by the county clerk. OAG 85-66 .

The state tax imposed by subdivision (1)(c) of this section applies only to the filing of the original statement and not the filing of a continuation statement. OAG 87-52 .

A legal process or instrument tax pursuant to this section is not applicable to an instrument known as an “assignment of a real estate mortgage.” OAG 92-130 .

From a plain reading of the provisions of subsection (1) of this section, it can be seen that an “assignment of a real estate mortgage” is not among the legal processes or instruments specifically described which are subject to the tax imposed in such subsection. Further, such an instrument is not encompassed within any of the types of processes or instruments which are listed, such that it might be said to be taxable by implication. OAG 92-130 .

A “contract for deed,” a “mineral lease,” and a “real estate lease,” are taxable conveyances pursuant to subsection (1) of this section while an “easement release,” a “deed of restriction” and a “land use restriction” are not “conveyances,” and thus are not subject to taxation under this section. OAG 95-12 .

Whether a given type of instrument is taxable hinges on whether an instrument is a “conveyance” within the meaning of either subdivision (1)(d) or (1)(e) of this section. OAG 95-12 .

An “easement” is taxable as a “conveyance” under either subdivision (1)(d) (real property) or (1)(e) (minerals or other mineral right or privilege) of this section. OAG 95-12 .

Research References and Practice Aids

Cross-References.

Counties to receive portion of revenue realized under paragraphs (a) and (b) of subsection (1) of this section, KRS 47.110 .

Tax on deed to be paid before recording, KRS 382.260 .

142.011. State taxes on legal actions and appeals. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 61, § 4, effective March 24, 1948; 1950, ch. 130, §§ 1, 2 and 3; 1962, ch. 10, § 1; 1972, ch. 338, § 1; 1974, ch. 40, § 1) was repealed by Acts 1976 (Ex. Sess.), ch. 14, § 491, effective January 2, 1978.

142.015. Commission of county clerk for collecting taxes.

The county clerk, in each county, shall be allowed five percent (5%) commission on the amounts collected for state taxes on legal processes and instruments provided for under KRS 142.010 , said five percent (5%) commission to be retained by the county clerk on said sums reported to the Department of Revenue and paid by the county clerk into the State Treasury.

History. Enact. Acts 1946, ch. 43; 1978, ch. 233, § 22, effective June 17, 1978; 1978, ch. 384, § 285, effective June 17, 1978; 2005, ch. 85, § 520, effective June 20, 2005.

NOTES TO DECISIONS

Cited in:

Greenup County v. Millis, 303 S.W.2d 898, 1957 Ky. LEXIS 272 ( Ky. 1957 ).

Opinions of Attorney General.

In the absence of a written demand as set out in paragraph (b) of subsection (2) of KRS 43.050 an audit by the auditor of public accounts of local officials in their handling of fines, forfeitures, and legal process taxes is permissive only. OAG 67-320 .

Research References and Practice Aids

Kentucky Law Journal.

Vanlandingham, The Fee System in Kentucky Counties, 40 Ky. L.J. 275 (1952).

142.020. Individuals who are exempt from poll tax. [Repealed.]

Compiler’s Notes.

This section (4239i-2, 4239i-2a: amend. Acts 1944, ch. 119) was repealed by Acts 1974, ch. 316, § 6.

142.030. Tax on criminal convictions paid into state treasury. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1956, ch. 37, §§ 2, 3; 1962, ch. 261, § 2; 1966, ch. 26, § 8; 1976 (Ex. Sess.), ch. 14, § 485; 1976 (Ex. Sess.), ch. 17, § 42) was repealed by Acts 1979 (Ex. Sess.), ch. 7, § 8, effective July 1, 1979.

142.040. Docket fee. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 282, §§ 2, 3; 1972, ch. 324, § 2; 1976 (Ex. Sess.), ch. 17, § 43) was repealed by Acts 1979 (Ex. Sess.), ch. 7, § 8, effective July 1, 1979.

142.050. Real estate transfer tax — Collection on recording — Exemptions.

  1. As used in this section, unless the context otherwise requires:
    1. “Deed” means any document, instrument, or writing other than a will and other than a lease or easement, regardless of where made, executed, or delivered, by which any real property in Kentucky, or any interest therein, is conveyed, vested, granted, bargained, sold, transferred, or assigned.
    2. “Value” means:
      1. In the case of any deed not a gift, the amount of the full actual consideration therefor, paid or to be paid, including the amount of any lien or liens thereon; and
      2. In the case of a gift, or any deed with nominal consideration or without stated consideration, the estimated price the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer, both conversant with the property and with prevailing general price levels.
  2. A tax upon the grantor named in the deed shall be imposed at the rate of fifty cents ($0.50) for each $500 of value or fraction thereof, which value is declared in the deed upon the privilege of transferring title to real property.
    1. If any deed evidencing a transfer of title subject to the tax herein imposed is offered for recordation, the county clerk shall ascertain and compute the amount of the tax due thereon and shall collect the amount as prerequisite to acceptance of the deed for recordation. (3) (a) If any deed evidencing a transfer of title subject to the tax herein imposed is offered for recordation, the county clerk shall ascertain and compute the amount of the tax due thereon and shall collect the amount as prerequisite to acceptance of the deed for recordation.
    2. The amount of tax shall be computed on the basis of the value of the transferred property as set forth in the deed.
    3. The tax required to be levied by this section shall be collected only once on each transaction and in the county in which the deed is required to be recorded by KRS 382.110(1).
  3. The county clerk shall collect the amount due and certify the date of payment and the amount of collection on the deed. The county clerk shall retain five percent (5%) as his fee for collection and remit the balance every three (3) months to the county treasurer, who shall deposit the money in the county general fund.
  4. The Department of Revenue may prescribe regulations necessary to carry out the purposes of this section.
  5. Any county clerk who willfully shall record any deed upon which a tax is imposed by this section without collecting the proper amount of tax and certifying the date and amount of collection on the deed as required by this section based on the declared value indicated in the affidavit appended to the deed shall, upon conviction, be fined $50 for each offense.
  6. The tax imposed by this section shall not apply to a transfer of title:
    1. Recorded prior to March 27, 1968;
    2. To, in the event of a deed of gift or deed with nominal consideration, or from the United States of America, this state, any city or county within this state, or any instrumentality, agency, or subdivision hereof;
    3. Solely in order to provide or release security for a debt or obligation;
    4. Which confirms or corrects a deed previously recorded;
    5. Between husband and wife, or between former spouses as part of a divorce proceeding;
    6. On sale for delinquent taxes or assessments;
    7. On partition;
    8. Pursuant to:
      1. Merger or consolidation between and among corporations, partnerships, limited partnerships, or limited liability companies; or
      2. Any conversion of a partnership, limited partnership, corporation, or limited liability company into a partnership, limited partnership, corporation, or limited liability company;
    9. Between a subsidiary corporation and its parent corporation for no consideration, nominal consideration, or in sole consideration of the cancellation or surrender of either corporation’s stock;
      1. Under a foreclosure proceeding; or (j) 1. Under a foreclosure proceeding; or
      2. Pursuant to a voluntary surrender under a mortgage in lieu of a foreclosure proceeding;
    10. Between a person and a corporation, partnership, limited partnership or limited liability company in an amount equal to the portion of the value of the real property transferred that represents the proportionate interest of the transferor of the property in the entity to which the property was transferred, if the transfer was for nominal consideration;
    11. Between parent and child or grandparent and grandchild, with only nominal consideration therefor;
    12. By a corporation, partnership, limited partnership, or limited liability company to a person as owner or shareholder of the entity, upon dissolution of the entity, in an amount equal to the portion of the value of the real property transferred that represents the proportionate interest of the person to whom the property was transferred, if the transfer was for nominal consideration;
    13. Between a trustee and a successor trustee; and
    14. Between a limited liability company and any of its members.
  7. The tax imposed by subsection (2) of this section shall not apply to transfers to a trustee, to be held in trust, or from a trustee to a beneficiary of the trust if:
    1. The grantor is the sole beneficiary of the trust;
    2. The grantor is a beneficiary of the trust and a direct transfer from the grantor of the trust to all other individual beneficiaries of the trust would have qualified for an exemption from the tax pursuant to one (1) of the provisions of subsection (7) of this section; or
    3. A direct transfer from the grantor of the trust to all other individual beneficiaries of the trust would have qualified for an exemption from the tax pursuant to one (1) of the provisions of subsection (7) of this section.
  8. As used in this section, “trust” shall have the same definition as contained in KRS 386B.1-010 .

History. Enact. Acts 1968, ch. 182, §§ 1 to 7; 1970, ch. 161, § 1; 1972, ch. 84, part III, § 2; 1974, ch. 42, § 1; 1978, ch. 251, § 1, effective June 17, 1978; 1990, ch. 411, § 6, effective July 13, 1990; 1992, ch. 19, § 1, effective July 14, 1992; 1994, ch. 55, § 1, effective July 15, 1994; 1996, ch. 29, § 1, effective February 29, 1996; 1998, ch. 341, § 2, effective July 15, 1998; 2005, ch. 85, § 521, effective June 20, 2005; 2006, ch. 149, § 204, effective July 12, 2006; 2012, ch. 44, § 3, effective July 12, 2012; 2014, ch. 25, § 97, effective July 15, 2014.

Legislative Research Commission Notes.

(7/12/2006). Under the authority of KRS 7.136(1), during codification a manifest clerical or typographical error occurring in 2006 Ky. Acts ch. 149, sec. 204(7)(h)2. has been corrected. It is clear from the context of the Act that a comma should appear after the words “limited partnership” and before the word “corporation.”

NOTES TO DECISIONS

1. Exemptions.

Improper reference to KRS 142.050(7)(e) as a cause for exemption from the transfer tax was improper, but a father could have taken advantage of KRS 142.050(7)( l ), and the “defect” was irrelevant to the validity of the deed. Smith v. Vest, 265 S.W.3d 246, 2007 Ky. App. LEXIS 466 (Ky. Ct. App. 2007).

County clerks were not entitled to summary judgment in their action to enforce a state transfer tax against two federal secondary lenders because, while they had standing to bring the suit, they lacked authority to do so, the federal charter exemptions were constitutional as an appropriate exercise of Congress’ powers in regulating the secondary mortgage market, and there was no federal interference in the State’s power to tax. Spoonamore v. Fed. Hous. Fin. Agency, 2014 U.S. Dist. LEXIS 6210 (E.D. Ky. Jan. 17, 2014).

Opinions of Attorney General.

Transfers of property to a city would be exempt from the application of the tax. OAG 68-155 .

If the deed method is utilized to reflect the consideration involved then the obligation falls upon the grantor-seller to show the consideration, whereas, if the consideration is not reflected in the deed, then the affidavit must be utilized and its preparation falls upon the grantee-purchaser. OAG 68-168 .

The duty to pay the tax falls on the seller. OAG 68-168 .

The tax imposed by this section is not applicable to leases but is applicable to the transfer of any other interest in real property. OAG 68-220 .

The tax imposed by this section is payable by the grantor as a tax on the privilege of transferring title to real property. OAG 68-220 .

Where consideration is or will be paid for the property, the full consideration must be shown in the deed and it cannot be restricted to the sum of cash paid unless that is the full actual consideration. OAG 68-225 .

The records required to be kept by this section are public records and subject to the right of inspection by the general public. OAG 68-252 .

Where the Commonwealth or its agency or instrumentality is the grantor in a deed offered for recordation, such conveyance is subject to the real estate transfer tax. OAG 68-284 .

Where a deed embraces land in more than one county the real estate transfer tax imposed by this section would be computed on the value of all the property conveyed in such a deed. OAG 68-285 .

Where a subdivision owner sells a lot to a builder who erects a house on it, and the deed is from the subdivision owner to the ultimate purchaser of the house and lot, “value” is the total price paid for the house and lot despite the fact that part of the purchase price was paid to one party, the subdivision owner, and part to another party, the builder. OAG 68-413 .

If a deed was executed, dated and delivered prior to March 28, 1968, the tax would not be applicable even though offered for recordation on or after March 28, 1968. OAG 68-414 .

The tax would not be collected on “strawman” deeds in which the property is reconveyed to the original owners with survivorship. OAG 68-414 .

The transfer tax applies to a quitclaim deed. OAG 68-425 .

A deed from a mortgagor to the secretary of housing and urban development given in lieu of foreclosure is exempt from the transfer tax. OAG 68-603 .

A deed from the secretary of housing and urban development to an individual or corporation conveying real property would be subject to the transfer tax. OAG 68-603 .

A transaction involving a deed from a mortgagee to the secretary of housing and urban development following acquisition by the mortgagee at a foreclosure sale would be exempt from the transfer tax. OAG 68-603 .

A transfer involving a deed from a mortgagor to a mortgagee for the purpose of providing security and a subsequent conveyance of the same property by the mortgagee to the secretary of housing and urban development in lieu of foreclosure would be exempt from the transfer tax. OAG 68-603 .

Where easements were granted by members to a nonprofit membership corporation for $1.00, an affidavit stating the estimated value would have to be filed and the tax paid on the estimated value. OAG 69-279 .

Where easements were granted by members to a nonprofit membership corporation, the transfer tax applied. OAG 69-279 .

Where the affidavit showed that a conveyance of property was made to provide security for an obligation to pay an indebtedness, the transfer was exempt from the tax. OAG 69-672 .

Deeds of conveyance by the secretary of housing and urban development conveying real property to private persons are not subject to the tax imposed by this section, either against the grantor or the grantee. OAG 70-19 .

When a deed which is not between husband and wife or parent and child recites only a nominal consideration, the value on which the tax would be paid would be the estimated open market price which should be set up in the accompanying affidavit. OAG 70-236 .

Where the urban renewal and community development agency condemns the property and obtains master commissioner’s deeds, the real estate transfer tax should be charged against the owner of condemned property. OAG 70-489 .

Any amount recited in a deed that is substantially less than the fair cash value of the property would be considered “nominal consideration.” OAG 70-541 .

The real estate transfer tax is not collectible on foreclosure sales involving the Government National Mortgage Association and the Federal National Mortgage Association where they bid in their own mortgages at the sales at the amount that does not exceed the indebtedness plus allowable costs. OAG 71-211 .

Deeds involving an exchange of property are subject to the tax provided for in this section. OAG 72-201 .

The state transfer tax on deeds is applicable where real estate is exchanged for other real estate with no money changing hands. OAG 72-336 .

A gift that is not between husband and wife or parent and child which states that the consideration was love and affection must have an affidavit setting out the prevailing market price of the property in question in order that the transfer tax can be applied. OAG 72-544 .

This section would apply to a sale of timber rights. OAG 72-789 .

In the case of a real estate conveyance to a straw man and an immediate conveyance back to husband and wife to create a joint holding, there is no necessity to recite fair market value in the deed from which the transfer tax is normally computed because the tax does not apply to such situations. OAG 74-158 .

A transfer of estate property from individuals (heirs) to a corporation in consideration of a promise among the heirs to transfer such realty is a taxable transfer and subject to this section. OAG 74-460 .

The transfer of land owned by two individuals to a corporation for stock is subject to real estate transfer tax on the full, actual consideration, even though the transfer involves a gift. OAG 74-540 .

Severance damages are something other than the fair cash value of a piece of property which has been expropriated by the federal government for public purposes and should not be considered in arriving at the total value upon which the transfer tax is to be levied when a deed covering such property is presented for recording with the county clerk. OAG 74-601 .

Where A owns 50% of an undivided interest in a piece of real estate, B owns 37.5% and C owns 12.5%, with the deed to the real estate held in the name of C as trustee, and A enters into an agreement to purchase the 50% interest of B and C for $41,687.60 and to hold them harmless of any further liability on the mortgage, the value of the transfer is $41,687.60 plus one half (1/2) of the unpaid balance of the mortgage. OAG 74-686 .

Where property is transferred by deed without a stated consideration and without a stated exemption is former subsection (8) of this section for this type of transfer, it is subject to the transfer tax provided for in this section to be determined as set out in clause 2 of subdivision (1)(b). OAG 75-17 .

Since this section makes no provisions for considering two or more deeds in the aggregate, where a total of 30 deeds was lodged to the board of education conveying various interests in a certain tract with a total consideration of $160,000, each deed must be evaluated in order to apply the tax rate, as the aggregate method is not authorized by this section and each deed must bear the correct amount of tax. OAG 75-32 .

The transfer of real estate from a corporation to a partnership in consideration of the cancellation of certain stock is subject to the transfer tax. OAG 75-326 .

The real estate transfer tax imposed on real property conveyed in Kentucky applies to land acquired by the state under threat of condemnation and the exceptions set out in former subdivision (8)(b) of this section apply only to gifts as transfers for a nominal consideration made to the state, neither of which are applicable in this situation. OAG 75-510 .

A transfer of real property between a former husband and wife pursuant to a divorce decree is subject to the real estate transfer tax assessed on one half (1/2) of the fair market value of the property. OAG 75-642 .

Section 4655 of title 42 of the United States Code, requiring state agencies to pay property transfer taxes where a federal program is involved, controls over this section, which is in conflict with that requirement. OAG 76-60 .

This section does not apply to a deed evidencing a title transfer effected prior to March 27, 1968, but offered for recordation subsequent to that date. OAG 76-59 .

Property transferred from the owner to a second person, two distinct parties, and then transferred from the second person to a third party is subject to the real estate transfer tax in this section for the simple reason that the transfer does not come within any of the exceptions listed in former subsection (8) of this section. OAG 76-83 .

Where three (3) individuals, who are the sole partners comprising a partnership and who hold the fee simple to real estate in their individual capacity, convey the real estate as individuals to the partnership in the partnership’s name, in such transaction an interest in real property is conveyed or transferred and therefore a transfer tax is due on the conveyance of real estate since such transaction does not come within any of the exceptions to the tax as listed in former subsection (8) of this section. OAG 76-618 .

Where a corporation is in the process of dissolution and the corporation’s liquidating dividend consists of real estate and the liquidating corporation conveys the deed to the real estate to the shareholders, each of three (3) shareholders receiving an undivided one-third interest, such conveyance of an interest in real property would not come within any of the exceptions listed under former subsection (8) of this section and therefore a transfer tax is due on the conveyance. OAG 76-618 .

Where as a result of a dissolution of a partnership among the parties a division of real property was made with additional compensation in the form of notes, mortgages, and other obligations assumed by certain parties in order to equalize the partition and distribution of the partnership assets, the deeds of partition qualify for the exemption under former subdivision (8)(g) of this section. OAG 77-119 .

The parenthetical expression “(in the event of a deed of gift or deed with nominal consideration)” was intended to apply to conveyances of real property to the enumerated governmental units, since the context does not suggest that the parenthetical expression was intended to apply to conveyances both to and from such governmental units. OAG 77-152 .

Where a person dies leaving property to his son or daughter who is also executor or executrix of the estate and such person deeds the decedent’s real property to the son or daughter as devisee no transfer tax would be due because real property passes directly from the testator to the devisee; the executor has no title in between. OAG 77-502 .

A transfer of real property by a parent to a trustee where the property is held in trust for the sole and exclusive use and benefit of the children of said parent is a transfer of title exempt from the tax imposed by this section; the transfer of real property by the trustee and succeeding trustee would be exempt if the transfer is made to a child or children of the original transferor but if made to another person or persons, not members of the transferor’s family, the transfer tax would apply. OAG 78-195 .

The transfer tax provided for in this section would not apply where a corporation transfers without consideration a tract of land to a partnership that is composed identically of the shareholders of the corporation. OAG 78-555 .

OAG 71-211 is modified by this OAG to state that the real estate transfer tax is collectible. OAG 78-748 .

The amendment of this section in former subdivision (8)(b), which ushered in the parenthetical expression that a deed to the Commonwealth would qualify as an exception only if the deed were a deed of gift or a deed with nominal consideration, was enacted in 1974 and the parenthetical expression modifies only the last antecedent. OAG 78-748 .

The legislature intended to except “easements” from the deed transfer tax (withdrawing OAG 68-235 ). OAG 79-233 .

The deed transfer tax applies to a transfer from a person to in-laws. OAG 79-236 .

Where the consideration on a deed was reduced from $20,900 and changed to $1.00, neither value should be accepted as the record value, rather it should be taxed at the prevailing market price for property of its nature. OAG 79-236 .

A judicial sales case wherein the title interests of persons owning a joint interest in the real property as being sold is taxable under this section, there being no applicable exception. OAG 79-641 .

The taxes imposed by KRS 142.010 and this section are not to be levied on certain federal instrumentalities, including: Federal Land Banks, Production Credit Associations, the Farmers Home Administration, and federal savings and loan associations. OAG 80-270 .

A theological seminary is not exempt by virtue of Ky. Const., § 170, from the payment of a real estate transfer tax required by this section since the real estate transfer tax is a tax on the privilege of transferring title to real property and thus in the nature of a license tax; accordingly, Ky. Const., § 170, which applies only to ad valorem taxes, does not apply to exempt the seminary. OAG 81-276 .

The state deed tax imposed pursuant to KRS 142.010 and the real estate transfer tax imposed pursuant to this section are irrevocable and not conditioned upon the deed being recorded; accordingly, a grantee who tenders a deed and land purchase contract to the county clerk and who then retrieves them prior to recordation cannot receive a refund of either tax. OAG 81-392 .

Where debtor executed general warranty deed to creditor bank in lieu of foreclosure, solely in order to ultimately procure a release of first mortgage given previously as security for bank loan, the deed in question fell squarely under the exception in former subdivision (8)(c) of this section, which excluded the deed from the application of the transfer tax. OAG 82-227 .

Where quitclaim deed was executed purely as a deed of correction as to the surveyed boundaries of a piece of property, although it was not called a deed of correction, and the transfer tax had already been paid in connection with transfer of the property involving the same grantor and grantee, it did not have to be paid again, as the quitclaim deed was exempt under former subdivision (8)(d) of this section. OAG 82-345 .

Institutions of purely public charity are exempt from payment of the real estate transfer charges levied by this section pursuant to Ky. Const., § 170. OAG 82-484 .

While this section does serve the function of providing the property valuation administrator with certain necessary information, the primary purpose of this section appears to be revenue raising. OAG 82-484 .

Since the purchaser of a condominium unit receives a recordable deed conveying a fee simple title to the unit and an undivided interest in the common elements, since the owner may convey or encumber the unit in any manner he wishes, but in so doing he does not jeopardize the interests of any coowner in the project and since each condominium unit is taxed separately and a coowner has no responsibility for the individual debts of other coowners, the instrument or deed conveying or transferring such ownership would be subject to the real estate transfer tax imposed by this section. However, where a corporation has only a 40-year lease which it will assign by an instrument of conveyance to individuals or corporations purchasing condominium units the instrument used to transfer ownership is an assignment of a lease and is by definition not a deed, therefore the instruments conveying the leasehold interest of the corporation to individual purchasers are not subject to the real estate transfer tax imposed by this section. OAG 82-529 .

A sale by a trustee in bankruptcy of real estate does not come within the exception of former subsection (8) of this section and is subject to the transfer tax imposed thereunder. OAG 83-10 .

Where individual transfers deed, for a nominal consideration, to himself as trustee of his own revocable trust, a transfer of title by deed within the meaning of this section has occurred because this section does not require that both the equitable and legal title be transferred. Additionally, none of the exemptions under former subsection (8) of this section would apply. OAG 83-43 .

Where only nominal consideration is shown on a deed, and the clerk has reason to believe that substantial consideration was paid, and where the tax applies, the value, for purposes of computing the tax, would be the estimated price the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer, both conversant with the property and with prevailing general price levels; of course, where the clerk can actually determine by good proof the actual substantial consideration paid, that actual amount paid would govern in calculating the proper tax to be placed on it. OAG 83-89 .

Where the deed falls within one of the exceptions to the tax under former subsection (8) of this section, no specific or actual consideration is required to be shown in the deed. OAG 83-89 .

Since a deed arising out of a condemnation proceeding was from private owners to city and actually involved substantial consideration, although amount of consideration was not specified in deed, the deed transfer was taxable under this section; the tax could be computed under subsection (2) of this section by determining the actual consideration received by grantors from the city. The duty of paying the tax clearly fell on the seller and the grantors could not avoid the incidence of the tax just because the deed did not spell out the actual consideration. OAG 83-89 .

Transfers from a partnership to the individuals comprising the partnership in dissolution or otherwise, the transfer being by one deed to the three (3) partners as “tenants-in-common” are exempt under former subdivision (8)(k) of this section. OAG 83-203 .

A transfer where a partnership, in essence, subdivides the property and transfers portions of the property to the individual partners with the subdivision of the property being based on the partners’ respective percentage of ownership constitutes a partition of the property which is exempt from the transfer tax under former subdivision (8)(g) of this section. OAG 83-203 .

A transfer by a trustee to a successor trustee appointed pursuant to the original trust instrument is subject to the real estate transfer tax. OAG 83-203 .

Transfers from individuals to a partnership composed of those same individuals whereby the property is placed in the “partnership’s name” are exempt under former subdivision (8)(k) of this section. OAG 83-203 .

The state tax on real estate transfers is collectible under this section where the deed is for nominal or unstated consideration and is a gift in reality as applies to a deed between grandparents to grandchildren or an aunt to a niece; former subdivision 8(e) of this section provides an exception to the tax if the deed is between husband and wife, or parent and child, with only nominal consideration. OAG 83-365 .

Where a single piece of property lies in more than one county, the transfer tax should be paid only to the clerk of the county in which the greatest part of the property lies; only one clerk will collect the tax, and thus only one clerk will get the fee for collection. OAG 84-48 .

Where the recorded will of partner devised his undivided one-third interest in partnership property to his three (3) sons, equally, share and share alike, the holding of those interests in the certain real estate owned by the partnership occurred as a result of the probated will of their father; since this section relates to deeds, but not to wills, the transfer tax had no application in such situation. OAG 84-73 .

Where, in a foreclosure of a mortgage proceeding, the title to the real estate is transferred, the literal language of former subdivision (8)(j) of this section exempts the transaction from the imposition of the tax regardless of who is grantee in the deed. OAG 84-229 .

The tax, where applicable, is upon the grantor named in the deed, not the grantee. OAG 84-229 .

For a transfer to be exempt from the real estate transfer tax, there must be a specific statutory authorization for the exemption, and since subsection (7) exempts only real estate transferred from a subsidiary to a parent corporation, the transfer from a parent to a subsidiary corporation is not exempt from the real estate transfer tax. OAG 91-5 .

A transfer of real estate from a parent corporation to a subsidiary corporation is not exempt [under subdivision (7)(i) of this section] from the real estate transfer tax. OAG 92-122 .

“Individuals” as employed in provision (7)(k) of this section does not encompass corporations. OAG 92-122 .

Transfers to a governmental unit are exempt from the real estate transfer tax only if the transfer is a gift or there is only nominal consideration. OAG 93-73 .

Where grantor desired to transfer real property to a revocable living trust in which grantor would be the beneficiary of a life estate in the property, and his wife and children would be beneficiaries of the remainder interest, the transfer was not “for the sole and exclusive benefit” of the children and spouse, and was therefore not exempt from the transfer tax. OAG 94-23 .

Subsection (7) of this section exempts transfers to or from trustees only if the transfer would be exempt if made directly from grantor to beneficiary. The provision does not exempt all transfers to trustees. OAG 95-15 .

Research References and Practice Aids

Kentucky Law Journal.

Property Tax Assessment Administration in Kentucky, 60 Ky. L.J. 141 (1971).

Northern Kentucky Law Review.

Brandt, Kentucky Real Estate Law Survey: 1990 Through 1993, 21 N. Ky. L. Rev. 435 (1994).

142.060. Charitable institutions include organizations owning properties listed in National Register.

It is declared to be the public policy of the Commonwealth of Kentucky that institutions of purely public charity as referred to in Section 170 of the Constitution of the Commonwealth of Kentucky include nonprofit corporations, societies, and organizations that own or maintain properties which are or become listed by the United States Department of Interior in the National Register as authorized by title 16, United States Code, section 470(f).

History. Enact. Acts 1976, ch. 318, § 1.

Collection and Remittance of CMRS Prepaid Service Charges

142.100. Definitions for KRS 142.100 to 142.135.

As used in KRS 142.100 to 142.135 :

  1. “Board” means the Kentucky 911 Services Board established in KRS 65.7623 ;
  2. “Department” means the Kentucky Department of Revenue;
  3. “Fund” means the CMRS fund established in KRS 65.7627 ;
  4. “CMRS prepaid service charge” means the charge imposed on prepaid wireless telecommunications service under KRS 65.7634 ;
  5. “Purchaser” means a person who purchases prepaid wireless telecommunications service in a retail transaction;
  6. “Retail transaction” means the purchase of prepaid wireless telecommunications service from a retailer for any purpose other than resale; and
  7. “Retailer” means a person who sells prepaid wireless telecommunications service to any person for a purpose other than resale.

HISTORY: 2016 ch. 111, § 16, effective January 1, 2017.

142.105. Collection and remittance of CMRS prepaid service charges.

  1. The department shall collect the CMRS prepaid service charge and remit the revenues to the CMRS fund as provided in KRS 142.100 to 142.135 .
  2. A retailer shall collect the CMRS prepaid service charge from consumers pursuant to KRS 65.7634 , and shall remit the amounts collected to the department on a monthly basis, on or before the twentieth day of the next calendar month.
  3. The CMRS prepaid service charge collected by the retailer from any consumer shall:
    1. Be deemed to be held in trust by the retailer for and on account of the Commonwealth; and
    2. Constitute a debt of the retailer to the Commonwealth.

HISTORY: 2016 ch. 111, § 17, effective January 1, 2017.

142.110. Registration by retailer with the department.

Each retailer shall file an application for a certificate of registration with the department within sixty (60) days of January 1, 2017. Each retailer seeking to sell or provide prepaid wireless telecommunications service in Kentucky for the first time shall, prior to selling or providing prepaid wireless telecommunications service, file an application for a certificate of registration with the department. The application shall be in the form and manner prescribed by the department. The application shall be signed by an executive officer or a person specifically authorized by the retailer to sign the application.

HISTORY: 2016 ch. 111, § 18, effective January 1, 2017.

142.115. Monthly return and payment of CMRS prepaid service charges — Retention of processing fee.

  1. On or before the twentieth day of the month, each retailer shall file a return for the preceding month with the department in a form prescribed by the department, together with payment of any CMRS prepaid service charges collected during the preceding month.
  2. The return shall be signed by the person required to file the return or a duly authorized agent.
  3. To reimburse itself for the cost of collecting and remitting the CMRS prepaid service charge, each retailer may deduct and retain from the CMRS prepaid service charge it collects during each calendar month an amount not to exceed three percent (3%) of the gross aggregate amount of the CMRS prepaid service charges it collected that month.

HISTORY: 2016 ch. 111, § 19, effective January 1, 2017.

142.120. Examination and audit of returns — Assessment for additional amount due and arrearages — Protest and appeal rights.

  1. As soon as practicable after each return required by KRS 142.115 is received, the department may examine and audit the return. If the amount due as computed by the department is greater than the amount remitted by the retailer, the difference shall be assessed by the department on behalf of the board within four (4) years from the date prescribed by law for filing of the return, except as provided in this section. A notice of assessment shall be mailed to the retailer.
  2. In case of a failure to file a return or the filing of a fraudulent return, the resulting arrearage may be assessed by the department at any time.
  3. A retailer may request a review of an action of the department and shall have the rights of protest and appeal as set forth in KRS 131.110 .

HISTORY: 2016 ch. 111, § 20, effective January 1, 2017.

142.125. Recordkeeping.

  1. Each retailer shall keep records, receipts, invoices, and other pertinent papers in the form that the department requires.
  2. Each retailer who files the returns required by KRS 142.115 shall keep records for not less than four (4) years from the making of the records, unless the department in writing authorizes their destruction at an earlier date.

HISTORY: 2016 ch. 111, § 21, effective January 1, 2017.

142.130. Administration of KRS 142.100 to 142.135 by department — Interest and penalties — Board to cooperate with department — Refunds or credits.

  1. The department shall administer the provisions of KRS 142.100 to 142.135 , and shall have all of necessary powers, rights, duties, and authority with respect to the assessment, collection, and administration of the CMRS prepaid service charge.
  2. Any CMRS prepaid service charges not paid on or before the due date shall bear interest at the interest rate established by KRS 131.183 from the date due until the date of payment.
  3. The provisions of KRS 131.180 shall apply to the CMRS prepaid service charge for the purposes of assessing and imposing penalties.
  4. The board shall fully cooperate with the department and shall provide the department with any information requested to carry out the provisions of KRS 142.100 to 142.135 .
  5. The CMRS prepaid service charge imposed and collected pursuant to KRS 65.7634 and 142.100 to 142.135 may be refunded or credited as provided in KRS 134.580 in the case of over payment or payment when no fee was due.

HISTORY: 2016 ch. 111, § 22, effective January 1, 2017.

142.135. Monthly transmittal of funds to board — Retention of collection and administration fee — Monthly report of receipts — Restricted use of funds.

  1. The department shall transmit the amounts remitted to it by retailers as required by KRS 142.105 to the board on a monthly basis. From each deposit, the department may deduct an amount equal to the actual operating and overhead expenses incurred in the collection and administration of the CMRS prepaid service charge, not to exceed one percent (1%) of the amount collected. The department shall report its actual expenses to the board on a quarterly basis.
  2. The department shall provide a monthly report of receipts from the CMRS prepaid service charge to the board.
  3. Moneys held by the department prior to their transfer to the board shall not be considered property of the Commonwealth and shall not be subject to appropriation by the General Assembly. Such moneys shall not be:
    1. Loaned to the Commonwealth or to any instrumentality or agency thereof;
    2. Subject to transfer to the Commonwealth or any agency or instrumentality thereof, except for purposes specifically authorized by this section; or
    3. Expended for any purpose other than a purpose authorized by KRS 65.7621 to 65.7643 .

HISTORY: 2016 ch. 111, § 23, effective January 1, 2017.

Provision of Health Care Items or Services

142.201. Definitions for KRS 142.201 to 142.259. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 1, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.203. Tax on gross revenues of hospitals for provision of health care items or services or hospital services. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 2, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.207. Tax on gross revenues for provision of specified health care items or services — Exception. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 3, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.211. Tax on pharmacies providing prescription drugs and prescribed durable medical equipment — Transfers of tax to named entities — Tax on contractors for provision of outpatient prescription drugs. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 4, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.213. Prohibition against transfer of taxes to recipient of taxable items or services — Exemption of charitable hospitals and providers from tax — Time when taxes imposed by KRS 142.201 to 142.259 become inapplicable. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 5, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.217. Adjustments to tax rates set in KRS 142.203, 142.207, and 142.211 — Method — Requirement of General Assembly approval to increase rates. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 6, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.221. Application for certificate of registration — Information to Revenue Cabinet from licensure boards. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 7, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.223. Due date of taxes. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 8, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.227. Filing of returns — Requirements. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 9, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.231. Extension of time for filing return. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 10, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.233. Processing of return — Billing for additional tax — Review of action of Revenue Cabinet — Taxpayer’s right of appeal. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 11, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.237. Offset of overpayments. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 12, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.241. Records to be kept by provider. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 13, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.243. Interest on unpaid tax. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 14, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.247. Administration by Revenue Cabinet. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 15, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.251. Reports of revenue receipts — Notification of rate changes — Duties of providers to register and comply. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 16, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.253. Surety bond — Restraining order or injunction. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 17, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.257. Liability of corporate officers for taxes imposed by KRS 142.203, 142.207, and 142.211. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 18, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

142.259. Penalties. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1993 (2nd Ex. Sess.), ch. 2, § 19, effective June 8, 1993) was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994. For present law see KRS 142.301 et seq.

Health Care Provider Tax

142.301. Definitions for KRS 142.301 to 142.363.

As used in KRS 142.301 to 142.363 :

  1. “Ground ambulance provider” means a Class I, II, or III ground ambulance provider described in KRS 311A.030 ;
  2. “Assessment” means the Medicaid ambulance service provider assessment established in KRS 142.318 ;
  3. “Department” means the Department of Revenue;
  4. “Charitable provider” means any provider which does not charge its patients for health-care items or services, and which does not seek or accept Medicare, Medicaid, or other financial support from the federal government or any state government. The collaboration with public hospitals, agencies, or other providers in the delivery of patient care; affiliation with public institutions to provide health-care education; or the pursuit of research in cooperation with public institutions or agencies shall not be considered as the receipt of government support by a charitable provider;
  5. “Dispensing” means to deliver one (1) or more doses of a prescription drug in a suitable container, appropriately labeled for subsequent administration or use by a patient or other individual entitled to receive the prescription drug;
  6. “Entity” means any firm, partnership, joint venture, association, corporation, company, joint stock association, trust, business trust, syndicate, cooperative, or other group or combination acting as a unit;
  7. “Gross revenues” means the total amount received in money or otherwise by a provider for the provision of health-care items or services in Kentucky, less the following:
    1. Amounts received by any provider as an employee or independent contractor from another provider for the provision of health-care items or services if:
      1. The employing or contracting provider receives revenue attributable to health-care items or services provided by the employee or independent contractor receiving payment; and
      2. The employing or contracting provider is subject to the tax imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , or 142.363 on the receipt of that revenue;
    2. Amounts received as a grant or donation by any provider from federal, state, or local government or from an organization recognized as exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code for:
      1. Research; or
      2. Administrative or operating costs associated with the implementation and operation of an experimental program;
    3. Salaries or wages received by an individual provider as an employee of a charitable provider, the federal government, or any state or local governmental entity;
    4. Salaries or wages received by an individual provider as an employee of a public university for the provision of services at a student health facility; and
    5. Amounts received by an HMO on a fixed, prepayment basis as premium payments;
  8. “Health-care items or services” means:
    1. Inpatient hospital services;
    2. Outpatient hospital services;
    3. Nursing-facility services;
    4. Services of intermediate-care facilities for individuals with intellectual disabilities;
    5. Physicians’ services provided prior to July 1, 1999;
    6. Licensed home-health-care-agency services;
    7. Outpatient prescription drugs;
    8. HMO services;
    9. Regional community services for mental health and individuals with intellectual disabilities;
    10. Psychiatric residential treatment facility services;
    11. Medicaid managed care organization services; and
    12. Supports for community living waiver program services;
  9. “Health-maintenance organization” or “HMO” means an organization established and operated pursuant to the provisions of Subtitle 38 of KRS Chapter 304;
  10. “Hospital” means an acute-care, rehabilitation, or psychiatric hospital licensed under KRS Chapter 216B;
  11. “Hospital services” means all inpatient and outpatient services provided by a hospital. “Hospital services” does not include services provided by a noncontracted, university-operated hospital, or any freestanding psychiatric hospital, if necessary waivers are obtained by the Cabinet for Human Resources, Cabinet for Health Services, or Cabinet for Health and Family Services from the Health Care Financing Administration or Centers for Medicare and Medicaid Services, or hospitals operated by the federal government;
  12. “Health and family services secretary” means the secretary of the Cabinet for Health and Family Services or that person’s authorized representative;
  13. “Inpatient hospital services,” “outpatient hospital services,” “intermediate-care-facility services for individuals with intellectual disabilities,” “physician services,” “licensed home-health-care-agency services,” and “outpatient prescription drugs” have the same meaning as set forth in regulations promulgated by the Secretary of the Department of Health and Human Services and codified at 42 C.F.R. pt. 440, as in effect on December 31, 1993;
  14. “Medicaid” means the state program of medical assistance as administered by the Cabinet for Health and Family Services in compliance with 42 U.S.C. sec. 1396 ;
  15. “Nursing-facility services” means services provided by a licensed skilled-care facility, nursing facility, nursing home, or intermediate-care facility, excluding services provided by intermediate-care facilities for individuals with intellectual disabilities and services provided through licensed personal care beds;
  16. “Person” means any individual, firm, partnership, joint venture, association, corporation, company, joint stock association, estate, trust, business trust, receiver, trustee, syndicate, cooperative, assignee, governmental unit or agency, or any other group or combination acting as a unit and the legal successor thereof;
  17. “Provider” means any person receiving gross revenues for the provision of health-care items or services in Kentucky, excluding any facility operated by the federal government;
  18. “Commissioner” means the commissioner of the Department of Revenue or that person’s authorized representative;
  19. “Total bed capacity” means the combination of licensed nursing home beds, licensed nursing facility beds, and licensed intermediate-care facility beds;
  20. “Regional community services programs for mental health and individuals with an intellectual disability” means programs created under the provisions of KRS 210.370 to 210.480 ;
  21. “Psychiatric residential treatment facility” has the same meaning as provided in KRS 216B.450 ; and
  22. “Supports for Community Living Waiver Program” has the same meaning as provided in KRS 205.6317 .

History. Enact. Acts 1994, ch. 512, § 96, effective July 15, 1994; 1996, ch. 110, § 3, effective August 1, 1996; 1998, ch. 426, § 101, effective July 15, 1998; 2005, ch. 73, § 2, effective June 20, 2005; 2005, ch. 85, § 522, effective June 20, 2005; 2005, ch. 99, § 20, effective June 20, 2005; 2005, ch. 120, § 1, effective June 20, 2005; 2012, ch. 146, § 11, effective July 12, 2012; 2020 ch. 110, § 1, effective July 15, 2020.

Compiler’s Notes.

KRS 142.311 referred to in (7)(a)2. has expired.

Research References and Practice Aids

Northern Kentucky Law Review.

Costich, The Kentucky Health Reform Act, 22 N. Ky. L. Rev. 381 (1995).

142.303. Tax on gross revenues of providers for hospital services — Exception.

  1. A tax is hereby imposed at a rate of two and one-half percent (2.5%) on gross revenues received by all providers on or after July 15, 1994, for the provision of hospital services. The tax imposed by this section shall not apply to gross revenues received for dispensing outpatient prescription drugs subject to tax under KRS 142.311 .
    1. Notwithstanding any other provision of the Kentucky Revised Statutes to the contrary, beginning in state fiscal year 2008-2009 and continuing annually thereafter, the tax imposed under subsection (1) of this section on providers of hospital services who paid taxes in state fiscal year 2005-2006 shall be assessed on gross revenues received by the provider during state fiscal year 2005-2006. Notwithstanding KRS 142.301 to 142.363 , hospital provider taxes due in state fiscal year 2008 and continuing annually thereafter shall be paid in twelve (12) equal monthly installments, with each payment due no later than twenty (20) days after the last day of each calendar month. At least thirty (30) days prior to the beginning of the state fiscal year, the Department of Revenue shall send written notice to each provider of hospital services of the provider’s total tax liability for the year, which shall be the amount the provider paid in taxes in state fiscal year 2005-2006. The provisions of this paragraph also shall apply if the hospital subsequently undergoes a change in ownership. (2) (a) Notwithstanding any other provision of the Kentucky Revised Statutes to the contrary, beginning in state fiscal year 2008-2009 and continuing annually thereafter, the tax imposed under subsection (1) of this section on providers of hospital services who paid taxes in state fiscal year 2005-2006 shall be assessed on gross revenues received by the provider during state fiscal year 2005-2006. Notwithstanding KRS 142.301 to 142.363 , hospital provider taxes due in state fiscal year 2008 and continuing annually thereafter shall be paid in twelve (12) equal monthly installments, with each payment due no later than twenty (20) days after the last day of each calendar month. At least thirty (30) days prior to the beginning of the state fiscal year, the Department of Revenue shall send written notice to each provider of hospital services of the provider’s total tax liability for the year, which shall be the amount the provider paid in taxes in state fiscal year 2005-2006. The provisions of this paragraph also shall apply if the hospital subsequently undergoes a change in ownership.
    2. If a hospital was not in operation during state fiscal year 2005-2006, the hospital shall be taxed pursuant to the provisions of subsection (1) of this section, provided that, upon request of the provider, the Department of Revenue may adjust the hospital’s annual tax liability in accordance with the gross revenues of a comparable hospital.

History. Enact. Acts 1994, ch. 512, § 97, effective July 15, 1994; 2007, ch. 9, § 1, effective June 26, 2007.

Compiler’s Notes.

KRS 142.311 referred to in subsection (1) has expired.

NOTES TO DECISIONS

  1. Constitutionality of Prior Law.
  2. Miscellaneous.
1. Constitutionality of Prior Law.

Two percent (2%) tax on physicians’ gross revenues utilized to obtain federal matching money to support Kentucky Medicaid provided for in House Bill 1 of the 1994 2nd Extraordinary Session, (Act 1993 (2nd Ex. Sess.), ch. 2; now repealed) did not violate Ky. Const., § 59. Revenue Cabinet v. Smith, 875 S.W.2d 873, 1994 Ky. LEXIS 34 (Ky.), cert. denied, 513 U.S. 1000, 115 S. Ct. 509, 130 L. Ed. 2d 417, 1994 U.S. LEXIS 8026 (U.S. 1994).

2. Miscellaneous.

District court properly upheld the HHS's decision to offset the hospitals' Medicare reimbursement by the Medicaid disproportionate share hospital payments the hospitals received where those payments essentially constituted a refund of the taxes the hospitals paid under Ky. Rev. Stat. Ann. § 142.303(1) to fund Medicaid payments. Breckinridge Health, Inc. v. Price, 860 F.3d 358, 2017 FED App. 0126P, 2017 U.S. App. LEXIS 10534 (6th Cir. Ky.), superseded, 869 F.3d 422, 2017 FED App. 0194P, 2017 U.S. App. LEXIS 16080 (6th Cir. Ky. 2017 ).

HHS's decision to offset the hospitals' Medicare reimbursement by the Medicaid disproportionate share hospital payments the hospitals received where those payments essentially constituted a refund of the taxes the hospitals paid under the statute to fund Medicaid payments was proper. Breckinridge Health, Inc. v. Price, 869 F.3d 422, 2017 FED App. 0194P, 2017 U.S. App. LEXIS 16080 (6th Cir. Ky. 2017 ), cert. denied, 139 S. Ct. 64, 202 L. Ed. 2d 21, 2018 U.S. LEXIS 5158 (U.S. 2018).

142.307. Tax on gross revenues of other providers for health-care services — Exception.

  1. A tax is hereby imposed at a rate of two percent (2%) on gross revenues received by each provider on or after July 15, 1994, for the provision of licensed home-health-care services and HMO services.
  2. The tax imposed by this section shall apply to freestanding psychiatric hospitals if necessary waivers are obtained by the Cabinet for Human Resources, Cabinet for Health Services, or Cabinet for Health and Family Services from the Health Care Financing Administration or Centers for Medicare and Medicaid Services. The tax imposed by this section shall not apply to gross revenues received for dispensing outpatient prescription drugs subject to tax under KRS 142.311 .

History. Enact. Acts 1994, ch. 512, § 98, effective July 15, 1994; 1996, ch. 110, § 1, effective August 1, 1996; 1998, ch. 426, § 102, effective July 15, 1998; 2005, ch. 73, § 4, effective June 20, 2005; 2005, ch. 99, § 21, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in subsection (2) has expired.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts chs. 73 and 99, which do not appear to be in conflict and have been codified together.

142.309. Phase out of tax on provision of physician services.

  1. A tax is hereby imposed on gross revenues received by each provider for the provision of physician services at the tax rate provided for in subsection (2) of this section.
  2. Gross revenues received by each provider for the provision of physician services on or after August 1, 1996, and before July 1, 1999, shall be subject to tax at the following rates:
    1. One and one-half percent (1.5%) of the gross revenues received after July 31, 1996, but on or before June 30, 1997;
    2. One percent (1%) of gross revenues received after June 30, 1997, but on or before June 30, 1998;
    3. One-half of one percent (0.5%) of gross revenues received after June 30, 1998, but on or before June 30, 1999.
  3. Gross revenues received by each provider for the provision of physician services after June 30, 1999, shall not be subject to tax imposed by the provisions of this chapter.

History. Enact. Acts 1996, ch. 110, § 2, effective August 1, 1996.

142.311. Tax on prescription drugs — Expiration on June 30, 1999. [Expired]

  1. A tax is hereby imposed on pharmacies or any other provider, dispensing or delivering in a suitable container outpatient prescription drugs in this state, at the rate of twenty-five cents ($0.25) per prescription for which any initial payment is received on or after July 15, 1994.
  2. The provisions of this section, and so much of KRS 142.303 and 142.307 that may impose a tax on prescription drugs, expire June 30, 1999.

History. Enact. Acts 1994, ch. 512, § 99, effective July 15, 1994; 1998, ch. 496, § 60, effective April 10, 1998.

142.313. Entity as taxable provider — Exception.

For the purposes of the taxes imposed under KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 :

  1. If two (2) or more providers provide health care items or services as an entity, and the entity is also a provider, then the entity shall be the taxable provider with regard to gross revenues received for health care items and services provided through the entity.
  2. If a provider who provides services through an entity receives gross revenues for the provision of health care items and services from a source other than the entity, the individual provider shall be the taxable provider with respect to that revenue.

History. Enact. Acts 1994, ch. 512, § 100, effective July 15, 1994; 1996, ch. 110, § 4, effective August 1, 1996; 2005, ch. 120, § 5, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in the introductory paragraph of this section has expired.

142.314. Tax on gross revenues of regional community services for mental health and services for individuals with an intellectual disability.

  1. A tax shall be imposed on regional community services for mental health and individuals with an intellectual disability at a uniform rate of up to four percent (4%) on gross revenues received by each provider after July 1, 2005, for the provision of regional community services for mental health and individuals with an intellectual disability.
  2. The Department for Medicaid Services shall promulgate administrative regulations to ensure that a portion of the revenues generated from the assessment levied under this section and federal matching funds shall be used for rate increases for regional community services for mental health and individuals with an intellectual disability to recognize cost increases, including current wage and benefit levels in the industry.
  3. The remaining revenue generated from the assessment levied under this section and federal matching funds shall be used to supplement the medical-assistance-related general fund appropriations of the Department for Medicaid Services.
  4. On or before July 1, 2005, the Cabinet for Health and Family Services, Department for Medicaid Services, shall submit an application to the Centers for Medicare and Medicaid Services to request any necessary waiver pursuant to 42 C.F.R. secs. 433.56 and 433.68.
  5. If an application to the Centers for Medicare and Medicaid Services for a waiver is denied, the Department for Medicaid Services may resubmit the application with appropriate changes to receive an approved waiver.
  6. The assessment imposed pursuant to this section shall begin on July 1, 2005, but is not due and payable until rates are increased pursuant to this provision.
  7. The provisions of this section shall be null and void if the waiver or plan amendment to increase rates is not approved by the Centers for Medicare and Medicaid Services.
  8. If the assessment provided for in this section is disallowed by the Centers for Medicare and Medicaid Services, all collections under this section shall cease.

History. Enact. Acts 2005, ch. 120, § 2, effective June 20, 2005; 2012, ch. 146, § 12, effective July 12, 2012.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

142.315. Tax on gross revenues of psychiatric residential treatment facility services.

  1. A tax shall be imposed on psychiatric residential treatment facility services at a uniform rate of up to five and one-half percent (5.5%) on gross revenues received by each provider after July 1, 2005, for the provision of psychiatric residential treatment facility services.
  2. The Department for Medicaid Services shall promulgate administrative regulations to ensure that a portion of the revenues generated from the assessment levied under this section and federal matching funds shall be used for rate increases for psychiatric residential treatment facility services to recognize cost increases, including current wage and benefit levels in the industry.
  3. The remaining revenue generated from the assessment levied under this section and federal matching funds shall be used to supplement the medical-assistance-related general fund appropriations of the Department for Medicaid Services.
  4. On or before July 1, 2005, the Cabinet for Health and Family Services, Department for Medicaid Services, shall submit an application to the Centers for Medicare and Medicaid Services to request any necessary waiver pursuant to 42 C.F.R. secs. 433.56 and 433.68.
  5. If an application to the Centers for Medicare and Medicaid Services for a waiver is denied, the Department for Medicaid Services may resubmit the application with appropriate changes to receive an approved waiver.
  6. The assessment imposed pursuant to this section shall begin on July 1, 2005, but is not due and payable until rates are increased pursuant to this provision.
  7. The provisions of this section shall be null and void if the waiver or plan amendment to increase rates is not approved by the Centers for Medicare and Medicaid Services.
  8. If the assessment provided for in this section is disallowed by the Centers for Medicare and Medicaid Services, all collections under this section shall cease.

History. Enact. Acts 2005, ch. 120, § 3, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

142.316. Tax on gross revenues of Medicaid managed care organization services.

  1. A tax shall be imposed on Medicaid managed care organization services at a uniform rate of up to five and one-half percent (5.5%) on gross revenues received by each provider after July 1, 2005, for the provision of Medicaid managed care organization services.
  2. The Department for Medicaid Services shall promulgate administrative regulations to ensure that a portion of the revenues generated from the assessment levied under this section and federal matching funds shall be used for rate increases for Medicaid managed-care-organization services to recognize cost increases, including current wage and benefit levels in the industry.
  3. No Medicaid managed care organization shall be guaranteed a repayment of its assessment in respect to 42 CFR 433.68, provided, however, in each fiscal year in which an assessment is implemented, the Department for Medicaid Services shall use the assessment proceeds to maintain actuarially sound rates as defined in the contract for the Medicaid managed care organizations to the extent permissible under federal and state law or regulation and without creating a guarantee to hold harmless, as those terms are used in 42 CFR 433.68 related to permissible health care-related taxes after the transition period.
  4. The remaining revenue generated from the assessment levied under this section and federal matching funds shall be used to supplement the medical assistance related general fund appropriations of the Department for Medicaid Services.
  5. On or before July 1, 2005, the Cabinet for Health and Family Services, Department for Medicaid Services, shall submit an application to the Centers for Medicare and Medicaid Services to request any necessary waiver pursuant to 42 C.F.R. secs. 433.56 and 433.68.
  6. If an application to the Centers for Medicare and Medicaid Services for a waiver is denied, the Department for Medicaid Services may resubmit the application with appropriate changes to receive an approved waiver.
  7. The assessment imposed pursuant to this section shall begin on July 1, 2005, but is not due and payable until rates are increased pursuant to this provision.
  8. The provisions of this section shall be null and void if the waiver or plan amendment to increase rates is not approved by the Centers for Medicare and Medicaid Services.
  9. If the assessment provided for in this section is disallowed by the Centers for Medicare and Medicaid Services, all collections under this section shall cease.

History. Enact. Acts 2005, ch. 120, § 4, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

142.317. Exemption from tax for charitable providers.

Charitable providers as defined in KRS 142.301 shall be exempt from the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 , as well as the provisions of KRS 142.321 , 142.333 , 142.341 , and 142.343 upon providing proper certification to the department.

History. Enact. Acts 1994, ch. 512, § 101, effective July 15, 1994; 1996, ch. 110, § 5, effective August 1, 1996; 2005, ch. 85, § 523, effective June 20, 2005; 2005, ch. 120, § 6, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in this section has expired.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts chs. 85 and 120, which do not appear to be in conflict and have been codified together.

142.318. Assessment on ground ambulance service providers.

  1. A ground ambulance provider shall pay an assessment to the department in an amount established by the Department for Medicaid Services under KRS 205.5602 .
  2. The payment of the assessment shall be made at the same time and in the same manner as in KRS 142.323 .
    1. In addition to any penalty assessed under KRS 131.180 and the interest assessed under KRS 131.183 , the department, in coordination with the Cabinet for Health and Family Services, may require a ground ambulance provider that fails to pay an assessment required by this section to pay an additional penalty to the department. (3) (a) In addition to any penalty assessed under KRS 131.180 and the interest assessed under KRS 131.183 , the department, in coordination with the Cabinet for Health and Family Services, may require a ground ambulance provider that fails to pay an assessment required by this section to pay an additional penalty to the department.
    2. The department, in consultation with the Cabinet for Health and Family Services, may promulgate administrative regulations to establish the additional penalty.
  3. The assessment shall not be implemented until after the Department for Medicaid Services receives notice of federal matching funds approval from the Centers for Medicare and Medicaid Services.
  4. All assessments and all penalties and fees related to those assessments shall be deposited in the ambulance service assessment fund established in KRS 205.5603 .
  5. A ground ambulance provider shall not increase charges or add a surcharge to ground transport fees based on, or as a result of, the assessment paid to the department.

HISTORY: 2020 ch. 110, § 2, effective July 15, 2020.

142.321. Application for certificate of registration — Information from licensure boards.

  1. Every provider subject to the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 that is not registered with the department pursuant to the provisions of KRS 142.221 shall, on July 15, 1994, file an application for a certificate of registration with the department. A certificate of registration filed in accordance with the provisions of KRS 142.221 shall remain valid for purposes of KRS 142.301 to 142.363 . Every provider seeking to provide health care items or services in Kentucky for the first time after July 15, 1994, shall, prior to providing these items or services, file an application for a certificate of registration with the department. The application shall be in the form prescribed by the department. The application shall be signed by the owner if a natural person; in the case of an association or partnership, by a member or partner; in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application.
  2. Every state board responsible for licensing or governing any provider subject to the tax imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 shall, upon request by the department, provide any information available to the licensing board necessary for the administration of the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 . The information shall be in the form required by the department and shall be used by the department for the sole purpose of administering the taxes imposed by KRS 142.303, 142.307, 142.309, 142.311, 142.314, 142.315, 142.316, 142.361, and 142.363.
  3. Every state board responsible for licensing or governing any provider subject to the tax imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 shall, upon request by the department, include the application for certificate of registration required by subsection (1) of this section with any new license issued. Application forms shall be provided by the department to the licensing board.

History. Enact. Acts 1994, ch. 512, § 102, effective July 15, 1994; 1996, ch. 110, § 6, effective August 1, 1996; 2005, ch. 85, § 524, effective June 20, 2005; 2005, ch. 120, § 7, effective June 20, 2005.

Compiler’s Notes.

KRS 142.221 referred to in subsection 1 was repealed by Acts 1994, ch. 512, § 119, effective July 15, 1994.

KRS 142.311 referred to in this section has expired.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts chs. 85 and 120, which do not appear to be in conflict and have been codified together.

142.323. Due date of taxes and assessments.

The taxes and assessment imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.318 , 142.361 , and 142.363 are due and payable to the department monthly and shall be remitted on or before the twentieth day of the next succeeding calendar month.

History. Enact. Acts 1994, ch. 512, § 103, effective July 15, 1994; 1996, ch. 110, § 7, effective August 1, 1996; 2005, ch. 85, § 525, effective June 20, 2005; 2005, ch. 120, § 8, effective June 20, 2005; 2020 ch. 110, § 3, effective July 15, 2020.

Compiler’s Notes.

KRS 142.311 referred to in this section has expired.

142.327. Filing of returns — Requirements.

  1. On or before the twentieth day of the month following each calendar month, a return for the preceding month shall be filed with the department in the form prescribed by the department, together with payment of any tax due.
  2. A return shall be filed by every provider. The return shall be signed by the person required to file the return or a duly-authorized agent.
  3. The return shall show the gross revenues of the provider during the preceding reporting period. The return shall also show the amount of taxes for the period covered by the return and other information as the department deems necessary for the proper administration of KRS 142.301 to 142.363 .
  4. The person required to file the return shall deliver the return, together with a remittance of the amount of the tax due, to the department.
  5. For the purpose of facilitating the administration, payment, or collection of the taxes levied by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 , the department may permit or require returns to be filed or tax payments to be made other than as specifically required by the provisions of this section, except the department shall not require or permit returns or payments to be filed or remitted more frequently than monthly.

History. Enact. Acts 1994, ch. 512, § 104, effective July 15, 1994; 1996, ch. 110, § 8, effective August 1, 1996; 2005, ch. 85, § 526, effective June 20, 2005; 2005, ch. 120, § 9, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in subsection (5) has expired.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts chs. 85 and 120, which do not appear to be in conflict and have been codified together.

142.331. Extension of time for filing return.

  1. The department shall, upon written request received on or prior to the due date of the return or tax, for good cause satisfactory to the department, extend the time for filing the return or paying the tax for a period not to exceed thirty (30) days.
  2. Any person for which the extension is granted shall pay, in addition to the tax, interest at the tax interest rate as defined in KRS 131.010(6) from the date on which the tax would otherwise have been due.

History. Enact. Acts 1994, ch. 512, § 105, effective July 15, 1994; 2005, ch. 85, § 527, effective June 20, 2005.

142.333. Processing of return — Billing for additional tax — Review of action of department — Taxpayer’s right of appeal.

  1. As soon as practicable after each return is received, the department shall examine it. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the excess shall be assessed by the department within four (4) years from the later of the date the return was filed or due, except that in the case of a failure to file a return or a fraudulent return, the excess may be assessed at any time. A notice of assessment shall be mailed to the provider. The provider and the department may agree to extend this time period.
  2. Any provider aggrieved by an action of the department may request a review and shall have the rights of appeal as set forth in KRS Chapter 131.
  3. Notwithstanding the four (4) year time limitation set forth in subsection (1), in the case of a return where the provider understates gross revenues by twenty-five percent (25%) or more, the excess shall be assessed by the department within six (6) years from the later of the date the return is due or filed.

History. Enact. Acts 1994, ch. 512, § 106, effective July 15, 1994; 2005, ch. 85, § 528, effective June 20, 2005.

142.337. Offset of overpayments.

In making a determination of tax liability, the department may offset overpayments for a period or periods, together with interest on the overpayments, against underpayments for another period or periods, against penalties, and against the interest on the underpayments.

History. Enact. Acts 1994, ch. 512, § 107, effective July 15, 1994; 2005, ch. 85, § 529, effective June 20, 2005.

142.341. Records to be kept by provider — Length of time of retention.

  1. Every provider shall keep records, receipts, invoices, and other pertinent papers in the form as the department may require.
  2. Every provider who files the returns required under KRS 142.323 shall keep records for not less than six (6) years from the making of records unless the department in writing authorizes their destruction at an earlier date.

History. Enact. Acts 1994, ch. 512, § 108, effective July 15, 1994; 2005, ch. 85, § 530, effective June 20, 2005.

142.343. Interest on unpaid tax.

In every case, any tax not paid on or before the due date shall bear interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.

History. Enact. Acts 1994, ch. 512, § 109, effective July 15, 1994.

142.347. Administration by Department of Revenue.

  1. Except when the health and family services secretary has been granted specific authority in KRS 142.301 to 142.363 , the department shall administer the provisions of KRS 142.301 to 142.363 , and shall have all of the powers, rights, duties, and authority with respect to the assessment, collection, refunding, and administration of the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 conferred generally by the Kentucky Revised Statutes including KRS Chapters 131, 134, and 135.
  2. The Cabinet for Health and Family Services shall be responsible for compliance with all federal reporting requirements regarding the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 .
  3. The Cabinet for Health and Family Services shall fully cooperate with the department and shall provide the department with any information requested to carry out the provisions of KRS 142.301 to 142.363 .

History. Enact. Acts 1994, ch. 512, § 110, effective July 15, 1994; 1996, ch. 110, § 9, effective August 1, 1996; 1998, ch. 426, § 103, effective July 15, 1998; 2005, ch. 85, § 531, effective June 20, 2005; 2005, ch. 99, § 118, effective June 20, 2005; 2005, ch. 120, § 10, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in subsections (1) and (2) has expired.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts chs. 85, 99, and 120, which do not appear to be in conflict and have been codified together.

142.351. Report of revenue receipts — Responsibility of providers to register and comply.

  1. A report of revenue receipts from the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 shall be provided on a quarterly basis by the department to the health and family services secretary on or before the tenth day of the second month following the close of each fiscal quarter.
  2. It is the responsibility of each provider, subject to tax under KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 to register with the department, and comply with the tax and reporting provisions of KRS 142.301 to 142.363 .

History. Enact. Acts 1994, ch. 512, § 111, effective July 15, 1994; 1996, ch. 110, § 10, effective August 1, 1996; 1998, ch. 426, § 104, effective July 15, 1998; 2005, ch. 85, § 532, effective June 20, 2005; 2005, ch. 99, § 119, effective June 20, 2005; 2005, ch. 120, § 11, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in this section has expired.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts chs. 85, 99, and 120, which do not appear to be in conflict and have been codified together.

142.353. Security to insure compliance — Sale of security or bearer bond — Restraining order or injunction.

  1. Whenever it is deemed necessary to insure compliance with the provisions of KRS 142.301 to 142.363 , the department may require any person subject to the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363 to place security with it. The amount of the security shall be fixed by the department but shall not be greater than three (3) times the estimated average liability of the provider or all providers in the same class as the provider, whichever is greater. This limitation shall apply regardless of the type of security placed with the department.
  2. The amount of the security may be increased or decreased by the department, subject to the limitations provided in subsection (1) of this section.
    1. If necessary, the department may sell the security at public auction in order to recover any tax, penalty, or interest due. However, security in the form of a bearer bond issued by the United States or any state or local governmental unit which has a prevailing market price may be sold by the department at a private sale at a price not lower than the prevailing market price. (3) (a) If necessary, the department may sell the security at public auction in order to recover any tax, penalty, or interest due. However, security in the form of a bearer bond issued by the United States or any state or local governmental unit which has a prevailing market price may be sold by the department at a private sale at a price not lower than the prevailing market price.
      1. The department shall provide notice by certified mail, sent to the last known address as reflected in the records of the department, or by delivery, to the person who placed the security with the department of the date, time, and place of the sale. (b) 1. The department shall provide notice by certified mail, sent to the last known address as reflected in the records of the department, or by delivery, to the person who placed the security with the department of the date, time, and place of the sale.
      2. Delivery means mailing the notice to the person it is addressed to, leaving the notice at his place of business with the person in charge of the place of business, or, if there is no one in charge, leaving the notice at a conspicuous place at the place of business. If the place of business is closed, or the person to be served has no place of business, leaving it at his home, with a person of suitable age and discretion residing in the home. Notice by certified mail must be postmarked no later than ten (10) days prior to the sale. Notice by delivery must be given no later than ten (10) days prior to the sale.
    2. Any amount in excess of the amount due the department after the sale shall be returned to the person placing the security.
  3. The Commonwealth may bring an action for a restraining order or a temporary or permanent injunction to restrain or enjoin the operation of a provider’s business until the security is obtained. The action may be brought in the Franklin Circuit Court or in the Circuit Court having jurisdiction over the provider.

History. Enact. Acts 1994, ch. 512, § 112, effective July 15, 1994; 1996, ch. 110, § 11, effective August 1, 1996; 2005, ch. 85, § 533, effective June 20, 2005; 2005, ch. 120, § 12, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in subsection (1) has expired.

Legislative Research Commission Notes.

(6/20/2005). This section was amended by 2005 Ky. Acts chs. 85 and 120, which do not appear to be in conflict and have been codified together.

142.357. Liability of corporate officers for taxes imposed by KRS 142.303, 142.307, 142.309, 142.311, 142.314, 142.315, 142.316, 142.361, and 142.363.

Notwithstanding any other provisions of KRS 142.301 to 142.363 , the president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any corporation subject to the provisions of KRS 142.301 to 142.363 shall be personally and individually liable jointly and severally, for the taxes imposed under KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363. Neither the corporate dissolution or withdrawal of the corporation from the state nor the cessation of holding any corporate office shall discharge the liability imposed by this section. The personal and individual liability shall apply to each and every person holding a corporate office at the time the taxes become or became due. No person will be personally and individually liable pursuant to this section if that person did not have authority in the management of the business or financial affairs of the corporation at the time the taxes imposed by KRS 142.303 , 142.307 , 142.309 , 142.311 , 142.314 , 142.315 , 142.316 , 142.361 , and 142.363. “Taxes” as used in this section shall include interest accrued at the rate provided by KRS 131.010(6) and all applicable penalties and fees imposed under the provisions of KRS 142.301 to 142.363 and KRS 131.180 , 131.440 , and 131.990 .

History. Enact. Acts 1994, ch. 512, § 113, effective July 15, 1994; 1996, ch. 110, § 12, effective August 1, 1996; 2005, ch. 120, § 13, effective June 20, 2005.

Compiler’s Notes.

KRS 142.311 referred to in this section has expired.

Research References and Practice Aids

Northern Kentucky Law Review.

Kentucky Survey Issue: Article: Personal Liability Regarding Taxation of Kentucky Corporations: Responsible Person Obligations Under the IRC and the KRS, 38 N. Ky. L. Rev. 285 (2011).

142.359. Penalties.

Penalties shall be imposed and assessed in accordance with the provisions of KRS 131.180 .

History. Enact. Acts 1994, ch. 512, § 114, effective July 15, 1994.

Research References and Practice Aids

Northern Kentucky Law Review.

Costich, The Kentucky Health Reform Act, 22 N. Ky. L. Rev. 381 (1995).

142.361. Provider assessment on nursing facility services — Disposition of revenues — Administrative regulations — Application to amend waiver — Circumstances rendering provisions void.

    1. A provider assessment is hereby imposed on nursing facility services as provided in this subsection. (1) (a) A provider assessment is hereby imposed on nursing facility services as provided in this subsection.
    2. The base for the assessment shall be determined on July 1 of each year, beginning on July 1, 2004, by dividing total gross revenues received by all nursing facilities for nursing facility services during the prior fiscal year by the total patient days for all nursing facilities attributable to nursing facility services during the prior fiscal year. The resulting amount shall be the base for the assessment imposed under this subsection, and shall be called the “average daily revenue per patient bed.”
    3. The assessment shall be imposed as follows:
        1. At a uniform rate per non-Medicare patient day of up to one percent (1%) of the average daily revenue per patient bed applied to actual non-Medicare patient bed days by each nursing facility on or after July 1, 2004, for the provision of nursing facility services that are provided at a non-hospital based facility: 1. a. At a uniform rate per non-Medicare patient day of up to one percent (1%) of the average daily revenue per patient bed applied to actual non-Medicare patient bed days by each nursing facility on or after July 1, 2004, for the provision of nursing facility services that are provided at a non-hospital based facility:
          1. Containing licensed intermediate care facility beds as of September 1, 2005; and
          2. With a facility total bed capacity of sixty (60) or fewer beds.
        2. This rate shall apply for qualifying providers beginning July 1, 2004. Any tax liability for tax periods beginning on or after July 1, 2004, attributable to the imposition of the levy under KRS 142.307 or the levy imposed by 2004 Ky. Acts ch. 142, sec. 1, shall be retroactively recalculated at the rate provided in this subsection, and no penalties or interest shall apply to any outstanding amounts.
      1. At a uniform rate per non-Medicare patient day of up to two percent (2%) of the average daily revenue per patient bed applied to actual non-Medicare patient bed days by each nursing facility on or after July 1, 2004, for the provision of nursing facility services that are provided at a hospital-based nursing facilities; and
      2. At a rate per non-Medicare patient day not to exceed six percent (6%) of the average daily revenue per patient bed applied to actual non-Medicare patient bed days by each nursing facility on or after July 1, 2004. This rate shall not apply to any provider assessed under subparagraphs 1. or 2. of this paragraph.
      3. Notwithstanding the provisions of subparagraphs 1. to 3. of this paragraph, no provider assessment shall be levied under this subsection on a state veterans’ nursing home on or after July 1, 2004.
    4. The rates established by paragraph (c) of this subsection are maximum rates. The rates may be adjusted annually on July 1 of each year by the Department for Medicaid Services. Notification of any rate change shall be provided to the Department of Revenue and to taxpayers in writing at least thirty (30) days prior to the new rate going into effect.
  1. The assessment imposed under subparagraph 3. of paragraph (c) of subsection (1) of this section is not required to be uniform, and the rate of assessment per non-Medicare day may be variable based upon a facility’s total annual census days if deemed an acceptable waivered class by the Centers for Medicare and Medicaid Services.
  2. All revenues collected pursuant to subsection (1) of this section shall be deposited in the Medical Assistance Revolving Trust Fund (MART) and transferred on a quarterly basis to the Department for Medicaid Services.
  3. The Department for Medicaid Services shall promulgate administrative regulations to ensure that a portion of the revenues generated from the assessment imposed by subsection (1) of this section and federal matching funds be used to increase reimbursement rates for nursing facilities. The regulations shall, at a minimum:
    1. Provide that the rate increases shall be used to fully phase in those providers whose current rates are less than the Medicaid price-based rates;
    2. Correct for inflation adjustments for the past two (2) years; and
    3. Re-base the rates to recognize current wage and benefit levels in the industry.
  4. The remaining revenue generated by the assessments levied under subsection (1) of this section and federal matching funds shall be used to supplement the medical assistance related general fund appropriations of the Department for Medicaid Services. Notwithstanding KRS 48.500 and 48.600 , the MART fund shall be exempt from any state budget reduction acts.
    1. On or before July 1, 2004, the Cabinet for Health and Family Services, Department for Medicaid Services shall submit an application to the Federal Centers for Medicare and Medicaid Services to request a waiver of the uniformity tax requirement pursuant to 42 C.F.R. sec. 433.68(e)(2). If an application to the Centers for Medicare and Medicaid Services for a waiver of the uniformity requirements is denied, the Department for Medicaid Services may resubmit the application with appropriate changes to receive an approved waiver. (6) (a) On or before July 1, 2004, the Cabinet for Health and Family Services, Department for Medicaid Services shall submit an application to the Federal Centers for Medicare and Medicaid Services to request a waiver of the uniformity tax requirement pursuant to 42 C.F.R. sec. 433.68(e)(2). If an application to the Centers for Medicare and Medicaid Services for a waiver of the uniformity requirements is denied, the Department for Medicaid Services may resubmit the application with appropriate changes to receive an approved waiver.
    2. On or before July 1, 2005, the Cabinet for Health and Family Services, Department for Medicaid Services, shall submit an application to the Federal Centers for Medicare and Medicaid Services to amend the waiver of the uniformity tax requirement granted in 2004. If the application to Centers for Medicare and Medicaid Services for an amendment to the previously granted waiver is denied, the Department for Medicaid Services may resubmit the application with appropriate changes to receive an approved amendment to the waiver.
  5. Assessments imposed pursuant to this section shall begin on July 1, 2004, but are not due and payable until rates are increased as provided in subsection (5) of this section.
  6. The provisions of this section shall be considered null and void if the uniformity waiver or plan amendment to increase rates is not approved by the Centers for Medicare and Medicaid Services.

History. Enact. Acts 2004, ch. 142, § 1, effective April 21, 2004; 2005, ch. 73, § 3, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

142.363. Tax on gross revenues received by providers for services for individuals with intellectual disabilities and the Supports for Community Living Waiver Program — Disposition of revenues — Administrative regulations — Application for waiver — Section void if approval not received from Centers for Medicare and Medicaid Services.

  1. In addition to the tax imposed by KRS 142.307 on intermediate-care facility services for individuals with intellectual disabilities, an additional assessment is hereby imposed at a uniform rate of five and one-half percent (5.5%) on gross revenues received by each provider after July 1, 2004, for the provision of intermediate-care facility services for individuals with intellectual disabilities and the provision of services through, or identical to those provided under, the Supports for Community Living Waiver Program.
  2. All revenues collected pursuant to subsection (1) of this section shall be deposited in the Medical Assistance Revolving Trust Fund (MART) and transferred on a quarterly basis to the Department for Medicaid Services.
  3. The Department for Medicaid Services shall promulgate regulations to ensure that a portion of the revenues generated from the assessment levied under this section and federal matching funds shall be used for rate increases for intermediate-care facility services for individuals with intellectual disabilities and providers of services through, or identical to those provided under, the Supports for Community Living Waiver Program to recognize cost increases including current wage and benefit levels in the industry.
  4. The remaining revenue generated from the assessment levied under this section and federal matching funds shall be used to supplement the medical assistance related General Fund appropriations of the Department for Medicaid Services. Notwithstanding KRS 48.500 and 48.600 , the MART fund shall be exempt from any state budget reduction acts.
  5. On or before the July 1, 2004, the Cabinet for Health and Family Services, Department for Medicaid Services shall submit an application to the Centers for Medicare and Medicaid Services to request a waiver of the uniformity requirement pursuant to 42 C.F.R. sec. 433.68(e)(2).
  6. If an application to the Centers for Medicare and Medicaid Services for a waiver of the uniformity requirements is denied, the Department for Medicaid Services may resubmit the application with appropriate changes to receive an approved waiver.
  7. The assessment imposed pursuant to this section shall begin on July 1, 2004, but is not due and payable until rates are increased pursuant to this provision.
  8. The provisions of this section shall be considered null and void if the uniformity waiver or plan amendment to increase rates is not approved by the Centers for Medicare and Medicaid Services.

History. Enact. Acts 2004, ch. 142, § 2, effective April 21, 2004; 2012, ch. 146, § 13, effective July 12, 2012.

Legislative Research Commission Notes.

(4/21/2004). Subsection (5) of this statute refers to “the Cabinet for Health and Family Services, Department for Medicaid Services.” Under KRS 12.020 , the Department for Medicaid Services is part of the Cabinet for Health Services, not part of the Cabinet for Health and Family Services. The creation of the Cabinet for Health and Family Services under Executive Order 2003-064 was not confirmed by the 2004 General Assembly.

Kentucky Tourism, Meeting, and Convention Marketing Act

142.400. Statewide transient room tax — Rate — Exclusions from tax.

  1. A transient room tax shall be imposed at a rate of one percent (1%) of the rent for every occupancy of any suite, room, rooms, or cabins charged by all persons, companies, corporations, groups, or organizations doing business as motor courts, motels, hotels, inns, tourist camps, or like or similar accommodations businesses. As used in this subsection, rent shall not include any other local or state taxes paid by the person or entity renting the accommodations.
  2. The tax imposed by subsection (1) of this section shall not apply to the rental or lease of any room or set of rooms that is equipped with a kitchen, in an apartment building, and that is usually leased as a dwelling for a period of thirty (30) days or more by an individual or business that regularly holds itself out as exclusively providing apartments.

History. Enact. Acts 2005, ch. 168, § 67, effective June 1, 2005.

142.402. Transient room tax due monthly — Returns — Extension for filing — Assessments — Refund or credit — Interest and penalties due.

  1. On or before the twentieth day of every month, a taxpayer subject to the tax provided in KRS 142.400 shall submit a return and the tax due for the preceding month to the Department of Revenue, in a form prescribed by the department. To facilitate administration, the department may permit or require returns or tax payments for other periods. Upon written request received on or before the due date, the department may extend the filing or tax payment due date up to thirty (30) days.
  2. The Department of Revenue shall examine and audit each return as soon as practicable after it is received. If the tax computed by the department is greater than the tax paid by the taxpayer, the department shall assess the excess within four (4) years from the filing deadline, including any extensions granted. If the taxpayer failed to file a return or filed a fraudulent return, then the excess may be assessed at any time.
  3. A taxpayer may request a refund or credit for any overpayment of tax under KRS 142.400 within four (4) years after the tax due date, including any extensions granted. The request shall be made to the Department of Revenue in writing and shall state the amount requested, the applicable period, the basis for the request, and any other information the department reasonably requires.
  4. Any tax not paid on or before its due date shall bear interest at the tax interest rate provided in KRS 131.183 from the date due until the date of payment. If an extension is granted, and the tax is not paid within the extension period, then interest shall accrue from the original due date.

History. Enact. Acts 2005, ch. 168, § 68, effective June 1, 2005.

Legislative Research Commission Notes.

(6/1/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

142.404. Officer and member liability for taxes due.

Notwithstanding any other provision of law to the contrary, the president, vice president, secretary, treasurer, manager, partner, or any other person holding any equivalent office or position in any corporation, limited liability company, limited liability partnership, or limited liability limited partnership subject to KRS 142.400 and 142.402 shall be personally and individually liable, both jointly and severally, for the tax imposed under KRS 142.400 . Dissolution, withdrawal of the corporation, limited liability company, limited liability partnership, or limited liability limited partnership from the state, or the cessation of holding any office shall not discharge the liability of any person. The liability shall attach at the time the tax becomes or became due. No person shall be held liable under this section if the person did not have authority to collect, truthfully account for, or pay over the tax at the time it became due. “Taxes” as used in this section shall include interest accrued under KRS 131.183 and all applicable penalties imposed under this chapter or KRS 131.180 , 131.410 to 131.445 , and 131.990 .

History. Enact. Acts 2005, ch. 168, § 69, effective June 1, 2005; 2006, ch. 149, § 205, effective July 12, 2006.

142.406. Tourism, meeting, and convention marketing fund — Creation and fund sources — Authorized investments — Use of funds — Annual report to Legislative Research Commission and to Governor.

  1. There is hereby created and established in the State Treasury a trust and agency account to be known as the tourism, meeting, and convention marketing fund. The fund shall be administered by the Tourism, Arts and Heritage Cabinet, with the approval of the Governor’s Office for Policy and Management.
  2. All tax receipts from the tax imposed under KRS 142.400 shall be deposited into the tourism, meeting, and convention marketing fund, and shall be appropriated for the purposes set forth in subsection (3) of this section. The fund shall also contain any other money contributed, allocated, or appropriated to it from any other source. Money in the fund shall be invested by the Finance and Administration Cabinet in instruments authorized under KRS 42.500 . Investment proceeds shall be deposited to the credit of the fund. Money in the fund shall not lapse but shall be carried forward to the next fiscal year or biennium.
  3. The tourism, meeting, and convention marketing fund shall be used for the sole purpose of marketing and promoting tourism in the Commonwealth including expenditures to market and promote events and venues related to meetings, conventions, trade shows, cultural activities, historical sites, recreation, entertainment, natural phenomena, areas of scenic beauty, craft marketing, and any other economic activity that brings tourists and visitors to the Commonwealth. Marketing and promoting tourism shall not include expenditures on capital construction projects.
  4. By September 1 of each year, the secretary of the Tourism, Arts and Heritage Cabinet shall report to the Governor and the Legislative Research Commission concerning the receipts, expenditures, and carryforwards of the fund for the preceding fiscal year.

History. Enact. Acts 2005, ch. 168, § 70, effective June 1, 2005; 2009, ch. 16, § 14, effective June 25, 2009.

Legislative Research Commission Notes.

(6/1/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

Research References and Practice Aids

2020-2022 Budget Reference.

See State/Executive Branch Budget, 2020 Ky. Acts ch. 92, Pt. V, I, 1 at 941.

142.408. Short title for KRS 142.400 to 142.408 — Kentucky Tourism, Meeting, and Convention Marketing Act.

KRS 142.400 to 142.408 may be cited as the Kentucky Tourism, Meeting, and Convention Marketing Act.

History. Enact. Acts 2005, ch. 168, § 71, effective June 1, 2005.

CHAPTER 143 Coal Tax

143.010. Definitions for chapter.

As used in this chapter:

  1. “Department” means the Department of Revenue;
  2. “Coal” means and includes any material composed predominantly of hydrocarbons in a solid state;
  3. “Severed,” “severing,” or “severance” means the physical removal of coal from the earth;
  4. “Ton” means a short ton of 2,000 pounds. The number of tons shall be determined at the first point at which the coal is weighed;
    1. “Taxpayer” means and includes any individual, partnership, joint venture, association, or corporation engaged in severing and/or processing coal in this state. In instances where contracts, either oral or written, are entered into by which persons, organizations, or businesses are engaged to mine or process the coal but do not obtain title to or do not have an economic interest therein, the party who owns the coal or has an economic interest shall be the taxpayer. (5) (a) “Taxpayer” means and includes any individual, partnership, joint venture, association, or corporation engaged in severing and/or processing coal in this state. In instances where contracts, either oral or written, are entered into by which persons, organizations, or businesses are engaged to mine or process the coal but do not obtain title to or do not have an economic interest therein, the party who owns the coal or has an economic interest shall be the taxpayer.
    2. For purposes of this chapter, a taxpayer possesses an economic interest in coal where the taxpayer has acquired by investment any interest in coal and secures, by any form of legal relationship, income derived from the severance or processing of coal, to which he must look for a return of his capital. A party who has no capital investment in the coal or who only receives an arm’s length royalty shall not be considered as having an economic interest;
  5. “Gross value” is defined as follows:
    1. For coal severed and/or processed and sold during a reporting period, gross value shall be the amount received or receivable by the taxpayer;
    2. For coal severed and/or processed, but not sold during a reporting period, gross value shall be determined as follows:
      1. If the coal is to be sold under the terms of an existing contract, the contract price shall be used in computing gross value; and
      2. If there is no existing contract, the fair market value for that grade and quality of coal shall be used in computing gross value;
    3. In a transaction involving related parties, gross value shall be the amount received or receivable from the first noncontrolled sale by the related parties. If coal is sold to a related party for consumption, gross value shall not be less than the fair market value for coal of similar grade and quality;
    4. In the absence of a sale, gross value shall be the fair market value for coal of similar grade and quality;
    5. If severed coal is purchased for the purpose of processing and resale, the gross value shall be the amount received or receivable during the reporting period reduced by the amount paid or payable to the registered taxpayer actually severing the coal;
    6. If severed coal is purchased for the purpose of processing and consumption, the gross value shall be the fair market value of processed coal of similar grade and quality reduced by the amount paid or payable to the registered taxpayer actually severing the coal;
    7. In all instances, the gross value shall not be reduced by any taxes, including the tax levied by KRS 143.020 , royalties, sales commissions, or any other expense; and
    8. In all instances, transportation expense incurred in transporting coal shall not be considered as gross income from the property;
  6. “Reporting period” means the period for which each taxpayer shall compute his tax liability and remit the tax due to the department. The reporting period shall be monthly. However, the department may, under certain conditions, authorize a quarterly reporting period;
  7. “Processing” includes cleaning, breaking, sizing, dust allaying, treating to prevent freezing, or loading or unloading for any purpose. “Processing” shall not include:
    1. Acts performed by a final consumer who is not a related party to the person who severed and/or processed the coal if such acts are performed only at the site where the coal is consumed for purposes of generating electricity;
    2. The act of unloading or loading for shipment coal that has not been severed, cleaned, broken, sized, or otherwise treated in Kentucky; or
    3. The use of electromagnetic energy on coal to reduce moisture, ash, sulfur, or mercury in the coal;
  8. “Related party” means two (2) or more persons, organizations, or businesses owned or controlled directly or indirectly by the same interest. Control shall exist if a contract or lease, either written or oral, is entered into whereby one (1) party mines or processes coal owned or held by another party and the owner or lessor participates in the mining, processing, or marketing of the coal or receives any value other than an arm’s length passive royalty interest. In the case of related parties, the department may apportion or allocate the receipts between or among the persons, organizations, or businesses if it determines that the apportionment or allocation is necessary in order to more clearly reflect gross value;
    1. “Transportation expense” means: (10) (a) “Transportation expense” means:
      1. The amount paid by a taxpayer to a third party for transporting coal from the mine mouth or pit to a processing plant, tipple, or loading dock; and
      2. The expense incurred by a taxpayer using his own facilities in transporting coal from the mine mouth or pit to a processing plant, tipple, or loading dock.
    2. “Transportation expense” shall not include:
      1. The cost of acquisition, improvements, and maintenance of real property;
      2. The cost of acquisition and operating expenses of mining and nonmining loading or unloading facilities; or
      3. The cost of acquisition and operating expenses of equipment used to load or unload the coal at the mine, processing facility, and mining and nonmining loading facility;
  9. “Registered taxpayer” means a taxpayer who holds a valid coal tax certificate of registration required under KRS 143.030(1) and the certificate of registration was valid for the period in which his coal was sold;
  10. “Above-drainage” means coal in a coal bed that outcrops at the surface within a mine permit area and that is accessed at the outcrop location;
  11. “Below-drainage” means coal in a coal bed that does not outcrop at the surface within a mine permit area and that is accessed by mine slopes or other openings that penetrate the coal a minimum of thirty (30) feet below the surface drainage level; and
  12. “Mining ratio” means the amount of bank cubic yards of surface material that must be removed before a ton of coal can be mined.

History. Enact. Acts 1972, ch. 62, part II, § 1; 1978, ch. 189, § 1, effective July 1, 1978; 1988, ch. 331, § 2, effective July 15, 1988; 1990, ch. 163, § 7, effective July 13, 1990; 1990, ch. 177, § 4, effective July 13, 1990; 1994, ch. 133, § 1, effective July 15, 1994; 2000, ch. 478, § 1, effective July 14, 2000; 2005, ch. 85, § 534, effective June 20, 2005; 2008, ch. 182, § 1, effective July 15, 2008; 2013, ch. 119, § 18, effective July 1, 2013.

Compiler’s Notes.

Section 611 of the Internal Revenue Code referred to in subsection (10) of this section and section 613 (c) of the Internal Revenue Code referred to in subsection (6) of this section are compiled as 26 USCS §§ 611 and 613, respectively.

Section 3 of Acts 1994, ch. 133, provided that the 1994 amendment to this section “shall be effective for tax periods beginning on or after August 1, 1994.”

Legislative Research Commission Notes.

(7/1/2013). Under the authority of KRS 7.136(1), the Reviser of Statutes has modified the internal numbering of subsection (10) of this statute from the way it appeared in 2013 Ky. Acts ch. 119, sec. 18. The words in the text were not changed.

NOTES TO DECISIONS

  1. Lessees of Coal Interests.
  2. Lessor.
  3. Gross Value.
  4. —Deductions.
  5. —Transportation Costs.
  6. Transfer to Wholly Owned Subsidiary.
  7. Liability of Mining Company.
1. Lessees of Coal Interests.

The lessees of coal interests, who had contract miners extract coal from the leasehold for them were the taxpayers engaged in severing coal who should have paid the coal severance tax. Commonwealth, Dep't of Revenue v. Majestic Collieries Co., 594 S.W.2d 877, 1979 Ky. LEXIS 321 ( Ky. 1979 ).

2. Lessor.

Under this chapter as it was enacted in 1972, a mineral owner who leased his coal to a severer of coal held not “engaged in severing” that coal. Cimmaron Coal Corp. v. Department of Revenue, 681 S.W.2d 435, 1984 Ky. App. LEXIS 534 (Ky. Ct. App. 1984).

3. Gross Value.

Under this chapter as it was enacted in 1972, and prior to its amendment in 1978, money which taxpayer received from a purchaser complying with a contractual obligation to pay severance tax was includable in “gross value.” Cimmaron Coal Corp. v. Department of Revenue, 681 S.W.2d 435, 1984 Ky. App. LEXIS 534 (Ky. Ct. App. 1984).

The evidence before the Board of Tax Appeals was not sufficient to support its finding that the payment by the Tennessee Valley Authority to the coal company was for coal severed during the audit period; therefore, the coal company properly excluded the payment from “gross value” under subdivision (6) of this section when it filed its severance tax return for the audit period in question. Commonwealth, Revenue Cabinet v. South Hopkins Coal Co., 734 S.W.2d 476, 1987 Ky. App. LEXIS 451 (Ky. Ct. App. 1987).

The plain meaning of subdivision (6) of this section is that the General Assembly intended that the gross value of coal for severance tax purposes is to be computed in the same manner as the “gross income from the property” was computed under Section 613(c) of the Internal Revenue Code as was in effect on December 31, 1977, with the exception that transportation expenses would not be considered as gross income from the property. Tradewater Mining Co. v. Revenue Cabinet of Kentucky, 753 S.W.2d 551, 1988 Ky. LEXIS 44 ( Ky. 1988 ).

Loaders and shovels used to load coal from the steam or mine mouth onto trucks, including such expenses as depreciation, repair, maintenance and employee wages and benefits were included in the gross value of the coal and subject to severance tax. Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819, 1989 Ky. LEXIS 52 ( Ky. 1989 ).

4. —Deductions.

Under this chapter as it was enacted in 1972, the trial court did not err in affirming the board’s order that the taxpayer’s royalty payments to the mineral owner from whom he leased his coal should not be deducted from gross value. Cimmaron Coal Corp. v. Department of Revenue, 681 S.W.2d 435, 1984 Ky. App. LEXIS 534 (Ky. Ct. App. 1984).

5. —Transportation Costs.

Under this chapter as it was enacted in 1972, gross value held not to include transportation costs from taxpayer’s mine to taxpayer’s processing plant. Cimmaron Coal Corp. v. Department of Revenue, 681 S.W.2d 435, 1984 Ky. App. LEXIS 534 (Ky. Ct. App. 1984).

Any reasonable interpretation of the literal words of this section would compel the conclusion that the “gross value” upon which the severance tax is levied is the amount received or receivable by the taxpayer for the coal severed; not for transportation furnished by others to remove the coal from the pit mouth and to the location of the independent broker’s tipple. Revenue Cabinet, Commonwealth v. Hoke Co., 697 S.W.2d 163, 1985 Ky. App. LEXIS 642 (Ky. Ct. App. 1985) (prior to 1978 amendment).

Subdivision (11) of this section is all inclusive in defining transportation costs to be excluded under subdivision (6) of this section; when read as a whole, this section dictates that the cost involved in any movement (transportation) of coal from its source to the customer is excludable. Revenue Cabinet, Commonwealth v. Pyramid Mining Co., 741 S.W.2d 662, 1987 Ky. App. LEXIS 546 (Ky. Ct. App. 1987).

The General Assembly’s inclusion of subdivision (11)(c) of this section expands the term “transportation expense” beyond the definition of “transportation” used in Section 613(c) of the Internal Revenue Code; were it not intended to so expand the transportation costs included in gross value for federal depletion purposes, there would have been no need whatsoever for subdivision (11)(c) of this section. Revenue Cabinet, Commonwealth v. Pyramid Mining Co., 741 S.W.2d 662, 1987 Ky. App. LEXIS 546 (Ky. Ct. App. 1987).

The loading and unloading of coal incident to the mining process is taxable, but the loading and unloading of coal related to nonmining transportation is not taxable; therefore, the mining company’s loading dock facility from where coal was transported to customers did not come within the meaning of “gross income from property” under the Internal Revenue Code, and the operating expenses of the dock were not included in gross value for the imposition of the coal tax under subdivision (6) of this section. Tradewater Mining Co. v. Revenue Cabinet of Kentucky, 753 S.W.2d 551, 1988 Ky. LEXIS 44 ( Ky. 1988 ).

Aside from the exemptions set forth in subdivision (11) of this section, a taxpayer should not be entitled to claim an item as a nonmining transportation expense unless he has shown that such cost was not used to increase his depletion allowance under section 613(c) of the Internal Revenue Code. To effectuate this rule, in future cases, upon request by the Revenue Cabinet, taxpayers shall be required to furnish their federal income tax returns or other evidence of their treatment of the claimed expense for federal tax purposes. Revenue Cabinet v. Brown Badgett, Inc., 771 S.W.2d 819, 1989 Ky. LEXIS 52 ( Ky. 1989 ).

6. Transfer to Wholly Owned Subsidiary.

Coal company which transferred coal to a sales company for 96% of the price paid by the ultimate purchaser of the coal could not avoid severance tax on the remaining 4% where the sales company was a wholly owned subsidiary of the coal company. Revenue Cabinet v. South East Coal Co., 791 S.W.2d 374, 1990 Ky. LEXIS 27 ( Ky. 1990 ), modified, 1990 Ky. LEXIS 68 (Ky. June 28, 1990).

7. Liability of Mining Company.

Where mining company had an economic interest in coal, it was liable for the severance tax on coal. Vericoals, Inc. v. Revenue Cabinet, 869 S.W.2d 49, 1994 Ky. App. LEXIS 6 (Ky. Ct. App. 1994).

Cited in:

Gillis v. Yount, 748 S.W.2d 357, 1988 Ky. LEXIS 13 ( Ky. 1988 ).

Opinions of Attorney General.

Where an airport authority in excavating for construction of a new airport removes a significant amount of coal, it will be liable for the 4% severance tax if it sells the coal as there are no exemptions provided in the statute. OAG 74-53 .

The coal severance tax imposed by KRS 143.010 to 143.990 , as distributed to the counties pursuant to KRS 42.300 (repealed), is not unconstitutional in violation of Const., §§ 3, 51, 59, 177 or 181. OAG 75-76 .

Where a coal company has a mine opening in one county but the greatest portion, if not all, of its coal is mined from seams of coal located in the adjoining county and removed through the opening in the first county, “severance,” as defined in this section, when applied to KRS 42.300 (repealed), means physical removal of the coal from its natural position in the coal seam to the earth’s surface; thus the severance tax must be considered collectible in the county where the coal lay in its natural formation prior to the mining removal process. OAG 75-578 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

143.020. Imposition of tax on severance or processing of coal.

For the privilege of severing or processing coal, in addition to all other taxes imposed by law, a tax is hereby levied on every taxpayer engaged in severing and/or processing coal within this Commonwealth at the rate of four and one-half percent (4.5%) of the gross value of all coal severed and/or processed during the reporting period; except that the minimum tax for a reporting period shall be an amount determined by applying a rate of fifty cents ($0.50) per ton to the total number of tons severed during the reporting period. The minimum tax shall not apply to a taxpayer who only processes coal.

History. Enact. Acts 1972, ch. 62, part II, § 2; 1976, ch. 84, § 1, effective March 29, 1976; 1978, ch. 189, § 2, effective July 1, 1978.

NOTES TO DECISIONS

Cited in:

Harrod Concrete & Stone Co. v. Crutcher, 2015 Ky. LEXIS 72 (Apr. 2, 2015).

NOTES TO DECISIONS

Analysis

  1. Place of Severance.
  2. Excise Tax.
  3. Liability for Tax.
  4. Gross Value.
1. Place of Severance.

Since “severance” of coal means the parting of the coal from the earth in which it has been embedded, the county in which underground seams of coal were located was entitled to an allocated portion of the state severance tax collections rather than the county in which mouths of mines through which the same coal was brought to the surface were located. Clay County v. Leslie County, 531 S.W.2d 524, 1975 Ky. LEXIS 47 ( Ky. 1975 ).

2. Excise Tax.

The fact that the tax for the severing or processing of coal is in a separate chapter (KRS Ch. 143) from the chapter (KRS Ch. 138) entitled “Excise Taxes” does not establish that such a tax is not an excise tax since the character of the tax is not determined by the label placed upon it by the Legislature, but by its operation and effect. Circle "C" Coal Co. v. Commonwealth, 628 S.W.2d 883, 1981 Ky. App. LEXIS 317 (Ky. Ct. App. 1981).

The tax upon the privilege of severing and processing coal in the commonwealth is an excise tax; therefore the trial court had jurisdiction under KRS 135.050 to grant an injunction against the severing of coal until delinquent severance taxes were paid. Circle "C" Coal Co. v. Commonwealth, 628 S.W.2d 883, 1981 Ky. App. LEXIS 317 (Ky. Ct. App. 1981).

3. Liability for Tax.

The one liable for the severance tax is the one who severs the coal, not the one who purchases it. Cimmaron Coal Corp. v. Department of Revenue, 681 S.W.2d 435, 1984 Ky. App. LEXIS 534 (Ky. Ct. App. 1984).

4. Gross Value.

In determining “gross value,” this commonwealth used the federal valuation methods used for depletion purposes, with the exception that “transportation expense” is not included. Revenue Cabinet, Commonwealth v. Pyramid Mining Co., 741 S.W.2d 662, 1987 Ky. App. LEXIS 546 (Ky. Ct. App. 1987).

In arriving at the taxable base (gross value) for imposition of the 4.50% tax rate under this section, gross value (synonymous with gross income) is determined, and transportation expense is deducted. Revenue Cabinet, Commonwealth v. Pyramid Mining Co., 741 S.W.2d 662, 1987 Ky. App. LEXIS 546 (Ky. Ct. App. 1987).

Opinions of Attorney General.

Where an airport authority in excavating for construction of a new airport removes a significant amount of coal, it will be liable for the 4% severance tax if it sells the coal as there are no exemptions provided in the statute. OAG 74-53 .

The coal severance tax imposed by KRS 143.010 to 143.990 , as distributed to the counties pursuant to KRS 42.300 (repealed), is not unconstitutional in violation of Ky. Const., §§ 3, 51, 59, 177 or 181. OAG 75-76 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 64 Ky. L.J. 371 (1975-76).

Notes, Economic, Social and Legal Aspects of Coal Transportation in Kentucky, 64 Ky. L.J. 601 (1975-76).

Whiteside and Gillig, Coal and Conservation — Tax Policy, 64 Ky. L.J. 573 (1975-76).

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Kentucky Law Survey, Whiteside and Harman, Kentucky Taxation, 67 Ky. L.J. 739 (1978-79).

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

143.021. Tax credit for thin seam coal.

  1. A nonrefundable severance tax credit against the severance tax imposed by KRS 143.020 shall be allowed for new permitted production after July 1, 2000, as follows.
    1. For coal mined from above-drainage seams using deep mining or underground mining methods, the credit shall be equal to:
      1. Two and one-quarter percent (2.25%) of the gross value of coal with a coal thickness of between twenty-seven (27) and thirty (30) inches; or
      2. Three percent (3%) of the gross value of coal with a coal thickness of less than twenty-seven (27) inches.
    2. For coal mined from below-drainage seams using deep mining or underground mining methods, the credit shall be equal to:
      1. Two and one-quarter percent (2.25%) of the gross value of coal with a coal thickness of between thirty-two (32) and thirty-six (36) inches;
      2. Three percent (3%) of the gross value of coal with a coal thickness of between twenty-seven (27) and thirty-two (32) inches; or
      3. Three and three-quarters percent (3.75%) of the gross value of coal with a coal thickness of less than twenty-seven (27) inches.
  2. Coal thickness under subsection (1) of this section shall be based on the weighted average isopach mapping of actual coal thickness by mine as certified by a professional engineer for each reporting period. The taxpayer shall attach a copy of the certified isopach mapping for each reporting period to the return filed for that period.
  3. The taxpayer shall take the tax credit under this section in conjunction with the taxpayer’s monthly return.

History. Enact. Acts 2000, ch. 478, § 2, effective July 14, 2000.

143.022. Coal severance tax refund on imported coal.

  1. A taxpayer engaged in severing or processing coal within this Commonwealth that has paid the tax imposed under KRS 143.020 may apply for a refund equal to the amount of tax paid under KRS 143.020 if the coal is transported directly to a market outside of North America.
  2. To apply for the refund allowed under subsection (1) of this section the taxpayer shall file an application for refund with the department and submit all information and documentation necessary to substantiate that the tax was paid upon the coal which was transported directly to a market outside of North America.
  3. The refund process allowed under subsection (1) of this section is available beginning on or after August 1, 2020, but before July 1, 2022, and limited during any calendar year to the export of a combined total of ten million (10,000,000) tons of coal subject to the tax imposed under KRS 143.020 and exported through United States coal export terminals to markets outside of North America.

HISTORY: 2020 ch. 91, § 46, effective April 15, 2020.

143.023. Limitation of tax on coal severance for coal used in burning solid waste.

Notwithstanding the severance tax on coal, provided in this chapter, the tax on coal used for burning solid waste shall be limited to fifty cents ($0.50) per ton or four percent (4%) of the selling price per ton whichever is less.

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 12, § 49, effective February 26, 1991.

Compiler’s Notes.

This section was enacted by Acts 1991 (Ex. Sess.), ch. 12, § 49, effective February 26, 1991 and was compiled as KRS 224.8907 and was removed and renumbered as this section from KRS 224.8907 (1) by the Reviser of Statutes under authority of KRS 7.136 and 7.140 and approved by the Legislative Research Commission on July 10, 1991.

143.024. Tax incentive for purchase or severance of coal used in alternative fuel or gasification facility.

  1. As used in this section:
    1. “Alternative fuel facility” has the same meaning as in KRS 154.27-010 ;
    2. “Approved company” has the same meaning as in KRS 154.27-010 ;
    3. “Authority” has the same meaning as in KRS 154.27-010;
    4. “Base amount” has the same meaning as in KRS 154.27-010;
    5. “Capital investment” has the same meaning as in KRS 154.27-010;
    6. “Eligible project” has the same meaning as in KRS 154.27-010;
    7. “Energy-efficient alternative fuel facility” has the same meaning as in KRS 154.27-010;
    8. “Gasification facility” has the same meaning as in KRS 154.27-010; and
    9. “Tax incentive agreement” has the same meaning as in KRS 154.27-010.
  2. Notwithstanding any other provision of KRS 134.580 or this chapter, an approved company that purchases or severs coal that is subject to the tax imposed under KRS 143.020 and that is specifically used by the approved company as feedstock for an alternative fuel facility, energy-efficient alternative fuel facility, or gasification facility may be eligible for an incentive under KRS 154.27-060 .
  3. A company approved for incentives under KRS 154.27-060 shall file a request for the incentive with the department within sixty (60) days of the completion of the construction, retrofit, or upgrade of the facility. In subsequent years, the approved company shall file a request for the incentive within sixty (60) days following the end of each calendar year. The request for incentives shall be in the form prescribed by the department through the promulgation of administrative regulations in accordance with KRS Chapter 13A. The request for incentives shall include but not be limited to the following information:
    1. Verification of the base amount;
    2. Verification of the tons of coal purchased and used or severed and used by the approved company as feedstock for an alternative fuel facility, energy-efficient alternative fuel facility, or gasification facility during the calendar year for which the request for incentives is being made;
    3. Verification that the minimum capital investment as set forth in the tax incentive agreement has been made;
    4. Verification of the output of coal-derived alternative transportation fuels, coal-derived synthetic natural gas, coal-derived liquid fuels, coal-derived energy-efficient alternative fuels, or other coal-derived chemicals or chemical feedstocks; and
    5. Any other information that the department may require.
  4. To assist in determining the amount of coal purchased and used or severed and used that is eligible for the incentive, the department shall obtain from the University of Kentucky Center for Applied Energy Research a reasonable and typical estimate of the tons of coal needed to produce a given output of coal-derived alternative transportation fuels, coal-derived synthetic natural gas, coal-derived liquid fuels, coal-derived energy-efficient alternative fuels, or other coal-derived chemicals or chemical feedstocks, considering:
    1. The type of coal to be used;
    2. Equipment to be employed;
    3. Size and output of the facility;
    4. Slate of products produced; and
    5. Other characteristics of the alternative fuel facility, energy-efficient alternative fuel facility, or gasification facility.
    1. The department and the authority shall review the request for incentives jointly and shall verify that the request for incentives meets all requirements established by statute and administrative regulation. (5) (a) The department and the authority shall review the request for incentives jointly and shall verify that the request for incentives meets all requirements established by statute and administrative regulation.
    2. The department shall verify the tax paid pursuant to KRS 143.020 on the coal purchased or severed by the approved company and used as feedstock for an alternative fuel facility, energy-efficient alternative fuel facility, or gasification facility during the calendar year for which the application was submitted and shall determine the amount of the tax paid that qualifies for distribution to the approved company pursuant to this section.
    3. The incentive amount shall be distributed to the approved company in quarterly installments beginning on July 1 of the year following the calendar year for which the request for incentives required under this section was submitted.
  5. The approved company seeking incentives shall execute information-sharing agreements prescribed by the department with vendors from which it purchased coal to verify the value of coal purchased by the approved company and used as feedstock for an alternative fuel facility, energy-efficient alternative fuel facility, or gasification facility and the amount of tax paid under KRS 143.020 on such coal.
  6. The department shall notify the authority of the incentive distributed to each approved company upon request.

History. Enact. Acts 2007 (2nd Ex. Sess.), ch. 1, § 11, effective August 30, 2007; 2010, ch. 60, § 4, effective July 15, 2010.

Legislative Research Commission Notes.

(8/30/2007). A manifest clerical or typographical error in subsection (4) of this section has been corrected by the Reviser of Statutes during codification pursuant to the authority of KRS 7.136 .

143.025. Determination of taxable gross value of severed coal.

  1. Taxpayers severing coal in Kentucky and partially or wholly processing the coal outside of Kentucky thereafter and taxpayers severing coal outside of Kentucky and partially or wholly processing the coal in Kentucky thereafter shall determine and report the gross value of the coal by application of the following formula:
    1. Determine the direct cost of severing or processing the coal in Kentucky as defined in paragraphs (d) and (e) of this subsection.
    2. Determine the direct cost of severing or processing the coal outside of Kentucky as defined in paragraphs (d) and (e) of this subsection.
    3. Exclude from paragraphs (a) and (b) of this subsection transportation expense and overhead cost as defined in paragraph (f) of this subsection.
    4. Include in the direct cost of severing coal: black lung excise tax; contract mining, less transportation expense contained therein; cost depletion; depreciation; development; equipment rental; explosives; fuel; labor and associated expenses; maintenance; reclamation; royalties when based on tons severed; and wheelage.
    5. Include in the direct cost of processing coal: depreciation; equipment rental; fee processing; fuel; labor and associated expense; maintenance; and refuse disposal.
    6. Include in the overhead costs: commissions; freight yard and siding expense; general expense; general insurance and supervision; general office expense; idle time expense; inventory adjustments; mine closing expense; officers’ salaries; percentage depletion; quality analysis; scale and weighman’s expense; transportation expense and taxes, including sales, coal severance, property, franchises, and state income taxes.
  2. For purposes of computing the formula under this section, any expense which is not directly attributable to either the severing or processing of the coal shall be classified as an overhead cost.
  3. Direct cost determined in subsection (1)(a) of this section divided by the total of direct cost determined in subsection (1)(a) of this section and the direct cost determined in subsection (1)(b) of this section and the result multiplied by the gross value of the coal shall equal the proportion of gross value which is subject to the tax levied under KRS 143.020 .
  4. Any taxpayer determining taxable gross value as provided in this section shall submit supporting computations and classifications of cost with each coal tax return, unless the department authorizes the taxpayer to submit the supporting information on a basis other than monthly.

History. Enact. Acts 1990, ch. 163, § 2, effective July 13, 1990; 2005, ch. 85, § 537, effective June 20, 2005; 2013, ch. 119, § 19, effective July 1, 2013.

143.030. Application for certificate of registration — Tax return — Revocation of certificate — Penalty for operation without certificate.

  1. Every individual, partnership, joint venture, association, limited liability company, limited liability partnership, corporation, or other business entity engaged in severing or processing coal shall, prior to July 1, 1978, or prior to severing or processing coal in this Commonwealth, file an application for a certificate of registration in such form as the department may prescribe. Every application shall be signed by:
    1. The owner if a natural person;
    2. A member or partner if the entity is an association, limited liability company, limited liability partnership, or partnership;
    3. An executive officer, if the entity is a corporation, or some person specifically authorized by the corporation to sign the application, to which shall be attached written evidence of his or her authority; or
    4. A licensed certified public accountant, or an attorney licensed to practice law in the Commonwealth of Kentucky, acting on behalf of the owner, association, partnership, limited liability company, limited liability partnership, corporation, or other business entity.
  2. On or before the twentieth day of the month following the reporting period in which any coal is severed or processed, the taxpayer severing or processing such coal shall file with the department a tax return in such form as the department may require and remit the amount of the tax due. A tax return is required for each reporting period even though there may be no tax liability.
  3. Whenever any taxpayer fails to comply with any provisions of this chapter, or any rule or regulation of the department relating thereto, the department may order the suspension or revocation of the certificate of registration held by such taxpayer.
  4. Any taxpayer, including any officer of a corporation, who conducts a coal severing or processing operation in this state without obtaining a certificate of registration or after a certificate of registration has been suspended or revoked, shall be guilty of a misdemeanor and upon conviction therefor, shall be fined an amount not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000) or imprisoned for a period not to exceed six (6) months or both such fine and imprisonment.

History. Enact. Acts 1972, ch. 62, part II, § 3; 1978, ch. 189, § 3, effective July 1, 1978; 2002, ch. 44, § 3, effective July 15, 2002; 2005, ch. 85, § 538, effective June 20, 2005.

143.035. Collection and payment of tax by processor — Agreement with department.

Notwithstanding any other provisions of this chapter to the contrary, where the department finds that it would facilitate and expedite the collection of the tax imposed by this chapter, the department may authorize the taxpayer processing the coal to report and pay the tax which would be due from the taxpayer severing the coal. Authorization from the department shall be in the form of an agreement executed by the taxpayer processing the coal, the taxpayer severing the coal and the department. The agreement shall be in such form as the department may prescribe. The agreement must be signed by the owners if the taxpayers are natural persons; in the case of a partnership or association by a partner or member; in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application. The director of the sales and severance tax division shall sign for the department. The agreement may be terminated by any party to the agreement upon giving thirty (30) days written notice to the other parties to the agreement; however, the department may terminate the agreement immediately upon written notice to the other parties when either the taxpayer processing the coal or the taxpayer severing the coal fails to comply with the terms of the agreement.

History. Enact. Acts 1978, ch. 189, § 6, effective July 1, 1978; 2005, ch. 85, § 539, effective June 20, 2005.

143.037. Certificates or forms for verification of deduction by processor — Statement required for coal severed outside of state — Deduction prohibited for nonregistrants or untraceable purchases.

  1. For the purpose of administering KRS 143.010(6)(e) and (f), the department shall provide to all registered taxpayers, who sell severed or processed coal that will subsequently be claimed as a deduction for purchased coal, certificates or other similar forms designed for the purpose of permitting the processor of the coal to verify his deduction for purchased coal. If coal which has been severed outside this state is purchased by a processor, he shall acquire a statement in such form as the department may prescribe from the person severing the coal outside this state.
  2. A deduction for purchased coal shall not be allowed for purchases of coal originating from persons severing coal in this state who are not registered to report and pay the tax due under this chapter or for purchases of coal which cannot be traced to a person who severed the coal outside this state.

History. Enact. Acts 1988, ch. 331, § 1, effective July 15, 1988; 2005, ch. 85, § 540, effective June 20, 2005.

143.040. Administration by Department of Revenue.

The Department of Revenue shall administer the provisions of this chapter and shall, subject to the provisions of KRS 143.090 , have all the powers, rights, duties, and authority with respect to promulgation of rules and regulations, assessment, collection, refunding and administration of the taxes levied by this chapter conferred generally on it by the Kentucky Revised Statutes including Chapters 131, 134, and 135 of such statutes.

History. Enact. Acts 1972, ch. 62, part II, § 4; 1976, ch. 84, § 2, effective March 29, 1976; 2005, ch. 85, § 535, effective June 20, 2005.

143.050. Bond for payment — Court action on unpaid bond.

  1. Any taxpayer charged with the filing of reports and payment of the tax imposed by this chapter may be required to post a cash or corporate surety bond in an amount to be determined by the department.
  2. The Commonwealth may bring an action for a restraining order, temporary or permanent injunction to restrain or enjoin the operation of a taxpayer’s business until the bond is posted. Such action may be brought in the Franklin Circuit Court or in the Circuit Court having jurisdiction of the taxpayer.

History. Enact. Acts 1972, ch. 62, part II, § 5; 2005, ch. 85, § 541, effective June 20, 2005.

143.060. Filing of return — Review of department — Assessment on understatement of value.

  1. As soon as practicable after each return is received, the department shall examine and audit it. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the excess shall be assessed within four (4) years from the date the return was filed, except as provided in subsection (2) of this section, and except that in the case of a failure to file a return or of a fraudulent return, the excess may be assessed at any time. A notice of such assessment shall be mailed to the taxpayer. The time herein provided may be extended by agreement between the taxpayer and the department.
  2. For the purpose of subsections (1) and (4) of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
  3. Any final ruling, order or determination of the department with regard to the administration of this chapter may be reviewed only in the manner provided in KRS 49.200 to 49.250 and 131.110 .
  4. Notwithstanding the four (4) year time limitation of subsection (1), in the case of a return where the taxpayer understates the gross value by twenty-five percent (25%) or more, the excess shall be assessed by the department within six (6) years from the date the return was filed.

HISTORY: Enact. Acts 1972, ch. 62, part II, § 6; 1978, ch. 189, § 4, effective July 1, 1978; 2005, ch. 85, § 542, effective June 20, 2005; 2017 ch. 74, § 88, effective June 29, 2017.

143.070. Civil penalties for violation of chapter.

Any person who violates any of the provisions of this chapter shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 .

History. Enact. Acts 1972, ch. 62, part II, § 7; 1992, ch. 403, § 21, effective July 14, 1992.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provided: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

143.080. Interest.

Any tax not paid on or before the due date shall bear interest at the tax interest rate as defined in KRS 131.010(6) from the date due until paid.

History. Enact. Acts 1972, ch. 62, part II, § 8; 1982, ch. 452, § 28, effective July 1, 1982.

143.085. Corporate officers personally liable.

Notwithstanding any other provisions of this chapter to the contrary, the president, vice president, secretary, treasurer, or any other person holding any equivalent corporate office of any corporation subject to the provisions of this chapter shall be personally and individually liable, both jointly and severally, for the taxes imposed under this chapter, and neither the corporate dissolution nor withdrawal of the corporation from the state nor the cessation of holding any corporate office shall discharge the foregoing liability of any person. The personal and individual liability shall apply to each and every person holding corporate office at the time the taxes become or became due. No person will be personally and individually liable pursuant to this section who had no authority in the management of the business or financial affairs of the corporation at the time that the taxes imposed by this chapter become or became due. Taxes as used in this section include interest accrued at the rate provided by KRS 143.080 , and all applicable penalties imposed under this chapter, and all applicable penalties and fees imposed under KRS 131.180 , 131.410 to 131.445 , and 131.990 .

History. Enact. Acts 1988, ch. 322, § 10, effective July 15, 1988; 1994, ch. 65, § 20, effective July 15, 1994.

Research References and Practice Aids

Northern Kentucky Law Review.

Kentucky Survey Issue: Article: Personal Liability Regarding Taxation of Kentucky Corporations: Responsible Person Obligations Under the IRC and the KRS, 38 N. Ky. L. Rev. 285 (2011).

143.090. Revenue credited to road fund and Office of Energy Policy.

  1. The Transportation Cabinet shall certify to the commissioner of the Department of Revenue by October 1 of each fiscal year the amount required for lease rental payments to the Kentucky Turnpike Authority for resource recovery road projects.
  2. The Office of Energy Policy shall certify to the commissioner of the Department of Revenue by October 1 of each year the amount of the annual lease rental payments required to be made for any energy research development or demonstration project undertaken by the Office of Energy Policy. The amount so certified shall in no case exceed three million dollars ($3,000,000) in any one (1) year.
  3. Upon receiving the certifications provided for in subsections (1) and (2) of this section, the commissioner of the Department of Revenue shall cause the certified amounts to be deposited from the proceeds of the tax levied by KRS 143.020 to the credit of the transportation fund and the Office of Energy Policy, respectively, unless otherwise provided by the General Assembly in a budget bill, as follows:
    1. An amount equal to the amount certified by the Transportation Cabinet shall be deposited to the transportation fund (road fund); and
    2. An amount equal to the amount certified by the Office of Energy Policy shall be transferred by appropriate interfund transfer procedures to the Office of Energy Policy.
  4. All tax levied by KRS 143.020 collected in excess of the amount required to be deposited to the transportation fund (road fund) or transferred to the Office of Energy Policy shall be deposited by the Department of Revenue to the credit of the general fund.
  5. If the proceeds of the tax levied by KRS 143.020 are less than the amounts certified under subsections (1) and (2) of this section, the commissioner of revenue shall prorate the proceeds to the transportation fund and the Office of Energy Policy based upon the ratio of each certified amount to the total of the two (2) certified amounts.

HISTORY: Enact. Acts 1972, ch. 62, part II, § 9; 1976, ch. 84, § 3, effective March 29, 1976; 1978, ch. 189, § 5, effective July 1, 1978; 1980, ch. 298, § 2, effective July 15, 1980; 1984, ch. 410, § 8, effective July 13, 1984; 1990, ch. 325, § 26, effective July 13, 1990; 1994, ch. 277, § 5, effective July 15, 1994; 2000, ch. 2, § 3, effective July 14, 2000; 2005, ch. 85, §§ 536 and 543, effective June 20, 2005; 2006, ch. 152, § 5, effective July 12, 2006; 2010, ch. 24, § 115, effective July 15, 2010; 2018 ch. 29, § 9, effective July 14, 2018.

NOTES TO DECISIONS

1. Construction.

Annual diversion of $19 million in coal severance tax receipts from the Workers’ Compensation Benefit Reserve Fund (BRF) to the general fund did not violate Ky. Const. § 180 because the act levying the tax, KRS 143.090(4), did not, itself, dedicate coal severance tax revenue to the BRF or the Kentucky Workers' Compensation Funding Commission. Beshear v. Haydon Bridge Co., 304 S.W.3d 682, 2010 Ky. LEXIS 8 ( Ky. 2010 ).

Cited in:

Commonwealth ex rel. Armstrong v. Collins, 709 S.W.2d 437, 1986 Ky. LEXIS 262 ( Ky. 1986 ).

143.100. Political subdivisions prohibited from taxing any operations relating to coal production.

No city, county, taxing district or other unit of government, except the Commonwealth of Kentucky, shall levy any occupational, license, excise, severance or other tax, assessment or impost of any kind whatsoever upon the severance, processing, sale, use, transportation, or other handling of coal within the Commonwealth of Kentucky.

History. Enact. Acts 1976, ch. 84, § 4, effective March 29, 1976.

NOTES TO DECISIONS

Cited in:

Circle “C” Coal Co. v. Commonwealth, 628 S.W.2d 883, 1981 Ky. App. LEXIS 317 (Ky. Ct. App. 1981).

Opinions of Attorney General.

The prohibition set forth in this section does not prevent a city from imposing a license fee for the privilege of engaging in an occupation carried on in that city, but rather, prohibits a city from singling out and imposing a direct tax upon the severance, processing, sale, use, transportation, or other handling of coal within the Commonwealth of Kentucky. Hence, a city ordinance which does not impose such a direct tax on any phase of coal handling, but rather imposes a license fee on persons, some of whom may be engaged in an occupation relating to coal, is not considered to be of the type which this section was intended to prohibit. OAG 82-378 .

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside and Buechel, Kentucky Taxation, 65 Ky. L.J. 425 (1976-77).

Penalties

143.990. Penalty.

Any taxpayer who fails to file required returns or remit the tax due under this chapter or who falsifies or alters a certificate or other form required under KRS 143.037 shall be guilty of a misdemeanor and upon conviction therefor shall be fined an amount not to exceed one thousand dollars ($1,000) or imprisoned for a period not to exceed six (6) months, or both.

History. Enact. Acts 1972, ch. 62, part II, § 10; 1988, ch. 331, § 3, effective July 15, 1988.

CHAPTER 143A Natural Resources Severance and Processing Taxes

143A.010. Definitions for chapter.

As used in this chapter:

  1. “Department” means the Department of Revenue;
  2. “Natural resource” means all forms of minerals including but not limited to rock, stone, limestone, shale, gravel, sand, clay, natural gas, and natural gas liquids which are contained in or on the soils or waters of this state. For purposes of this chapter, “natural resource” does not include coal and oil which are taxed under KRS 143.020 and 137.120 ;
  3. “Severing” or “severed” means the physical removal of the natural resource from the earth or waters of this state by any means; however, “severing” or “severed” shall not include the removal of natural gas from underground storage facilities into which the natural gas has been mechanically injected following its initial removal from the earth;
    1. “Taxpayer” means and includes any individual, partnership, joint venture, association, corporation, receiver, trustee, guardian, executor, administrator, fiduciary, or representative of any kind engaged in the business of severing and/or processing natural resources in this state for sale or use. In instances where contracts, either oral or written, are entered into whereby persons, organizations or businesses are engaged in the business of severing and/or processing a natural resource but do not obtain title to or do not have an economic interest therein, the party who owns the natural resource or has an economic interest is the taxpayer. (4) (a) “Taxpayer” means and includes any individual, partnership, joint venture, association, corporation, receiver, trustee, guardian, executor, administrator, fiduciary, or representative of any kind engaged in the business of severing and/or processing natural resources in this state for sale or use. In instances where contracts, either oral or written, are entered into whereby persons, organizations or businesses are engaged in the business of severing and/or processing a natural resource but do not obtain title to or do not have an economic interest therein, the party who owns the natural resource or has an economic interest is the taxpayer.
    2. For purposes of this chapter, a taxpayer possesses an economic interest in a natural resource where the taxpayer has acquired by investment any interest in a natural resource and secures, by any form of legal relationship, income derived from the severance or processing of the natural resource, to which he must look for a return of his capital. A party who has no capital investment in the natural resource or who only receives an arm’s length royalty shall not be considered as having an economic interest;
  4. “Gross value” is defined as follows:
    1. For natural resources severed and/or processed and sold during a reporting period, gross value is the amount received or receivable by the taxpayer;
    2. For natural resources severed and/or processed, but not sold during a reporting period, gross value shall be determined as follows:
      1. If the natural resource is to be sold under the terms of an existing contract, the contract price shall be used in computing gross value; and
      2. If there is no existing contract, the fair market value for that grade and quality of the natural resource shall be used in computing gross value;
    3. In a transaction involving related parties, gross value shall not be less than the fair market value for natural resources of similar grade and quality;
    4. In the absence of a sale, gross value shall be the fair market value for natural resources of similar grade and quality;
    5. If severed natural resources are purchased for the purpose of processing and resale, the gross value is the amount received or receivable during the reporting period reduced by the amount paid or payable to the taxpayer actually severing the natural resource;
    6. If severed natural resources are purchased for the purpose of processing and consumption, the gross value is the fair market value of processed natural resources of similar grade and quality reduced by the amount paid or payable to the taxpayer actually severing the natural resource;
    7. In all instances, the gross value shall not be reduced by any taxes including the tax levied in KRS 143A.020 , royalties, sales commissions, or any other expense; and
    8. In all instances, transportation expense incurred in transporting a natural resource shall not be considered as gross income from the property;
  5. “Processing” includes but is not limited to breaking, crushing, cleaning, drying, sizing, or loading or unloading for any purpose. “Processing” shall not include the act of unloading or loading for shipment natural resources that have not been severed, cleaned, broken, crushed, dried, sized or otherwise treated in Kentucky;
  6. “Related parties” means two (2) or more persons, organizations or businesses owned or controlled directly or indirectly by the same interests; and
    1. “Transportation expense” means: (8) (a) “Transportation expense” means:
      1. The amount paid by a taxpayer to a third party for transporting natural resources; and
      2. The expenses incurred by a taxpayer using his own facilities in transporting natural resources from the point of extraction to a processing plant, tipple, or loading dock.
    2. “Transportation expense” shall not include:
      1. The cost of acquisition, improvements, and maintenance of real property;
      2. The cost of acquisition and operating expenses of mining and nonmining loading or unloading facilities; or
      3. The cost of acquisition and operating expenses of equipment used to load or unload the natural resource at the point of extraction, processing facility, or mining and nonmining loading facility.

History. Enact. Acts 1980, ch. 392, § 1, effective June 1, 1980; 1984, ch. 173, § 1, effective July 13, 1984; 1994, ch. 133, § 2, effective July 15, 1994; 2005, ch. 85, § 544, effective June 20, 2005; 2013, ch. 119, § 20, effective July 1, 2013.

Compiler’s Notes.

Section 613(c) of the Internal Revenue Code, referred to in the introductory paragraph of subsection (5), and section 611 of the Internal Revenue Code, referred to in subsection (8), are compiled as 26 USCS §§ 613(c) and 611, respectively.

Section 3 of Acts 1994, ch. 133, provides that the 1994 amendment to this section “shall be effective for tax periods beginning on or after August 1, 1994.”

NOTES TO DECISIONS

1. Severing.

Lessee, natural gas processor, was solely responsible for payment of severance tax due under this section; royalty owners were not statutorily liable for severance tax, and absent specific contractual provision apportioning severance taxes, lessee could not deduct severance taxes or any portion thereof prior to calculating royalty value. Appalachian Land Co. v. EQT Prod. Co., 619 Fed. Appx. 507, 2015 FED App. 0719N, 2015 U.S. App. LEXIS 19006 (6th Cir. Ky. 2015 ).

Cited in:

Gillis v. Yount, 748 S.W.2d 357, 1988 Ky. LEXIS 13 ( Ky. 1988 ).

Opinions of Attorney General.

Counties and cities are “taxpayers” under this chapter, since they are municipal corporations and come under the broad term “corporation,” provided that they are severing and/or processing one or more of the “natural resources” set out in that chapter. OAG 80-340 .

Where a county operates a rock quarry, the county is a “taxpayer” under the provisions of this chapter since it severs and processes rocks, and although the exemption provision of KRS 143A.030 does not apply to rock used on county and state roads, Const., § 170 does exempt the county from the tax as it relates to the rock so used, however, the county is not exempt from the tax as relates to county rock sold to private individuals for purely private purposes. OAG 80-340 .

143A.020. Levy of natural resources severance and processing tax — Application of tax.

  1. For the privilege of severing or processing natural resources in this state, a tax is hereby levied at the rate of four and one-half percent (4.5%) on natural gas and four and one-half percent (4.5%) on all other natural resources, such rates to apply to the gross value of the natural resource severed or processed except that no tax shall be imposed on the processing of ball clay.
  2. The tax shall apply to all taxpayers severing and/or processing natural resources in this state, and shall be in addition to all other taxes imposed by law.

History. Enact. Acts 1980, ch. 392, § 2, effective June 1, 1980.

NOTES TO DECISIONS

  1. Credit Proper.
  2. Deduction of severance taxes
  3. Payment of tax.
1. Credit Proper.

Taxpayer was entitled to a refund of overpaid taxes based on a credit against a severance tax imposed because the sales on the Cumberland River qualified as sales in interstate commerce, and they were sales to a purchaser outside of the state. Ninety-nine percent of the taxpayer’s limestone was sold to out-of-state customers, and these sales affected the price and supply of limestone around this region of the country. Dep't of Revenue, Finance & Admin. Cabinet v. Roanoke Cement Co., LLC, 443 S.W.3d 1, 2014 Ky. App. LEXIS 30 (Ky. Ct. App. 2014).

2. Deduction of severance taxes

Producer/lessee could not deduct severance taxes or any portion thereof prior to calculating a royalty value because the 1944 lease at issue did not provide for apportionment of severance taxes, the only party to the lease that engaged in severing the gas, bringing the gas to market, processing the gas was the producer, and the successor lessor received only a royalty payment under the lease at issue, it has no economic interest in the gas for purposes of the severance tax. Appalachian Land Co. v. EQT Prod. Co., 468 S.W.3d 841, 2015 Ky. LEXIS 1749 ( Ky. 2015 ).

3. Payment of tax.

Lessee, natural gas processor, was solely responsible for payment of severance tax due under this section; royalty owners were not statutorily liable for severance tax, and absent specific contractual provision apportioning severance taxes, lessee could not deduct severance taxes or any portion thereof prior to calculating royalty value. Appalachian Land Co. v. EQT Prod. Co., 619 Fed. Appx. 507, 2015 FED App. 0719N, 2015 U.S. App. LEXIS 19006 (6th Cir. Ky. 2015 ).

Cited in:

Gillis v. Yount, 748 S.W.2d 357, 1988 Ky. LEXIS 13 ( Ky. 1988 ); Harrod Concrete & Stone Co. v. Crutcher, 2015 Ky. LEXIS 72 (Apr. 2, 2015).

143A.025. Natural gas severance incentives.

  1. As used in this section:
    1. “Alternative fuel facility” has the same meaning as in KRS 154.27-010 ;
    2. “Approved company” has the same meaning as in KRS 154.27-010 ;
    3. “Authority” has the same meaning as in KRS 154.27-010;
    4. “Base amount” has the same meaning as in KRS 154.27-010;
    5. “Capital investment” has the same meaning as in KRS 154.27-010;
    6. “Eligible project” has the same meaning as in KRS 154.27-010; and
    7. “Tax incentive agreement” has the same meaning as in KRS 154.27-010.
  2. Notwithstanding any other provision of KRS 134.580 or this chapter, an approved company that purchases or severs natural gas or natural gas liquids that is subject to the tax imposed under KRS 143A.020 and that is specifically used by the approved company as feedstock for an alternative fuel facility described in KRS 154.27-020 (4)(d) may be eligible for an incentive under KRS 154.27-060 .
  3. A company approved for incentives under KRS 154.27-060 shall file a request for the incentive with the department within sixty (60) days of the completion of the construction, retrofit, or upgrade of the facility. In subsequent years, the approved company shall file a request for the incentive within sixty (60) days following the end of each calendar year. The request for incentives shall be in the form prescribed by the department through the promulgation of administrative regulations in accordance with KRS Chapter 13A. The request for incentives shall include but not be limited to the following information:
    1. Verification of the base amount;
    2. Verification of the thousand (1,000) cubic foot units (Mcf) of natural gas or gallons of natural gas liquids purchased and used or severed and used by the approved company as feedstock for an alternative fuel facility during the calendar year for which the request for incentives is being made;
    3. Verification that the minimum capital investment as set forth in the tax incentive agreement has been made;
    4. Verification of the output of natural-gas-derived or natural gas liquids-derived alternative transportation fuel; and
    5. Any other information that the department may require.
    1. The department and the authority shall review the request for incentives jointly and shall verify that the request for incentives meets all requirements established by statute and administrative regulation. (4) (a) The department and the authority shall review the request for incentives jointly and shall verify that the request for incentives meets all requirements established by statute and administrative regulation.
    2. The department shall verify the tax paid pursuant to KRS 143A.020 on the natural gas and natural gas liquids purchased or severed by the approved company and used as feedstock for an alternative fuel facility during the calendar year for which the application was submitted and shall determine the amount of the tax paid that qualifies for distribution to the approved company pursuant to this section.
    3. The incentive amount shall be distributed to the approved company in quarterly installments beginning on July 1 of the year following the calendar year for which the request for incentives required under this section was submitted. (6) The approved company seeking incentives shall execute information-sharing agreements prescribed by the department with vendors from which it purchased natural gas and natural gas liquids to verify the value of natural gas and natural gas liquids purchased by the approved company and used as feedstock for an alternative fuel facility and the amount of tax paid under KRS 143A.020 on such natural gas and natural gas liquids.

(7) The department shall notify the authority of the incentive distributed to each approved company upon request.

History. Enact. Acts 2010, ch. 139, § 5, effective July 15, 2010.

143A.030. Exemptions.

The taxes imposed in KRS 143A.020 do not apply to fluorspar, lead, zinc, and barite severed for any purposes or to rock, limestone, or gravel used for privately maintained but publicly dedicated roads or limestone when sold or used by the taxpayer for agricultural purposes so as to qualify for exemption from sales and use taxes as provided in KRS 139.480 .

History. Enact. Acts 1980, ch. 392, § 3, effective June 1, 1980; 1984, ch. 173, § 2, effective July 13, 1984; 2002, ch. 367, § 2, effective August 1, 2002.

NOTES TO DECISIONS

Cited in:

Gillis v. Yount, 748 S.W.2d 357, 1988 Ky. LEXIS 13 ( Ky. 1988 ).

Opinions of Attorney General.

The exemption provision of this section would not apply to the rock, limestone or gravel used for county or state roads since implied exceptions to the express provisions of a statute are not favored; although this exemption would fit subdivision access roads, not a part of state, city or county road systems, this clearly stated exemption cannot be twisted into an application relating to rock used on state or county roads. OAG 80-340 .

Where a county operates a rock quarry, the county is a “taxpayer” under the provisions of this chapter since it severs and processes rocks, and although the exemption provision does not apply to rock used on county and state roads, Const., § 170 does exempt the county from the tax as it relates to the rock so used, however, the county is not exempt from the tax as relates to county rock sold to private individuals for purely private purposes. OAG 80-340 .

143A.033. Credit for production from recovered inactive natural gas well.

  1. As used in this section, “recovered inactive well” means a well that has been inactive for a consecutive two (2) year period or a well that has been plugged and abandoned, as determined by the Energy and Environment Cabinet, Division of Oil and Gas, and that resumes producing natural gas.
  2. Every taxpayer engaged in severing or processing natural gas within this Commonwealth shall be allowed a credit against the tax imposed under KRS 143A.020 equal to four and one-half percent (4.5%) of the gross value of natural gas that is produced from a recovered inactive well.

History. Enact. Acts 1998, ch. 359, § 2, effective July 15, 1998; 2005, ch. 123, § 16, effective June 20, 2005; 2010, ch. 24, § 116, effective July 15, 2010.

143A.035. Credit against tax imposed on severed or processed limestone.

  1. A credit is hereby allowed against the tax imposed by this chapter on the gross value of limestone which is severed or processed within this state and sold to a purchaser outside of this state.
  2. The credit allowed in subsection (1) of this section shall be equal to the tax imposed by this chapter on the gross value of a similar quantity of severed or processed limestone valued as of the day the sale is made to a purchaser outside of this state.
  3. The credit allowed in this section shall extend only to a taxpayer who severs or processes limestone through the rip-rap construction aggregate or agricultural limestone stages, and who sells in interstate commerce not less than sixty percent (60%) of such stone. The credit shall not be allowed to a taxpayer who processes the limestone beyond the agricultural limestone stage.

History. Enact. Acts 1984, ch. 173, § 3, effective July 13, 1984.

NOTES TO DECISIONS

1. Credit Proper.

Taxpayer was entitled to a refund of overpaid taxes based on a credit against a severance tax imposed because the sales on the Cumberland River qualified as sales in interstate commerce, and they were sales to a purchaser outside of the state. Ninety-nine percent of the taxpayer’s limestone was sold to out-of-state customers, and these sales affected the price and supply of limestone around this region of the country. Dep't of Revenue, Finance & Admin. Cabinet v. Roanoke Cement Co., LLC, 443 S.W.3d 1, 2014 Ky. App. LEXIS 30 (Ky. Ct. App. 2014).

Whether a taxpayer is entitled to claim the tax credit does not depend upon the manner in which the limestone severed and processed in Kentucky reaches an out-of-state purchaser; the phrase “outside of this state” is meant to modify the word “purchaser.” Therefore, a taxpayer was entitled to a credit that included the value of severed limestone that was sold along the Cumberland River. Dep't of Revenue, Finance & Admin. Cabinet v. Roanoke Cement Co., LLC, 443 S.W.3d 1, 2014 Ky. App. LEXIS 30 (Ky. Ct. App. 2014).

143A.036. Limitation on tax on limestone used in manufacture of cement.

Notwithstanding any other statutory provisions, the tax imposed by KRS 143A.020 applicable to limestone actually used in the manufacture of cement by an integrated miner and manufacturer of cement shall be limited to fourteen cents ($0.14) per ton of limestone mined in Kentucky and actually used in the manufacture of cement.

History. Enact. Acts 2000, ch. 337, § 3, effective August 1, 2000.

143A.037. Limitation of tax on clay — Credit for clay used in landfills.

  1. Notwithstanding any statutory provisions to the contrary, the tax imposed in KRS 143A.020 and applicable to clay, in any form, shall be limited to twelve cents ($0.12) per ton.
  2. The General Assembly of the Commonwealth of Kentucky finds that the accumulative costs of the environmentally responsible landfill disposal of solid waste affects the development of new landfill capacity. Therefore, it being the intent of the General Assembly to help control those costs, a credit is hereby allowed against the tax on clay, imposed by subsection (1) of this section, which is severed or processed within this state and sold to and used as a component of landfill construction by an approved waste management or waste disposal facility within this state.
  3. The credit allowed in subsection (2) of this section shall be equal to the tax imposed by subsection (1) of this section.
  4. The credit allowed in this section shall extend only to a taxpayer who severs or processes the natural resource subject to the tax.

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 12, § 49, effective February 26, 1991.

Compiler’s Notes.

This section was enacted by Acts 1991 (Ex. Sess.), ch. 12, § 49, effective February 26, 1991 and was renumbered as this section by the Reviser of Statutes under the authority of KRS 7.136 and 7.140 and confirmed by the Legislative Research Commission on July 10, 1991.

143A.040. Department of Revenue to administer tax.

The Department of Revenue shall administer the provisions of this chapter and shall have all the powers, rights, duties and authority with respect to rules and regulations, collection, refunding and administration of the taxes levied by KRS 143A.020 conferred generally on it by the Kentucky Revised Statutes, including KRS Chapters 131, 134 and 135.

History. Enact. Acts 1980, ch. 392, § 4, effective June 1, 1980; 2005, ch. 85, § 545, effective June 20, 2005.

143A.050. Certificate of registration required.

  1. Every taxpayer shall, before engaging in the severing or processing of a natural resource subjected to tax under KRS 143A.020 , obtain a certificate of registration by filing with the department an application in such form and containing such information as the department may prescribe. Every application shall be signed by the owner if a natural person; in the case of an association or partnership, by a member or partner; in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application.
  2. Whenever any taxpayer fails to comply with any provisions of this section through KRS 143A.130 or any rule or regulation of the department relating thereto, the department may suspend or revoke the certificate of registration held by such taxpayer.
  3. The Commonwealth may bring an action for a restraining order or a temporary or permanent injunction to restrain or enjoin operation of a taxpayer’s business being operated without a certificate of registration. Such action may be brought in the Franklin Circuit Court or in the Circuit Court having jurisdiction of the taxpayer.

History. Enact. Acts 1980, ch. 392, § 5, effective June 1, 1980; 2005, ch. 85, § 546, effective June 20, 2005; 2013, ch. 119, § 21, effective July 1, 2013.

143A.060. Collection of tax — Agreement for processor to pay tax due from severor — Provisions applicable to natural gas.

Notwithstanding any other provisions of this chapter to the contrary:

  1. In the case of natural resources other than natural gas, where the department finds that it would facilitate and expedite the collection of the tax imposed under KRS 143A.020 , the department may authorize the taxpayer processing the natural resource to report and pay the tax which would be due from the taxpayer severing the natural resource. Authorization from the department shall be in the form of an agreement executed by the taxpayer processing the natural resource, the taxpayer severing the natural resource, and the department. The agreement shall be in such form as the department may prescribe. The agreement must be signed by the owners if the taxpayers are natural persons; in the case of a partnership or association by a partner or member; in the case of a corporation, by an executive officer or some person specifically authorized by the corporation to sign the application. The executive director of the Office of Legal Services for Revenue shall sign for the department. The agreement may be terminated by any party to the agreement upon giving thirty (30) days’ written notice to the other parties to the agreement; however, the department may terminate the agreement immediately upon written notice to the other parties when either the taxpayer processing the natural resource or the taxpayer severing the natural resource fails to comply with the terms of the agreement; and
    1. In the case of natural gas, except for those cases: (2) (a) In the case of natural gas, except for those cases:
      1. Where the person severing or severing and processing the natural gas will sell the gas to the ultimate consumer; or
      2. Where the department determines that the collection of the taxes due under KRS 143A.020 would be accomplished in a more efficient and effective manner through the severor, or severor and processor, remitting the taxes,
    2. On or before the last day of the month following each calendar month, each person first purchasing natural gas as described in paragraph (a) of this subsection, shall report purchases of natural gas during the month, showing the quantities of gas purchased, the price paid, the date of purchase, and any other information deemed necessary by the department for the administration of the tax levied by KRS 143A.020 , and shall pay the amount of tax due, on forms prescribed by the department.
    3. On or before the last day of the month following each calendar month, each person severing, or severing and processing natural gas, shall report the sales of natural gas, showing the name and address of the person to whom sold, the quantity of gas sold, the date of sale, and the sales price on forms prescribed by the department.

the first person to purchase the natural gas after it has been severed, or in the event that the natural gas has been severed and processed before the first sale, the first person to purchase the natural gas after it has been severed and processed, shall be liable for the collection of the tax imposed under KRS 143A.020 . He shall collect the taxes imposed from the person severing, or severing and processing, the natural gas, and he shall remit the taxes to the department. In those cases where the person severing or severing and processing the natural gas sells the gas to the ultimate consumer, the person so severing or severing and processing the natural gas shall be liable for the tax imposed under KRS 143A.020 . In those cases where the department determines that the collection of the taxes due under KRS 143A.020 from the severance or severance and processing of natural gas would be accomplished in a more efficient and effective manner through the severor, or severor and processor, remitting the taxes, the department shall set out its determination in writing, stating its reasons for so finding, and so advise the severor or severor and processor at least fifteen (15) days in advance of the first reporting period for which such action would be effective.

History. Enact. Acts 1980, ch. 392, § 6, effective June 1, 1980; 2005, ch. 85, § 547, effective June 20, 2005.

Legislative Research Commission Notes.

(6/20/2005) 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

(1988). A technical correction has been made in this section by the Reviser of Statutes pursuant to KRS 7.136 .

143A.070. Bond of taxpayer may be required.

  1. Whenever it is deemed necessary to insure compliance with KRS 143A.050 to 143A.130 , the department may require any taxpayer to post a cash or corporate surety bond.
  2. The amount of the bond shall be fixed by the department but, except as provided in subsection (3) of this section, shall not be greater than three (3) times the average quarterly liability of taxpayers filing returns for quarterly periods, five (5) times the average monthly liability of taxpayers required to file returns for monthly periods, or two (2) times the average periodic liability of taxpayers permitted or required to file returns for other than monthly or quarterly periods.
  3. Notwithstanding the provisions of subsection (2) of this section, no bond required under this section shall be less than five hundred dollars ($500).
  4. The amount of the bond provided herein may be increased or decreased by the department at any time subject to the limitations herein provided.
  5. The Commonwealth may bring an action for a restraining order or a temporary or permanent injunction to restrain or enjoin the operation of a taxpayer’s business until the bond is posted and any delinquent tax, including applicable interest and penalties, has been paid. Such action may be brought in the Franklin Circuit Court or in the Circuit Court having jurisdiction of the taxpayer.

History. Enact. Acts 1980, ch. 392, § 7, effective June 1, 1980; 2005, ch. 85, § 548, effective June 20, 2005.

143A.080. Monthly reporting and payment, exception.

  1. On or before the last day of the month following each calendar month, every taxpayer shall report the gross value of natural resources sold, processed, or used during the preceding month and pay the amount of tax due on forms prescribed by the department.
  2. Returns shall be signed by the taxpayer required to file the return or by his duly authorized agent but need not be verified by oath.
  3. Returns required under this section shall contain such information as the department deems necessary for the proper administration of this chapter.
  4. The taxpayer required to file the return provided under this section shall deliver the return together with a remittance of the amount of the tax due to the department.
  5. For purposes of facilitating the administration, payment, or collection of the taxes levied by KRS 143A.020 , the department may permit or require returns or tax payments for periods other than monthly. When permitted, returns for other than monthly periods shall be filed and paid in such manner as the department may prescribe.
  6. No taxpayer shall change from the reporting system required under this section or permitted in writing by the department, without the written authorization of the department.
  7. A tax return is required for each reporting period even though there may be no tax due.

History. Enact. Acts 1980, ch. 392, § 28, effective June 1, 1980; 2005, ch. 85, § 549, effective June 20, 2005.

143A.090. Extension of time for filing return or paying tax, interest.

  1. The department may upon written request received on or prior to the due date of the return or tax, for good cause satisfactory to the department, extend the time for filing the return or paying the tax for a period not exceeding thirty (30) days.
  2. Any taxpayer to whom an extension is granted and who pays the tax within the period for which the extension is granted shall pay, in addition to the tax, interest at the tax interest rate as defined in KRS 131.010(6) from the date on which the tax would otherwise have been due.

History. Enact. Acts 1980, ch. 392, § 9, effective June 1, 1980; 1982, ch. 452, § 29, effective July 1, 1982; 2009, ch. 12, § 41, effective June 25, 2009.

143A.100. Audit — Additional assessment — Determination of liability when business discontinued — Statute of limitations.

  1. As soon as practicable after each return is received, the department shall examine and audit it. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the excess shall be assessed by the department within four (4) years from the date the return was filed, except as provided in subsection (4) of this section and except that in the case of a failure to file a return or of a fraudulent return the excess may be assessed at any time. A notice of such assessment shall be mailed to the taxpayer. The time herein provided may be extended by agreement between the taxpayer and the department.
  2. For the purpose of subsections (1) and (4) of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
  3. When a business is discontinued, a determination may be made at any time thereafter within the periods specified in subsection (1) of this section as to liability arising out of that business, irrespective of whether the determination is issued prior to the due date of the liability as otherwise specified in KRS 143A.080 .
  4. Notwithstanding the four (4) year time limitation of subsection (1) of this section, in the case of a return where the tax computed by the department is greater by twenty-five percent (25%) or more than the amount returned by the taxpayer, the excess shall be assessed by the department within six (6) years from the date the return was filed.

History. Enact. Acts 1980, ch. 392, § 10, effective June 1, 1980; 2005, ch. 85, § 550, effective June 20, 2005.

143A.110. Interest on past due taxes.

In every case, any tax not paid on or before the due date shall bear interest at the tax interest rate as defined in KRS 131.010(6) from the date due until the date of payment.

History. Enact. Acts 1980, ch. 392, § 11, effective June 1, 1980; 1992, ch. 338, § 8, effective August 1, 1992.

143A.120. Offset of overpayments against underpayments.

In making a determination of tax liability the department may offset overpayments for a period or periods, together with interest on the overpayments, against underpayments for another period or periods, against penalties, and against the interest on the underpayments.

History. Enact. Acts 1980, ch. 392, § 12, effective June 1, 1980; 2005, ch. 85, § 551, effective June 20, 2005.

143A.130. Taxpayer required to keep records.

  1. Every taxpayer liable for the reporting or payment of the taxes levied by KRS 143A.020 shall keep such records, receipts, invoices, and other pertinent papers in such form as the department may require.
  2. Every such taxpayer shall keep such records for not less than four (4) years from the making of such records unless the department in writing sooner authorizes their destruction.

History. Enact. Acts 1980, ch. 392, § 13, effective June 1, 1980; 2005, ch. 85, § 552, effective June 20, 2005.

143A.140. Refund or credit — Form for claim.

  1. The taxes paid pursuant to the provisions of this chapter shall be refunded or credited in the manner provided in KRS 134.580 .
  2. A claim for refund or credit shall be made on a form prescribed by the department and shall contain such information as the department may require.

History. Enact. Acts 1980, ch. 392, § 14, effective June 1, 1980; 1996, ch. 344, § 7, effective July 15, 1996; 2005, ch. 85, § 553, effective June 20, 2005.

Compiler’s Notes.

Section 11 of Acts 1996, ch. 344 read, “The provisions of this Act shall apply for the taxable years beginning after December 31, 1995.”

Penalties

143A.990. Civil penalties for violation of chapter.

Any person who violates any of the provisions of this chapter shall be subject to the uniform civil penalties imposed pursuant to KRS 131.180 .

History. Enact. Acts 1980, ch. 392, § 15, effective June 1, 1980; 1992, ch. 403, § 22, effective July 14, 1992.

Compiler’s Notes.

Section 26 of Acts 1992, ch. 403, provides: “The provisions of this Act shall become effective for all tax returns or reports due on or after August 1, 1992 and all taxes assessed by the cabinet on or after December 31, 1992.”

143A.991. Penalties.

  1. Any taxpayer who fails to file required returns and remit the tax due under this chapter shall be guilty of a misdemeanor and upon conviction therefor shall be fined an amount not less than ten dollars ($10) nor more than one hundred dollars ($100), or imprisoned for a period not to exceed thirty (30) days, or both such fine and imprisonment.
  2. Any taxpayer, including any officer of a corporation, who engages in the severing and/or processing of natural resources in this state or sells or uses natural resources so severed or processed without obtaining a certificate of registration or after a certificate of registration has been suspended or revoked, shall be guilty of a misdemeanor and upon conviction therefor, shall be fined an amount not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000) or imprisoned for a period not to exceed six (6) months, or both such fine and imprisonment.

History. Enact. Acts 1980, ch. 392, § 16, effective June 1, 1980.

Research References and Practice Aids

Kentucky Law Journal.

Kentucky Law Survey, Whiteside, Taxation, 71 Ky. L.J. 479 (1982-83).

CHAPTER 144 Tax Incentives for Economic Development

Air Transportation Industry

144.110. Definitions for KRS 144.110 to 144.130. [Repealed]

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 2, effective May 24, 1991; 2005, ch. 85, § 554, effective June 20, 2005; repealed by 2017 ch. 71, § 2, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 2, effective May 24, 1991; 2005, ch. 85, § 554, effective June 20, 2005) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.

144.115. Legislative findings and declarations. [Repealed]

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 1, effective May 24, 1991; repealed by 2017 ch. 71, § 2, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 1, effective May 24, 1991) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.

144.120. Sales and use tax credit — Qualifications — Amount — Reporting requirements. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 3, effective May 24, 1991; 1992, ch. 345, § 1, effective July 14, 1992) was repealed by 1998 Ky. Acts, ch. 400, sec. 4, effective July 1, 2000. For present law see KRS 144.132 .

144.125. General tax credit — Qualifications — Amount — Duration — Use — Reporting requirements. [Repealed]

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 4, effective May 24, 1991; 2005, ch. 168, § 34, effective March 18, 2005; 2005, ch. 85, § 556, effective June 20, 2005; repealed by 2017 ch. 71, § 2, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 4, effective May 24, 1991; 2005, ch. 168, § 34, effective March 18, 2005; 2005, ch. 85, § 556, effective June 20, 2005) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.

144.130. Application for credits — Date for meeting qualifications — Pro rata forfeiture of credits — Extensions — Notice requirements for department. [Repealed]

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 5, effective May 24, 1991; 2005, ch. 85, § 557, effective June 20, 2005; repealed by 2017 ch. 71, § 2, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 5, effective May 24, 1991; 2005, ch. 85, § 557, effective June 20, 2005) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.

144.132. Sales and use tax credit for aircraft fuel — Reporting and payment requirements.

  1. As used in this section:
    1. “Certificated air carrier” means an air carrier that is listed on the United States Department of Transportation certificated air carrier list or a foreign indirect air carrier registered with the United States Department of Transportation;
    2. “Department” means the Department of Revenue; and
    3. “Person” has the same meaning as in KRS 139.010 .
    1. Any certificated air carrier which is engaged in the air transportation of persons or property for hire shall be entitled to a credit against the Kentucky sales and use tax paid on aircraft fuel, including jet fuel, as determined by this section. (2) (a) Any certificated air carrier which is engaged in the air transportation of persons or property for hire shall be entitled to a credit against the Kentucky sales and use tax paid on aircraft fuel, including jet fuel, as determined by this section.
    2. Certificated air carriers shall pay the first one million dollars ($1,000,000) in Kentucky sales and use tax due on the purchase of aircraft fuel, including jet fuel. The one million dollars ($1,000,000) shall be increased to reflect the sales and use tax on aviation fuel attributable to operations of any other company when such company is purchased, merged, acquired, or otherwise combined with the certificated air carrier after the base period. The increase shall be based on the tax applicable to aircraft fuel purchased during the twelve (12) month period immediately preceding the purchase, merger, or other acquisition by or in combination with the certificated air carrier. The sales and use tax credit shall be an amount equal to the Kentucky sales and use tax otherwise applicable to the purchase of aircraft fuel, including jet fuel, purchased by the certificated air carrier during each fiscal year , in excess of one million dollars ($1,000,000).
  2. On and after June 29, 2017, any person that:
    1. Contracts with one (1) or more certificated air carriers for the transportation by air of persons, property, or mail; and
    2. Is responsible for the purchase and payment of aircraft fuel, including jet fuel to transport the persons, property, or mail;
  3. Each certificated air carrier that qualifies for the credit authorized in subsection (2) of this section and every person that qualifies for the credit authorized in subsection (3) of this section purchasing aircraft fuel, including jet fuel, on which Kentucky sales and use tax for the fiscal year is reasonably expected to exceed one million dollars ($1,000,000) shall report and pay directly to the department the tax applicable to the purchase of aircraft fuel, including jet fuel, purchased for storage use or other consumption during the fiscal year.
  4. Each certificated air carrier that qualifies for the credit authorized in subsection (2) of this section and every person that qualifies for the credit authorized in subsection (3) of this section that claims the sales and use tax credit shall file an annual sales and use tax reconciliation report with the department on or before October 15 of the fiscal year following the fiscal year for which the credit is claimed. The report shall be in a form and contain information and documentation as the department may reasonably require to verify the computation of the tax credit against the tax imposed under KRS 139.200 and 139.310 .

shall be entitled to a credit against the Kentucky sales and use tax paid on aircraft fuel, including jet fuel, during the fiscal year in excess of one million dollars ($1,000,000).

HISTORY: Enact. Acts 1998, ch. 400, § 2, effective July 15, 1998; 2005, ch. 168, § 75, effective June 1, 2005; 2005, ch. 85, § 558, effective June 20, 2005; 2017 ch. 71, § 1, effective June 29, 2017.

144.135. General tax credit reconciliation report relative to corporation license tax. [Repealed]

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 6, effective May 24, 1991; 2005, ch. 85, § 559, effective June 20, 2005; repealed by 2017 ch. 71, § 2, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 6, effective May 24, 1991; 2005, ch. 85, § 559, effective June 20, 2005) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.

144.137. Sales and use tax and general tax credit reconciliation reports relative to sales and use tax. [Repealed]

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 7, effective May 24, 1991; 1998, ch. 400, § 3, effective July 15, 1998; 2005, ch. 85, § 560, effective June 20, 2005; repealed by 2017 ch. 71, § 2, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 7, effective May 24, 1991; 1998, ch. 400, § 3, effective July 15, 1998; 2005, ch. 85, § 560, effective June 20, 2005) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.

144.139. General tax credit reconciliation report relative to corporation income tax. [Repealed]

History. Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 8, effective May 24, 1991; 2005, ch. 85, § 561, effective June 20, 2005; 2006 (1st Extra. Sess.) ch. 2, § 37, effective June 28, 2006; repealed by 2017 ch. 71, § 2, effective June 29, 2017.

Compiler’s Notes.

This section (Enact. Acts 1991 (1st Ex. Sess.), ch. 7, § 8, effective May 24, 1991; 2005, ch. 85, § 561, effective June 20, 2005; 2006 (1st Extra. Sess.) ch. 2, § 37, effective June 28, 2006) was repealed by Acts 2017, ch. 80, § 58, effective June 29, 2017.