KRS 141.389: Nonrefundable and nontransferable distilled spirits ad valorem tax credit -

- Election to waive credits -- Credit to be used only for capital improvement at

licensed distiller's premises -- Refundable credit for taxpayer investing and

creating jobs in area of low and moderate income -- Administrative regulations

-- Annual report.

(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 beg inning 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, 20 16, 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 eig hty 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, but prior to

January 1, 2024, 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.

(b) 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

141.0401, with the ordering of the credits as provided in KRS 141.0205.

(2) (a) For purposes of this section:

1. "Accumulated amount" means the tax credits that have been

accumulated by a taxpayer under subsection (4)(a) of this section;

2. "Base reduction percentage" means the percentage by which the

taxpayer's total number of barrels of distilled spirits stored or aging in

this state as of January 1 of a taxable year does not equal or exceed the

taxpayer's total number of barrels of distilled spirits stored or aging in

this state as of January 1, 2025;

3. "Business-wide reduction" has the same meaning as in KRS 138.208;

4. "Extraordinary event" has the same meaning as in KRS 138.208; and

5. "LMI" means a low and moderate income population where the county

median family income or county median household income is less than

eighty percent (80%) of the state median fami ly income or state median

household income, respectively, as determined by using the most recent

five (5) year American Community Survey published by the United

States Census Bureau. For purposes of this section, once a county has

been identified as an LMI population, the county shall remain an LMI

population without regard to future determinations using the United

States Census Bureau data.

(b) A taxpayer may make an election regarding the distilled spirits tax credit

related to taxable years beginning on or after January 1, 2024, but prior to

January 1, 2040. The election shall be to:

1. a. Waive any accumulated amount of tax credits; and

b. Be allowed a nonrefundable and nontransferable tax credit up to

twenty-five thousand (25,000) barrels of distilled s pirits in a

bonded warehouse or premises for each taxable year. The tax

credit shall be equal to one hundred percent (100%) of the tax

assessed under KRS 132.160 and paid by the taxpayer under KRS

132.180 on a timely basis on those barrels; or

2. a. Waive all future tax credits allowed under this section; and

b. Be allowed a refundable tax credit on multiple taxes as described

in subsection (7) of this section.

(c) Any election made under 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 tax return, including an extension of time to file a return under

KRS 141.170, for the taxpayer's first taxable year beginning on or after

January 1, 2024.

(d) Any election made unde r this subsection shall be binding on both the

department and the taxpayer and shall be irrevocable.

(3) 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:

(a) Construction, replacement, or remodeling of warehouses or facilities;

(b) Purchases of barrels and pallets used for the s torage and aging of distilled

spirits in maturing warehouses;

(c) Acquisition, construction, or installation of equipment for the use in the

manufacture, bottling, or shipment of distilled spirits;

(d) Addition or replacement of access roads or parking facilities; and

(e) Construction, replacement, or remodeling of facilities to market or promote

tourism, including but not limited to a visitor's center.

(4) The distilled spirits credit allowed under subsection (1) of this section:

(a) May be accumulated for multiple taxable years;

(b) Shall be claimed on the return of the taxpayer filed for the taxable year during

which the credits were used pursuant to subsection (3) of this section; and

(c) Shall not include:

1. Any delinquent tax paid to the Commonwealth; or

2. Any interest, fees, or penalty paid to the Commonwealth.

(5) (a) Before the distilled spirits credit allowed under subsection (1) of this section

shall be claimed on any return, the capital improvements required by

subsection (3) of this section shall be completed and specifically associated

with the credit allowed on the return.

(b) 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.

(c) 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.

(6) If the taxpayer is a pass -through entity, the taxpayer may apply the credits allowed

in subsection (1) or (2) of this section against the limited liability entity tax imposed

by KRS 141.0401, an d shall pass the credits through to its members, partners, or

shareholders in the same proportion as the distributive share of income or loss is

passed through.

(7) (a) For taxable years beginning on or after January 1, 2026, a taxpayer making an

election under subsection (2)(b)2. of this section is entitled to a refundable tax

credit if the taxpayer:

1. Makes a capital investment of at least twenty million dollars

($20,000,000) within an LMI; and

2. Creates ten (10) or more new jobs within an LMI.

(b) Upon certification to the department that the capital investment has been

made and the jobs have been created within an LMI, the department shall:

1. Award a refundable credit that is:

a. Equal to no more than fifty percent (50%) of the accumulated

amount;

b. Based on the sales and use tax paid on the purchase of tangible

personal property used in the capital investment within the LMI

and the withholding of tax from wages paid by the taxpayer as an

employer under KRS 141.310 from employees hired to fill the jobs

created within the LMI; and

c. Refunded over a period, the earlier of which is:

a. Fifteen (15) years; or

b. Until the amount determined in subdivision a. of this

subparagraph has been utilized through the sales and use tax

and withholding tax remitted; and

2. Reduce the taxpayer's accumulated amount by the amount refunded.

(c) 1. Any portion of the fifty percent (50%) of the accumulated amount

remaining on or after March 1, 2039, shall lapse.

2. No later than June 15, 2039, the department shall report to the Interim

Joint Committee on Appropriations and Revenue the total of the lapsing

accumulated amounts and the number of taxpayers related to the lapsing

accumulated total.

(d) 1. To qualify for the portion of the refundable credit for sales and use tax

paid under paragraph (b) of this subsection, the taxpayer shall:

a. Collect from the purchasers of tangible personal property used in

the construction, replacement, or remodeling of warehouses or

facilities all documentation relating to the payment of sales or use

tax;

b. Document sales and use tax paid directly by the taxpayer; and

c. File an application for refund of the sales or use tax paid as

reflected in the documentation collected.

2. To qualify for the portion of the refundable credit for tax withhel d from

employees, the taxpayer shall document the amount withheld and file an

application for a refund as prescribed by the department.

(e) Requests for a refund shall be filed annually and shall cover purchases made

or the amount withheld from employees d uring the immediately preceding

year. Requests for a refund shall be filed in the manner directed by the

department.

(f) Interest shall not be allowed or paid on any refund made under this section.

(g) To fulfill the requirements for a sales and use tax refund, the taxpayer shall

execute information -sharing agreements prescribed by the department with

contractors, vendors, a nd other related parties to verify construction material

costs.

(8) (a) Notwithstanding subsection (7) of this section, for taxable years beginning on

or after January 1, 2026, the taxpayer's accumulated amount shall be reduced

by the taxpayer's base reduc tion percentage, including a recapture of any

credits which have previously been refunded.

(b) If a business-wide reduction or extraordinary event occurs, any taxpayer may

apply to the secretary of the Finance and Administration Cabinet for a waiver

of the reduction in the accumulated amount.

(9) The department may promulgate an administrative regulation pursuant to KRS

Chapter 13A to implement the allowable credits under this section, require the

filing of forms designed by the department, and require spec ific information for the

evaluation of the credits taken by any taxpayer.

(10) No later than September 1, 2016, and annually thereafter, the department shall

report to the Interim Joint Committee on Appropriations and Revenue:

(a) The name of each taxpayer taking the credits permitted by subsection (1) or

(2) of this section;

(b) The amount of credits taken by that taxpayer;

(c) The type of capital improvement made for which the credit allowed under

subsection (1) of this section is claimed;

(d) Whether the credits offset tax liability or were refunded to the taxpayer;

(e) The type of tax that was refunded to the taxpayer; and

(f) The amount of tax refunded for each type of tax.