{"data":{"id":"us-ky/krs-136.535","jurisdiction":"us-ky","citation":"KRS 136.535","heading":"Calculation of property factor.","body":"(1) As used in this section:\n(a) \"Administration\" means the process of managing an account. The process\nincludes bookkeeping, collecting the payments, corresponding with the\ncustomer, reporting to management regarding the status of the agreement and\nproceeding against the borrower or the security interest if the borrower is in\ndefault. The activity is located at the regular place of business that oversees\nthis activity;\n(b) \"Approval\" means the procedure whereby employees or the board of directors\nof the financial institution make the fina l determination whether to enter into\nthe agreement. The activity is located at the regular place of business which\nthe financial institution's employees making the final determination are\nregularly connected with or working out of, regardless of where the services of\nthe employees were actually performed. If the board of directors makes the\nfinal determination, the activity is located at the commercial domicile of the\nfinancial institution;\n(c) \"Investigation\" means the procedure whereby employees of the f inancial\ninstitution determine the credit worthiness of the customer as well as the\ndegree of risk involved in making a particular agreement. The activity is\nlocated at the regular place of business which the financial institution's\nemployees making the in vestigation are regularly connected with or working\nout of, regardless of where the services of the employees were actually\nperformed;\n(d) \"Negotiation\" means the procedure whereby employees of the financial\ninstitution and its customer determine the terms  of the agreement, including\nthe amount, duration, interest rate, frequency of repayment, currency\ndenomination, and security required. The activity is located at the regular\nplace of business which the financial institution's employees are regularly\nconnected with or out of, regardless of where the services of the employees\nwere actually performed;\n(e) \"Participation\" means an extension of credit in which an undivided ownership\ninterest is held on a pro rata basis in a single loan or pool of loans and rela ted\ncollateral. In a loan participation, the credit originator initially makes the loan\nand then subsequently resells all or a portion of it to other lenders. The\nparticipation may or may not be known to the borrower; and\n(f) \"Solicitation\" occurs when:\n1. An employee of the financial institution initiates contact with the\ncustomer. The activity is located at the regular place of business which\nthe financial institution's employee making the contact is regularly\nconnected with or working out of, regardless of where the services of the\nemployee were actually performed; or\n2. The customer initiates the contact with the financial institution. If the\ncustomer's initial contact was not at a regular place of business of the\nfinancial institution, the regular place  of business, if any, where the\nsolicitation occurred is determined by the facts in each case.\n(2) The property factor is a fraction, the numerator of which is the average value of real\nproperty and tangible personal property rented to the financial instit ution that is\nlocated or used within this Commonwealth during the taxable year, the average\nvalue of the financial institution's real and tangible personal property owned that is\nlocated or used within this Commonwealth during the taxable year, and the ave rage\nvalue of the financial institution's loans and credit card receivables that are located\nwithin this Commonwealth during the taxable year, and the denominator of which is\nthe average value of all such property located or used within and without this\nCommonwealth during the taxable year. Average value of property is determined\nunder subsection (4) of this section.\n(3) (a) The value of real property and tangible personal property owned by the\nfinancial institution is the original cost or other basis of pr operty for federal\nincome tax purposes without regard to depletion, depreciation, or\namortization.\n(b) Loans are valued at their outstanding principal balance, without regard to any\nreserve for bad debts. If a loan is charged off in whole or in part for federal\nincome tax purposes, the portion of the loan charged off is not outstanding. A\nspecifically-allocated reserve established pursuant to regulatory or financial\naccounting guidelines which is treated as charged off for federal income tax\npurposes shall be treated as charged off for purposes of this section.\n(c) Credit card receivables are valued at their  outstanding principal balance,\nwithout regard to any reserve for bad debts. If a credit card receivable is\ncharged off in whole or in part for federal income tax purposes, the portion of\nthe receivable charged off is not outstanding.\n(4) The average value of property owned by the financial institution is computed on an\nannual basis by adding the value of the property on the first day of the taxable year\nand the value on the last day of the taxable year and dividing the sum by two (2). If\naveraging on this basis does not properly reflect average value, the department may\nrequire averaging on a more frequent basis. The financial institution may request\npermission from the department to average on a more frequent basis. When\naveraging on a more frequent basis is authorized by the department, the same\nmethod of valuation shall be used consistently by the financial institution with\nrespect to property within and without this Commonwealth and on all subsequent\nreturns unless the financial institution receives prio r permission from the\ndepartment or the department requires a different method of determining average\nvalue.\n(5) (a) The average value of real property and tangible personal property that the\nfinancial institution has rented from another and which is not t reated as\nproperty owned by the financial institution for federal income tax purposes\nshall be determined annually by multiplying the gross rents payable during the\ntaxable year by eight (8).\n(b) Where the use of the general method described in this subsec tion results in\ninaccurate valuations of rented property, any other method which properly\nreflects the value may be adopted by the department or by the financial\ninstitution when approved in writing by the department. Once approved, the\nalternative method of valuation shall be used on all subsequent returns unless\nthe financial institution receives prior approval from the department or the\ndepartment requires a different method of valuation.\n(6) (a) Except as described in paragraph (b) of this subsection, r eal property and\ntangible personal property owned by or rented to the financial institution is\nconsidered to be located within this Commonwealth if it is physically located,\nsituated, or used within this Commonwealth.\n(b) Transportation property is include d in the numerator of the property factor to\nthe extent that the property is used in this Commonwealth. The extent to\nwhich an aircraft shall be deemed to be used in this Commonwealth and the\namount of value that is to be included in the numerator of this\nCommonwealth's property factor is determined by multiplying the average\nvalue of the aircraft by a fraction the numerator of which is the number of\nlandings of the aircraft in this Commonwealth and the denominator of which\nis the total number of landings o f the aircraft everywhere. If the extent of the\nuse of any transportation property within this Commonwealth cannot be\ndetermined, then the property shall be deemed to be used wholly in the state in\nwhich the property has its principal base of operations. A  motor vehicle shall\nbe deemed to be used wholly in the state in which it is registered.\n(7) (a) 1. A loan is considered to be located within this Commonwealth if it is\nproperly assigned to a regular place of business of the financial\ninstitution within this Commonwealth.\n2. A loan is properly assigned to the regular place of business with which it\nhas a preponderance of substantive contacts. A loan assigned by the\nfinancial institution to a regular place of business without the\nCommonwealth shall be presumed to have been properly assigned if:\na. The financial institution has assigned, in the regular course of its\nbusiness, the loan on its records to a regular place of business\nconsistent with federal or state regulatory requirements;\nb. The assignment on it s records is based upon substantive contacts\nof the loan to the regular place of business; and\nc. The financial institution uses the records reflecting assignment of\nloans for the filing of all state and local tax returns for which an\nassignment of loans to a regular place of business is required.\n3. The presumption of proper assignment of a loan provided in\nsubparagraph 2. of this paragraph may be rebutted upon a showing by\nthe department, supported by a preponderance of the evidence, that the\npreponderance of substantive contacts regarding the loan did not occur\nat the regular place of business to which it was assigned on the financial\ninstitution's records. When the presumption has been rebutted, the loan\nshall then be located within this Commonwealth if the financial\ninstitution had a regular place of business within this Commonwealth at\nthe time the loan was made and the financial institution fails to show, by\na preponderance of the evidence, that the preponderance of substantive\ncontacts regarding the loan occurred outside this Commonwealth.\n(b) For financial institutions with commercial domicile in this Commonwealth as\ndefined in KRS 136.500, it shall be presumed, subject to rebuttal by the\nfinancial institution on a showing supported by the preponderan ce of\nevidence, that the preponderance of substantive contacts regarding the loan\noccurred within this Commonwealth.\n(c) To determine the state in which the preponderance of substantive contacts\nrelating to a loan have occurred, the facts and circumstances  regarding the\nloan at issue shall be reviewed on a case-by-case basis, and consideration shall\nbe given to activities such as the solicitation, investigation, negotiation,\napproval, and administration of the loan as defined in subsection (1) of this\nsection.\n(8) Credit card receivables shall be treated as loans and shall be subject to the\nprovisions of subsection (7) of this section.\n(9) A loan that has been properly assigned to a state shall, absent any change of\nmaterial fact, remain assigned to that sta te for the length of the original term of the\nloan. Thereafter, the loan may be properly assigned to another state if that loan has a\npreponderance of substantive contacts to a regular place of business there.","path":["KRS Chapter 136"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=28572","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:27Z","sha256":"4c7218e61cefd7202d74f7789f89feaeadabb6dade9259a461cbe303b7c282ed","source_id":"us-ky","stale":false,"prev":"us-ky/krs-136.530","next":"us-ky/krs-136.540"},"notice":"GroundRules: Original legal text. Not legal advice."}