{"data":{"id":"us-ky/krs-141.039","jurisdiction":"us-ky","citation":"KRS 141.039","heading":"Calculation of gross income and net income for corporations.","body":"In the case of corporations:\n(1) Gross income shall be calculated by adjusting federal gross income as defined in\nSection 61 of the Internal Revenue Code as follows:\n(a) Exclude income that is exempt from state taxation by the Kentucky\nConstitution and the Constitution and statutory laws of the United States;\n(b) Exclude all dividend income;\n(c) Include interest income derived from obligations of sister states and political\nsubdivisions thereof;\n(d) Exclude fifty percent (50%) of gross income derived from any disposal of\ncoal covered by Section 631(c) of the Internal Revenue Code if the\ncorporation does not claim any deduction for percentage depletion, or for\nexpenditures attribut able to the making and administering of the contract\nunder which such disposition occurs or to the preservation of the economic\ninterests retained under such contract;\n(e) Include the amount calculated under KRS 141.205;\n(f) Ignore the provisions of Sectio n 281 of the Internal Revenue Code in\ncomputing gross income;\n(g) Include the amount of deprecation deduction calculated under 26 U.S.C. sec.\n167 or 168;\n(h) Allow the same treatment allowed under Pub. L. No. 116 -260, secs. 276 and\n278, related to the tax treatment of forgiven covered loans, deductions\nattributable to those loans, and tax attributes associated with those loans for\ntaxable years ending on or after March 27, 2020, but before January 1, 2022;\n(i) For taxable years beginning on or after January 1, 2020, but before March 11,\n2023, allow the same treatment of restaurant revitalization grants in\naccordance with Pub. L. No. 117 -2, sec. 9673 and 15 U.S.C. sec. 9009c,\nrelated to the tax treatment of the g rants, deductions attributable to those\ngrants, and tax attributes associated with those grants;\n(j) For taxable years beginning on or after January 1, 2026:\n1. Include the amount deducted for domestic research or experimental\nexpenditures under 26 U.S.C. sec. 174A; and\n2. Allow a subtraction equal to the amortization of domestic research or\nexperimental expenditures computed in accordance with 26 U.S.C. sec.\n174, as that section existed on December 31, 2024;\n(k) Include the amount deducted for any qualifie d film or television production,\nany qualified live theatrical production, and any qualified sound recording\nproduction under 26 U.S.C. sec. 181;\n(l) Include interest deducted under 26 U.S.C. sec. 139L for amounts paid to a\nqualified lender on any qualified real estate loan; and\n(m) For purposes of determining the limitation on business interest under 26\nU.S.C. sec. 163(j), the provisions of that section in effect on December 31,\n2024, exclusive of any amendments made subsequent to that date, shall be\nused; and\n(2) Net income shall be calculated by subtracting from gross income:\n(a) The deduction for depreciation allowed by KRS 141.0101;\n(b) Any amount paid for vouchers or similar instruments that provide health\ninsurance coverage to employees or their families;\n(c) All the deductions from gross income allowed corporations by Chapter 1 of\nthe Internal Revenue Code, as modified by KRS 141.0101, except:\n1. Any deduction for a state tax which is computed, in whole or in part, by\nreference to gross or net income and which is paid or accrued to any\nstate of the United States, the District of Columbia, the Commonwealth\nof Puerto Rico, any territory or possession of the United States, or to any\nforeign country or political subdivision thereof;\n2. The deductions conta ined in Sections 243, 245, and 247 of the Internal\nRevenue Code;\n3. The provisions of Section 281 of the Internal Revenue Code shall be\nignored in computing net income;\n4. Any deduction directly or indirectly allocable to income which is either\nexempt from taxation or otherwise not taxed under the provisions of this\nchapter, except for deductions allowed under Pub. L. No. 116 -260, secs.\n276 and 278, related to the tax treatment of forgiven covered loans and\ndeductions attributable to those loans for taxable  years ending on or\nafter March 27, 2020, but before January 1, 2022; and deductions\nallowed under Pub. L. No. 117 -2, sec. 9673 and 15 U.S.C. sec. 9009c,\nrelated to the tax treatment of restaurant revitalization grants and\ndeductions attributable to those grants for taxable years beginning on or\nafter January 1, 2020, but before March 11, 2023. Nothing in this\nchapter shall be construed to permit the same item to be deducted more\nthan once;\n5. Any deduction for amounts paid to any club, organization, or\nestablishment which has been determined by the courts or an agency\nestablished by the General Assembly and charged with enforcing the\ncivil rights laws of the Commonwealth, not to afford full and equal\nmembership and full and equal enjoyment of its goods, ser vices,\nfacilities, privileges, advantages, or accommodations to any person\nbecause of race, color, religion, national origin, or sex, except nothing\nshall be construed to deny a deduction for amounts paid to any religious\nor denominational club, group, or establishment or any organization\noperated solely for charitable or educational purposes which restricts\nmembership to persons of the same religion or denomination in order to\npromote the religious principles for which it is established and\nmaintained;\n6. Any deduction prohibited by KRS 141.205; and\n7. Any dividends -paid deduction of any captive real estate investment\ntrust; and\n(d) 1. A deferred tax deduction in an amount computed in accordance with this\nparagraph.\n2. For purposes of this paragraph:\na. \"Net deferred tax asset\" means that deferred tax assets exceed the\ndeferred tax liabilities of the combined group, as computed in\naccordance with accounting principles generally accepted in the\nUnited States of America; and\nb. \"Net deferred tax liability\" mea ns deferred tax liabilities that\nexceed the deferred tax assets of a combined group as defined in\nKRS 141.202, as computed in accordance with accounting\nprinciples generally accepted in the United States of America.\n3. Only publicly traded companies, inclu ding affiliated corporations\nparticipating in the filing of a publicly traded company's financial\nstatements prepared in accordance with accounting principles generally\naccepted in the United States of America, as of January 1, 2019, shall be\neligible for this deduction.\n4. If the provisions of KRS 141.202 result in an aggregate increase to the\nmember's net deferred tax liability, an aggregate decrease to the\nmember's net deferred tax asset, or an aggregate change from a net\ndeferred tax asset to a net defe rred tax liability, the combined group\nshall be entitled to a deduction, as determined in this paragraph.\n5. For ten (10) years beginning with the combined group's first taxable\nyear beginning on or after January 1, 2028, a combined group shall be\nentitled to a deduction from the combined group's entire net income\nequal to one -tenth (1/10) of the amount necessary to offset the increase\nin the net deferred tax liability, decrease in the net deferred tax asset, or\naggregate change from a net deferred tax asse t to a net deferred tax\nliability. The increase in the net deferred tax liability, decrease in the net\ndeferred tax asset, or the aggregate change from a net deferred tax asset\nto a net deferred tax liability shall be computed based on the change that\nwould result from the imposition of the combined reporting requirement\nunder KRS 141.202, but for the deduction provided under this paragraph\nas of June 27, 2019.\n6. The deferred tax impact determined in subparagraph 5. of this paragraph\nshall be converted to the annual deferred tax deduction amount, as\nfollows:\na. The deferred tax impact determined in subparagraph 5. of this\nparagraph shall be divided by the tax rate determined under KRS\n141.040;\nb. The resulting amount shall be further divided by the\napportionment factor determined by KRS 141.120 or 141.121 that\nwas used by the combined group in the calculation of the deferred\ntax assets and deferred tax liabilities a s described in subparagraph\n5. of this paragraph; and\nc. The resulting amount represents the total net deferred tax\ndeduction available over the ten (10) year period as described in\nsubparagraph 5. of this paragraph.\n7. The deduction calculated under this paragraph shall not be adjusted as a\nresult of any events happening subsequent to the calculation, including\nbut not limited to any disposition or abandonment of assets. The\ndeduction shall be calculated without regard to the federal tax effect and\nshall n ot alter the tax basis of any asset. If the deduction under this\nsection is greater than the combined group's entire Kentucky net income,\nany excess deduction shall be carried forward and applied as a deduction\nto the combined group's entire net income in future taxable years until\nfully utilized.\n8. Any combined group intending to claim a deduction under this\nparagraph shall file a statement with the department on or before July 1,\n2019. The statement shall specify the total amount of the deduction\nwhich t he combined group claims on the form, including calculations\nand other information supporting the total amounts of the deduction as\nrequired by the department. No deduction shall be allowed under this\nparagraph for any taxable year, except to the extent cl aimed on the\ntimely filed statement in accordance with this paragraph.","path":["KRS Chapter 141"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57915","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:33Z","sha256":"f09a65f102bbf08f055dbf0e83b6c1b8cd4a5fede7ffed7d7976be9826c91f39","source_id":"us-ky","stale":false,"prev":"us-ky/krs-141.030","next":"us-ky/krs-141.040"},"notice":"GroundRules: Original legal text. Not legal advice."}