{"data":{"id":"us-ky/krs-141.0401","jurisdiction":"us-ky","citation":"KRS 141.0401","heading":"Limited liability entity tax -- Exemptions -- Rate.","body":"(1) As used in this section:\n(a) \"Kentucky gross receipts\" means an amount equal to the computation of the\nnumerator of the apportionment fraction under KRS 141.120, any\nadministrative regulations related to the computation of the sales factor, and\nKRS 141.121 and includes the proportiona te share of Kentucky gross receipts\nof all wholly or partially owned limited liability pass -through entities,\nincluding all layers of a multi-layered pass-through structure;\n(b) \"Gross receipts from all sources\" means an amount equal to the computation\nof the denominator of the apportionment fraction under KRS 141.120, any\nadministrative regulations related to the computation of the sales factor, and\nKRS 141.121 and includes the proportionate share of gross receipts from all\nsources of all wholly or partially owned limited liability pass-through entities,\nincluding all layers of a multi-layered pass-through structure;\n(c) \"Affiliated group\" has the same meaning as in KRS 141.201;\n(d) \"Cost of goods sold\" means:\n1. Amounts that are:\na. Allowable as cost of go ods sold pursuant to the Internal Revenue\nCode and any guidelines issued by the Internal Revenue Service\nrelating to cost of goods sold, unless modified by this paragraph;\nand\nb. Incurred in acquiring or producing the tangible product generating\nthe Kentucky gross receipts.\n2. For manufacturing, producing, reselling, retailing, or wholesaling\nactivities, cost of goods sold shall only include costs directly incurred in\nacquiring or producing the tangible product. In determining cost of\ngoods sold:\na. Labor costs shall be limited to direct labor costs as defined in\nparagraph (f) of this subsection;\nb. Bulk delivery costs as defined in paragraph (g) of this subsection\nmay be included; and\nc. Costs allowable under Section 263A of the Internal Revenue Code\nmay be included only to the extent the costs are incurred in\nacquiring or producing the tangible product generating the\nKentucky gross receipts. Notwithstanding the foregoing, indirect\nlabor costs allowable under Section 263A shall not be included;\n3. For any activity other than manu facturing, producing, reselling,\nretailing, or wholesaling, no costs shall be included in cost of goods\nsold.\nAs used in this paragraph, \"guidelines issued by the Internal Revenue Service\"\nincludes regulations, private letter rulings, or any other guidance issued by the\nInternal Revenue Service that may be relied upon by taxpayers under reliance\nstandards established by the Internal Revenue Service;\n(e) 1. \"Kentucky gross profits\" means Kentucky gross receipts reduced by\nreturns and allowances attributable  to Kentucky gross receipts, less the\ncost of goods sold attributable to Kentucky gross receipts. If the amount\nof returns and allowances attributable to Kentucky gross receipts and the\ncost of goods sold attributable to Kentucky gross receipts is zero, th en\n\"Kentucky gross profits\" means Kentucky gross receipts; and\n2. \"Gross profits from all sources\" means gross receipts from all sources\nreduced by returns and allowances attributable to gross receipts from all\nsources, less the cost of goods sold attribut able to gross receipts from all\nsources. If the amount of returns and allowances attributable to gross\nreceipts from all sources and the cost of goods sold attributable to gross\nreceipts from all sources is zero, then gross profits from all sources\nmeans gross receipts from all sources;\n(f) \"Direct labor\" means labor that is incorporated into the tangible product sold\nor is an integral part of the manufacturing process;\n(g) \"Bulk delivery costs\" means the cost of delivering the product to the\nconsumer if:\n1. The tangible product is delivered in bulk and requires specialized\nequipment that generally precludes commercial shipping; and\n2. The tangible product is taxable under KRS 138.220;\n(h) \"Manufacturing\" and \"producing\" means:\n1. Manufacturing, producing, c onstructing, or assembling components to\nproduce a significantly different or enhanced end tangible product;\n2. Mining or severing natural resources from the earth; or\n3. Growing or raising agricultural or horticultural products or animals;\n(i) \"Real property\" means land and anything growing on, attached to, or erected\non it, excluding anything that may be severed without injury to the land;\n(j) \"Reselling,\" \"retailing,\" and \"wholesaling\" mean the sale of a tangible\nproduct;\n(k) \"Tangible personal property\"  means property, other than real property, that\nhas physical form and characteristics; and\n(l) \"Tangible product\" means real property and tangible personal property;\n(2) (a) For taxable years beginning on or after January 1, 2007, an annual limited\nliability entity tax shall be paid by every corporation and every limited\nliability pass-through entity doing business in Kentucky on all Kentucky gross\nreceipts or Kentucky gross profits except as provided in this subsection. A\nsmall business exclusion from this  tax shall be provided based on the\nreduction contained in this subsection. The tax shall be the greater of the\namount computed under paragraph (b) of this subsection or one hundred\nseventy-five dollars ($175), regardless of the application of any tax cred its\nprovided under this chapter or any other provisions of the Kentucky Revised\nStatutes for which the business entity may qualify.\n(b) The limited liability entity tax shall be the lesser of subparagraph 1. or 2. of\nthis paragraph:\n1. a. If the corporatio n's or limited liability pass -through entity's gross\nreceipts from all sources are three million dollars ($3,000,000) or\nless, the limited liability entity tax shall be one hundred seventy -\nfive dollars ($175);\nb. If the corporation's or limited liability pass -through entity's gross\nreceipts from all sources are greater than three million dollars\n($3,000,000) but less than six million dollars ($6,000,000), the\nlimited liability entity tax shall be nine and one-half cents ($0.095)\nper one hundred dollars ($100) of the corporation's or limited\nliability pass-through entity's Kentucky gross receipts reduced by\nan amount equal to two thousand eight hundred fifty dollars\n($2,850) multiplied by a fraction, the numerator of  which is six\nmillion dollars ($6,000,000) less the amount of the corporation's or\nlimited liability pass -through entity's Kentucky gross receipts for\nthe taxable year, and the denominator of which is three million\ndollars ($3,000,000), but in no case shall the result be less than one\nhundred seventy-five dollars ($175);\nc. If the corporation's or limited liability pass -through entity's gross\nreceipts from all sources are equal to or greater than six million\ndollars ($6,000,000), the limited liability entit y tax shall be nine\nand one-half cents ($0.095) per one hundred dollars ($100) of the\ncorporation's or limited liability pass -through entity's Kentucky\ngross receipts.\n2. a. If the corporation's or limited liability pass -through entity's gross\nprofits from  all sources are three million dollars ($3,000,000) or\nless, the limited liability entity tax shall be one hundred seventy -\nfive dollars ($175);\nb. If the corporation's or limited liability pass -through entity's gross\nprofits from all sources are at least t hree million dollars\n($3,000,000) but less than six million dollars ($6,000,000), the\nlimited liability entity tax shall be seventy -five cents ($0.75) per\none hundred dollars ($100) of the corporation's or limited liability\npass-through entity's Kentucky g ross profits, reduced by an\namount equal to twenty -two thousand five hundred dollars\n($22,500) multiplied by a fraction, the numerator of which is six\nmillion dollars ($6,000,000) less the amount of the corporation's or\nlimited liability pass -through entity's Kentucky gross profits, and\nthe denominator of which is three million dollars ($3,000,000), but\nin no case shall the result be less than one hundred seventy -five\ndollars ($175);\nc. If the corporation's or limited liability pass -through entity's gross\nprofits from all sources are equal to or greater than six million\ndollars ($6,000,000), the limited liability entity tax shall be\nseventy-five cents ($0.75) per one hundred dollars ($100) of all of\nthe corporation's or limited liability pass-through entity's Kentucky\ngross profits.\nIn determining eligibility for the reductions contained in this paragraph, a\nmember of an affiliated group shall consider the total gross receipts and the\ntotal gross profits from all sources of the entire affiliated group, inclu ding\neliminating entries for transactions among the group.\n(c) A credit shall be allowed against the tax imposed under paragraph (a) of this\nsubsection for the current year to a corporation or limited liability pass -\nthrough entity that owns an interest in a limited liability pass -through entity.\nThe credit shall be the proportionate share of tax calculated under this\nsubsection by the lower -level pass -through entity, as determined after the\namount of tax calculated by the pass -through entity has been reduce d by the\nminimum tax of one hundred seventy -five dollars ($175). The credit shall\napply across multiple layers of a multi -layered pass-through entity structure.\nThe credit at each layer shall include the credit from each lower layer, after\nreduction for th e minimum tax of one hundred seventy -five dollars ($175) at\neach layer.\n(d) The department may promulgate administrative regulations to establish a\nmethod for calculating the cost of goods sold attributable to Kentucky.\n(3) A nonrefundable credit based on the tax calculated under subsection (2) of this\nsection shall be allowed against the tax imposed by KRS 141.020 or 141.040. The\ncredit amount shall be determined as follows:\n(a) The credit allowed a corporation subject to the tax imposed by KRS 141.040\nshall be equal to the amount of tax calculated under subsection (2) of this\nsection for the current year after subtraction of any credits identified in KRS\n141.0205, reduced by the minimum tax of one hundred seventy -five dollars\n($175), plus any credit determ ined in paragraph (b) of this subsection for tax\npaid by wholly or partially owned limited liability pass -through entities. The\namount of credit allowed to a corporation based on the amount of tax paid\nunder subsection (2) of this section for the current y ear shall be applied to the\nincome tax due from the corporation's activities in this state. Any remaining\ncredit from the corporation shall be disallowed.\n(b) The credit allowed members, shareholders, or partners of a limited liability\npass-through entity shall be the members', shareholders', or partners'\nproportionate share of the tax calculated under subsection (2) of this section\nfor the current year after subtraction of any credits identified in KRS\n141.0205, as determined after the amount of tax paid h as been reduced by the\nminimum tax of one hundred seventy -five dollars ($175). The credit allowed\nto members, shareholders, or partners of a limited liability pass -through entity\nshall be applied to income tax assessed on income from the limited liability\npass-through entity. Any remaining credit from the limited liability pass -\nthrough entity shall be disallowed.\n(4) Each taxpayer subject to the tax imposed in this section shall file a return, on forms\nprepared by the department, on or before the fifteenth day of the fourth month\nfollowing the close of the taxpayer's taxable year. Any tax remaining due after\nmaking the payments required in KRS 141.044 shall be paid by the original due\ndate of the return.\n(5) The department shall prescribe forms and promulgat e administrative regulations as\nneeded to administer the provisions of this section.\n(6) The tax imposed by subsection (2) of this section shall not apply to:\n(a) For taxable years beginning prior to January 1, 2021:\n1. Financial institutions, as defined in KRS 136.500, except banker's banks\norganized under KRS 287.135 or 286.3-135;\n2. Savings and loan associations organized under the laws of this state and\nunder the laws of the United States and making loans to members only;\n3. Banks for cooperatives;\n4. Production credit associations;\n5. Insurance companies, including farmers' or other mutual hail, cyclone,\nwindstorm, or fire insurance companies, insurers, and reciprocal\nunderwriters;\n6. Corporations or other entities exempt under Section 501 of the Intern al\nRevenue Code;\n7. Religious, educational, charitable, or like corporations not organized or\nconducted for pecuniary profit;\n8. Corporations whose only owned or leased property located in this state\nis located at the premises of a printer with which it ha s contracted for\nprinting, provided that:\na. The property consists of the final printed product, or copy from\nwhich the printed product is produced; and\nb. The corporation has no individuals receiving compensation in this\nstate as provided in KRS 141.901;\n9. Public service corporations subject to tax under KRS 136.120;\n10. Open-end registered investment companies organized under the laws of\nthis state and registered under the Investment Company Act of 1940;\n11. Any property or facility which has been certif ied as a fluidized bed\nenergy production facility;\n12. An alcohol production facility as defined in KRS 247.910;\n13. Real estate investment trusts as defined in Section 856 of the Internal\nRevenue Code;\n14. Regulated investment companies as defined in Sect ion 851 of the\nInternal Revenue Code;\n15. Real estate mortgage investment conduits as defined in Section 860D of\nthe Internal Revenue Code;\n16. Personal service corporations as defined in Section 269A(b)(1) of the\nInternal Revenue Code;\n17. Cooperatives de scribed in Sections 521 and 1381 of the Internal\nRevenue Code, including farmers' agricultural and other cooperatives\norganized or recognized under KRS Chapter 272, advertising\ncooperatives, purchasing cooperatives, homeowners associations\nincluding those described in Section 528 of the Internal Revenue Code,\npolitical organizations as defined in Section 527 of the Internal Revenue\nCode, and rural electric and rural telephone cooperatives; or\n18. Publicly traded partnerships as defined by Section 7704(b) of  the\nInternal Revenue Code that are treated as partnerships for federal tax\npurposes under Section 7704(c) of the Internal Revenue Code, or their\npublicly traded partnership affiliates. \"Publicly traded partnership\naffiliates\" shall include any limited lia bility company or limited\npartnership for which at least eighty percent (80%) of the limited\nliability company member interests or limited partner interests are\nowned directly or indirectly by the publicly traded partnership; and\n(b) For taxable years beginning on or after January 1, 2021:\n1. Insurance companies, including farmers' or other mutual hail, cyclone,\nwindstorm, or fire insurance companies, insurers, and reciprocal\nunderwriters;\n2. Corporations or other entities exempt under Section 501 of the In ternal\nRevenue Code;\n3. Religious, educational, charitable, or like corporations not organized or\nconducted for pecuniary profit;\n4. Corporations whose only owned or leased property located in this state\nis located at the premises of a printer with which i t has contracted for\nprinting, provided that:\na. The property consists of the final printed product, or copy from\nwhich the printed product is produced; and\nb. The corporation has no individuals receiving compensation in this\nstate as provided in KRS 141.901;\n5. Public service corporations subject to tax under KRS 136.120;\n6. Open-end registered investment companies organized under the laws of\nthis state and registered under the Investment Company Act of 1940;\n7. An alcohol production facility as defined in KRS 247.910;\n8. Real estate investment trusts as defined in Section 856 of the Internal\nRevenue Code;\n9. Regulated investment companies as defined in Section 851 of the\nInternal Revenue Code;\n10. Real estate mortgage investment conduits as defined in Sect ion 860D of\nthe Internal Revenue Code;\n11. Personal service corporations as defined in Section 269A(b)(1) of the\nInternal Revenue Code;\n12. Cooperatives described in Sections 521 and 1381 of the Internal\nRevenue Code, including farmers' agricultural and ot her cooperatives\norganized or recognized under KRS Chapter 272, advertising\ncooperatives, purchasing cooperatives, homeowners associations\nincluding those described in Section 528 of the Internal Revenue Code,\npolitical organizations as defined in Section 527 of the Internal Revenue\nCode, and rural electric and rural telephone cooperatives; or\n13. Publicly traded partnerships as defined by Section 7704(b) of the\nInternal Revenue Code that are treated as partnerships for federal tax\npurposes under Section 77 04(c) of the Internal Revenue Code, or their\npublicly traded partnership affiliates. \"Publicly traded partnership\naffiliates\" shall include any limited liability company or limited\npartnership for which at least eighty percent (80%) of the limited\nliability company member interests or limited partner interests are\nowned directly or indirectly by the publicly traded partnership.\n(7) (a) As used in this subsection, \"qualified exempt organization\" means an entity\nlisted in subsection (6)(a) and (b) of this sec tion and shall not include any\nentity whose exempt status has been disallowed by the Internal Revenue\nService.\n(b) Notwithstanding any other provisions of this section, any limited liability\npass-through entity that is owned in whole or in part by a qualified exempt\norganization shall, in calculating its Kentucky gross receipts or Kentucky\ngross profits, exclude the proportionate share of its Kentucky gross receipts or\nKentucky gross profits attributable to the ownership interest of the qualified\nexempt organization.\n(c) Any limited liability pass -through entity that reduces Kentucky gross receipts\nor Kentucky gross pro fits in accordance with paragraph (b) of this subsection\nshall disregard the ownership interest of the qualified exempt organization in\ndetermining the amount of credit available under subsection (3) of this\nsection.\n(d) The Department of Revenue may promu lgate an administrative regulation to\nfurther define \"qualified exempt organization\" to include an entity for which\nexemption is constitutionally or legally required, or to exclude any entity\ncreated primarily for tax avoidance purposes with no legitimate business\npurpose.\n(8) The credit permitted by subsection (3) of this section shall flow through multiple\nlayers of limited liability pass-through entities and shall be claimed by the taxpayer\nwho ultimately pays the tax on the income of the limited liabili ty pass -through\nentity.","path":["KRS Chapter 141"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57941","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:33Z","sha256":"c450dccac6415e5f7fba3e4ab3838d2aeb3194fda533f732cf700b279970cd4d","source_id":"us-ky","stale":false,"prev":"us-ky/krs-141.040","next":"us-ky/krs-141.0405"},"notice":"GroundRules: Original legal text. Not legal advice."}