{"data":{"id":"us-ky/krs-141.206","jurisdiction":"us-ky","citation":"KRS 141.206","heading":"Filing of returns by pass -through entities -- Withholding requirements on","body":"owners of pass -through entities -- Appointment issues for pass -through\nentities.\n(1) Every pass -through entity doing business in this state shall, on or before the\nfifteenth day of the fourth month following the close of its annual accounting\nperiod, file a copy of its federal tax return with the form prescribed and furnished\nby the department.\n(2) (a) Pass-through entities shall calculate net income in the same manner a s in the\ncase of an individual under KRS 141.019 and the adjustment required under\nSections 703(a) and 1363(b) of the Internal Revenue Code.\n(b) Computation of net income under this section and the computation of the\npartner's, member's, or shareholder's d istributive share shall be computed as\nnearly as practicable identical with those required for federal income tax\npurposes except to the extent required by differences between this chapter and\nthe federal income tax law and regulations.\n(3) Individuals, estates, trusts, or corporations doing business in this state as a partner,\nmember, or shareholder in a pass -through entity shall be liable for income tax only\nin their individual, fiduciary, or corporate capacities, and no income tax shall be\nassessed against the net income of any pass-through entity, except as required:\n(a) For S corporations under KRS 141.040;\n(b) For a partnership level audit under KRS 141.211; and\n(c) For a pass-through entity making an election under KRS 141.209.\n(4) (a) Every pass-through entity required to file a return under subsection (1) of this\nsection, except publicly traded partnerships as described in KRS\n141.0401(6)(a)18. and (b)13., shall withhold Kentucky income tax on the\ndistributive share, whether distributed or undistribu ted, of each nonresident\nindividual partner, member, or shareholder.\n(b) Withholding shall be at the maximum rate provided in KRS 141.020.\n(5) (a) Every pass -through entity required to withhold Kentucky income tax as\nprovided by subsection (4) of this section shall pay estimated tax for the\ntaxable year, if for a nonresident individual partner, member, or shareholder,\nthe estimated tax liability can reasonably be ex pected to exceed five hundred\ndollars ($500).\n(b) The payment of estimated tax shall contain the information and shall be filed\nas provided in KRS 141.207.\n(6) (a) If a pass -through entity demonstrates to the department that a partner,\nmember, or sharehold er has filed an appropriate tax return for the prior year\nwith the department, then the pass -through entity shall not be required to\nwithhold on that partner, member, or shareholder for the current year unless\nthe exemption from withholding has been revoke d pursuant to paragraph (b)\nof this subsection.\n(b) 1. An exemption from withholding shall be considered revoked if the\npartner, member, or shareholder does not file and pay all taxes due in a\ntimely manner.\n2. An exemption so revoked shall be reinstated only with permission of the\ndepartment.\n3. If a partner, member, or shareholder who has been exempted from\nwithholding does not file a return or pay the tax due, the department\nmay require the pass-through entity to pay to the department the amount\nthat sho uld have been withheld, up to the amount of the partner's,\nmember's, or shareholder's ownership interest in the entity.\n4. The pass -through entity shall be entitled to recover a payment made\npursuant to this paragraph from the partner, member, or sharehold er on\nwhose behalf the payment was made.\n(7) In determining the tax under this chapter, a resident individual, estate, or trust that\nis a partner, member, or shareholder in a pass -through entity shall take into account\nthe partner's, member's, or sharehold er's total distributive share of the pass -through\nentity's items of income, loss, deduction, and credit.\n(8) In determining the tax under this chapter, a nonresident individual, estate, or trust\nthat is a partner, member, or shareholder in a pass -through entity required to file a\nreturn under subsection (1) of this section shall take into account:\n(a) 1. If the pass -through entity is doing business only in this state, the\npartner's, member's, or shareholder's total distributive share of the pass -\nthrough entity's items of income, loss, and deduction; or\n2. If the pass-through entity is doing business both within and without this\nstate, the partner's, member's, or shareholder's distributive share of the\npass-through entity's items of income, loss, and deductio n multiplied by\nthe apportionment fraction of the pass -through entity as prescribed in\nsubsection (11) of this section; and\n(b) The partner's, member's, or shareholder's total distributive share of credits of\nthe pass-through entity.\n(9) A corporation that is subject to tax under KRS 141.040 and is a partner or member\nin a pass -through entity shall take into account the corporation's distributive share\nof the pass-through entity's items of income, loss, and deduction and:\n(a) 1. For taxable years beginning on or after January 1, 2007, but prior to\nJanuary 1, 2018, shall include the proportionate share of the sales,\nproperty, and payroll of the limited liability pass -through entity or\ngeneral partnership in computing its own apportionment factor; and\n2. For t axable years beginning on or after January 1, 2018, shall include\nthe proportionate share of the sales of the limited liability pass -through\nentity or general partnership in computing its own apportionment factor;\nand\n(b) Credits from the partnership.\n(10) (a) If a pass -through entity is doing business both within and without this state,\nthe pass-through entity shall compute and furnish to each partner, member, or\nshareholder the numerator and denominator of each factor of the\napportionment fraction determined in accordance with subsection (11) of this\nsection.\n(b) For purposes of determining an apportionment fraction under paragraph (a) of\nthis subsection, if the pass-through entity is:\n1. Doing business both within and without this state; and\n2. A partner or member in another pass-through entity;\nthen the pass -through entity shall be deemed to own the pro rata share of the\nproperty owned or leased by the other pass -through entity, and shall also\ninclude its pro rata share of the other pass-through entity's payroll and sales.\n(c) The phrases \"a partner or member in another pass -through entity\" and \"doing\nbusiness both within and without this state\" shall extend to each level of\nmultiple-tiered pass-through entities.\n(d) The attribution to the pass -through en tity of the pro rata share of property,\npayroll and sales from its role as a partner or member in another pass -through\nentity will also apply when determining the pass -through entity's ultimate\napportionment factor for property, payroll and sales as requir ed under\nsubsection (11) of this section.\n(11) (a) For taxable years beginning pri or to January 1, 2018, a pass -through entity\ndoing business within and without the state shall compute an apportionment\nfraction, the numerator of which is the property factor, representing twenty -\nfive percent (25%) of the fraction, plus the payroll factor , representing\ntwenty-five percent (25%) of the fraction, plus the sales factor, representing\nfifty percent (50%) of the fraction, with each factor determined in the same\nmanner as provided in KRS 141.901, and the denominator of which is four\n(4), reduced by the number of factors, if any, having no denominator,\nprovided that if the sales factor has no denominator, then the denominator\nshall be reduced by two (2).\n(b) For taxable years beginning on or after January 1, 2018, a pass -through entity\ndoing business within and without the state shall compute an apportionment\nfraction as provided in KRS 141.120.\n(12) Resident individuals, estates, or trusts that are partners in a partnership, members of\na limited liability company electing partnership tax treatment for federal income tax\npurposes, owners of single member limited liability companies, or shareholders in\nan S corporation which does not do business in this state are subject to tax under\nKRS 141.020 on federal net income, gain, deduction, or loss passed t hrough the\npartnership, limited liability company, or S corporation.\n(13) An S corporation election made in accordance with Section 1362 of the Internal\nRevenue Code for federal tax purposes is a binding election for Kentucky tax\npurposes.\n(14) (a) Nonresident individuals shall not be taxable on investment income distributed\nby a qualified investment partnership. For purposes of this subsection, a\n\"qualified investment partnership\" means a pass -through entity that, during\nthe taxable year, holds only invest ments that produce income that would not\nbe taxable to a nonresident individual if held or owned individually.\n(b) A qualified investment partnership shall be subject to all other provisions\nrelating to a pass -through entity under this section and shall no t be subject to\nthe tax imposed under KRS 141.040 or 141.0401.\n(15) (a) A pass -through entity shall deliver to the department a return upon a form\nprescribed by the department showing the total amounts paid or credited to its\nnonresident individual partners, members, or shareholders, the amount paid in\naccordance with this subsection, and any other information the department\nmay require.\n(b) A pass -through entity shall furnish to its nonresident partner, member, or\nshareholder annually, but not later than t he fifteenth day of the fourth month\nafter the end of its taxable year, a record of the amount of tax paid on behalf\nof the partner, member, or shareholder on a form prescribed by the\ndepartment.","path":["KRS Chapter 141"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=57942","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:34Z","sha256":"ddc3789d1b0561b8d41e84314c1b1e6ae5088aa5f98e25a6dccdeee320916906","source_id":"us-ky","stale":false,"prev":"us-ky/krs-141.205","next":"us-ky/krs-141.207"},"notice":"GroundRules: Original legal text. Not legal advice."}