{"data":{"id":"us-ky/krs-141.901","jurisdiction":"us-ky","citation":"KRS 141.901","heading":"Division of income of interstate business for tax purposes --","body":"Apportionment.\nThe provisions of this section are the same as appeared in KRS 141.120 prior to its repeal\nand reenactment in Section 60 of 2018 Ky. Acts chs. 171 and 207. This sectio n applies to\nall corporations for taxable years beginning prior to January 1, 2018, and to a provider, as\ndefined in KRS 141.121, for taxable years beginning on or after January 1, 2018.\n(1) As used in this section, unless the context requires otherwise:\n(a) \"Business income\" means income arising from transactions and activity in the\nregular course of a trade or business of the corporation and includes income\nfrom tangible and intangible property if the acquisition, management, or\ndisposition of the propert y constitutes integral parts of the corporation's\nregular trade or business operations;\n(b) \"Commercial domicile\" means the principal place from which the trade or\nbusiness of the corporation is managed;\n(c) \"Compensation\" means wages, salaries, commission s, and any other form of\nremuneration paid or payable to employees for personal services;\n(d) \"Financial organization\" means any bank, trust company, savings bank,\nindustrial bank, land bank, safe deposit company, private banker, savings and\nloan association, credit union, cooperative bank, investment company, or any\ntype of insurance company;\n(e) \"Nonbusiness income\" means all income other than business income;\n(f) \"Public service company\" means any business entity subject to taxation under\nKRS 136.120;\n(g) \"Sales\" means all gross receipts of the corporation not allocated under\nsubsections (3) to (7) of this section, except as provided by KRS 141.121; and\n(h) \"State\" means any state of the United States, the District of Columbia, the\nCommonwealth of Puerto Rico, any territory or possession of the United\nStates, and any foreign country or political subdivision thereof.\n(2) Any corporation which is required by KRS 141.900 to allocate and apportion its net\nincome shall allocate and apportion its net income as provided in this section.\n(3) Rents and royalties from real property, intangible or tangible personal property,\ncapital gains and losses, interest, or patent or copyright royalties, to the extent that\nthey constitute nonbusiness income, shall be allocated as provided in subsections\n(4) to (7) of this section.\n(4) (a) Net rents and royalties from real property located in this state are allocable to\nthis state.\n(b) Net rents and royalties from tangible personal property are allocable to this\nstate if and to the extent that the property is utilized in this state; or in their\nentirety if the corporation's commercial domicile is in this state and the\ncorporation is not organized under the laws of or taxable in the state in which\nthe property is utilized.\n(c) The extent of utilization of tangible personal property in a state is determined\nby multiplying the rents and royalties by a fraction, the numerator of which is\nthe number of days of physical location of the property in the state during the\nrental or royalty period in the taxable year and the denominator of which is\nthe number of days of physical location of the property everywhere during all\nrental or royalty peri ods in the taxable year. If the physical location of the\nproperty during the rental or royalty period is unknown or unascertainable by\nthe corporation, the tangible personalty is utilized in the state in which the\nproperty was located at the time the renta l or royalty payer obtained\npossession.\n(d) Net rents and royalties from intangible personal property located in this state\nare allocable to this state. For purposes of this section, royalties from property\nleased in Kentucky shall be considered as royalti es from intangible personal\nproperty.\n(5) (a) Capital gains and losses from sales or other dispositions of real property\nlocated in this state are allocable to this state.\n(b) Capital gains and losses from sales or other dispositions of tangible personal\nproperty are allocable to this state if the property had a situs in this state at the\ntime of the sale, or the corporation's commercial domicile is in this state and\nthe corporation is not taxable in the state in which the property had a situs.\n(c) Capital gains and losses from sales or other dispositions of intangible personal\nproperty are allocable to this state if the corporation's commercial domicile is\nin this state.\n(6) Interest is allocable to this state if the corporation's commercial domicile is in this\nstate.\n(7) (a) Patent and copyright royalties are allocable to this state if and to the extent\nthat the patent or copyright is utilized by the payer in this state; or if and to the\nextent that the patent or copyright is utilized by the payer in a stat e in which\nthe corporation is not taxable and the corporation's commercial domicile is in\nthis state.\n(b) A patent is utilized in a state to the extent that it is employed in production,\nfabrication, manufacturing, or other processing in the state or to the extent that\na patented product is produced in the state. If the basis of receipts from patent\nroyalties does not permit allocation to states or if the accounting procedures\ndo not reflect states of utilization, the patent is utilized in the state in whic h\nthe corporation's commercial domicile is located.\n(c) A copyright is utilized in a state to the extent that printing or other publication\noriginates in the state. If the basis of receipts from copyright royalties does not\npermit allocation to states or i f the accounting procedures do not reflect states\nof utilization, the copyright is utilized in the state in which the corporation's\ncommercial domicile is located.\n(8) (a) Except as provided in subsection (9) of this section, all business income shall\nbe a pportioned to this state by multiplying the income by a fraction, the\nnumerator of which is the property factor, representing twenty -five percent\n(25%) of the fraction, plus the payroll factor, representing twenty -five percent\n(25%) of the fraction, plus the sales factor, representing fifty percent (50%) of\nthe fraction, and the denominator of which is four (4), reduced by the number\nof factors, if any, having no denominator, provided that if the sales factor has\nno denominator, then the denominator shall be reduced by two (2).\n(b) 1. The property factor is a fraction, the numerator of which is the average\nvalue of the corporation's real and tangible personal property owned or\nrented and used in this state during the tax period and the denominator\nof which i s the average value of all the corporation's real and tangible\npersonal property owned or rented and used during the tax period;\nprovided, however, that property which has been certified as a pollution\ncontrol facility as defined in KRS 224.1 -300 shall be excluded from the\nproperty factor.\n2. Property owned is valued at its original cost. If the original cost of any\nproperty is not determinable or is nominal or zero (0) the property shall\nbe valued by the department pursuant to administrative regulations\npromulgated by the department. Property rented is valued at eight (8)\ntimes the net annual rental rate. Net annual rental rate is the annual\nrental rate paid by the corporation less any annual rental rate received by\nthe corporation from subrentals, provided  that the rental and subrentals\nare reasonable. If the department determines that the annual rental or\nsubrental rate is unreasonable, or if a nominal or zero (0) rate is charged,\nthe department may determine and apply the rental rate as will\nreasonably reflect the value of the property rented by the corporation.\n3. The average value of property shall be determined by averaging the\nvalues at the beginning and ending of the tax period but the department\nmay require the averaging of monthly values during the tax period if\nreasonably required to reflect properly the average value of the property.\n(c) The payroll factor is a fraction, the numerator of which is the total amount\npaid or payable in this state during the tax period by the corporation for\ncompensation, and the denominator of which is the total compensation paid or\npayable by the corporation everywhere during the tax period. Compensation is\npaid or payable in this state if:\n1. The individual's service is performed entirely within the state;\n2. The individual's service is performed both within and without the state,\nbut the service performed without the state is incidental to the\nindividual's service within the state; or\n3. Some of the service is performed in the state and the base of operations\nor, if there is no base of operations, the place from which the service is\ndirected or controlled is in the state, or the base of operations or the\nplace from which the service is directed or controlled is not in any state\nin which some part of the service is perf ormed, but the individual's\nresidence is in this state.\n(d) 1. The sales factor is a fraction, the numerator of which is the total sales of\nthe corporation in this state during the tax period, and the denominator\nof which is the total sales of the corporat ion everywhere during the tax\nperiod.\n2. Sales of tangible personal property are in this state if:\na. The property is delivered or shipped to a purchaser, other than the\nUnited States government, or to the designee of the purchaser\nwithin this state regardless of the f.o.b. point or other conditions of\nthe sale; or\nb. The property is shipped from an office , store, warehouse, factory,\nor other place of storage in this state and the purchaser is the\nUnited States government.\n3. Sales, other than sales of tangible personal property, are in this state if\nthe income-producing activity is performed in this state;  or the income-\nproducing activity is performed both in and outside this state and a\ngreater proportion of the income -producing activity is performed in this\nstate than in any other state, based on costs of performance.\n(9) (a) If the allocation and apporti onment provisions of this section do not fairly\nrepresent the extent of the corporation's business activity in this state, the\ncorporation may petition for or the department may require, in respect to all or\nany part of the corporation's business activity, if reasonable:\n1. Separate accounting;\n2. The exclusion of any one (1) or more of the factors;\n3. The inclusion of one (1) or more additional factors which will fairly\nrepresent the corporation's business activity in this state; or\n4. The employment of an y other method to effectuate an equitable\nallocation and apportionment of income.\n(b) A corporation may elect the allocation and apportionment methods for the\ncorporation's business income provided for in subparagraphs 1. and 2. of this\nparagraph. The elec tion, if made, shall be irrevocable for a period of five\nyears.\n1. All business income derived directly or indirectly from the sale of\nmanagement, distribution, or administration services to or on behalf of\nregulated investment companies, as defined under the Internal Revenue\nCode of 1986, as amended, including trustees, and sponsors or\nparticipants of employee benefit plans which have accounts in a\nregulated investment company, shall be apportioned to this state only to\nthe extent that shareholders of the investment company are domiciled in\nthis state as follows:\na. Total business income shall be multiplied by a fraction, the\nnumerator of which shall be Kentucky receipts from the services\nfor the tax period and the denominator of which shall be the total\nreceipts everywhere from the services for the tax period;\nb. For purposes of subdivision a. of this subparagraph, Kentucky\nreceipts shall be determined by multiplying total receipts for the\ntax period from each separate investment company for which the\nservices are performed by a fraction. The numerator of the fraction\nshall be the average of the number of shares owned by the\ninvestment company's shareholders domiciled in this state at the\nbeginning of and at the end of the investment company's taxable\nyear, and the denominator of the fraction shall be the average of\nthe number of the shares owned by the investment company\nshareholders everywhere at the beginning of and at the end of the\ninvestment company's taxable year; and\nc. Nonbusiness income shall be all ocated to this state as provided in\nsubsections (4) to (7) of this section.\n2. All business income derived directly or indirectly from the sale of\nsecurities brokerage services by a business which operates within the\nboundaries of any area of the Commonwea lth, which on June 30, 1992,\nwas designated as a Kentucky Enterprise Zone, as described in KRS\n154.655(2) before that statute was renumbered in 1992, shall be\napportioned to this state only to the extent that customers of the\nsecurities brokerage firm are domiciled in this state. The portion of\nbusiness income apportioned to Kentucky shall be determined by\nmultiplying the total business income from the sale of these services by\na fraction determined in the following manner:\na. The numerator of the fraction shall be the brokerage commissions\nand total margin interest paid in respect of brokerage accounts\nowned by customers domiciled in Kentucky for the brokerage\nfirm's taxable year;\nb. The denominator of the fraction shall be the brokerage\ncommissions and total margin interest paid in respect of brokerage\naccounts owned by all of the brokerage firm's customers for that\nyear; and\nc. Nonbusiness income shall be allocated to this state as provided in\nsubsections (4) to (7) of this section.\n(10) Public service com panies and financial organizations required by KRS 141.900 to\nallocate and apportion net income shall allocate and apportion such income as\nfollows:\n(a) Nonbusiness income shall be allocated to this state as provided in subsections\n(4) to (7) of this section;\n(b) Business income shall be apportioned to this state by multiplying the business\nincome by a fraction, the numerator of which is the property factor,\nrepresenting twenty-five percent (25%) of the fraction, plus the payroll factor,\nrepresenting twenty-five percent (25%) of the fraction, plus the sales factor,\nrepresenting fifty percent (50%) of the fraction, and the denominator of which\nis four (4), reduced by the number of factors, if any, having no denominator,\nprovided that if the sales factor has n o denominator, then the denominator\nshall be reduced by two (2). The payroll factor shall be determined as\nprovided in subsection (8)(c) of this section. The property factor and sales\nfactor shall be determined as provided by administrative regulations\npromulgated by the department.\n(c) An affiliated group electing to file a consolidated return under KRS\n141.200(4) or required to file a consolidated return under KRS 141.200(11)\nthat includes a public service company, a provider of communications\nservices or  multichannel video programming services as defined in KRS\n136.602, or a financial organization shall determine the amount of payroll to\nbe included in the apportionment factor as provided in subsection (8)(c) of\nthis section. The amount of property and sa les of the public service company,\nprovider of communications services or multichannel video programming\nservices as defined in KRS 136.602, or financial organization to be included\nin the apportionment factors of the affiliated group shall be determined i n\naccordance with administrative regulations promulgated by the department\nunder paragraph (b) of this subsection.\n(11) For taxable years beginning on or after January 1, 2007, a corporation that:\n(a) Owns an interest in a limited liability pass-through entity; or\n(b) Owns an interest in a general partnership organized or formed as a general\npartnership after January 1, 2006;\nshall include the proportionate share of sales, property, and payroll of the limited\nliability pass-through entity or general partne rship when apportioning income, and\nshall include the proportionate share of sales in calculating the tax due pursuant to\nKRS 141.0401. The phrases \"an interest in a limited liability pass -through entity\"\nand \"an interest in a general partnership organized  or formed as a general\npartnership after January 1, 2006,\" shall extend to each level of multiple -tiered\npass-through entities.","path":["KRS Chapter 141"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=47367","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:50:35Z","sha256":"fb446adf5f59c7320073d7aae077481ec9f43bc0b00f67b77728329886e18340","source_id":"us-ky","stale":false,"prev":"us-ky/krs-141.900","next":"us-ky/krs-141.985"},"notice":"GroundRules: Original legal text. Not legal advice."}