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Kentucky Bill Signed Into Law: Immediate Action Required Regarding Estimated Payments

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On March 26, 2019, Governor Matthew Bevin signed into law House Bill 354, which enacts many tax-related provisions. One of the major changes within this bill requiring immediate action is the state’s change to the estimated payment procedures schedule, which will now align with the Internal Revenue Code.

Under prior law, estimated payments of corporate income tax (CIT) and limited liability entity tax (LLET) for calendar-year taxpayers were due on June 15 (50%), September 15 (25%), and December 15 (25%). For 2019 and forward, Kentucky's 2019 estimated payments for calendar-year taxpayers are now due in four installments instead of three, on April 15 (25%), June 15 (25%), September 15 (25%), and December 15 (25%).

See the chart below for easy referencing:

OLD NEW
15-Apr 0% 25%
15-Jun 50% 25%
15-Sep 25% 25%
15-Dec 25% 25%

In addition to this change, which must be addressed by April 15, 2019, Kentucky also recently modified the following:

Mandatory Unitary Combined Reporting: Effective for years beginning January 1, 2019. Combined reporting to be filed on a water’s-edge basis. The combined reporting statute will allow for sharing of attributes, such as NOLS, among group members.

LLET: A minimum $175 LLET is established for smaller businesses with less than $6 million of gross receipts.

Bank Franchise Tax (BFT): Will sunset as of December 31, 2021, and no longer apply. Beginning January 1, 2021, financial institutions will be subject to the CIT or LLET. For the 2021 year, financial institutions will be subject to both the BFT and CIT or LLET. A credit will be allowed for 2021.

Recycling Credits: Kentucky law provides for a credit against the CIT or individual income tax for 50% of the installed costs of machinery and equipment used to recycle industrial and post consumer wastes. The amount of the credit is limited to 10% of the total allowable credits and 25% of the taxpayer's income tax liability. Unused credits can be carried forward.

CIT Deduction for Deferred Taxes: As of January 1, 2019, the state provides for a deduction for deferred taxes, which would be limited to publicly traded corporations. While this may be a welcome deduction, the computation is very complicated and will require detailed support.

OTHER CHANGES

Kentucky adopted marketplace provider nexus provisions for sales/use tax purposes. A marketplace provider, such as an Amazon or an eBay, is deemed to have nexus within Kentucky if the provider makes retail sales on its own behalf or facilitates retail sales of tangible personal property, digital property, or services that are delivered or transferred electronically to a purchaser in the state in any sales combination that exceeds $100,000 or reaches 200 or more separate transactions in the preceding or current calendar year. This provision applies to transactions occurring on or after July 1, 2019.

Contact your Marcum state and local tax specialist if you have questions on these provisions.

 
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John Bonk, Senior Manager, Tax & Business

Senior Manager
Tax & Business
Miami, FL
 
 
 
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