Friday, June 09, 2006

New Kentucky income tax regulations

The Kentucky Department of Revenue has issued some new income tax regulations:

· Adjustments to gross income, net operating loss deduction for personal income taxes
( 103 KAR 17: 060E )

If a deduction or adjustment is allowable based on the receipt of certain types of income, limited to a maximum amount for federal income tax purposes, Kentucky income used to make allocations has to be same type as that used on the federal return. Kentucky residents, part-year & non- residents have to compute NOL deductions using income & expenses allowed on Kentucky returns.

· Guidelines for couples on division of income
( 103 KAR 17: 100E )

Income derived from joint ownership of real property, and tangible & intangible personal property, has to be divided equally by married couples filing joint returns. Income from self- employment has to be divided according to the percentage amount of each spouse’s contribution of services or capital, unless taxes have been paid separately by each spouse or a par6nership agreement provides proof of separate income.

· Guidance on corporate claims of right adjustment
( 103 KAR 16: 320E )

If year the income or deduction was originally reported is still under the statute of limitations, claim of right has to be made by amending that same year’s income tax return. If year is closed under statute of limitations, claim has to be made in same tax year as credit or deduction was claimed for federal purposes, subject to adjustments between federal and Kentucky law.

· Apportionment on completed contract basis
( 103 KAR 16: 340E )

Is method of accounting that allows deferment of reporting business income or loss from multi- year construction contracts until year project is completed or accepted, consequently requiring separate computations be made for each contract completed during tax year, regardless of whether project is located in or outside of Kentucky, to determine amount of income attributable to sources in Kentucky.

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