The Kentucky Department of Revenue recently released guidance regarding the deductibility of state taxes from Gross Income for Corporations. Kentucky Technical Advice Memorandum, KY-TAM-18-06, sheds some light as to which taxes are deductible and those that are not.

KY-TAM-18-06 concludes that all state taxes not based on gross or net income are allowable as a deduction in the state of Kentucky. Specifically referenced in this memorandum as the basis of their conclusion is KRS 141.039(2)(c)1. This statute states that state taxes which are not deductible from a corporation’s gross income in arriving at taxable income include: “any state tax which is computed, in whole or in part, by reference to gross or net income and which is paid or accrued to any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, or to any foreign country or political subdivision thereof.”

The memorandum then provides a brief list of examples of some common state taxes which are allowed as a deduction against a Corporation’s gross income. This includes taxes based on:

  • Capital stock or Capital base
  • Net worth
  • Real and personal tangible property
  • Intangible property
  • Property produced
  • Use or Consumption
  • The right to conduct business in a state that are not based on gross or net income.

Clearly stated in the text is the fact that this is a non-exclusive list, as other types of taxes not included maybe be deductible.

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Please contact us here, or call 513-241-8313 to speak with a member of the Barnes Dennig team for any questions regarding state taxes, state tax deductions, or any other state and local tax matters.