Kentucky House Bill 487 Supersedes Certain Provisions of H.B. 366

Kentucky H.B. 366 became law on April 13, 2018, implementing numerous tax law changes. But the legislature quickly went to work and passed H.B. 487 on April 14th. H.B. 487 incorporates H.B. 366 in its entirety, but also contains technical corrections as well as some key changes. Governor Matt Bevin had 10 business days to either veto the bill or sign it into law. That time passed without his signature, so H.B. 487 became law as of April 27^th at 12:01 a.m.

H.B. 487 will supersede the prior law if there are conflicts between them. Some of the key changes that result from H.B. 487 becoming law include:

Effective for tax years beginning on or after January 1, 2018:

• Certain types of companies are excepted from the new single-sales factor apportionment changes set forth in H.B. 366. Notably, a “provider” of “communication services,” “cable services,” or “internet access” would be permitted to use the three-factor apportionment formula that was in effect prior to H.B. 366. Transportation companies and freight forwarders are also excepted from the single-sales factor apportionment.
• Taxpayers are required to add back the 20% deduction relating to passthrough income to individuals under IRC § 199A to arrive at net income for Kentucky taxation.

Effective for transactions beginning on or after July 1, 2018:

• Installation and repair services related to manufacturing or industrial processing are exempt from sales tax.

Effective for tax years beginning on or after January 1, 2019:

• Members of a unitary business group are required to file a combined report or make an election to file a consolidated return with all affiliated group members.
• Computer software, except pre-written computer software, are exempt from state and local ad valorem taxes.

House Bill 487 also amends provisions related to Kentucky credits and incentives:

• The Kentucky Industrial Revitalization Act (KIRA) credit is retained.
• The Kentucky Investment Fund Act (KIFA) is suspended for 2 years and is capped at $3 million annually beginning on January 1, 2021. The $3 million cap remains in place indefinitely.
• The Kentucky Angel Investment Act (KAIA) is suspended for 2 years starting on or after January 1, 2019 and is capped at $3 million annually when it resumes on January 1, 2021. The $3 million cap remains in place indefinitely.

Please contact your CSH advisor if you have any additional questions.