136.530 Calculation of receipts factor. - Kentucky Statutes

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Page 1 of 7 136.530 Calculation of receipts factor. (1) The receipts factor is a fraction, the numerator of which is the receipts of the financial institution in this Commonwealth during the taxable year as determined by
subsection (2) of this section and the denominator of which is the receipts of the
financial institution within and without this Commonwealth during the taxable year.
Receipts shall include the following:
(a) Receipts from the lease or rental of real property owned by the financial institution; (b) Receipts from the lease or rental of tangible personal property owned by the financial institution; (c) Interest and fees or penalties in the nature of interest from loans secured by real property; (d) Interest and fees or penalties in the nature of interest from loans not secured by real property; (e) Net gains from the sale of loans. Net gains from the sale of loans includes income recorded under the coupon stripping rules of Section 1286 of the
Internal Revenue Code; (f) Interest and fees or penalties in the nature of interest from credit card receivables and receipts from fees charged to card holders, such as annual
fees; (g) Net gains, but not less than zero (0), from the sale of credit card receivables;
(h) All credit card issuer's reimbursement fees;
(i) Receipts from merchant discount. Receipts from merchant discount shall be computed net of any cardholder charge backs, but shall not be reduced by any
interchange transaction fees or by any issuer's reimbursement fees paid to
another for charges made by its card holders; (j) Loan servicing fees derived from loans secured by real property;
(k) Loan servicing fees derived from loans not secured by real property;
(l) Interest, dividends, net gains, but not less than zero (0), and other income from investment assets and activities and from trading assets and activities.
Investment assets and activities and trading assets and activities include but
are not limited to investment securities, trading account assets, federal funds,
securities purchased and sold under agreements to resell or repurchase,
options, futures contracts, forward contracts, notional principal contracts such
as swaps, equities, and foreign currency transactions. The receipts factor shall
include the following amounts:
1. The amount by which interest from federal funds sold and securities
purchased under resale agreements exceeds interest expense on federal
funds purchased and securities sold under repurchase agreements; and 2. The amount by which interest, dividends, gains, and other income from
trading assets and activities, including but not limited to assets and
activities in the matched book, in the arbitrage book, and foreign Page 2 of 7 currency transactions, exceed amounts paid in lieu of interest, amounts
paid in lieu of dividends, and losses from these assets and activities; (m) All receipts derived from sales that would be included in the factor established by KRS 141.120(8)(c); and (n) Receipts from services not otherwise specifically listed. (2) A determination of whether receipts should be included in the numerator of the fraction shall be made as follows:
(a) Receipts from the lease or rental of real property owned by the financial institution shall be included in the numerator if the property is located within
this Commonwealth or receipts from the sublease of real property if the
property is located within this Commonwealth. (b) 1. Except as described in subparagraph 2. of this paragraph, receipts from
the lease or rental of tangible personal property owned by the financial
institution shall be included in the numerator if the property is located
within this Commonwealth when it is first placed in service by the
lessee. 2. Receipts from the lease or rental of transportation property owned by the
financial institution are included in the numerator of the receipts factor
to the extent that the property is used in this Commonwealth. The extent
an aircraft will be deemed to be used in this Commonwealth and the
amount of receipts that is to be included in the numerator of this
Commonwealth's receipts factor is determined by multiplying all the
receipts from the lease or rental of the aircraft by a fraction, the
numerator of which is the number of landings of the aircraft in this
Commonwealth and the denominator of which is the total number of
landings of the aircraft. If the extent of the use of any transportation
property within this Commonwealth cannot be determined, then the
property shall be deemed to be used wholly in the state in which the
property has its principal base of operations. A motor vehicle shall be
deemed to be used wholly in the state in which it is registered. (c) 1. Interest and fees or penalties in the nature of interest from loans secured
by real property shall be included in the numerator if the property is
located within this Commonwealth. If the property is located both within
this Commonwealth and one (1) or more other states, receipts shall be
included if more than fifty percent (50%) of the fair market value of the
real property is located within this Commonwealth. If more than fifty
percent (50%) of the fair market value of the real property is not located
within any one (1) state, then the receipts described in this subparagraph
shall be included in the numerator if the borrower is located in this
Commonwealth. 2. The determination of whether the real property securing a loan is located
within this Commonwealth shall be made as of the time the original
agreement was made, and any subsequent substitutions of collateral shall
be disregarded. Page 3 of 7 (d) Interest and fees or penalties in the nature of interest from loans not secured by real property shall be included in the numerator if the borrower is located
in this Commonwealth. (e) Net gains from the sale of loans shall be included in the numerator as provided in subparagraphs 1. and 2. of this paragraph. Net gains from the sale of loans
includes income recorded under the coupon stripping rules of Section 1286 of
the Internal Revenue Code.
1. The amount of net gains, but not less than zero (0), from the sale of
loans secured by real property included in the numerator is determined
by multiplying net gains by a fraction the numerator of which is the
amount included in the numerator of the receipts factor pursuant to
paragraph (c) of this subsection and the denominator of which is the
total amount of interest and fees or penalties in the nature of interest
from loans secured by real property. 2. The amount of net gains, but not less than zero (0), from the sale of
loans not secured by real property included in the numerator is
determined by multiplying net gains by a fraction the numerator of
which is the amount included in the numerator of the receipts factor
pursuant to paragraph (d) of this subsection and the denominator of
which is the total amount of interest and fees or penalties in the nature of
interest from loans not secured by real property. (f) Interest and fees or penalties in the nature of interest from credit card receivables and receipts from fees charged to card holders, such as annual
fees, shall be included in the numerator if the billing address of the card
holder is in this Commonwealth. (g) Net gains, but not less than zero (0), from the sale of credit card receivables to be included in the numerator shall be determined by multiplying the amount
established in paragraph (g) of subsection (1) of this section by a fraction the
numerator of which is the amount included in the numerator of the receipts
factor pursuant to paragraph (f) of this subsection and the denominator of
which is the financial institution's total amount of interest and fees or penalties
in the nature of interest from credit card receivables and fees charged to card
holders. (h) Credit card issuer's reimbursement fees to be included in the numerator shall be determined by multiplying the amount established in paragraph (h) of
subsection (1) of this section by a fraction the numerator of which is the
amount included in the numerator of the receipts factor pursuant to paragraph
(f) of this subsection and the denominator of which is the financial
institution's total amount of interest and fees or penalties in the nature of
interest from credit card receivables and fees charged to card holders. (i) Receipts from merchant discount shall be included in the numerator if the commercial domicile of the merchant is in this Commonwealth. Receipts from
merchant discount shall be computed net of any cardholder charge backs but Page 4 of 7 shall not be reduced by any interchange transaction fees or by any issuer's
reimbursement fees paid to another for charges made by its card holders. (j) 1. a. Loan servicing fees derived from loans secured by real property to
be included in the numerator shall be determined by multiplying
the amount determined under paragraph (j) of subsection (1) of this
section by a fraction the numerator of which is the amount
included in the numerator of the receipts factor pursuant to
paragraph (c) of this subsection and the denominator of which is
the total amount of interest and fees or penalties in the nature of
interest from loans secured by real property. b. Loan servicing fees derived from loans not secured by real
property to be included in the numerator shall be determined by
multiplying the amount determined under paragraph (k) of
subsection (1) of this section by a fraction the numerator of which
is the amount included in the numerator of the receipts factor
pursuant to paragraph (d) of this subsection and the denominator
of which is the total amount of interest and fees or penalties in the
nature of interest from loans not secured by real property. 2. In circumstances in which the financial institution receives loan
servicing fees for servicing either the secured or the unsecured loans of
another, the numerator of the receipts factor shall include the fees if the
borrower is located in this Commonwealth. (k) Receipts from services not otherwise apportioned under this section shall be included in the numerator if the service is performed in this Commonwealth.
If the service is performed both within and without this Commonwealth, the
numerator of the receipts factor includes receipts from services not otherwise
apportioned under this section, if a greater proportion of the income-
producing activity is performed in this Commonwealth based on cost of
performance. (l) 1. The numerator of the receipts factor includes interest, dividends, net
gains, but not less than zero (0), and other income from investment
assets and activities and from trading assets and activities described in
paragraph (l) of subsection (1) of this section that are attributable to this
Commonwealth.
a. The amount of interest, dividends, net gains, but not less than zero
(0), and other income from investment assets and activities in the
investment account to be attributed to this Commonwealth and
included in the numerator is determined by multiplying all income
from the assets and activities by a fraction the numerator of which
is the average value of the assets that are properly assigned to a
regular place of business of the financial institution within this
Commonwealth and the denominator of which is the average value
of all the assets. Page 5 of 7 b. The amount of interest from federal funds sold and purchased and
from securities purchased under resale agreements and securities
sold under repurchase agreements attributable to this
Commonwealth and included in the numerator is determined by
multiplying the amount described in subparagraph 1. of paragraph
(l) of subsection (1) of this section from funds and securities by a
fraction the numerator of which is the average value of federal
funds sold and securities purchased under agreements to resell
which are properly assigned to a regular place of business of the
financial institution within this Commonwealth and the
denominator of which is the average value of all funds and
securities. c. The amount of interest, dividends, gains, and other income from
trading assets and activities, including but not limited to assets and
activities in the matched book, in the arbitrage book, and foreign
currency transactions, but excluding amounts described in
subdivisions a. and b. of this subparagraph, attributable to this
Commonwealth and included in the numerator is determined by
multiplying the amount described in subparagraph 2. of paragraph
(l) of subsection (1) of this section by a fraction the numerator of
which is the average value of trading assets which are properly
assigned to a regular place of business of the financial institution
within this Commonwealth and the denominator of which is the
average value of all assets. d. For purposes of this subparagraph, average value shall be
determined using the rules for determining the average value of
tangible personal property set forth in KRS 136.535(3) and (4). 2. In lieu of using the method set forth in subparagraph 1. of this
paragraph, the financial institution may elect, or the department may
require in order to fairly represent the business activity of the financial
institution in this Commonwealth, the use of the method set forth in this
subparagraph.
a. The amount of interest, dividends, net gains, but not less than zero
(0), and other income from investment assets and activities in the
investment account to be attributed to this Commonwealth and
included in the numerator is determined by multiplying all income
from assets and activities by a fraction the numerator of which is
the gross income from assets and activities which are properly
assigned to a regular place of business of the financial institution
within this Commonwealth and the denominator of which is the
gross income from all assets and activities. b. The amount of interest from federal funds sold and purchased and
from securities purchased under resale agreements and securities
sold under repurchase agreements attributable to this Page 6 of 7 Commonwealth and included in the numerator is determined by
multiplying the amount described in subparagraph 1. of paragraph
(l) of subsection (1) of this section from funds and securities by a
fraction the numerator of which is the gross income from funds
and securities which are properly assigned to a regular place of
business of the financial institution within this Commonwealth and
the denominator of which is the gross income from all funds and
securities. c. The amount of interest, dividends, gains, and other income from
trading assets and activities, including but not limited to assets and
activities in the matched book, in the arbitrage book and foreign
currency transactions, but excluding amounts described in
subdivisions a. and b. of this subparagraph, attributable to this
Commonwealth and included in the numerator is determined by
multiplying the amount described in subparagraph 2. of paragraph
(l) of subsection (1) of this section by a fraction the numerator of
which is the gross income from trading assets and activities which
are properly assigned to a regular place of business of the financial
institution within this Commonwealth and the denominator of
which is the gross income from all assets and activities. 3. If the financial institution elects or is required by the department to use
the method set forth in subparagraph 2. of this paragraph, it shall use this
method on all subsequent returns unless the financial institution receives
prior permission from the department to use, or the department requires,
a different method. 4. The financial institution shall have the burden of proving that an
investment asset or activity or trading asset or activity was properly
assigned to a regular place of business outside this Commonwealth by
demonstrating that the day-to-day decisions regarding the asset or
activity occurred at a regular place of business outside this
Commonwealth. Where the day-to-day decisions regarding an
investment asset or activity or trading asset or activity occur at more
than one (1) regular place of business and one (1) regular place of
business is in this Commonwealth and one (1) regular place of business
is outside this Commonwealth, the asset or activity shall be considered
to be located at the regular place of business of the financial institution
where the investment or trading policies or guidelines with respect to the
asset or activity are established. Unless the financial institution
demonstrates to the contrary, the policies and guidelines shall be
presumed to be established at the commercial domicile of the financial
institution. (m) The numerator of the receipts factor includes all other receipts derived from sales as determined pursuant to the provisions set forth in KRS 141.120(8)(c). Page 7 of 7 (n) 1. All receipts that would be assigned under this section to a state in which
the financial institution is not taxable shall be included in the numerator
of the receipts factor, if the financial institution's commercial domicile is
in this Commonwealth. 2. For purposes of subparagraph 1. of this paragraph, "taxable" means
either:
a. That a financial institution is subject in another state to a net
income tax, a franchise tax measured by net income, a franchise
tax for the privilege of doing business, a corporate stock tax
including a bank shares tax, a single business tax, an earned
surplus tax, or any tax which is imposed upon or measured by net
income; or b. That another state has statutory authority to subject the financial
institution to any of the taxes in subdivision a. of this
subparagraph, whether in fact the state does or does not impose the
tax. Effective: June 20, 2005
History: Amended 2005 Ky. Acts ch. 85, sec. 332, effective June 20, 2005; and ch. 168, sec. 33, effective March 18, 2005. -- Created 1996 Ky. Acts ch. 254, sec. 8,
effective July 15, 1996. Legislative Research Commission Note (3/18/2005). 2005 Ky. Acts ch. 168, sec. 165, provides that this section shall apply to tax years beginning on or after January 1,
2005. Legislative Research Commission Note (3/18/2005). This section was amended by 2005 Ky. Acts chs. 85 and 168, which do not appear to be in conflict and have been
codified together. Legislative Research Commission Note (7/15/96). In codifying subsections (1)(m) and (2)(m) of this statute, references to Section 28 of 1996 Ky. Acts ch. 254 (KRS
134.380) have been shown instead as references to Section 31 of that Act (KRS
136.070). Without changing these references or the text of the material referred to,
House Floor Amendment 1 to House Bill 416 (which became Acts ch. 254) added
three new sections to the bill and changed the numbering of the original Section 28
(KRS 136.070) to Section 31 but did not make the necessary corresponding
adjustment to these internal references. This action has been taken under KRS
7.136(1)(h).