Kentucky Provides Guidance on Global Intangible Low-Taxed Income

Corporate taxpayers can deduct global intangible low-taxed income (GILTI) on their Kentucky income tax return GILTI, according to Kentucky guidance. The guidance covers how Kentucky requires corporate income taxpayers to report GILTI.

What Is GILTI?

The Tax Cuts and Jobs Act (TCJA) added IRC §250 and IRC §951A–provisions that cover GILTI.

IRC §951A requires U.S. shareholders of controlled foreign corporations (CFC) to include its GILTI in gross income for the tax year. This provision operates in a manner like other Subpart F income.

IRC §250 allows a deduction for part of a domestic corporation’s GILTI.

How Do Kentucky Taxpayers Report GILTI?

Kentucky corporate taxpayers can deduct all dividend income. Kentucky treats Subpart F income, including GITLI, as dividend income.

However, Kentucky does not allow the IRC §250 deduction, and taxpayers must add it to federal taxable income on Kentucky returns. Kentucky does not allow a deduction directly or indirectly related to nontaxable income, and it treats GILTI as nontaxable income.

Expenses Related to GILTI

Taxpayers must also add any expenses related to GILTI. A taxpayer that cannot determine actual expenses can estimate those expenses.

Sales Factor and LLC Gross Receipts

Finally, a taxpayer cannot include nontaxable GILTI in the calculation of:

  • its sales factor for apportioning income to Kentucky; or
  • gross receipts for its Kentucky limited liability entity tax.

TAM-18-02, Kentucky Department of Revenue, August 2018, ¶203-200

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