Kentucky issued guidance on which state taxes corporations can deduct from taxable income.
Which State Taxes Are Deductible?
Kentucky allows a deduction for all state taxes that are not based on gross or net income. Examples of deductible state taxes include:
– capital stock or capital base taxes;
– net worth taxes;
– real and personal property taxes;
– intangible property taxes;
– production taxes;
– use or consumption taxes; and
– business privilege taxes.
Some states impose tax based on the highest of a corporation’s:
– capital or net worth; or
– fixed dollar minimum tax.
Under this circumstance, a Kentucky taxpayer can deduct the tax based on capital or the minimum tax.
What Does “State Tax” Mean?
The term “state tax” means taxes paid or accrued to:
– any state in the U.S.;
– the District of Columbia;
– Puerto Rico;
– any U.S. territory or possession; and
– any foreign country or its political subdivisions.
KY-TAM-18-06, Kentucky Department of Revenue, November 1, 2018, ¶203-205