On March 31, 2023, Kentucky Gov. Andy Beshear signed House Bill 5 into law. This bill makes several clarifying changes to recently enacted House Bill 360, which allows a pass-through entity (PTE) to elect to pay its tax liability at the entity level on behalf of its individual partners, members, or shareholders for taxable years beginning on or after January 1, 2022.
Key updates to the bill include:
- Clarification that the election is to be made annually on a form prescribed by the Kentucky Department of Revenue and is binding once made.
- Allows for a refundable PTE credit at the individual level equal to the 100% of the owner’s pro rata share of tax paid by the PTE.
- Defines direct and indirect entity owners and “authorized person” eligible to file the election on behalf of the electing entity.
- For tax year 2022, elections are to be made after March 31, 2023 but before August 31, 2024.
- Electing entities are not required to make estimated payments until taxable years beginning on or after January 1, 2024.
- All calculations for the PTE return will continue to be made as provided by Kentucky law (KRS 141.206).
FORVIS will continue to monitor this legislation. If you have any questions or need assistance, please reach out to a professional at FORVIS or submit the Contact Us form below.