In a recent Technical Advice Memorandum (TAM 18-06), the Department of Revenue issued guidance on which taxes are considered deductible in computing Kentucky corporate income tax liability. Under Kentucky law, state taxes “computed in whole or in part by reference to gross or net income” are not deductible. In contrast, taxes that are based on capital, net worth, real, tangible or intangible property, property produced, or that are based on use or consumption will be deductible. Likewise, taxes imposed for the right to conduct business in a state that are not based on net or gross income are deductible. The TAM does not list specific state taxes that the Department considers to be deductible or non-deductible. However, the TAM confirms that if a state tax is imposed on the higher of different bases, it is deductible if the taxpayer ultimately pays tax on a non-income base. The TAM also confirms that Kentucky taxpayers can deduct limited liability entity tax (LLET) based on gross receipts, although a portion of the LLET is allowed as a credit against corporate income tax liability. Please contact Brandon Erwine at (614) 249-1877 with questions.