Government > Policy Development >Taxation Issues
Kentucky Net Operating Losses
Since 2005, Kentucky law restricts the use of net operating losses for business. With the 2005 change, Kentucky corporations were required to file as consolidated units, and combined, claimed losses cannot exceed more than 50% of their actual losses. However, at the Federal level, Kentucky corporations are allowed to net the combination of all losses and all income, without an artificial 50% “cap” on losses.

Chamber Position:
We support legislation which eliminates any restrictions of the use of net operating losses for businesses. Such an action would bring Kentucky into conformity with Federal law, and also encourage investment in new companies.

Kentucky Alternative Minimum Calculation (LLET)
In 2005 and 2006, this portion of Kentucky’s Tax Modernization reform to the tax code was designed to equitably levy taxes on “big box stores” which operate in a multi-state or even a national marketplace. The Chamber believes that this tax is not operating as it was intended.

Chamber Position:
We support legislation that, at a minimum, would exempt all small businesses from this tax.

Kentucky Alternative Minimum Tax Credits (LLET)
The Chamber supports legislation that would allow a credit for the Limited Liability Entity Tax (LLET) against Kentucky tax on income from all sources.

Chamber Position:
We also support legislation that would allow any unused credits to be carried forward for an indefinite period.

KERS and CERS Financial Challenges Ahead
The Northern Kentucky Chamber of Commerce urges the 2009 General Assembly to continue addressing the financial challenges confronting the retirement systems which cover state government employees (KERS) and local government employees (CERS). The local government contribution for hazardous duty employees may increase from 18.5% of salary in FY ’03 to over 60% of salary in FY ’13 and non hazardous from 7.37% to 31%, respectively. These contribution rate increases are simply not sustainable for Northern Kentucky’s local governments and special districts (airport, sewer, water, libraries, Area Development Districts) included in the CERS system.

At best, continued and increased contributions on this obligation will result in drastic reductions in local service delivery or a dramatic increase in current local tax rates. At worst, these payments could drive some local governments into bankruptcy. Despite action on pensions in the 2008 Special Session the Chamber believes that this situation is real, and poses a serious threat to our ability to support growth and economic development.

Chamber Position:
While KERS and CERS are technically separate retirement funds, the Chamber urges the General Assembly to address the financial challenges of KERS and CERS at the same time. We recognize that there are considerable legal questions regarding the boundaries or limits of statutory changes, due to the “inviolable contract” theory set forth by the Kentucky Supreme Court. We urge the General Assembly to clarify these limits, by adopting four specific measures.

• We urge the General Assembly to test the inviolable contract, itself. 
• Reverse the current state statute which automatically increases the cost-of-living adjustment for state employees.
• In both KERS and CERS, enact reasonable increases to employee contributions to help fund health care benefits, annual cost-of-living adjustments, and other benefits, not subject to the inviolable contract.
• We strongly encourage the requirement of 50% of the members serving on the Investment Committees at KERS and CERS have significant professional financial or investment experience upon the next appointments, or as soon as feasible.