KyCPA testifies on LLET during legislative committee hearing
Kentucky Society of CPAs President Harry Freibert, KyCPA Government Affairs Director Charles George, and businesswoman Vivian Stobaugh, CPA, testified at the Interim Appropriations and Revenue Committee hearing in Frankfort recently regarding the Society’s push to clarify the cost of goods sold (COGS) definition in Kentucky’s limited liability entity tax (LLET) statute. Freibert and George told the committee that Kentucky’s current definition of COGS was ambiguous, and that the Department of Revenue’s recently enhanced enforcement caught taxpayers and practitioners by surprise. They advocated to align Kentucky’s COGS definition with that of the COGS definition for federal tax purposes. By bringing Kentucky in line with the IRS, they said the clarification would both enhance compliance by businesses and improve enforcement by the DOR.
Stobaugh, a controller at a wood products manufacturer in western Kentucky, said the Department’s recent actions amount to an unforeseen tax increase and keeping track of Kentucky versus federal COGS deductions would be a compliance nightmare. She added that her company operates on razor-thin margins and any additional tax or compliance burdens hurt her ability to compete with out-of-state competitors.
KyCPA advocates will seek legislation to clarify the COGS definition when the General Assembly convenes in January, and are urging members to contact their legislators about the importance of the issue.