Kentucky Income tax / Franchise Tax: State high court upholds validity of retroactive ban on unitary filing refund claims

Department v. Johnson Controls, Inc. , Ky. (8/27/09). The Kentucky Supreme Court reversed the Kentucky Court of Appeals' 2006 decision to hold that legislation enacted in 2000 (H.B. 541), which retroactively prohibited granting refund claims based on unitary return filings for years prior to 1996, was constitutionally valid and did not violate the taxpayers' due process rights. The Court explained that because the amendments to the Kentucky tax code made by the State legislature in 1996 and 2000 were made to clarify the law in regard to the filing of combined returns under the unitary business plan and to exercise its revenue-raising powers, they furthered a legitimate governmental purpose and were rationally related to that purpose. Consequently, the taxpayers in this case were not entitled to tax refunds because they could not amend their Kentucky separate returns to a combined return under the unitary business plan. Note that unitary filing was formally prohibited by statute in Kentucky in 1996.

Lengthy dissenting opinions and limited concurring opinions follow the main opinion.