AN ACT relating to transactional precious metals.

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AN ACT relating to transactional precious metals. 1
WHEREAS, several states have introduced or enacted legislation to recognize 2
transactional gold and silver; and 3
WHEREAS, the use of gold and silver as a medium of exchange has a historical 4
basis in fostering economic stability and individual liberty; and 5
WHEREAS, the Constitution of the United States under Article 1, Section 10, 6
allows for the states to declare gold a nd silver legal tender for use in payment of debts, 7
taxes, fees, and other obligations; and 8
WHEREAS, recognizing gold and silver as legal tender promotes economic justice 9
by allowing citizens of every economic stratus access to the ability to preserve thei r 10
wealth by hedging against inflation with precious metals; and 11
WHEREAS, establishing voluntary mechanisms for the use of precious metals in 12
transactions enhances Kentucky's economic resilience; and 13
WHEREAS, allowing the use of gold and silver as legal ten der provides individuals 14
and businesses within Kentucky an alternative option for preserving and exchanging 15
wealth; 16
NOW, THEREFORE, 17
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 18
SECTION 1. A NEW SECTION OF KRS CHAPTER 41 IS CREATED TO 19
READ AS FOLLOWS: 20
(1) As used in this section: 21
(a) "Bullion depository" means an entity providing vault facilities within the 22
United States for the storage of gold bullion and silver bullion that: 23
1. Complies with the prescribed London Bullion Market Association or 24
equivalent best practice guidelines; and 25
2. Provides accounts that: 26
a. Hold gold bullion and silver bullion; and 27
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b. Allow account holders to buy, sell, save, and spend gold bullion 1
and silver bullion; 2
(b) "Depository agent" means a private entity authorized by the State Treasurer 3
to operate a bul lion depository or perform related services under this 4
section; 5
(c) "Electronic payment system" means an electronic platform or payment 6
system that enables participating vendors to receive and process a payment 7
from an account holder of a bullion depositor y using gold specie and silver 8
specie held in the bullion depository as the basis for the payment 9
transaction; 10
(d) "Gold bullion" and "silver bullion": 11
1. Means, as applicable, refined precious gold or silver metal that is: 12
a. In any shape or form; and 13
b. Valued primarily based on its metal content and not on its form 14
or function; and 15
2. Includes, as applicable, gold coin and silver coin; 16
(e) "Gold coin" and "silver coin" means, as applicable, gold or silver metal 17
that is: 18
1. In bars or other physical forms certified at least: 19
a. For gold metal, ninety -nine and one -half percent (99.5%) pure; 20
and 21
b. For silver metal, ninety -nine and nine -tenths percent (99.9%) 22
pure; and 23
2. Coined, stamped, or imprinted with its weight and purity; 24
(f) "Gold specie" and "silver specie" means, as applicable, gold or silver 25
bullion that: 26
1. Has intrinsic value; and 27
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2. Is used or intended for use as money; 1
(g) "Governing authority": 2
1. Means any government, agency, authority, board, bureau, 3
commission, committee, council, department, government corporation, 4
institution, legislative body, political subdivision, instrumentality, or 5
other entity of this state; and 6
2. Includes: 7
a. Any city, county, charter county government, urban -county 8
government, consolidated local government, unified local 9
government, public school district, public institution of 10
education, special district, or municipal corporation of this state; 11
and 12
b. Any government, agency, authority, board, bureau, department, 13
commission, council, committee, instrumentality, or other entity 14
of an entity referenced in subdivision a. of this subparagraph; 15
(h) "Legal tender" means a recognized medium of exchange for the payment of 16
debts, taxes, fees, and other obligations; 17
(i) "Person" includes: 18
1. A natural person; 19
2. Any type or form of corporation, company, partnership, 20
proprietorship, association, or other legal entity; and 21
3. A government, governmental subdivision or agency , governing 22
authority, or other body politic; and 23
(j) "Social credit scoring system" means a system of recordkeeping, data 24
collection, or scoring that: 25
1. Evaluates, monitors, or ranks an individual's or entity's behavior, 26
beliefs, associations, or complia nce with government or corporate 27
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standards; and 1
2. Conditions access to services, benefits, or opportunities based on an 2
evaluation, monitoring, or ranking referenced in subparagraph 1. of 3
this paragraph. 4
(2) (a) Subject to paragraphs (b) and (c) of this s ubsection, gold specie and silver 5
specie are recognized as legal tender by the Commonwealth of Kentucky. 6
(b) Gold specie or silver specie may be used for the payment of: 7
1. Debts between private parties, if the parties mutually agree to use of 8
the specie; and 9
2. Taxes, fees, or other obligations owed to the Commonwealth of 10
Kentucky or a governing authority, if the Commonwealth of Kentucky 11
or governing authority agrees to accept the specie as payment. 12
(c) Except as provided in paragraph (b) of this subsection, a person shall not be 13
required to accept gold specie or silver specie as payment. 14
(3) Subject to subsections (4) and (9) of this section, the State Treasurer: 15
(a) Shall promulgate administrative regulations in accordance with KRS 16
Chapter 13A: 17
1. To designate or establish a bullion depository for the secure storage of 18
gold bullion and silver bullion to facilitate transactions under this 19
section; 20
2. To authorize and approve one (1) or more electronic payment systems 21
to facilitate transactions under this section; and 22
3. That are otherwise necessary to implement this section; and 23
(b) May: 24
1. Operate the bullion depository directly or contract with a depository 25
agent; and 26
2. Contract with one (1) or more private entities to develop or operate 27
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any electronic payment system. 1
(4) The administrative regulations promulgated by the State Treasurer under 2
subsection (3) of this section shall establish requirements for ensuring: 3
(a) The designated or established bullion depository is: 4
1. Secure; 5
2. Transparent to account holders; and 6
3. Accessible for use by any person; 7
(b) Each authorized and approved electronic payment system: 8
1. Is reliable; and 9
2. Complies with applicable state an d federal laws, including this section 10
and any lawful administrative regulations promulgated under this 11
section; 12
(c) That any depository agent or contracted entity operates in the best interests 13
of the Commonwealth of Kentucky and the account holders of th e 14
designated or established bullion depository; 15
(d) With respect to the designated or established bullion depository, that the 16
following is regularly verified: 17
1. The gold bullion and silver bullion held by the depository; and 18
2. Compliance with this secti on by the depository, including any lawful 19
administrative regulations promulgated under this section; 20
(e) That each authorized and approved electronic payment system and any 21
participating vendors are: 22
1. Authorized to do business in this state; and 23
2. Compliant with state and federal money transmitter laws; 24
(f) That appropriate fraud prevention measures are implemented by: 25
1. The designated or established bullion depository; 26
2. Any depository agent or contracted entity; 27
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3. Each authorized and approved electronic payment system; and 1
4. Each participating vendor of an authorized and approved electronic 2
payment system; and 3
(g) 1. The privacy of the bullion depository's account holders and the 4
participants of each authorized and approved electronic payment 5
system, which shall include, at a minimum, that transaction 6
information shall not, except to the extent the State Treasurer deems 7
necessary to enforce and effectuate this section, be: 8
a. Shared with any person other than the account holder or 9
participant without proper court authorization; or 10
b. Used in any sort of social credit scoring system implemented or 11
maintained by the United States, a state of the United States, a 12
foreign country or jurisdiction, an intergovernmental 13
organization, or any government, agen cy, agent, instrumentality, 14
central bank, or other entity thereof. 15
2. a. The United States, a state of the United States, a foreign country 16
or jurisdiction, an intergovernmental organization, or any 17
government, agency, agent, instrumentality, central bank, or 18
other entity thereof shall not use an account holder's or 19
participant's transaction information in violation of 20
subparagraph 1.b. of this paragraph. 21
b. Any account holder or participant aggrieved by a violation of 22
subdivision a. of this subparagraph sh all have a cause of action 23
against the alleged violator in any court of competent 24
jurisdiction to obtain all appropriate relief, which shall include, 25
without limitation: 26
i. Injunctive relief; 27
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ii. Declaratory relief; 1
iii. Compensatory damages; 2
iv. Costs; and 3
v. Attorney's fees. 4
(5) A bullion depository designated or established by the State Treasurer under this 5
section shall have a contractual relationship with each electronic payment system 6
that is authorized and approved by the State Treasurer under this section to 7
provide services for deposits of gold bullion and silver bullion as provided by the 8
State Treasurer under this section. 9
(6) For each deposit made in a bullion depository designated or established by the 10
State Treasurer under this section, the bullion depository shall insure the deposit 11
under an all-risk insurance policy issued by a nongovernmental operated insurer 12
for one hundred percent (100%) of the full replacement value of the deposit. 13
(7) A deposit made in a bullion depository designated or established by the State 14
Treasurer under this section shall: 15
(a) Be the sole property of the account holder; and 16
(b) Not be subject to appropriation by any state or the United States without due 17
process of law. 18
(8) By July 1 of each year, the State Treasurer shall submit an annual written report 19
to the Legislative Research Commission for referral to the appropriate interim 20
joint committees or other appropriate committees that details the following: 21
(a) The status and operat ions of the designated or established bullion 22
depository; 23
(b) The implementation and usage of authorized and approved electronic 24
payment systems; and 25
(c) The economic impact of recognizing gold specie and silver specie as legal 26
tender. 27
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(9) The State Treasu rer shall implement this section within one (1) year of the 1
effective date of this section. 2
(10) Nothing in this section shall be construed to authorize, endorse, create, or 3
implement: 4
(a) A central bank digital currency; or 5
(b) Any mechanism for surveilla nce, social credit scoring, or behavioral 6
conditioning, or any other form of social or economic control, by the 7
Commonwealth of Kentucky or a governing authority. 8
Section 2. KRS 141.019 is amended to read as follows: 9
In the case of taxpayers other than corporations: 10
(1) Adjusted gross income shall be calculated by subtracting from the gross income of 11
those taxpayers the deductions allowed individuals by Section 62 of the Internal 12
Revenue Code and adjusting as follows: 13
(a) Exclude income that is exempt from state taxation by the Kentucky 14
Constitution and the Constitution and statutory laws of the United States; 15
(b) Exclude income from supplemental annuities provided by the Railroad 16
Retirement Act of 1937 as amended and whic h are subject to federal income 17
tax by Pub. L. No. 89-699; 18
(c) Include interest income derived from obligations of sister states and political 19
subdivisions thereof; 20
(d) Exclude employee pension contributions picked up as provided for in KRS 21
6.505, 16.545, 21.360, 61.523, 61.560, 65.155, 67A.320, 67A.510, 78.610, 22
and 161.540 upon a ruling by the Internal Revenue Service or the federal 23
courts that these contributions shall not be included as gross income until such 24
time as the contributions are distributed or made available to the employee; 25
(e) Exclude Social Security and railroad retirement benefits subject to federal 26
income tax; 27
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(f) Exclude any money received because of a settlement or judgment in a lawsuit 1
brought against a manufacturer or distributor of "Agent Orange" for damages 2
resulting from exposure to Agent Orange by a member or veteran of the 3
Armed Forces of the United States or any dependent of such person who 4
served in Vietnam; 5
(g) 1. a. For taxable years beginning after December 31, 2005, but before 6
January 1, 2018, exclude up to forty-one thousand one hundred ten 7
dollars ($41,110) of total distributions from pension plans, annuity 8
contracts, profit -sharing plans, retirement plans, or employee 9
savings plans; and 10
b. For taxable years beginning on or after January 1, 2018, exclude 11
up to thirty -one thousand one hundred ten dollars ($31,110) of 12
total distributions from pension pl ans, annuity contracts, profit -13
sharing plans, retirement plans, or employee savings plans. 14
2. As used in this paragraph: 15
a. "Annuity contract" has the same meaning as set forth in Section 16
1035 of the Internal Revenue Code; 17
b. "Distributions" includes but i s not limited to any lump -sum 18
distribution from pension or profit -sharing plans qualifying for the 19
income tax averaging provisions of Section 402 of the Internal 20
Revenue Code; any distribution from an individual retirement 21
account as defined in Section 408 of the Internal Revenue Code; 22
and any disability pension distribution; and 23
c. "Pension plans, profit-sharing plans, retirement plans, or employee 24
savings plans" means any trust or other entity created or organized 25
under a written retirement plan and formi ng part of a stock bonus, 26
pension, or profit -sharing plan of a public or private employer for 27
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the exclusive benefit of employees or their beneficiaries and 1
includes plans qualified or unqualified under Section 401 of the 2
Internal Revenue Code and individua l retirement accounts as 3
defined in Section 408 of the Internal Revenue Code; 4
(h) 1. a. Exclude the portion of the distributive share of a shareholder's net 5
income from an S corporation subject to the franchise tax imposed 6
under KRS 136.505 or the capital stock tax imposed under KRS 7
136.300; and 8
b. Exclude the portion of the distributive share of a shareholder's net 9
income from an S corporation related to a qualified subchapter S 10
subsidiary subject to the franchise tax imposed under KRS 11
136.505 or the capital stock tax imposed under KRS 136.300. 12
2. The shareholder's basis of stock held in an S corporation where the S 13
corporation or its qualified subchapter S subsidiary is subject to the 14
franchise tax imposed under KRS 136.505 or the capital stock tax 15
imposed under KRS 136.300 shall be the same as the basis for federal 16
income tax purposes; 17
(i) Exclude income received for services performed as a precinct worker for 18
election training or for working at election booths in state, county, and local 19
primaries or regular or special elections; 20
(j) Exclude any capital gains income attributable to property taken by eminent 21
domain; 22
(k) 1. Exclude all income from all sources for members of the Armed Forces 23
who are on active duty and who are killed in the line of duty, for t he 24
year during which the death occurred and the year prior to the year 25
during which the death occurred. 26
2. For the purposes of this paragraph, "all income from all sources" shall 27
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include all federal and state death benefits payable to the estate or any 1
beneficiaries; 2
(l) Exclude all military pay received by members of the Armed Forces while on 3
active duty; 4
(m) 1. Include the amount deducted for depreciation under 26 U.S.C. sec. 167 5
or 168; and 6
2. Exclude the amounts allowed by KRS 141.0101 for depreciation; 7
(n) Include the amount deducted under 26 U.S.C. sec. 199A; 8
(o) Ignore any change in the cost basis of the surviving spouse's share of property 9
owned by a Kentucky community property trust occurring for federal income 10
tax purposes as a result of the death of the predeceasing spouse; 11
(p) Allow the same treatment allowed under Pub. L. No. 116 -260, secs. 276 and 12
278, related to the tax treatment of forgiven covered loans, deductions 13
attributable to those loans, and tax attributes associated with those loans fo r 14
taxable years ending on or after March 27, 2020, but before January 1, 2022; 15
[and] 16
(q) For taxable years beginning on or after January 1, 2020, but before March 11, 17
2023, allow the same treatment of restaurant revitalization grants in 18
accordance with Pub . L. No. 117 -2, sec. 9673 and 15 U.S.C. sec. 9009c, 19
related to the tax treatment of the grants, deductions attributable to those 20
grants, and tax attributes associated with those grants; and 21
(r) Ignore any capital gains and losses attributable to the sale o r exchange of 22
gold specie and silver specie as defined in Section 1 of this Act; and 23
(2) Net income shall be calculated by subtracting from adjusted gross income all the 24
deductions allowed individuals by Chapter 1 of the Internal Revenue Code, as 25
modified by KRS 141.0101, except: 26
(a) Any deduction allowed by 26 U.S.C. sec. 164 for taxes; 27
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(b) Any deduction allowed by 26 U.S.C. sec. 165 for losses, except wagering 1
losses allowed under Section 165(d) of the Internal Revenue Code; 2
(c) Any deduction allowed by 26 U.S.C. sec. 213 for medical care expenses; 3
(d) Any deduction allowed by 26 U.S.C. sec. 217 for moving expenses; 4
(e) Any deduction allowed by 26 U.S.C. sec. 67 for any other miscellaneous 5
deduction; 6
(f) Any deduction allowed by t he Internal Revenue Code for amounts allowable 7
under KRS 140.090(1)(h) in calculating the value of the distributive shares of 8
the estate of a decedent, unless there is filed with the income return a 9
statement that the deduction has not been claimed under KRS 140.090(1)(h); 10
(g) Any deduction allowed by 26 U.S.C. sec. 151 for personal exemptions and 11
any other deductions in lieu thereof; 12
(h) Any deduction allowed for amounts paid to any club, organization, or 13
establishment which has been determined by the cour ts or an agency 14
established by the General Assembly and charged with enforcing the civil 15
rights laws of the Commonwealth, not to afford full and equal membership 16
and full and equal enjoyment of its goods, services, facilities, privileges, 17
advantages, or accommodations to any person because of race, color, religion, 18
national origin, or sex, except nothing shall be construed to deny a deduction 19
for amounts paid to any religious or denominational club, group, or 20
establishment or any organization operated solely for charitable or educational 21
purposes which restricts membership to persons of the same religion or 22
denomination in order to promote the religious principles for which it is 23
established and maintained; and 24
(i) A taxpayer may elect to claim the standard deduction allowed by KRS 25
141.081 instead of itemized deductions allowed pursuant to 26 U.S.C. sec. 63 26
and as modified by this section. 27
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Section 3. KRS 141.039 is amended to read as follows: 1
In the case of corporations: 2
(1) Gross income shall be calculated by adjusting federal gross income as defined in 3
Section 61 of the Internal Revenue Code as follows: 4
(a) Exclude income that is exempt from state taxation by the Kentucky 5
Constitution and the Constitution and statutory laws of the United States; 6
(b) Exclude all dividend income; 7
(c) Include interest income derived from obligations of sister states and political 8
subdivisions thereof; 9
(d) Exclude fifty percent (50%) of gross income derived from any disposal of 10
coal covered by Section 631(c) of the Internal Revenue Code if the 11
corporation does not claim any deduction for percentage depletion, or for 12
expenditures attributable to the making and administering of the contract 13
under which such disposition occurs or to the preservatio n of the economic 14
interests retained under such contract; 15
(e) Include the amount calculated under KRS 141.205; 16
(f) Ignore the provisions of Section 281 of the Internal Revenue Code in 17
computing gross income; 18
(g) Include the amount of deprecation deduction calculated under 26 U.S.C. sec. 19
167 or 168; 20
(h) Allow the same treatment allowed under Pub. L. No. 116 -260, secs. 276 and 21
278, related to the tax treatment of forgiven covered loans, deductions 22
attributable to those loans, and tax attributes associated wit h those loans for 23
taxable years ending on or after March 27, 2020, but before January 1, 2022; 24
[and] 25
(i) For taxable years beginning on or after January 1, 2020, but before March 11, 26
2023, allow the same treatment of restaurant revitalization grants in 27
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accordance with Pub. L. No. 117 -2, sec. 9673 and 15 U.S.C. sec. 9009c, 1
related to the tax treatment of the grants, deductions attributable to those 2
grants, and tax attributes associated with those grants; and 3
(j) Ignore any capital gains and losses attributab le to the sale or exchange of 4
gold specie and silver specie as defined in Section 1 of this Act; and 5
(2) Net income shall be calculated by subtracting from gross income: 6
(a) The deduction for depreciation allowed by KRS 141.0101; 7
(b) Any amount paid for vo uchers or similar instruments that provide health 8
insurance coverage to employees or their families; 9
(c) All the deductions from gross income allowed corporations by Chapter 1 of 10
the Internal Revenue Code, as modified by KRS 141.0101, except: 11
1. Any deduction for a state tax which is computed, in whole or in part, by 12
reference to gross or net income and which is paid or accrued to any 13
state of the United States, the District of Columbia, the Commonwealth 14
of Puerto Rico, any territory or possession of the United States, or to any 15
foreign country or political subdivision thereof; 16
2. The deductions contained in Sections 243, 245, and 247 of the Internal 17
Revenue Code; 18
3. The provisions of Section 281 of the Internal Revenue Code shall be 19
ignored in computing net income; 20
4. Any deduction directly or indirectly allocable to income which is either 21
exempt from taxation or otherwise not taxed under the provisions of this 22
chapter, except for deductions allowed under Pub. L. No. 116 -260, secs. 23
276 and 278, related to the tax treatment of forgiven covered loans and 24
deductions attributable to those loans for taxable years ending on or 25
after March 27, 2020, but before January 1, 2022 ; and deductions 26
allowed under Pub. L. No. 117 -2, sec. 9673 and 15 U.S.C. sec. 9009c, 27
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related to the tax treatment of restaurant revitalization grants and 1
deductions attributable to those grants for taxable years beginning on or 2
after January 1, 2020, but before March 11, 2023. Nothing in this 3
chapter shall be construed to permit the same item to be deducted more 4
than once; 5
5. Any deduction for amounts paid to any club, organization, or 6
establishment which has been determined by the courts or an agency 7
established by the General Assembly and charged with enforcing the 8
civil rights laws of the Commonwealth, not to afford full and equal 9
membership and full and equal enjoyment of its goods, services, 10
facilities, privileges, advantages, or accommodations to any person 11
because of race, color, religion, national origin, or sex, except nothing 12
shall be construed to deny a deduction for amounts paid to any religious 13
or denominational club, group, or establishment or any organization 14
operated solely for charitable or educational purposes which restricts 15
membership to persons of the same religion or denomination in order to 16
promote the religious principles for which it is established and 17
maintained; 18
6. Any deduction prohibited by KRS 141.205; and 19
7. Any dividends -paid d eduction of any captive real estate investment 20
trust; and 21
(d) 1. A deferred tax deduction in an amount computed in accordance with this 22
paragraph. 23
2. For purposes of this paragraph: 24
a. "Net deferred tax asset" means that deferred tax assets exceed the 25
deferred tax liabilities of the combined group, as computed in 26
accordance with accounting principles generally accepted in the 27
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United States of America; and 1
b. "Net deferred tax liability" means deferred tax liabilities that 2
exceed the deferred tax assets of a combined group as defined in 3
KRS 141.202, as computed in accordance with accounting 4
principles generally accepted in the United States of America. 5
3. Only publicly traded companies, including affiliated corporations 6
participating in the filing of a public ly traded company's financial 7
statements prepared in accordance with accounting principles generally 8
accepted in the United States of America, as of January 1, 2019, shall be 9
eligible for this deduction. 10
4. If the provisions of KRS 141.202 result in an agg regate increase to the 11
member's net deferred tax liability, an aggregate decrease to the 12
member's net deferred tax asset, or an aggregate change from a net 13
deferred tax asset to a net deferred tax liability, the combined group 14
shall be entitled to a deduction, as determined in this paragraph. 15
5. For ten (10) years beginning with the combined group's first taxable 16
year beginning on or after January 1, 2026, a combined group shall be 17
entitled to a deduction from the combined group's entire net income 18
equal to one-tenth (1/10) of the amount necessary to offset the increase 19
in the net deferred tax liability, decrease in the net deferred tax asset, or 20
aggregate change from a net deferred tax asset to a net deferred tax 21
liability. The increase in the net deferred tax liability, decrease in the net 22
deferred tax asset, or the aggregate change from a net deferred tax asset 23
to a net deferred tax liability shall be computed based on the change that 24
would result from the imposition of the combined reporting requirement 25
under KRS 141.202, but for the deduction provided under this paragraph 26
as of June 27, 2019. 27
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6. The deferred tax impact determined in subparagraph 5. of this paragraph 1
shall be converted to the annual deferred tax deduction amount, as 2
follows: 3
a. The deferre d tax impact determined in subparagraph 5. of this 4
paragraph shall be divided by the tax rate determined under KRS 5
141.040; 6
b. The resulting amount shall be further divided by the 7
apportionment factor determined by KRS 141.120 or 141.121 that 8
was used by t he combined group in the calculation of the deferred 9
tax assets and deferred tax liabilities as described in subparagraph 10
5. of this paragraph; and 11
c. The resulting amount represents the total net deferred tax 12
deduction available over the ten (10) year per iod as described in 13
subparagraph 5. of this paragraph. 14
7. The deduction calculated under this paragraph shall not be adjusted as a 15
result of any events happening subsequent to the calculation, including 16
but not limited to any disposition or abandonment of assets. The 17
deduction shall be calculated without regard to the federal tax effect and 18
shall not alter the tax basis of any asset. If the deduction under this 19
section is greater than the combined group's entire Kentucky net income, 20
any excess deduction shall be carried forward and applied as a deduction 21
to the combined group's entire net income in future taxable years until 22
fully utilized. 23
8. Any combined group intending to claim a deduction under this 24
paragraph shall file a statement with the department on or before July 1, 25
2019. The statement shall specify the total amount of the deduction 26
which the combined group claims on the form, including calculations 27
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and other information supporting the total amounts of the deduction as 1
required by the department. No deduction shall be allowed under this 2
paragraph for any taxable year, except to the extent claimed on the 3
timely filed statement in accordance with this paragraph. 4
Section 4. Section 1 of this Act may be cited as the Ke ntucky Transactional 5
Gold and Silver Act. 6