* This story and headline have been updated to reflect that Brown-Forman’s spokesman says he erred when originally telling Insider Louisville that the company requested Bevin to veto the bill, and that it instead asked the governor to “help in rectifying” the bill’s “negative consequences.”
The spokesman for Brown-Forman says the bourbon giant has asked Gov. Matt Bevin to “help in rectifying” negative consequences of the tax “cleanup” bill passed by the Kentucky General Assembly on the last day of this year’s legislative session, citing an obscure provision within the bill that would hurt it and other large companies doing business in other states.
While legislators passed House Bill 487 in order restore a manufacturing tax credit used by Toyota, Ford and GE Appliances that was inadvertently left out of their original revenue bill, Brown-Forman spokesman Phil Lynch says this new bill also changed Kentucky to a “combined reporting” state — requiring large companies to report all of their business income throughout the country, instead of just Kentucky.
Lynch originally told Insider that the company asked Bevin to veto the bill. However, after the publication of this story, Lynch said that he had misinterpreted what he had been told about Brown-Forman’s letter to the governor, which specifically stated that “we respectfully request your help in rectifying the negative consequences regarding combined reporting resulting from HB 487.”
Thursday is the last day the governor could veto the bill before it becomes law.
Lynch told Insider that legislators included this combined reporting provision at the very last minute, “without anybody in the business community knowing anything about it.”
“We and other companies would be taxed in Kentucky for operations that occur in other states, so it would be a big tax hit for us,” said Lynch. “And it would put us at a competitive disadvantage, because lots of other states do not have combined reporting, including our neighboring states of Tennessee and Indiana.”
Lynch said Brown-Forman “expressed our concern to the governor and to the legislative leadership about this change” when it was discovered, originally stating that requesting a veto from Bevin was “the only course of action” at this point, with the session over.
He added it is not just Brown-Forman, but “lots of other companies” expressing this same concern to the governor.
“I know there were companies like Pfizer, Walmart and Johnson & Johnson that were all involved in this big conversation this week that we were involved in,” said Lynch. “How this is going to affect us and what we might do to try to convince the governor to veto it.”
The so-called “cleanup” bill, HB 487, did not include a fiscal analysis and was unveiled and passed on the same day.
As for the idea of a combined reporting requirement for large companies, the Kentucky Chamber of Commerce opposed a bill to enact this change in last year’s session, saying it would cost companies up to $25 million.
In a report last fall from the progressive Kentucky Center for Economic Policy on strategies for Kentucky to raise new revenue, the think-tank recommended combined reporting as a way to close corporate tax loopholes, thus “eliminating their ability to shift profits … to states or foreign nations with low or no corporate taxes.” The report indicated that 24 states with corporate taxes have enacted combined reporting.
The new combined reporting requirement under HB 487 does not go into affect until the beginning of next year, meaning that the General Assembly could hypothetically pass legislation in next year’s session that reverses this provision before companies file their 2019 taxes.
Kim Freeman, the spokeswoman for GE Appliances, said in a statement to Insider that while this provision should be reviewed, the bill should not be vetoed by the governor.
“After the recently ended tumultuous legislative session, it is GE Appliances’ view that it is a good idea to take a time-out to review the revisions to the tax code, including the new consolidated reporting requirement,” stated Freeman. “We do not think a veto is the right step. There’s time before the new fiscal year begins to look at what further changes are appropriate to promote jobs and growth.”
The spokespersons for the governor and the Republican leadership of the House and Senate did not immediately return an email seeking comment on this combined reporting requirement in HB 487.