In 2007, Kentucky enacted a nonrefundable income tax credit of up to $1 per gallon of ethanol produced in the state. Under the statute, ethanol producers were required to file a credit claim “on forms prescribed by the department by January 15 following the close of the preceding calendar year.” The Department of Revenue (Department) appears to have made the reporting form available informally on its website well in advance of the filing deadline, but it did not formally submit the form to the Legislative Research Commission as a formal regulation until January 15, 2009, which was the statutory deadline for filing credit claims. The Legislative Research Commission published the regulation on February 1, 2009, thus making the reporting form official.
The taxpayer filed its credit application on February 4, 2009, and requested that the Department extend the filing deadline. The Department denied the request. After a second request to extend the deadline, which also was denied, the taxpayer appealed the Department’s ruling that the taxpayer's credit application was untimely to the Board of Tax Appeals. The Board reversed the Department’s ruling, finding that the decision to publish the official reporting form on the day it was due was arbitrary and capricious. The Board directed the Department to consider the application as timely filed. The Franklin Circuit Court and the Court of Appeals affirmed. The Court of Appeals ruled that while the form was informally made available at an earlier date, “the official reporting form did not become legally effective until January 15, 2009, the day it was due.” Therefore, the Department’s failure to extend the filing deadline was arbitrary.