By Joe Biesk
The Associated Press

FRANKFORT - Gov. Paul Patton said Thursday that he would consider calling the General Assembly into special session to make changes in the state's corporate tax structure.

Patton said there are too many loopholes for corporations in the state to avoid paying taxes. He estimated the state loses about $80 million a year in corporate license taxes.

"This is the problem that needs to be addressed. It needs to be addressed on my watch," Patton said. "Now if you get a new governor, does anybody think that a new governor is going to come in here and raise taxes $400 million? No, they're going to cut the budget."

As evidence that Kentucky needs to change its tax policy, Patton cited a class-action lawsuit, spearheaded by Illinois Tool Works Inc., over Kentucky's different treatment of companies located within or outside the state.

Certain Kentucky companies with subsidiaries have optional methods for computing their license tax and can choose the method that costs them less. Non-Kentucky companies have no such option and end up paying more.

A Franklin County Circuit Court judge ruled that companies have to be treated equally, portending a significant tax increase for some Kentucky corporations, beginning this year.

Earlier this month, the Senate tried but failed to pass a measure to prevent the increase. The legislation could be taken up again when the General Assembly returns on Monday to act on Patton's vetoes. Patton hinted he might veto the tax measure too but said he was leaving the door "a little bit open."

The governor identified several possible changes to regain lost revenue and eliminate corporate loopholes. He said he would be willing to hear additional ideas from lawmakers.

"I am insistent that the entire subject of corporate loopholes be addressed," Patton said. "And I don't know that there is anything that I have become involved with in seven years as governor that I feel any more strongly about than that."