KENTUCKY CORPORATION INCOME TAX AND LLET RETURN

Page 1 of 18

PURPOSE OF INSTRUCTIONS

These instructions have been designed for corporations,

other than S corporations, which are required by

law to ﬁle a Kentucky Corporation Income Tax and

LLET Return. Any corporation electing S corporation

treatment in accordance with §§1361(a) and 1362(a) of

the Internal Revenue Code must use Form 720S and

related schedules. Form 720 is complementary to the

Federal form 1120 Series.

HOW TO OBTAIN FORMS AND INSTRUCTIONS

Forms and instructions are available at all Kentucky

Taxpayer Service Centers (page 18). They may also be

obtained by writing FORMS, Department of Revenue,

P. O. Box 518, Frankfort, KY 40602-0518, or by calling

502-564–3658. Forms can be downloaded from www.

revenue.ky.gov.

KENTUCKY TAX LAW CHANGES

Enacted by the 2018 Regular Session of the General

Assembly—There are many amendments to Kentucky’s

tax code with most changes effective beginning in tax

year 2018. The Department of Revenue (“Department”)

has guidance online at https://TaxAnswers.ky.gov

and https://revenue.ky.gov/TaxProfessionals/Pages/

Guidance.

Tax Rate—For tax year 2018, a ﬂat income tax rate of

ﬁve percent (5%) was enacted for both corporations

and individuals.

Internal Revenue Code (IRC) Update—House Bill (HB)

487 updates the Internal Revenue Code (IRC) reference

date from December 31, 2015, to December 31, 2017,

including the adoption of many of the provisions of

the Federal Tax Cuts and Jobs Act (TCJA) for purposes

of computing income tax, except for depreciation

differences contained in KRS 141.0101.

Kentucky has adopted the following federal provisions:

• The eighty percent (80%) of taxable income limitation

for the net operating loss (NOL) deduction and an

unlimited carryforward of unused net operating

losses for NOL generated on or after 1/1/18

• Net interest expense deduction limitation

• Repeal of the Domestic Production Activity

Deduction

• Tax treatment of Foreign Derived Intangible Income

• Globally Intangible Low Taxed Income (see Kentucky

TAM 18-02)

Distinct Federal/State Differences:

• Kentucky continues to be decoupled from the federal

law for the depreciation deduction and IRC Section

179 expense deduction.

• Kentucky did not adopt the new federal twenty

percent (20%) deduction for Qualiﬁed Business

Income of Pass-through Entities.

Apportionment Changes for 2018:

The apportionment factor for assigning multi-state

income to Kentucky changed from a three (3)-factor

apportionment formula based on sales, property, and

payroll to a single-factor formula based on receipts.

This change is effective for taxable years beginning on

or after January 1, 2018. Note that “sales factor” refers

to the “receipts factor”.

Receipts from services and the sale of intangibles are

assigned to Kentucky under the single-factor formula if

the taxpayer’s market for the sales is in this state.

A three (3)-factor apportionment method is still

required for corporations in the business of providing:

• Communications service;

• Cable service; or

• Internet access.

Special apportionment provisions are retained for

passenger airlines and qualiﬁed air freight forwarders.

2018

720

Commonwealth of Kentucky

Department of Revenue

INSTRUCTIONS

KENTUCKY CORPORATION INCOME

TAX AND LLET RETURN

Page 2 of 18

INSTRUCTIONS

720

(2018)

Tax Credit Changes:

• A new Inventory Tax Credit was created and is

effective January 1, 2018. It is a nonrefundable and

nontransferable credit against income and limited

liability entity taxes for tangible personal property

(ad valorem) tax timely paid on inventory. The credit

is phased-in as follows: 25% in 2018; 50% in 2019;

75% in 2020; and 100% in 2021 and thereafter.

• The refundable ﬁlm industry tax credit was changed

to a nonrefundable and nontransferable credit for

applications approved on or after April 27, 2018.

• The Incentives for Energy Independence Act (IEIA)

ultimately will sunset on August 1, 2018 and no more

incentives under that program will be approved after

that date.

Tax Administration Changes:

• The time to protest an assessment or reduced refund

was increased from 45 to 60 days. This change is

applicable to notices of tax due or reduced refund

notices issued on or after July 1, 2018.

Kentucky Revised Statutes—Kentucky Revised

Statutes are referred to in these instructions as “KRS”

and can be found online at www.lrc.ky.gov/statutes.

Kentucky Administrative Regulations—Kentucky

Administrative Regulations are referred to in these

instructions as “KAR” and can be found online at www.

lrc.ky.gov/kar/titles.htm.

CURRENT YEAR INTEREST RATE

Pursuant to KRS 131.183, the 2019 tax interest rate has

been set at ﬁve percent (5%). The rate charged by the

Kentucky Department of Revenue on unpaid taxes is

seven percent (7%) and when interest is due on a refund,

the rate is three percent (3%).

KENTUCKY FORM CHANGES

New:

Schedule INV—Kentucky Inventory Tax Credit schedule

is new for taxable years beginning on or after January

1, 2018 and is used to calculate the Inventory Tax Credit

against income and LLE taxes for ad valorem (property)

taxes timely paid on inventory.

Updated:

Form 2220–K—This form is no longer required to be

attached to the return and is now a supporting worksheet

used to calculate the underpayment penalty and interest

due on late or underpaid estimated tax installment(s).

Schedule A—Part I, Lines 1 through 12 were separated

to distinguish the difference in computation of

apportionment fraction for all companies (Lines 1

through 3, single sales factor) and for Providers that

continue to use the three (3)-factor apportionment (Lines

1 through 12). For all other companies, Lines 4 through

12 must be completed for informational purposes. See

KRS 141.120 and KRS 141.121(1)(e).

Forms 720S, 720S(K), 765, 765(K), 765-GP, 765–

GP(K), and applicable Schedules K–1—Separated the

previous Apportionment Pass-through Items into two

sections to distinguish the differences in computing

the apportionment factor. The sections are now

labeled Apportionment for Pass-through Items and

Apportionment for Providers.

Schedule TCS—The Tax Credit Summary was updated to

add the Film Industry and Inventory tax credits.

Schedule RPC—This schedule has been shortened and

simpliﬁed. All previous questions are maintained, but

many have been combined or reformatted to reduce

confusion.

Schedule O–720 and Schedule O–PTE—Have been

shortened signiﬁcantly due to the elimination of

numerous deductions because of federal and Kentucky

tax law changes.

Discontinued:

• Schedule CI—Application for Coal Incentive Tax

Credit

• Schedule FD—Food Donation Tax Credit (2018 is

the ﬁnal year in which any unused prior year credit

carryforward may be utilized)

• Schedule HH—Kentucky Housing for Homeless

Families Deduction

• Schedule KESA—Kentucky Environmental Steward

ship Act Tax Credit

• Schedule KEOZ—Kentucky Economic Opportunity

Zone Tax Credit

• Form 8903–K—Kentucky Domestic Production

Activities Deduction

Page 3 of 18

INSTRUCTIONS

720

(2018)

The following list of ﬁling tips is provided for your

convenience to help ensure that returns are processed

accurately and promptly. To avoid processing problems,

please note the following:

• Schedule COGS—If the company is computing its

LLET based on gross proﬁts, the Schedule COGS,

Limited Liability Entity Tax Cost of Goods Sold,

must be attached to Form 720. Failure to include

this schedule may result in a tax adjustment and

assessment.

• Account Closure—When ceasing operations and

closing an account, there are different requirements

for the Secretary of State and the Department of

Revenue.

• Account Number/FEIN—Always ensure the correct

Kentucky Corporation/LLET account number and

FEIN is used on the return being ﬁled.

• Payments—Place payments on the front of the

return so they are clearly visible when the return is

processed.

• Payments—Do not leave check stubs attached to

checks when sending in a payment. Check stubs

delay the machines that sort incoming mail, which

causes longer processing times.

• Form 851-K/Schedule A, page 2—When completing

these forms only include subsidiaries in which the

parent company directly owns 80% or more of the

voting stock and are doing business in Kentucky.

• Estimated Payments—Make estimated payments on

a timely basis to avoid penalty and interest. When

making EFT payments online, use the Taxable Year

Ending NOT the due date of the payment.

• Form 720V—Form 720V is a payment voucher for

e-ﬁled returns, NOT an extension form. To extend a

ﬁling date, use Form 720EXT, Extension of Time to

File Kentucky Corporation/LLET Return.

• Extensions—Extensions are for extending the ﬁling

date only; late payment penalties and interest apply

to payments made after the original due date.

• Schedule A—Do not check the box on Schedule

A, Apportionment and Allocation, indicating the

use of an alternative allocation and apportionment

formula if the corporation has not received written

approval from the Department of Revenue. If written

approval has been received, a copy of the letter from

the Department of Revenue must be attached to the

return when ﬁled.

• Additional errors that delay processing returns or

create adjustments include:

¡Incorrect form submitted

¡Incorrect tax exemption code

¡Incomplete information

¡Missing forms or schedules

¡Incorrect taxable year end

¡Tax Payment Summary Section of return blank

or incorrect

¡Failure to include payment of tax due with the

return

¡Omitting Form 720EXT when paying with an

extension

Filing Tips and Checkpoints

Electronic Filing FAQs and Helpful Tips

• If your return is rejected for an invalid Kentucky Corporation/LLET Account Number or Federal Employer Identiﬁcation

Number (FEIN), please complete Form 20A100, "Declaration of Representative," and contact our Registration Section

at 502-564-3306 for instructions on how to obtain an account number.

• Direct debit is an option for electronically ﬁled forms; however, direct deposit is not.

• If your e-ﬁled return has been REJECTED, DO NOT submit a 720V voucher at that time. You will get a NEW

720V voucher once you have successfully ﬁled an accepted Kentucky return. (Note: The Submission ID number will

change each time your return is sent to the Kentucky Department of Revenue.)

• To determine which forms are supported by your software, please check with the company that develops your

software.

More Options for Taxpayers Paying Online

The Department of Revenue (DOR) is now able to offer taxpayers additional payment options for Corporation Income

Tax and Limited Liability Entity Tax (LLET). Taxpayers can make a payment online for an e-ﬁled Corporation Income Tax

and/or LLET return that would normally be sent with a Form 720-V voucher. Corporation Income Tax and LLET payments

for bills, estimates, and extensions can also be made using the Enterprise Electronic Payment System (EEPS). To use

EEPS, go to www.revenue.ky.gov and click on the E-File & Payments tile. From the selections of tax types available,

click “Corporation Income Tax” or “Limited Liability Entity Tax (LLET)” and select the Electronic Payment link. To make

payments, the FEIN is required along with the Kentucky Corporate/LLET 6-digit account number.

Page 4 of 18

INSTRUCTIONS

720

(2018)

IMPORTANT

Corporations must create a Kentucky Form 4562,

Schedule D and Form 4797 by converting federal forms.

Depreciation, Section 179 Deduction and Gains/Losses

From Disposition of Assets—For taxable years beginning

after December 31, 2001, Kentucky depreciation and IRC §179

deduction are determined per the Internal Revenue Code in

effect on December 31, 2001. For calendar year 2018 returns

and ﬁscal year returns that begin in 2018, any corporation that

for federal purposes elects in the current taxable year or has

elected in past taxable years any of the following will have

a different depreciation and IRC §179 expense deduction for

Kentucky:

• MACRS bonus depreciation; or

• IRC §179 expense deduction in excess of $25,000.

If a corporation has taken MACRS bonus depreciation or IRC

§179 expense deduction in excess of $25,000 for any year,

federal and Kentucky differences will exist, and the differences

will continue through the life of the assets.

Important: If a corporation has not taken MACRS bonus

depreciation or the IRC §179 expense deduction in excess

of $25,000 for any taxable year, then no adjustment will be

needed for Kentucky income tax purposes. If federal Form

4562 is required to be ﬁled for federal income tax purposes, a

copy must be submitted with Form 720 to substantiate that

no adjustment is required.

Determining and Reporting Depreciation and IRC §179

Deduction Differences—federal/Kentucky depreciation or

IRC §179 deduction differences must be reported as follows:

1. The depreciation from federal Form 1120, Line 20 and

depreciation claimed on federal Form 1125-A or elsewhere

on Form 1120 must be included on Form 720, Part III, Line

4. If federal Form 4562 is required to be ﬁled for federal

income tax purposes, a copy must be attached to Form

720.

2. Convert federal Form 4562 to a Kentucky form by entering

Kentucky at the top center of the form above Depreciation

and Amortization. Compute Kentucky depreciation and

IRC §179 deduction per the IRC in effect on December

31, 2001, by ignoring the lines and instructions regarding

the special depreciation allowance and the additional

IRC §179 deduction. NOTE: For Kentucky purposes,

the maximum IRC §179 deduction amount on Line 1 is

$25,000 and the threshold cost of IRC §179 property on

Line 3 is $200,000. The $25,000 maximum allowable

IRC §179 deduction for Kentucky purposes is reduced

dollar–for–dollar by the amount by which the cost of

qualifying IRC §179 property placed in service during

the year exceeds $200,000. In determining the IRC §179

deduction for Kentucky, the income limitation on Line

11 should be determined by using Kentucky net income

before the IRC §179 deduction instead of federal taxable

income.

3. The corporation must attach the Kentucky Form 4562

to Form 720, and the amount from Kentucky

Form 4562,

Line 22 must be included on Form 720, Part III

, Line 14.

A Kentucky Form 4562 must be ﬁled for each year even

though a federal Form 4562 may not be required.

Determining and Reporting Differences in Gain or Loss From

Disposition of Assets—If during the year the corporation

disposes of assets on which it has taken the special

depreciation allowance or the additional IRC §179 deduction

for federal income tax purposes, the corporation will need to

determine and report the difference in the amount of gain or

loss on such assets as follows:

If a capital gain is reported on federal Form 1120, Line

, enter this amount on Schedule O–720, Part II, Line

1. Convert federal Schedule D (Form 1120) and other

applicable federal forms to Kentucky forms by entering

Kentucky at the top center of the form, and compute the

Kentucky capital gain or (loss) from the disposal of assets

using Kentucky basis. Enter the capital gain from Kentucky

Schedule D, Line 18 on Schedule O–720, Part I, Line 1.

Federal Schedule D (Form 1120) ﬁled with the federal return

and the Kentucky Schedule D must be attached to Form

720.

2. If the amount reported on federal Form 1120, Line 9 (from

Form 4797, Line 17) is a gain, enter this amount on Schedule

O–720, Part II, Line 2. If the amount reported on federal

Form 1120, Line 9 (from Form 4797, Line 17) is a loss, enter

this amount on Schedule O–720, Part I, Line 2. Convert

federal Form 4797 and other applicable federal forms to

Kentucky forms by entering Kentucky at the top center of

the form, and compute the Kentucky gain or (loss) from

the sale of business property listing Kentucky basis. If the

amount on Kentucky Form 4797, Line 17 is a gain, enter this

amount on Schedule O–720, Part I, Line 3. If the amount on

Kentucky Form 4797, Line 17 is a loss, enter this amount

on Schedule O–720, Part II, Line 3. Federal Form 4797 ﬁled

with the federal return and the Kentucky Form 4797 must

be attached to Form 720.

Page 5 of 18

INSTRUCTIONS

720

(2018)

5. Once you have linked your business, your business name

and CBI number will appear in the My Businesses box on

the dashboard, click on the CBI number, once your business

loads, click on the Tax Administration tab to register for tax

accounts.

The paper application is available by calling the Department

of Revenue, Division of Registration and Data Integrity at

502–564–3306, or can be downloaded at www.revenue.ky.gov

(click on Form Search, and search for 10A100). The

application may be faxed to 502–227–0772 or e-mailed to

DOR.Registration@ky.gov

Who Must File—LLET and Corporation Income Tax

LLET—The limitations imposed and protections provided by the

United States Constitution or Pub. L. No. 86–272 do not apply

to the tax imposed by KRS 141.0401. A Kentucky Corporation

Income Tax and LLET Return (Form 720) must be filed by

every corporation (a) organized under the laws of this state;

(b) having its commercial domicile in this state; (c) owning or

leasing property in this state; (d) having one or more individuals

performing services in this state; (e) maintaining an interest in

a pass–through entity doing business in this state; (f) deriving

income from or attributable to sources within this state, including

deriving income directly or indirectly from a trust doing business

in this state, or deriving income directly or indirectly from a

single member limited liability company that is doing business

in this state and is disregarded as an entity separate from its

single member for federal income tax purposes or (g) directing

activities at Kentucky customers for the purposes of selling them

goods or services. KRS 141.0401 and KRS 141.010(7)

Corporation Income Tax—Except for the limitations imposed and

protections provided by the United States Constitution or Pub. L.

No. 86–272, a Kentucky corporation income tax and LLET return

must be ﬁled by every corporation meeting the provisions listed

above. KRS 141.040 and KRS 141.010(7)

Disregarded Entities—A limited liability company (LLC) is

treated in the same manner as it is treated for federal income

tax purposes. Therefore, a single member LLC that is disregarded

for federal income tax purposes must be included in the return

ﬁled by its single member (parent entity). KRS 141.010(7) and

KRS 141.200(10)

Pass-through Entities—Corporations doing business in Kentucky

solely as a partner or member in a pass-through entity will

ﬁle Form 720 pursuant to the provisions of KRS 141.010, KRS

141.120, and KRS 141.206. (See Schedule A—Apportionment and

Allocation instructions.)

Other Entities—Foreign Sales Corporations (FSCs) and interest–

deferred or interest–charged Domestic International Sales

Corporations (DISCs) are subject to Kentucky income tax to the

same extent as other corporations.

Additionally, certain organizations which must ﬁle special returns

for federal purposes, e.g., homeowners associations, political

organizations, real estate investment trusts, and regulated

investment companies must ﬁle Form 720.

GENERAL INFORMATION

Internal Revenue Code Reference Date—Kentucky’s Internal

Revenue Code (IRC) reference date is December 31, 2017,

including the provisions contained in Pub. L. No. 115-97,

exclusive of any amendments made subsequent to that date,

other than amendments that extend provisions in effect

on December 31, 2017, that would otherwise terminate, for

purposes of computing corporation and individual income tax,

except for depreciation differences per KRS 141.0101.

Kentucky Tax Registration Application—Prior to doing business

in Kentucky, each corporation should complete a Kentucky Tax

Registration Application, Form 10A100, to register for a Kentucky

Corporation/LLET Account Number. This account number will be

used for remitting the corporation income tax per KRS 141.040

and the LLET per KRS 141.0401.

One Stop Business Services link.

1. Go to onestop.ky.gov .

2. Click on Begin Your Registration.

Note: The One Stop Business Services login page provides

information for creating a user account as well as portal

security. You will also ﬁnd overview information for the

services the portal currently provides. This information is

updated regularly to reﬂect new services and notify you

when additional agencies join the portal.

3. If you do not already have a One Stop user account, click on

the link labeled Click here to create one. Once a user account

has been created, an e-mail will be sent to you with further

instructions to activate the account and login.

4. Once logged in,

• If your business needs to register with both the Secretary

of State and the Department of Revenue or only needs

to register with the Department of Revenue, use the

and your Commonwealth Business Identiﬁer (CBI).

• If the business is already registered with the Secretary of

State and you do not already have access to the business

on your Dashboard, choose the Link My Business option.

Enter the Commonwealth Business Identiﬁer (CBI),

Security Token, and Business Name exactly as it appears

on your Kentucky articles of organization/incorporation,

your Kentucky Certiﬁcate of Authority, or your CBI letter

(including all punctuation) and link your business, click

Send Invite and follow the instructions sent to your

email to register for tax accounts.

The Link My Business option will require you to name at least

one “One-Stop Portal Business Administrator” (for example, the

business owner or representative).

Note: The administrator can then delegate access to other

individuals—for example, an attorney, accountant, or

manager. The administrator also determines the appropriate

authority level for delegates to make changes—this could

range from ﬁling annual reports with the Secretary of State’s

ofﬁce, changing the business address, or ﬁling and paying

taxes. Only the One Stop business administrator(s) can

grant, approve, withdraw, or revoke access to the business.

Page 6 of 18

INSTRUCTIONS

720

(2018)

Corporations Not Required to File—Corporations which are

exempt by law from Kentucky income tax and LLET include

financial institutions as defined in KRS 136.500, insurance

companies, savings and loan associations, corporations

exempted by IRC

§501, and religious, educational, charitable,

and like corporations not conducted for proﬁt. KRS 141.040 and

KRS 141.0401

Required Forms and Information—Each corporation must enter

all applicable information on Form 720, enclose schedule for each

line item or line item instruction which states "attach schedule,"

and include Kentucky forms or schedules, if applicable.

Kentucky Forms and Schedules

1. Corporation Income Tax Return (Form 720)

2. Apportionment and Allocation (Schedule A)

3. Cost of Goods Sold (Schedule COGS)

4. Application for Filing Extension (Form 720EXT)

5. Tax Credit Summary Schedule (Schedule TCS)

6. Related Party Costs Disclosure Statement (Schedule RPC)

7. Other Additions And Subtractions To/From Federal Ordinary

Income (Schedule O–720)

Required Federal Forms and Schedules

All corporations must provide a copy of the following federal

forms submitted to the Internal Revenue Service:

1. Form 1120, all pages—If Form 1120 is not ﬁled, attach copies

of the income statement, cost of goods sold schedule, and

balance sheet of the federal form ﬁled. If the corporation is

not required to submit a balance sheet for federal income tax

purposes, attach the balance sheet prepared on a consistent

basis from the books and records of the corporation.

2. Form 1125-A—Cost of Goods Sold

3. Form 1125-E—Compensation of Ofﬁcers

4. Form 851—Afﬁliations Schedule

5. Form 4797—Sales of Business Property

6. Schedule D—Capital Gains and Losses

7. Form 3800—General Business Credit

8. Form 5884—Work Opportunity Credit

9. Schedules for items on Form 1120, Schedule L, which state

"attach schedule" (if required by IRS)

Electronic Funds Transfer (EFT)—

The Department of Revenue

accepts electronically filed Corporation Income Tax/Limited

Liability Entity Tax estimated tax voucher payments and extension

payments for corporation income tax and limited liability entity

tax. Before ﬁling by EFT, the corporation must have a valid six-digit

Kentucky Corporation/LLET account number and have registered

with the Department of Revenue to ﬁle EFT. Using an incorrect

account number, such as an account number for withholding tax

or sales and use tax, may result in the payment being credited to

another taxpayer's account. When making EFT payments online,

use the taxable year ending, NOT the due date of the payment.

For more information, contact the Department of Revenue at

800-839-4137 or 502-564-6020. The EFT registration form is

available at www.revenue.ky.gov.

Accounting Procedures—Kentucky income tax law requires a

corporation to report income on the same calendar or ﬁscal

year and to use the same methods of accounting required for

federal income tax purposes. Any federally approved change

in accounting periods or methods must be reported to the

Department of Revenue. Check the applicable box on page 1,

Item G and attach a copy of the federal approval to the return

when ﬁled. KRS 141.140

Mailing/Payment—If including payments for other taxes in

addition to corporation income tax or LLET, send a separate check

or money order for each type of tax.

Mail the return to:

Kentucky Department of Revenue

P. O. Box 856910

Louisville, KY 40285-6910

Make the check(s) payable to the Kentucky State Treasurer.

Mail returns with no tax due or refund requests to:

Kentucky Department of Revenue

P. O. Box 856905

Louisville, KY 40285-6905

Filing/Payment Date—A Kentucky Corporation Income Tax and

LLET Return must be ﬁled and payment must be made on or

before the 15th day of the fourth month following the close of

the taxable year. KRS 141.160, KRS 141.220, and 103 KAR 15:050

If the ﬁling/payment date falls on a Saturday, Sunday, or a legal

holiday, the ﬁling/payment date is deemed to be on the next

business day. KRS 446.030(1)(a)

Extensions—A six-month extension of time to ﬁle a Kentucky

Corporation Income Tax and LLET Return may be obtained by

ﬁling Form 720EXT or attaching a copy of the federal extension to

the return when ﬁled. A copy of the federal extension submitted

after the return is ﬁled does not constitute a valid extension,

and late ﬁling penalties will be assessed. If a payment is made

with an extension, Kentucky Form 720EXT must be used. For

further information, see the instructions for Form 720EXT.

103 KAR 15:050

NOTE: An extension of time to ﬁle a return does not extend the

date for payment of tax.

Corporation Estimated Taxes

The Corporation Income/Limited Liability Entity Tax Estimated

Tax Voucher, Form 720–ES, is used to submit estimated tax

payments for corporation income tax and LLET. See Electronic

Funds Transfer (EFT). If the corporation is required to make

estimated tax payments and needs Form 720-ES vouchers,

contact the Department of Revenue at 502-564-3658.

Page 7 of 18

INSTRUCTIONS

720

(2018)

Internal Revenue Service Audit Adjustments—A corporation that

has received ﬁnal adjustments resulting from Internal Revenue

Service audits must submit copies of the “ﬁnal determinations of

the federal audit” within 180 days of the conclusion of the federal

audits. Use the required amended form from the table above for

reporting federal audit adjustments and computing additional tax

due or refunds and attach the complete Revenue Agent's Report

(RAR). Failure to submit the required amended form will result

in delays in processing refunds requested on amended returns.

Any refund claim resulting from a federal audit adjustment must

be ﬁled within four years of the date the tax was paid or within

six months of the conclusion of the federal audit, whichever is

later. KRS 141.210(2)(d) and KRS 141.235(2)(b)

Mail return with federal audit adjustments (RAR) to:

Corporate Governmental Program Section

P. O. Box 1074, Station 68

Frankfort, Kentucky 40602-1074

Interest—Interest at the tax interest rate plus two percent is

applied to corporation income tax and LLET liabilities not paid

by the date prescribed by law for ﬁling the return (determined

without regard to extensions thereof). See page 1 for the current

year rate.

Penalties

Failure to ﬁle the Kentucky Corporation Income Tax and LLET

Return by the ﬁling date including extensions—2 percent of

the tax due for each 30 days or fraction thereof that the return

is late (maximum 20 percent). The minimum penalty is $10 for

each tax. KRS 131.180(1)

Failure to pay income tax and/or LLET tax by the payment

date—2 percent of the tax due for each 30 days or fraction

thereof that the payment is overdue (maximum 20 percent). The

minimum penalty is $10 for each tax. KRS 131.180(2)

Late payment or underpayment of estimated tax penalty—10

percent penalty of the late payment or underpayment. The

minimum penalty is $25. KRS 131.180(3)

Failure or refusal to ﬁle a Kentucky Corporation Income Tax and

LLET Return or furnish information requested in writing—5

percent of the tax assessed for each 30 days or fraction thereof

that the return is not ﬁled or the information is not submitted

(maximum 50 percent). The minimum penalty is $100. KRS

131.180(4)

Negligence—10 percent of the tax assessed. KRS 131.180(7)

Fraud—50 percent of the tax assessed. KRS 131.180(8)

Cost of Collection Fees—25 percent on all taxes which become

due and owing for any reporting period, regardless of when

due. These collection fees are in addition to all other penalties

provided by law. KRS 131.440(1)(b)

Records Retention—The Department of Revenue deems

acceptable virtually any records retention system which results

in an essentially unalterable method of records storage and

retrieval, provided: (a) authorized Department of Revenue

personnel are granted access, including any specialized

equipment; (b) taxpayer maintains adequate back–up; and (c)

taxpayer maintains documentation to verify the retention system

is accurate and complete.

Corporation Estimated Tax Payments—A corporation must make

estimated tax installments if its combined tax liability per KRS

141.040 and KRS 141.0401 can reasonably be expected to exceed

$5,000. Estimated tax installments are required as follows:

If the estimated tax is reasonably expected to exceed $5,000

before the 2nd day of the 6th month, 50% of the estimated tax

must be paid by the 15th day of the 6th month, 25% by the 15th

day of the 9th month, and 25% by the 15th day of the 12th month.

If the estimated tax is reasonably expected to exceed $5,000 after

the 1st day of the 6th month and before the 2nd day of the 9th

month, 75% of the estimated tax must be paid by the 15th day

of the 9th month, and 25% by the 15th day of the 12th month.

If the estimated tax is reasonably expected to exceed $5,000 after

the 1st day of the 9th month, 100% of the estimated tax must be

paid by the 15th day of the 12th month.

Safe harbor: A corporation can satisfy its declaration requirement

if its current year estimated tax payments, including prior year

credit, are equal to the combined tax liability per KRS 141.040

and KRS 141.0401 for the prior tax year, and its combined tax

liability for the prior tax year was equal to or less than $25,000.

Interest: Failure to pay estimated tax installments on or before the

due date prescribed by KRS 141.044 will result in an assessment

of interest on the late payment or underpayment. The interest

due on any late payment or underpayment will be at the rate

provided by KRS 131.183(1). KRS 141.044 and KRS 141.985

Penalty: Failure to pay estimated tax installments equal to the

amount determined by subtracting $5,000 from 70% of the

combined tax liability due per KRS 141.040 and KRS 141.0401

as computed by the taxpayer on the return ﬁled for the taxable

year will result in an underpayment penalty of 10% of the

underpayment. The underpayment penalty will not apply if the

current year estimated tax payments, including prior year credit,

are equal to or greater than the combined tax liability due per

KRS 141.040 and KRS 141.0401 for the previous taxable year, and

the combined tax liability due per KRS 141.040 and KRS 141.0401

for the previous taxable year was equal to or less than $25,000.

KRS 131.180(3) and KRS 141.990(3)

Amended Return—Amended Kentucky forms must be used to

make any corrections to Form 720 (See table below for required

amended form), including net operating loss carrybacks (for

years prior to 2005), capital loss carrybacks and Internal Revenue

Service audit adjustments. Do not submit Federal Form 1139 to

apply for a refund of Kentucky corporation income tax resulting

from net operating loss carryback or a capital loss carryback.

Failure to submit the required Kentucky amended forms will

result in delays in processing refunds requested on amended

returns.

Net Operating Losses—For tax years beginning on or after

January 1, 2005, the net operating loss carryback deduction will

not be allowed. Any net operating losses must be carried forward.

Tax Year Amended Form

2004 & prior ...........720X

2005 & 2006 ...........720–Amended

2007 & 2008 ...........720–Amended (2007–2008)

2009 - 2018 .............720 (check Amended return box

or Amended return—RAR box)

Page 8 of 18

INSTRUCTIONS

720

(2018)

FORM 720—SPECIFIC INSTRUCTIONS

LLET and Income Tax Filing Status

Caution: KRS 141.200(10) provides that every corporation doing

business in this state except those exempt from taxation under

KRS 141.040(1)(a) to (h) shall, each taxable year, ﬁle a separate

return unless the corporation was, for any part of the taxable

year: (a) an includible corporation in an afﬁliated group; (b) a

common parent corporation doing business in this state; (c) a

qualiﬁed subchapter S subsidiary that is included in the return

ﬁled by the Subchapter S parent corporation; (d) a qualiﬁed

real estate investment trust subsidiary that is included in the

return ﬁled by the real estate investment trust parent; or (e)

a disregarded entity that is included in the return ﬁled by its

parent entity.

KRS 141.200(11)(a) provides that an afﬁliated group, whether or

not ﬁling a federal consolidated return, shall ﬁle a mandatory

nexus consolidated return which includes all includible

corporations as deﬁned in KRS 141.200(9)(e).

Item A—LLET Exemption Code

If the corporation is exempt from LLET, enter one of the following

two–digit codes in the space provided. Failure to include a valid

code will delay the processing of the tax return and may result

in a tax notice for assessment of taxes and penalties.

REASON

CODE REASON

10 A public service corporation subject to tax under

KRS 136.120.

11 An open–end registered investment company

organized under the laws of this state and

registered under the Investment Company Act of

1940.

12 A property or facility which has been certiﬁed as a

ﬂuidized bed energy production facility as deﬁned

in KRS 211.390.

13 An alcohol production facility as deﬁned in KRS

247.910.

14 A real estate investment trust as deﬁned in Section

856 of the Internal Revenue Code.

15 A captive real estate investment trust as deﬁned

in KRS 141.010(2).

16 A regulated investment company as deﬁned in

Section 851 of the Internal Revenue Code.

17 A real estate mortgage investment conduit as

deﬁned in Section 860D of the Internal Revenue

Code.

18 A personal service corporation as defined in

Section 269A(b)(1) of the Internal Revenue Code.

19 A cooperative described in Sections 521 and

1381 of the Internal Revenue Code, including

farmers' agricultural and other cooperatives

organized or recognized under KRS Chapter 272,

advertising cooperatives, purchasing cooperatives,

homeowners associations including those

described in Section 528 of the Internal Revenue

Code, political organizations as deﬁned in Section

527 of the Internal Revenue Code, and rural electric

and rural telephone cooperatives.

Item B—Income Tax Exemption Code

If the corporation is exempt from Kentucky corporation income

tax, enter the following two–digit code in the space provided.

Failure to include a valid code will delay the processing of

the tax return and may result in a tax notice for assessment

of taxes and penalties.

Check the box to indicate when filing a mandatory nexus

consolidated return.

Separate Return—A corporation must ﬁle a separate return

unless it is an includible corporation in an afﬁliate group per

KRS 141.200(11). KRS 141.200(10)

Mandatory Nexus Consolidated Return—An afﬁliated group must

ﬁle a mandatory nexus consolidated return per KRS 141.200(11)

which include all includible corporations. The mandatory nexus

consolidated return will consist of the common parent that is

doing business in this state and any includible corporation(s)

doing business in this state. KRS 141.200(9) to 141.200(14)

Item C—Check the applicable box:

(a) Amended Return—This is an amended tax return. Provide

an explanation of all changes in Part V—Explanation of

Amended Return Changes.

(b) Amended Return–RAR—This is an amended tax return as a

result of a Revenue Agent Report (RAR) (Form 4549). Provide

an explanation in Part V— Explanation of Amended Return

Changes and attach Form 4549, Department of Treasury—

Internal Revenue Service Income Tax Examination Changes.

Item D—Enter the corporation's Federal Identiﬁcation Number.

See federal Publication 583 if the corporation has not obtained

this number.

Item E—Enter the six-digit Kentucky Corporation/LLET Account

Number on the applicable line at the top of each form and

schedule and on all checks and correspondence. This number

was included in correspondence received from the Department

of Revenue at the time of registration.

Using an incorrect account number, such as an account number

for withholding or sales and use tax, may result in the payment

and/or return being credited to another taxpayer's account.

If the Kentucky Corporation/LLET Account Number is not known,

complete Form 20A100, Declaration of Representative, and

contact Registration at 502–564–3306 for instructions on how

to obtain an account number.

Name and Address—Print or type the corporation’s name as set

forth in the charter. For the address, include the suite, room,

REASON

CODE

REASON

22 This return contains only the LLET as the

corporation is exempt from income tax as

provided by Public Law 86-272.

Page 9 of 18

INSTRUCTIONS

720

(2018)

or other unit number after the street address. If the U.S. Postal

Service does not deliver mail to the street address and the

corporation has a P.O. Box, show the box number instead of the

street address.

Change of Name—Check the applicable box if the corporation's

name has changed since the ﬁling of the prior year Kentucky

tax return. Attach a statement to the tax return providing the

corporation's name reﬂected on the prior year Kentucky tax

return.

Telephone Number—Enter the business telephone number of the

principal ofﬁcer or chief accounting ofﬁcer signing this return.

Period Covered—File the 2018 return for calendar year 2018 and

ﬁscal years that begin in 2018. For a ﬁscal year, ﬁll in the taxable

period beginning and ending at the top of Form 720.

Note: For 52/53 week ﬁlers, ﬁll in the taxable period beginning

and ending dates as speciﬁed below:

• Begin on the ﬁrst day of the calendar month beginning nearest

to the ﬁrst day of the 52/53-week tax year.

• End on the last day of the calendar month ending nearest to

the last day of the 52/53-week tax year.

All corporations must enter the Taxable Year Ending at the top

right of Form 720 and supporting forms and schedules to indicate

the ending month and year for which the return is ﬁled.

• A calendar year is a period from January 1 through December

31 each year. This would be entered as:

• A ﬁscal year is 12 consecutive months ending on the last day of

any month except December. A ﬁscal year ending January 31,

2019, would be entered as:

• A 52/53-week year is a ﬁscal year that varies between 52 and

53 weeks. Example: A 52/53-week year ending the ﬁrst week

of the month would be entered as the month and year of the

prior month. If it ends the ﬁrst week of January 2019, the

taxable year ending would be entered as:

Failure to properly reﬂect the Taxable Year Ending may result in

delinquency notices or billings for failure to ﬁle.

State and Date of Incorporation—Enter the state and date of

incorporation.

Principal Business Activity in Kentucky—Enter the entity's

principal business activity in Kentucky.

__ __ / __ __

MM YY

1 2

1 8

__ __ / __ __

MM YY

0 1

1 9

__ __ / __ __

MM YY

1 2

1 8

North American Industrial Classiﬁcation System (NAICS)—Enter

your six–digit NAICS code. To view a complete listing of

NAICS codes, visit the Census Bureau at

www.census.gov/

eos/www/naics.

Item F—Enter the name and Kentucky Corporation/LLET Account

Number of the common parent, if different than the corporation

listed in Section E.

Item G—Check the applicable boxes:

(a) Initial Return—This is the corporation’s ﬁrst Kentucky tax

return ﬁled. Complete questions 1 and 2 on Schedule Q—

Kentucky Corporation/LLET Questionnaire.

(b) Change of Accounting Period—The corporation has

changed its accounting period since it ﬁled its prior year

Kentucky tax return. Attach a statement to the tax return

showing the corporation's taxable year end before the

change and its new taxable year end. If the corporation

received written approval from the Internal Revenue

Service to change its taxable year, attach a copy of the

letter.

one year and not an initial return or a ﬁnal return. Check the

appropriate box in Part IV—Explanation of Final Return and/

or Short–Period Return.

(d) Final Return—This is the corporation’s ﬁnal Kentucky tax

return. Check the appropriate box in Part IV—Explanation

of Final Return and/or Short–Period Return.

Item H—Provider 3-Factor Apportionment Code

If the entity is a provider as deﬁned in KRS 141.121(1)(e), enter

one of the following two-digit codes in the space provided. The

apportionment fraction for a provider continues to be calculated

using a three (3)- factor formula as provided in KRS 141.901 for

tax years beginning on or after January 1, 2018.

Failure to include a valid code will delay the processing of the

tax return and may result in a tax notice for assessment of taxes

and penalties.

PART I—LLET COMPUTATION

Line 1—Enter the amount from Schedule L, Section D, Line 1.

Line 2—Enter the sum of all recapture amounts from Schedule

RC–R, Line 12, Form 8874(K)-B, Line 3 and/or Schedule DS,

page 2, Line 10. Attach Schedule RC–R, Form 8874(K)-B and/or

Schedule DS.

REASON

CODE

PROVIDER BUSINESS

31 Communications service as deﬁned in KRS 136.602;

32 Cable service as deﬁned in KRS 136.602;

33 Internet service as deﬁned in 47 U.S.C. sec. 151; or

34 Other (attach statement)

Page 10 of 18

INSTRUCTIONS

720

(2018)

Line 3—Enter the total of Lines 1 and 2.

Line 4—Enter the nonrefundable LLET credit from Kentucky

Schedule(s) K–1. Copies of Kentucky Schedule(s) K–1 must be

attached to the tax return in order to claim the credit.

Line 5—Enter the total tax credits from Schedule TCS, Part III,

Column E, Line 1 (attach Schedule TCS).

Line 6—Enter the greater of Line 3 less Lines 4 and 5, or $175.

Line 7—Enter the amount of tax withheld on Form PTE–WH, Line

9. Form PTE-WH must be attached to the tax return.

Line 8—Enter the total LLET estimated tax payments made for

the taxable year. Do not include the amount credited from the

prior year.

Line 9—Enter the refundable Certiﬁed Rehabilitation Tax Credit

(attach the Kentucky Heritage Council certiﬁcation(s)).

Line 10—Enter the refundable Film Industry Tax Credit (attach

the Kentucky Film Ofﬁce certiﬁcation(s)).

NOTE: For applications approved prior to April 27, 2018 this credit

is refundable and should be entered here. For applications

approved on or after April 27, 2018, this credit is nonrefundable

and should be entered on Schedule TCS.

Line 11—Enter the amount of LLET paid with Form 720EXT,

Extension of Time to File Kentucky Corporation/LLET Return.

Line 12—Enter the amount credited to the 2018 LLET from Form

720, Part I, Line 21 of the 2017 return.

Line 13—Enter the income tax overpayment from Part II, Line

17 credited to the 2018 LLET. If ﬁling an amended return, enter

the amount from the original return.

Line 14—Enter the LLET paid on the original return. This line is

used only when ﬁling an amended return.

Line 15—Enter the LLET overpayment on the original return. This

line is used only when ﬁling an amended return.

Line 16—If the total of Lines 6 and 15 is greater than the total of

Lines 7 through 14, enter the LLET due on this line and on Line

1 of the LLET Payment Summary.

Line 17—If the total of Lines 6 and 15 is less than the total of Lines

7 through 14, enter the LLET overpayment on this line.

Line 18—Enter the portion of Line 17 to be credited to the 2018

income tax liability on Part II, Line 12. If ﬁling an amended return,

do not enter an amount on this line.

Line 19—Enter the portion of Line 17 to be credited to 2018

LLET interest.

Line 20—Enter the portion of Line 17 to be credited to 2018 LLET

penalty.

Line 21—Enter the portion of Line 17 to be credited to 2019 LLET.

If ﬁling an amended return, do not enter an amount on this line.

Line 22—Enter the portion of Line 17 to be refunded (Line 17 less

Lines 18 through 21).

PART II—INCOME TAX COMPUTATION

Line 1—To compute the income tax liability, apply the tax rate

of ﬁve percent (5%) of taxable net income.

Short–Period Computation of Income Tax—A corporation

ﬁling an income tax return for a period of less than 12 months

is required to annualize taxable net income. To annualize,

multiply taxable net income computed for the short-period

by 365 and divide by the number of days in the short–period.

The income tax liability is the tax computed on the annualized

income multiplied by the number of days in the short–period

and divided by 365. Annualization is not permitted if the return

is for the initial or ﬁnal period of operations. KRS 141.140

Line 2—Enter the sum of all recapture amounts from Schedule

RC-R, Line 13, Form 8874(K)-B, Line 3 and/or Schedule DS,

Page 2, Line 11. Attach Schedule RC-R, Form 8874(K)-B or

Schedule DS.

Line 3—Enter the amount of the Tax Installment on LIFO

Recapture. A corporation may be liable for the additional

tax due to LIFO recapture under federal Regulations Section

1.1363–2, if the corporation used the LIFO inventory pricing

method for its last tax year as a C corporation prior to becoming

an S corporation. To determine the LIFO recapture, complete

the worksheet below.

1. Kentucky taxable income from

Form 720, Part III, Line 22 ...................... __________________

2. LIFO recapture amount .......................... __________________

3. Add Lines 1 and 2................................... __________________

4. Income tax on the amount on Line

3 above .................................................... __________________

5. Income tax from Form 720, Part II,

Line 1 ....................................................... __________________

6. Line 4 less Line 5 .................................... __________________

7. Tax installment on LIFO Recapture

(Line 6 multiplied by 25%) (enter

on Line 3) ................................................ __________________

Line 4—Add the totals for Lines 1 through 3.

Line 5—Enter the total amount from Line 8 of the Corporation

LLET Credit worksheets. KRS 141.0401(3)(a) provides that the

LLET credit allowed a member or partner of a limited liability

pass–through entity against tax imposed by KRS 141.040 is the

member's or partner's proportionate share of the LLET for the

current year after the subtraction of the minimum tax of $175

and any credits identiﬁed in KRS 141.0205. The LLET credit

allowed is applied to income tax assessed on income from the

limited liability pass–through entity. Any remaining LLET credit

from the limited liability pass–through entity is disallowed.

Enter on Line 2 of the worksheet, the Kentucky net distributive

share income from the limited liability pass–through entity that

is included in the corporation's Kentucky taxable income on

Line 1. If the corporation is taxable only in Kentucky, enter the

net distributive share income from the Kentucky Schedule K–1.

If the corporation is taxable in Kentucky and taxable in another

state, enter the net distributive share income from the Kentucky

Schedule K–1 multiplied by the corporation's apportionment

fraction on Schedule A (see instructions).

Page 11 of 18

INSTRUCTIONS

720

(2018)

Corporation LLET Credit Worksheet

Complete a separate worksheet for each limited liability pass–

through entity. Attach each worksheet to the return and retain

a copy for your records.

Name ____________________________________________________

Address __________________________________________________

FEIN ____________________ KY Acct # ____________________

Percentage of Ownership __________________________________

1. Kentucky taxable income,

Form 720, Part III, Line 22 ......................... __________________

2. Kentucky net distributive share income

from Kentucky Schedule K-1

(see instructions above) ........................... __________________

3. Line 1 less Line 2 ...................................... __________________

4. Income tax from Form 720, Part II,

Line 1 ......................................................... __________________

5. Income tax on the amount on Line

3 above ...................................................... __________________

6. Line 4 less Line 5. If Line 5 is greater

than Line 4, enter -0- ................................ __________________

7. Nonrefundable LLET credit from

Kentucky Schedule K-1 (Form 765

or Form 765-GP) ........................................ __________________

8. Lesser of Line 6 or Line 7, enter here

and on Form 720, Part II, Line 5 ............... __________________

Line 6—Enter the amount from Part I, Line 6 less $175.

Line 7—Enter total credits from Kentucky Schedule TCS, Part III,

Column F, Line 2 (attach Schedule TCS).

Line 8—Enter the amount of Line 4, less Lines 5 through 7, but

not less than zero.

Line 9—Enter the total of estimated income tax payments made

for the taxable year. Do not include the amount credited from

the prior year.

Line 10—Enter the total of income tax paid with Form 720EXT,

Extension of Time to File Kentucky Corporation/LLET Return.

Line 11—Enter the amount credited to the 2018 income tax from

Form 720, Part II, Line 20 of the 2017 return.

Line 12—Enter the LLET overpayment from Part I, Line 18 credited

to the 2018 income tax. If ﬁling an amended return, enter the

amount from the original return.

Line 13—Enter the corporation income tax paid on the original

return. This line is used only when ﬁling an amended return.

Line 14—Enter the corporation income tax overpayment on the

original return. This line is used only when ﬁling an amended

return.

Line 15—If the total of Lines 8 and 14 is greater than the total of

Lines 9 through 13, enter the difference on this line and on Line

1 of the Income Tax Payment Summary.

Line 16—If the total of Lines 8 and 14 is less than the total of

Lines 9 through 13, enter the difference on this line.

Line 17—Enter the portion of Line 16 to be credited to the 2018

LLET on Part I, Line 13. If ﬁling an amended return, do not enter

an amount on this line.

Line 18—Enter the portion of Line 16 to be credited to 2018

corporation income tax interest.

Line 19—Enter the portion of Line 16 to be credited to 2018

corporation income tax penalty.

Line 20—Enter the portion of Line 16 to be credited to 2019

corporation income tax. If ﬁling an amended return, do not

enter an amount on this line.

Line 21—Enter the portion of Line 16 to be refunded (Line 16

less Lines 17 through 20).

PART III—TAXABLE INCOME COMPUTATION

Line 1—Enter the amount of federal taxable income in

accordance with the following instructions:

(a) Separate Entity Kentucky Return/Separate Entity Federal

Return—If this is a separate entity income tax return and

the corporation ﬁled a separate entity federal income tax

return for the taxable year, enter the amount from Line 28

of Form 1120. Attach a copy of Form 1120, all pages.

(b) Separate Entity Kentucky Return/Consolidated Federal

Return—If this is a separate entity income tax return and

the corporation ﬁled a consolidated federal income tax

return for the taxable year, enter the amount from Line 28

of the pro forma Form 1120 prepared on a separate entity

basis. Attach a copy of the pro forma Form 1120, all pages.

forma federal Form 1120 and supporting Schedule CR

showing the federal income and deductions of each

member of the mandatory nexus consolidated group and

the consolidated totals. Enter the amounts from Schedule

CR, Line 27 on Schedule KCR, Line 1. Enter the statutory

additions and subtractions from federal taxable income

of each member of the nexus consolidated group and the

consolidated totals. Enter the consolidated totals from

Schedule KCR Lines 1 through 17 on Form 720, Part III,

Lines 1 through 17.

Attach Form 851-K and an organizational chart showing

the ownership percentages and indicating which entities

have Kentucky nexus.

Special Returns—If the corporation is an organization which

ﬁled a special return for federal purposes (e.g., 1120H, 1120POL),

enter the amount from the line on the special return which is

comparable to Line 28 (Form 1120), federal taxable income.

Attach all pages of form comparable to all the pages of Form

1120.

Page 12 of 18

INSTRUCTIONS

720

(2018)

REIT Returns—Enter the amount from Line 22, Form 1120–REIT

adjusted to add back any net operating loss deduction reﬂected

on Line 21a, Form 1120–REIT.

Additions to Federal Taxable Income—Lines 2 through 9

specify items of additional taxable income or unallowable

deductions which are differences between federal taxable

income and Kentucky taxable net income.

Line 2—Enter interest income from obligations of states other

than Kentucky and the political subdivisions of states other

than Kentucky. KRS 141.039 (1)(c)

Line 3—Enter state taxes measured in whole or in part by

gross or net income. "State" means any state of the United

States, the District of Columbia, the Commonwealth of Puerto

Rico, any territory or possession of the United States, or

any foreign country or political subdivision thereof. Attach

a schedule itemizing the total taxes deducted on Form 1120.

KRS 141.039(2)(c)

Line 4—See instructions on page 4 regarding depreciation

and IRC

§179 deduction differences, and if applicable, include

the total of depreciation amounts from Line 20 on Form 1120,

Form 1125A, and elsewhere on the return. If federal Form 4562

is required to be ﬁled for federal income tax purposes, a copy

must be attached.

Line 5—Enter deductions attributable to income which is

exempt from taxation. Any expense related directly or indirectly

to the acquisition, management, or disposition of assets, the

income from which is exempt, is not deductible. Attach a

schedule. An entry is REQUIRED on this line if amounts appear

on lines 11 or 12 below. KRS 141.039(2)(c) and 103 KAR 16:060

Line 6—Enter related party cost additions from Schedule RPC,

Part II, Section B, Line 1.

Line 7—Enter the amount of dividend–paid deduction of a

captive real estate investment trust. KRS 141.039(2)(c)7.

Line 8—Enter the amount from Schedule O–720, Part I, Line 13.

Line 9— Enter Revenue Agent Report (RAR) (Form 4549) federal

taxable income increase(s). Use this line only if amending Form

720 as a result of an RAR adjustment (attach a copy of Form

4549 to the amended Form 720).

Line 10—Enter the total of Lines 1 through 9.

Subtractions from Federal Taxable Income—Lines 11 through

16 specify items of income which are excluded or additional

deductions allowed which are differences between federal

taxable income and Kentucky taxable net income.

Line 11—Enter the amount of interest income from U.S.

government bonds or from securities issued by a federal agency

or other income exempt from state taxation by the Kentucky

Constitution, the United States Constitution or the United

States Code. Securities which are merely guaranteed by the

U.S. government are not tax-exempt. Attach a schedule listing

the type of obligation and the amount of tax-exempt interest.

KRS 141.039(1)(a)

Line 12—Enter the amount of dividend income from Form 1120.

KRS 141.039(1)(b)

Line 13—Enter the amount of the work opportunity credit

reﬂected on federal Form 5884. For Kentucky purposes, the

corporation may deduct the total amount of salaries and wages

paid or incurred for the taxable year. This adjustment does not

apply for other federal tax credits.

Line 14—See instructions on page 4 regarding depreciation

and

§179 deduction differences, and if applicable, include the

amount from Line 22 of the Kentucky Form 4562. Kentucky

Form 4562 must be attached.

Line 15—Enter the amount from Schedule O–720, Part II, Line 14.

Line 16—Enter Revenue Agent Report (RAR) (Form 4549)

federal taxable income decrease(s). Use this line only if

amending Form 720 as a result of an RAR adjustment (attach

a copy of Form 4549 to the amended Form 720).

Line 17—Subtract Lines 11 through 16 from Line 10.

Line 18—For a mandatory nexus consolidated ﬁler only, enter

the amount from Schedule NOL (Form 720), Part I, Section A,

Line 6 or 7, as applicable. Line 6 is the current net operating loss

disallowed and is added to net income. Enter this amount as

a positive. Line 7 is the net operating loss carryforward and is

subtracted from net income. Enter this amount as a negative.

Separate entity ﬁlers enter zero (–0–). If the afﬁliated group

includes a member having a NOL carryforward that was not

a member of the afﬁliated group in the prior year, complete

Schedule NOL, Part I, Section A, Column D.

Line 19—Add Line 17 and Line 18.

Line 20—Enter the amount from Line 19 or the amount on

Schedule A, Part II, Line 8, if applicable. A corporation that is

taxable in this state and taxable in another state must allocate

and apportion income to Kentucky on Schedule A (Form 720),

Apportionment and Allocation. See Schedule A instructions

for information on the apportionment fraction. KRS 141.010(27)

and KRS 141.120.

Line 21—If the corporation is filing a mandatory nexus

consolidated return, enter zero (–0–). For Kentucky purposes,

the same carryforward provisions allowed by IRC

§172 are

applicable for losses incurred in taxable years beginning after

December 31, 1979, except that no loss may be carried to a

taxable year beginning before January 1, 1980. The amount to

be carried forward is the amount of loss determined by KRS

Chapter 141 and, in the case of a multistate corporation, it is the

amount determined after apportionment and allocation. Attach

a schedule showing the computation of the net operating loss

deduction but do not enter more than the corporation's taxable

income. For additional details on carryover rules, see federal

Publication 536, Net Operating Losses. Attach Schedule NOL.

KRS 141.050

Line 22—Subtract Line 21 from Line 20.

Tax Payment Summary

The payment submitted with Form 720 must be itemized.

Enter the amount of LLET payment from Part I, Line 16 and/

or corporation income tax payment from Part II, Line 15 on

the applicable tax payment lines in addition to the respective

amount of interest and penalties. Subtotal each and enter the

total payment on the Total Payment line.

SCHEDULE Q—Answer all applicable questions on Schedule Q.

The Kentucky Secretary of State Organization number can be

found online at www.sos.ky.gov. This is not the same number

as the Corporation/LLET Account Number reported in Item E

on page 1.

Page 13 of 18

INSTRUCTIONS

720

(2018)

SCHEDULE L—LIMITED LIABILITY ENTITY TAX COMPUTATION

Purpose of Schedule—Schedule L, Limited Liability Entity Tax

Computation, is used to compute the limited liability entity

tax (LLET) per KRS 141.0401(2). If the corporation ﬁling the

tax return is a partner or member of a limited liability pass-

through entity or general partnership (organized or formed as

a general partnership after January 1, 2006) doing business

in Kentucky, complete Schedule L-C, Limited Liability Entity

Tax—Continuation Sheet.

Short-Period Computation of LLET— For short-period returns,

annualizing gross receipts or gross proﬁts is not permitted. A

minimum of $175 is due per taxable year. Taxable year is deﬁned

as the period for which the return is made. KRS 141.010(28)

Section A of this schedule must be completed by the corporation,

except a corporation exempt from LLET per KRS 141.0401(6). If

the corporation ﬁling the tax return is a partner or member of

a limited liability pass-through entity or general partnership

(organized or formed as a general partnership after January

1, 2006) doing business in Kentucky, complete Schedule L–C,

Limited Liability Entity Tax—Continuation Sheet. Kentucky

gross receipts, Kentucky gross proﬁts, total gross receipts from

all sources, and total gross proﬁts from all sources must be

completed per KRS 141.0401(1). See the line-by-line instructions

below.

Section B of this form must be completed to compute the LLET

on Kentucky gross receipts.

Section C of this form must be completed to compute the LLET

on Kentucky gross proﬁts.

Section D of this form must be completed to show the LLET

liability before the application of any tax credits.

LINE-BY-LINE INSTRUCTIONS

Check Box—If the entity is required to attach Schedule L-C, check

the box.

Section A—Computation of Gross Receipts and Gross Proﬁts

If the corporation ﬁling the tax return is a partner or member

of a limited liability pass-through entity or general partnership

doing business in Kentucky, complete Schedule L-C and enter

the total amounts from Schedule L-C, Section A, Lines 2 and 5

on Schedule L, Section A, Column A, Lines 2 and 5; and the total

amounts from Schedule L-C, Section B, Lines 2 and 5 on Schedule

L, Section A, Column B, Lines 2 and 5, and continue to Schedule

L, Sections B, C, and D unless the amount on Schedule L, Section

A, Column B, Line 2 is $3,000,000 or less (see form).

Line 1(a)—Enter Kentucky gross receipts less returns and

allowances in Column A and Total gross receipts less returns

and allowances in Column B. Gross receipts includes, but is not

limited to sales, rent, proceeds from the sale of real and tangible

personal property, interest, and dividends.

Line 1(b)—Not applicable to corporations. Pass-through entities

only: Enter Kentucky gross receipts allocable to a "qualiﬁed

exempt organization" as deﬁned in KRS 141.0401(7).

Line 3(a)—Enter the Kentucky cost of goods sold and total

cost of goods sold from Schedule COGS, Columns A and B,

Line 8. For an entity other than manufacturing, producing,

reselling, retailing, or wholesaling, no costs can be claimed.

KRS 141.0401(1)(d)

Line 3(b)—Not applicable to corporations. Pass-through entities

only: Enter Kentucky gross receipts allocable to a "qualiﬁed

exempt organization" as deﬁned in KRS 141.0401(7).

Section B—Computation of Gross Receipts LLET

Line 1—If gross receipts from all sources (Column B, Line 2)

are greater than $3,000,000, but less than $6,000,000, enter the

following: (Column A, Line 2 x 0.00095) – ($2,850 x (($6,000,000

– Column A, Line 2) / $3,000,000)), but in no case shall the result

be less than zero.

Line 2—If gross receipts from all sources (Column B, Line 2) are

$6,000,000 or greater, enter the following: Column A, Line 2 x

0.00095.

Line 3—Enter the amount from Line 1 or Line 2.

Section C—Computation of Gross Proﬁts LLET

Line 1—If gross proﬁts from all sources (Column B, Line 5) are

greater than $3,000,000, but less than $6,000,000, enter the

following: (Column A, Line 5 x 0.0075) – ($22,500 x (($6,000,000

– Column A, Line 5) / $3,000,000)), but in no case shall the result

be less than zero.

Line 2—If gross proﬁts from all sources (Column B, Line 5) are

$6,000,000 or greater, enter the following: Column A, Line 5 x

0.0075.

Line 3—Enter the amount from Line 1 or Line 2.

Section D—Computation of LLET

Line 1—Enter the lesser of Section B, Line 3 or Section C, Line 3.

If less than $175, enter the minimum of $175 here and on page

1, Part I, Line 1.

Signature—Form 720 must be signed by an authorized

corporate ofﬁcer. Failure by corporate ofﬁcers to sign

the return, to complete all applicable lines on any required

Kentucky form, to attach all applicable schedules, including

copies of federal forms, or to complete all information on the

questionnaire will delay the processing of tax returns.

Page 14 of 18

TAX CREDIT SUMMARY

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Economic Development Tax Credits

— This section is completed

only if a corporation has been approved for one or more of the

credits authorized by the:

• Kentucky Rural Economic Development Act (KREDA – KRS

154.22)

• Metropolitan College Consortium Tax Credit (MCC – KRS

141.381)

• Kentucky Small Business Tax Credit Program (KSBTC – KRS

141.384)

• Kentucky Industrial Development Act (KIDA – KRS 154.28)

• Kentucky Jobs Retention Agreement (KJRA – KRS 154.25)

• Kentucky Industrial Revitalization Act (KIRA – KRS 154.26);

• Kentucky Jobs Development Act (KJDA – KRS 154.24);

• Kentucky Business Investment Program (KBI – KRS 154.32)

• Kentucky Reinvestment Act (KRA – KRS 154.34)

• Skills Training Investment Credit Act (STICA – KRS 154.12)

• Incentives for Energy Independence Act (IEIA – KRS 154.27)

To qualify for the KREDA, KIDA, KJRA, KIRA, KJDA, KBI, KRA, or

IEIA credits, a corporation must be approved by the Kentucky

Economic Development Finance Authority (KEDFA) and must

have executed and activated the appropriate agreement with

KEDFA. Form(s) and instructions for the computation of the

credit(s) will be mailed to the approved taxpayer. To claim any

of these credits, the applicable tax credit schedule or schedules

must be attached to the tax return.

To claim the STICA or MCC credit, a copy of the tax credit

certiﬁcation(s) received from Bluegrass State Skills Corporation

reﬂecting the amount of credit awarded must be attached to

the tax return. The credit for either the STICA or MCC must be

claimed on the tax return ﬁled for the taxable year during which

the ﬁnal authorizing resolution is adopted by Bluegrass State

Skills Corporation. The STICA credit not used during the year in

which the ﬁnal authorizing resolution is adopted by Bluegrass

State Skills Corporation may be carried forward three successive

years; the MCC credit not used during the year in which the

ﬁnal authorizing resolution is adopted by Bluegrass State Skills

Corporation may be carried forward to tax years ending before

April 15, 2027. If a STICA or MCC credit is being carried forward

from a prior year, attach a schedule reﬂecting the original credit

available, the amount of the credit used each year, and the

balance of the credit.

To claim the KSBTC credit, a copy of the tax credit notiﬁcation

received from KEDFA reﬂecting the amount of credit awarded

must be attached to the tax return. The credit for the KSBTC must

be claimed on the tax return for the taxable year during which

the credit was approved by KEDFA. The tax credit not used during

the year of approval by KEDFA may be carried forward up to ﬁve

years. If a KSBTC credit is being carried forward from a prior

year, attach a schedule reﬂecting the original credit available, the

amount of the credit used each year, and the balance of the credit.

Economic development tax credits are allowed against the taxes

imposed by KRS 141.040 and KRS 141.0401.

Information regarding the approval process for these credits

may be obtained from the Cabinet for Economic Development,

Department for Financial Incentives (telephone: 502-564-4554)

or Bluegrass State Skills Corporation (telephone: 502-564-2021).

Farming Operation Networking Tax Credit—A qualiﬁed farming

operation which has a farm operation networking project

approved by the Cabinet for Economic Development per KRS

141.410 to KRS 141.414 is allowed a credit against the taxes

imposed by KRS 141.040 or KRS 141.020 and KRS 141.0401

attributable to the project per KRS 141.412. The annual tax

credit is available for the ﬁrst ﬁve (5) years that the farming

operation is involved in the networking project. The annual tax

credit is equal to the approved costs incurred by the qualiﬁed

farming operation during the tax year and must not exceed the

income, Kentucky gross proﬁts, or Kentucky gross receipts of

the qualiﬁed farming operation generated by or arising out of

the qualiﬁed farming operation's participation in a networking

project. Schedule FON must be attached to the tax return

claiming the credit. KRS 141.412

Certiﬁed Rehabilitation Tax Credit—This credit is allowed

only if the taxpayer has been approved for the credit by the

Kentucky Heritage Council. Credit is allowed against the taxes

imposed by KRS 141.020 or KRS 141.040 and KRS 141.0401 or

KRS 136.505 for qualiﬁed rehabilitation expenses on certiﬁed

historic structures. KRS 171.3961 and KRS 171.397

Unemployment Tax Credit—If a taxpayer hired a Kentucky

resident classiﬁed as unemployed for at least 60 days and

the resident remains in the employ of the taxpayer for 180

consecutive days during the tax year (a qualiﬁed person),

the taxpayer may be entitled to the unemployment tax credit

against the taxes imposed by KRS 141.020 or KRS 141.040

and KRS 141.0401. For each qualified person, a one–time

nonrefundable credit of $100 may be claimed. The period

of unemployment must be certiﬁed by the Education and

Workforce Development Cabinet, Department of Workforce

Investment, Ofﬁce of Employment and Training, Frankfort,

KY, and a copy of the certiﬁcation must be maintained by

the taxpayer. For certiﬁcation questions, call 502–564–7456.

Schedule UTC must be attached to the return claiming this

credit. KRS 141.065

Recycling/Composting Tax Credit—A taxpayer, which

purchases recycling and/or composting equipment to be used

exclusively in Kentucky for recycling or composting post–

consumer waste materials, may be entitled to a nonrefundable

credit against the taxes imposed by KRS 141.020, KRS 141.040,

and KRS 141.0401 in an amount equal to 50 percent of the

installed cost of the equipment. Application for this credit

must be made on Schedule RC and a copy of the schedule

reﬂecting the amount of credit approved by the Department of

Revenue must be attached to the tax return on which the credit

is claimed. The amount of this credit claimed for the tax year

may not exceed 25 percent of the tax liability and cannot exceed

10 percent of the credit approved in the ﬁrst year of eligibility.

For taxable years beginning after December 31, 2004, a taxpayer

which purchases recycling and/or composting equipment to be

used exclusively in Kentucky for recycling or composting post–

consumer waste material that qualiﬁes as a Major Recycling

Project is entitled to a nonrefundable credit against the taxes

imposed by KRS 141.020, KRS 141.040, and KRS 141.0401. The

credit is an amount equal to 50 percent of the installed cost of

the recycling or composting equipment limited to: 50 percent

of the excess of the total of each tax liability over the baseline

tax liability of the taxpayer or $2,500,000. To qualify, the

taxpayer must: (1) invest more than $10,000,000 in recycling

or composting equipment to be used exclusively in this state;

(2) have more than 750 full–time employees with an average

Schedule TCS is used by corporations to apply tax credits for entities subject to the corporation income tax imposed by KRS 141.040 and/

or the limited liability entity tax (LLET) imposed by KRS 141.0401. The amount of tax credit against each tax can be different. Taxpayer as

used in this section refers to the corporation.

Page 15 of 18

TAX CREDIT SUMMARY

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(2018)

hourly wage of more than 300 percent of the federal minimum

wage; and (3) have plant and equipment with a total cost of

more than $500,000,000. Application for this credit must be

made on Schedule RC and a copy of the schedule reﬂecting the

amount of credit approved by the Department of Revenue must

be attached to the tax return on which the credit is claimed.

The credit is limited to a period of 10 years commencing with

the approval of the recycling credit application.

A taxpayer is entitled to claim the recycling credits in KRS

141.390(2)(a) and (b), but cannot claim both for the same

recycling and/or composting equipment. KRS 141.390

Coal Conversion Tax Credit—A corporation which converts boilers

from other fuels to Kentucky coal or which substitutes Kentucky

coal for other fuels in a boiler capable of burning coal and other

fuels to produce energy for speciﬁc purposes may be entitled

to a credit against the taxes imposed by KRS 141.040 and KRS

141.0401 equal to 4.5 percent of expenditures for Kentucky coal

(less transportation costs). Unused portions of this credit may

not be carried forward or back. Schedule CC must be attached

to the tax return claiming this credit. KRS 141.041

Kentucky Investment Fund Tax Credit

—

A taxpayer which makes a

cash contribution to an investment fund approved by KEDFA per

KRS 154.20–250 to KRS 154.20–284 is entitled to a nonrefundable

credit equal to 40 percent of the investor’s proportional ownership

share of all qualified investments made by the investment

fund and veriﬁed by the authority. The credit may be applied

against the taxes imposed by KRS 141.020 or 141.040, 141.0401,

136.320, 136.300, 136.310, 136.505, and 304.3–270. A copy of the

notiﬁcation from KEDFA reﬂecting the amount of credit granted

and the year in which the credit may ﬁrst be claimed must be

attached to the tax return claiming this credit.

The tax credit amount that may be claimed by an investor in any

tax year must not exceed 50 percent of the initial aggregate credit

amount approved by the authority for the investment fund which

is proportionally available to the investor. Example: An investor

with a 10 percent investment in a fund which has been approved

for a total credit to all investors of $400,000 is limited to $20,000

maximum credit in any given year ($400,000 x 10% x 50%).

If the amount of credit that may be claimed in any tax year

exceeds the tax liabilities, the excess credit may be carried

forward, but the carryforward of any excess tax credit will not

increase the limitation that may be claimed in any tax year. Any

credit not used in 15 years, including the year in which the credit

may ﬁrst be claimed, will be lost.

Information regarding the approval process for these credits

may be obtained from the Cabinet for Economic Development,

Department of Financial Incentives at 502–564–4554. KRS 141.068

Qualiﬁed Research Facility Tax Credit—A taxpayer is entitled

to a credit against the taxes imposed by KRS 141.020 or KRS

141.040 and KRS 141.0401 of 5 percent of the qualiﬁed costs of

construction, remodeling, expanding, and equipping facilities

in Kentucky for "qualiﬁed research." Any unused credit may

be carried forward 10 years. Schedule QR, Qualiﬁed Research

Facility Tax Credit, must be attached to the tax return on which

this credit is claimed. Federal Form 6765, Credit for Increasing

Research Activities, must also be attached if applicable. See

instructions for Schedule QR for more information regarding

this credit. KRS 141.395

GED Incentive Tax Credit

—

A taxpayer is entitled to a credit

against the taxes imposed by KRS 141.020 or KRS 141.040 and

KRS 141.0401. The credit reﬂected on this line must equal the

sum of the credits reﬂected on the attached GED–Incentive

Program Final Reports. This credit may be claimed only in the year

during which the learning contract was completed and unused

portions of the credit may not be carried forward or back. For

information regarding the program, contact the Education and

Workforce Development Cabinet, Kentucky Adult Education,

Council on Postsecondary Education at 502–573–5114. The GED–

Incentive Program Final Report (DAEL–31) for each employee

that completed a learning contract during the tax year must be

attached to the tax return claiming the credit. KRS 164.0062

Voluntary Environmental Remediation Tax Credit—The

taxpayer must have an agreed order and be approved by

the Energy and Environment Cabinet per KRS 224.1–514.

Maximum tax credit allowed to be claimed per taxable year is

25 percent of the approved credit. This credit may be claimed

against the taxes imposed by KRS 141.020 or KRS 141.040

and KRS 141.0401. For more information regarding credit for

voluntary environmental remediation property, contact the

Energy and Environment Cabinet at 502–564–6716. Schedule

VERB must be attached to the tax return claiming this credit.

KRS 141.418

Biodiesel Tax Credit—Producers and blenders of biodiesel

and producers of renewable diesel are entitled to a tax credit

against the taxes imposed by KRS 141.020 or KRS 141.040

and KRS 141.0401. The taxpayer must ﬁle a claim for biodiesel

credit with the Department of Revenue by January 15 each year

for biodiesel produced or blended and the renewable diesel

produced in the previous calendar year. The department will

issue a credit certiﬁcation (Schedule BIO) to the taxpayer by

April 15. The credit certiﬁcation must be attached to the tax

return claiming this credit. KRS 141.423 and 103 KAR 15:140

Clean Coal Incentive Tax Credit—Effective for tax years ending

on or after December 31, 2006, a nonrefundable, nontransferable

credit against the taxes imposed by KRS 136.120 or KRS 141.020

or KRS 141.040 and KRS 141.0401 will be allowed for a clean

coal facility. Per KRS 141.428, a clean coal facility means an

electric generation facility beginning commercial operation on

or after January 1, 2005, at a cost greater than $150 million that

is located in the Commonwealth of Kentucky and is certiﬁed by

the Energy and Environment Cabinet as reducing emissions of

pollutants released during generation of electricity through the

use of clean coal equipment and technologies. The amount of

the credit is $2 per ton of eligible coal purchased that is used to

generate electric power at a certiﬁed clean coal facility, except

that no credit will be allowed if the eligible coal has been used

to generate a credit under KRS 141.0405 for the taxpayer, parent,

or subsidiary. KRS 141.428

Ethanol Tax Credit

—

Producers of ethanol are entitled to a tax

credit against the taxes imposed by KRS 141.020 or KRS 141.040

and KRS 141.0401. The taxpayer must ﬁle a claim for ethanol credit

with the Department of Revenue by January 15 each year for

ethanol produced in the previous calendar year. The department

will issue a credit certiﬁcation (Schedule ETH) to the taxpayer by

April 15. The credit certiﬁcation must be attached to the tax return

claiming this credit. KRS 141.4242 and 103 KAR 15:110

Cellulosic Ethanol Tax Credit—Producers of cellulosic ethanol

are entitled to a tax credit against the taxes imposed by

KRS 141.020 or KRS 141.040 and KRS 141.0401. The taxpayer

must file a claim for ethanol credit with the Department

of Revenue by January 15 each year for cellulosic ethanol

produced in the previous calendar year. The department will

issue a credit certiﬁcation (Schedule CELL) to the taxpayer by

April 15. The credit certiﬁcation must be attached to the tax

return claiming this credit. KRS 141.4244

and 103 KAR 15:120

Page 16 of 18

TAX CREDIT SUMMARY

720

(2018)

Railroad Maintenance and Improvement Tax Credit—For tax years

beginning on or after January 1, 2010, an owner of any Class II

railroad or Class III railroad located in Kentucky or any person who

transports property using the rail facilities of a Class II railroad or

Class III railroad located in Kentucky or furnishes railroad–related

property or services to a Class II railroad or Class III railroad

located in Kentucky, but only with respect to miles of railroad track

assigned to the person by a Class II railroad or Class III railroad,

is entitled to a nonrefundable credit against taxes imposed by

KRS 141.020 or KRS 141.040 and KRS 141.0401 in an amount equal

to ﬁfty percent of the qualiﬁed expenditures paid or incurred to

maintain or improve railroads located in Kentucky, including

roadbeds, bridges, and related structures, that are owned or

leased as of January 1, 2008, by a Class II or Class III railroad.

The credit allowed must not exceed the product of $3,500

multiplied by the sum of: (1) The number of miles of railroad

track in Kentucky owned or leased by the eligible taxpayer as

of the close of the taxable year; and (2) The number of miles

of railroad track in Kentucky assigned to the eligible taxpayer

by a Class II railroad or Class III railroad which owns or leases

the railroad track as of the close of the taxable year. Attach

Schedule RR-I to the return claiming this credit. KRS 141.385

Railroad Expansion Tax Credit—For tax years beginning on or

after January 1, 2010: (a) a corporation that owns fossil energy

resources subject to tax under KRS 143.020 or KRS 143A.020

or biomass resources and transports these resources using

rail facilities; or (b) a railway company subject to tax under

KRS 136.120 that serves a corporation that owns fossil energy

resources subject to tax under KRS 143.020 or KRS 143A.020 or

biomass resources is entitled to a nonrefundable tax credit against

taxes imposed under KRS 141.040 and KRS 141.0401 equal to

twenty–ﬁve percent of the expenditures paid or incurred by the

corporation or railway company to expand or upgrade railroad

track, including roadbeds, bridges, and related track structures,

to accommodate the transport of fossil energy resources or

biomass resources.

The credit amount approved for a calendar year for all taxpayers

under KRS 141.386 is limited to $1 million. If the total amount of

approved credit exceeds $1 million, the department will determine

the amount of credit each corporation and railroad company

receives by multiplying $1 million by a fraction, the numerator of

which is the amount of approved credit for a corporation or railway

company and the denominator of which is the total approved

credit for all corporations and railway companies.

Each corporation or railway company eligible for the credit

must file Schedule RR-E by the fifteenth day of the first

month following the close of the preceding calendar year.

The department will determine the amount of the approved

credit and issue a credit certificate to the corporation or

railway company by the fifteenth day of the third month

following the close of the calendar year. KRS 141.386

ENDOW Kentucky Tax Credit – A taxpayer making an

endowment gift to a permanent endowment fund of a qualiﬁed

community foundation, county-specific component fund,

or afﬁliate community foundation, which has been certiﬁed

under KRS 147A.325, is entitled to a tax credit equal to twenty

percent (20%) of the endowment gift, not to exceed $10,000.

The nonrefundable tax credit is allowed against the taxes

imposed by KRS 141.020 or KRS 141.040 and KRS 141.0401 and

if not used in the year the tax credit is awarded, may be carried

forward for a period not to exceed ﬁve years. The department

will issue a credit certiﬁcation (Schedule ENDOW) to a taxpayer

upon receiving proof that the endowment gift was made to the

approved community foundation per KRS 141.438(7). Schedule

ENDOW must be attached to the taxpayer’s tax return each year

to claim the credit. A partner, member, or shareholder of a pass-

through entity must attach a copy of Schedule K-1, Form 720S,

765, or 765-GP to the partner’s, member’s, or shareholder’s tax

return each year to claim the tax credit. KRS 141.438 and 103

KAR 15:195

New Markets Development Program Tax Credit—A taxpayer

that makes a qualiﬁed equity investment per KRS 141.432(7)

in a qualiﬁed community development entity deﬁned by KRS

141.432(6) is entitled to a nonrefundable tax credit against the

taxes imposed by KRS 141.020, 141.040, 141.0401, 136.320,

136.330, 136.340, 136.350, 137.370, 136.390, or 304.3-270. The

total amount of tax credits that may be awarded by the department

is limited to $10 million. “Qualiﬁed low-income community

investment” means any capital or equity investment in, or loan

to, any qualiﬁed active low-income community business made

after June 4, 2010. With respect to any one qualiﬁed active low-

income community business, the maximum amount of qualiﬁed

active low-income community investments that may be made

in the business, on a collective basis with all of its afﬁliates,

with the proceeds of qualiﬁed equity investments that have

been certiﬁed under KRS 141.433 is $10 million, whether made

by one or several qualiﬁed community development entities.

The amount of the credit will be equal to 39% of the purchase

price of the qualiﬁed equity investment made by the taxpayer.

A taxpayer is allowed to claim zero percent (0%) for each of

the ﬁrst two credit allowance dates, seven percent (7%) for the

third allowance date, and eight percent (8%) for the next four

allowance dates. “Credit allowance date” means with respect

to any qualiﬁed equity investment: (a) the date on which the

investment is initially made; and (b) each of the six anniversary

dates of that date thereafter. KRS 141.432 to KRS 141.434

Food Donation Tax Credit—For taxable years beginning on or

after January 1, 2018, the tax credit was repealed. 2018 is the

ﬁnal year in which any unused prior year credit carryforward

may be utilized. See Schedule TCS, Part II, line 18 to claim this

credit. KRS 141.392

Film Industry Tax Credit—For applications approved on or

after April 27, 2018, a nonrefundable and nontransferable credit

against the taxes imposed by KRS 141.020 or KRS 141.040 and

KRS 141.0401 is available for taxpayers who have received

notiﬁcation from the ﬁlm ofﬁce that the approved company

has satisﬁed all requirements of KRS 148.542 to KRS 148.546.

KRS 141.383

Inventory Tax Credit—For taxable years beginning on or after

January 1, 2018, a nonrefundable and nontransferable tax

credit is allowed against the taxes imposed by KRS 141.020

or KRS 141.040 and KRS 141.0401 for ad valorem (property)

taxes timely paid on inventory. This credit is phased in as

follows: 25% in 2018; 50% in 2019; 75% in 2020; 100% in 2021

and thereafter. KRS 141.408

Distilled Spirits Tax Credit—For taxable years beginning on

or after January 1, 2015, a nonrefundable and nontransferable

credit against the tax imposed by KRS 141.020 or KRS 141.040

and KRS 141.0401 is available to taxpayers who pay Kentucky

property tax on distilled spirits.

The distilled spirits credit is equal to: eighty percent (80%) of

the property tax assessed and timely paid for taxable years

beginning on or after January 1, 2018 and 100 percent of

the property tax assessed and timely paid for taxable years

beginning on or after January 1, 2019.

The amount of the credit is contingent on the costs associated

with the following capital improvements at the premises of

Page 17 of 18

TAX CREDIT SUMMARY

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(2018)

the distiller: construction, replacement, or remodeling of

warehouses or facilities; purchases of barrels and pallets

used for the storage and aging of distilled spirits in maturing

warehouses; acquisition, construction, or installation of

equipment for the use in the manufacture, bottling, or shipment

of distilled spirits; addition or replacement of access roads or

parking facilities; and construction, replacement, or remodeling

of facilities to market or promote tourism, including but not

limited to a visitor's center. KRS 141.389

Page 18 of 18

GENERAL INFORMATION

720

(2018)

Kentucky Department of Revenue

Mission Statement

As part of the Finance and Administration Cabinet, the mission

of the Kentucky Department of Revenue is to administer tax

laws, collect revenue, and provide services in a fair, courteous,

and efﬁcient manner for the beneﬁt of the Commonwealth

and its citizens.

* * * * * * * * * * * * *

The Kentucky Department of Revenue does not discriminate

on the basis of race, color, national origin, sex, age, religion,

disability, sexual orientation, gender identity, veteran status,

genetic information, or ancestry in employment or the

provision of services.

TANGIBLE PERSONAL PROPERTY TAXES—The listing

period for tangible personal property is January 1 through

May 15 of each year. Each taxpayer is responsible for

reporting his tangible personalty subject to ad valorem

taxation. The Tangible Personal Property Tax Return,

Revenue Form 62A500, and instructions can be obtained

from your local county property valuation administrator’s

ofﬁce or the Ofﬁce of Property Valuation. You may also

go to www.revenue.ky.gov to download these forms. A

separate form must be ﬁled for each location in Kentucky

where you have tangible personal property.

TAXPAYER ASSISTANCE

Forms:

Operations and Support Services Branches

P. O. Box 518

Frankfort, KY 40602–0518

502-564-3658

Website: www.revenue.ky.gov

Email: Financerevenueformsandenvelopes@ky.gov

Information:

Division of Corporation Tax

Department of Revenue

501 High Street, Station 52

Frankfort, KY 40601–2103

502-564-8139

Mailing/Payment:

Mail the return to:

Kentucky Department of Revenue, P. O. Box 856910,

Louisville, KY 40285-6910. Make the check(s) payable to the

Kentucky State Treasurer.

Mail returns with no tax due or refund requests to: Kentucky

Department of Revenue, P. O. Box 856905, Louisville, KY

40285-6905.

KENTUCKY TAXPAYER SERVICE CENTERS

Information and forms are available from Kentucky Taxpayer

Service Centers in the following cities.

Ashland, 1539 Greenup Avenue, 41101-7695

606-920-2037

Bowling Green, 201 West Professional Park Court, 42104-3278

270-746-7470

Corbin, 15100 North US 25E, Suite 2, 40701-6188

606-528-3322

Frankfort, 501 High Street, 40601–2103

502-564-4581 (Taxpayer Assistance)

Hopkinsville, 181 Hammond Drive, 42240-7926

270-889-6521

Louisville, 600 West Cedar Street

2nd Floor West, 40202-2310

502-595-4512

Northern Kentucky, Turfway Ridge Ofﬁce Park

7310 Turfway Road, Suite 190

Florence, 41042-4871

859-371-9049

Owensboro, Corporate Center

401 Frederica Street,

Building C, Suite 201, 42301-6295

270-687-7301

Paducah, Clark Business Complex, Suite G

2928 Park Avenue, 42001-4024

270-575-7148

Pikeville, Uniplex Center, Suite 203

126 Trivette Drive, 41501-1275

606-433-7675

Kentucky State Treasury—Unclaimed Property

Individuals

The Kentucky State Treasury may be holding unclaimed

property for you or your family. The Treasury holds

hundreds of millions of dollars from bank accounts, payroll

checks, life insurance, utility deposits, and other types of

property that have been unclaimed by the owners. Please

visit www.treasury.ky.gov or www.missingmoney.com for

more information on how to locate and claim any funds

that may belong to you.

Businesses

Kentucky businesses are required to comply with the

Kentucky Revised Uniform Unclaimed Property Act,

codiﬁed as KRS Chapter 393A. If you have uncashed vendor

checks, payroll checks, unclaimed customer deposits or

refunds, or other types of property belonging to third-

parties, you may be required to turn the property over to

the Kentucky State Treasury. Please review KRS Chapter

393A, or visit ww w.treasury.ky.gov for more information.

YOUR RIGHTS

AS A KENTUCKY TAXPAYER

As part of the Finance and Administration Cabinet, the

mission of the Kentucky Department of Revenue (DOR) is to

administer tax laws, collect revenue, and provide services in

a fair, courteous, and efﬁcient manner for the beneﬁt of the

Commonwealth and its citizens.

As a Kentucky taxpayer, you have the right to expect the DOR

to honor its mission and uphold your rights every time you

contact or are contacted by the DOR.

Some Kentucky taxpayer rights are very speciﬁc, such as

when and how to protest a Notice of Tax Due or the denial of

a refund. Others are more general.

The following is a summary of your rights and the DOR’s

responsibilities to you as a Kentucky taxpayer.

RIGHTS OF TAXPAYER

Privacy

You have the right to privacy with regard to information you

provide pertaining to returns, reports, or the affairs of your

business.

Assistance

You have the right to advice and assistance from the DOR in

complying with state tax laws.

Explanation

You have the right to a clear and concise explanation of:

9 basis of assessment of additional taxes, interest and

penalties, or the denial or reduction of any refund or credit

claim;

9 procedure for protest and appeal of a Notice of Tax Due,

a reduction or denial of a refund, or a denial of a request

for additional time to ﬁle a supporting statement; and

9 tax laws and changes in tax laws so that you can comply

with the law.

Protest and Appeal

You have the right to ﬁle a protest with the DOR if you disagree

with a Notice of Tax Due, a reduction or denial of a refund, or

a denial of a request for additional time to ﬁle a supporting

statement. If you ﬁle a timely protest, you have a right to a

conference to discuss the matter. If you are not satisﬁed with

the Department’s ﬁnal ruling following your protest, you may

appeal the ﬁnal ruling to the Kentucky Claims Commission, Tax

Appeals pursuant to KRS 131.110(5) and KRS 49.220 et. seq.

(See reverse for procedure to ﬁle a protest.)

Representation

You have the right to representation by your authorized agent

(attorney, accountant, or other person) in any hearing or

conference with the DOR. You have the right to be informed

of this right prior to the conference or hearing. If you intend

for your representative to attend the conference or hearing in

your place, you will be required to give your representative

a power of attorney before the DOR can discuss tax matters

with your authorized agent. See Form 20A100.

Recordings

You have the right to make an audio recording of any meeting,

conference, or hearing with the DOR. The DOR has the right

to make an audio recording, if you are notiﬁed in writing in

advance or if you make a recording. You have the right to

receive a copy of the recording.

Consideration

You have the right to consideration of:

9 waiver of penalties or collection fees if “reasonable cause”

for reduction or waiver is given (“reasonable cause” is

deﬁned in KRS 131.010(9) as: “an event, happening, or

circumstance entirely beyond the knowledge or control of

a taxpayer who has exercised due care and prudence in

the ﬁling of a return or report or the payment of monies

due the department pursuant to law or administrative

regulation”);

9 installment payments of delinquent taxes, interest, and

penalties;

9 waiver of interest and penalties, but not taxes, resulting

from incorrect written advice from the DOR if all facts

were given and the law did not change or the courts did

not issue a ruling to the contrary;

9 extension of time for ﬁling reports or returns; and

9 payment of charges incurred resulting from an erroneous

ﬁling of a lien or levy by the DOR.

Guarantee

You have the right to a guarantee that DOR employees are

not paid, evaluated, or promoted based on taxes assessed

or collected, or a tax assessment or collection quota or goal

imposed or suggested.

Damages

You have the right to ﬁle a claim for actual and direct monetary

damages with the Kentucky Claims Commission if a DOR

employee willfully, recklessly, and intentionally disregards

your rights as a Kentucky taxpayer.

Interest

You may have the right to receive interest on an overpayment

of tax.

DEPARTMENT OF REVENUE RESPONSIBILITIES

The DOR has the responsibility to:

9 perform audits and conduct conferences and hearings

with you at reasonable times and places;

9 authorize, require, or conduct an investigation or

surveillance of you only if it relates to a tax matter;

9 make a written request for payment of delinquent taxes

which are due and payable at least 30 days prior to seizure

and sale of your assets;

9 conduct educational and informational programs to help

you understand and comply with the laws;

9 publish clear and simple statements to explain tax

procedures, remedies, your rights and obligations, and

the rights and obligations of the DOR;

9 notify you in writing when an erroneous lien or levy is

released and, if requested, notify major credit reporting

companies in counties where lien was ﬁled;

JULY 2018

9 advise you of procedures, remedies, and your rights and

obligations with an original notice of audit or when an

original Notice of Tax Due is issued, a refund or credit

is denied or reduced, or whenever a license or permit is

denied, revoked, or canceled;

9 notify you in writing prior to termination or modiﬁcation

of a payment agreement;

9 furnish copies of the agent’s audit workpapers and a written

narrative explaining the reason(s) for the assessment;

9 resolve tax controversies on a fair and equitable basis at

the administrative level whenever possible;

9 notify you in writing at your last known address at least 60

days prior to publishing your name on a list of delinquent

taxpayers for which a tax or judgment lien has been ﬁled;

and

9 notify you by certiﬁed mail 20 days prior to submitting

your name to the relevant agency for the revocation or

denial of professional license, driver’s license, or motor

vehicle registration.

PROTEST AND APPEAL PROCEDURE

Protest

If you receive a Notice of Tax Due, or if the DOR notiﬁes you

that a tax refund has been reduced or denied, or the DOR

denies your request for additional time to ﬁle a supporting

statement, you have the right to protest. To do so:

9 submit a written protest within 60 days from the original

notice date (or 45 days if the original notice date is prior

to 07/01/2018); notice of refund reduction or denial, or

denial of a request for additional time to ﬁle a supporting

statement;

9 identify the type of tax involved and give the account

number, Social Security number, or other identiﬁcation

number and attach a copy of the DOR Notice of Tax Due

or refund denial to support that your protest is timely;

9 explain why you disagree;

9 attach any proof or documentation available to support

your protest or request additional time to support your

protest;

9 sign your statement, include your daytime telephone

number and mailing address; and

9 mail to the Kentucky Department of Revenue,

Frankfort, Kentucky 40620.

Conference

You have the right to request a conference to discuss the issue.

Final Ruling

If you do not want to have a conference or if the conference

did not resolve your protest, you have the right to request a

ﬁnal ruling of the DOR so that you can appeal your case further.

Appeal

If you do not agree with the DOR’s ﬁnal ruling, you can ﬁle

a written appeal with the Kentucky Claims Commission. If

you do not agree with the decision of the Kentucky Claims

Commission, you have the right to appeal their ruling to the

Kentucky courts (ﬁrst to the circuit court in your home county

or in Franklin County, then to the Kentucky Court of Appeals,

and ﬁnally to the Kentucky Supreme Court).

NOTE: The above protest and appeal procedures do not apply

for real property which is valued by the local property valuation

administrator (PVA). Contact the local PVA for information

about how to appeal the valuation of real property.

TAXPAYER OMBUDSMAN

The DOR has a Taxpayer Ombudsman whose job is to serve as

an advocate for taxpayers’ rights. One of the main functions

of the Ombudsman is to ensure that your rights as a Kentucky

taxpayer are protected.

Also, an important function of the Taxpayer Ombudsman is

to confer with DOR employees when you have a problem

or conﬂict that you have been unable to resolve. However,

it is not the role of the Ombudsman to intercede in an audit,

handle a protest, waive taxes, penalty or interest, or answer

technical tax questions. To ﬁle a protest, see PROTEST AND

APPEAL PROCEDURE. Please do not mail your protest to the

Ombudsman.

The Taxpayer Ombudsman is your advocate and is there to

make sure your rights are protected. If you think you are not

being treated fairly or if you have a problem or complaint,

please contact the Ombudsman for assistance.

The Taxpayer Ombudsman may be contacted by telephone at

502–564–7822 (between 8:00 a.m. and 5:00 p.m. weekdays).

The mailing address is: Department of Revenue, Taxpayer

Ombudsman, P. O. Box 930, Frankfort, Kentucky 40602-0930.

WHERE TO GET ASSISTANCE

The DOR has ofﬁces in Frankfort and taxpayer service centers

in nine cities and towns throughout Kentucky. DOR employees

in the service centers answer tax questions and provide

assistance. You may obtain assistance by contacting any of

the following:

Ashland Taxpayer Service Center

1539 Greenup Avenue, 41101–7695

606–920–2037

Bowling Green Taxpayer Service Center

201 West Professional Park Court, 42104–3278

270–746–7470

Corbin Taxpayer Service Center

15100 North US25E, Suite 2, 40701–6188

606–528–3322

Frankfort Taxpayer Service Center

501 High Street, 40601–2103

502–564–4581 (Taxpayer Assistance)

Hopkinsville Taxpayer Service Center

181 Hammond Drive, 42240–7926

270–889–6521

Louisville Taxpayer Service Center

600 West Cedar Street, 2nd Floor West, 40202–2310

502–595–4512

Northern Kentucky Taxpayer Service Center

Turfway Ridge Ofﬁce Park

7310 Turfway Road, Suite 190

Florence 41042–4871

859–371–9049

Owensboro Taxpayer Service Center

401 Frederica Street, Building C, Suite 201, 42301–6295

270–687–7301

Paducah Taxpayer Service Center

Clark Business Complex, Suite G

2928 Park Avenue, 42001–4024

270–575–7148

Pikeville Taxpayer Service Center

Uniplex Center, 126 Trivette Drive, Suite 203, 41501–1275

606–433–7675

* * * * * * * * * *

The DOR has an online taxpayer service center where you can

download forms, publications, and obtain general information

about the department. The address is www.revenue.ky.gov.

The information in this brochure merely summarizes your

rights as a Kentucky taxpayer and the responsibilities of the

Department of Revenue. The Kentucky Taxpayers’ Bill of Rights

may be found in the Kentucky Revised Statutes (KRS) at

Chapter 131.041-131.083. Additional rights and responsibilities

are provided for in KRS 131.020, 131.110, 131.170, 131.1817,

131.183, 131.190, 131.500, 131.654, 133.120, 133.130, 134.580,

and 134.590.

Printing costs paid from state funds.

Commonwealth of Kentucky

DEPARTMENT OF REVENUE

10F100 (7-18)

The Kentucky Department of Revenue does not discriminate

on the basis of race, color, national origin, sex, age, religion,

disability, sexual orientation, gender identity, veteran status,

genetic information or ancestry in employment or the provision

of services.