Kentucky Apportionment and Allocation for corporations and pass-through entities taxable both within and without Kentucky - Schedule 41A720A

Apportionment and Allocation for corporations and pass-through entities taxable both within and without Kentucky - Schedule 41A720A
Schedule A
SCHEDULE

A

Taxable Year Ending

*1600010211*

41A720A (10-16)
Commonwealth of Kentucky
DEPARTMENT OF REVENUE

	

Mo.	Yr.

APPORTIONMENT AND ALLOCATION
(For corporations and pass-through entities taxable
both within and without Kentucky.)

➤	 See instructions.
➤	 Attach to Form 720, 720S, 725,
	 765 or 765-GP.

Regulations 103 KAR 16:090, 103 KAR 16:270, 103 KAR 16:290

  Name of Corporation or Pass-through Entity	
Federal Identification Number	
		

__ __  __ __ __ __ __ __ __	

	

	

__ __ / __ __

Kentucky Corporation/LLET
Account Number

__ __ __ __ __ __

Check this box and complete Schedule A-C, Apportionment and Allocation – Continuation Sheet: (i) if the corporation filing this 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; or (ii) if the pass-through entity filing this tax return is a partner or member of a pass-through entity doing business in Kentucky.

	

Check this box and complete Schedule A-N, Apportionment Factor Schedule (For a Nexus Consolidated Tax Return), if the corporation is filing a mandatory
nexus consolidated tax return as provided by KRS 141.200(11).
If apportionment method other than statutory formula is used:

	

Check this box: (i) if the department has granted written approval to use an alternative allocation and apportionment method as provided by KRS 141.120(9)(a),
and attach a copy of the approval letter to the tax return; or (ii) if the company has made an irrevocable five year election to use an allocation and apportionment
method as provided by KRS 141.120(9)(b), and attach a copy of the election to the tax return. 			

SECTION I. COMPUTATION OF APPORTIONMENT FRACTION

SECTION II. APPORTIONMENT AND ALLOCATION OF INCOME

Convert lines 3, 4, 7, 10, 11 and 12 to a percentage carried to four decimal places.		 1.	 Net income (from Form 720, Part III, line 20).........................	1	

00

2.	 Deduct nonbusiness income (if applicable):
  1.	 Kentucky sales...............	1	

00

  2.	 Total sales......................	2	

00

  3.	 Sales factor
	
(line 1 divided by line 2)........ 	3	

%

  4.	 Double-weighted Sales factor
	
(line 3 multiplied by 2).................................................	4	
  5.	 Average value of
	
Kentucky real/tangible
	
property (Section III)......	5	
  6.	 Average value of total
	
real/tangible property
	
(Section IV).....................	6	

%

00

00

  7.	 Property factor (line 5
	
divided by line 6)..........................................................	7	
  8.	 Kentucky payrolls..........	8	

  9.	 Total payrolls................. 	

9	

%

00

	

(c)	Royalties...................................... 	2(c)	

00

	
(d)	 Net gain or loss on sale or
		
exchange of capital assets......... 	2(d)	

00

	

00

(e)	 Total (lines (a) through (d))........ 	2(e)	

	
(f)	Less related expenses
		(attach schedule)......................... 	  2(f)	 (	00)
3.	 Net nonbusiness income.........................................................	3	

00

4.	 Business income (line 1 less line 3)........................................	4	

00

5.	 Business income apportioned to Kentucky (line 4
	
multiplied by Section I, line 12)..............................................	5	

00

6.	 Add Kentucky nonbusiness income (if applicable):
(a)	Interest........................................ 	6(a)	

00

	

(b)	Rents............................................ 	6(b)	

00

	

(c)	Royalties...................................... 	6(c)	

00

00

	
(d)	 Net gain or loss on sale or
		
exchange of capital assets......... 	6(d)	

00

	

00

%

11.	 Total (add lines 4, 7 and 10).........................................	11	

%

12.	 Apportionment fraction—line 11 divided by 4
	
or number of factors present (sales representing 2
	factors) .........................................................................	12	

%

SECTION III. KENTUCKY REAL/TANGIBLE PROPERTY
PROPERTY

00

(b)	Rents............................................ 	2(b)	

	

	

	

(a)	Interest........................................ 	2(a)	

	

00

10.	 Payroll factor (line 8 divided by line 9).......................	10	

	

	

A.  Beginning of Year	

B.  End of Year	

(e)	 Total (lines (a) through (d))........ 	6(e)	

	
(f)	 Less Kentucky
		related expenses
		(attach schedule) ........................ 	 6(f)	 (	00)
7.	 Kentucky net nonbusiness income.........................................	7	

00

8.	 Taxable net income (line 5 plus line 7) (enter here and
	
on Form 720, Part III, line 21)................................................... 	8	

00

SECTION IV. TOTAL REAL/TANGIBLE PROPERTY
PROPERTY

1. 	Inventories......................... 	1

1. 	Inventories.........................	1

2.	Buildings............................ 	2

2.	Buildings............................	2

A.  Beginning of Year	

3.	 Machinery and equipment.	3

3.	 Machinery and equipment.	3

4.	Land................................... 	4

4.	Land...................................	4

5.	 Other tangible assets........ 	5

5.	 Other tangible assets........	5

6.	 Total (lines 1 through 5).... 	6

6.	 Total (lines 1 through 5).... 	6

7.	 Average value of real/tangible property owned in
	 Kentucky, total of line 6, columns A and B
	 divided by 2...................................................................... 	7

7.	 Average value of real/tangible property owned
	 everywhere, total of line 6, columns A and B
	 divided by 2...................................................................... 	7

8.	 Leased property (Eight times the annual rental
	 rate less subrentals)......................................................... 	8

8.	 Leased property (Eight times the annual rental
	 rate less subrentals)......................................................... 	8

9.	 Total (lines 7 and 8) (enter on Section I, line 5)............. 	9

9.	 Total (lines 7 and 8) (enter on Section I, line 6)............. 	9

B.  End of Year

Page 2

41A720A (10-16)
Commonwealth of Kentucky
DEPARTMENT OF REVENUE

Instructions for Schedule A—Apportionment and Allocation

General—A corporation that is taxable in this state and taxable in
another state shall apportion and allocate net income to Kentucky in
accordance with KRS 141.120. A pass–through entity doing business
within and without the state shall compute an apportionment fraction
in accordance with KRS 141.206(12). Public service companies (defined
in KRS 136.120) and financial organizations shall apportion and allocate
net income in accordance with KRS 141.120(10) and Regulations 103
KAR 16:100 through 103 KAR 16:150.
A corporation must use the statutory formula unless the corporation
has been required or granted approval in writing by the Department of
Revenue to use an alternative method provided by KRS 141.120(9)(a) or
the corporation qualifies for and elects an alternative apportionment
method provided by KRS 141.120(9)(b). A copy of the letter from the
Department of Revenue requiring or granting approval to use a method
other than the statutory formula or a statement electing an alternative
apportionment method in accordance with KRS 141.120(9)(b)(1) or (2)
must be attached to the return when filed.
Mandatory Nexus Consolidated Returns—An affiliated group filing a
mandatory nexus consolidated return is treated as a single corporation.
All transactions between members of the affiliated group shall be
eliminated in determining the sales, property and payroll factors.
Attach Schedule A-N, Apportionment Factor Schedule (For a Nexus
Consolidated Tax Return), to Schedule A reflecting the computation
of the consolidated factors.
COMPUTATION OF APPORTIONMENT FRACTION
Schedule A must be submitted with the applicable tax return (Form 720,
720S, 725, 765 or 765-GP). If the corporation or any corporation in an
affiliated group filing Schedule A owns an interest in a limited liability
pass-through entity or a general partnership (organized or formed as a
general partnership after January 1, 2006) doing business in Kentucky,
complete Schedule A-C, Apportionment and Allocation-Continuation
Sheet. If the pass-through entity filing Schedule A owns an interest in
a pass-through entity doing business in Kentucky, complete Schedule
A-C, Apportionment and Allocation-Continuation Sheet.
If Schedule A-C is required, complete Schedule A-C and enter the
amounts from Schedule A-C, Total column, Lines 1, 2, 5, 6, 8 and 9
on the corresponding lines of Schedule A, Section I, Lines 1, 2, 5, 6, 8
and 9. The apportionment fraction is then determined by completing
Schedule A, Section I, Lines 3, 4, 7, 10, 11 and 12.
A corporation or pass-through entity not required to file Schedule A-C
shall compute its apportionment fraction as follows:
Sales—Total sales include all gross receipts other than nonbusiness
receipts, except as provided in KRS 141.121. Sales of real or tangible
personal property are assigned to Kentucky if the property is located in
Kentucky or is shipped or delivered to a purchaser in Kentucky. Sales
of tangible personal property to the U.S. government are assigned to
Kentucky if the property is shipped from Kentucky.
KRS 141.120(8)(c)(3) provides that sales other than sales of tangible
personal property are assigned to Kentucky if the income–producing
activity is performed entirely within Kentucky or if the income–
producing activity is performed both within and without Kentucky
and a greater portion of the income–producing activity is performed
in Kentucky than in any other state based on cost of performance.
The following are general guidelines for assigning these receipts to
Kentucky but should not be considered all–inclusive:
A.	 Receipts from intangibles are assigned to Kentucky if the
corporation’s commercial domicile is in Kentucky or the intangible
has acquired a Kentucky business situs. Examples of receipts
from intangibles which are deemed to have acquired a Kentucky
business situs are franchise fees from a franchisee located in

Kentucky and a corporation’s Kentucky distributive share of net
income from a partnership doing business in Kentucky.
B.	 Rents or royalties from real or tangible personal property are
assigned to Kentucky if the property is located in Kentucky. In
the case of mobile property, the rent is assigned to Kentucky if
the lessee’s base of operations for the property is in Kentucky.
C.	 Receipts from the performance of services are assigned to
Kentucky if the services are performed entirely in Kentucky or the
services are performed both within and without Kentucky but a
greater portion is performed in Kentucky than in any other state
based on cost of performance.
Property—Total property includes all real and tangible personal
property owned or rented and used during the taxable year. Property
owned is valued at original cost. Leased property is valued at eight
times the annual rental rate less any nonbusiness subrentals. Real
and tangible personal properties are assigned to Kentucky if owned or
rented and used in Kentucky. Exclude (a) construction in progress and
(b) property which has been certified by Kentucky as a pollution control
facility and is owned or leased by the corporation. Safe harbor lease
property must be included in the factor of the seller/lessee at cost and
excluded from the property factor of the purchaser/lessor.
Payroll—Total payroll includes all compensation paid or payable by the
corporation during the tax period. Kentucky payroll is that portion of
total payroll that is paid or payable for services performed within the
state. Compensation is paid or payable in this state if: (i) the individual’s
service is performed entirely within the state; (ii) the individual’s
service is performed both within and without the state, but the service
performed without the state is incidental to the individual’s service
within the state; or (iii) some of the service is performed in the state
and the base of operations or, if there is no base of operations, the
place from which the service is directed or controlled is in the state, or
the base of operations or the place from which the service is directed
or controlled is not in any state in which some part of the service is
performed, but the individual’s residence is in this state.
Apportionment Fraction—To compute the apportionment fraction, the
sales factor must be multiplied by two and the property and payroll
factors must each be multiplied by one and the total divided by four.
A corporation which does not have sales, property or payroll must
average only the factors which are present to determine the weighted
apportionment fraction.
APPORTIONMENT AND ALLOCATION OF INCOME
Business income arises from transactions and activities in the regular
course of the corporation’s trade or business and includes income
from tangible and intangible property if the acquisition, management
or disposition of the property constitutes integral parts of the
corporation’s trade or business.
Classifying income by categories (such as interest, rents, royalties
and capital gains) does not determine whether income is business
or nonbusiness. For example, gain or loss recognized on the sale of
property may be business income or nonbusiness income depending
upon its relationship to the corporation’s trade or business.
Nonbusiness income includes all income not properly classified as
business income less all direct or indirect expenses attributable to
the production of this income. Nonbusiness income is allocated to
Kentucky if (a) the corporation’s commercial domicile (the principal
place from which the trade or business is managed) is located in
Kentucky or (b) property creating the nonbusiness income is utilized
in Kentucky. Generally, tangible personal property is utilized in
Kentucky if it is physically located in Kentucky; intangible property,
such as patents and copyrights, is utilized in Kentucky if it is actually
used in Kentucky.