Kentucky Kentucky General Partnership Income Return Instructions

Kentucky General Partnership Income Return Instructions
Form 765-GP Instructions
INSTRUCTIONS

765-GP
Commonwealth of Kentucky
Department of Revenue

KENTUCKY GENERAL PARTNERSHIP
INCOME RETURN

2019

PURPOSE OF INSTRUCTIONS

HOW TO OBTAIN ADDITIONAL FORMS

These instructions have been designed for Kentucky
general partnerships, both domestic and foreign,
which are required by law to file a Kentucky general
partnership income return (Form 765-GP). Form 765-GP
is complementary to the federal form 1065.

Forms and instructions are available at all Kentucky
Taxpayer Service Centers (see page 14). 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 2019 Regular Session of the General
Assembly—Kentucky clarified and modified several
of the tax changes passed in 2018. The Department
of Revenue (“Department”) has guidance at
https://revenue.ky.gov/TaxProfessionals/Pages/default.aspx .
Internal Revenue Code (IRC) Update—House Bill (HB)
354 updated the Internal Revenue Code (IRC) reference
date to December 31, 2018 for taxable years beginning
on or after January 1, 2019.
Estimated
Tax
Payment
Requirements—2019
estimated tax rules and penalties changed to generally
follow federal for corporations and pass-through
entities. Estimated payments are broken into four
equal payments of 25% of the estimated tax. These
payments are due April 15, June 15, September 15, and
December 15 each year. Estimated payments are due
for fiscal year filers on the 15th day of the 4th, 6th, 9th,
and 12th months each year. Annualization and adjusted
seasonal installment methods are now allowed for
Kentucky estimated tax payment purposes. The
declaration penalty has been replaced with an addition
to tax penalty that mirrors the federal penalty for late
or underpaid estimated tax payments.
Seven-month Extensions for C Corporations—C
corporations requesting an extension of time to file
(on Form 720EXT) on or after June 27, 2019 will now
be granted seven (7) months (from the previous six
months) to file their tax return.
Unitary Combined Filing Required—Corporations
doing business in Kentucky that are part of a unitary
business must begin filing combined returns for tax
years beginning on or after January 1, 2019, unless
they elect to file a same-as-federal affiliated group
consolidated return. Unitary combined filers should
use the new Form 720U and accompanying schedules.

•	 Net Operating Losses (NOL)—HB 458 allows NOLs to
be shared among taxpayer members of a combined
group, subject to certain limitations.
•	 “Common control” defined—Corporations within a
combined group must be more than 50% owned by
another corporation within the group.
•	 I n te rc o m p a ny   e l i m i n a t i o n s — I n t e r c o m p a ny
transactions should be eliminated in the calculation
of combined income and gross receipts.
•	 Includible entities. HB 354 and HB 458 clarified the
definitions of “water’s edge”, “tax haven”, and other
provisions affecting which companies are included
in the combined group. KRS 141.202
•	 Regulatory guidance. The department proposed a
regulation, 103 KAR 16:400, to provide taxpayers
additional guidance on unitary combined filing.
Elective Consolidated Returns—The election period
was shortened to 48 months (from the previous 96
months). To make the election, the common parent of
the affiliated group must attach the Kentucky Form 722
to the return on or before the due date of the return,
including extensions, for the first tax year the election
is made. A copy of the initial election must be attached
to the return for each year in which the election is
effective.
Tax Credit Changes:
Inventory Tax Credit—The inventory tax credit increases
to 50% of the ad valorem (tangible personal property)
tax timely paid in 2019. Rental heavy equipment is now
subject to ad valorem tax and thus is eligible for the
credit.
Page 1 of 14

765-GP
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INSTRUCTIONS

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 2020 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%).

Page 2 of 14

including extensions, for the first tax year the election is
made. A copy of the initial election must be attached to
the return for each year in which the election is effective.
Updated:
Form 2220–K—Updated to include estimated tax
rules and penalty changes to follow federal rules for
corporations and pass-through entities. Annualization
and adjusted seasonal installment methods are now
allowed for Kentucky estimated tax payment purposes.
The declaration penalty has been replaced with an
addition to tax penalty that mirrors the federal penalty
for late or underpaid estimated tax payments.

New:

Form 720ES—Updated to include estimated tax changes
to generally follow federal dates for corporations and
pass-through entities. Estimated payments are broken
into four equal payments of 25% of the estimated tax.
These payments are due April 15, June 15, September
15, and December 15 each year. Estimated payments
are due for fiscal year filers on the 15th day of the 4th,
6th, 9th, and 12th months each year. Annualization and
adjusted seasonal installment methods are now allowed
for Kentucky estimated tax payment purposes.

Form 720U—Unitary combined filers should use the
new Form 720U and accompanying schedules included
in the 720U packet to file their returns.

KIRA–SP, KJDA–SP, KJRA–SP, and KBI–SP—Updated to
request the amount of credit claimed for local wage
assessments.

Form 722—Use Form 722 to elect to file a consolidated
return including all members of the federal affiliated
group. To make the election, the common parent of
the affiliated group must attach the Kentucky Form 722
to the return on or before the due date of the return,

Forms 725, 725–EZ, and 765—Updated to include income
tax payment summary.

KENTUCKY FORM CHANGES

Schedule INV–Updated to include Section A to report
the Timely Inventory Tax Paid per local bills.

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INSTRUCTIONS

Page 3 of 14

Electronic Filing FAQs and Helpful Tips
•	

Mandatory E-File if Gross Receipts ≥ $1,000,000—For tax years beginning on or after January 1, 2019, corporations
and pass-through entities are required to e-file if their federal gross receipts are one million dollars ($1,000,000) or
greater. This applies to Forms 720, 720S, 720U, 765, 765GP, 725, and 725EZ. KRS 131.250(2)(g)

•	 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.
•	

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

Filing Tips and Checkpoints
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:
•	

Filing Form—Only a general partnership should
file Form 765-GP. All other partnerships should file
Form 765.

•	

Payment—No money is due with a Form 765-GP.

•	

Account Number—Always ensure the correct
Federal Identification Number is used on the return
being filed.

•	

Extensions—Extensions are for extending the filing
date only; late filing penalties may apply to returns
filed after the extended due date.

•	

Corrected K-1’s—Adjustments to LLET or distributive
share require that corrected Kentucky K-1’s are sent
to all partners, members, or shareholders for proper
compliance by taxpayers.

•	

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 general partnership 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.

•	

Incorrect Year Forms—Returns submitted on the
wrong year form, on or before the due date, will be
accepted as timely filed, but will require the return
to be revised on the correct year form before the
return can be processed.

•	

Additional errors that delay processing returns:
¡	Incomplete form submitted
¡	Incomplete information
¡	Missing forms or schedules
¡	Incorrect taxable year end

765-GP
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INSTRUCTIONS

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IMPORTANT
General Partnerships must create a Kentucky Form 4562, Schedule D
and Form 4797 by converting federal forms.
Schedule 4562
Depreciation—For property placed in service after September
10, 2001, Kentucky depreciation (§168) is determined per the
Internal Revenue Code (IRC) in effect on December 31, 2001.
Section 179 Deduction—For property placed in service after
September 10, 2001, but prior to January 1, 2020, only the
expense deduction ($25,000) allowed under §179 of the IRC
in effect on December 31, 2001, exclusive of any amendments
made subsequent to that date, is allowed.
For property placed in service on or after January 1, 2020, only
the expense deduction ($100,000) allowed under §179 of the IRC
in effect on December 31, 2003, exclusive of any amendments
made subsequent to that date, is allowed.
For 2019 returns, any general partnership 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;
• 	 IRC §179 expense deduction in excess of $25,000 for
property placed in service after September 10, 2001, but
prior to January 1, 2020; or
•	 IRC §179 expense deduction in excess of $100,000 for
property placed in service on or after January 1, 2020.
If a general partnership has taken MACRS bonus depreciation or
IRC §179 expense deduction in excess of the amounts outlined
above for any year, federal and Kentucky differences will exist
and the differences will continue through the life of the assets.
Important: If a general partnership has not taken MACRS
bonus depreciation or the IRC §179 expense deduction in excess
of the amounts outlined above 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 765-GP 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 1065, Line 16(a) must
be included on Form 765-GP, Part I, Line 3. If federal Form
4562 is required to be filed for federal income tax purposes,
a copy must be attached to Form 765-GP.
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 (§168)
per the IRC in effect on December 31, 2001, by ignoring the
lines and instructions regarding the special depreciation
allowance. NOTE: For Kentucky purposes, for property
placed into service between September 10, 2001 and
December 31, 2019, 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. For Kentucky purposes,
for property placed into service on or after January 1, 2020,
the maximum IRC §179 deduction amount on Line 1 is
$100,000 and the threshold cost of IRC §179 property on Line
3 is $400,000. The 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 the threshold.
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 general partnership must attach the Kentucky Form
4562 to Form 765-GP and the amount from Kentucky Form
4562, Line 22 less the IRC §179 deduction on Line 12 must
be included on Form 765-GP, Part I, Line 8. The IRC §179
deduction from the Kentucky Form 4562, Line 12 must be
included on Form 765-GP, Schedule K, Section A, Line 9.
A Kentucky Form 4562 must be filed for each year, even
though a federal Form 4562 may not be required.
Schedule 4797 and Schedule D
Gains/Losses from Disposition of Assets—Determining and
Reporting Differences in Gain or Loss From Disposition of
Assets—If during the year the general partnership disposes of
assets on which it has taken the special depreciation allowance
or the additional IRC §179 deduction for federal income tax
purposes, the general partnership will need to determine and
report the difference in the amount of gain or loss on such
assets as follows:
1.	Conver t federal Schedule D (Form 1065) 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 amount from Kentucky
Schedule D, Line 7 on Form 765-GP, Schedule K, Section A,
Line 4(d) or 7. Enter the amount from Kentucky Schedule D,
Line 15 on Form 765-GP, Schedule K, Section A, Line 4(e)
or 7. Federal Schedule D (Form 1065) filed with the federal
return and the Kentucky Schedule D must be attached to
Form 765-GP.
2.	 If the amount reported on federal Form 1065, Line 6 (from
Form 4797, Line 17) is a gain, enter this amount on Schedule
O–PTE, Part II, Line 1. If the amount reported on federal
Form 1065, Line 6 (from Form 4797, Line 17) is a loss, enter
this amount on Schedule O–PTE, Part I, Line 1. 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–PTE, Part I, Line 2. If the amount
on Kentucky Form 4797, Line 17 is a loss, enter this amount
on Schedule O–PTE, Part II, Line 2. Federal Form 4797 filed
with the federal return and the Kentucky Form 4797 must
be attached to Form 765-GP.

765-GP
(2019)

INSTRUCTIONS

Tax Treatment of Kentucky General Partnerships and Partners
General partnerships are exempt by law from Kentucky income
tax. However, general partners of general partnerships doing
business in Kentucky must report their share of income for
Kentucky income tax purposes. This applies to individuals,
trusts, estates, and corporations. Individuals who are Kentucky
residents are required to file Form 740 and report their share of
general partnership income earned within or without Kentucky.
A nonresident partner’s distributive share income is reported
by the general partnership on a nonresident withholding return.
Resident partners of a general partnership must report and
pay tax on the distributive share of net income, gain, loss, or
deduction. Nonresident partners of a general partnership must
report and pay tax on the distributive share of net income, gain,
loss, or deduction multiplied by the apportionment fraction per
KRS 141.206(11)(b). KRS 141.206(7) and (8)
If the general partnership is a partner or member of a limited
liability pass–through entity doing business in Kentucky, the
general partners are entitled to an LLET credit against taxes
imposed by KRS 141.020 or KRS 141.040 and KRS 141.0401.
The LLET credit is the general partners’ proportionate share of
the LLET from the limited liability pass–through entity for the
current year after the subtraction of any credits identified in KRS
141.0205 and reduced by the minimum tax of $175. The LLET
credit allowed may be applied to the income tax assessed on
the income from the limited liability pass–through entity. Any
remaining LLET credit from the limited liability pass–through
entity will be disallowed. KRS 141.0401(3)

GENERAL INFORMATION
Internal Revenue Code Reference Date— Kentucky’s Internal
Revenue Code (IRC) reference date is December 31, 2018,
exclusive of any amendments made subsequent to that date,
other than amendments that extend provisions in effect
on December 31, 2018, that would otherwise terminate, for
purposes of computing corporation and individual income tax,
except for depreciation differences per KRS 141.0101.
Who Must File—A Kentucky General Partnership Income
Return (Form 765 – GP) must be filed by ever y general
partnership: (a) being organized under the laws of this state;
(b) having a 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 purpose of selling them goods or services. KRS 141.010(7)
and KRS 141.206(1)

Page 5 of 14

Nonresident Withholding and Composite Return (Form 740NP–
WH)

A partner or member that is an S corporation or partnership
is not subject to withholding. S corporations and partnerships
are pass-through entities per KRS 141.010(22).
KRS 141.206(4) provides that for taxable years beginning on
or after January 1, 2019, every pass–through entity required
to file a return under KRS 141.206(1), except publicly traded
partnerships defined in KRS 141.0401(6)(a)18 and (b)14, must
withhold Kentucky income tax or file a composite return on
the distributive share, whether distributed or undistributed,
of each nonresident individual (includes an estate or trust)
partner, member, or shareholder, or each C corporation partner
or member that is doing business in Kentucky only through its
ownership interest in a pass–through entity. Withholding and
composite filing is at the highest rate provided in KRS 141.020
or KRS 141.040.
Withholding is not required if: (a) the partner, member, or
shareholder is exempt from withholding per KRS 141.206(6)(a);
(b) the partner or member is exempt from Kentucky income tax
per KRS 141.040(1); (c) the pass-through entity is a qualified
investment partnership per KRS 141.206(14), and the partner,
member, or shareholder is an individual; or (d) the partner or
member is a pass-through entity.
For taxable years beginning on or after January 1, 2019, a passthrough entity required to withhold or file a Composite return
on Kentucky income tax per KRS 141.206 must make estimated
tax payments if required by KRS 141.206(5). If the pass-through
entity is required to make estimated tax payments for taxable
years beginning on or after January 1, 2019, use Form 740NPWH-ES (Kentucky Estimated Tax Voucher).
The reporting of a nonresident individual’s, estate’s, or trust’s
net distributive share income and withholding on Form
740NP–WH at the rate of five percent (5%) will satisfy the filing
requirements of KRS 141.180 for a nonresident individual,
estate, or trust partner, member, or shareholder whose only
Kentucky source income is net distributive share income. The
partners’, members’, or shareholders’ distributive share of
income must include all items of income or deduction used
to compute adjusted gross income on the Kentucky return that
is passed through to the partner, member, or shareholder by
the pass–through entity, including but not limited to interest,
dividend, capital gains or losses, guaranteed payments, and
rents (KRS 141.206(15)). The nonresident individual, estate,
or trust partner, member, or shareholder may file a Kentucky
Individual Income Tax Return Nonresident or Part–Year Resident
(Form 740–NP) or a Kentucky Fiduciary Income Tax Return
(Form 741) to take advantage of the credits and deductions.

General Partnerships—General partnerships doing business in
Kentucky solely as a partner in a pass–through entity will file
Form 765–GP per KRS 141.010, KRS 141.120, and KRS 141.206.
For apportionment information, see instructions on page 7.

A pass–through entity must file Form 740NP–WH and complete
a Form PTE–WH for each nonresident individual, estate, or
trust partner, member, or shareholder; or corporate partner
or member. Form 740NP–WH with Copy A of each Form PTE–
WH must be filed and paid by the 15th day of the fourth month
following the close of the taxable period. Provide copies B and
C of Form PTE–WH to the partner, member, or shareholder.

Pass-through Entities—A pass-through entity doing business
in Kentucky solely as a partner or member in a pass-through
entity will file Form 765-GP per KRS 141.010, KRS 141.120, and
KRS 141.206. (See Schedule A- Apportionment and Allocation
Instructions.)

Required Forms and Information—A partnership must enter
all applicable information on Form 765–GP, attach a schedule
for each line item or line item instruction which states “attach
schedule,” and attach the following forms or schedules, if
applicable:

765-GP
(2019)

INSTRUCTIONS

Kentucky Forms and Schedules
1.	 General Partnership Income Return (Form 765–GP)
2.	 Partner’s Share of Income, Credits, Deductions, Etc.—
Schedule K–1 (Form 765–GP)
3.	 Apportionment and Allocation (Schedule A)
4.	 Cost of Goods Sold (Schedule COGS)
5.	 Application for Extension of T
  ime to File Individual, General
Partnership and Fiduciary Income Tax Returns for Kentucky
(Form 40A102)
6.	 Related Party Costs Disclosure Statement (Schedule RPC)
7.	 Other Additions And Subtractions To/From Federal Ordinary
Income (Schedule O–PTE)
Required Federal Forms and Schedules
All partnerships must provide a copy of the following federal
forms submitted to the Internal Revenue Service:
1.	 Form 1065, all pages
2.	 Form 1125-A—Cost of Goods Sold
3.	 Form 4797—Sales of Business Property
4.	 Schedule D—Capital Gains and Losses
5.	 Form 5884—Work Opportunity Credit
6.	 Schedules for items on Form 1065, Schedule L, which state,
“attach schedule.”

40A102, Application for Extension of Time to File Individual,
General Partnership, and Fiduciary Income Tax Returns for
Kentucky, 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. 103 KAR 15:050
Federal Extension—A partnership granted an extension of time
for filing a federal income tax return will be granted the same
extension of time for filing a Kentucky income and LLET return
for the same taxable year if a copy of the federal Form 7004 is
attached to the Kentucky return when it is filed. A copy of the
federal Form 7004 should not be mailed to the Department of
Revenue before filing the return.
Amended Return—To correct Form 765–GP as originally filed,
file an amended Form 765–GP and check the appropriate box
on page 1, Item C. If the amended return results in a change in
income or a change in the distribution of any income or other
information provided to partners, an amended Schedule K–1
(Form 765–GP) must also be filed with the amended Form 765–GP
and given to each partner. Check the Amended K–1 box on each
Schedule K–1 to indicate that it is an amended Schedule K–1.
Internal Revenue Service Audit Adjustments—A general
partnership which has received final adjustments resulting from
an Internal Revenue Service audit must submit copies of the
“final determinations of the federal audit” within 180 days of the
conclusion of the federal audit. Use Form 765–GP for reporting
federal audit adjustments, check the Amended Return box, and
attach the complete Revenue Agent Report (RAR).
Mail returns with federal audit adjustments (RAR) to:
Corporate Governmental Programs Section
P. O. Box 1074, Station 68
Frankfort, KY 40602-1074

7.	 Form 4562—Depreciation and Amortization
8.	 Form 8825—Rental Real Estate Income and Expenses of a
Partnership or an S Corporation
Accounting Procedures—Kentucky income tax law requires a
general partnership 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. Attach a copy of the federal
approval to the return when filed. KRS 141.140
Filing Date—A general partnership return must be filed on or
before the 15th day of the fourth month following the close of
the taxable year.
If the filing date falls on a Saturday, Sunday, or a legal holiday,
the filing date is deemed to be on the next business day. KRS
446.030(1)(a)
Mail the return to:
Kentucky Department of Revenue
Frankfort, KY 40620
Extensions—A six-month extension of time to file a general
partnership income return may be obtained by filing Form

Page 6 of 14

GENERAL INSTRUCTIONS (FORM 765-GP)
Enter the general partnership’s federal identification number.
See federal Publication 583 if the general partnership has not
obtained this number.
Item A—
Name and Address—Print or type the general partnership
name. For the address, include the suite, room, or other unit
number after the street address. If the U.S. Postal Service
does not deliver mail to the street address and the general
partnership has a P.O. Box, show the box number instead of
the street address.
Change of Name—Check the applicable box if the general
partnership’s name has changed since the filing of the prior
year Kentucky tax return. Attach a statement to the tax return
providing the general partnership’s name reflected on the prior
year Kentucky tax return.
Period Covered—File the 2019 return for calendar year 2019 and
fiscal years that begin in 2019. For a fiscal year, fill in the taxable
period beginning and ending at the top of Form 765–GP.

765-GP
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INSTRUCTIONS

Page 7 of 14

NOTE: For 52/53 week filers, fill in the taxable period beginning
and ending dates as specified below:

(b)	 Publicly Traded Partnership—This partnership is a publicly
traded partnership as provided by KRS 141.0401(6)(r).

•	 Begin on the first day of the calendar month beginning nearest
to the first day of the 52/53-week tax year.

(c)	 Qualified Investment Partnership—The general partnership
is a qualified investment partnership per KRS 141.206(14)(a).

•	 End on the last day of the calendar month ending nearest to
the last day of the 52/53-week tax year.

(d)	 Final Return—This is the general partnership’s final Kentucky
tax return. Check the appropriate box in Part II – Explanation
of Final Return and/or Short-Period Return.

All partnerships must enter Taxable Year Ending at the top right
of Form 765 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:

	

1 2  1 9
__ __ / __ __

  MM	 YY

•	 A fiscal year is 12 consecutive months ending on the last day
of any month except December. A fiscal year ending January
31, 2020, would be entered as:

	

0 1  2 0
__ __ / __ __

  MM	 YY

•	 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 2020, the
taxable year ending would be entered as:

(e)	 Short-period Return—This return is for a period of less than
one year and not an initial return or final return. Check the
appropriate box in Part II – Explanation of Final Return and/
or Short-Period Return.
(f)	 Amended Return—This is an amended tax return. Provide
an explanation of all changes in Part III – Explanation of
Amended Return Changes.
Item D—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.
	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

Failure to properly reflect the Taxable Year Ending may result
in delinquency notices or billings for failure to file.

	

34	

Other (attach statement)

Date Commenced or Qualified—Enter the date the entity’s
business commenced or qualified.

INCOME/DEDUCTIONS TO BE REPORTED—The income and
deductions of a Kentucky general partnership are determined
under the Internal Revenue Code (IRC) in effect December 31,
2018, except for differences provided in KRS 141.010 and KRS
141.206.

	

1 2  1 9
__ __ / __ __

  MM	 YY

Principal Business Activity in Kentucky—Enter the entity’s
principal business activity in Kentucky.
North American Industrial Classification System (NAICS)—Enter
your six–digit NAICS code. To view a complete listing of NAICS
codes, visit the Census Bureau Web site at www.census.gov/
eos/www/naics .
Telephone Number—Enter the business telephone number of
the general partner or chief financial officer signing this return.
Item B—Enter number of partners (attach K–1s).
Item C—Check the applicable boxes:
(a)	 Initial Return—This is the general partnership’s first time filing
a return in Kentucky. Complete questions 1 and 2 on Schedule
	
Q—Kentucky General Partnership Questionnaire.

Differences include but are not limited to:
(1)	 Exclude interest income from U.S. government obligations.
(2)	 Include interest income from obligations of other states and
their political subdivisions.
(3)	 Exclude MACRS bonus depreciation or IRC §179 expense
deduction in excess of $25,000.
For additional instructions for reporting income and deductions,
see federal instructions, Form 1065.

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INSTRUCTIONS

PART I – ORDINARY INCOME (LOSS) COMPUTATION
Line 1—The Kentucky Form 765–GP begins with ordinary
income (loss) reported on federal Form 1065, Line 22. Report
adjustments to federal ordinary income (loss) on Form 765–GP,
Lines 2, 3, 4, 5, 7, 8, and 9. See instructions for Lines 3, 5, 8, and
9 for reporting differences in depreciation and basis for assets
purchased after September 10, 2001.
Reporting Depreciation Differences—Important: Use Lines 3
and 8 only if the general partnership has elected for federal
income tax purposes to take the special depreciation allowance.
Attach a copy of the federal Form 4562 filed for federal income
tax purposes to verify that no adjustments are required.
Line 2 – 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 reflecting the total taxes deducted on Form 1065.
KRS 141.039(2)(c)
Line 3—See instructions on page 4 regarding depreciation and
IRC §179 deduction differences, and if applicable, include the
depreciation amount from Line 16a of Form 1065 (do not include
the IRC §179 deduction). If federal Form 4562 is required to be
filed for federal income tax purposes, a copy must be attached.
Line 4—Enter related party cost additions from Schedule RPC,
Part II, Section B, Line 1.
Line 5— Enter the amount from Schedule O–PTE, Part I, Line 7.
Line 6— Enter the total of Lines 1 through 5.
Line 7—Enter the amount of the work opportunity credit reflected
on federal Form 5884. For Kentucky purposes, the general
partnership 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 8—Enter Kentucky depreciation (do not include IRC §179
deduction). See instructions on page 4 regarding depreciation
and IRC §179 deduction differences, and if applicable, Kentucky
converted Form 4562 must be attached.
Line 9—Enter the amount from Schedule O–PTE, Part II, Line 7.
Line 10— Enter the total of Lines 7 through 9.
Line 11— Enter Line 6 less Line 10.

SCHEDULE Q—Answer all applicable questions on Schedule Q.
SCHEDULE K (FORM 765-GP)
General Instructions—Complete all applicable lines by entering
the total pro rata share amount for each item listed. Federal
instructions for Form 1065 and federal Schedule K provide
additional information which will assist the general partnership
in completing Schedule K, Form 765–GP.
A general partnership filing Form 765–GP must use Form 765GP(K), “Kentucky Schedule K for General Partnerships with
Economic Development Project(s),” if the partnership has one or
more projects under the Kentucky Rural Economic Development
Act (KREDA), Kentucky Industrial Development Act (KIDA),
Kentucky Jobs Retention Agreement (KJRA), Kentucky Industrial
Revitalization Act (KIRA), Kentucky Jobs Development Act

Page 8 of 14

(KJDA), Kentucky Business Investment Program (KBI), Kentucky
Reinvestment Act (KRA), Incentives for Energy Independence Act
(IEIA), or Farming Operation Networking Project (FON).
SECTION A—Income (Loss) and Deductions
Line 1—Enter Kentucky ordinary income (loss) from trade or
business activities reported on Form 765–GP, Ordinary Income
(Loss) Computation, page 1, Line 11.
Line 2—Enter net income (loss) from rental real estate activities
reported on federal Schedule K, Form 1065 adjusted to reflect
any differences in Kentucky and federal income tax laws.
Line 3(a)—Enter the gross income from other rental activities
reported on federal Schedule K, Form 1065.
Line 3(b)—Enter the expenses from other rental activities
reported on federal Schedule K, Form 1065 adjusted to reflect
any differences in Kentucky and federal income tax laws.
Line 3(c)—Enter the difference of Line 3(a) and Line 3(b).
Line 4(a)—Enter interest income from federal Schedule K, Form
1065 adjusted to exclude tax–exempt U.S. government interest,
if any, and to include interest income from obligations of states
other than Kentucky and their political subdivisions.
Line 4(b)—Enter the amount of dividend income reported on
federal Schedule K, Form 1065.
Line 4(c)—Enter the amount of royalty income reported on
federal Schedule K, Form 1065.
Line 4(d)—See instructions on page 4 regarding differences in
gain or loss from disposition of assets, and if applicable, enter the
amount from Line 7 of the Kentucky Schedule D that is portfolio
income. Report any gain or loss that is not portfolio income on
Line 7, Schedule K, Form 765-GP. Kentucky Schedule D must be
attached to Form 765-GP. Otherwise, enter the amount from Line
7 of the federal Schedule D (Form 1065) that is portfolio income.
Line 4(e)—See instructions on page 4 regarding differences in
gain or loss from disposition of assets, and if applicable, enter the
amount from Line 15 of the Kentucky Schedule D that is portfolio
income. Report any gain or loss that is not portfolio income on
Line 7, Schedule K, Form 765–GP. Kentucky Schedule D must be
attached to Form 765–GP. Otherwise, enter the amount from Line
15 of the federal Schedule D (Form 1065) that is portfolio income.
Line 4(f)—Enter any other portfolio income not reported on Lines
4(a) through 4(e), Schedule K, Form 765–GP.
Line 5—Enter guaranteed payments to partners from federal
Schedule K, Form 1065.
Line 6—See instructions on page 4 regarding differences in
gain or loss from disposition of assets. If applicable, enter the
amount from Line 17 of the Kentucky Form 4797, and Kentucky
Form 4797 must be attached to Form 765–GP. Otherwise, enter
net gain (loss) under IRC §1231 from federal Form 4797. Do not
include net gains (losses) from involuntary conversions due to
casualties or thefts on this line. Instead, report them on Line 7.
Line 7—Enter all other items of income (loss) of the general
partnership not included on Lines 1 through 6. See federal
instructions for Schedule K, Form 1065.
Line 8—Enter total contributions paid by the general partnership
during its taxable year and attach a schedule showing separately

765-GP
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INSTRUCTIONS

the contributions subject to percentage limitations of each
category. These percentage limitations must be applied to the
Kentucky amounts rather than the federal amounts.
Line 9—See instructions on page 4 regarding depreciation and
IRC §179 deduction differences, and if applicable, include the
amount from Line 12 of the Kentucky Form 4562. Kentucky Form
4562 must be attached. Otherwise, enter IRC §179 deduction
from federal Form 4562.
Line 10—Enter the expense deductions related to portfolio
income reported on federal Schedule K, Form 1065 adjusted to
exclude expenses related to tax–exempt interest income and
other exempt income.
Line 11—Enter any other deductions of the general partnership
not included on Lines 8, 9, and 10. See federal instructions for
Schedule K, Form 1065.

Page 9 of 14

BIO—Biodiesel tax credit per KRS 141.424; attach Schedule BIO
CCI—Clean Coal Initiative tax credit per KRS 141.428; attach
Schedule CCI
ETH—Ethanol tax credit per KRS 141.4242; attach Schedule ETH
CELL—Cellulosic Ethanol tax credit per KRS 141.4244; attach
Schedule CELL
RR–I—Railroad Maintenance and Improvement tax credit per
KRS 141.385; attach Schedule RR-I
RR–E—Railroad Expansion tax credit per KRS 141.386; attach
Schedule RR-E
ENDOW—ENDOW Kentucky tax credit per KRS 141.438; attach
Schedule ENDOW

Line 12(a)—Enter the general partnership’s deductible interest
expense allocable to debt on property held for investment
purposes. Property held for investment purposes includes
property that produces investment income (interest, dividends,
annuities, royalties, etc.). The total amount entered should
equal the amount of interest expense reported on federal
Schedule K, Form 1065 adjusted to exclude any interest expense
on debts incurred to purchase or carry investment property
producing, or held for the production of U.S. government
interest income.

NMDP—New Markets Development Program tax credit per KRS
141.434; attach Form 8874(K)-A

Lines 12(b)(1) and (b)(2)—Enter only the investment income
included on Lines 4(a), 4(b), 4(c), and 4(f), Schedule K, Form
765–GP, and only the investment expenses included on Line 10,
Schedule K, Form 765–GP. See federal instructions for Schedule
K, Form 1065.

Line 14—Enter the refundable certified rehabilitation tax
credit. Attach the Kentucky Heritage Council certification(s)
or Kentucky Schedule(s) K–1 (Form 765–GP).

Line 13 – Use the following codes for tax credits passed through
to the partnership’s owners.
KSBTC–Kentucky Small Business tax credit per KRS 141.384;
attach a copy of the Kentucky Economic Development Finance
Authority notification
STICA—Skills Training Investment Credit Act tax credit per KRS
141.405; attach copy of the Bluegrass State Skills Corporation
certification(s)
CR—Certified Rehabilitation tax credit per KRS 171.397; attach
a copy of the Kentucky Heritage Council certification(s)
UTC—Kentucky Unemployment tax credit per KRS 141.065;
attach Schedule UTC
RC—Recycling/Composting Equipment tax credit per KRS
141.390; attach Schedule RC
KIFA—Kentucky Investment Fund tax credit per KRS 154.20-258;
attach a copy of the Kentucky Economic Development Finance
Authority notification with the credit amount granted and the
first year the credit may be claimed

DS—Distilled Spirits tax credit per KRS 141.389; attach Schedule
DS
FILM—Film industry tax credit per KRS 141.383; attach film
office certification
INV—Inventory tax credit per KRS 141.408; attach Schedule INV

Line 15—Enter the refundable film industr y tax credit.
Attach the Kentucky Film Office certification(s) or Kentucky
Schedule(s) K-1 (Form 765-GP).
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 16(a)—Enter the information provided on federal Schedule
K, Form 1065, Line 13c(1).
Line 16(b)—Enter the amount reported on federal Schedule K,
Form 1065, Line 13c(2).
Line 17—Enter the total amount of tax exempt interest income
of the partnership from U.S. government bonds and securities
and obligations of Kentucky and its political subdivisions.
Line 18—Enter the total amount of any other type of income
of the partnership where the partner is exempt from Kentucky
income tax.

QR—Qualified Research facility tax credit per KRS 141.395;
attach Schedule QR

Line 19—Enter the total amount of nondeductible expenses paid
or incurred by the general partnership including, but not limited
to, state taxes measured by gross/net income, expenses related
to tax–exempt income, etc. Do not include a deduction reported
elsewhere on Schedule K, Form 765–GP, capital expenditures
or items the deductions for which are deferred to a later year.

GED—GED incentive tax credit per KRS 151B.402; attach
GED–Incentive Program Final Report (Form DAEL–31) for each
employee that completed a learning contract during the year

Line 20—Enter the amount reported on federal Schedule K,
Form 1065, Line 19a and 19b, adjusted to reflect any differences
in Kentucky and federal tax laws, such as depreciation.

VERB—Voluntary Environmental Remediation tax credit per
KRS 141.418; attach Schedule VERB

Line 21—Attach schedules to report the general partnership’s
total income, expenses, and other information applicable to

765-GP
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INSTRUCTIONS

items not included on Lines 1 through 12 and Lines 14 through
21 including, but not limited to, any recapture of Section 179
deduction, gross income and other information relating to
oil and gas well properties enabling the general partnership
to figure the allowable depletion deduction, and any other
information the partners need to prepare their Kentucky
income tax returns. See federal instructions for Schedule K,
Form 1065, Line 13d.

Page 10 of 14

identifying numbers, and other general partner information
must be complete and legible. Schedule K–1 (Form 765–GP)
must be completed and given to each general partner with
instructions on or before the day on which Form 765–GP is
filed with the Department of Revenue.
A copy of each partner’s K–1 (Form 765–GP) must be attached
to Form 765–GP filed with the Department of Revenue and a
copy kept as part of the general partnership’s records.

SECTION B—LLET Pass-through Items (Required)
Enter the corporation’s and pass-through entities partner’s
proportionate share of the receipts, gross profits, and
nonrefundable credit of the limited liability pass-through entity
or general partnership in Section B, Lines 1 through 5.
SECTION C—Apportionment Pass-through Items (if applicable)
Line 1—Enter the general partnership’s Kentucky receipts from
Schedule A, Part I, Line 1.
Line 2—Enter the general partnership’s total receipts from
Schedule A, Part I, Line 2.
SECTION D—Apportionment for Providers, (KRS 141.121(1)(e))
Line 1—Enter the general partnership’s Kentucky property from
Schedule A, Part I, Line 5.
Line 2—Enter the general partnership’s total property from
Schedule A, Part I, Line 6.
Line 3—Enter the general partnership’s Kentucky payroll from
Schedule A, Part I, Line 8.
Line 4—Enter the general partnership’s total payroll from
Schedule A, Part I, Line 9.

-

	Signature—Form 765–GP must be signed by a partner.
	
Failure by  a  partner  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.

SCHEDULE K–1 (FORM 765–GP)—KENTUCKY
PARTNER’S SHARE OF INCOME,
CREDITS, DEDUCTIONS, ETC.
General Instructions
Schedule K–1 (Form 765–GP) shows each general partner’s pro
rata share of the general partnership’s income, deductions,
credits, etc. On each Schedule K–1 (Form 765–GP), enter the
names, addresses, and identifying numbers of the general
partner and general partnership and complete items A, B,
C, D, and E. All general partners’ names, Social Security or

Specific Instructions
Federal instructions for Schedule K–1 (Form 1065) explain the
rules for allocating items of income (loss), deductions, credits,
etc., to each general partner. The distributive share items
reported on all Kentucky Schedules K–1, Lines 1 through 21
must equal the amounts reported on Kentucky Schedule K,
Lines 1 through 21. The distributive share items reported on all
Schedules K–1, Sections B, C, and D must equal the amounts
reported on comparable lines of Schedule K, Sections B, C,
and D, Schedule K–1. Section E does not correspond with
Schedule K.
Multiple Activities—If items of income, loss or deduction
from more than one activity are reported on Lines 1, 2, or 3 of
Schedule K–1 (Form 765–GP), the general partnership must
provide information for each activity to its general partners. See
Passive Activity Reporting Requirements in the instructions
for Schedule K–1 (Form 1065) for details on the information to
be provided on an attachment to Schedule K–1 (Form 765–GP)
for each activity.
At–Risk Activities—If the general partnership is involved in
one or more at–risk activities for which a loss is reported on
Schedule K–1 (Form 765–GP), the general partnership must
report information separately for each at–risk activity. See
Special Reporting Requirements for At–Risk Activities in the
federal instructions for Schedule K–1 (Form 1065) for details on
the information to be provided on an attachment to Schedule
K–1 (Form 765–GP) for each at–risk activity.
Sections A, B, C, and D—Enter the general partner’s total pro
rata share of each item listed on Schedule K, Form 765–GP.
Do not multiply these amounts by the percentage entered on
Item C(2). Attach schedules showing separately the required
information for each IRC §469 passive activity and each IRC
§465 at-risk activity. Other schedules are to be attached for
line items where requested on Schedule K-1 (Form 765-GP).
Enter on attached schedules the supplemental information
required to be reported separately to each general partner
for Lines 1 through 21 and any other information or items and
amounts not included on Schedule K–1 (Form 765-GP) for
which the partner needs to prepare a Kentucky income tax
return including, but not limited to, any recapture of IRC §179
deduction, gross income, and other information relating to
oil and gas well properties enabling the partner to figure the
allowable depletion deduction, etc. See instructions for federal
Schedule K–1 (Form 1065), Line 20.

765-GP
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TAX CREDIT SUMMARY

Kentucky Small Business Tax Credit Program—KRS 141.384
provides a Kentucky Small BusinessTax Credit Program (KSBTC)
nonrefundable tax credit against the taxes imposed by KRS
141.020 or KRS 141.040 and KRS 141.0401. A small business is
not eligible to apply for and receive final approval for the credit
until one year after the small business: (a) creates and fills one
or more eligible positions over the base employment, and that
position or positions are created and filled for twelve months; and
(b) invests $5,000 or more in qualifying equipment or technology.
The maximum amount of credits that may be committed in each
fiscal year by the Kentucky Economic Development Finance
Authority (KEDFA) is capped at $3 million.The maximum amount
of credit for each small business for each year must not exceed
$25,000. To claim the KSBTC credit, a copy of the notification
received from KEDFA must be attached to the tax return. 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. The tax credit not used during the year
of approval by KEDFA may be carried forward up to five years.
Skills Training Investment Tax Credit—To claim the STICA credit,
a copy of the Bluegrass State Skills Corporation certification(s)
reflecting the amount of credit awarded must be attached. The
credit must be claimed on the income tax return filed for the
taxable year during which the final authorizing resolution is
adopted by the Bluegrass State Skills Corporation. If the amount
of the credit exceeds the income tax liability for the taxable year
during which the final authorizing resolution is adopted by the
Bluegrass State Skills Corporation, the excess may be carried
forward for three successive years. If the credit claimed is being
carried forward from a prior year, attach a schedule reflecting
the computation of the amount of credit available to be carried
forward in addition to the Bluegrass State Skills Corporation
certification(s). KRS 141.405
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.
Certification copies must be attached to the return claiming the
credit. 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 or 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

Page 11 of 14

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
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
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

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TAX CREDIT SUMMARY

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 151B.402
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 taxes imposed by KRS 136.120, 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

Page 12 of 14

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
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 (50%) 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 when 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 (25%) 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
141.040 and KRS 141.0401 and if not used in the year the tax credit

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TAX CREDIT SUMMARY

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. Note: This credit may limit charitable contribution
deductions allowed under Section 170 of the IRC. See the IRC and
federal regulations for additional information on any limitations.
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 limite