Kentucky Related Party Costs Disclosure Statement

Related Party Costs Disclosure Statement
Schedule RPC
SCHEDULE

RPC

RELATED PARTY COSTS
DISCLOSURE STATEMENT

Commonwealth of Kentucky
Department of Revenue

2023

	 See instructions.

Taxable Year Ending

	 Attach to Form 720, 720U, or PTE.

	

Name of Entity	
Federal Identification Number	
		

__ __ __ __ __ __ __ __ __

__ __ / __ __
M M

Y Y

Kentucky Corporation/LLET
Account Number (if applicable)

__ __ __ __ __ __

Schedule RPC, Related Party Costs Disclosure Statement, must be completed by an entity that paid, accrued, or incurred intangible expenses, intangible interest expense, or management fees to a related member.
To be entitled to an exception from the add back of expenses and a corresponding deduction from net income, the taxpayer
must complete and attach this schedule to the applicable Kentucky tax return (Form 720, 720U, or PTE).
Failure to complete Schedule RPC and attach all supporting documentation will result in disallowance of the
exception(s).

PART I – RELATED PARTY COSTS
	1	Total intangible expenses paid to a related member: Do not include any interest
		 expense or costs related to intangible interest expense.............................................................	1	
	2	Total intangible interest expenses paid to a related member...............................................	2	
	3	Total management fees paid to a related member.................................................................	3	
	4	Total Related Party Costs: Add lines 1 through 3.....................................................................	4	

00
00
00
00

PART II – EXCEPTIONS TO ADD BACK
Section A — Exceptions to Expenses
	 1	 Enter amount from Part III, Section A, line 5...............................................................................	1	
	 2	 Enter amount from Part III, Section B, line 5...............................................................................	2	
	 3	 Enter amount from Part III, Section C, line 14............................................................................	3	
	4	Total Exceptions: Add lines 1 through 3...................................................................................	4	

00
00
00
00

	 Section B — Total Required Related Party Cost Add Back After Exceptions
	1	Total: Part I, line 4 less Part II, line 4. Enter here and on Form 720, Part I, line 6;
		 Form 720U, Schedule U4, line 6; or Form PTE, Part I, line 4.....................................................	1	

00

PART III – DETAIL OF EXCEPTIONS TO ADD BACK
Section A — Exception for related party costs where the entity and the recipient are both included in the same
consolidated Kentucky corporation income tax return

Name of Related Member

Federal Identification
Number

Amount
Deducted

Kentucky Corp./LLET
Account Number

	 1				

	 2				
	 3				
	 4				
	 5	 Total of lines 1 through 4. Enter here and on PART II, Section A, line 1			

230332 41A720RPC (10-23)	

Page 1 of 3

00
00
00
00
00

Schedule RPC
(2023)

Page 2 of 3

Section B — Exception for related party costs for transactions that the recipient regularly engages with one or more unrelated
parties on terms identical to that of the subject transaction and alternative apportionment methods
Transactions with terms identical to those with unrelated parties
	 1	 Has the recipient regularly engaged in transactions with one (1) or more unrelated parties on terms identical
		 to that of the subject transaction?
	 2	 Identical Terms—Exception amount enter here	
Alternative Apportionment
	 3	 Is there a written agreement between the taxpayer and the Department which provides for use of an alternative
		 method of apportionment per KRS 141.120(12)?
	 4	 Alternative Apportionment—Exception amount enter here 	
	 5	 Total of Line 2 and Line 4: Enter here and on Part II, Section A, Line 2	

¨ Yes  ¨ No
$

¨ Yes  ¨ No
$

$

NOTE: If the answer to Line 1 is “Yes”, attach copies of the written agreement between the taxpayer and the recipient and the recipient and the
unrelated party. If the answer to Line 3 is “Yes”, attach a copy of the written agreement between the taxpayer and the Department. Failure to attach
written agreements will result in a denial of the exception(s). If any of the answers are “No”, the taxpayer does not qualify for this exception.

Section C — Exception for related party costs paid to related members who are subject to tax in their state or country of domicile.
	 1	
		
		
		
		
	 2	
		
		
		
		
	 3	
		
		

Were any intangible expenses, intangible interest expenses, or management fees paid,
accrued, or incurred to a recipient where the expense or payment was subject to, in the
related member’s state or country of commercial domicile, a net income tax or a franchise
tax measured by, in whole or in part, net income? Note: Country must have in force a
comprehensive income tax treaty with the United States if the recipient is a foreign corporation.
Is the recipient engaged in substantial business activities separate and apart from the
acquisition, use, licensing, management, ownership, sale, exchange, or any other
disposition of intangible property, or in the financing of related members, as
evidenced by the maintenance of permanent office space and full-time employees
dedicated to the maintenance and protection of intangible property?
Is the transaction giving rise to the intangible expenses, intangible interest expenses, or
management fees between the taxpayer and the recipient made at a commercially
reasonable rate and at terms comparable to an arm’s length transaction?

Domestic

Foreign

¨ Yes  ¨ No

¨ Yes  ¨ No

¨ Yes  ¨ No

¨ Yes  ¨ No

¨ Yes  ¨ No

¨ Yes  ¨ No

NOTE: If the answers to Questions 1, 2, and 3 above in the Domestic column are all “Yes,” complete the following schedule and attach a copy of
the pertinent parts of the contract or other documentation that support this exception. Failure to provide the requested information will result in
a denial of the exception. If any of the answers are “No,” the taxpayer does not qualify for this exception.

Domestic
Name of Related
Member

Federal Identification
Number

State of Commercial
Domicile

Name of
Tax

Amount
Deducted

	 4				
	 5				
	 6				
	 7				
	8	Total of lines 4 through 7. 			

00
00
00
00
00

NOTE: If the Answers to lines 1, 2, and 3 in the Foreign column above are all “Yes”, complete lines lines 9 through 13 and attach a copy of all
pertinent parts of the contract or other documentation that supports the exception. Failure to provide the requested information will result in
the denial of the exception. If any of the answers are “No”, the taxpayer does not qualify for the exception.

Foreign

Name of Related Member

Name of Foreign
Nation

Description of
Treaty

	 9				
	10				
	11				
	12				
	13	 Total of lines 9 through 12. 			
	14	 Add line 8 and line 13. Enter here and on PART II, Section A, line 3			

230337 41A720RPC (10-23)

Amount
Deducted

00
00
00
00
00
00

Schedule RPC
(2023)

INSTRUCTIONS FOR RELATED PARTY COSTS

Page 3 of 3

KRS 141.205(1)(l) states that “related party costs” means intangible expense, intangible interest expense, management fees, and any
costs or expenses associated with other related party transactions.
KRS 141.205(1)(h) states that “recipient” means a related member or foreign corporation to whom the item of income that corresponds to
the intangible interest expense, the intangible expense, or the management fees, is paid.
KRS 141.205(1)(b) states that “intangible expenses” includes the following only to the extent that the amounts are allowed as deductions
or costs in determining taxable net income before the application of any net operating loss deduction per Chapter 1 of the Internal Revenue
Code: (i) Expenses, losses, and costs for, related to, or in connection directly or indirectly with the direct or indirect acquisition, use,
maintenance, management, ownership, sale, exchange, or any other disposition of intangible property; (ii) Losses, related to, or incurred in
connection directly or indirectly with, factoring transactions or discounting transactions; (iii) Royalty, patent, technical, and copyright fees; (iv)
Licensing fees; and (v) Other similar expenses and costs.
KRS 141.205(1)(c) states that “intangible interest expense” means only those amounts which are directly or indirectly allowed as deduction
per IRC §163 for purposes of determining taxable income under that code, to the extent that the amounts are directly or indirectly for, related
to, or connected to the direct or indirect acquisition, use, maintenance, management, ownership, sale, exchange, or any other disposition of
intangible property.
KRS 141.205(1)(d) states that “management fees” includes but is not limited to expenses and costs paid for services pertaining to accounts
receivable and payable, employee benefit plans, insurance, legal, payroll, data processing, purchasing, tax, financial and securities,
accounting, reporting and compliance services, or similar services, only to the extent that the amounts are allowed as a deduction or cost
in determining taxable net income before the application of net operating loss deduction for the taxable year per Chapter 1 of the Internal
Revenue Code.
PART I—RELATED PARTY COSTS
Line 1— Intangible Expenses—Enter the total of all intangible
expenses paid to a related member. Do not include any interest
expense or costs related to intangible interest expense.

Section B—Exception for related party costs for transactions
that the recipient regularly engages with one or more
unrelated parties on terms identical to that of the subject
transaction and alternative apportionment methods.

Line 2— Intangible Interest Expenses—Enter the total of all
intangible interest expenses paid to a related member.

Lines 1 and 3—Answer “Yes” or “No” by checking the applicable
box.

Line 3— Management Fees—Enter the total of all management
fees paid to a related member.

Lines 2 and 4—Enter the exception amount.

Line 4— Total Related Party Costs—Enter the total of Lines 1
through 3.

Line 5—Enter total of Section B, Lines 2 and 4 here and on Part
II, Section A, Line 2.

PART II—EXCEPTIONS TO ADD BACK

Section C—Exception for related party costs paid to related
members who are subject to tax in their state or country of
domicile.

Section A—Exceptions to Expenses
Line 1—Enter the amount from Part III, Section A, Line 5.
Line 2—Enter the amount from Part III, Section B, Line 5.
Line 3—Enter the amount from Part III, Section C, Line 14.
Line 4—Enter the total of Lines 1 through 3.

Questions 1 to 3—Answer questions 1 through 3. If the answers
in the Domestic column are all “Yes”, complete Lines 4 through 8.
If the answers in the Foreign column are all “Yes”, complete Lines
9 through 13.

Line 1—Enter the amount from Part I, Line 4 less the amount on
Part II, Line 4. Also, enter the amount on Form 720, Part I, Line 6;
Form 720U, Schedule U4, line 6; Form PTE, Part I, Line 4.

Lines 4 to 7—For each related member, include the name,
Federal Identification Number, state of commercial domicile, name
of tax, and the amount deducted by the taxpayer. If more than
four related members, attach a statement with each member’s
information and add to the total on Line 8.

PART III—DETAIL OF EXCEPTIONS TO ADD BACK

Line 8—Enter the total amount deducted. Add Lines 4 through 7.

Section B—Total Related Party Cost Add Back After Exceptions

Section A—Exception for related party costs where the entity
and the recipient are both included in the same consolidated
Kentucky corporation income tax return.
Lines 1 to 4—For each related member, include the name,
Federal Identification Number, Kentucky Corporation/LLET
Account Number, and the amount deducted by the taxpayer. If
more than four related members, attach a statement with each
member’s information and enter the total on Line 1.
Line 5—Enter the total of Lines 1 through 4. Also, enter the total
on Part II, Section A, Line 1.
41A720RPC (10-23)	

Lines 9 to 12—For each related member, include the name of
foreign nation, description of treaty, and the amount deducted
by the taxpayer. If more than four related members, attach a
statement with each member’s information and add to the total
on Line 13.
Line 13—Enter the total amount deducted. Add Lines 9 through
12.
Line 14—Enter the total of Section C, Lines 8 and 13 here and on
Part II, Section A, Line 3.