Form 41a720-S56 - Schedule Fon - Tax Credit Computation Schedule

41A720-S56 (10-16)

Page 2

INSTRUCTIONS—SCHEDULE FON

Commonwealth of Kentucky

DEPARTMENT OF REVENUE

The FON tax credit is applied against 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; however,

for tracking purposes, the maximum amount of credit used against either tax is the amount that is used for the tax

year.

PURPOSE OF SCHEDULE—This schedule is used by

of the certification(s) from the Cabinet for Economic

a corporation which has a farm operation networking

Development.

project (FON) approved by the Cabinet for Economic

Alternative Methods—In accordance with KRS 141.414(6),

Development as provided by KRS 141.410 to 141.414,

if the approved company can show that the nature of the

to determine the credit allowed against the Kentucky

operations and activities of the approved company are

corporation income tax and LLET attributable to the

such that it is not practical to use separate accounting to

project in accordance with KRS 141.412. The annual tax

determine net income, Kentucky gross receipts or Kentucky

credit shall be available for the first five (5) years that the

gross profits from the operation at which the project

farming operation is involved in the networking project.

is located, the approved company shall determine net

The annual tax credit shall be equal to the approved costs

income, Kentucky gross receipts or Kentucky gross profits

incurred by the qualified farming operation during the tax

attributable to the project using an alternative method

year and shall not exceed the income, Kentucky gross

approved by the Department of Revenue. Thus, if any

profits or Kentucky gross receipts, as the case may be, of

method other than separate accounting is used, a copy of

the qualified farming operation generated by or arising

the letter from the Department of Revenue approving the

out of the qualified farming operation’s participation in

alternative method must be attached to this schedule.

a networking project

GENERAL INSTRUCTIONS

* In accordance with KRS 141.414(4)(a), if the project

is a separate operation, net income attributable to

Part I—Computation of LLET Excluding FON Project

the project shall be determined by the separate

accounting method.

Line 2—Using Schedule LLET, create a new Schedule

LLET to compute the LLET of the FON project using only

** In accordance with KRS 141.414(4)(b), if the project

the Kentucky gross receipts and Kentucky gross profits of

is a separate operation, Kentucky gross receipts or

the project. Enter “FON” at the top center of the Schedule

Kentucky gross profits attributable to the project

LLET and attach it to the tax return.

shall be determined under the separate accounting

method reflecting only the Kentucky gross receipts

If the corporation has operations other than the

or Kentucky gross profits directly attributable to the

FON project, it must attach schedules reflecting the

operation.

computation of Kentucky gross profits and Kentucky

gross receipts from the FON project in accordance with

*** In accordance with KRS 141.414(5)(a), if the FON

KRS 141.414(4)(b)** or KRS 141.414(5)(b).****

project is an expansion to a previously existing

operation, net income attributable to the entire

Part II—Computation of Taxable Net Income Excluding

operation shall be determined under the separate

Net Income from FON Project and FON Tax Credit

accounting method and the net income attributable to

Section B

the FON project shall be determined by apportioning

the separate accounting net income of the entire

Line 2—Enter net income for the FON project. If the

operation to the FON project income using a formula

corporation’s only operation in Kentucky is the FON

approved by the Department of Revenue. A copy

project, the amount entered on Line 1 must be entered

of the letter from the Department of Revenue

on Line 2. If the corporation has operations other than

approving the percentage must be attached to this

the FON project, it must attach schedules reflecting the

schedule.

computation of the net income from the FON project in

accordance with KRS 141.414(4)(a)* or KRS 141.414(5)

**** In accordance with KRS 141.414(5)(b), if the FON

(a).***

project is an expansion to a previously existing

operation, Kentucky gross receipts or Kentucky

See form for computation.

gross profits attributable to the entire operation

Part III—Limitation

shall be determined under the separate accounting

method and the Kentucky gross receipts or Kentucky

Calculate the FON tax credit based on the corporation’s tax

gross profits attributable to the FON project shall be

liability, tax liability attributable to the FON project, and

determined by apportioning the separate accounting

the credit limitation from Schedule FON-T. Enter credit on

Kentucky gross receipts or Kentucky gross profits

Schedule TCS, Part II, Column E and Column F .

of the entire operation to the FON project Kentucky

A corporation with more than one farming operation

gross receipts or Kentucky gross profits. A copy

networking project must separately compute the

of the letter from the Department of Revenue

tax credit derived from each project. Complete an

approving the percentage must be attached to this

applicable schedule for each project and attach a copy

schedule.

Form 41a720-S56 - Schedule Fon - Tax Credit Computation Schedule - 2016 Page 2

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