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INSTRUCTIONS –SCHEDULE KIRA-SP

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41A720-S26 (10-11)

Commonwealth of Kentucky

DEPARTMENT OF REVENUE

PURPOSE OF SCHEDULE—This schedule is used by any

such that it is not practical to use a separate accounting

pass-through entity which has entered into a service and

method to determine the net income, Kentucky gross receipts

technology agreement or a tax incentive agreement for

and Kentucky gross profits from the facility at which the

a Kentucky Industrial Revitalization Act (KIRA) project to

economic development project is located, the approved

determine the credit allowed against the Kentucky income

company shall use an alternative method approved by

tax and LLET in accordance with KRS 141.403 on the income

the Department of Revenue. A copy of the letter from the

and Kentucky gross receipts or Kentucky gross profits from

Department of Revenue approving the alternative method

the project.

must be attached to this schedule.

Pass-through entities should first complete Form 720S, 765

Separate Accounting—If the economic development project

or 765-GP to determine net income (loss), deductions, etc.,

is a totally separate facility, net income shall reflect only

from the entire operations of the pass-through entity. The

the gross income, deductions, expenses, gains and losses

pass-through entity should then complete Schedule KIRA-

allowed under this chapter directly attributable to the

SP to determine the KIRA tax credit and the tax due, if any,

facility and overhead expenses apportioned to the facility;

from the KIRA project. A pass-through entity is subject to

and Kentucky gross receipts or Kentucky gross profits shall

tax as provided by KRS 141.020 and KRS 141.0401 on the net

reflect only Kentucky gross receipts or Kentucky gross profits

income and the Kentucky gross receipts or Kentucky gross

directly attributable to the facility.

profits from the project and the KIRA credit is applied against

If the economic development project is an expansion to a

the tax of the KIRA project. Consequently, the pass-through

previously existing facility, net income of the entire facility

entity must use Form 720S(K), Form 765(K) or Form 765-

shall reflect only the gross income, deductions, expenses,

GP(K) in lieu of Schedule K (Form 720S), Schedule K (Form

gains and losses allowed under this chapter directly

765) or Schedule K (Form 765-GP) in order to exclude the net

attributable to the facility and overhead expenses apportioned

income from the KIRA project from the partners, members

to the facility; and Kentucky gross receipts and Kentucky

or shareholders’ distributive share income, and Schedule

gross profits shall reflect only Kentucky gross receipts and

LLET(K) in lieu of Schedule LLET in order to exclude the

Kentucky gross profits directly attributable to the facility. Net

Kentucky gross receipts or the Kentucky gross profits of the

income, Kentucky gross receipts and Kentucky gross profits

KIRA project from the LLET at the entity level.

of the entire facility attributable to the economic development

Multiple Projects—A pass-through entity with multiple

project shall be determined by apportioning the net income,

economic development projects must complete an applicable

Kentucky gross receipts and Kentucky gross profits by a

schedule (Schedule KREDA-SP , Schedule KIDA-SP , Schedule

formula approved by the Department of Revenue.

KEOZ-SP , Schedule KJRA-SP , Schedule KIRA-SP , Schedule

Line 2—Enter the net operating loss from the KIRA project,

KJDA-SP , Schedule KBI-SP , Schedule KRA-SP or Schedule

if any, being carried forward from previous years.

IEIA-SP) to determine the credit and net tax liability, if any,

for each project.

Note: Just as the income from a KIRA project does not flow

through to partners, members or shareholders, neither do the

Line 1—If the pass-through entity’s only operation is the KIRA

losses. The project’s net operating loss from prior years must

project, the amount entered on Line 1 is the net income (loss)

be subtracted from the project income before calculating

from Form 720S, 765 or 765-GP . If the pass-through entity

the KIRA credit.

has operations other than the KIRA project, a schedule must

be attached reflecting the computation of the net income

General Partnership—Lines 5 and 6 of this schedule shall

(loss) from the KIRA project in accordance with the following

not be completed by a general partnership as a general

instructions, and such amount entered on Line 1.

partnership is not subject to LLET.

Separate Facility—In accordance with KRS 141.403(6), if the

Line 5—Using Schedule LLET, create a new Schedule LLET

project is a totally separate facility, net income, Kentucky

to compute the LLET of the KIRA project using only the

gross receipts and Kentucky gross profits attributable to

Kentucky gross receipts and Kentucky gross profits of the

the project shall be determined by a separate accounting

project. Enter “KIRA” at the top center of the Schedule LLET

method.

and attach it to the tax return.

Expansion of Existing Facility—In accordance with KRS

Line 9—In lieu of the tax credit, the approved company

141.403(7), if the KIRA project is an expansion to a previously

may elect, on an annual basis, to apply as an estimated tax

existing facility, the net income, Kentucky gross receipts

payment an amount equal to the allowable tax credit. Any

and Kentucky gross profits shall be determined under a

estimated tax payment shall be in satisfaction of the tax

separate accounting method reflecting the entire facility,

liability of the partners, members or shareholders of the pass-

and the net income, Kentucky gross receipts and Kentucky

through entity, and shall be paid on behalf of the partners,

gross profits shall be determined by apportioning the net

members or shareholders. Enter an amount on either (a) or

income, Kentucky gross receipts and Kentucky gross profits

(b), but in no case shall there be an entry on both (a) and

of the entire facility to the economic development project by

(b). In accordance with KRS 141.403(5), this estimated tax

a formula approved by the Department of Revenue. A copy

payment is excluded in determining each partner, member

of the letter from the Department of Revenue approving

or shareholder’s distributive share income or credit from a

the percentage must be attached to the schedule.

pass-through entity. Accordingly, the partners, members or

Alternative Methods—In accordance with KRS 141.403(8),

shareholders are not entitled to claim any portion of this

if the approved company can show that the nature of the

estimated tax payment against their Kentucky income tax

operations and activities of the approved company are

liability.

Schedule Kira-Sp (Form 41a720-S26) - Tax Computation Schedule (For A Kira Project Of A Pass-Through Entity) Page 2

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