Form 8903-K - Kentucky Domestic Production Activities Deduction - 2015 Page 2
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241A720-S9 (10-15)
INSTRUCTIONS FOR FORM 8903-K
Page 2
Commonwealth of Kentucky
DEPARTMENT OF REVENUE
Purpose of Form—This form is used by a corporation as defined
eligible or chose not to figure QPAI at the entity level, include
in KRS 141.010(24) filing Form 720, Kentucky Corporation Income
the following: (i) DPGR; (ii) Cost of goods sold allocable to DPGR;
Tax and LLET Return, to calculate its domestic production
(iii) Expenses allocable to DPGR; and (iv) Kentucky W-2 wages
allocable to DPGR.
activities deduction (DPAD) for Kentucky corporation income tax
purposes. The Kentucky DPAD may be different from the federal
DPAD because of the differences in qualified production activities
SPECIFIC LINE INSTRUCTIONS
income or taxable income resulting from differences in Kentucky
and federal tax laws as provided by KRS 141.010. In addition, for
taxable years beginning on or after January 1, 2010, the Kentucky
Lines 1 through 6—Using the federal instructions for Form 8903,
rate to be applied to the lesser of the qualified production activities
Lines 1 through 6, enter the federal amounts adjusted to reflect
income or taxable income shall be six percent (6%) in lieu of the
the differences in Kentucky and federal income tax law.
rate provided by IRC §199(a). KRS 141.010(13)
Line 7—Enter the QPAI amount from the information attached
KDPAD is limited by Kentucky apportioned taxable net income
to Kentucky Schedule K-1 (Form 765 or Form 765-GP). This line
before the KDPAD and after the Kentucky net operating loss
applies only to a corporation filing Form 720 that is a partner or
deduction (KNOLD).
member of a partnership filing Kentucky Form 765 or Form 765-
GP that was eligible and chose to figure QPAI at the entity level
Other definitions used in these instructions are as follows:
and allocated QPAI to its partners or members.
(1) “DPGR” means the federal domestic productions gross
Line 8—If the corporation filing the return is a member of an
receipts reported on line 1 of the federal Form 8903;
expanded affiliated group (EAG), skip Lines 1 through 6. Enter
the member’s respective amount of Kentucky QPAI. Kentucky
(2) “KDPGR” means the portion of the DPGR that is derived
QPAI is computed in the same manner as federal QPAI except
from qualifying production activities as defined by Section
for the differences in QPAI resulting from differences in Kentucky
199(c)(4) of the Internal Revenue Code which are manufactured,
and federal depreciation and expense deductions allowed under
produced, grown, or extracted in whole or in a significant part
Sections 168 and 179 of the Internal Revenue Code and other
within the Commonwealth of Kentucky; and,
Kentucky adjustments provided by KRS 141.010. Attach the
following supporting information:
(3) “QPAI” means qualified production activities income as
defined by Section 199(c) of the Internal Revenue Code.
(1) Federal Form 8903 of the EAG reporting member, federal
QPAI computation schedule of the EAG and federal QPAI
Individuals—When computing Kentucky net income, a full-year
computation schedule of the member.
resident individual is allowed the federal DPAD adjusted using a
six percent (6%) rate in lieu of the rate provided by IRC §199(a). A
(2) Kentucky QPAI computation schedule of the EAG. The
part-year resident or full-year nonresident individual is allowed a
Kentucky QPAI computation schedule of the EAG shall begin
portion of the federal DPAD, determined by multiplying the federal
with federal QPAI and show all adjustment to arrive at Kentucky
DPAD, adjusted using a six percent (6%) rate in lieu of the rate
QPAI.
provided by IRC §199(a), by a fraction, the numerator of which
is the KDPGR and the denominator of which is the DPGR. The
(3) Member’s Kentucky QPAI computation schedule. The
DPAD for a part-year resident or full-year nonresident individual
Kentucky QPAI computation schedule of the member shall
cannot exceed 50% of the Kentucky W-2 wages allocable to DPGR.
begin with federal QPAI and show all adjustments to arrive
KRS 141.010(11)
at Kentucky QPAI.
Pass-Through Entities—A pass-through entity does not complete
Line 10—Enter 100% or the apportionment factor from Schedule
Form 8903-K but reports information on each shareholder’s,
A, Section I, Line 12.
partner’s or member’s Kentucky Schedule K-1 that will be needed
to compute their DPAD. A pass-through entity shall attach the
Line 12—Enter the taxable income from Form 720, Part III, Line
following information to each Kentucky Schedule K-1 to be used
23.
by the shareholder, partner or member to compute their DPAD
for Kentucky income tax purposes:
Line 15—Form W-2 wages are computed pursuant to KRS
141.120(8)(b) and regulation 103 KAR 16:090 and include only
If the shareholder, partner or member is an individual (includes
Kentucky wages properly allocable to DPGR. Do not include
estates and trusts), include the following: (i) DPGR; (ii) KDPGR;
wages reported on Line 16.
and (iii) Kentucky W-2 wages allocable to DPGR.
Line 16—Enter the Kentucky wages allocable to DPGR provided
If the partner or member is a corporation or pass-through entity
by a pass-through entity as an attachment to the Kentucky
and the partnership filing Form 765 or Form 765-GP was eligible
Schedule K-1.
and chose to figure QPAI at the entity level, include the following:
(i) QPAI and (ii) Kentucky W-2 wages allocable to DPGR.
Line 20—Enter the amount from box 6 of Form 1099-PATR, or if
applicable, multiply box 6 of Form 1099-PATR by the cooperative’s
If the partner or member is a corporation or pass-through entity
Kentucky apportionment factor from Schedule A, Section I, Line
and the partnership filing Form 765 or Form 765-GP was not
12.
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