Form 41a720s(I) - Kentucky S Corporation Income Tax And Llet Return

Pass–through Entities—An S corporation doing business in

Composite Return—Nonresidents Only

Kentucky solely as a partner or member in a pass-through

entity will file Form 720S pursuant to the provisions of KRS

Do not include a nonresident individual (includes an estate

141.010, 141.120 and 141.206. (See Schedule A—Apportionment

or trust partner, member or shareholder) partner, member or

and Allocation Instructions and Schedule A–C Apportionment

shareholder in a composite return if the partner’s, member’s

and Allocation Continuation Sheet.)

or shareholder’s distributive share income was subject to

withholding and reported on Form 740NP–WH and PTE–WH.

Nonresident Withholding (Form 740NP–WH)

The composite return applies only to nonresident individual

(includes an estate or trust partner, member or shareholder)

Withholding

partners, members or shareholders: (i) whose distributive share

income was not subject to withholding as provided by KRS

A partner or member that is an S corporation or partnership is

141.206(5); (ii) whose only source of income within this state

not subject to withholding. S corporations and partnerships are

is distributive share income from one or more pass–through

pass-through entities as provided by KRS 141.010(26).

entities; and (iii) that elect to be included in a composite return

as provided by KRS 141.206(16).

KRS 141.206(5) provides that for taxable years beginning on or

after January 1, 2007, every pass–through entity required to file a

For taxable years beginning on or after January 1, 2007, the

return under KRS 141.206(2), except publicly traded partnerships

Department of Revenue will permit the filing of a “composite

as defined in KRS 141.0401(6)(r), shall withhold Kentucky

return” as provided by KRS 141.206(16) on behalf of electing

income tax on the distributive share, whether distributed or

nonresident individual partners, members or shareholders of

undistributed, of each nonresident individual (includes an estate

a pass–through entity as defined in KRS 141.010(26). Income

or trust partner, member or shareholder) partner, member or

tax will be computed at the highest marginal rate provided in

shareholder, or each C–corporation partner or member that is

KRS 141.020 on the partner’s, member’s or shareholder’s pro

doing business in Kentucky only through its ownership interest

rata share of the distributive share income from a pass–through

in a pass–through entity. Withholding shall be at the maximum

entity doing business in, or deriving income from sources within

rate as provided in KRS 141.020 or KRS 141.040.

Kentucky. The partners’, members’ or shareholders’ distributive

share of income shall include all items of income or deduction

used to compute adjusted gross income on the Kentucky return

Withholding shall not be required if: (a) the partner, member

that is passed through to the partner, member or shareholder

or shareholder is exempt from withholding as provided by

by the pass–through entity, including but not limited to interest,

KRS 141.206(7)(a); (b) the partner or member is exempt from

dividend, capital gains or losses, guaranteed payments and

Kentucky income tax as provided by KRS 141.040(1); (c) the

rents (KRS 141.206(16)).

pass-through entity is a qualified investment partnership as

provided by KRS 141.206(15), and the partner, member or

The composite return of a pass–through entity shall be

shareholder is an individual; or (d) the partner or member is a

filed with the Department of Revenue on Form 740NP–WH,

pass-through entity.

Kentucky Nonresident Income Tax Withholding on Distributive

Share Income Report and Composite Income Tax Return. The

For taxable years beginning on or after January 1, 2012, a pass-

composite return box on the front of Form 740NP–WH must

through entity required to withhold Kentucky income tax as

be checked to indicate that it is a composite return, and a

provided by KRS 141.206(5) shall make estimated tax payments

Form PTE–WH must be completed for each of the electing

if required by the provisions of KRS 141.206(6). If the pass-

nonresident individual partners, members or shareholders.

through entity is required to make estimated tax payments for

The composite return box on each Form PTE–WH must be

taxable years beginning on or after January 1, 2012, use Form

checked to indicate that it is part of a composite return. Form

740NP-WH-ES (Kentucky Estimated Tax Vouchers).

740NP–WH and Copy A of Form PTE–WH shall be mailed to

the Kentucky Department of Revenue with payment of any tax

The reporting of a nonresident individual’s, estate’s or trust’s net

due by the 15th day of the fourth month following the close of

distributive share income and withholding on Form 740NP–WH

the pass–through entity’s taxable year. Also, Copy B and C of

at the maximum rate of six (6) percent shall satisfy the filing

Form PTE–WH shall be provided to the partners, members or

requirements of KRS 141.180 for a nonresident individual,

shareholders included in the composite return.

estate or trust partner, member or shareholder whose only

Kentucky source income is net distributive share income. The

For taxable years beginning on or after January 1, 2012, a

nonresident individual, estate or trust partner, member or

pass–through entity filing a composite return shall make

shareholder may file a Kentucky Individual Income Tax Return

estimated tax payments if required by the provisions of KRS

Nonresident or Part–Year Resident (Form 740–NP) or a Kentucky

141.206(6). If the pass-through entity is required to make

Fiduciary Income Tax Return (Form 741) to take advantage of

estimated tax payments for taxable years beginning on or

the graduated tax rates, credits and deductions.

after January 1, 2012, use Form 740NP-WH-ES (Kentucky

Estimated Tax Vouchers).

A pass-through entity shall complete Form 740NP–WH and

Form PTE–WH for each nonresident individual, estate or

Substitute Forms—Any form to be used in lieu of an official

trust partner, member or shareholder and each corporate

Department of Revenue form must be submitted to the

partner or member and mail Form 740NP–WH and Copy A of

department for prior approval.

Form PTE–WH to the Kentucky Department of Revenue with

payment of any tax due by the 15

day of the fourth month

Required Forms and Information—An S corporation must enter

following the close of the pass–through entity’s taxable year.

all applicable information on Form 720S, attach a schedule

Also, Copy B and C of Form PTE–WH shall be provided to the

for each line item or line item instruction which states “attach

partners, members or shareholders. Form 740NP–WH and

schedule,” and attach the following forms or schedules, if

Form PTE–WH are available at

applicable.

Form 41a720s(I) - Kentucky S Corporation Income Tax And Llet Return - 2012 Page 5

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