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41A720–S36 (10–14)

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INSTRUCTIONS–SCHEDULE KRA–SP

Commonwealth of Kentucky

DEPARTMENT OF REVENUE

PURPOSE OF SCHEDULE—This schedule is used by any pass–through

chapter directly attributable to the facility and overhead expenses

entity which has entered into a tax incentive agreement for a Kentucky

apportioned to the facility; and Kentucky gross receipts or Kentucky

Reinvestment Act (KRA) project to determine the credit allowed against

gross profits shall reflect only Kentucky gross receipts or Kentucky

the Kentucky income tax and LLET in accordance with KRS 141.415

gross profits directly attributable to the facility.

on the income and Kentucky gross receipts or Kentucky gross profits

from the project.

If the economic development project is an expansion to a previously

existing facility, net income of the entire facility shall reflect only

Pass–through entities should first complete Form 720S, 765 or

the gross income, deductions, expenses, gains and losses allowed

765–GP to determine net income (loss), deductions, etc., from the

under this chapter directly attributable to the facility and overhead

entire operations of the pass–through entity. The pass–through entity

expenses apportioned to the facility; and Kentucky gross receipts and

should then complete Schedule KRA–SP to determine the KRA tax

Kentucky gross profits shall reflect only Kentucky gross receipts and

credit and the tax due, if any, from the KRA project. A pass–through

Kentucky gross profits directly attributable to the facility. Net income,

entity is subject to tax as provided by KRS 141.020 and KRS 141.0401

Kentucky gross receipts and Kentucky gross profits of the entire facility

on the net income and the Kentucky gross receipts or Kentucky gross

attributable to the economic development project shall be determined

profits from the project and the KRA credit is applied against the tax

by apportioning the net income, Kentucky gross receipts and Kentucky

of the KRA project. Consequently, the pass–through entity must use

gross profits by a formula approved by the Department of Revenue.

Form 720S(K), Form 765(K) or Form 765–GP(K) in lieu of Schedule K

(Form 720S), Schedule K (Form 765) or Schedule K (Form 765–GP)

Line 2—Enter the net operating loss from the KRA project, if any, being

in order to exclude the net income from the KRA project from the

carried forward from previous years.

partners, members or shareholders’ distributive share income, and

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

Note: Just as the income from a KRA project does not flow through to

Kentucky gross receipts or the Kentucky gross profits of the KRA

partners, members or shareholders, neither do the losses. The project’s

project from the LLET at the entity level.

net operating loss from prior years must be subtracted from the project

income before calculating the KRA credit.

Multiple Projects—A pass–through entity with multiple economic

development projects must complete an applicable schedule (Schedule

General Partnership—Lines 5 and 6 of this schedule shall not be

KREDA–SP , Schedule KIDA–SP , Schedule KEOZ–SP , Schedule KJRA–SP ,

completed by a general partnership as a general partnership is not

Schedule KIRA–SP , Schedule KJDA–SP , Schedule KBI–SP , Schedule

subject to LLET.

KRA–SP or Schedule IEIA–SP) to determine the credit and net tax

liability, if any, for each project.

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

the LLET of the KRA project using only the Kentucky gross receipts

Line 1—If the pass–through entity’s only operation is the KRA project,

and Kentucky gross profits of the project. Enter “KRA” at the top

the amount entered on Line 1 is the net income (loss) from Form 720S,

center of the Schedule LLET and attach it to the tax return.

765 or 765–GP . If the pass–through entity has operations other than the

KRA project, a schedule must be attached reflecting the computation

Limitation—For an approved company which received preliminary

of the net income (loss) from the KRA project in accordance with the

approval for a reinvestment project prior to February 1, 2010, the

following instructions, and such amount entered on Line 1.

amount of incentives allowed in any tax year shall not exceed the

lesser of: (i) the tax liability of the approved company related to the

Separate Facility—In accordance with KRS 141.415(6), if the KRA project

reinvestment project for that taxable year, or (ii) the approved costs

is a totally separate facility, net income, Kentucky gross receipts, and

that have not yet been recovered.

Kentucky gross profits attributable to the project shall be determined

by a separate accounting method.

For an approved company which received preliminary approval for

a reinvestment project on or after February 1, 2010, the amount of

Expansion of Existing Facility—In accordance with KRS 141.415(7),

incentives allowed in any tax year shall not exceed the lesser of: (i)

if the KRA project is an expansion to a previously existing facility,

the tax liability of the approved company related to the reinvestment

the net income, Kentucky gross receipts and Kentucky gross profits

project for that taxable year, (ii) twenty percent (20%) of the total

shall be determined under a separate accounting method reflecting

amount of the approved costs, or (iii) the approved costs that have

the entire facility, and the net income, Kentucky gross receipts and

not yet been recovered.

Kentucky gross profits shall be determined by apportioning the net

income, Kentucky gross receipts and Kentucky gross profits of the

Line 9—Enter: (i) the total amount of the approved costs, if the company

entire facility to the economic development project by a formula

received preliminary approval for the project prior to February 1, 2010;

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

or (ii) twenty percent (20%) of the total amount of the approved costs,

the Department of Revenue approving the formula must be attached

if the company received preliminary approval for the project on or

to the schedule.

after February 1, 2010.

Alternative Me thods—In ac c ordanc e with K RS 141.415 ( 8 ) ,

Line 10—In lieu of the tax credit, the approved company may elect,

if the approved c ompany c an show that the nature of the

on an annual basis, to apply as an estimated tax payment an amount

o p e r a t i o n s a n d a c t i v i t i e s o f t h e a p p r ove d c o m p a ny a r e

equal to the allowable tax credit. Any estimated tax payment shall

such that it is not practical to use a separate accounting method to

be in satisfaction of the tax liability of the partners, members or

determine the net income, Kentucky gross receipts and Kentucky

shareholders of the pass–through entity, and shall be paid on behalf

gross profits from the facility at which the economic development

of the partners, members or shareholders. Enter an amount on either

project is located, the approved company shall use an alternative

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

method approved by the Department of Revenue. A copy of the letter

In accordance with KRS 141.415(5), this estimated tax payment is

from the Department of Revenue approving the alternative method

excluded in determining each partner, member or shareholder’s

must be attached to this schedule.

distributive share income or credit from a pass–through entity.

Accordingly, the partners, members or shareholders are not entitled

Separate Accounting—If the economic development project is

to claim any portion of this estimated tax payment against their

a totally separate facility, net income shall reflect only the gross

Kentucky income tax liability.

income, deductions, expenses, gains and losses allowed under this

Schedule Kra-Sp - Tax Computation Schedule (For A Kra Project Of A Pass-Through Entity) Page 2

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