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Kentucky Free Printable  for 2021 Kentucky Kentucky Pass-Through Entity Income and LLET Return - Instructions

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Kentucky Pass-Through Entity Income and LLET Return - Instructions
Form PTE Instructions

INSTRUCTIONS PTE Commonwealth of Kentucky Department of Revenue KENTUCKY PASS-THROUGH ENTITY INCOME AND LLET RETURN 2020 PURPOSE OF THE INSTRUCTIONS HOW TO OBTAIN ADDITIONAL FORMS These instructions have been designed for passthrough entities: S-corporations, partnerships, and general partnerships , which are required by law to file a Kentucky income tax and LLET return. Form PTE is complementary to the federal forms 1120S and 1065. Forms and instructions are available at all Kentucky Taxpayer Service Centers (see page 22).They may also be obtained by writing FORMS, Department of Revenue, 501 High Street, Station 23B, Frankfort, KY 40601, or by calling 502–564–3658. Forms can be downloaded from www.revenue.ky.gov . KENTUCKY TAX LAW CHANGES Enacted by the 2020 Regular Session of the General Assembly— Four-year statute of limitations extended for certain 2019 returns. Kentucky postponed 2019 filing and payment deadlines until July 15, 2020 for income tax and LLET returns originally due between April 1 and July 1, 2020. The four-year period in which the Department can audit and make adjustments began on the later of the postponed due date of July 15, 2020, the extended due date if an extension request was timely filed, or the date the return was filed. Kentucky Section 179 Deduction Phase-out Threshold Eliminated—For property placed into service on or after January 1, 2020, the Kentucky Section 179 deduction will no longer be reduced or eliminated for exceeding the threshold. Kentucky allows a deduction under §179 of the IRC of up to $100,000 for property placed into service on or after January 1, 2020. Enacted new partnership audit rules—To adapt to the new federal centralized partnership audit rules, Kentucky adopted the model statute proposed by the Multistate Tax Commission (MTC) for partnership audits. Under the new audit rules, partnerships may be subject to income tax at the entity level. • Partnerships have 90 days to notify the Department of Revenue and the entity’s direct partners of any final federal adjustments, file amended returns, and pay any additional tax due. • Partners have 180 days to pay any additional tax due. • In lieu of the partners paying any additional tax due, the partnership may elect to pay additional tax due at the entity level for tax owed by the partners. Tax Credit Changes: Kentucky Selling Farmers Tax Credit—A nonrefundable and nontransferable credit is allowed beginning January 1, 2020 for qualified selling farmers. This credit must be approved by the Kentucky Economic Development Finance Authority. This credit must be claimed on the tax return in the first year that the credit was approved. You cannot claim more than the credit approved by the Kentucky Economic Development Finance Authority. The credit also cannot exceed $25,000 in any taxable year. Finally, the credit cannot exceed $100,000 over the lifetime of the selling farmers credit. Any unused credit in a taxable year may be carried forward up to five (5) years. If the credit is not utilized within the five (5) year period, the credit is lost. Inventory Tax Credit—The inventory tax credit increases to 75% of the ad valorem (tangible personal property) tax timely paid in 2020. Kentucky Revised Statutes—Kentucky Revised Statutes are referred to in these instructions as “KRS” and can be found online at legislature.ky.gov/Law/Statutes/Pages/default.aspx . Kentucky Administrative Regulations—Kentucky Administrative Regulations are referred to in these instructions as “KAR” and can be found online at legislature.ky.gov/Law/kar/Pages/default.aspx . Page 1 of 22 PTE (2020) INSTRUCTIONS CURRENT YEAR INTEREST RATE Pursuant to KRS 131.183, the 2021 tax interest rate has been set at three percent (3%). The rate charged by the Kentucky Department of Revenue on unpaid taxes is five percent (5%) and when interest is due on a refund, the rate is one percent (1%). KENTUCKY FORM CHANGES New: Form PTE—Pass-through entities use the new Form PTE to report their ordinary income (loss) and tax liability computations. Form PTE replaces the Forms 720S (S-Corporations), 765 (Partnerships), and 765GP (General Partnerships). “Other additions and subtractions” from the Schedule O-PTE have been incorporated into the Form PTE in the Ordinary Income (Loss) computation. The Schedule O-PTE has been eliminated. Schedule K-1 (Form PTE)—Single owner’s share of pass-through items. This schedule replaces the Schedule K-1 for the discontinued Forms 720S, 765, and 765-GP. Form PTE(K)—Kentucky Schedule K for pass-through entities with economic development projects. This form replaces the Forms 720S(K), 765(K), and 765GP(K), which have been discontinued. Schedule DE—Separate schedule to list all disregarded entities included in a return. This is required to be attached to a return that includes disregarded entities. Applicable to Forms 720, 720U, PTE, and 725. Form KBR–V—The Kentucky Business Return Voucher replaces the 720-V and is used when a paper check for tax due is sent to the Department of Revenue for either a paper return or an e-filed return. Information on the KBR-V replaces the Tax Payment Summary previously included on the bottom of tax forms. The Form KBR-V must be used to submit paper payment due on a return for Forms 720, 720U, PTE, or 725. Do not submit this form if you made an electronic payment with your return. Updated: Several main forms and schedules were redesigned with larger font sizes and more space between lines to provide for easier optical character recognition (OCR) readability and a cleaner, less busy look. Black boxes, known as “slug marks”, have been placed on Page 2 of 22 the corners of all forms and schedules to allow for improved scanning and OCR. Form 720—The Form 720 was reorganized. The Taxable Income Computation was moved to Part I at the front of the form. “Other additions and subtractions” from the Schedule O-720 were incorporated into the Form 720, and the Schedule O-720 was eliminated. The number of questions on Schedule Q, Questionnaire, was significantly reduced. Form 720U and Schedules U1 through U10—The front page of the Form 720U had lines added and new indicators to better show tax due or refund. Several schedules within the Package 720U were redesigned. Schedule U1, Questionnaire, was shortened significantly. Schedule U2 had a few fields removed. Schedule U9 has several new lines to allow for the crediting of payments amongst group members. Schedule U10 was updated to capture the current year net operating loss in the NOL carryforward and to reflect federal guidance regarding the 80% limitation. Form 2220–K—The instructions were clarified to specify when a taxpayer owes an underpayment of estimated tax penalty and when a taxpayer must include Form 2220-K with their return even if they do not owe the penalty. Schedule RC—The form was updated to reflect changes to the Major Recycling Credit enacted by the Legislature in 2019. Forms and Schedules Discontinued: Form 720S (Including Schedule K-1 and Schedule K) Form 765 (Including Schedule K-1 and Schedule K) Form 765GP (Including Schedule K-1 and Schedule K) Form 725-EZ Form 720-V Schedule O-720 Schedule O-PTE PTE (2020) INSTRUCTIONS Page 3 of 22 Electronic Filing FAQs and Helpful Tips • Mandatory E-File if Gross Receipts ≥ $1,000,000—For tax years beginning on or after January 1, 2019, corporations and pass-through entities are required to e-file if their federal gross receipts are one million dollars ($1,000,000) or greater. This applies to Forms 720, 720U, PTE, and 725. • If your return is rejected for an invalid Kentucky Corporation/LLET Account Number or Federal Employer Identification Number (FEIN), please complete Form 20A100, “Declaration of Representative,” and contact our Registration Section at 502564–3306 for information on how to obtain an account number. • Direct debit is an option for electronically filed forms; however, direct deposit is not. • If you e-filed your return and wish to make a payment by check, please use the KBR-V provided by your software vendor. • To determine which forms are supported by your software, please check with the company that develops your software. More Options for Taxpayers Paying Online The Department of Revenue (DOR) is now able to offer taxpayers additional payment options for Corporation Income Tax and Limited Liability Entity Tax (LLET). Taxpayers can make a payment online for an e-filed Corporation Income Tax and/or LLET return that would normally be sent with a KBR-V voucher. Corporation Income Tax and LLET payments for bills, estimates, and extensions can also be made using the Enterprise Electronic Payment System (EEPS). To use EEPS, go to www.revenue.ky.gov and click on the Make a Payment or File a Return tile. From the selections of tax types available, click “Corporation Income Tax” or “Limited Liability Entity Tax (LLET)” and select the Electronic Payment link. To make payments, the FEIN is required along with the Kentucky Corporation/LLET 6-digit account number. Filing Tips and Checkpoints The following list of filing tips is provided for your convenience to help ensure that returns are processed accurately and promptly. To avoid processing problems, please note the following: • Corrected K-1’s—Adjustments to LLET or distributive share require that corrected Kentucky K-1's are sent to all partners, members, or shareholders for proper compliance by taxpayers. • Account Closure—There are different requirements for the Secretary of State and the Department of Revenue when ceasing operations and closing an account. It is advised that you consult with both agencies when closing a business tax account. • • Account Number/FEIN—Always ensure the correct Kentucky Corporation/LLET account number and FEIN is used on the return being filed. Schedule A—Do not check the box on Schedule A, Apportionment and Allocation, indicating the use of an alternative allocation and apportionment formula if the corporation has not received written approval from the Department of Revenue. If written approval has been received, a copy of the letter from the Department of Revenue must be attached to the return when filed. • • Payments—Place payments on the front of the return so that they are clearly visible. Do not leave check stubs attached to checks. Check stubs will delay the machines that sort incoming mail, which causes longer processing times. Incorrect Year Forms—Returns submitted on the wrong year form on or before the due date will be accepted as timely filed, but will require the return to be revised on the correct year form before the return can be processed. • Additional errors that delay processing returns: • Estimated Payments—Make estimated payments on a timely basis to avoid penalty. • EFT Payments—When making EFT payments online, use the Taxable Year Ending, NOT the due date of the payment. • • Form KBR-V- Form KBR-V is a payment voucher for e-filed and paper return payments. It is NOT an extension form. To extend a filing date, use Form 720EXT, Extension of Time to File Kentucky Corporation/LLET Return. Extensions—Extensions are for extending the filing date only; late payment penalties and interest apply to payments made after the original due date. ¡ Incorrect form submitted ¡ Incorrect tax exemption code ¡ Incomplete information ¡ Missing forms or schedules ¡ Incorrect taxable year end ¡ Failure to include payment of tax due with the return ¡ Omitting Form 720EXT when paying with an extension PTE (2020) INSTRUCTIONS Page 4 of 22 IMPORTANT Pass-through entities must create a Kentucky Form 4562, Schedule D and Form 4797 by converting federal forms. Schedule 4562 Depreciation—For property placed in service after September 10, 2001, Kentucky depreciation (§168) is determined per the Internal Revenue Code (IRC) in effect on December 31, 2001. Section 179 Deduction—For property placed in service after September 10, 2001, but prior to January 1, 2020, only the expense deduction ($25,000) allowed under §179 of the IRC in effect on December 31, 2001, exclusive of any amendments made subsequent to that date, is allowed. For property placed in service on or after January 1, 2020, only the expense deduction ($100,000) allowed under §179 of the IRC in effect on December 31, 2003, exclusive of any amendments made subsequent to that date, is allowed, except that the phase-out provisions of §179 of the IRC limiting the qualifying investment in property, shall not apply. For 2020 returns, any pass-through entity that for federal purposes elects in the current taxable year or has elected in past taxable years any of the following will have a different depreciation and IRC §179 expense deduction for Kentucky: • MACRS bonus depreciation; • IRC §179 expense deduction in excess of $25,000 for property placed in service after September 10, 2001, but prior to January 1, 2020; or • IRC §179 expense deduction in excess of $100,000 for property placed in service on or after January 1, 2020. If a pass-through entity has taken MACRS bonus depreciation or IRC §179 expense deduction in excess of the amounts outlined above for any year, federal and Kentucky differences will exist and the differences will continue through the life of the assets. Important: If a pass-through entity has not taken MACRS bonus depreciation or the IRC §179 expense deduction in excess of the amounts outlined above for any taxable year, then no adjustment will be needed for Kentucky income tax purposes. If federal Form 4562 is required to be filed for federal income tax purposes, a copy must be submitted with Form PTE to substantiate that no adjustment is required. Determining and Reporting Depreciation and IRC §179 Deduction Differences— 1. The depreciation from federal Form 1120S, Line 14 or Form 1065, Line 16(a) and depreciation claimed on federal Form 1125-A or elsewhere on Form 1120S or Form 1065 must be included on Form PTE, Part I, Line 3. If federal Form 4562 is required to be filed for federal income tax purposes, a copy must be attached to Form PTE. 2. Convert federal Form 4562 to a Kentucky form by entering Kentucky at the top center of the form above Depreciation and Amortization. Compute Kentucky depreciation (§168) per the IRC in effect on December 31, 2001, by ignoring the lines and instructions regarding the special depreciation allowance. NOTE: For Kentucky purposes, for property placed into service after September 10, 2001, but prior to January 1, 2020, the maximum IRC §179 deduction amount on Line 1 is $25,000 and the threshold cost of IRC §179 property on Line 3 is $200,000. For property placed into service after September 10, 2001, but prior to January 1, 2020, the maximum allowable IRC §179 deduction for Kentucky purposes is reduced dollar–for– dollar by the amount by which the cost of qualifying IRC §179 property placed in service during the year exceeds the threshold. In determining the IRC §179 deduction for Kentucky for property placed into service after September 10, 2001, but prior to January 1, 2020, the income limitation on Line 11 should be determined by using Kentucky net income before the IRC §179 deduction instead of federal taxable income. For Kentucky purposes, for property placed into service on or after January 1, 2020, the maximum IRC §179 deduction amount on Line 1 is $100,000 and the phase-out threshold does not apply for purposes of determining Kentucky depreciation. 3. The pass-through entity must attach the Kentucky Form 4562 to Form PTE, and the amount from Kentucky Form 4562, Line 22 must be included on Form PTE, Part I, Line 13. A Kentucky Form 4562 must be filed for each year, even though a federal Form 4562 may not be required. Schedule 4797 and Schedule D Gains/Losses from Disposition of Assets—Determining and Reporting Differences in Gain or Loss From Disposition of Assets—If during the year the pass-through entity disposes of assets on which it has taken the special depreciation allowance or the additional IRC §179 deduction for federal income tax purposes, the pass-through entity will need to determine and report the difference in the amount of gain or loss on such assets as follows: 1. Convert federal Schedule D (Form 1120S or Form 1065) and other applicable federal forms to Kentucky forms by entering Kentucky at the top center of the form, and compute the Kentucky capital gain or (loss) from the disposal of assets using Kentucky basis. Enter the amount from Kentucky Schedule D, Line 7 on Form PTE, Schedule K, Section A, Line 4(d) or 7. Enter the amount from Kentucky Schedule D, Line 15 on Form PTE, Schedule K, Section A, Line 4(e) or 7. Federal Schedule D (Form 1120S or Form 1065) filed with the federal return and the Kentucky Schedule D must be attached to Form PTE. 2. If the amount reported on federal Form 1120S, Line 4 or Form 1065, Line 6 (from Form 4797, Line 17) is a gain, enter this amount on Form PTE, Part I, Line 14. If the amount reported on federal Form 1120S, Line 4 or 1065, Line 6 (from Form 4797, Line 17) is a loss, enter this amount on Form PTE, Part I, Line 5. Convert federal Form 4797 and other applicable federal forms to Kentucky forms by entering Kentucky at the top center of the form and compute the Kentucky gain or (loss) from the sale of business property listing Kentucky basis. If the amount on Kentucky Form 4797, Line 17 is a gain, enter this amount on Form PTE, Part I, Line 6. If the amount on Kentucky Form 4797, Line 17 is a loss, enter this amount on Form PTE, Part I, Line 15. Federal Form 4797 filed with the federal return and the Kentucky Form 4797 must be attached to Form PTE. PTE (2020) INSTRUCTIONS Tax Treatment of S Corporation and Shareholder(s) A corporation which elects S corporation treatment for federal income tax purposes per §§1361(a) and 1361(b) of the IRC must file as an S corporation for Kentucky income tax purposes. For taxable years beginning on or after January 1, 2007, an S corporation is classified as a limited liability pass–through entity per KRS 141.010(16). For taxable years beginning on or after January 1, 2007, an annual limited liability entity tax (LLET) must be paid by every corporation and every limited liability pass–through entity doing business in Kentucky on all Kentucky gross receipts or Kentucky gross profits per KRS 141.0401(2), unless specifically excluded. See LLET Exemption Codes on page 9 of these instructions. For tax years beginning on or after January 1, 2007, an S corporation is required: (1) to submit installments of tax on the recapture of LIFO reserves per IRC §1363(d); (2) pay tax on built-in gains per IRC §1374; and (3) pay tax on net passive investment income per IRC §1375. The tax rate imposed on the LIFO recapture, built–in gains, and net passive investment income is five percent (5%). KRS 141.040(4) In determining tax per KRS Chapter 141, a resident individual, estate, or trust that is a shareholder of an S corporation must take into account the shareholder’s total distributive share of the S corporation’s items of income, loss, and deduction. In determining tax per KRS Chapter 141, a nonresident individual, estate, or trust that is a shareholder of an S corporation must take into account the shareholder’s total distributive share of the S corporation’s items of income, loss, and deduction multiplied by the apportionment fraction. KRS 141.206(11)(b), KRS 141.206(7) and (8) Resident and nonresident individual shareholders are entitled to a nonrefundable LLET credit against tax imposed under KRS 141.020 (Kentucky individual income tax). The nonrefundable LLET credit allowed shareholders is the shareholders’ proportionate share of the LLET for the current year after the subtraction of any credits identified in KRS 141.0205 and reduced by $175. The credit allowed shareholders may be applied to the income tax assessed on income from the S corporation. Any remaining credit from the S corporation will be disallowed. KRS 141.0401(3) Banks and Savings and Loan Associations—KRS 141.040(1) excludes financial institutions (banks and savings and loan associations) as defined in KRS 136.500 from tax on taxable net income, and KRS 141.0401(6)(a) and (b) exclude financial institutions from the LLET. KRS 141.019(1)(h) excludes from the Kentucky adjusted gross income of the shareholders the distributive share of net income from an S corporation subject to tax under KRS 136.505, the bank franchise tax, or KRS 136.300, the savings and loan association capital stock tax. KRS 141.019(1)(h) also excludes from the Kentucky adjusted gross income of the shareholders the portion of the distributive share of net income from an S corporation related to a qualified S subsidiary subject to tax under KRS 136.505 or KRS 136.300. An S corporation subject to tax under KRS 136.505 or KRS 136.300 should enter zero on Lines 1 through 10 of Form PTE, Schedule K. An S corporation related to a qualified S subsidiary subject to tax under KRS 136.505 or KRS 136.300 should exclude Page 5 of 22 from the amounts entered on Lines 1 through 10 of Form PTE, Schedule K the portion of these items related to the subsidiary. The net amount of the items of income and deductions excluded from Lines 1 through 10 of Form PTE, Schedule K should be entered on Line 15 of Form PTE, Schedule K. A statement should be attached to each shareholder’s Form PTE, Schedule K–1 advising the shareholder that this income is excluded for Kentucky income tax purposes because the S corporation is subject to tax under either KRS 136.505 or KRS 136.300. GENERAL INFORMATION Internal Revenue Code Reference Date—Kentucky’s Internal Revenue Code (IRC) reference date is December 31, 2018, exclusive of any amendments made subsequent to that date, other than amendments that extend provisions in effect on December 31, 2018, that would otherwise terminate, for purposes of computing corporation and individual income tax, except for depreciation differences per KRS 141.0101. Kentucky Tax Registration Application—Prior to doing business in Kentucky, each pass-through entity should complete a Kentucky Tax Registration Application, Form 10A100, to register for a Kentucky Corporation/LLET Account Number. This account number will be used for remitting the corporation income tax per KRS 141.040 and the LLET per KRS 141.0401. Register your business online at http://onestop.ky.gov using the One Stop Business Services link. 1. Go to onestop.ky.gov . 2. Click on the link for One Stop Business Services. Note: The One Stop Business Services login page provides information for creating a user account as well as portal security. You will also find overview information for the services the portal currently provides. This information is updated regularly to reflect new services and notify you when additional agencies join the portal. 3. Welcome to the Kentucky Online Gateway. Select that you are a citizen or business partner. If you do not already have an account, click on Create Account. Complete your Kentucky Online Gateway user account. Once a user account has been created, an email will be sent to you with further instructions to activate the account and login.You must use the activation link in the email prior to logging in to your account. 4. Once logged in, launch the Kentucky Business One Stop App. • If your business needs to register with both the Secretary of State and the Department of Revenue or only needs to register with the Department of Revenue, use the Register My Business option, to register for tax accounts and your Commonwealth Business Identifier (CBI). • If the business is already registered with the Secretary of State and you do not already have access to the business on your Dashboard, choose the Link My Business option. Enter the Commonwealth Business Identifier (CBI), SecurityToken, and Business Name exactly as it appears on your Kentucky articles of organization/incorporation, your Kentucky Certificate of Authority, or your CBI letter (including all punctuation) and link your business, click Send Invite and follow the instructions sent to your email to register for tax accounts. PTE (2020) INSTRUCTIONS The Link My Business option will require you to name at least one “One-Stop Portal Business Administrator” (for example, the business owner or representative). Note: The administrator can then delegate access to other individuals—for example, an attorney, accountant, or manager. The administrator also determines the appropriate authority level for delegates to make changes—this could range from filing annual reports with the Secretary of State’s office, changing the business address, or filing and paying taxes. Only the One Stop business administrator(s) can grant, approve, withdraw, or revoke access to the business. 5. Once you have linked your business, your business name and CBI number will appear in the My Businesses box on the dashboard, click on the CBI number, once your business loads, click on the Tax Administration tab to register for tax accounts. The paper application is available by calling the Department of Revenue, Division of Registration and Data Integrity at 502–564–3306, or can be downloaded at www.revenue.ky.gov (click on Find a Form, and search for 10A10 0). The application may be faxed to 502–227–0772 or e-mailed to [email protected] . Who Must File—LLET and Corporation Income Tax LLET—The limitations imposed and protections provided by the United States Constitution or Pub. L. No. 86–272 do not apply to the limited liability entity tax imposed by KRS 141.0401. A Kentucky Pass-Through Entity Income and LLET Return (Form PTE) must be filed by every pass-through entity: (a) being organized under the laws of this state; (b) having a commercial domicile in this state; (c) owning or leasing property in this state; (d) having one or more individuals performing services in this state; (e) maintaining an interest in a pass–through entity doing business in this state; (f) deriving income from or attributable to sources within this state, including deriving income directly or indirectly from a trust doing business in this state, or deriving income directly or indirectly from a single member limited liability company that is doing business in this state and is disregarded as an entity separate from its single member for federal income tax purposes, or (g) directing activities at Kentucky customers for the purpose of selling them goods or services. KRS 141.010(7), KRS141.040, KRS 141.0401, and KRS 141.206 Disregarded Entities—A Qualified Sub Chapter S Subsidiary (QSSS) and a single member limited liability company (LLC) are treated in the same manner as they are treated for federal income tax purposes. Therefore, a QSSS or a single member LLC that is disregarded for federal income tax purposes should be included in the return filed by its single member (owner). All disregarded entities included in the return should be listed on the Schedule DE and attached to the return. KRS 141.010(7) and KRS 141.200(10) Pass–through Entities—A pass-through entity doing business in Kentucky solely as a partner or member in a pass-through entity will file Form PTE per KRS 141.010, 141.120, and 141.206. (See Schedule A—Apportionment and Allocation Instructions.) Page 6 of 22 Nonresident Withholding and Composite Return (Form 740NP–WH) A partner or member that is an S corporation or partnership is not subject to withholding. S corporations and partnerships are pass-through entities per KRS 141.010(22). KRS 141.206(4) provides that for taxable years beginning on or after January 1, 2019, every pass–through entity required to file a return under KRS 141.206(1), except publicly traded partnerships defined in KRS 141.0401(6)(a)18 and (b)14, must withhold Kentucky income tax or file a composite return on the distributive share, whether distributed or undistributed, of each nonresident individual (includes an estate or trust) partner, member, or shareholder, or each C corporation partner or member that is doing business in Kentucky only through its ownership interest in a pass–through entity. Withholding and composite filing is at the highest rate provided in KRS 141.020 or KRS 141.040. Withholding is not required if: (a) the partner, member, or shareholder is exempt from withholding per KRS 141.206(6)(a); (b) the partner or member is exempt from Kentucky income tax per KRS 141.040(1); (c) the pass-through entity is a qualified investment partnership per KRS 141.206(14), and the partner, member, or shareholder is an individual; or (d) the partner or member is a pass-through entity. For taxable years beginning on or after January 1, 2019, a pass-through entity required to withhold or file a composite return on Kentucky income tax per KRS 141.206 must make estimated tax payments if required by KRS 141.206(5). If the pass-through entity is required to make estimated tax payments for taxable years beginning on or after January 1, 2019, use Form 740NP-WH-ES (Kentucky Estimated Tax Voucher). The reporting of a nonresident individual’s, estate’s, or trust’s net distributive share income and withholding on Form 740NP–WH at the rate of five percent (5%) will satisfy the filing requirements of KRS 141.180 for a nonresident individual, estate, or trust partner, member, or shareholder whose only Kentucky source income is net distributive share income. The partners’, members’, or shareholders’ distributive share of income must include all items of income or deduction used to compute adjusted gross income on the Kentucky return that is passed through to the partner, member, or shareholder by the pass–through entity, including but not limited to interest, dividend, capital gains or losses, guaranteed payments, and rents (KRS 141.206(15)). The nonresident individual, estate, or trust partner, member, or shareholder may file a Kentucky Individual Income Tax Return Nonresident or Part–Year Resident (Form 740–NP) or a Kentucky Fiduciary Income Tax Return (Form 741) to take advantage of the credits and deductions. A pass–through entity must file Form 740NP–WH and complete a Form PTE–WH for each nonresident individual, estate, or trust partner, member, or shareholder; or corporate partner or member. Form 740NP–WH with Copy A of each Form PTE–WH must be filed and paid by the 15th day of the fourth month following the close of the taxable period. Provide copies B and C of Form PTE–WH to the partner, member, or shareholder. PTE (2020) INSTRUCTIONS Required Forms and Information—A pass-through entity must enter all applicable information on Form PTE, attach a schedule for each line item or line item instruction which states “attach schedule,” and attach the following forms or schedules, if applicable: Kentucky Forms and Schedules   1. Pass-through Entity Income and LLET Return (Form PTE)   2. Kentucky Shareholder’s Share of Income, Credits, Deductions, Etc.—Schedule K–1 (Form PTE)   3. Apportionment and Allocation (Schedule A)   4. Limited Liability Entity Tax—Continuation Sheet (Schedule L–C) 5. Cost of Goods Sold (Schedule COGS)  6. Application for Filing Extension (Form 720EXT). General Partnerships may also use Form 40A102 7. Tax Credit Summary Schedule (Schedule TCS) Page 7 of 22 Accounting Procedures—Kentucky income tax law requires a pass-through entity to report income on the same calendar or fiscal year and to use the same methods of accounting required for federal income tax purposes. Any federally approved change in accounting periods or methods must be reported to the Department of Revenue. Check the applicable box on page 1, Item G, and attach a copy of the federal approval to the return when filed. KRS 141.140 Mailing/Payment—Only include payment for corporation income tax and/or LLET. No payment is due for general partnerships filing Form PTE. Mail the return with payment to: Make the check(s) payable to the Kentucky State Treasurer. Kentucky Department of Revenue Frankfort, KY 40620-0021 Mail returns with no tax due or refund requests to: 8. Related Party Costs Disclosure Statement (Schedule RPC) 9. Disregarded Entity Schedule, if applicable (Schedule DE) Required Federal Forms and Schedules All pass-through entities must provide a copy of the following federal forms submitted to the Internal Revenue Service:   1. Form 1120S or 1065, all pages   2. Form 1125-A—Cost of Goods Sold Kentucky Department of Revenue P. O. Box 856905 Louisville, KY 40285-6905 Filing/Payment Date—A pass-through entity return must be filed and payment must be made on or before the 15th day of the fourth month following the close of the taxable year. KRS 141.160, KRS 141.220, and 103 KAR 15:050 If the filing/payment date falls on a Saturday, Sunday, or a legal holiday, the filing/payment date is deemed to be on the next business day. KRS 446.030(1)(a) 3. Form 4797—Sales of Business Property   4. Schedule D—Capital Gains and Losses   5. Form 5884—Work Opportunity Credit   6. Schedules for items on Form 1120S or 1065, Schedule L, which state, “attach schedule.”   7. Form 4562—Depreciation and Amortization   8. Form 8825—Rental Real Estate Income and Expenses of a Partnership or an S Corporation Electronic Funds Transfer (EFT)—The Department of Revenue accepts electronically filed Corporation Income Tax/Limited Liability Entity Tax estimated tax voucher payments and extension payments for corporation income tax and limited liability entity tax. Before filing by EFT, the pass-through entity must have a valid six-digit Kentucky Corporation/LLET account number and have registered with the Department of Revenue to pay EFT. Using an incorrect account number, such as an account number for withholding or sales and use tax, may result in the payment being credited to another taxpayer’s account. When making EFT payments online, use the Taxable Year Ending, NOT the due date of the payment. For more information, contact the Department of Revenue at 800–839–4137 or 502–564–6020. The EFT registration form is available at www.revenue.ky.gov . Extensions—A six-month extension of time to file a Passthrough Entity Income and LLET return may be obtained by filing Form 720EXT by the original due date of the return or attaching a copy of the federal extension to the return when filed. A copy of the federal extension submitted after the return is filed does not constitute a valid extension, and late filing penalties will be assessed.  If the pass-through entity is making a payment with its extension, Kentucky Form 720EXT must be used. For further information, see the instructions for Form 720EXT. 103 KAR 15:050 Or, a General Partnership may file Form 40A102, Application for Extension of Time to File Individual, General Partnership, and Fiduciary Income Tax Returns. Federal Extension—An S corporation or limited liability passthrough entity granted an extension of time for filing a federal income tax return will be granted the same extension of time for filing a Kentucky income and LLET return for the same taxable year provided a copy of the federal Form 7004 is attached to the Kentucky return when it is filed. A copy of the federal Form 7004 should not be mailed to the Department of Revenue before filing the return. NOTE: An extension of time to file a return does not extend the date for payment of tax. PTE (2020) INSTRUCTIONS Estimated Taxes The Corporation Income/Limited Liability Entity Tax Estimated Tax Voucher, Form 720ES, is used to submit estimated tax payments for corporation income tax and LLET. See Electronic Funds Transfer (EFT). If the pass-through entity is required to make estimated tax payments and needs Form 720ES vouchers, contact the Department of Revenue at 502–564–3658. Estimated  Tax  Payments—A pass-through entity must make estimated tax installments if its combined tax liability under KRS 141.040 and KRS 141.0401 can reasonably be expected to exceed $5,000. Estimated tax installments are required as follows: If the estimated tax is reasonably expected to exceed $5,000, 25% of the estimated tax must be paid by the 15th day of the 4th month, 15th day of the 6th month, 15th day of the 9th month, and the 15th day of the 12th month of the tax year. Recalculating Estimated Tax—If after the pass-through entity calculates and pays its estimated tax, it finds that its tax liability for the year will be more or less than originally estimated, it may have to recalculate its required installments. If earlier installments were underpaid, the pass-through entity may owe a penalty. An immediate payment should be made to reduce the amount of penalty resulting from the underpayment of earlier installments, whether caused by a change in estimate, failure to make a payment, or a mistake. Penalty—Failure to make estimated installments, pay an estimated installment in full, or pay estimated installments timely will result in an addition to tax that will be considered a penalty under KRS 141.044. The tax interest rate identified under KRS 131.183 is the underpayment rate used to calculate the penalty. The entity should use Form 2220-K to determine the penalty. KRS 141.044 and KRS 141.990 Amended Return—To correct Form PTE as originally filed, file an amended Form PTE and check the appropriate box on page 1, Item G. If the amended return results in a change in income or a change in the distribution of any income or other information provided to partners or shareholders, an amended Schedule K–1 (Form PTE) must also be filed with the amended Form PTE and a copy given to each partner or shareholder. Check Item E(2) on each Schedule K–1 to indicate that it is an amended Schedule K–1. Internal Revenue Service Audit Adjustments—A pass-through entity which has received final adjustments resulting from an Internal Revenue Service audit must submit copies of the “final determinations of the federal audit” within 180 days of the conclusion of the federal audit. Use Form PTE or prior year’s Form 720S or 765 for reporting federal audit adjustments, check the Amended Return box, and attach the complete Revenue Agent Report (RAR). Failure to submit the required amended form will result in delays in processing refunds requested. Any refund claim resulting from a federal audit adjustment must be filed within four years of the date the tax was paid or within six months of the conclusion of the federal audit, whichever is later. KRS 141.211(2) and KRS 141.235(2)(b) Page 8 of 22 Mail returns with federal audit adjustments (RAR) to: Corporate Governmental Programs Section P. O. Box 1074, Station 68 Frankfort, KY 40602-1074 Interest—Interest  at  the  tax  interest  rate plus t wo percent  is  applied  to corporation income and LLET liabilities not paid by the date prescribed by law for filing the return (determined without regard to extensions thereof). See page 2 for the current year rate. Penalties—Refer below. Failure to file a Kentucky Pass-Through Entity Income Tax and LLET Return by the filing date including extensions—2 percent of the tax due for each 30 days or fraction thereof that the return is late (maximum 20 percent). The minimum penalty is $10 for each tax. KRS 131.180(1) Failure to pay income tax and/or LLET by the payment date—2 percent of the tax due for each 30 days or fraction thereof that the payment is overdue (maximum 20 percent). The minimum penalty is $10 for each tax. KRS 131.180(2) Failure to make estimated installments, pay an estimated installment in full, or pay estimated installments timely—The addition to tax is considered a penalty under KRS 141.044. The underpayment rate is the tax interest rate identified under KRS 131.183. KRS 141.044 Failure or refusal to file a Kentucky Pass-Through Entity Income Tax and LLET Return or furnish information requested in writing—5 percent of the tax assessed for each 30 days or fraction thereof that the return is not filed or the information is not submitted (maximum 50 percent). The minimum penalty is $100. KRS 131.180(3) Negligence—10 percent of the tax assessed. KRS 131.180(6) Fraud—50 percent of the tax assessed. KRS 131.180(7) Cost of Collection Fees—25 percent on all taxes which become due and owing for any reporting period, regardless of when due. These collection fees are in addition to all other penalties provided by law. KRS 131.440(1)(b) Records Retention—The Department of Revenue deems acceptable virtually any records retention system which results in an essentially unalterable method of records storage and retrieval, provided: (a) authorized Department of Revenue personnel are granted access, including any specialized equipment; (b) taxpayer maintains adequate back–up; and (c) taxpayer maintains documentation to verify the retention system is accurate and complete. PTE (2020) INSTRUCTIONS Page 9 of 22 FORM PTE—SPECIFIC INSTRUCTIONS Item E—Income Tax Exemption Code Period Covered—File the 2020 return for calendar year 2020 and fiscal years that begin in 2020. For a fiscal year, fill in the taxable period beginning and ending at the top of Form PTE. If the pass-through entity is exempt from income tax, enter the following two–digit code in the space provided. Failure to include a valid code will delay the processing of the tax return and may result in a tax notice for assessment of taxes and penalties. NOTE: For 52/53 week filers, fill in the taxable period beginning and ending dates as specified below: • • Begin on the first day of the calendar month beginning nearest to the first day of the 52/53-week tax year. REASON CODE 22 End on the last day of the calendar month ending nearest to the last day of the 52/53-week tax year. REASON This return contains only the LLET as the S corporation is exempt from income tax as provided by Public Law 86–272. Item A—Check the box that applies to the entity type filing this return. Item F—Provider 3-Factor Apportionment Code Item B—Enter the pass-through entity’s federal identification number (FEIN). See federal Publication 583 if the pass-through entity has not obtained this number. If the entity is a provider as defined in KRS 141.121(1)(e), enter one of the following two-digit codes in the space provided. The apportionment fraction for a provider continues to be calculated using a three (3)- factor formula as provided in KRS 141.901 for tax years beginning on or after January 1, 2018. Item C—Enter the six-digit Kentuck y Corporation/LLET Account Number on the applicable line at the top of each form and schedule and on all checks and correspondence. This number was included in correspondence received from the Department of Revenue at the time of registration. Using an incorrect account number, such as an account number for withholding or sales and use tax or the Kentucky Secretary of State organization number, may result in the payment and/ or return being credited to another taxpayer’s account. If the Kentucky Corporation/LLET Account Number is not known, complete Form 20A100, “Declaration of Representative,” and contact Registration at 502–564–3306 for instructions on how to obtain an account number. Item D—LLET Exemption Code If the pass-through entity is exempt from LLET, enter one of the following two–digit codes in the space provided. Failure to include a valid code will delay the processing of the tax return and may result in a tax notice for assessment of taxes and penalties. Failure to include a valid code will delay the processing of the tax return and may result in a tax notice for assessment of taxes and penalties. REASON CODE 31 Communications service as defined in KRS 136.602; 32 Cable service as defined in KRS 136.602; 33 Internet service as defined in 47 U.S.C. sec. 151; or 34 Other (attach statement) Item G—Check the applicable boxes: • Publicly Traded Partnership—The pass-through entity is a publicly traded partnership as provided by KRS 141.0401(6)(r). • Qualified Investment Partnership—The pass-through entity is a qualified investment partnership per KRS 141.206(14)(a). • LLC—The pass-through entity is a Limited Liability Company (LLC). • LP—The pass-through entity is a Limited Partnership (LP). • LLP—The pass-through entity is a Limited Liability Partnership (LLP). • Initial Return—This is the pass-through entity’s first Kentucky tax return filed. Complete questions 1 and 2 on Schedule Q—Questionnaire. • Change of Accounting Period—The entity has changed its accounting period since it filed its prior year Kentucky tax return. Attach a statement to the tax return showing the entity’s taxable year end before the change and the new taxable year end. If the entity received written approval from the Internal Revenue Service to change its taxable year, attach a copy of the letter. REASON CODE 10 REASON A public service corporation subject to tax under KRS 136.120. (S corporations only) 12 A property or facility which has been certified as a fluidized bed energy production facility as defined in KRS 211.390. 13 An alcohol production facility as defined in KRS 247.910. 18 A personal service corporation as defined in § 269A(b)(1) of the Internal Revenue Code. (S corporations only) 21 A qualified investment partnership as defined in KRS 141.206(14)(a). NOTE: LLET Exempt codes are not applicable to general partnerships. PROVIDER BUSINESS PTE (2020) INSTRUCTIONS • Amended Return—This is an amended tax return. Provide an explanation of all changes in Part V—Explanation of Amended Return Changes. • Short–period Return—This return is for a period of less than one year and not an initial return or a final return. Check the appropriate box in Part IV—Explanation of Final Return and/or Short-Period Return. • Final Return—This is the pass-through entity’s final Kentucky tax return. Check the appropriate box in Part IV— Explanation of Final Return and/or Short-Period Return. Item H—Enter the number of K-1’s issued or received and the number of owners included in this return. Name and Address—Print or type the pass-through entity’s name as set forth in the charter or articles of organization. For the address, include the suite, room, or other unit number after the street address. If the U.S. Postal Service does not deliver mail to the street address and the entity has a P.O. Box, show the box number instead of the street address. Change of Name—Check the box if the pass-through entity’s name has changed since the filing of the prior year Kentucky tax return. Attach a statement to the tax return providing the pass-through entity’s name reflected on the prior year Kentucky tax return. Telephone Number—Enter the business telephone number of the principal officer or chief accounting officer signing this return. State of Organization—Enter the state of organization. Date of Organization—Enter the date of organization. Principal Business Activity in Kentucky—Enter the entity’s principal business activity in Kentucky. Page 10 of 22 or Form 1065, Line 16(a), Form 1125-A and elsewhere on the return (do not include the IRC §179 deduction). If federal Form 4562 is required to be filed for federal income tax purposes, a copy must be attached. Line 4—Enter related party expense additions from Schedule RPC, Part II, Section B, Line 1. Line 5—Enter the federal loss from federal Form 1120S, Line 4 or federal Form 1065, Line 6. If the loss from Form 4797, Line 17 is the same for both federal and Kentucky, do not make an entry on this line. Line 6—Enter the Kentucky gain from Kentucky Form 4797, Line 17. If the gain from Form 4797, Line 17 is the same for both federal and Kentucky, do not make an entry on this line. Line 7—Enter federal allowable depletion from federal Form 1120S, Line 15 or federal Form 1065, Line 17. Do not deduct depletion for oil and gas properties as each partner, member, or shareholder figures depletion on oil and gas properties. If the depletion is the same for both federal and Kentucky, do not make an entry on this line. Line 8—Enter the difference of the Kentucky distributive share income amounts from Kentucky Schedule(s) K-1 in excess of federal distributive share amounts from federal Schedule(s) K-1. Line 9—Enter the addition to federal taxable income equal to the excess of Kentucky taxable income over federal taxable income resulting from amendments to the IRC (excluding amendments af fecting depreciation and the IRC §179 deduction) subsequent to the applicable IRC date. Attach a schedule to the tax return showing the detail of the addition, including the related IRC section(s). North American Industrial Classification System (NAICS)— Enter your six–digit NAICS code. To view a complete listing of NAICS  codes, visit the Census Bureau at www.census.gov/ eos/www/naics . Line 10—Enter any other additions to federal income not reported on Lines 2 through 9, and attach an explanation to the tax return. PART I—ORDINARY INCOME (LOSS) COMPUTATION Line 11—Enter the total of Lines 1 through 10. Line 1—Enter the amount from federal Form 1120S, Line 21, or Form 1065, Line 22 ordinary income (loss) from trade or business activities. Attach Form 1120S or Form 1065, all pages. Subtractions from Federal Ordinary Income—Lines 12 through 19 itemize additional deductions allowed which are differences between federal ordinary income and Kentucky ordinary income. Additions to Federal Ordinary Income—Lines 2 through 10 itemize additional income or disallowed deductions which are differences between federal ordinary income and Kentucky ordinary income. Line 2—Enter state taxes measured in whole or in part by gross or net income. “State” means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States or any foreign country or political subdivision thereof. Attach a schedule reflecting the total taxes deducted on federal Form 1120S or 1065. KRS 141.039(2)(c) Line 3— See instructions on page 4 regarding depreciation and IRC §179 deduction differences, and if applicable, include the total of depreciation amounts from Form 1120S, Line 14 Line 12—Enter the amount of the work opportunity credit reflected on federal Form 5884. For Kentucky purposes, the pass-through entity may deduct the total amount of salaries and wages paid or incurred for the taxable year. This adjustment does not apply for other federal tax credits. Line 13—Enter Kentucky depreciation (do not include IRC §179 deduction). See instructions on page 4 regarding depreciation and IRC §179 deduction differences, and if applicable, Kentucky Form 4562 must be attached. Line 14—Enter the federal gain from federal Form 1120S, Line 4 or federal Form 1065, Line 6. If the gain from Form 4797, Line 17 is the same for both federal and Kentucky, do not make an entry on this line. PTE (2020) INSTRUCTIONS Line 15—Enter the Kentucky loss from Kentucky Form 4797, Line 17. If the loss from Form 4797, Line 17 is the same for both federal and Kentucky, do not make an entry on this line. Line 16—Enter Kentucky allowable depletion using Kentucky taxable income and deductions. If the depletion is the same for both federal and Kentucky, do not make an entry on this line. To determine the allowable depletion deduction for Kentucky purposes, the percentage limitations per the IRC must be applied using Kentucky taxable income and deductions. Line 17—Enter the difference of the federal distributive share income amounts from federal Schedule(s) K-1 in excess of Kentucky distributive share amounts from Kentucky Schedule(s) K-1. Line 18—Enter the subtraction from federal taxable income equal to the excess of federal taxable income over Kentucky taxable income resulting from amendments to the IRC (excluding amendments affecting depreciation and the IRC §179 deduction) subsequent to the applicable IRC date. Attach a schedule to the tax return showing the detail of the subtraction, including the related IRC section(s). Page 11 of 22 Schedule(s) K-1 (PTE). NOTE: For applications approved prior to April 27, 2018, this credit is refundable and should be entered here. For applications approved on or after April 27, 2018, this credit is nonrefundable and should be entered on Schedule TCS. Line 10—Enter the amount of LLET paid with Form 720EXT, Extension of Time to File Kentucky Corporation/LLET Return. Line 11—Enter the amount credited to 2020 LLET from Form 720S, Part I, Line 20 or Form 765, Part II, Line 18 of the 2019 return. Line 12—Enter the income tax overpayment from Part III, Line 13 credited to the 2020 LLET. If filing an amended return, enter the amount from the original return. Line 13—Enter the LLET paid on the original return. This line is used only when filing an amended return. Line 14—Enter the LLET overpayment on the original return. This line is used only when filing an amended return. Line 19—Enter any other subtractions from federal income not reported on Lines 12 through 18, and attach an explanation to the tax return. Line 15—Enter the Estimated Tax Penalty and attach Form 2220-K. Line 20—Enter the total of Lines 12 through 19. Line 16—If the total of Lines 6, 14, and 15 is greater than the total of Lines 7 through 13, enter the LLET due on this line and on Form KBR-V, Corp/LLET Payment Voucher. Line 21—Subtract Line 20 from Line 11. PART II—LLET COMPUTATION Line 1—Enter the amount from Schedule L, Section E, Line 1. Line 2—Enter the sum of all tax credit recapture amounts from Schedule RC–R, Line 12, Form 8874(K)-B, Line 3, and/or Schedule DS, page 2, Line 10. Attach Schedule RC–R, Form 8874(K)-B and/or Schedule DS. Line 3—Enter the total of Lines 1 and 2. Line 4—Enter the nonrefundable LLET credit from Kentucky Schedule(s) K–1. Copies of Kentucky Schedule(s) K–1 must be attached to the tax return in order to claim the credit. Line 5—Enter the total nonrefundable tax credits from Schedule TCS, Part III, Column E, Line 1 (attach Schedule TCS). Line 6—Enter the greater of Line 3 less Lines 4 and 5, or $175 minimum. Line 7—Enter the total estimated LLET payments made for the taxable year. Do not include the amount credited from the prior year. Line 8—Enter the refundable certified rehabilitation tax credit. Attach the Kentucky Heritage Council certification(s) or Kentucky Schedule(s) K–1 (PTE). Line 9—Enter the refundable film industry tax credit. Attach the Kentucky Film Office certification (s) or Kentucky Line 17—If the total of Lines 6, 14, and 15 is less than the total of Lines 7 through 13, enter the difference on this line as a positive number. Line 18—If an underpayment exists on Part III, Line 11, Income tax due, enter the portion of the overpayment on Line 17 to be credited to the 2020 corporation income tax. Enter the amount on this line and on Part III, Line 8. Line 19—If Line 17 reflects an overpayment, enter the portion of Line 17 to be credited to 2020 LLET interest due. Line 20—If Line 17 reflects an overpayment, enter the portion of Line 17 to be credited to the 2020 LLET penalty due. Line 21—If Line 17 reflects an overpayment, enter the portion of Line 17 to be credited to 2021 LLET. Line 22—If Line 17 reflects an overpayment, enter the portion of Line 17 to be refunded (Line 17 less Lines 18 through 21). PART III – INCOME TAX COMPUTATION For S Corporations: Complete Lines 1 through 3 Partnerships: If box is checked, skip to Line 4 Line 1—Enter tax from the Excess Net Passive Income Tax Worksheet, Line 13. (See instructions and worksheet on page 17.) If the S corporation has accumulated earnings and profits at the close of its tax year, has passive investment income for PTE (2020) INSTRUCTIONS the tax year that is in excess of twenty-five percent of gross receipts, and has excess passive income, the S corporation must pay a tax on the excess net passive income per KRS 141.040(4)(c). Complete Lines 1 through 3 and Line 9 of the worksheet on page 17 to make this determination. If Line 2 is greater than Line 3 and the S corporation has taxable income (see instructions for Line 9 of worksheet), it must pay the tax. Attach completed worksheet to the return. Page 12 of 22 Line 7—Enter the amount credited to the 2020 income tax from Form 720S, Part II, Line 16 of the 2019 return. Line 8—Enter the LLET overpayment credited to the 2020 income tax from Part II, Line 18. If filing an amended return, enter the amount from the original return. Line 9—Enter the income tax paid on the original return. This line is used only when filing an amended return. Line 2—Enter the built–in gains tax from the Built–In Gains Tax Worksheet, Line 8. Attach completed worksheet to the return. (See instructions and worksheet on page 17.) Line 10—Enter the income tax overpayment on the original return. This line is used only when filing an amended return. If the S corporation for the taxable year has built-in gains per IRC §1374, the S corporation must pay a built-in gains tax as provided by KRS 141.040(4)(c). Line 11—If the total of Lines 4 and 10 is greater than the total of Lines 5 through 9, enter the difference on this line and on Form KBR-V, Corp/LLET Payment Voucher. IRC §1374 provides that the built-in gains tax may apply to the following S corporations: (1) An S corporation that was a C corporation before it elected to be an S corporation; or (2) An S corporation that acquired an asset with a basis determined (in whole or in part) by reference to its basis (or the basis of any other property) in the hands of a C corporation per IRC §1374(d)(8). Line 12—If the total of Lines 4 and 10 is less than the total of Lines 5 through 9, enter the difference on this line as a positive number. An S corporation may owe tax if it has net recognized built-in gain during the applicable recognition period. The applicable recognition period is the ten (10) year period beginning: (1) For an asset held when the S corporation was a C corporation, on the first day of the first tax year for which the corporation is an S corporation; or (2) For an asset with a basis determined by reference to its basis (or the basis of any other property) in the hands of the C corporation, on the date the asset was acquired by the S corporation. Line 14— If Line 12 reflects an overpayment, enter the portion of Line 12 to be credited to 2020 corporation income tax interest due. A corporation must compute the built-in gains tax separately for the group of assets it held at the time its S election became effective and for each group of assets it acquired from a C corporation with the basis determined (in whole or in part) by reference to the basis of the asset (or any other property) in hands of the C corporation. For details, see §1.1374-8 of the Treasury Regulations. Line 3—Enter the amount of Tax installment on LIFO recapture. The first installment is paid on the C corporation’s final return, and the remaining three installments are paid on the S corporation’s first three tax returns. Attach a schedule showing the amounts and dates of the installments paid by the S corporation. Line 4—Total S Corporation: Enter the total of Lines 1 through 3, but not less than zero. Partnership: Enter the tax due that the partnership elects to pay on behalf of its partners resulting from an IRS audit. Line 5—Enter the total of the estimated income tax payments made for the taxable year. Do not include the amount credited from the prior year. Line 6—Enter the amount of income tax paid with Form 720EXT, Extension of Time to File Kentucky Corporation/LLET Return. Line 13— If an underpayment exists on Part II, Line 16, LLET due, enter the portion of the overpayment on Line 12 to be credited to the 2020 LLET. Enter the amount on this line and on Part II, Line 12. Line 15— If Line 12 reflects an overpayment, enter the portion of Line 12 to be credited to the 2020 corporation income tax penalty due. Line 16— If Line 12 reflects an overpayment, enter the portion of Line 12 to be credited to 2021 corporation income tax. Line 17— If Line 12 reflects an overpayment, enter the portion of Line 12 to be refunded (Line 12 less Lines 13 through 16). SCHEDULE K (FORM PTE) General Instructions—Complete all applicable lines by entering the total pro rata share amount for each item listed. Federal instructions for Form 1120S or 1065 and federal Schedule K provide additional information which will assist the pass-through entity in completing Schedule K, Form PTE. A pass-through entity must use Form PTE(K), Kentucky Schedule K For Pass-Through Entities With Economic Development Project(s), if the pass-through entity has one or more projects under the Kentucky Rural Economic Development Act (KREDA), Kentucky Industrial Development Act (KIDA), Kentucky Jobs Retention Agreement (KJRA), Kentucky Industrial Revitalization Act (KIRA), Kentucky Jobs Development Act (KJDA), Kentucky Business Investment Program (KBI), Kentucky Reinvestment Act (KRA), Incentives for Energy Independence Act (IEIA), or Farming Operation Networking Project (FON). NOTE: Banks and savings and loan associations see special instructions under Tax Treatment of S Corporation and Shareholder(s) on page 5 of these instructions. PTE (2020) INSTRUCTIONS Section A—Income (Loss) and Deductions Line 1—Enter Kentucky ordinary income (loss) from Form PTE, Part I, Line 21. Line 2—Enter net income (loss) from rental real estate activities reported on federal Schedule K, Form 1120S or Form 1065, adjusted to reflect any differences in Kentucky and federal income tax laws. Line 3(a)—Enter the gross income from other rental activities reported on federal Schedule K, Form 1120S or Form 1065. Line 3(b)—Enter the expenses from other rental activities reported on federal Schedule K, Form 1120S or Form 1065, adjusted to reflect any differences in Kentucky and federal income tax laws. Line 3(c)—Enter the difference of Line 3(a) and Line 3(b). Line 4(a)—Enter interest income from federal Schedule K, Form 1120S or Form 1065, adjusted to exclude tax-exempt U.S. government interest, if any, and to include interest income from obligations of states other than Kentucky and their political subdivisions. Lines 4(b) and 4(c)—Enter the amount of dividend and royalty income reported on federal Schedule K, Form 1120S or Form 1065. Line 4(d)—See instructions on page 4 regarding differences in gain or loss from disposition of assets, and if applicable, enter the amount from Line 7 of the Kentucky Schedule D that is portfolio income. Report any gain or loss that is not portfolio income on Line 7, Schedule K, Form PTE. Kentucky Schedule D must be attached to Form PTE. Otherwise, enter the amount from Line 7 of the federal Schedule D (Form 1120S or Form 1065) that is portfolio income. Line 4(e)—See instructions on page 4 regarding differences in gain or loss from disposition of assets, and if applicable, enter the amount from Line 15 of the Kentucky Schedule D that is portfolio income. Report any gain or loss that is not portfolio income on Line 7, Schedule K, Form PTE. Kentucky Schedule D must be attached to Form PTE. Otherwise, enter the amount from Line 15 of the federal Schedule D (Form 1120S or Form 1065) that is portfolio income. Line 4(f)—Enter any other portfolio income not reported on Lines 4(a) through 4(e), Schedule K, Form PTE. Line 5—Partnerships Only—Guaranteed payments to partners Line 6—See instructions on page 4 regarding differences in gain or loss from disposition of assets. If applicable, enter the amount from Line 7 of the Kentucky Form 4797, and Kentucky Form 4797 must be attached to Form PTE. Otherwise, enter net gain (loss) under IRC §1231 from federal Form 4797. Do not include net gains (losses) from involuntary conversions due to casualties or thefts on this line. Instead, report them on Kentucky Schedule K, Line 7. Line 7—Enter all other items of income (loss) of the passthrough entity not included on Lines 1 through 6. See federal instructions for Schedule K, Form 1120S or Form 1065. Page 13 of 22 Line 8—Enter total contributions paid by the pass-through entity during its taxable year and attach a schedule showing separately the contributions subject to the 50 percent, 30 percent, and 20 percent limitations. These percentage limitations must be applied to the Kentucky amounts rather than the federal amounts. Line 9—See instructions on page 4 regarding depreciation and IRC §179 deduction differences, and if applicable, include the amount from Line 12 of the Kentucky Form 4562. Kentucky Form 4562 must be attached. Otherwise, enter IRC §179 deduction from federal F
Extracted from PDF file 2020-kentucky-form-pte-instructions.pdf, last modified December 2020

More about the Kentucky Form PTE Instructions Corporate Income Tax TY 2020

Pass Through Entity Tax - Instructions

We last updated the Kentucky Pass-Through Entity Income and LLET Return - Instructions in February 2021, so this is the latest version of Form PTE Instructions, fully updated for tax year 2020. You can download or print current or past-year PDFs of Form PTE Instructions directly from TaxFormFinder. You can print other Kentucky tax forms here.

Other Kentucky Corporate Income Tax Forms:

TaxFormFinder has an additional 129 Kentucky income tax forms that you may need, plus all federal income tax forms.

Form Code Form Name
Form PTE Instructions Kentucky Pass-Through Entity Income and LLET Return - Instructions
Form 725 Kentucky Single Member LLC Individually Owned & LLET Return
Form 720-ES Kentucky Estimated Tax Voucher - Corporation Income/Limited Liability Entity Tax - Form 41A720ES
Form PTE Kentucky Pass-Through Entity Income and LLET Return
Form 720S Kentucky S Corporation Income Tax and LLET Return

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Form Sources:

Kentucky usually releases forms for the current tax year between January and April. We last updated Kentucky Form PTE Instructions from the Department of Revenue in February 2021.

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About the Corporate Income Tax

The IRS and most states require corporations to file an income tax return, with the exact filing requirements depending on the type of company.

Sole proprietorships or disregarded entities like LLCs are filed on Schedule C (or the state equivalent) of the owner's personal income tax return, flow-through entities like S Corporations or Partnerships are generally required to file an informational return equivilent to the IRS Form 1120S or Form 1065, and full corporations must file the equivalent of federal Form 1120 (and, unlike flow-through corporations, are often subject to a corporate tax liability).

Additional forms are available for a wide variety of specific entities and transactions including fiduciaries, nonprofits, and companies involved in other specific types of business.


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