Kentucky PKG IEBA is a tax credit package used by a business entity that has been approved for incentives under the Incentives for Energy-Related Business Act. This package is used to report IEBA tax incentives, calculate the allowable credit, and track the approved incentive amounts for an energy-related business project. A business must have preliminary or final approval before using this package. The package includes different schedules depending on the type of entity filing the Kentucky return. Corporations use Schedule IEBA and Schedule IEBA-T. Pass-through entities and general partnerships use Schedule IEBA-SP and Schedule IEBA-T. The package also helps track approved costs, wage assessments, tax credits, income tax, limited liability entity tax, and credit limitations during the term of the incentive agreement. Each package should include only one approved IEBA project, so a business with more than one approved project must complete a separate package for each project.
How To File Kentucky PKG IEBA
Use Kentucky PKG IEBA only if your business has been approved for the IEBA credit. Do not use this package for a project that has not received approval.
Attach the completed package to the Kentucky return that applies to your business. Use Form 720 or Form 720U if the business is a corporation. Use Form PTE or Form 725 if the business is a pass-through entity or general partnership.
Only include one incentive project in each Package IEBA. If your business has multiple approved projects, complete a separate IEBA package for each one.
If the business files Form 720 or Form 720U, complete Schedule IEBA and Schedule IEBA-T. If the business files Form PTE or Form 725, complete Schedule IEBA-SP and Schedule IEBA-T.
For the first and last years of the incentive agreement, claim the tax incentive only for the part of the taxable year that falls within the agreement term. Separate period accounting is recommended. If separate period accounting is not available, use a proration factor.
For the first year, divide the number of days from the activation date through the end of the taxable year by the total number of days in the taxable year. Then multiply total income by that factor to find the project income for the eligible period.
For the last year, divide the number of days from the first day of the taxable year through the end of the agreement term by the total number of days in the taxable year. Then multiply total income by that factor to find the project income for the eligible period.
How To Complete Kentucky PKG IEBA
Package-Level Instructions
Line 1: Package Name: Use this package for the Incentives for Energy-Related Business Act, also called IEBA.
Line 2: Tax Year: Confirm that the package is for the correct tax year before completing the schedules.
Line 3: Approval Requirement: Use the package only if the business has received approval for the IEBA credit from the proper Kentucky economic development authority.
Line 4: Return Attachment: Attach the completed IEBA package to Form 720, Form 720U, Form PTE, or Form 725, depending on the entity type.
Line 5: One Project Per Package: Include only one approved IEBA incentive project in each package. Do not combine separate projects in one package.
Line 6: Corporation Filing Rule: If the business files Form 720 or Form 720U, complete Schedule IEBA and Schedule IEBA-T.
Line 7: Pass-Through Entity Filing Rule: If the business files Form PTE or Form 725, complete Schedule IEBA-SP and Schedule IEBA-T.
Line 8: First Year Proration: In the first year of the agreement, claim the incentive only for the period beginning on the activation date and ending on the last day of the taxable year.
Line 9: Last Year Proration: In the last year of the agreement, claim the incentive only for the period beginning on the first day of the taxable year and ending on the final day of the agreement term.
Line 10: Separate Period Accounting: Use separate period accounting when available to determine the project income for the eligible period.
Line 11: Proration Factor: If separate period accounting is not available, calculate the proration factor and apply it to total income to determine the project income.
Schedule IEBA Instructions For Corporations
Line 12: Taxable Year Ending: Enter the month and year when the corporation’s taxable year ends.
Line 13: Name Of Corporation: Enter the full legal name of the corporation.
Line 14: Federal Identification Number: Enter the corporation’s federal identification number.
Line 15: Kentucky Corporation/LLET Account Number: Enter the Kentucky Corporation or LLET account number. It must be 9 digits. If it has only 6 digits, add zeros at the beginning.
Line 16: Location Of Project: Enter the physical location of the approved IEBA project.
Line 17: City: Enter the city where the IEBA project is located.
Line 18: County: Enter the county where the IEBA project is located.
Line 19: Activation Date Of IEBA Incentive Agreement: Enter the month, day, and year when the IEBA incentive agreement became active.
Line 20: Economic Development Project Number: Enter the project number assigned to the IEBA project.
Schedule IEBA, Part I, Computation Of LLET Excluding IEBA Project
Line 21: Part I, Line 1, LLET From Form 720 Or Form 720U: Enter the LLET from Form 720, Part II, line 1, or Form 720U, Schedule U8, Section E, line 1.
Line 22: Part I, Line 2, LLET On IEBA Project: Enter the LLET on the IEBA project from Schedule L-ECON. Use only the Kentucky gross receipts and Kentucky gross profits from the IEBA project when preparing Schedule L-ECON.
Line 23: Part I, Line 3, LLET Excluding IEBA Project: Subtract Part I, line 2 from Part I, line 1. Enter the result.
Schedule IEBA, Part II, Section A, Computation Of Corporation Tax
Line 24: Section A, Line 1, Income Tax: Enter the income tax from Form 720, Part III, line 1, or Form 720U, Schedule U5, Section D, line 8.
Line 25: Section A, Line 2, LLET Of Corporation: Enter the LLET of the corporation from Part I, line 1.
Line 26: Section A, Line 3, Nonrefundable LLET Credit: Subtract $175 from Section A, line 2. Enter the result, but do not enter more than the amount on Section A, line 1.
Line 27: Section A, Line 4, Total Corporation Tax: Add Section A, lines 1 and 2, then subtract Section A, line 3. Enter the result.
Schedule IEBA, Part II, Section B, Computation Of Tax Excluding IEBA Project
Line 28: Section B, Line 1, Taxable Net Income: Enter taxable net income from Form 720, Part I, line 43, or Form 720U, Schedule U5, Section D, line 7.
Line 29: Section B, Line 2, Net Income From IEBA Project: Enter the net income from the IEBA project. If the project has a loss, enter zero.
Line 30: Section B, Line 3, Taxable Net Income Excluding IEBA Project: Subtract Section B, line 2 from Section B, line 1. If line 2 is greater than line 1, enter zero.
Line 31: Section B, Line 4, Income Tax Liability Excluding IEBA Project: Multiply Section B, line 3 by 5%. Enter the result.
Line 32: Section B, Line 5, LLET Excluding LLET On IEBA Project: Enter the amount from Part I, line 3.
Line 33: Section B, Line 6, LLET Credit Against Tax Excluding IEBA Project: Subtract $175 from Section B, line 5. Enter the result, but do not enter more than Section B, line 4.
Line 34: Section B, Line 7, Total Tax Excluding IEBA Project: Add Section B, lines 4 and 5, then subtract Section B, line 6.
Line 35: Section B, Line 8, Total Tax Attributable To IEBA Project: Subtract Section B, line 7 from Section A, line 4. Enter the result here and also carry it to Part III, line 1.
Schedule IEBA, Part III, Limitation
Line 36: Part III, Line 1, Tax Liability Attributable To IEBA Project: Enter the amount from Part II, Section B, line 8.
Line 37: Part III, Line 2, Limitation From Schedule IEBA-T: Enter the limitation amount from Schedule IEBA-T, Column C.
Line 38: Part III, Line 3, Allowable IEBA Tax Credit: Enter the smaller of Part III, line 1 or Part III, line 2. This is the allowable IEBA tax credit.
Line 39: Schedule TCS Entry: Enter the allowable IEBA credit on Schedule TCS, Part I, Column E and Column F.
Line 40: Multiple Corporation Projects: If the corporation has more than one economic development project, compute the credit separately for each project using the correct tax computation schedule.
Line 41: Schedule L-ECON Attachment: Attach Schedule L-ECON when computing the separate LLET for the IEBA project.
Line 42: Multiple Schedule L-ECON Rule: If the corporation has more than one approved project, attach a separate Schedule L-ECON for each project’s LLET computation.
Line 43: First And Last Year LLET Rule: In the first and last years of each project, calculate only the Kentucky gross receipts and Kentucky gross profits received during the agreement term.
Line 44: Corporation Project Income Rule: If the corporation’s only Kentucky operation is the IEBA project, enter the same taxable net income amount on Section B, line 1 and Section B, line 2.
Line 45: Alternative Method Attachment: If separate accounting is not practical and another approved method is used, attach the approval letter from the Kentucky Department of Revenue.
Schedule IEBA-SP Instructions For Pass-Through Entities
Line 46: Taxable Year Ending: Enter the month and year when the pass-through entity’s taxable year ends.
Line 47: Name Of Pass-Through Entity: Enter the full legal name of the pass-through entity.
Line 48: Federal Identification Number: Enter the entity’s federal identification number.
Line 49: Kentucky Corporation/LLET Account Number: Enter the Kentucky Corporation or LLET account number. It must be 9 digits. If it has 6 digits, add leading zeros.
Line 50: Location Of Project: Enter the physical location of the approved IEBA project.
Line 51: City: Enter the city where the project is located.
Line 52: County: Enter the county where the project is located.
Line 53: Activation Date Of IEBA Incentive Agreement: Enter the month, day, and year when the IEBA incentive agreement became active.
Line 54: Economic Development Project Number: Enter the assigned economic development project number.
Schedule IEBA-SP, Part I, Computation Of IEBA Tax Credit And Tax Due
Line 55: Part I, Line 1, Kentucky Taxable Income On IEBA Project: Enter the Kentucky taxable income from the IEBA project. If the entity’s only operation is the IEBA project, use the net income or loss from Form PTE. If the entity has other operations, attach a schedule showing how the IEBA project income or loss was calculated.
Line 56: Part I, Line 2, Net Operating Loss Deduction On IEBA Project: Enter any net operating loss deduction from the IEBA project that is being carried forward from previous years.
Line 57: Part I, Line 3, Kentucky Taxable Income After Net Operating Loss Deduction: Subtract line 2 from line 1. Enter the result.
Line 58: Part I, Line 4, Income Tax Liability Of IEBA Project: Multiply line 3 by 5%. Enter the project income tax liability.
Line 59: Part I, Line 5, LLET On IEBA Project: Enter the LLET on the IEBA project from Schedule L-ECON. General partnerships should not complete this line.
Line 60: Part I, Line 6, Nonrefundable LLET Credit: Subtract $175 from line 5. Enter the result, but do not enter more than line 4. General partnerships should not complete this line.
Line 61: Part I, Line 7, Total Tax On IEBA Project: Add lines 4 and 5, then subtract line 6. Enter the total tax on the IEBA project.
Line 62: Part I, Line 8, Limitation: Enter the limitation from Schedule IEBA-T, Column C.
Line 63: Part I, Line 9(a), IEBA Tax Credit: Enter the smaller of line 7 or line 8 if the entity is claiming the amount as an IEBA tax credit.
Line 64: Part I, Line 9(b), Estimated Tax Payment: Enter the smaller of line 7 or line 8 if the entity elects to treat the amount as an estimated tax payment instead of an IEBA tax credit. If this option is chosen, complete Part II.
Line 65: Line 9 Entry Rule: Enter an amount on either line 9(a) or line 9(b), not both.
Line 66: Part I, Line 10, Tax Due On The Project: If line 7 is larger than the amount entered on line 9(a) or line 9(b), enter the difference as tax due on the project. Add this amount to Form PTE, Part II, line 16, or Form 725, Part II, line 15.
Schedule IEBA-SP, Part II, Estimated Tax Election
Line 67: Election Statement: Complete Part II only if the pass-through entity chooses to apply the allowable IEBA amount as an estimated tax payment instead of a credit.
Line 68: Name Of Pass-Through Entity In Election: Enter the name of the pass-through entity making the election.
Line 69: Taxable Year Ended In Election: Enter the taxable year ending date for the election.
Line 70: Estimated Tax Payment Amount: The election applies an amount equal to the smaller of Part I, line 7 or Part I, line 8 as an estimated tax payment.
Line 71: Signature Of Shareholder, Partner, Or Member: The shareholder, partner, or member making the election must sign.
Line 72: Print Name: Print the name of the person signing the election.
Line 73: Date: Enter the date the election is signed.
Line 74: Credit Does Not Pass Through: The IEBA credit does not pass through to members, partners, or shareholders.
Line 75: Form PTE(K) Adjustment: Use Form PTE(K) to exclude the net income from the IEBA project from the distributive share income of partners, members, or shareholders.
Line 76: Multiple Pass-Through Projects: If the pass-through entity has multiple economic development projects, complete the applicable schedule for each project to determine the credit and any net tax liability.
Line 77: First And Last Year Income Rule: In the first and last years of the project, include only Kentucky taxable income received during the agreement term.
Line 78: Separate Facility Rule: If the IEBA project is a separate facility, determine net income, Kentucky gross receipts, and Kentucky gross profits using separate accounting for that facility.
Line 79: Alternative Method Rule: If separate accounting is not practical and another approved method is used, attach the Department of Revenue approval letter.
Line 80: Net Operating Loss Rule: IEBA project losses do not pass through to partners, members, or shareholders. A prior year IEBA project net operating loss must be subtracted from project income before the credit is calculated.
Line 81: General Partnership Rule: A general partnership is not subject to LLET, so it should not complete Schedule IEBA-SP lines 5 and 6.
Line 82: Schedule L-ECON Rule For Pass-Through Entities: Use Schedule L-ECON to compute a separate LLET for the IEBA project when LLET applies.
Schedule IEBA-T Tracking Schedule Instructions
Line 83: Name Of Entity: Enter the legal name of the entity maintaining the IEBA tracking schedule.
Line 84: Entity Type, Corporation: Check this box if the entity is a corporation.
Line 85: Entity Type, Limited Liability Pass-Through Entity: Check this box if the entity is a limited liability pass-through entity.
Line 86: Entity Type, General Partnership: Check this box if the entity is a general partnership.
Line 87: Entity Type, Other: Check this box if another entity type applies, then write the entity type on the line provided.
Line 88: Federal Identification Number: Enter the entity’s federal identification number.
Line 89: Kentucky Corporation/LLET Account Number: Enter the Kentucky Corporation or LLET account number. It must be 9 digits. If it has only 6 digits, add leading zeros.
Line 90: Location Of Project: Enter the physical location of the approved IEBA project.
Line 91: City: Enter the city where the project is located.
Line 92: County: Enter the county where the project is located.
Line 93: Activation Date Of IEBA Incentive Agreement: Enter the month, day, and year when the IEBA incentive agreement became active.
Line 94: Economic Development Project Number: Enter the assigned project number.
Line 95: Schedule IEBA-T Purpose: Use Schedule IEBA-T to maintain a record of approved incentives recovered through Kentucky income tax, LLET, or wage assessments.
Line 96: Separate Tracking Schedule Requirement: Keep a separate Schedule IEBA-T for each approved IEBA project for the full duration of the agreement.
Line 97: Year-By-Year Tracking Requirement: Starting with the first taxable year of the IEBA agreement, complete Columns A through E using a separate row for each year.
Line 98: Current Year Attachment: Attach the updated Schedule IEBA-T to Schedule IEBA or Schedule IEBA-SP when filing the Kentucky tax return.
Line 99: Schedule TCS Credit Reporting: Enter all tax credits on Schedule TCS. Credits must be claimed in the required order.
Line 100: Credit Limitation Rule: Total credits cannot reduce the LLET below the $175 minimum and cannot reduce income tax below zero.
Schedule IEBA-T Columns
Line 101: Column A, Taxable Year Ended: Enter the month, day, and year for the ending date of the taxable year shown on that row.
Line 102: Column B, Carry Forward Balance Of Approved Incentive For Wage Assessments: For the first taxable year, enter the approved incentive to be recovered by wage assessments under the tax incentive agreement.
Line 103: Column B, Later Years: For each later year, compare the prior year Column B and Column D. If prior year Column B is greater than prior year Column D, enter the difference. If prior year Column D equals prior year Column B, enter zero.
Line 104: Column C, Carry Forward Balance Of Approved Incentive For Income Tax And LLET: For the first taxable year, enter the approved incentive to be recovered by income tax and LLET credits under the tax incentive agreement.
Line 105: Column C, Later Years: For each later year, compare the prior year Column C and Column E. If prior year Column C is greater than prior year Column E, enter the difference. If prior year Column E equals prior year Column C, enter zero.
Line 106: Column D, IEBA Wage Assessments Credit Claimed: Enter the IEBA wage assessments withheld during the current year. The wage assessments claimed cannot exceed the balance in Column B.
Line 107: Column E, IEBA Tax Credit Claimed On Return: Enter the greater of the IEBA credit claimed against LLET or income tax for this project as reported on Schedule TCS. If no credit is claimed, enter zero.
Line 108: Schedule IEBA-T Transfer To Schedule IEBA: For a corporation, use Schedule IEBA-T, Column C as the limitation amount on Schedule IEBA, Part III, line 2.
Line 109: Schedule IEBA-T Transfer To Schedule IEBA-SP: For a pass-through entity, use Schedule IEBA-T, Column C as the limitation amount on Schedule IEBA-SP, Part I, line 8.
Line 110: Final Review: Check the entity name, entity type, identification numbers, project location, activation date, project number, taxable year rows, wage assessment balance, income tax and LLET balance, wage assessments claimed, and tax credit claimed before filing.
Line 111: Final Filing Step: Attach the required IEBA schedules to the correct Kentucky return and make sure all transferred amounts match Schedule IEBA, Schedule IEBA-SP, Schedule IEBA-T, and Schedule TCS.