Kentucky PKG NMDP is a tax credit package for the Kentucky New Markets Development Program Tax Credit. It is used by a qualified community development entity, also called a CDE, that is applying for or has been approved for Kentucky New Markets Development Program tax credits. The package is not for general taxpayers or ordinary business tax credit claims. It is specifically for entities involved in qualified equity investments or long term debt securities that may qualify for certification under Kentucky’s New Markets Development Program rules. The package includes several related forms. Form 8874(K) is the application used by the CDE to request certification of qualified equity investments eligible for the Kentucky NMDP tax credit. Form 8874(K)-A is used after the CDE receives cash for a certified qualified equity investment and needs to provide notice and certification for each taxpayer. Form 8874(K)-B is used when a previously approved credit becomes subject to recapture or when a remaining credit balance must be reported. Form 8874(K)-C is used by the CDE to request a refund of the refundable performance fee after meeting the required investment conditions. This package helps the Department review the CDE, confirm CDFI Fund certification, confirm allocation and service area details, certify eligible taxpayers and investment amounts, approve the credit schedule, handle recapture if needed, and process performance fee refunds when requirements are satisfied.
Who Should Use Kentucky PKG NMDP
Use Kentucky PKG NMDP only if the entity is a qualified community development entity applying for or approved for the Kentucky New Markets Development Program Tax Credit.
A CDE seeking certification of an equity investment or long term debt security as a qualified equity investment should use Form 8874(K).
A CDE that has received cash from a taxpayer for a certified qualified equity investment should use Form 8874(K)-A for that taxpayer.
A CDE or taxpayer may receive Form 8874(K)-B when an approved credit is subject to recapture or when the remaining credit balance must be shown.
A CDE requesting a refund of the refundable performance fee should use Form 8874(K)-C after meeting the required conditions.
How To File Kentucky PKG NMDP
The CDE must prepare the proper form, attach all required supporting documents, include the required cashier’s checks when filing Form 8874(K), sign the form under penalty of perjury, and mail the package to the Department of Revenue, Division of Corporation Tax, Tax Credits Section, Station 52, 501 High Street, Frankfort, KY 40601-2103. For Form 8874(K), attach proof of current CDFI Fund certification, the NMTC allocation agreement, documentation of the CDE service area, details about the use of proceeds, and any additional taxpayer investment schedule if more space is needed. For Form 8874(K)-A, file one form for each taxpayer after the CDE receives cash for the qualified equity investment. For Form 8874(K)-B, use the form when a recapture event affects a previously approved credit or when the remaining credit balance must be reported. For Form 8874(K)-C, file the refund request with proof of certification and proof that the required conditions have been met.
Important Timing Rules
The Department generally notifies the CDE within 30 days after receiving Form 8874(K) whether the application is approved or denied.
If the Department intends to deny the application, the CDE receives written notice of the reason for denial.
After receiving a denial notice, the CDE has 15 days to provide information needed to fix the application.
After the Department receives the additional information, it has another 30 days to approve or deny the application.
If the CDE does not complete the application or provide the requested information within the 15 day period, the application is treated as denied and must be resubmitted in full with a new submission date.
Within 90 days after receiving certification, the CDE must issue the qualified equity investment and receive cash in the certified purchase price amount.
The CDE must provide evidence of receiving the cash within 10 business days after receiving it.
If the CDE does not receive the required cash within 90 days after certification, the certification lapses and the CDE must reapply before issuing the qualified equity investment.
Package NMDP Cover Page Instructions
Eligibility Statement: Use this package only if the entity is a qualified community development entity applying for or approved for the Kentucky New Markets Development Program Tax Credit.
Included Form 8874(K): Use this form to apply for certification of qualified equity investments eligible for the Kentucky New Markets Development Program Tax Credit.
Included Form 8874(K)-A: Use this form to provide notice of Kentucky New Markets Development Program Tax Credit and certification after the CDE receives cash for the taxpayer’s qualified equity investment.
Included Form 8874(K)-B: Use this form when a Kentucky New Markets Development Program Tax Credit is subject to recapture or when a remaining credit balance must be reported.
Included Form 8874(K)-C: Use this form when requesting a refund of the refundable performance fee.
Form 8874(K) Line By Line Instructions
Form 8874(K) is the application for certification of qualified equity investments eligible for the Kentucky New Markets Development Program Tax Credit.
Form 8874(K) Header Instructions
Field A: Enter the full legal name of the qualified community development entity.
Field B: Enter the federal identification number of the CDE.
Field C: Enter the Kentucky Corporation/LLET account number of the CDE, if applicable. The number must have 9 digits. If it has only 6 digits, add leading zeros.
Number And Street: Enter the street address of the CDE.
City: Enter the city for the CDE address.
State: Enter the state for the CDE address.
Zip Code: Enter the ZIP code for the CDE address.
Telephone: Enter the CDE’s telephone number.
Fax Number: Enter the CDE’s fax number, if available.
Field D: If the CDE is included in a parent taxpayer’s consolidated tax return, enter the parent taxpayer’s name. If this does not apply, leave it blank.
Field E: Enter the parent taxpayer’s federal identification number, if applicable.
Field F: Enter the parent taxpayer’s Kentucky Corporation/LLET account number, if applicable.
Field G: Select the CDE’s entity type. Choose corporation, limited liability pass-through entity, general partnership, or other. If other is selected, write the entity type on the blank line.
Field H: Enter the application submission date using month, day, and year.
Field I: Enter the total number of taxpayers making qualified equity investments. This number should match the number of entries listed on line 6.
Field J: Enter the total amount of qualified equity investments for all taxpayers. This amount should match the total from line 6.
Form 8874(K) Application Questions And Lines
Line 1: State whether the entity has been certified as a qualified community development entity under IRC Section 45D(c) by the U.S. Department of Treasury, Community Development Financial Institutions Fund. Check yes or no, enter the certification date, and attach proof of current CDFI Fund certification, including the original certification and later updates.
Line 2: State whether the entity has received a New Markets Tax Credit allocation from the CDFI Fund that includes Kentucky in the service area under the allocation agreement. Check yes or no, enter the allocation date, and attach a copy of the allocation.
Line 3: State whether the entity includes Kentucky in its service area. Check yes or no.
Line 4: Identify the CDE’s service area. Mark or describe whether the service area is county, state, multi-state, or national. Attach documentation that describes the service area, such as a map, articles of organization, bylaws, or other supporting documents.
Line 5: Provide details about how the proceeds from the qualified equity investments will be used. Include a description of the qualified active low-income community business connected to the investment.
Line 6: List each taxpayer making a qualified equity investment. For each taxpayer, enter the taxpayer’s name, taxpayer identifying number, type of investment, and purchase price of the qualified equity investment.
Line 6, Name: Enter the name of each taxpayer making the qualified equity investment.
Line 6, Taxpayer Identification Number: Enter the taxpayer identification number for each listed taxpayer.
Line 6, Type Of Investment Equity: Mark this column if the taxpayer’s investment is an equity investment.
Line 6, Type Of Investment Debt: Mark this column if the taxpayer’s investment is a debt investment.
Line 6, Purchase Price Of The Qualified Equity Investment: Enter the dollar amount of each taxpayer’s qualified equity investment.
Line 6, Total Qualified Equity Investments For All Taxpayers: Add all taxpayer investment amounts entered on line 6. This total should equal the amount entered in Field J.
Additional Schedule For Line 6: If there is not enough space to list all taxpayers, attach a schedule with the same information required on line 6.
Line 7: Include a nonrefundable application fee of $1,000 with the application. The payment must be made by cashier’s check. A separate cashier’s check must be used for this fee.
Line 8: Include a refundable performance fee with the application. The fee equals 0.5 percent of the qualified equity investment requested to be certified, but it cannot exceed $500,000. The payment must be made by cashier’s check. A separate cashier’s check must be used for this fee.
Form 8874(K) Signature And Submission Instructions
Perjury Declaration: The executive officer declares that the CDE’s allocation agreement remains active, has not been revoked or canceled by the CDFI Fund, and that the application and attachments are true, correct, and complete to the best of the officer’s knowledge.
Signature Of Executive Officer Of CDE: The executive officer of the CDE must sign the application.
Date: Enter the date the executive officer signs the application.
Type Or Print Name And Title: Type or print the name and title of the signing executive officer.
Department Use Only, Application Approved: Do not complete this area. It is reserved for Department approval.
Department Use Only, Application Not Approved: Do not complete this area. It is reserved for Department denial and explanation.
Department Use Only, By And Date: Do not complete this area. It is for Department signature and date.
Mailing Address: Mail the completed application to Department of Revenue, Division of Corporation Tax, Tax Credits Section, Station 52, 501 High Street, Frankfort, KY 40601-2103.
Form 8874(K)-A Line By Line Instructions
Form 8874(K)-A is the notice of Kentucky New Markets Development Program Tax Credit and certification. The CDE files this form for each taxpayer after receiving cash for the taxpayer’s qualified equity investment.
Form 8874(K)-A Header Instructions
Field A: Enter the name of the qualified community development entity.
Field B: Enter the federal identification number of the CDE.
Field C: Enter the Kentucky Corporation/LLET account number of the CDE, if applicable. The number must have 9 digits. Add leading zeros if needed.
Field D: Enter the name of the taxpayer making the qualified equity investment.
Field E: Enter the taxpayer’s identification number.
Field F: Enter the taxpayer’s Kentucky Corporation/LLET account number, if applicable. The number must have 9 digits. Add leading zeros if needed.
Number And Street: Enter the taxpayer’s street address.
City: Enter the taxpayer’s city.
State: Enter the taxpayer’s state.
Zip Code: Enter the taxpayer’s ZIP code.
Field G: Enter the certified purchase price of the taxpayer’s qualified equity investment.
Field H: Enter the date the CDE received cash for the taxpayer’s qualified equity investment.
Field I: Select the taxpayer’s entity type. Choose individual, estate, trust, general partnership, corporation, S corporation, or limited liability pass-through entity.
Form 8874(K)-A Signature Instructions
Perjury Declaration: The executive officer confirms that the form and all attached documents and statements are true, correct, and complete to the best of the officer’s knowledge.
Signature Of Executive Officer Of CDE: The executive officer of the CDE must sign the form.
Date: Enter the date the form is signed.
Type Or Print Name And Title: Type or print the signing officer’s name and title.
Form 8874(K)-A Department Use Only Lines
These lines are completed by the Department after review.
Line 1: The Department enters the total allowable credit by adding lines 2(a) through 2(g).
Line 2(a): The allowable credit for Year 1 is zero.
Line 2(b): The allowable credit for Year 2 is zero.
Line 2(c): The allowable credit for Year 3 is 7 percent.
Line 2(d): The allowable credit for Year 4 is 8 percent.
Line 2(e): The allowable credit for Year 5 is 8 percent.
Line 2(f): The allowable credit for Year 6 is 8 percent.
Line 2(g): The allowable credit for Year 7 is 8 percent.
Approval Statement: The Department approves the tax credits for each year when the form is accepted.
By: This area is completed by the Department.
Date: This area is completed by the Department.
Mailing Address: Mail Form 8874(K)-A to Department of Revenue, Division of Corporation Tax, Tax Credits Section, Station 52, 501 High Street, Frankfort, KY 40601-2103.
Form 8874(K)-A Filing Rules
Cash Receipt Requirement: The CDE must receive cash equal to the certified purchase price from each taxpayer within 90 days after receiving the approved application.
Evidence Requirement: The CDE must provide evidence of receiving the cash within 10 business days after receipt.
Certification Lapse Rule: If the CDE does not receive the cash within the 90 day period, the taxpayer’s certification lapses and the CDE cannot issue the qualified equity investment without filing a new application.
One Form Per Taxpayer: The CDE must file Form 8874(K)-A separately for each taxpayer as evidence that cash was received for that taxpayer’s qualified equity investment.
Taxpayer Return Attachment: A taxpayer claiming the approved credit must attach a copy of approved Form 8874(K)-A to the tax return each year the credit is claimed.
Partner, Member, Or Shareholder Attachment: A partner, member, or shareholder claiming the credit must also attach a copy of Schedule K-1, Form PTE, to the tax return each year.
Form 8874(K)-B Line By Line Instructions
Form 8874(K)-B is the notice of Kentucky New Markets Development Program Tax Credit recapture. It is used when a recapture event affects a previously approved credit or when a remaining credit balance must be reported.
Form 8874(K)-B Header Instructions
Field A: Enter the name of the qualified community development entity.
Field B: Enter the federal identification number of the CDE.
Field C: Enter the Kentucky Corporation/LLET account number of the CDE, if applicable. The number must have 9 digits. Add leading zeros if needed.
Field D: Enter the name of the taxpayer that made the qualified equity investment.
Field E: Enter the taxpayer’s identification number.
Field F: Enter the taxpayer’s Kentucky Corporation/LLET account number, if applicable. The number must have 9 digits. Add leading zeros if needed.
Number And Street: Enter the taxpayer’s street address.
City: Enter the taxpayer’s city.
State: Enter the taxpayer’s state.
Zip Code: Enter the taxpayer’s ZIP code.
Field G: Enter the certified purchase price of the taxpayer’s qualified equity investment.
Field H: Enter the date the CDE received cash for the taxpayer’s qualified equity investment.
Field I: Select the taxpayer’s entity type. Choose individual, estate, trust, general partnership, corporation, S corporation, or limited liability pass-through entity.
Field J: Enter the date the taxpayer’s qualified equity investment became subject to recapture.
Field K: Explain the reason for the recapture.
Form 8874(K)-B Tax Credit Recapture Table Instructions
Original Tax Credit Column: Enter the originally approved credit amounts for each applicable year.
Decrease Of Tax Credit Column: Enter the amount by which the original credit is reduced because of the recapture event.
Balance Of Tax Credit Column: Enter the remaining credit after the decrease is applied.
Tax Credit Claimed By Taxpayer Column: Enter the credit amount already claimed by the taxpayer.
Line 1: Add the amounts from lines 2(a) through 2(g) for each column.
Line 2(a): Enter the Year 1 amount, if applicable.
Line 2(b): Enter the Year 2 amount, if applicable.
Line 2(c): Enter the Year 3 amount, if applicable.
Line 2(d): Enter the Year 4 amount, if applicable.
Line 2(e): Enter the Year 5 amount, if applicable.
Line 2(f): Enter the Year 6 amount, if applicable.
Line 2(g): Enter the Year 7 amount, if applicable.
Line 3: If the tax credit claimed by the taxpayer on line 1 is greater than the balance of tax credit on line 1, enter the recapture amount.
Line 4: If the balance of tax credit on line 1 is greater than the tax credit claimed by the taxpayer on line 1, enter the remaining credit balance.
Form 8874(K)-B Department Use Only Lines
Recapture Of Tax Credit Amount: The Department enters the tax credit recapture amount, if applicable.
By: This area is completed by the Department.
Date: This area is completed by the Department.
Form 8874(K)-B Filing Rules
CDE Notification Requirement: If a recapture event occurs, the CDE must notify the Department when it discovers the event.
Department Notice: The Department may also issue written notice of proposed recapture after discovering the event or after receiving notice from the CDE.
90 Day Cure Period: If the CDE cannot fix the deficiency within 90 days after the original recapture notice, the Department sends Form 8874(K)-B to the CDE and each taxpayer.
Pass-Through Taxpayer Rule: If the taxpayer is a pass-through entity, the Department may also send Form 8874(K)-B to each partner, member, or shareholder showing that owner’s recapture amount or remaining credit balance.
Tax Return Attachment For Recapture: If line 3 shows a recapture amount, the taxpayer or owner must attach Form 8874(K)-B to the tax return for the year that includes the credit recapture date and report the recapture on the applicable line of the return.
Tax Return Attachment For Balance: If line 4 shows a remaining credit balance, the taxpayer or owner must attach Form 8874(K)-B to the tax return each year the remaining credit is claimed.
Form 8874(K)-C Line By Line Instructions
Form 8874(K)-C is the Kentucky New Markets Development Program Tax Credit request for refund of performance fee. It is used by a CDE to request a refund of the refundable performance fee after satisfying the required conditions.
Form 8874(K)-C Header Instructions
Field A: Enter the name of the qualified community development entity.
Field B: Enter the federal identification number of the CDE.
Field C: Enter the Kentucky Corporation/LLET account number of the CDE, if applicable. The number must have 9 digits. Add leading zeros if needed.
Number And Street: Enter the CDE’s street address.
City: Enter the CDE’s city.
State: Enter the CDE’s state.
Zip Code: Enter the CDE’s ZIP code.
Field D: Enter the certified purchase price of the qualified equity investment.
Field E: Enter the date of the request for refund of performance fee.
Field F: Select the CDE’s entity type. Choose corporation, limited liability pass-through entity, general partnership, or other. If other is selected, write the entity type.
Form 8874(K)-C Refund Calculation Instructions
Line 1: Enter the amount of qualified equity investment certified by the Department for which the CDE received cash within 90 days after certification.
Line 2: Enter the amount of the qualified equity investment placed in qualified active low-income community businesses located in Kentucky 12 months after the CDE received cash for the qualified equity investment.
Line 3: Divide line 2 by line 1 and enter the percentage. Carry the percentage to two decimal places.
Line 4: Enter the required investment percentage. For this form, the required percentage is 100 percent.
Line 5: If line 3 is less than line 4, subtract line 3 from line 4 and enter the difference as a percentage. If line 3 is equal to or greater than line 4, enter 0 percent.
Line 6: Enter the refundable performance fee paid by the CDE.
Line 7: Multiply the percentage on line 5 by the amount on line 6. This is the forfeited portion of the performance fee.
Line 8: Subtract line 7 from line 6. This is the performance fee amount to be refunded.
Form 8874(K)-C Signature And Department Lines
Perjury Declaration: The executive officer declares that the form and all attached documents and statements are true, correct, and complete to the best of the officer’s knowledge.
Signature Of Executive Officer Of CDE: The executive officer of the CDE must sign the refund request.
Date: Enter the date the refund request is signed.
Type Or Print Name And Title: Type or print the signing officer’s name and title.
Department Use Only, Approved Refund Amount: Do not complete this area. The Department enters the approved refund amount.
Department Use Only, By And Date: Do not complete this area. It is reserved for Department signature and date.
Mailing Address: Mail Form 8874(K)-C to Department of Revenue, Division of Corporation Tax, Tax Credits Section, Station 52, 501 High Street, Frankfort, KY 40601-2103.
Form 8874(K)-C Filing Rules
Earliest Refund Request Date: The CDE may request a refund no sooner than 30 days after meeting all required conditions.
Written Request Requirement: Filing Form 8874(K)-C satisfies the written request requirement for the refund.
Department Review Period: The Department reviews the refund request within 30 days.
Refund Without Interest: If the CDE meets all requirements, the Department issues the performance fee refund without interest.
Noncompliance Notice: If the CDE does not meet the requirements, the Department gives written notice that the CDE is noncompliant and may be subject to forfeiture of the fee.
Full Forfeiture Rule: The entire performance fee is forfeited if the CDE or its subsidiary fails to issue the full certified qualified equity investment and receive cash for it within 90 days after receiving the certification notice.
Partial Forfeiture Rule: A portion of the performance fee is forfeited if the CDE or subsidiary fails to meet the required investment percentage by the first allowance date of the qualified equity investment.
Proportionate Forfeiture Rule: The forfeiture amount is based on the portion of the qualified equity investment that was not invested as required.
90 Day Cure Period: The forfeiture may be subject to a 90 day cure period when allowed under the recapture rules.
Required Attachments: Attach proof of certification and proof that the requirements for the performance fee refund have been met.
Final Filing Checklist
CDE Status Confirmed: Confirm the entity is a qualified community development entity.
CDFI Fund Certification Attached: Attach proof of current CDFI Fund certification, including original certification and updates.
NMTC Allocation Attached: Attach a copy of the New Markets Tax Credit allocation that includes Kentucky in the service area.
Kentucky Service Area Confirmed: Make sure Kentucky is included in the CDE’s service area.
Service Area Documentation Attached: Attach a map, articles of organization, bylaws, or other documents that describe the service area.
Use Of Proceeds Described: Provide details about how the qualified equity investment proceeds will be used.
Taxpayer Investment List Completed: List each taxpayer, identifying number, investment type, and purchase price.
Line 6 Total Matches Field J: Confirm the total qualified equity investments on line 6 equals the total entered in Field J.
Application Fee Included: Include the $1,000 nonrefundable application fee by separate cashier’s check.
Performance Fee Included: Include the refundable performance fee by separate cashier’s check.
Form Signed By Executive Officer: Make sure the proper executive officer signs and dates the form.
Cash Received Within 90 Days: After certification, confirm the CDE receives the certified purchase price in cash within 90 days.
Cash Evidence Sent Within 10 Business Days: Send evidence of cash receipt to the Department within 10 business days after receiving the cash.
Form 8874(K)-A Filed For Each Taxpayer: File a separate notice and certification form for every taxpayer.
Approved Form Attached To Returns: Taxpayers should attach the approved credit certification form to the return each year the credit is claimed.
Recapture Events Reported: Notify the Department if an event occurs that could cause recapture.
Performance Fee Refund Supported: Attach the required proof when requesting a refund of the performance fee.
Mailing Address Checked: Send the required forms to Department of Revenue, Division of Corporation Tax, Tax Credits Section, Station 52, 501 High Street, Frankfort, KY 40601-2103.