Kentucky Schedule KIDA is part of the Kentucky Industrial Development Act tax incentive reporting package. It is used only by a business entity that received approval for a KIDA credit under the applicable Kentucky economic development law. The package helps an approved company calculate the credit connected with an eligible economic development project, measure the tax attributable to that project, apply the applicable annual credit limitation, and maintain a year-by-year record of approved costs or debt service payments and credits claimed. A corporation filing Kentucky Form 720 or Form 720U completes Schedule KIDA and Schedule KIDA-T. A pass-through entity filing Form PTE or Form 725 completes Schedule KIDA-SP and Schedule KIDA-T. Only one incentive project may be reported in each KIDA package. If a business has multiple approved projects, it must prepare a separate package and related calculations for each project. The allowable credit depends on the approved project, the tax attributable to that project, the applicable limitation, and the remaining available credit tracked during the term of the incentive agreement.
Who Should File Kentucky Schedule KIDA?
Use this package only when the business has received preliminary or final approval for a Kentucky Industrial Development Act project in accordance with KRS 154.28-010 through KRS 154.28-140, on or before June 26, 2009.
The filing requirement depends on the entity type:
Corporations Filing Form 720 Or Form 720U: Complete Schedule KIDA and Schedule KIDA-T.
Pass-Through Entities Filing Form PTE Or Form 725: Complete Schedule KIDA-SP and Schedule KIDA-T.
Multiple Approved Projects: Complete a separate KIDA package for each approved economic development project.
How To File Kentucky Schedule KIDA
Attach the completed KIDA package to the applicable Kentucky tax return:
Form 720: Attach Schedule KIDA and Schedule KIDA-T when the filer is a corporation using Form 720.
Form 720U: Attach Schedule KIDA and Schedule KIDA-T when the filer is part of a unitary combined filing using Form 720U.
Form PTE: Attach Schedule KIDA-SP and Schedule KIDA-T when the filer is a pass-through entity using Form PTE.
Form 725: Attach Schedule KIDA-SP and Schedule KIDA-T when the filer uses Form 725.
Enter allowable tax credits on Schedule TCS as required. Credits must be claimed in the prescribed order. Total credits cannot reduce limited liability entity tax below the $175 minimum or reduce income tax liability below zero.
First And Last Year Proration Rules
KIDA incentives may only be claimed during the active term of the incentive agreement. When the first or last year of the agreement does not cover the full taxable year, the eligible project income must be limited to the covered period.
First Year Proration: Divide the number of days from the activation date through the end of the taxable year by the total number of days in that taxable year. Multiply total income by this factor when separate period accounting is not available.
Last Year Proration: Divide the number of days from the beginning of the taxable year through the final day of the incentive agreement by the total number of days in the taxable year. Multiply total income by this factor when separate period accounting is not available.
Separate Period Accounting: Use separate period accounting when available because it identifies income earned during the incentive agreement term directly.
How to Complete Kentucky Schedule KIDA
Identification Section
Taxable Year Ending: Enter the ending month and year of the taxable period for which the corporation is claiming the KIDA credit.
Name Of Corporation: Enter the corporation’s full legal business name.
Federal Identification Number: Enter the corporation’s Federal Employer Identification Number.
Kentucky Corporation/LLET Account Number: Enter the Kentucky corporation or LLET account number. The number must contain nine digits. If the account number has six digits, add leading zeros.
Location Of Project: Enter the physical location of the approved KIDA project.
City: Enter the city where the project is located.
County: Enter the county where the project is located.
Activation Date Of KIDA Incentive Agreement: Enter the project activation date in month, day, and year format.
Economic Development Project Number: Enter the project number assigned to the KIDA economic development agreement.
Part I: Computation Of LLET Excluding KIDA Project
This section calculates the corporation’s limited liability entity tax after removing the LLET associated with the KIDA project.
Line 1: Enter the LLET from Form 720, Part II, line 1, or from Form 720U, Schedule U8, Section E, line 1.
Line 2: Enter the LLET calculated specifically for the KIDA project using Schedule L-ECON. Use only the Kentucky gross receipts and Kentucky gross profits attributable to the project. Attach Schedule L-ECON when filing the return. If the corporation has more than one project, complete a separate Schedule L-ECON for each project.
Line 3: Subtract line 2 from line 1. Enter the remaining LLET that is not attributable to the KIDA project.
Additional Rules For Part I
When the KIDA project is the corporation’s only Kentucky operation, the calculation should reflect the project activity alone.
When the corporation also has operations outside the KIDA project, attach supporting schedules showing how the Kentucky gross receipts and Kentucky gross profits from the KIDA project were calculated.
During the first and last years of the incentive agreement, calculate only the Kentucky gross receipts and gross profits received during the eligible agreement term.
Part II: Computation Of Taxable Net Income Excluding Net Income From KIDA Project And KIDA Tax Credit
Section A: Computation Of Corporation Tax
Line 1: Enter the income tax shown on Form 720, Part III, line 1, or Form 720U, Schedule U5, Section D, line 8.
Line 2: Enter the corporation’s LLET amount from Part I, line 1.
Line 3: Calculate the allowable nonrefundable LLET credit. Subtract $175 from line 2, but do not enter more than the income tax amount reported on line 1.
Line 4: Add line 1 and line 2, then subtract line 3. Enter the corporation’s total tax before removing tax attributable to the KIDA project.
Section B: Computation Of Tax Excluding KIDA Project
Line 1: Enter taxable net income from Form 720, Part I, line 43, or Form 720U, Schedule U5, Section D, line 7.
Line 2: Enter net income attributable to the KIDA project. If the project produced a loss, enter zero. If the corporation’s only Kentucky operation is the KIDA project, enter the same amount reported on line 1.
Line 3: Subtract line 2 from line 1. Enter taxable net income excluding the KIDA project. If line 2 is greater than line 1, enter zero.
Line 4: Multiply line 3 by the 5 percent tax rate. Enter the income tax liability excluding the KIDA project.
Line 5: Enter the LLET excluding the KIDA project from Part I, line 3.
Line 6: Subtract $175 from line 5. Enter the result, but do not enter more than the tax amount on line 4.
Line 7: Add line 4 and line 5, then subtract line 6. Enter the total tax excluding the KIDA project.
Line 8: Subtract Section B, line 7 from Section A, line 4. This amount is the tax attributable to the KIDA project. Transfer this amount to Part III, line 1.
Supporting Computation Rules For Section B
If the corporation has operations in addition to the KIDA project, attach schedules showing how net income from the KIDA project was determined.
Separate Facility Project: Use separate accounting to determine net income, Kentucky gross receipts, and Kentucky gross profits directly attributable to the project facility.
Expansion Of Existing Facility: Determine the amounts for the entire facility through separate accounting, then allocate the eligible portion to the KIDA project using an approved formula. Attach the approval letter for the percentage used.
Alternative Method: When separate accounting is not practical and an alternative calculation method is used, attach the approval letter authorizing that method.
Part III: Limitation
This section limits the corporation’s credit to the smaller of the tax attributable to the project or the available project credit limitation.
Line 1: Enter the tax liability attributable to the KIDA project from Part II, Section B, line 8.
Line 2: Enter the credit limitation amount from Schedule KIDA-T, Column D.
Line 3: Compare line 1 and line 2. Enter the smaller amount as the allowable KIDA tax credit.
Schedule TCS Entry: Enter the allowable credit from line 3 on Schedule TCS, Part I, Column E and Column F.
Schedule KIDA-SP For Pass-Through Entities
Purpose Of Schedule KIDA-SP
Schedule KIDA-SP is used by a pass-through entity to calculate the credit and any tax due connected with an approved KIDA project. Credits calculated on this schedule do not pass through to members, partners, or shareholders. The pass-through entity applies the credit against the tax attributable to the KIDA project.
A pass-through entity should first complete Form PTE to determine income, loss, deductions, and other amounts from its full operations. It should then complete Schedule KIDA-SP to calculate the credit and any project tax due.
How To Complete The Schedule KIDA-SP Identification Section
Taxable Year Ending: Enter the ending month and year of the taxable period for which the KIDA project calculation is being made.
Name Of Pass-Through Entity: Enter the full legal name of the pass-through entity.
Federal Identification Number: Enter the entity’s Federal Employer Identification Number.
Kentucky Corporation/LLET Account Number: Enter the Kentucky account number. Use nine digits. Add leading zeros if a six-digit number has been assigned.
Location Of Project: Enter the address or identifiable location of the approved KIDA project.
City: Enter the city where the project is located.
County: Enter the county where the project is located.
Activation Date Of KIDA Incentive Agreement: Enter the activation date for the approved KIDA project.
Economic Development Project Number: Enter the assigned project number.
Part I: Computation Of KIDA Tax Credit And Tax Due
Line 1: Enter Kentucky taxable income attributable to the KIDA project. If the project is the pass-through entity’s only operation, use the net income or loss from Form PTE. If the entity has operations outside the project, calculate only the income related to the KIDA project and attach a supporting schedule.
Line 2: Enter any net operating loss deduction from the KIDA project carried forward from prior years. Report the amount as a subtraction.
Line 3: Subtract line 2 from line 1. Enter Kentucky taxable income from the KIDA project after the net operating loss deduction.
Line 4: Multiply line 3 by the 5 percent tax rate. Enter the income tax liability attributable to the KIDA project.
Line 5: Enter the LLET calculated for the KIDA project from Schedule L-ECON. Use only the Kentucky gross receipts and Kentucky gross profits associated with the approved project. Do not complete this line for a general partnership.
Line 6: Calculate the nonrefundable LLET credit by subtracting $175 from line 5. Do not enter an amount greater than line 4. Do not complete this line for a general partnership.
Line 7: Add line 4 and line 5, then subtract line 6. Enter total tax attributable to the KIDA project.
Line 8: Enter the project credit limitation amount from Schedule KIDA-T, Column D.
Line 9(a): If the entity chooses to claim a KIDA tax credit, enter the smaller of line 7 or line 8 on this line. Do not enter an amount on line 9(b) when completing line 9(a).
Line 9(b): If the entity elects to use the eligible amount as an estimated tax payment instead of a KIDA tax credit, enter the smaller of line 7 or line 8 on this line and complete Part II. Do not enter an amount on line 9(a) when completing line 9(b).
Line 10: When line 7 is greater than the amount entered on line 9(a) or line 9(b), subtract the applicable line 9 amount from line 7. Enter the difference as tax due from the KIDA project. Add this liability to Form PTE, Part II, line 16, or Form 725, Part II, line 15, as applicable.
Important Rules For Schedule KIDA-SP
Project Income Does Not Pass Through: Income from a KIDA project is excluded from the distributive share income of partners, members, or shareholders through Form PTE(K).
Project Losses Do Not Pass Through: A KIDA project net operating loss remains with the project and is applied against future project income before the credit is calculated.
General Partnerships: General partnerships should not complete lines 5 and 6 because general partnerships are not subject to LLET.
Multiple Projects: Complete a separate applicable economic development credit schedule for each project.
First And Last Years: Include only Kentucky taxable income and applicable LLET amounts earned during the eligible term of the incentive agreement.
Part II: Estimated Tax Election
Complete this section only if the pass-through entity chooses line 9(b) instead of claiming the KIDA tax credit on line 9(a).
Name Of Pass-Through Entity: Enter the legal name of the pass-through entity making the election.
Taxable Year Ended: Enter the tax year ending date for which the annual election is being made.
Election Statement: By completing this election, the pass-through entity chooses to apply an amount equal to the lesser of line 7 or line 8 as an estimated tax payment instead of claiming the KIDA tax credit.
Signature Of Shareholder, Partner, Or Member: An authorized shareholder, partner, or member must sign the election.
Print Name: Clearly print the name of the individual signing the election.
Date: Enter the date the election is signed.
Estimated Tax Election Rules
The approved pass-through entity may make this election annually. Any amount treated as an estimated tax payment must be paid on behalf of the partners, members, or shareholders to satisfy their tax liability.
Do not enter amounts on both line 9(a) and line 9(b). The entity must choose either the tax credit or the estimated tax payment election.
Partners, members, and shareholders cannot claim any portion of this estimated payment against their individual Kentucky income tax liability.
Schedule KIDA-T Tracking Schedule For A KIDA Project
Purpose Of Schedule KIDA-T
Schedule KIDA-T is used to keep a continuing record of the debt service payments or approved costs, the annual KIDA tax credit limitation, and the credit claimed for each year of the incentive agreement. Every approved KIDA project must have its own tracking schedule, updated annually throughout the agreement term.
Attach an updated copy of Schedule KIDA-T to the applicable Schedule KIDA or Schedule KIDA-SP each year. Also attach an updated copy to the applicable wage assessment reporting and annual reconciliation filing.
How To Complete The Schedule KIDA-T Identification Section
Name Of Entity: Enter the full legal name of the business entity approved for the KIDA project.
Entity Type, Corporation: Check this box when the approved entity is a corporation.
Entity Type, Limited Liability Pass-Through Entity: Check this box when the approved entity is a limited liability pass-through entity.
Entity Type, General Partnership: Check this box when the approved entity is a general partnership.
Entity Type, Other: Check this box when none of the listed categories applies, and identify the entity type on the provided line.
Federal Identification Number: Enter the entity’s Federal Employer Identification Number.
Kentucky Corporation/LLET Account Number: Enter the Kentucky account number. It must contain nine digits. If the assigned number contains six digits, add leading zeros.
Location Of Project: Enter the location of the approved economic development project.
City: Enter the project city.
County: Enter the project county.
Activation Date Of KIDA Incentive Agreement: Enter the activation date in month, day, and year format.
Economic Development Project Number: Enter the project number assigned to the KIDA agreement.
How To Determine The Activation Date
Projects Approved Before July 15, 1996: Enter the date on which the financing agreement was executed.
Projects Approved On Or After July 15, 1996: Enter the date established by the approved company as the activation date for implementing the incentives authorized by the financing agreement.
Schedule KIDA-T Column Instructions
Use one row for each taxable year of the KIDA agreement, beginning with the first taxable year.
Column A, Taxable Year Ended: Enter the ending date of each taxable year for which amounts are being reported in Columns B through E.
Column B, Carry Forward Balance: Leave this column blank for the first taxable year of the agreement. For each later year, compare the previous year’s Column D amount with the previous year’s Column E amount. If Column D was greater than Column E, enter the difference as the carry forward balance. If the amounts were equal, enter zero. If the amount claimed in Column E was greater than the eligible limitation in Column D, the credit claimed exceeded the available amount.
Column C, Debt Service Payment Or Approved Costs: Enter the applicable amount for the taxable year. For an eligible debt service project, include principal and interest paid under the financing agreement. For an approved cost project, enter the approved costs allowed under the agreement.
Column D, KIDA Tax Credit Limitation: Add Column B and Column C for the same taxable year. Enter this total as the annual KIDA credit limitation. Transfer this amount to Schedule KIDA, Part III, line 2, or Schedule KIDA-SP, Part I, line 8, depending on the entity type filing the package.
Column E, KIDA Tax Credit Claimed On Return: Enter the amount used for tracking the credit claimed for that year. When tax credits against LLET and income tax differ, enter the larger of the two credit amounts claimed for the project on Schedule TCS. Enter zero when no credit was claimed.
Debt Service Payment And Approved Cost Treatment
Debt Service Payment: Use this treatment for KIDA projects governed by the provisions effective before July 15, 2002. Debt service payment includes principal and interest paid under the applicable financing agreement.
Approved Costs: Use this treatment for KIDA projects governed by the provisions effective after July 14, 2002.
Supporting Documents And Attachments
Attachments For Corporations
Schedule L-ECON: Attach this schedule when calculating LLET attributable to the KIDA project.
Project Income Computation Schedule: Attach supporting calculations when the corporation has activity outside the KIDA project.
Approved Alternative Method Letter: Attach the Department of Revenue approval letter when a method other than separate accounting is used.
Approved Allocation Percentage Letter: Attach the required approval letter when the project is an expansion of an existing facility and a formula is used to allocate facility activity to the project.
Schedule TCS: Report the allowable credit in the applicable credit columns.
Attachments For Pass-Through Entities
Schedule L-ECON: Attach this schedule when the entity is subject to LLET and calculates LLET for the KIDA project. General partnerships do not complete the LLET lines.
Project Income Computation Schedule: Attach calculations when the entity conducts operations outside the KIDA project.
Approved Alternative Method Letter: Attach the approval letter when an authorized alternative method is used.
Approved Allocation Percentage Letter: Attach the approval letter when the project is an expansion and an approved allocation formula is applied.
Form PTE(K): Use this form to exclude KIDA project net income from the distributive share income of partners, members, or shareholders.
Important Filing Reminders
Use One Package Per Project: Report only one KIDA incentive project in each completed package.
Complete The Correct Schedule: Corporations use Schedule KIDA. Pass-through entities use Schedule KIDA-SP. Both use Schedule KIDA-T.
Track Credits Annually: Maintain an updated Schedule KIDA-T for every year during the agreement term.
Do Not Overstate The Credit: The allowable credit cannot exceed the applicable project tax liability or the credit limitation shown on Schedule KIDA-T.
Follow Credit Ordering Rules: Claim credits in the required statutory order.
Observe Minimum Tax Rules: Credits cannot reduce LLET below $175 or income tax liability below zero.
Prorate Partial Years: In the first and last years of the agreement, calculate only eligible amounts earned during the covered incentive period.
Use Approved Methods: Attach approval documentation whenever an alternative method or allocation formula is used.
Choose One Pass-Through Election: A pass-through entity may claim the KIDA tax credit or elect to apply the allowable amount as an estimated tax payment. It cannot choose both for the same year.