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​Nonresident Withholding Filing​ Requirement

Per KRS 141.206(5)​, every pass through entity doing business in Kentucky (except publicly traded partnerships) is required to withhold income tax on the distributive share income whether distributed or undistributed, of each:

  • Nonresident individual partner, member or shareholder (including trusts and estates per KRS 141.030(1)​; and
  • Corporate partner or member that is doing business in Kentucky only through its ownership interest in a pass through entity. Meaning, if the corporate partner/ member is doing business in Kentucky pursuant to KRS 141.010(25)​ for reasons other than its ownership interest in a PTE, withholding is not required. Withholding is also not required if net distributive share income is not subject to Kentucky income tax (such as PL 86.272 and KRS 141.040).

A Kentucky Nonresident Income Tax Withholding on Distributive Share Income Report and Composite Income Tax Return should be submitted on form 740NP-WH (with copy A of PTE-WH completed for each partner, member or shareholder) by the 15th day of the fourth month following the close of the tax year, at the maximum rate provided in KRS 141.020 or KRS 141.040 (6%).

A partner, member or shareholder may be exempt from withholding if appropriate tax return (720, 740NP, 741 etc.) for prior year was filed. A 740NP-WH form needs to be filed to demonstrate the exemption. In the case of exemption, the partner, member or shareholder is reporting pass through income on a current year tax return (720, 740NP, or 741).

Effective for taxable years beginning after December 31, 2011, every pass-through entity required to withhold Kentucky income tax shall make a declaration and payment of estimated tax. For vouchers​, and to determine if you are required to make estimated payments, please refer to form 740NP-WH-ES

A partner, member or shareholder may claim nonresident withholding paid (as shown on the last line of the PTE-WH form) on the LLET and/or income tax return.

Extension of Time

An extension of time to file Form 740NP-WH Kentucky Nonresident Income Tax Withholding on Distributive Share Income Report and Composite Income Tax Return shall be obtained by filing the following forms on or before the due date of the return;

The balance of tax due shall accompany the extension; an extension of time to file the return does not extend the date for the payment of tax. If no tax is due, a copy of the federal Form 7004, Kentucky Form 720 SL or 40A 102 must be attached to Form 740 NP-WH when filed. For complete instructions and Form 40A 201 NP-WH-SL, follow the link provided here.​​​

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Prior Year Pass-​Through Entities Forms

2015 Business Income Tax Software Approval List​​

​Commonly Asked Questions

Can a pass-through entity file a composite return?

Yes, per KRS 141.206(16)(a), if the shareholders agree to be included in the composite return and have been exempted from nonresident withholding. Estimated payments are required if the tax liability is expected to be $500.00 or more.

What form does a pass-through entity use to file a composite return?

Per KRS141.206(16)(d) a pass-through entity shall deliver to the Department a return upon a form prescribed by the Department. The form to be completed is Kentucky Form 740 NP-WH. 2009 is the first year for the use of Kentucky Form 740 NP-WH as a composite return. Any returns filed on Kentucky Form 740-NP, Kentucky Income Tax Return Non-Resident or Part-Year Resident, will not be accepted.

Are estimated payments required for composite returns?

Yes, the composite return is a return filed on behalf of non resident individual partners, members or shareholders. Per KRS 141.300, if the tax liability can be expected to be over $500 then estimated payments are required. Interest and penalty bills will be issued for underpayment of estimated payments.

If a Kentucky Form 765, Kentucky Partnership Income and LLET Return is passing a loss to its partners, is a Kentucky Form 740 NP-WH necessary to be filed?

The Kentucky Form 740 NP-WH would not have to be filed.

The Kentucky Department of Revenue conducts work
under the authority of the Finance and Administration Cabinet.