Producers and blenders of biodiesel are entitled to a tax credit to be applied both to the income tax imposed under KRS 141.020 or 141.040 and to the limited liability entity tax imposed under KRS 141.0401, with the ordering of credits as provided in KRS 141.0205. The amount of tax credit claimed against the corporation income tax and LLET can be different.
For pass-through entities not subject to tax under KRS 141.040, the amount of approved credit shall be applied against the LLET at the entity level, and shall also be distributed to each partner, member, shareholder, or beneficiary based on the partner's, member's, shareholder's, or beneficiary's distributive share of the income of the pass-through entity.
Each taxpayer is required to notify the Department of Revenue (DOR) electronically of all partners, members, shareholders, or beneficiaries of the pass through entity.
Tax Credit Cap:
- Calendar year prior to January 1, 2008: $1,500,000
- Calendar year beginning on or after January 1, 2008, but before January 1, 2009: $5,000,000
- Calendar years beginning on or after January 1, 2009: $10,000,000
Standards as outlined in 103 KAR 15:140 and KRS 141.422:
Biodiesel and Blended biodiesel
- Must meet current American Society for Testing and Materials specification D6751.
- Blended biodiesel is a blend of biodiesel with petroleum diesel so that the percentage of biodiesel is at least 2%.
- Must provide test results for July 1 and December 31 of each calendar year with Schedule BIO.
Renewable Diesel - American Society for Testing and Materials Specifications
- D396 for fuel oils or fuel-oil burning equipment
- D975 for diesel fuel oils suitable for various types of diesel fuel engines
- D1655 for aviation fuels
Credit equal to one dollar per gallon of produced or blended biodiesel unless total amount of approved credit for all taxpayers exceeds annual cap. If the cap is exceeded, the allowable credit is prorated amongst the qualified taxpayers. Proration shall be determined by dividing the credit for each separate taxpayer by total eligible credit for all taxpayers then multiplying by the tax credit cap amount. (Separate Taxpayer's Approved Credit /All Taxpayers' Approved Credits) x Tax Credit Cap
- DOR determines amount of approved credit based upon fuel produced or blended in Kentucky in the preceding calendar year.
- Re-blending of biodiesel does not qualify.
- This is a nonrefundable credit.
- Taxpayer must file claim for biodiesel credit with DOR by January 15th each year.
- DOR must issue credit certification to the taxpayer by April 15th each year.
- Credit shall be claimed on return filed for the first fiscal year ending after the close of the preceding calendar year in which the biodiesel was produced or blended.
- The credit shall not be carried forward to a return for any other period.
- Use Form: Schedule BIO