Clean Coal Incentive Tax Credit
The clean coal incentive tax credit is a nonrefundable and nontransferable credit that may be taken against income taxes imposed by KRS 141.020 (individual income tax) or KRS 141.040 (corporation income tax), the limited liability entity tax (LLET) imposed by KRS 141.0401, or the public service corporation property tax (state portion only) imposed by 136.120. Unused credit amounts cannot be carried forward to later tax years and must be used on the tax return filed for the period during which the eligible coal was purchased.
The application process begins with the Energy and Environment Cabinet. The Energy and Environment Cabinet must approve and certify use of the clean coal equipment and technologies within a clean coal facility. A taxpayer that is eligible for the credit shall then file a clean coal incentive tax credit, Schedule CCI, application and credit certificate with Department of Revenue. This schedule must be submitted by March 15 of each year to apply for the credit on coal purchases for the prior calendar year.
Forms Required to Claim the Tax Credit
Schedule CCI is sent to the taxpayer with Part II, Tax Credit, filled out for their records. A copy is required to be attached to the tax return on which the credit is claimed. Taxpayers who receive a share of the clean coal incentive tax credit via a
Kentucky K-1 through their ownership in a pass-through entity must complete and file
Schedule TCS for corporations and pass-through entities or
Schedule ITC for individuals. These schedules should be completed to reflect the taxpayer's share of the credit. The Schedule TCS or Schedule ITC is required to be attached to any return on which the credit is claimed. A copy of the tax credit issued by the department must be attached to their tax return. Each pass-through entity claiming the clean coal incentive tax credit must file a report with the department by email at
DORTaxCredits@ky.gov. The report must detail each partner, member, or shareholder's name, address, phone number, identification number, and distributive share of the tax credit. These forms may be found on the DOR Find a Form webpage.
Who Can Claim the Credit?
A pass-through entity (partnership, S-Corporation, LLC, general partnership, trust, etc.) may apply the clean coal incentive tax credit against the LLET on its Kentucky Corporation and LLET Return and pass the credit through to its partners, members, or shareholders in the same proportion as the distributive share of income or loss is passed through with the ordering of the credits under KRS 141.0205.
The credit is passed through to the partners, members, or shareholders of a pass-through entity that are the partners, members, or shareholders at the time of the application and subsequent approval of the credit. The income is reported on the Kentucky Schedule K-1 and any credit that is passed through to the partners, members, or shareholders may be used against individual income tax or corporate income tax and LLET. Each pass-through entity shall notify the department electronically of all partners, members, or shareholders who may claim any amount of the approved credit. Failure to provide information to the department in a manner prescribed by regulation may constitute the forfeiture of available credits to all partners, members, or shareholders associated with the pass-through entity.
A sole proprietor reporting business income on Schedule C (federal Form 1040) may claim the credit for clean coal incentive tax credit under the business name. An individual may claim the credit if it is passed through to them from a partnership, LLC, or S-Corporation on a Kentucky Schedule K-1.
A corporation may apply the clean coal incentive tax credit against income tax and LLET on its Kentucky Corporation Income Tax and LLET Return and then it may be applied to the tax imposed by KRS 136.120, public service corporation property tax (state portion only). The credit shall meet the entirety of the taxpayer's liability under the first tax listed in consecutive order before applying any remaining credit to the next lax listed. A corporation may also claim the credit if it is passed through to them from a pass-through entity on a Kentucky Schedule K-1.