RECYCLING/COMPOSTING CREDIT – KRS 141.390
- SCHEDULE RC (41A720RC) must be filled out for this credit.
- Applications may be filed whether an entity has a calendar year end (CYE) or a fiscal year end (FYE).
- A timely RC application must be filed and post marked before the first day of the seventh month following the close of the accounting period.
Example: CYE 12/31/2015 - Must be received by our office by 7/1/2016
- There are no extensions to file
- More than one application can be filed for the same year, although DOR requests that only one application be filed per year.
- The credit cannot be pre-approved. An application must be submitted for review of approval.
- The approved credit remains at the entity level and may be used against both LLET and INCOME tax.
- The credit may be used at the entity level to offset both LLET and INCOME tax. The credit flows down to the shareholders and the amount is calculated in proportion to each shareholder's ownership percentage which is listed on the K-1 of the corporate return. An S-Corporation shareholder can be an individual or a business entity.
- The credit receives the same treatment as an S-Corporation and its partners.
- Single Member LLC
- The credit receives the same treatment as an S-Corporation but with only the sole member receiving the flow through credit.
- Sole Proprietor
- The sole proprietor receives the full benefit of the credit for equipment purchased under the business name.
- The credit is approved for only one (1) person.
- If the equipment was purchased by a husband and wife and both names are listed on the application, the credit may be wholly claimed if they file jointly, but must be split if they file separately. If the application lists only one of the spouse's names, the listed spouse is entitled to claim the full credit. On a combined return, both spouses' (combined) income is used in the determination of the allowable amount of credit that may be claime
- The credit receives the same treatment as a Partnership or S-Corporation by being passed through to the beneficiaries of the trust.
AFTER AN APPLICATION IS APPROVED
- A limit of 10% of the approved credit may be claimed in the first year after approval. The taxpayer is still subject to a limit on the credit of 25% of the actual tax liability.
- In subsequent years, the taxpayer may claim up to 25% of the actual tax liability.
- Any unused credit is available to be carried forward until it is completely utilized. The approved credit does not expire.
- For consolidated returns, the parent or subsidiary with the approved credit(s) will be allowed to claim the credit(s) against the tax liability on the parent company's consolidated return.
- Credit approved under a disregarded entity will flow up to the parent company filing the tax return.
MAJOR RECYCLING CREDIT
- A Major Recycling Project means a project after December 31, 2004 for which a taxpayer invests more than $10,000,000 in recycling or composting equipment to be used exclusively in Kentucky, has more than 750 full-time employees with average hourly wages of more than 300% of federal minimum wage, and has plant and equipment with total cost of more than $500,000,000.
- Approved companies are eligible for credit against taxes imposed by KRS 141.020, KRS 141.040, or KRS 141.0401 in an amount equal to 50% of the installed cost of the recycling or composting equipment.
- The credit is limited each tax year to 50% of the excess of the total tax liability over the baseline year tax liability of the taxpayer not to exceed $2,500,000. Baseline year tax liability means the tax liability of the taxpayer for the most recent tax year ending prior to January 1, 2005.
- There is a 10 year time frame in which the credit must be claimed. The taxpayer loses any unclaimed balance of credit once the 10 year period of time has elapsed.
- The credit amount is adjusted if the equipment is disposed of before the end of recapture period.