Nonresident Withholding Filing Requirement
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
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.