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INSTRUCTIONS FOR FORM 8903-K

Purpose of Form – This form is to be used by taxpayers in

SPECIFIC LINE INSTRUCTIONS

calculating their Kentucky domestic production activities

Lines 1 through 6

deduction (KDPAD).

Enter Kentucky amounts using the federal instructions.

Your KDPAD may be different from the federal DPAD because

of differences in taxable net income and qualified production

Line 7

activity income resulting from differences in Kentucky and

federal depreciation and expense deductions allowed under

Only applies to corporations (corporations as defined in KRS

Sections 168 and 179 of the Internal Revenue Code (IRC) and

141.010(24)) that are general partners. For a corporate partner

other Kentucky adjustments provided by KRS 141.010.

of a general partnership, the general partnership needs to

compute its qualified production activities income based on

KDPAD is limited by your Kentucky apportioned taxable net

Kentucky amounts as provided in the above instructions for

income before the KDPAD amount and is taken after the

General Partnerships.

Kentucky net operating loss deduction (KNOLD).

Line 9

KDPAD is only computed for corporations as defined in KRS

141.010(24). General partnerships (Form 765-GP), limited

Enter the apportionment factor from Schedule A (Form

liability partnerships (Form 765), S corporations (Form 720S),

41A720A), Section I, Line 12.

and individually owned single member LLCs (Form 725 or

Schedule CP, Form 725) shall provide for partners/sharehold-

Line 11

ers that are corporations, individual nonresidents, estates,

trusts, or general partnerships the Kentucky domestic pro-

Corporations: Enter your Kentucky taxable income from the

duction gross receipts, the federal domestic production gross

applicable return before your KDPAD deduction.

receipts and Kentucky wages. Attach this information to

• Form 720, Part I, Line 22

Schedule K-1s.

• Form 720S, Part I, Line 25

For taxpayers other than corporations: (1) a full-year resi-

• Form 725, Part I, Line 13

dent individual is allowed the federal deduction for the

• Schedule CP Form 725, Part I, Line 13

KDPAD; (2) a part-year resident or full-year nonresident indi-

vidual shall prorate the allowable federal DPAD based upon

• Form 765, Part I, Line 27

the percentage of Kentucky domestic production gross re-

ceipts to federal domestic production gross receipts. The

Line 14

KDPAD shall not exceed 50 percent of the Kentucky W-2 wages

from the entity that generated Kentucky domestic produc-

Form W-2 wages are computed pursuant to KRS 141.120(8)(b)

tion gross receipts. Enter the KDPAD amount computed for a

and Regulation 103 KAR 16:090E. This is the numerator of the

nonresident or part-year resident individual on Form 740-NP ,

payroll factor as computed on Schedule A (Form 41A720A),

page 3, Column B, Line 30.

Section I, Line 8. Corporations that do not allocate and

apportion under KRS 141.120 shall enter their Form W-2 wages

When calculating your KDPAD, follow the IRS proposed or

included in the Kentucky return. Do not include Form W-2

final Regulation §1.199 along with the exceptions provided

wages you must report on Line 15. IRC Section 199 was

in the Kentucky Regulation 103 KAR 16:310.

amended to define W-2 wages to mean wages incurred in the

domestic production activity. Kentucky has not adopted this

General Partnerships—Following federal instructions and

change.

using Kentuck y amounts, attach a statement with the

information necessary to enable each corporate partner to

Line 15

figure the DPAD under IRC § 199. If the partnership elected to

use the small business simplified overall method to allocate

Enter the Form W-2 wages from the schedule attached to your

and apportion cost of goods sold and deductions between

Kentucky Schedule K-1.

domestic production gross receipts and other receipts for

federal purposes, use the same method for Kentucky purposes

Line 19

using Kentucky amounts and attach a statement to each

Schedule K-1 showing qualified production activity income

Enter the amount from box 6 of Form 1099-PATR multiplied

(using federal Schedule K-1 code U or S2) and the employer’s

by the cooperative’s Kentucky apportionment factor from

W-2 wages (using federal Schedule K-1 code V or S3).

Schedule A (Form 41A720A).

Qualified Exempt Organizations—Any corporation of the type

Line 20

listed in KRS 141.010(24)(b) to (h) that is owned in whole or in

part by a qualified exempt organization as provided by KRS

The Expanded Affiliated Group (EAG) means entities included

141.040(8)(b) shall in calculating the taxable net income and

in the Kentucky expanded affiliated group. This only includes

qualified production activity income for the purposes of the

Kentucky corporations as defined in KRS 141.010(24) and

KDPAD exclude the proportionate share of taxable net income

doing business in Kentucky as defined in KRS 141.010(25) and

and qualified production activity income attributable to the

Regulation 103 KAR 16:240E. The KDPAD for the EAG is based

ownership interest of the qualified exempt organization.

upon Kentucky amounts following federal rules.

Instructions For Form 8903-K - Kentucky Domestic Production Activities Deduction (Kdpad) - Kentucky Department Of Revenue

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