Form 765-Gp - Kentucky General Partnership Income Return

Tax Treatment of Kentucky General Partnerships and Partners

Nonresident Withholding (Form 740NP–WH)

Withholding

General partnerships are exempt by law from Kentucky income

tax. However, general partners of general partnerships doing

A partner or member that is an S corporation or partnership is

business in Kentucky must report their share of income for

not subject to withholding. S corporations and partnerships are

Kentucky income tax purposes. This applies to individuals,

pass-through entities as provided by KRS 141.010(26).

trusts, estates and corporations. Individuals who are Kentucky

residents are required to file Form 740 and report their share of

KRS 141.206(5) provides that for taxable years beginning on

general partnership income earned within or without Kentucky.

or after January 1, 2007, every pass–through entity required

Nonresidents who are not included by the general partnership

to file a return under KRS 141.206(2), except publicly traded

in a composite return filing or nonresident withholding shall file

partnerships as defined in KRS 141.0401(6)(r), shall withhold

Form 740–NP and report their distributive share of income from

Kentucky income tax on the distributive share, whether

general partnerships doing business in Kentucky.

distributed or undistributed, of each nonresident individual

(includes an estate or trust partner, member or shareholder)

Resident partners of a general partnership shall report and

partner, member or shareholder, or each C–corporation partner

pay tax on the distributive share of net income, gain, loss, or

or member that is doing business in Kentucky only through

deduction. Nonresident partners of a partnership shall report

its ownership interest in a pass–through entity. Withholding

and pay tax on the distributive share of net income, gain, loss, or

shall be at the maximum rate as provided in KRS 141.020 or

deduction multiplied by the apportionment fraction as provided

KRS 141.040.

by KRS 141.206(12). KRS 141.206(8) and (9)

Withholding shall not be required if: (a) the partner, member

or shareholder is exempt from withholding as provided by

If the general partnership is a partner or member of a limited

KRS 141.206(7)(a); (b) the partner or member is exempt from

liability pass–through entity doing business in Kentucky, the

Kentucky income tax as provided by KRS 141.040(1); (c) the

general partners shall be entitled to an LLET credit against taxes

pass-through entity is a qualified investment partnership as

imposed by KRS 141.020 or KRS 141.040 and KRS 141.0401. The

provided by KRS 141.206(15), and the partner, member or

LLET credit shall be the general partners’ proportionate share

shareholder is an individual; or (d) the partner or member is a

of the LLET from the limited liability pass–through entity for the

pass-through entity.

current year after the subtraction of any credits identified in KRS

141.0205 and reduced by the minimum tax of $175. The LLET

For taxable years beginning on or after January 1, 2012, a pass-

credit allowed shall be applied to the income tax assessed on

through entity required to withhold Kentucky income tax as

the income from the limited liability pass–through entity. Any

provided by KRS 141.206(5) shall make estimated tax payments if

remaining LLET credit from the limited liability pass–through

required by KRS 141.206(6). If the pass-through entity is required

entity shall be disallowed. KRS 141.0401(3)

to make estimated tax payments for taxable years beginning

on or after January 1, 2012, use Form 740NP-WH-ES (Kentucky

GENERAL INFORMATION

Estimated Tax Vouchers).

The reporting of a nonresident individual’s, estate’s or trust’s

Internal Revenue Code Reference Date—Effective for taxable

net distributive share income and withholding on Form 740NP–

years beginning after December 31, 2006, Kentucky Revised

WH at the maximum rate of six (6) percent shall satisfy the

Statute (KRS) 141.010(3) was amended to define “Internal

filing requirements of KRS 141.180 for a nonresident individual,

Revenue Code” (IRC) for Kentucky income tax purposes to

estate or trust partner, member or shareholder whose only

mean the IRC in effect on December 31, 2006, exclusive of

Kentucky source income is net distributive share income.

any amendments made subsequent to that date, other than

The nonresident individual estate or trust partner, member or

amendments that extend provisions in effect on December

shareholder may file a Kentucky Individual Income Tax Return

31, 2006, that would otherwise terminate and as modified

Nonresident or Part–Year Resident (Form 740–NP) or a Kentucky

by KRS 141.0101, except that for property placed in service

Fiduciary Income Tax Return (Form 741) to take advantage of

after September 10, 2001, only the depreciation and expense

the graduated tax rates, credits and deductions.

deductions allowed under Sections 168 and 179 of the Internal

Revenue Code in effect on December 31, 2001, exclusive of any

A pass–through entity shall complete Form 740NP–WH and

amendments made subsequent to that date. KRS 141.010(3)

Form PTE–WH for each nonresident individual, estate or trust

partner, member or shareholder and each corporate partner

Who Must File—A Kentucky General Partnership Income

or member and mail Form 740NP–WH and Copy A of Form

Return, Form 765 – GP, must be filed by ever y general

PTE–WH to the Kentucky Department of Revenue with payment

partnership: (a) being organized under the laws of this state;

of any tax due by the 15

day of the fourth month following

(b) having a commercial domicile in this state; (c) owning or

the close of the pass–through entity’s taxable year. Also, Copy

leasing property in this state; (d) having one or more individuals

B and C of Form PTE–WH shall be provided to the partners,

performing services in this state; (e) maintaining an interest

members or shareholders. Form 740NP–WH and Form PTE–WH

in a pass–through entity doing business in this state; (f)

are available at

deriving income from or attributable to sources within this

state, including deriving income directly or indirectly from a

Composite Return—Nonresidents Only

trust doing business in this state, or deriving income directly

or indirectly from a single member limited liability company

Do not include a nonresident individual (includes an estate

that is doing business in this state and is disregarded as an

or trust partner, member or shareholder) partner, member or

entity separate from its single member for federal income tax

shareholder in a composite return if the partner’s, member’s

purposes; or (g) directing activities at Kentucky customers for

or shareholder’s distributive share income was subject to

the purpose of selling them goods or services. KRS 141.010(25)

withholding and reported on Form 740NP–WH and PTE–WH.

and KRS 141.206(2)

The composite return applies only to nonresident individual

(includes an estate or trust partner, member or shareholder)

General Partnerships—General partnerships doing business in

partners, members or shareholders: (i) whose distributive

Kentucky solely as a partner in a pass–through entity will file

share income was not subject to withholding as provided

Form 765–GP pursuant to the provisions of KRS 141.010, 141.120

by KRS 141.206(5); (ii) whose only source of income within

and 141.206. For apportionment information, see instructions

this state is distributive share income from one or more

on page 6.

Form 765-Gp - Kentucky General Partnership Income Return - 2012 Page 4

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