8874(K) - NMDP: New Markets Development Program (NMDP) Tax Credit (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky Form 8874(K) is an application to certify qualified equity investments eligible for the New Markets Development Program tax credit. It collects information about the qualified community development entity (CDE), its certification and service area, the planned use of inve
Who files this form
A qualified community development entity (CDE) must file Form 8874(K) with the Kentucky Department of Revenue to have an equity investment or long-term debt security certified as a qualified equity investment eligible for the NMDP tax credit.
This package is only for a qualified CDE applying for or already approved for a Kentucky NMDP tax credit. The CDE also files Form 8874(K)-A for each taxpayer as evidence that it received cash for the taxpayer’s qualified equity investment.
What you'll need
For the Form 8874(K) application, gather:
- Proof of current CDFI Fund certification, including the original certification and all subsequent updates.
- A copy of the new markets tax credit allocation agreement that includes Kentucky in the service area.
- Documentation describing the CDE’s service area, such as a map, articles of organization, or bylaws.
- Information about how the investment proceeds will be used, including a description of the qualified active low-income community business.
- Each investing taxpayer’s name, identification number, investment type, and investment amount. Attach a schedule if more space is needed.
- The CDE’s identifying information and, if it is included in a consolidated return, the requested parent taxpayer information.
- Two separate cashier’s checks payable to the Kentucky State Treasurer: a $1,000 nonrefundable application fee and a refundable performance fee of 0.5% of the investment requested to be certified, capped at $500,000.
For a performance fee refund using Form 8874(K)-C, attach proof of certification and proof that the requirements of KRS 141.433(8)(d) have been met.
How to file
Complete Form 8874(K), include the required attachments and separate fee checks, and have an executive officer of the CDE sign and date it. Type or print the officer’s name and title.
Mail the application to:
Department of Revenue
Division of Corporation Tax
Tax Credits Section, Station 52
501 High Street
Frankfort, KY 40601-2103
The same mailing address is printed on Forms 8874(K)-A and 8874(K)-C.
After certification, the CDE must file Form 8874(K)-A for each taxpayer to document receipt of cash for the qualified equity investment. To claim the credit, the taxpayer must attach the approved Form 8874(K)-A to the tax return each year. A partner, member, or shareholder claiming the credit must also attach a copy of Schedule K-1, Form PTE.
Common mistakes
- Combining the fees into one check. The application fee and performance fee each require a separate cashier’s check payable to the Kentucky State Treasurer.
- Entering totals that do not match. Item I must equal the number of taxpayer entries on line 6. The total investment amount on line 6 must equal Item J.
- Leaving out certification records. Proof of current CDFI Fund certification must include the original certification and all subsequent updates.
- Not correcting application deficiencies. If the CDE does not provide the required information or complete its application within 15 days after receiving the denial notice, the application is deemed denied and must be resubmitted in full with a new submission date.
- Not receiving the full investment cash after certification. If the CDE does not receive cash for the total certified investment within 90 days after receiving the certification notice, certification lapses and the entire performance fee is forfeited. The CDE must reapply before issuing the investment.
Questions people ask
When will the department respond to an application?
The department will notify the CDE within 30 days after receiving the application whether it is approved or denied. If additional information is submitted to correct deficiencies, the department has another 30 days after receiving that information to approve or deny the application.
What happens if the program’s credit cap limits my application?
If the $10 million tax credit cap limits the credits, the department will notify the CDE. The CDE may withdraw the application and receive a full performance fee refund, or accept a partial credit and receive a refund of the performance fee attributable to the uncertified amount.
How is the credit spread over the seven years?
Form 8874(K)-A lists no allowable credit for years 1 and 2, a 7% credit for year 3, and an 8% credit for each of years 4 through 7.
How do I request a performance fee refund?
The CDE may request a refund no sooner than 30 days after meeting all requirements of KRS 141.433(8). Submitting Form 8874(K)-C satisfies the written-request requirement. The department must review the request within 30 days and either issue the refund without interest or give written notice of noncompliance and possible forfeiture.