FON: Farming Operation Networking (FON) Tax Credit (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky’s Farming Operation Networking (FON) Tax Credit package reports tax incentives for an approved FON project. Its schedules calculate the allowable credit and maintain a record of approved costs and tax credits.
Who files this form
Use the 2024 FON package only if your business has received preliminary or final approval for the Farming Operation Networking credit from the Cabinet for Economic Development.
The schedules you must complete depend on your Kentucky return:
- Form 720 or 720U: Complete Schedule FON and Schedule FON-T.
- Form PTE or 725: Complete Schedule FON-SP and Schedule FON-T.
Include only one incentive project in each FON package.
What you'll need
Have the following information and schedules ready:
- Your business name, federal identification number, and Kentucky Corporation/LLET account number.
- The project number, location, and activation date of the FON incentive agreement.
- Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
- Schedule FON-T, updated with current-year approved costs, carryforward balances, and credits claimed.
- Schedule TCS, Tax Credit Summary Schedule.
- Schedule L-ECON for the project's LLET calculation, when applicable. General partnerships do not complete the LLET lines on Schedule FON-SP.
Additional attachments may be required:
- Project income and, where required, Kentucky gross receipts and gross profits calculations if the business has other operations.
- A Department of Revenue approval letter if you use an approved allocation percentage for an expansion or an alternative accounting method.
- Copies of Cabinet for Economic Development certifications for a corporation with multiple FON projects.
How to file
Attach the FON package to your Kentucky Form 720, 720U, PTE, or 725.
- Complete Schedule FON for a business filing Form 720 or 720U, or Schedule FON-SP for a business filing Form PTE or 725.
- Complete a separate Schedule FON-T for each project and attach an updated copy to Schedule FON or FON-SP.
- Attach Schedule L-ECON and any required supporting calculations or approval letters.
- Enter tax credits on Schedule TCS. For Schedule FON, enter the allowable credit in Part II, Columns E and F of Schedule TCS.
Schedule FON-SP must be signed and dated by a shareholder, partner, or member, with their name printed. Any project tax due on Schedule FON-SP, line 10, is added to Form PTE, Part II, line 16, or Form 725, Part II, line 15.
The package does not provide mailing or e-filing directions or a mailing address.
Common mistakes
- Combining projects: Include only one incentive project per package and maintain a separate Schedule FON-T for each project.
- Passing credits or losses through to owners: FON credits and project losses do not pass through to partners, members, or shareholders. Prior-year project net operating losses must be subtracted from project income before calculating the credit.
- Completing LLET lines for a general partnership: General partnerships should leave Schedule FON-SP, lines 5 and 6, uncompleted.
- Claiming too much credit: Total credits claimed cannot reduce LLET below $175 or income tax liability below zero. Credits must be claimed in the prescribed statutory order.
- Double-counting credits on Schedule FON-T: Record the greater of the credit claimed against LLET or income tax, not their sum. If Column E exceeds Column D, you have exceeded the eligible credit amount.
Questions people ask
What costs count as approved costs?
Approved costs are costs incurred during the tax year by a qualified farming operation to train and improve the skills of managers and employees involved in a networking project.
How long is the annual credit available?
The annual credit is available for the first five years that the farming operation participates in the networking project.
Can unused credits be carried forward?
Yes. A credit not used in the year it becomes available may be carried forward to the next five taxable years until fully used. The total credit used in a year must not exceed the income, Kentucky gross profits, or Kentucky gross receipts generated by the farming operation's participation in the project that year.
Do FON credits pass through to owners of a pass-through entity?
No. These credits do not pass through to members, partners, or shareholders. The instructions also require use of Form PTE(K) to exclude FON project net income from their distributive share income.