FON: Farming Operation Networking (FON) Tax Credit (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
The Kentucky Farming Operation Networking (FON) Tax Credit package reports tax incentives for an approved business project. It includes schedules to calculate the allowable credit and maintain a record of approved costs and tax credits.
Who files this form
Use the 2025 FON package to report approved Farming Operation Networking tax incentives. Only use it if your business has received preliminary or final approval from the Kentucky Cabinet for Economic Development under KRS 141.410 to 141.414.
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.
Use a separate package for each incentive project.
What you'll need
Have the following information and schedules ready:
- Your entity name, federal identification number, and Kentucky Corporation/LLET account number.
- The project location, project number, and activation date of the FON incentive agreement.
- Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
- Records of approved costs, prior-year carryforward balances, and credits claimed for Schedule FON-T.
- Schedule TCS, the Tax Credit Summary Schedule.
Additional attachments may be required:
- Schedule L-ECON to calculate the project's separate LLET, when applicable. Attach a separate Schedule L-ECON for each project's LLET calculation.
- Supporting calculations of project net income and, where required, Kentucky gross receipts and gross profits if you have operations outside the FON project.
- 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 if a corporation has more than one FON project.
How to file
- Complete one FON package for each project. Use Schedule FON for a Form 720 or 720U filer, or Schedule FON-SP for a Form PTE or 725 filer.
- Update Schedule FON-T with current-year information. Maintain a separate tracking schedule for each project, using one line for each year of the agreement.
- Attach the updated Schedule FON-T to Schedule FON or FON-SP, along with any required supporting schedules and 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.
- Attach the package to Form 720, 720U, PTE, or 725 and file it with the Kentucky tax return.
For Schedule FON-SP, a shareholder, partner, or member must sign and date the certification and print their name. Any tax due on the project from line 10 is added to Form PTE, Part II, line 16, or Form 725, Part II, line 15.
Common mistakes
- Using the package without approval: The package is only for businesses approved for the FON credit by the Cabinet for Economic Development.
- Combining projects: Include only one incentive project per package.
- Passing credits or losses through to owners: FON credits do not pass through to members, partners, or shareholders. Project losses do not flow through either. Subtract prior-year project net operating losses from project income before calculating the credit.
- Claiming more credit than allowed: Credits must be claimed in the order prescribed by KRS 141.0205. Total credits cannot reduce LLET below $175 or income tax liability below zero. Schedule FON-T also warns that Column E exceeding Column D means more credit was claimed than was eligible.
- Completing LLET lines for a general partnership: General partnerships should not complete Schedule FON-SP, lines 5 and 6.
- Entering a six-digit Kentucky account number without leading zeros: The Corporation/LLET account number must have nine digits.
Questions people ask
How long is the annual FON credit available?
The annual credit is available for the first five years that the farming operation participates in the networking project.
Can unused credit be carried forward?
Yes. Credit not used in the year it becomes available may be carried forward to the next five taxable years until fully used. The annual amount used is subject to the limits stated in the package.
What counts as an approved cost?
Approved costs are costs incurred during the taxable year to train and improve the skills of managers and employees involved in a networking project, as described in KRS 141.410(1).
What amount goes in Schedule FON-T, Column E?
Record the greater of the credit claimed against LLET or income tax, not the sum of both. Use the greater of Schedule TCS, Column E or Column F, for that project, if applicable. Otherwise, enter zero.