Schedule CHEM: Renewable Chemical Production Tax Credit Certificate and Schedule (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky Schedule CHEM is the Renewable Chemical Production Tax Credit Certificate and Schedule. It reports the molecular weight in pounds of renewable chemicals produced in Kentucky, sales receipts, Kentucky employee counts, and credit amounts approved and used.
Who files this form
Taxpayers seeking Kentucky’s renewable chemical production tax credit must file Schedule CHEM with the Department of Revenue. The schedule reports the pounds in molecular weight of renewable chemicals produced in Kentucky, and the department certifies the credit amount.
A pass-through entity must also report each partner’s, member’s, shareholder’s, or beneficiary’s share of the approved credit on Schedule K-1 and notify the department electronically of everyone who may claim the credit.
When it's due
For the 2024 calendar year, the schedule gives these deadlines relative to the close of that year:
- January 15 following the close of the calendar year: Submit the preliminary approval application to the Department of Agriculture.
- March 1 following the close of the calendar year: File Schedule CHEM with the Department of Revenue.
- April 15 following the close of the calendar year: The Department of Revenue will issue the credit certificate showing the available credit.
The schedule states that the credit is available for tax years beginning on or after January 1, 2021, with an expiration date of December 31, 2024.
What you'll need
- Preliminary credit certification from the Department of Agriculture: Attach it to Schedule CHEM.
- Taxpayer identification and business details: Include the name, mailing address, location county and address, entity type, and Kentucky Corporation/LLET account number, if applicable. Individuals enter their Social Security number; other entities enter their FEIN.
- Required reporting information: Provide gross receipts from sales by type of renewable chemical produced in Kentucky, Kentucky employee counts for the current calendar year, and Kentucky employee counts for the calendar year immediately before the first application year. Attach a supporting statement if there is not enough space.
- Credit-use information: Provide the amounts claimed against LLET and income tax and the credit balances requested in Part VI.
- Approved credit certificate: Attach it to the tax return claiming the credit.
Pass-through entities also need each recipient’s name, address, telephone number, identification number, and distributive share of the credit for the required electronic notification.
How to file
- Submit an application to the Department of Agriculture for preliminary approval.
- Complete the taxpayer information on Schedule CHEM. Check the entity type and whether the business first qualified by organizing, expanding, or locating in Kentucky. Complete the taxpayer-use portions and sign and date the declaration.
- File Schedule CHEM with the Department of Revenue, attaching the Department of Agriculture’s preliminary credit certification. Parts I and II are completed by the Department of Revenue, which also determines the approved credit in Part III.
- Attach the approved credit certificate to the return claiming the credit. The form lists Forms 720, 720U, PTE, 725, 740, 740-NP, and 741.
- Report LLET credit on Schedule TCS, Part II, Column E; corporation income tax credit on Schedule TCS, Part II, Column F; and individual income tax credit on Form 740, 740-NP, or 741. Track credit use in Part VI.
The printed Department of Revenue contacts are:
- Fax: 502-564-0058
- Email: DORTaxCredits@ky.gov
- Tax Credits Section telephone: 502-564-8139
The text does not provide a mailing address or e-file instructions. It warns that credit certification cannot be guaranteed for schedules sent through regular mail.
Pass-through entities must email recipient information to DORTaxCredits@ky.gov in a separate plain-text or plain ASCII attachment.
Common mistakes
- Leaving out required attachments: Attach the preliminary certification to Schedule CHEM and the approved credit certificate to the return claiming the credit.
- Assuming regular mail guarantees certification: The schedule says it does not. If you do not receive confirmation within two weeks of submitting the application, call 502-564-8139.
- Skipping the pass-through entity notification: Failure to provide recipient information in the required electronic format causes all partners, members, shareholders, or beneficiaries to forfeit available credits.
- Reducing LLET below its minimum: The credit cannot reduce LLET below $175.
- Waiting too long to use the credit: Unused credit may be carried forward for three years. Credit not claimed within three years is lost.
Questions people ask
How is the credit calculated?
The rate is five cents ($0.05) per molecular pound of weight of renewable chemical produced in Kentucky.
Is there an annual credit limit?
Yes. The combined annual cap for biodiesel, renewable diesel, and renewable chemical production credits is $10,000,000. If total approved credit exceeds that cap, the department allocates credit using each taxpayer’s requested credit divided by all taxpayers’ requested credit, multiplied by the cap.
Can I receive a refund or transfer the credit?
No. The credit is nonrefundable and nontransferable. It applies against individual income tax, corporation income tax, and/or LLET. The amounts claimed against corporation income tax and LLET may differ.
Can unused credit be carried forward?
Yes. Unused credit may be carried forward for up to three years. Any credit not claimed within three years is lost.