Schedule CHEM: Renewable Chemical Production Tax Credit Certificate and Schedule (2025)

Who files this form

Schedule CHEM is used by taxpayers seeking certification of Kentucky’s renewable chemical production tax credit. It reports the molecular weight, in pounds, of renewable chemicals produced in Kentucky. The Department of Revenue certifies the credit amount.

Pass-through entities must report each owner’s or beneficiary’s share of the approved credit on Schedule K-1 and send the required information electronically to the department.

Important for the 2025 version: Although this schedule is labeled 2025, its instructions say the credit is available for tax years beginning on or after January 1, 2021, with an expiration date of December 31, 2024. They also allow unused credit to be carried forward for up to three years.

When it's due

The 2025 Schedule CHEM prints these deadlines, each measured from the close of the preceding calendar year:

• January 15: Submit the preliminary approval application to the Department of Agriculture.
• March 1: File Schedule CHEM with the Department of Revenue.
• April 15: The Department of Revenue will issue the credit certificate by this date.

These are printed as recurring deadlines, not as specific 2025 calendar dates. The same instructions state that the credit applies to tax years beginning on or after January 1, 2021, with an expiration date of December 31, 2024.

What you'll need

Have the following ready:

• The Department of Agriculture’s preliminary tax credit certification, which must be attached to Schedule CHEM.
• Your name, mailing address, Kentucky location address and county, entity type, and how the business first qualified: organizing, expanding, or locating in Kentucky.
• Your Social Security number if filing as an individual, or FEIN for other entities, plus your Kentucky Corporation/LLET account number if applicable.
• Gross receipts from sales for each type of renewable chemical produced in Kentucky.
• Kentucky employee counts for the current calendar year and the calendar year immediately before the year the entity first applied for the credit.
• Credit balances and amounts used against LLET and income tax for Part VI.

Attach a supporting statement if Part IV does not have enough lines. Keep the Department of Revenue’s approved credit certificate to attach to the tax return claiming the credit.

How to file

1. Submit an application to the Department of Agriculture for preliminary approval.
2. Complete the taxpayer information and applicable taxpayer sections of Schedule CHEM, including Parts IV, V, and VI. Sign and date the declaration. The Department of Revenue completes Parts I and II and determines the approved credit in Part III.
3. File Schedule CHEM with the Department of Revenue, attaching the Department of Agriculture’s preliminary certification.
4. Attach the approved credit certificate to the tax return claiming the credit. The form lists Forms 720, 720U, PTE, 725, 740, 740-NP, and 741 as returns to which Schedule CHEM is attached.

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. Follow the Schedule TCS or Schedule ITC instructions for reporting credit used.

The text does not provide a mailing address or an e-file procedure for Schedule CHEM. It warns that credit certification cannot be guaranteed for schedules sent through regular mail. The department will confirm receipt. If confirmation does not arrive within two weeks, contact the Tax Credits Section at 502-564-8139. The listed fax is 502-564-0058, and the email is DORTaxCredits@ky.gov.

Pass-through entities: Email DORTaxCredits@ky.gov a separate plain-text or plain-ASCII attachment listing each partner’s, member’s, shareholder’s, or beneficiary’s name, address, telephone number, identification number, and distributive share of the credit. Also include each share on Schedule K-1.

Common mistakes

• Leaving off the preliminary certification: Attach the Department of Agriculture’s certification to Schedule CHEM.
• Leaving off the approved certificate: Attach the Department of Revenue’s credit certificate to the tax return claiming the credit.
• Using an incomplete Kentucky account number: The form requires nine digits. Add leading zeros if the number has six digits.
• Assuming regular mail guarantees certification: The instructions say it does not. Follow up if receipt is not confirmed within two weeks.
• Missing pass-through reporting: Failure to provide the required electronic information in the stated format forfeits available credits for all partners, members, shareholders, or beneficiaries.
• Reducing LLET too far: The credit cannot reduce LLET below the $175 minimum.
• Letting unused credit expire: Credit not claimed within the three-year carryforward period is lost.

Questions people ask

What is the credit rate?

The rate is five cents ($0.05) per molecular pound of renewable chemical produced in Kentucky.

Is there an annual credit cap?

Yes. The combined annual cap for biodiesel, renewable diesel, and renewable chemical production credits is $10,000,000. If total approved credit exceeds the cap, the department uses each taxpayer’s requested credit divided by all taxpayers’ requested credit, multiplied by the cap, to determine the approved amount.

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 as described in the instructions.

Can unused credit be carried forward?

Yes. Unused credit may be carried forward for up to three years. Any credit not claimed within that period is lost. Use Part VI to record credit balances and amounts used.

Must the corporation income tax and LLET credit amounts match?

No. The instructions say the amounts claimed against corporation income tax and LLET can be different.

Official sources

• https://revenue.ky.gov/Forms/Schedule%20CHEM%20(10-25).pdf