Schedule DS: Distilled Spirits Tax Credit (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky Schedule DS reports capital improvements and calculates the distilled spirits tax credit based on those improvements and distilled spirits ad valorem tax paid. It also reports credit recapture when an associated capital improvement is sold or otherwise disposed of before
Who files this form
Use Schedule DS to claim the distilled spirits tax credit for capital improvements associated with Kentucky property tax paid on distilled spirits. The improvements must be at the premises of a licensed distiller.
The schedule also must be filed by taxpayers required to recapture a previously claimed credit because an associated capital improvement was sold or otherwise disposed of before the end of its useful life for Kentucky depreciation purposes.
What you'll need
- A copy of the local ad valorem tax notice and the receipt from your local jurisdiction to support the credit claimed in Part II.
- Records verifying the capital improvements associated with the credit. Keep these records for five years.
- The ad valorem taxable year ending, assessment date, payment date, and amount paid for each year included.
- An attached schedule with Part II information for each taxable year if the ad valorem tax covers multiple years.
- For credit recapture, property descriptions, disposal dates, improvement costs, and the amounts previously claimed against income tax and limited liability entity tax (LLET). Attach a schedule with the required information for each taxable year if recapture covers multiple years.
How to file
Attach Schedule DS to Form 720, 720U, PTE, 725, 740, 740-NP, or 741, as applicable.
- Part I: Enter completed capital improvements by category and add lines 1 through 5.
- Part II: Enter the property tax information, beginning with the earliest taxable year. Multiply the tax paid by the applicable percentage. The allowable credit is the smaller of total capital improvements or the calculated tax credit.
- Part III: Complete this part if credit recapture is required, and attach the schedule to the applicable tax return.
For a pass-through entity reporting recapture, a copy of Schedule DS must also be attached to each partner’s, member’s, shareholder’s, or beneficiary’s Kentucky Schedule K-1.
Common mistakes
- Leaving out proof of payment: The instructions specifically require a copy of the local ad valorem tax notice and receipt to support Part II.
- Omitting multi-year details: Attach the required information for each taxable year when the property tax or credit recapture covers multiple years.
- Not attaching Schedule DS: The schedule must be attached to the tax return.
- Leaving out disposed property: If more than five capital improvement items were disposed of during the tax year, attach additional schedules as needed.
Questions people ask
What types of capital improvements are listed?
The form lists warehouses or facilities; barrels and pallets used for storage and aging; equipment for manufacturing, bottling, or shipping; access roads or parking facilities; and facilities that market or promote tourism, including a visitor’s center.
When do I claim the credit?
Claim it on the return for the year the credits were used, which is the year the capital improvements are completed. Credits may be accumulated for multiple taxable years.
Is the credit refundable or transferable?
No. The credit is nonrefundable and nontransferable. It may be claimed against the income taxes and LLET specified in the instructions.
Can a pass-through entity use the credit?
A pass-through entity may apply the credit against LLET and pass it through to members, partners, shareholders, or beneficiaries in the same proportion as their distributive share of income or loss.
When is credit recapture required?
Recapture is required if an associated capital improvement is sold or otherwise disposed of before the end of its useful life for Kentucky depreciation purposes. Use Part III to report the property and calculate recapture.