Schedule DS: Distilled Spirits Tax Credit (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
Kentucky Schedule DS reports capital improvements and calculates the distilled spirits tax credit based on Kentucky property tax paid on distilled spirits. It also reports accumulated credits and any credit recapture when associated improvements are sold or otherwise disposed of
Who files this form
Use Schedule DS to claim the distilled spirits tax credit for completed capital improvements at the premises of a licensed distiller. The credit is available to taxpayers who pay Kentucky property tax on distilled spirits.
You must also use Schedule DS if you are required to recapture a previously claimed distilled spirits tax credit because the related 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 completed capital improvements associated with the credit. Keep these records for five years.
- For each year of accumulated ad valorem tax: the taxable year ending, assessment date, payment date, amount paid, and allowable percentage.
- An attached schedule with Part II information for each taxable year if the ad valorem tax covers multiple years.
- If reporting recapture, information about the property disposed of, its cost, the disposal date, and the credit previously claimed. 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.
Claim the credit on the return for the year the credits were used, which is the year the capital improvements were completed. Report capital improvements in Part I, compute the credit in Part II, and report any required recapture in Part III.
For a pass-through entity reporting recapture, attach a copy of Schedule DS to each partner’s, member’s, shareholder’s, or beneficiary’s Kentucky Schedule K-1. Each recipient must use their pro rata share of the Schedule DS information on their applicable return.
Common mistakes
- Leaving a six-digit Kentucky Corporation/LLET Account Number without leading zeros. The form requires nine digits, so add leading zeros if the number has six digits.
- Omitting supporting tax documents. The instructions specifically remind you to submit a copy of the local ad valorem tax notice and receipt to substantiate the Part II credit.
Questions people ask
How much credit can I claim?
The allowable credit is the smaller of total capital improvements in Part I, line 6, or the total calculated in Part II, line 6. Part II uses 100% of the qualifying ad valorem tax assessed and paid on time.
What types of capital improvements are listed?
The form lists warehouse or facility construction, replacement, or remodeling; barrels and pallets for storage and aging in maturing warehouses; equipment for manufacturing, bottling, or shipping distilled spirits; access roads or parking facilities; and facilities that market or promote tourism, including a visitor’s center.
Is the credit refundable or transferable?
No. The credit is nonrefundable and nontransferable. It may be claimed against the income taxes and limited liability entity tax identified in the instructions.
Can credits be accumulated over multiple years?
Yes. Claim accumulated credits on the return for the year they are used for capital improvements. The credit must not include delinquent tax or any interest, fees, or penalties paid to the Commonwealth.
Can a pass-through entity pass the credit to its owners or beneficiaries?
Yes. A pass-through entity may apply the credit against its limited liability entity tax and pass the credit to members, partners, shareholders, or beneficiaries in the same proportion as their distributive share of income or loss.