Schedule RC-R: Recycling or Composting Equipment Tax Credit Recapture (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky Schedule RC-R calculates the recycling or composting equipment tax credit that must be recaptured when qualifying equipment is sold, transferred, or disposed of before the end of the recapture period. It reports equipment details, previously approved and used credits, an
Who files this form
Use Schedule RC-R if you sell, transfer, or dispose of qualifying recycling or composting equipment before the end of the recapture period. The schedule determines whether you must repay part of the tax credit or have a remaining credit available for the year of disposal.
Partners, members, shareholders, and beneficiaries receiving amounts from a pass-through entity’s Schedule RC-R must also prepare their own Schedule RC-R and attach it to their tax return.
What you'll need
Have these records and details available:
- Your entity name, taxable year ending, Kentucky Corporation/LLET account number, and federal identification number.
- A description of each item of equipment and its useful life under Internal Revenue Code Section 168.
- The dates each item was purchased or installed and sold, transferred, or disposed of.
- The tax year, including month and year, when the Department of Revenue approved the credit.
- Schedule RC showing the originally approved credit.
- Records of credit used in prior years against limited liability entity tax (LLET) and income tax.
- Equipment costs if the original credit covered more than one item, so prior-year credits can be prorated.
If you receive these items through a pass-through entity, use the copy of its Schedule RC-R attached to your Kentucky Schedule K-1.
How to file
Attach Schedule RC-R to the applicable return: Form 720, 720U, PTE, 725, 740, 740-NP, or 741.
- In Section A, describe each item of equipment and check its useful-life box. Attach additional Schedules RC-R if you disposed of more than three items.
- In Section B, enter the dates, full years held, approved credit, allowable percentage, and credits used in prior years. Follow the line instructions to calculate credit balances, recapture, and the credit reduction.
- Transfer the recapture amounts to your return as follows.
Line 12: LLET credit recapture
- Form 720: Part II, line 2.
- Form 720U: Schedule U9, Section A, line 2.
- Form PTE: Part II, line 2.
- Form 725: Part II, line 2.
Line 13: Income tax credit recapture
- Form 720: Part III, line 2.
- Form 720U: Schedule U9, Section B, line 2.
- Form 740: page 1, line 13.
- Form 740-NP: page 1, line 14, combined with the income tax amount.
- Form 741: line 17.
Reduce the credit balances on Schedule RC, Part III or Part VI: for LLET, by lines 10 plus 14 minus 12; for income tax, by lines 11 plus 14 minus 13.
A pass-through entity must attach a copy of Schedule RC-R to each partner’s, member’s, shareholder’s, or beneficiary’s Kentucky Schedule K-1. Each recipient must prepare and attach their own Schedule RC-R to their return.
Common mistakes
- Carrying an unused balance into a later year. Any credit balance not used in the year of the sale, transfer, or disposal cannot be carried forward.
- Skipping cost-based proration. If the original approved credit covered more than one item, prior-year credits entered on lines 8 and 9 must be prorated based on equipment cost.
- Leaving out additional equipment. Attach additional Schedules RC-R if you disposed of more than three items during the tax year.
- Missing pass-through attachments. The entity must attach Schedule RC-R to each recipient’s Kentucky Schedule K-1, and each recipient must prepare a Schedule RC-R for their own return.
Questions people ask
Does disposing of equipment always mean I must repay credit?
Recapture applies when the credit used in prior tax years exceeds the recomputed credit. The difference must be recaptured on the return for the year of the sale, transfer, or disposal.
Can I still use a remaining credit?
If the recomputed credit exceeds the credit already used, the difference may reduce tax liability in the year of disposal, subject to the stated credit limitations. Any balance unused in that year cannot be carried forward.
How do I find the allowable credit percentage?
Use the Allowable Tax Credit Percentage table on Schedule RC-R. It uses how long the equipment was held and whether its useful life is less than five years or five years or more. Line 3 asks for the number of full years held.
How do pass-through recipients complete their own schedule?
Include your pro rata share of the equipment amounts from the entity’s Schedule RC-R, lines 1 through 7 and line 14. Compute lines 8 through 13 yourself and attach your Schedule RC-R to your tax return.