Schedule RC: Application for Income Tax/LLET Credit for Recycling and/or Composting Equipment or Major Recycling Project (2025)

Who files this form

Use Schedule RC to request approval for Kentucky income tax and limited liability entity tax (LLET) credits for qualifying recycling or composting equipment. The equipment must be purchased and placed in service for exclusive use in Kentucky.

Individual, fiduciary, and corporate taxpayers also use the schedule to keep a record of approved credits claimed on their tax returns. Approved pass-through entity credits are distributed to partners, members, or shareholders on a pro rata or distributive-share basis.

To qualify as a Major Recycling Project, the taxpayer must meet all three requirements:

• Invest more than $10 million in recycling or composting equipment used exclusively in Kentucky.
• Have at least 400 full-time employees with an average hourly wage of more than 300% of the federal minimum wage.
• Have plant and equipment with a total cost of more than $500 million.

When it's due

For tax year 2025, file the application on or before the first day of the seventh month following the close of the taxable year in which the equipment was purchased or placed in service.

Applications postmarked after that deadline will not be approved. You must receive approval before claiming the credit.

What you'll need

Prepare the following information and supporting documents:

• Entity name, entity type, identification and account numbers, address, and contact information.
• Each item's specific equipment name, Kentucky location, purchase date, placed-in-service date, purchase price, and installation cost.
• A description of how each item is used exclusively in recycling or composting postconsumer waste.
• Copies of vendor invoices, installation contracts, and other documents needed to verify equipment and installation costs.
• A spreadsheet showing the cost of each equipment item to help reconcile the supporting documents with Schedule RC.

For a Major Recycling Project, also provide the investment, employee, wage, and total plant-and-equipment cost information requested in Part IV.

When claiming an approved credit, attach a copy of the approved application, updated with credit-use entries, to the Kentucky tax return for each year the credit is claimed.

How to file

1. Complete the applicant information and taxable-year dates.
2. Complete Part I, Columns A through F, and the equipment descriptions. Use the Part I Continuation on page 3 if you have more than two types of equipment.
3. For a Major Recycling Project, check the box and complete Part I and page 2. Complete Part V after receiving the approved application.
4. Attach the required cost documentation. File one application covering all qualifying purchases for the taxable period.
5. Have the applicant or another authorized person sign the application.

Mail to:

Department of Revenue

Division of Corporation Tax, Station 52

501 High Street

Frankfort, KY 40601

The original approved application will be returned to the purchaser. After approval, record credits as they are used and attach an updated copy of the approved application to each Kentucky return on which you claim the credit.

Common mistakes

• Leaving the application unsigned. Unsigned applications will be returned.
• Claiming the credit before approval. Prior approval is required.
• Completing Department of Revenue fields. Leave Part I, Column G, and Part II blank.
• Submitting costs that cannot be matched to supporting documents. Approval is delayed until the department receives enough information to reconcile each item's equipment and installation costs.
• Claiming equipment before installation is complete. Equipment requiring installation must be fully installed and placed in service during the first taxable year for which the credit is claimed.
• Combining income tax and LLET credit balances. Calculate and track them separately. An unused balance for one tax cannot be used against the other.
• Reducing LLET below its minimum. The credit cannot reduce LLET liability below $175.
• Recording a Major Recycling Project credit in Part III. Use Part V for the calculation and Part VI to track credit use.

Questions people ask

How much is the regular recycling or composting equipment credit?

For equipment other than a Major Recycling Project, the total allowable credit is 50% of qualifying equipment and installation costs. In the purchase or placed-in-service year, the claim is limited to the lesser of 10% of the total allowable credit or 25% of each tax liability. In other years, the limit is 25% of the tax liability. Unused credit may be carried forward.

How much is the Major Recycling Project credit for tax year 2025?

The total allowable credit is 25% of the installed cost of qualifying equipment. The annual claim is limited to 75% of each tax liability otherwise due, subject to LLET limitations. The credit period is 30 years beginning with approval of the application.

Do repairs or capitalized equipment leases qualify?

No. Qualifying costs do not include repairs, even major repairs that are capitalized and depreciated. They also do not include equipment leases that the lessee must capitalize and depreciate for federal income tax purposes.

Can shipping charges count as installation costs?

Yes. Installation cost includes shipping charges incurred and paid by the purchaser. Enter installation costs in Column F and round to the nearest whole dollar.

How does a pass-through entity report the credit?

Report the total approved credit on Form PTE, Schedule K. Distribute the approved credit to partners, members, or shareholders on a pro rata or distributive-share basis and report their shares on Schedule K-1.

Official sources

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