Schedule RPC: Related Party Costs Disclosure Statement (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
Kentucky Schedule RPC reports intangible expenses, intangible interest expenses, and management fees paid to related members. It calculates exceptions and the remaining related party costs that must be added back to income, and is attached to Form 720, 720U, or PTE.
Who files this form
An entity must complete Schedule RPC if it paid, accrued, or incurred intangible expenses, intangible interest expenses, or management fees to a related member.
To claim an exception from adding these expenses back to net income, the taxpayer must complete Schedule RPC and attach it, with supporting documentation, to Kentucky Form 720, 720U, or PTE.
What you'll need
Have the following information ready:
- Entity name, federal identification number, Kentucky Corporation/LLET account number, if applicable, and taxable year ending.
- Totals for intangible expenses, intangible interest expenses, and management fees paid to related members.
- The applicable Kentucky return: Form 720, 720U, or PTE.
If you claim an exception, provide the information and documents for that exception:
- Same consolidated Kentucky return: Each related member’s name, federal identification number, Kentucky Corporation/LLET account number, and amount deducted.
- Transactions on identical terms with unrelated parties: Copies of the written agreements between the taxpayer and recipient and between the recipient and unrelated party.
- Alternative apportionment: A copy of the written agreement between the taxpayer and the Department.
- Recipient subject to tax in its state or country of domicile: Pertinent contract provisions or other supporting documentation. For domestic recipients, provide the related member’s name, federal identification number, state of commercial domicile, name of tax, and amount deducted. For foreign recipients, provide the related member’s name, foreign nation, treaty description, and amount deducted.
For Part III, Sections A and C, attach a statement with each member’s information if there are more than four related members.
How to file
Attach Schedule RPC and all supporting documentation to Kentucky Form 720, 720U, or PTE.
- In Part I, enter intangible expenses, intangible interest expenses, and management fees separately. Add lines 1 through 3.
- Complete the applicable exception details in Part III, then transfer the exception totals to Part II, Section A.
- In Part II, Section B, subtract total exceptions from total related party costs.
- Enter the resulting add-back amount on Form 720, Part I, line 6; Form 720U, Schedule U4, line 6; or Form PTE, Part I, line 4.
The supplied text does not provide a mailing address or e-file instructions.
Common mistakes
- Including interest on Part I, line 1. Do not include interest expense or costs related to intangible interest expense on this line. Report intangible interest expenses on line 2.
- Leaving out the schedule or supporting documents. Failure to complete Schedule RPC and attach all supporting documentation will result in disallowance of the exceptions.
- Omitting written agreements for Part III, Section B. Attach the agreements required for a “Yes” answer on line 1 or line 3. Missing agreements will result in denial of the exceptions.
- Claiming a Part III, Section C exception without meeting all three conditions. Questions 1 through 3 must all be answered “Yes” in the applicable Domestic or Foreign column. Attach the requested contract provisions or other supporting documentation.
Questions people ask
What expenses count as management fees?
Management fees include costs for services such as accounts receivable and payable, employee benefit plans, insurance, legal, payroll, data processing, purchasing, tax, accounting, and reporting and compliance. They count only to the extent allowed as a deduction or cost in determining taxable net income before the net operating loss deduction.
Is there an exception when both entities are on the same consolidated Kentucky return?
Yes. Part III, Section A provides an exception when the entity and recipient are both included in the same consolidated Kentucky corporation income tax return. List each related member’s required identifying information and the amount deducted.
What if I have more than four related members?
For Part III, Section A, attach a statement with each member’s information and enter the total on line 1. For Section C, attach a statement and include the additional amounts in the total on line 8 for domestic recipients or line 13 for foreign recipients.
Does a foreign recipient need to be in a treaty country for the Part III, Section C exception?
Yes. If the recipient is a foreign corporation, its country must have a comprehensive income tax treaty in force with the United States. The Foreign column answers to questions 1 through 3 must also all be “Yes,” and supporting documentation must be attached.