Schedule RPC: Related Party Costs Disclosure Statement (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
Kentucky Schedule RPC reports intangible expenses, intangible interest expenses, and management fees paid to related members. It also reports exceptions to adding these costs back to income and calculates the required add back after exceptions.
Who files this form
An entity must complete Schedule RPC if it paid, accrued, or incurred intangible expenses, intangible interest expense, or management fees to a related member.
To claim an exception from adding these expenses back to income and a corresponding deduction from net income, complete Schedule RPC and attach it to the applicable Kentucky return: Form 720, 720U, or PTE. Include all supporting documentation.
What you'll need
- Entity information: Name, federal identification number, Kentucky Corporation/LLET account number if applicable, and taxable year ending.
- Related party cost amounts: Totals for intangible expenses, intangible interest expenses, and management fees paid to related members.
- Same consolidated return exception: Each related member’s name, federal identification number, Kentucky Corporation/LLET account number, and amount deducted.
- Identical-terms exception: Copies of the written agreements between the taxpayer and recipient, and between the recipient and unrelated party.
- Alternative apportionment exception: A copy of the written agreement between the taxpayer and the Department of Revenue.
- Tax-in-domicile exception: Pertinent contract provisions or other documentation supporting the exception. For domestic recipients, provide each member’s name, federal identification number, state of commercial domicile, name of tax, and amount deducted. For foreign recipients, provide the member’s name, foreign nation, treaty description, and amount deducted.
If you have more than four related members to report in Part III, Section A or the domestic or foreign tables in Section C, attach a statement with each member’s information.
How to file
Attach Schedule RPC to Form 720, 720U, or PTE, along with supporting documentation for any exceptions claimed.
- Part I: Report intangible expenses on line 1, intangible interest expenses on line 2, and management fees on line 3. Add them on line 4.
- Part III: Complete the details for the exceptions you claim.
- Part II, Section A: Transfer the exception totals from Part III and add them on line 4.
- 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.
Common mistakes
- Including interest in Part I, line 1. Do not include any interest expense or costs related to intangible interest expense on that line. Report intangible interest expenses on line 2.
- Leaving Schedule RPC or supporting documents out of the return. The form warns that failure to complete the schedule and attach all supporting documentation will result in disallowance of the exceptions.
- Omitting written agreements for Part III, Section B. The required agreements must be attached or the exceptions will be denied.
- Claiming a Section C exception without meeting all three conditions. All three answers in the applicable Domestic or Foreign column must be “Yes.” If any answer is “No,” the taxpayer does not qualify for that exception. Required supporting documentation must also be attached.
Questions people ask
What kinds of costs are intangible expenses?
The form lists costs connected with intangible property, losses connected with factoring or discounting transactions, royalty and patent fees, technical and copyright fees, licensing fees, and similar expenses. These count only to the extent allowed as deductions or costs in determining taxable net income before a net operating loss deduction.
What services can count as management fees?
Examples include payroll, legal, insurance, employee benefit plans, data processing, purchasing, tax, accounting, reporting, and compliance services. The definition applies only to amounts allowed as a deduction or cost in determining taxable net income before a net operating loss deduction.
Can costs qualify for an exception if both entities are on the same consolidated Kentucky return?
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 information and the amount deducted.
Is there an additional treaty condition for a foreign recipient?
Yes. For the Part III, Section C exception, the form says the country must have a comprehensive income tax treaty in force with the United States if the recipient is a foreign corporation. All three questions in the Foreign column must be answered “Yes,” and supporting documentation must be attached.