Boone County Net Profit Instructions 2022

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BOONE COUNTY FISCAL COURT

Boone County Net

Profit Instructions 2022

Boone County Occupational Tax Department

These instructions are a working tool for interpreting and administering the Boone County Ordinance

07-27. We have made every attempt to address the most common concerns however the

instructions do not address every issue.

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Table of Contents

Net Profit License Tax Return ....................................................................................................................... 5

General Instructions:................................................................................................................................. 5

Who must file Form a Net Profit Tax Return: ........................................................................................... 5

A Tax Form Must Be Filed Even If: ............................................................................................................ 5

When to file: ............................................................................................................................................. 5

Where to file: ............................................................................................................................................ 6

Signature: .................................................................................................................................................. 6

Extensions: ................................................................................................................................................ 6

Estimated Tax: ........................................................................................................................................... 6

Late Filing/Paying Penalty: ........................................................................................................................ 6

Interest: ..................................................................................................................................................... 7

Refund Request: ........................................................................................................................................ 7

Accounting Methods: ................................................................................................................................ 7

ADJUSTED BUSINESS CALULATION PAGE (Page 2 of the Net Profit Return) ................................................ 7

Line 1 ......................................................................................................................................................... 7

Line 2 ......................................................................................................................................................... 7

Line 3 ......................................................................................................................................................... 7

Line 4 ......................................................................................................................................................... 7

Line 5 ......................................................................................................................................................... 8

Line 6 ......................................................................................................................................................... 8

Line 7 ......................................................................................................................................................... 8

Line 8 ......................................................................................................................................................... 8

Line 9 ......................................................................................................................................................... 8

Line 10 ....................................................................................................................................................... 8

Lines 11 ..................................................................................................................................................... 8

Line 12 ....................................................................................................................................................... 8

Line 13 ....................................................................................................................................................... 8

Line 14 ....................................................................................................................................................... 9

Line 15 ....................................................................................................................................................... 9

LCOHOL BEVERAGE SALES DEDUCTION ...................................................................................................... 9

Line 16 ..................................................................................................................................................... 10

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Line 17 ..................................................................................................................................................... 11

Line 18 ..................................................................................................................................................... 11

Line 19 ..................................................................................................................................................... 11

Computation of Apportionment Percentages ............................................................................................ 11

Sales Factor ............................................................................................................................................. 11

Line 20, column a: ................................................................................................................................... 11

Line 20, column b: ................................................................................................................................... 11

Line 20, column c: ................................................................................................................................... 12

Payroll Factor .......................................................................................................................................... 12

Line 21, column a: ................................................................................................................................... 12

Line 21, column b: ................................................................................................................................... 12

Line 21, column c .................................................................................................................................... 12

Line 22, column c .................................................................................................................................... 12

Line 23 ..................................................................................................................................................... 12

Line 24 ..................................................................................................................................................... 12

Line 25, column a .................................................................................................................................... 12

Line 28, column b .................................................................................................................................... 12

Line 28, column c .................................................................................................................................... 12

Net Profit Tax Return (Page 1) .................................................................................................................... 12

Line 1 ....................................................................................................................................................... 12

Line 2 ....................................................................................................................................................... 12

Line 3 ....................................................................................................................................................... 13

Line 4 ....................................................................................................................................................... 13

Line 5 ....................................................................................................................................................... 13

Line 6 ....................................................................................................................................................... 13

Line 7 ....................................................................................................................................................... 13

Line 8 ....................................................................................................................................................... 13

Line 9 ....................................................................................................................................................... 13

Line 10 ..................................................................................................................................................... 13

ine 11 ..................................................................................................................................................... 13

Line 12 ..................................................................................................................................................... 13

Line 13 ..................................................................................................................................................... 13

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Line 14 ..................................................................................................................................................... 13

Line 15 ..................................................................................................................................................... 13

Line 16 ..................................................................................................................................................... 13

Line 17 ..................................................................................................................................................... 13

Line 18 ..................................................................................................................................................... 13

Line 19 ..................................................................................................................................................... 13

Line 20 ..................................................................................................................................................... 14

Line 21 ..................................................................................................................................................... 14

Total Remittance ..................................................................................................................................... 14

Signature ................................................................................................................................................. 14

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Net Profit License Tax Return

General Instructions:

The following instructions are provided to aid the taxpayer in the completion of the Net Profit Tax

Return. They are not intended to be all-inclusive and therefore should be used only as a supplement

to the existing ordinances and regulations. If you have any questions that are not addressed in these

instructions please refer to the Occupational License Fee Ordinance 07-27 or the Boone County

Regulations found on our website. These instructions mirror the paper tax form and line number

references may vary in the online version in the tax portal.

Who must file Form a Net Profit Tax Return:

Each separate corporation, limited liability company, partnership, limited partnership, registered limited

liability partnership, sole proprietorship, association, joint stock company, receivership, trust,

professional service organization, or other legal entity with business activity in Boone County.

Individuals who receive wages, salaries, commissions, or other compensation for work done or services

performed in Boone County, Kentucky from which the full amount of occupational taxes due have not

been withheld by their employer and remitted to the Boone County Fiscal Court.

Individuals having rental income from real property, where property is a warehouse, apartment hotel,

hotel building, office building, or other similar structure where payments typically are made for both the

privilege of occupying the property and/or for services provided for the convenience of the occupant,

are presumed to be in business.

Individuals whose receive income arising from the rental of real property within Boone County,

Kentucky.

A Tax Form Must Be Filed Even If:

Your business activity resulted in a loss for the tax year.

You were not actively engaged in business within Boone County during the year. Indicate “No Business

Activity” on Net Profit Form, sign form and remit with business license fee payment.

You applied for a business license with the intention of starting a business but never transacted business

within Boone County and do not plan to conduct business in the future. Indicate “no Business Activity”

on the Net Profit Form, complete the “closure Form”, sign both forms and remit together.

Your business was operational for a portion of the tax year but ceased operation prior to completion of

the fiscal period. Complete the tax forms according to the instructions provided and attach a copy of

the Closure form to finalize your account with the Boone County Occupational License Office.

When to file:

The Net Profit Tax Return must be delivered or postmarked by the 15

day of the 4

month after the

end of the fiscal year.

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Form 1099 Misc. must be delivered or postmarked by February 28

following the close of the calendar

year in which non-employee compensation payments were made.

Where to file:

All returns with a payment due should be mailed to Boone County Fiscal Court, PO Box 791638,

Baltimore, MD 21279-1638.

All returns without a payment due should be mailed to Boone County Fiscal Court, Po Box 960,

Burlington, KY 41005-0960.

Signature:

If the return is being filed by a corporation, it must be signed and dated by a corporate officer

authorized to sign. If the return is being filed by a partnership, it must be signed by a general partner. If

a return is being filed by a sole proprietor or individual, it must be signed by that individual. A return

that is not signed may be returned and may incur late filing and interest charges.

Extensions:

If an extension is required, a separate extension request to the Boone County Fiscal Court, accompanied

by the regulatory business license fee and any estimated tax due, is required to be filed directly with our

office on or before the original due date of the return. You must file the Net Profit Extension Form or a

copy of your federal extension application with the Boone County Fiscal Court to request an automatic

6-month extension to file the Net Profit Tax Return. The extension request must be properly signed by

the authorized agent and received on or before the original due date. All extension requests are

required to include your five digit Boone County account number. Any estimated tax due must be paid

by the 15

day of the fourth month following the close of the fiscal year end.

Interest at the rate of 12 percent per annum shall apply to any unpaid license tax during the period of

extension and shall be included with the amount remitted in payment of the occupational license tax at

the time of filing the Net Profit Tax Return.

An extension request will be granted with the understanding that all prior filing and payment

requirements have been fulfilled. However, if upon further examination it becomes evident that prior

filing and payment requirements have not been fulfilled: interest and penalty shall be assessed in full

and in the same manner as though no extension had been granted.

Estimated Tax:

If an extension of time for the filing of a return has been granted, any balance of the occupational

license tax unpaid by the regular due date bears interest at the rate of twelve percent (12%) per annum.

Late Filing/Paying Penalty:

There is a five percent (5%) penalty per month or a fraction of a month to a maximum of twenty-five

percent (25%) for failure to file and/or pay timely. The minimum late filing/paying penalty is $25 per

taxing jurisdiction.

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Interest:

Interest is computed at one percent (1%) penalty per month or a fraction of a month( twelve percent

12% per annum) from the original due date until the date of payment.

Refund Request:

Claims for refund or credit must be submitted within two (2) years from the filing of the tax return or

due date of the tax return, or two years from the date the overpayment was made, whichever is later.

Accounting Methods:

Consolidated Returns – Are not permitted in filing this return. If a corporation which is subject to the

occupational license tax is included in a consolidated return, that corporation shall submit the following:

1. The Net Profit Tax Return is based upon the taxable income (or loss) of the corporation subject

to the occupational license tax, not the consolidated taxable income.

2. A copy of the consolidated Form 1120 or its equivalent.

3. A computation sheet allocating all revenue and expense items on the consolidated Federal

return to each corporation included in that consolidated return.

Separate Accounting Method –is not permitted in the filing of this return. Therefore, if any entity has

operations both within and outside Boone County, Kentucky, the total profit or loss per the Federal

return of the entity should be reported on this return. The total profit or loss is to be multiplied by the

apportionment factor or receipts and wages earned.

ADJUSTED BUSINESS CALCULATION PAGE (Page 2 of the Net Profit

Return)

Line 1 Enter the amount of non-employee compensation reported in federal form 1099 MISC. Note:

Line 1 should only be completed by individuals who receive payments for contract services who are not

claiming business expenses and did not own or operate a business during the year .(Attach a copy of

Federal Form 1040 page 1 and Form 1099 Misc.)

Line 2 Enter the net profit or (loss) per Federal Schedule C or per Federal Schedule C-EZ (attach a copy

of Schedule C, Pages 1&2, Schedule C-EZ)

Line 3 Enter the net rental profit or (loss) per Federal Schedule E (attach a copy of Schedule E)

Line 4 Enter the net farm profit or (loss) Federal Schedule F (attach Schedule F, Pages 1 & 2)

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Line 5 Enter 100% of the short-term capital gains and long term capital gains from Federal Form 4797

or Form 6252 (installment sales) of Federal Schedule D representing gain from the sale of property used

in a trade or business (attach Form 4797, Pages 1 & 2 or Form 6252)

Line 6 Enter the net gain or (loss) from the sale of property used in the trade of business per Federal

Form 4797 (attach Form 4797, Pages 1 & 2)

Line 7 Enter the “ordinary income or (loss) per Federal Form 1065” from Federal Form 1065 (attach

Form 1065, Pages 1-4, Schedule of other Deductions and Rental Schedule(s), if applicable)

Line 8 Enter “Taxable income or (loss) per Federal Form 1120.”

Line 9 Enter “Taxable income or (loss) per Federal Form 1120S or Federal Form 1120-REIT”.

Line 10 – Add to taxable income deductions taken for taxes which are calculated based on income.

Lines 11 – Additions from Federal Form 1065 and 1120S – This line does not apply to entities filing

form 1120, 1120-REIT or Sch. C.

Income items that are reported on the Schedule K that are added to taxable Net Profit. Attach

copy of Schedule K and rental schedule(s), if applicable.

1. Net income from rental real estate

et income from other rental activities

uaranteed payments to partners

. In

terest incom

. Dividend income

6. Royalty income

et short-term capital gain

et long-term capital gain

et gain under Section 1231 (other than due to casualty or theft)

10. Other income –

Line 12 – “Net operating loss deducted on Form 1120 or 1120-REIT”. This line does not apply to

entities filing Form 1120S.

Line 13 – Add lines 1 through 12

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Line 14 – – Deductions from Federal Form 1065 and 1120S – This line does not apply to entities

filing form 1120, 1120-REIT or 1040 Schedule C.

Deduction items that are reported on the Schedule K that are subtracted from taxable Net Profit. Attach

copy of Schedule K and rental schedule(s), if applicable.

1. Net loss from rental real estate

et loss from other rental activities

. Po

rtfolio loss

Net short-term capital loss

Net long-term capital loss

7. Other portfolio loss

Expense deductions for recovery property (Section 179)

et loss under Section 1231 (other than due to casualty or theft)

. C

haritable contributions

. D

eductions related to portfolio loss

Subtractions from Schedule K of Form 1065 are the same as deductions for an S-Corp.(Note – The

following items shall NOT BE DEDUCTIBLE for purposes of determining the taxable net profit when they

are reported on Schedule K as being paid on behalf of a partner by the partnership)

a) Health and life insurance premiums

b) Amounts contributed to a Keogh, SEP, or any other self-employment retirement plan

c) Amounts paid for self-employment taxes

Line 15 – Enter the Alcohol Beverage Sales Deduction (see instructions below for calculation of this

deduction).

ALCOHOL BEVERAGE SALES DEDUCTION

There is no occupational tax assessed on the net profit earned from the sale of alcoholic beverages in

Kentucky and to the extent that a licensee’s net profit is derived from the sale of alcoholic beverages

within Kentucky, thus a deduction may be taken from the Licensee’s total net profit derived from all

sources. A deduction may be taken only if the business engaged in selling alcoholic beverages had a

profit.

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ivide the total Kentucky alcoholic beverage sales by the total gross sales of the business, including non-

alcoholic beverage sales, to calculate the alcoholic beverage percentage.

Multiply the alcoholic beverage percentage to Line 13, minus the sum of Line 14, 16 and 17 from the

Adjusted Business Income Calculation on page 2 of the Net Profit Tax Return.

Line 16 Other Adjustments. A copy of the schedule or a statement that verifies the adjustments

taken must be included with the Net Profit Tax Return. If the required back up documentation is not

received the adjustments will be disallowed.

Items that would be included on this line are as follows:

a) An adjustment for business expenses which is elected by the taxpayer as a credit against federal

income tax liability in lieu of a deduction for business expenses otherwise available to the

taxpayer. Some of them include:

a. If wages and salary expense are being reduced as a result of the new jobs or win credit

b. If the depreciable basis of an asset was reduced by the amount of investment credit

claimed, then ACRS depreciation may be taken on that basis reduced over the life of the

asset.

b) An adjustment for the total deduction for dividends paid and the Section 857 (b) (2) (E)

deduction. (Note: This amount is the distribution of income to the owners. Since the

occupational license fee is not assessed on the owners, the amount must be added back to

taxable income.

c) Ordinary income from other partnerships or S Corporations which is included in income on Line

7 or Line 9 of Page 2 Calculation of adjusted business income that has already been taxed by

Boone County can be deducted. Please note the name of the entity and the Boone County

account number for the pass through entity.

d) Non-Taxable Income. Corporate taxpayer may deduct, if substantiation is provided by

including a completed copy of Schedule C of the Federal Form 1120, the following amounts

(net of the deductions properly allocated thereto) without proof of non-unitary source.

e) An adjustment for income from foreign sources. Taxpayers may deduct the following amounts

without proof of non-unitary source:

f) Foreign dividend gross-up under Section 78 of the Internal Revenue Code

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g) Income from controlled foreign corporations under subpart F, not actually received.

h) Other dividends from foreign corporations.

i) Interest earned on US Obligations

Line 17 – If a partner incurs out-of-pocket expenses in connection with providing services to a

partnership, those expenses are deductible on the partner’s individual tax return if the partnership

agreement states in writing that the partner pay the expenses. If the partner has the right to be

reimbursed, but fails to obtain reimbursement, the partner is not entitled to the deduction. The out-of-

pocket expenses are deducted on the partner’s individual return, Schedule E, Part II, column (i). If the

partner is allowed to deduct the expenses on their individual return, then a deduction is permitted on

their local occupational license return. Attach a schedule detailing these expenses.

Line 18 – Total Deductible items – add lines 14 through 17

Line 19 – Adjusted Net Business Income – Subtract Line 18 from Line 13 – if the amount is a loss

enter zero as the adjusted net business income.

Computation of Apportionment Percentages

Sales Factor

Line 20, column a:

Enter the total gross receipts from sales, rents, services in the ordinary course

or usual trade of business earned within Boone County during the period covered by the return.

Line 20, column b: Enter the total gross receipts from sales, rents, and services in the ordinary

course of usual trade of business earned everywhere during the period covered by the tax return. Note:

This amount equals the “gross receipts less returns and allowances” as reported on the federal income

tax return. If the taxpayer’s principal business within the locality is rental income, then the amount

would include the total gross rents as reported on Federal Income tax return. This amount does not

include interest, or dividend. If the

taxpayer’s principal business is the sale of property, then the sales

are reported in the “gross receipts” amount for Federal Income tax purposes.

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Line 20, column c: Divide column a by column b. Enter the result on Line 20, column c.

Payroll Factor

Line 21, column a:

Enter the total compensation paid to employees for services rendered in Boone

County during the period covered by the return. This amount should equal the amount of Total Gross

Earnings reported on the quarterly payroll withholding returns. Sometimes a difference is noted due to

the accrual accounting process. In this situation, the auditor would request the taxpayer to submit a

reconciliation of the difference.

Line 21, column b: Enter the total compensation paid to employees for services rendered

everywhere during the period covered by the tax return. It would not include guaranteed payments to

partners deducted on Federal Form 1065 because partners are not considered employees.

Line 21, column c: Divide column a by column b. Enter the result on Line 21, column c.

Line 22, column c – Add column C, Lines 20 and 21. Enter the result on Line 22, column c.

Line 23 – Divide Line 22, column c by the number of percents used on lines 20 and 21, column c.

Enter the result on Line 23, column c. If both Lines 20b and 21 b are greater than zero, divide the entry

on Line 22 by 2. If either Line 20b or 21 b is zero, enter the amount from Line 22 on Line 23, column c.

Line 24 – Multiply Line 19 by Line 23c and enter it on Line 24, column c.

Line 25, column a – Enter the amount from Line 24 here and on Page 1 Line 1 of the Net Profit

Return. There is no maximum on this amount.

Line 25, column b – Enter the amount from Line 24 if the amount is under $67,179; if the

amount is over $67,179 enter $67,179. Also enter these amounts on Page 1, Line 6 of the Net Profit

Return.

Line 25, column c - Enter the amount from Line 24 if the amount is under $16,666; if the amount is

over $16,666 enter $16,666. Also enter these amounts on Page 1, Line 11 of the Net Profit Return.

Net Profit Tax Return (Page 1)

Line 1 - Enter the amount from Page 2 of the Net Profit tax Return, Line 25, column a

Line 2 – Multiply Line 1 by ½ of 1% (.005) and enter result here

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Line 3 – If the return is postmarked after the due date please multiply Line 2 by 5% per month. If the

amount is under $25 the late filing penalty will be $25. The late filing fee cannot be greater than 25% of

Line 2.

Line 4 – if the return is postmarked after the due date of the return please multiply Line 2 by 1% for

every month the return is late

Line 5 – Add lines 2, 3 and 4 and enter result here

Line 6 – Enter the amount from Page 2 of the Net Profit tax Return, Line 25, column b

Line 7 - Multiply Line 6 by 8/10 of 1% (.008) and enter result here

Line 8 – If the return is postmarked after the due date please multiply Line 7 by 5% per month. If the

amount is under $25 the late filing penalty will be $25. The late filing fee cannot be greater than 25% of

Line 7.

Line 9 - if the return is postmarked after the due date of the return please multiply Line 7 by 1% for

every month the return is late.

Line 10 – Add Lines 7, 8 and 9 and enter result here

Line 11 – Enter the amount from Page 2 of the Net Profit tax Return, Line 25, column C

Line 12 - Multiply Line 11 by 15/100 of 1% (.0015) and enter result here

Line 13 - If the return is postmarked after the due date please multiply Line 12 by 5% per month. If

the amount is under $25 the late filing penalty will be $25. The late filing fee cannot be greater than

25% of Line 12.

Line 14 - if the return is postmarked after the due date of the return please multiply Line 12 by 1% for

every month the return is late.

Line 15 – Add Lines 12, 13, and 14 and enter the result here

Line 16 – Add lines 5, 10, and 15 and enter result here

Line 17 – Add annual business license fee. There is a minimum of $25 for each business conducting

business in Boone County regardless if they have a physical location in our taxing jurisdiction. There is

an additional $25 for each additional physical location in Boone County.

Line 18 – Add Line 16 and Line 17 and enter the result here. This is the total amount due.

Line 19 – Please enter overpayments from a prior year that you had requested a credit for.

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Line 20 – Please enter any estimated tax payments you submitted with your extension request.

Line 21 – Add Line 19 and Line 20 and enter the result here

Total Remittance – Subtract Line 21 from Line 18. If the result is a positive amount this is the

additional amount owed to Boone County. If the amount is a negative amount this is an overpayment.

Please check if you want your overpayment applied as a credit to next year’s net profit tax return or

refunded. The County will not refund any overpayments under $25.00 and will automatically apply the

amount to the next years estimated payments. Boone County will waive this requirement if a taxpayer

has ceased operation and has filed a closure form with our office.

Signature

If the return is being filed by a corporation, it must be signed and dated by the president, vice president,

treasurer, assistant treasurer, chief accounting officer or any other corporate officer authorized to sign.

If the return is being filed by a partnership, it must be signed by a general partner.

The licensee who signs the return must print his/her name, title telephone number and e-mail address

(if they have one) in the area provided.