Kentucky R&D Tax Credits

While Kentucky doesn't have a specific statute that mirrors IRC Section 41, the Qualified Research Facility Tax Credit is a nonrefundable credit equal to 5% of the qualified costs of construction of research facilities that may be applied against income taxes imposed by KRS 141.020 (individual income tax), KRS 141.040 (corporation income tax), or KRS 141.0401 (limited liability entity tax, or LLET). Kentucky statute KRS 141.0205 provides an ordering provision when utilizing credits. Any unused credit may be carried forward 10 years.

Construction of research facilities means expenses associated with the construction, remodeling, and equipping of facilities in Kentucky, or expanding existing facilities to conduct qualified research.

Qualified research is defined in a manner consistent with Section 41 of the Internal Revenue Code. Expenses must be attributed to tangible, depreciable property and cannot include any amounts paid or incurred for replacement property (e.g. raw materials or supplies).

Learn more about Kentucky's R&D Tax Credit here.

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R&D Tax Credit Available:

Yes - Qualified Research Facility Tax Credit

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Eligible Entities:

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:

Schedule QR is due with Kentucky Form 720 filing

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Data Required to Compute Credit:

Claim Period Kentucky Qualified R&D Construction Expenses

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Credit Carryforward:

10 Years

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The R&D tax credit equals:

• 5% of the qualified costs of construction, remodeling, expanding, and equipping facilities in Kentucky for "qualified research".
• Schedule QR, Qualified Research Facility Tax Credit, must be filed with the income tax return claiming the state tax credit. A schedule of the tangible, depreciable property listing the date purchased, date placed in service, description, and cost must be included with the return. For credit carryforwards, a copy of the Schedule QR must be attached each year the credit is claimed on the filed income tax return.
• Taxpayers that receive a share of the qualified research facility credit via a Kentucky K-1 through their ownership in a pass-through entity must file Schedule TCS for corporations and pass-through entities or Schedule ITC for individuals. These schedules should be completed to reflect the taxpayer's share of the credit. The Schedule TCS or Schedule ITC is required to be attached to any return which is claiming the credit, along with a copy of the Schedule QR.