Kentucky R&D Tax Credit Summary

Businesses that invest in facilities used to pursue research may qualify for a state income tax credit. The tax credit was enacted in 2002 and currently applies to taxable years beginning on or after January 1, 2007.

Summary of Kentucky's Research Facilities State Income Tax Credit:

  • The nonrefundable income tax credit is equal to five percent (5%) of the qualified cost for "construction of research facilities" for "qualified research" as defined in Internal Revenue Code Section 41.

  • "Construction of research facilities" means:

    • constructing, remodeling, and equipping facilities in Kentucky; or

    • expanding existing facilities in Kentucky for qualified research; and

    • includes only tangible, depreciable property, and does not include any amounts paid or incurred for replacement property.

Eligible Entities: C-Corporation, S-Corporations, LLCs, Partnerships

Deadline for Tax Filing: Due with Form 720. 

  • A copy of the Schedule QR must be submitted each year until the full credit is utilized or the 10-year carryforward period has expired.

  • Fill out Schedule QR and attach it to Form 720720S725765 or 765-GP.

Data Required to Compute Credit: Claim Period Kentucky Qualified R&D Expenses (QREs)

Credit Carryforward: Any unused credit may be carried forward for 10 years.​

  • If the credit amount that an investor can claim in a given tax year exceeds the investor’s income tax liability for that year, that investor can carry forward the excess tax credit until the tax credit is used, up to 10 years.

  • Any tax credits not used within 10 years are forfeited.

Refundable/Transferable Tax Credit: No

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