Kentucky Qualified Research Facility Tax Credit

Program overview

Rather than crediting research wages and supplies, Kentucky targets the capital side of research investment. The credit applies to the cost of constructing, remodelling, equipping or expanding facilities used for qualified research as defined under IRC Section 41. This makes it complementary to the federal credit: a company can claim federal credits on its research labour while claiming Kentucky credits on the laboratory it builds. Kentucky also offers a separate sales and use tax incentive for certain research equipment.

Eligibility

Corporations and individuals that construct or equip a qualified research facility located in Kentucky and use it for research meeting the federal definition.

Benefits

Non-refundable credit against Kentucky income tax and limited liability entity tax.

Kentucky IDR questions

What an examiner is likely to ask about this credit. S1–S7 apply to every state claim; the rest come from this program's own rules.

1. S1Confirm the research was physically performed within Kentucky.
2. S2Provide the Kentucky qualified research expense calculation and base amount.
3. S3Reconcile Kentucky expenses to the federal Form 6765.
4. S4Show how wages and supplies were apportioned between Kentucky and other locations.
5. S5Provide the Kentucky return and credit schedule for each year claimed.
6. S6Show the carryforward schedule for unused Kentucky credits.
7. S7Confirm the entity claiming the credit is the entity subject to Kentucky tax.

Draft questions for illustration, reviewed by a specialist before any engagement.