Kentucky Research and Development Tax Credit Summary

Businesses that invest in facilities used to pursue research may qualify for a state income tax credit. Here is a 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.
  • Includes only tangible, depreciable property, and does not include any amounts paid or incurred for replacement property.
  • Any unused credit may be carried forward for 10 years.
  • The tax credit was enacted in 2002 and currently applies to taxable years beginning on or after January 1, 2007.

Kentucky R&D Tax Credit Case Study

A company constructed a new research facility in Lexington, Kentucky. The company designs and manufactures components for the automobile industry. In addition to the federal R&D Tax Credit it has traditionally claimed, the company claimed state R&D Tax Credits for the construction of a new research facility in 2014. This project involved a multi-year study covering the tax years 2011 - 2014. The Company qualified for the federal R&D Tax Credits of $327,833 and an additional $210,000 in Kentucky state R&D Tax Credit.

  
FEDERAL
 
KENTUCKY
Year
Total QREs
Credit
Total QREs
Credit
2014
$1,300,000
$135,333
$4,200,000
$210,000
2013
900,000
91,100
NA
NA
2012
650,000
63,000
NA
NA
2011
450,000
38,500
NA
NA
     
Total $3,300,000$327,833 $4,200,000$210,000