Are R&D Tax Credits Available in Kentucky?
Yes. The state of Kentucky provides the Research and Development (R&D) Tax Credit for businesses that invest in facilities used to pursue research and may qualify for a state income tax credit. Here is a summary:
- 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.
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FEDERAL
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KENTUCKY
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|
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 | ||