Film Industry Tax Credit

The film industry tax credit is a credit that may be applied against income taxes imposed by KRS 141.020 (individual income tax) or KRS 141.040 (corporation income tax) and the limited liability entity tax (LLET) imposed by KRS 141.0401. The film industry tax credit is a tax credit calculated based upon varying percentages of qualified motion picture or entertainment production expenditures. Depending on the date the application is approved, this tax credit is either refundable or nonrefundable. The annual total tax incentive cap is provided under KRS 141.383 and varies by tax year. Specifics on the refundability and the annual credit cap are provided as follows:

Applications approved prior to April 27, 2018:

Refundable tax credit
No annual cap

Applications approved on or after April 27, 2018, but before January 1, 2022:

Nonrefundable and nontransferable tax credit
No carryforward or carryback of unused credit
Annual cap of $100,000,000

Applications approved on or after January 1, 2022:

Refundable tax credit
Annual cap of $75,000,000

Application Process

For applications submitted before January 1, 2022: The film tax credit application process begins with the Kentucky Film Office. At least thirty days before incurring any expenditures, an eligible Kentucky-based company should file an application for tax incentives with the Kentucky Film Office. The application should include the name and address of the applicant, verification the applicant is a Kentucky-based company, the production script of detailed synopsis, filming or production locations, anticipated filming or production begin date and completion date. The application should also include total anticipated qualifying expenditures including payroll expenditures for resident and nonresident above-the-line crew and below-the-line crew by county, the address of a Kentucky location where the records of production will be kept and an affirmation that if not for the incentive offered, the eligible company would not film or produce the production in the Commonwealth. The Kentucky Film Office will notify the Department of Revenue of the approved company and the amount of credit awarded to be claimed on their income tax return(s).

For applications submitted on or after January 1, 2022: The film tax credit application process begins with the Kentucky Economic Development Finance authority created in KRS 154.20-010. At least thirty days before incurring any expenditures, an eligible Kentucky-based company should file an application for tax incentives with the Kentucky Economic Development Finance authority. All films and productions will begin filming within six months of filing the application and must complete filming or production within two years of the start date. The application should include the name and address of the applicant, verification the applicant is a Kentucky-based company, the production script of detailed synopsis, filming or production locations, anticipated filming or production begin date and completion date. The application should also include total anticipated qualifying expenditures including payroll expenditures for resident and nonresident above-the-line crew and below-the-line crew by county, the address of a Kentucky location where the records of production will be kept and an affirmation that if not for the incentive offered, the eligible company would not film or produce the production in the Commonwealth. The appropriate authority will notify the Department of Revenue of the approved company and the amount of credit awarded to be claimed on their income tax return(s).

Who Can Claim the Credit?

Pass-through Entities

For applications approved after April 27, 2018 and before January 1, 2022, a pass-through entity (partnership, S-Corporation, LLC, general partnership, trusts, etc.) may apply the nonrefundable film industry tax credit against the LLET on its Kentucky Income and LLET Return and pass the credit through to its members, partners, or shareholders in the same proportion as the distributive share of income or loss is passed through with the ordering of the credits under KRS 141.0205. The pass-through entity is not required to have income for the credit to be passed through and utilized by members, partners, or shareholders.

The credit is passed through to the partners, members, or shareholders of a pass through entity that are the partners, members, or shareholders at the time of the application and subsequent approval of the credit. The income or loss is reported on the Kentucky Schedule K-1 and any credit that is passed through to the members, partners, or shareholders may be used against individual income tax or corporate income tax and LLET. There is no carryforward or carryback allowed for any unused tax credit.

For applications approved before April 27, 2018 and on or after January 1, 2022, a pass-through entity may apply the refundable film industry tax credit against the LLET on its Kentucky Income and LLET Return and have any unused credit refunded to the pass-through entity.

Individuals

A sole proprietor reporting business income on Schedule C (federal Form 1040) may claim the film industry tax credit for applications approved under the application name approved by the Kentucky Film and Tourism Office or Kentucky Economic Development Finance authority, as appropriate. An individual may also claim the credit if it is passed through to them from a partnership, LLC, or S-Corporation on a Kentucky Schedule K-1.

An individual may also claim the credit if they received approval from the Kentucky Film and Tourism Office or Kentucky Economic Development Finance authority, as appropriate. If a husband and wife were approved and both names are listed on the application, the credit may be wholly claimed if they file jointly, but must be split if they file separately. If the application lists only one of the spouse's names, the listed spouse is entitled to claim the full credit.

For applications approved before April 27, 2018 and on or after January 1, 2022, an individual may apply the refundable film industry tax credit against income tax on their Kentucky Income Tax Return and have any unused credit refunded to them.

For applications approved after April 27, 2018 and before January 1, 2022, an individual may apply the nonrefundable film industry tax credit against income tax on their Kentucky Income Tax Return. There is no carryforward or carryback allowed for any unused tax credit.

Corporations

For applications approved after April 27, 2018 and before January 1, 2022, a corporation may apply the nonrefundable film industry tax credit against income tax and LLET on its Kentucky Corporation Income Tax and LLET Return. A corporation may also claim the credit if it is passed through to them from a pass-through entity on a Kentucky Schedule K-1. There is no carryforward or carryback allowed for any unused tax credit.

For applications approved before April 27, 2018 and on or after January 1, 2022, a corporation may apply the refundable film industry tax credit against income tax and LLET on its Kentucky Income and LLET Return and have any unused credit refunded to the corporation.

Forms Required to Claim the Tax Credit

A copy of the approval letter from the authority is attached each year the credit is claimed on the filed income tax return. Taxpayers that receive a share of the film industry 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 on which the credit is claimed, along with a copy of the approval letter.

Applicable Forms

Schedule ITC (Individual Filers)

Schedule TCS (Corporate and Pass-Through Filers)

Business Tax Credits

Phone(502) 564-8139
Fax(502) 564-0058
Address
Kentucky Department of Revenue
Tax Credits Section
501 High Street
Frankfort, KY 40602-0491
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