Kentucky Qualified Broadband Incentive Credit



The Kentucky Qualified Broadband Incentive tax credit is a nonrefundable and nontransferable 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 for taxpayers who expand broadband services in Kentucky. This credit is for taxable years beginning on or after January 1, 2025, but before January 1, 2029.


The credit is equal to the amount of sales tax actually paid on qualified broadband investments. Per KRS 141.391(3)(b), the credit is reduced by the amount of seller reimbursement allowed under KRS 139.570 and is limited to 50% of eligible equipment or services and qualified broadband investment. The annual tax credit cap is $5,000,000 in each taxable year the credit is available. If the total amount of credits granted approval exceeds $5,000,000, each taxpayer shall receive no more than its applicable pro rata share of the $5,000,000 limit. There is no carryforward provision for this tax credit. Any credit amount not utilized will be lost in the same year.


Application Process

For preliminary approval, the Schedule KQBI, Kentucky Qualified Broadband Investment Tax Credit Application and Schedule, must be submitted to the Kentucky Department of Revenue by December 31. The Department of Revenue will confirm receipt of the application.

The application must include the amount of sales and use tax that the taxpayer remitted or intends to remit for the qualified broadband investment. A statement must also be attached to the application to explain how approval of this tax credit will result in greater investment in Kentucky by (i) Expansion of broadband services; (ii) An upgrade to existing broadband infrastructure; or (iii) An increase of access to broadband for residents in this state.

The Department of Revenue will review all submitted applications no later than January 15 and certify the amount of the qualified broadband investment tax credit by February 1.


Who Can Claim the Credit?

Pass-through Entities

A pass-through entity (partnership, S-Corporation, LLC, general partnership, trust, etc.) may apply the Kentucky Qualified Broadband Incentive credit against the LLET on its Kentucky Income and LLET Return and pass the credit through to its partners, members, 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.


Individuals

A sole proprietor reporting business income on Schedule C (federal Form 1040) may claim the Kentucky Qualified Broadband Incentive credit under the business name. An individual may claim the credit if it is passed through to them from a partnership, LLC, or S-Corporation on a Kentucky Schedule K-1.


Corporations

A corporation may apply the Kentucky Qualified Broadband Incentive 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.


How to File the Kentucky Qualified Broadband Incentive Credit

When filing the Kentucky tax return, attach the Schedule KQBI with the department certification of the approved credit amount, completing the Taxpayer Use Only portion to include the Amount of Credit Approved and the Amount of Credit Claimed. Submit verification of sales and use tax remitted with the return (see KRS 141.391(4)(a)(2)(b)). Per KRS 141.391(4)(b), failure to do so will result in the denial of the credit on the return.


Definitions

Eligible equipment or services means the equipment used in the expansion of broadband services in Kentucky and includes:

  1. Wires, cables, fiber, conduits, antennas, poles, switches, routers, amplifiers, rectifiers, repeaters, receivers, multiplexers, transmitters, circuit cards, insulating and protective materials and cases, power equipment, backup power equipment, diagnostic equipment, storage devices, and modems;
  2. General central office or headend equipment, including:
    • Channel cards;
    • Frames; and
    • Cabinets;
  3. Equipment used in successor technologies, including items used to monitor, test, maintain, enable, or facilitate:
    • Eligible equipment or services;
    • Machinery;
    • Software;
    • Ancillary components;
    • Appurtenances; and
    • Accessories; and​
  4. Any other infrastructure that is used in whole or in part to provide or expand broadband communications services.

​Qualified broadband investment means the purchase or lease of any eligible equipment or services by any provider that Kentucky sales and use tax has been paid under KRS Chapter 139. Does not include the purchase or lease of personal consumer electronics, including:

  • Smartphones;
  • Computers;
  • Tablets;
  • Consumer-grade modems; and
  • ​Routers


Statutory Authority: 

KRS 141.391​


Applicable Forms: