A pass-through entity (partnership, S-Corporation, LLC, general partnership, trust, etc.) may apply the qualified research facility 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 is passed through with the ordering of the credits under KRS 141.0205.
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 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.
A sole proprietor reporting business income on Schedule C (federal Form 1040) may claim the credit for qualified cost of construction of research facilities under the business name. 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 constructed a qualified research facility and claimed the credit on the Schedule QR filed with their individual income tax return
If a taxpayer and spouse constructed the qualified research facility and contributed to the cost of equipment 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.
A corporation may apply the qualified research facility 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.