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Renewable Chemical Production Tax Credit

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​The Renewable chemical production tax credit is a nonrefundable and nontransferable credit available for tax years 2021 through 2024 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 in an amount certified by the Department of Revenue.  This credit is for any taxpayer that has met the requirements outlined in KRS 246.700 and received a preliminary certification of the tax credit by the Department of Agriculture and final certification under KRS 141.423 by the Department of Revenue. This credit is for a qualified taxpayer that produces renewable chemicals pursuant to KRS 141.422 to 141.4231, 246.700 and 302 KAR 4:010. The total amount of tax credit shall be an amount equal to five cents ($0.05) per molecular pound of weight of renewable chemicals produced in Kentucky by an eligible business, unless the total amount of approved credit for all taxpayers exceeds the annual cap of $10,000,000. The renewable chemical production tax credit shares the annual $10,000,000 cap with the biodiesel and renewable diesel production tax credits per KRS 141.422. The renewable chemical production tax credit may be carried forward three years for use in succeeding years, but ca​nnot be carried back to be used in prior tax years. The renewable chemical production tax credit will expire on December 31, 2024.


Agreement and Application Process

Any taxpayer interested in claiming the Renewable Chemical Production tax credit, must enter into an agreement with the Department of Agriculture and then submit their application to the Department of Agriculture.​

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Who Can Claim the Credit?

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​Pass-through Entities

A pass-through entity (partnership, S-Corporation, LLC, general partnership, trusts, etc.) may apply the renewable chemical production 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 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. 

Individuals

A sole proprietor reporting business income on Schedule C (federal Form 1040) may claim the renewable chemical production credit 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.

If a taxpayer and spouse are entitled to claim the credit, 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.

​Corporations

A corporation may apply the renewable chemical production 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.

Claiming the Renewable Chemical Production Tax Credit on Your Tax Return

File Schedule CHEM (2021 tax forms and schedules will be released in January of 2022), with the department's approved credit certificate completed. In order to claim the credit, fill out Part V, Renewable Chemical Production Credit Used By Taxpayer, and enter the amount of credit claimed for the taxable year against the LLET or income tax on Schedule TCS or Schedule ITC, following the instructions on each schedule. The credit is claimed on the return filed for the first fiscal year ending after the close of the preceding calendar year in which the Renewable Chemical was produced and approved by the Department of Agriculture.  Credit can be carried forward three years after which any unused credits are lost. 



Business Tax Credits

​Applicable Forms

Schedule CHEM - 2021 tax forms and schedules will be released in January of 2022

Schedule ITC (Individual Filers)

Schedule TCS (Corporate and Pass-Through Filers)


Download the Taxpayer Bill of Rights

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