The Economic Development tax credits are 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 with the ordering of credits as provided in KRS 141.0205.
For further information on economic development tax credits as well as additional Kentucky business incentives and financial programs, visit the Cabinet for Economic Development's Financial Incentives webpage at: http://www.thinkkentucky.com/Locating_Expanding/Financial_Incentives.aspx.
Information regarding the approval process for Skills Training Investment Credit Act and Metropolitan College Consortium Tax Credit may be obtained from the Bluegrass State Skills Corporation (telephone: 502-564-7670).
Application Process
The application process begins with the Cabinet for Economic Development, Department for Financial Incentives, or the Bluegrass State Skills Corporation.
Who Can Claim the Credit?
Pass-through Entities
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 partners, members, 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 credit. An individual may also claim the credit if it is passed through to them from a pass-through entity on a Kentucky Schedule K-1.
An individual may also claim the credit on their individual income tax return. For a husband and a wife filing separate returns or filing separately on a joint return, the credit may be taken by either or divided equally. 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 an economic development 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.
Wage Assessment
A company that has received approval from the Cabinet for Economic Development to take wage assessment credits against their withholding account must complete form 42A900.