KBI: Kentucky Business Investment Program (KBI) Tax Credit (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
The Kentucky Business Investment Program (KBI) tax credit package reports approved KBI tax incentives and calculates the allowable tax credit. It also tracks approved project costs, wage assessments, and tax credits, including local wage assessment credits claimed.
Who files this form
Use the 2024 KBI package to report tax incentives for a business approved for the Kentucky Business Investment Program by the Cabinet for Economic Development. You must have received preliminary or final approval to determine the allowable credit.
- Businesses filing Form 720 or 720U must complete Schedule KBI and Schedule KBI-T.
- Businesses filing Form PTE or 725 must complete Schedule KBI-SP and Schedule KBI-T.
Include only one incentive project in each KBI package.
What you'll need
Have these forms and records ready:
- Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
- Your federal identification number, Kentucky Corporation/LLET account number, project number, project location, and incentive agreement activation date.
- Records of annual approved costs, state and local wage assessment credits claimed, prior-year carryforward balances, and tax credits claimed for Schedule KBI-T.
- Project income records and, when calculating LLET, Kentucky gross receipts and gross profits records.
Attach these supporting schedules or letters when applicable:
- Schedule L-ECON for each project's separate LLET calculation. General partnerships do not complete the LLET lines on Schedule KBI-SP.
- Schedules showing project income calculations if the business has other operations. Corporations with other operations must also attach schedules showing the project's Kentucky gross receipts and gross profits calculations.
- The Department of Revenue approval letter for an allocation formula used for an expansion project or for an alternative accounting method.
Pass-through entities must use Form PTE(K) to exclude KBI project net income from owners' distributive share income.
How to file
- Complete a separate KBI package for each incentive project.
- Complete Schedule KBI if filing Form 720 or 720U, or Schedule KBI-SP if filing Form PTE or 725. The pass-through instructions say to complete Form PTE first to determine income, deductions, and other amounts for the entire business.
- Update Schedule KBI-T with current-year information and attach it to Schedule KBI or KBI-SP.
- Enter tax credits on Schedule TCS. For corporations, enter the allowable KBI credit in Part I, Columns E and F.
- Attach the package and required supporting documents to Form 720, 720U, PTE, or 725.
Also attach a copy of the updated Schedule KBI-T to the Wage Assessment Report and Annual Reconciliation.
The package does not provide a mailing address or e-filing instructions.
Common mistakes
- Using the package without approval. It is only for businesses approved for the KBI credit by the Cabinet for Economic Development.
- Combining projects. Include only one incentive project per package and maintain a separate Schedule KBI-T for each project.
- Claiming incentives outside the agreement term. First- and last-year incentives must be prorated to the eligible period.
- Passing credits or losses through to owners. KBI credits and project losses do not pass through to partners, members, or shareholders. Prior-year project net operating losses must be subtracted from project income before calculating the credit.
- Completing both credit and estimated-payment lines. On Schedule KBI-SP, enter an amount on either line 9(a) or 9(b), never both.
- Claiming too much credit. Total credits claimed cannot reduce LLET below $175 or income tax liability below zero. Credits must be claimed in the prescribed statutory order.
Questions people ask
What taxes can the corporate KBI credit offset?
The credit applies against Kentucky corporation income tax and/or the limited liability entity tax (LLET) attributable to the project.
How is the corporate credit limited?
Schedule KBI allows the lesser of the tax liability attributable to the project or the credit limitation from Schedule KBI-T, Column F.
What does Schedule KBI-T track?
It records approved costs, wage assessments, and tax credits throughout the agreement. Use a separate line for each tax year, beginning with the agreement's first tax year, and update the schedule annually.
What if the income tax credit and LLET credit differ?
For tracking purposes, record the greater of the credit claimed against LLET or income tax, not the sum of the two.
Can a pass-through entity choose an estimated tax payment instead of the credit?
Yes. It may make an annual election to apply an amount equal to the allowable credit as an estimated tax payment and complete Schedule KBI-SP, Part II. Although the payment must satisfy tax liability on behalf of partners, members, or shareholders, they cannot claim any portion of it against their Kentucky income tax liability.