KBI: Kentucky Business Investment Program (KBI) Tax Credit (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
The Kentucky Business Investment Program (KBI) tax credit package reports approved business tax incentives and calculates the allowable KBI tax credit. It includes schedules for recording approved project costs, wage assessments, and tax credits, and is attached to Form 720, 720U
Who files this form
Use the 2025 KBI package to report Kentucky Business Investment Program tax incentives only if your business has received preliminary or final approval from the Cabinet for Economic Development under KRS 154.32.
- 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.
Use a separate package for each incentive project.
What you'll need
Have the following information and schedules ready:
- Your business name, federal identification number, Kentucky Corporation/LLET account number, and taxable year ending date.
- The project's location, activation date, and economic development incentive agreement project number.
- Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
- Records of annual approved costs, state and local wage assessment credits claimed, and prior-year KBI credit amounts for Schedule KBI-T.
- Schedule L-ECON to calculate the project's separate LLET, when applicable. Attach a separate schedule for each project's LLET calculation.
- Supporting project income calculations if the business has other operations. Corporations with other operations must also attach project gross receipts and gross profits calculations.
- A copy of the Department of Revenue approval letter if you use an approved expansion allocation formula or an alternative accounting method.
Schedule TCS is used to report tax credits. Pass-through entities must also use Form PTE(K) to exclude KBI project net income from owners' distributive share income.
How to file
Attach the KBI package to Form 720, 720U, PTE, or 725, as applicable.
- Complete Schedule KBI for a Form 720 or 720U filer, or Schedule KBI-SP for a Form PTE or 725 filer.
- Update Schedule KBI-T with current-year information and attach a copy to Schedule KBI or KBI-SP filed with your Kentucky return.
- Attach required supporting schedules and approval letters. Report tax credits on Schedule TCS.
- Also attach an updated copy of Schedule KBI-T to the Wage Assessment Report and Annual Reconciliation.
The package does not provide a mailing address or e-file instructions.
Common mistakes
- Combining projects: Include only one incentive project in each KBI package.
- Claiming incentives outside the agreement term: Incentives are available only during the agreement term. Prorate the first and last years accordingly.
- Passing credits or losses through to owners: KBI credits and project losses do not pass through to members, partners, or shareholders. Subtract prior-year project net operating losses before calculating the credit.
- Filling in both credit and estimated payment lines: On Schedule KBI-SP, enter an amount on line 9(a) or 9(b), never both.
- Completing LLET lines for a general partnership: General partnerships should not complete Schedule KBI-SP lines 5 and 6.
- Overstating credits: Total credits claimed cannot reduce LLET below $175 or income tax liability below zero. Follow the credit order prescribed by KRS 141.0205.
- Adding both tax credits together for tracking: In Schedule KBI-T, Column G, record the greater of the credit claimed against LLET or income tax, not their sum.
Questions people ask
What taxes can the KBI credit offset?
For corporations, the credit applies against Kentucky corporation income tax and/or limited liability entity tax (LLET) attributable to the project. Schedule KBI-SP determines the credit against Kentucky income tax and/or LLET attributable to a pass-through entity's project.
Can a pass-through entity's owners claim the KBI credit?
No. KBI credits do not pass through to members, partners, or shareholders.
How is the allowable credit limited?
Schedule KBI uses the lesser of the tax liability attributable to the project or the credit limitation from Schedule KBI-T, Column F. Schedule KBI-SP likewise uses the lesser of its total project tax or that credit limitation.
How long must I maintain Schedule KBI-T?
Maintain a separate Schedule KBI-T for the duration of each project. Start with the first tax year of the incentive agreement and use a separate line for each year.
What happens in the first and last years of the agreement?
Tax incentives must be prorated to the agreement term. Separate period accounting is recommended. If it is unavailable, the package allows a proration factor based on the number of days within the agreement term divided by the total days in the taxable year.