KRA: Kentucky Reinvestment Act (KRA) Tax Credit (2024)

Who files this form

Use the 2024 KRA package to report Kentucky Reinvestment Act tax incentives only if your business has received preliminary or final approval from the Cabinet for Economic Development.

• Businesses filing Form 720 or 720U must complete Schedule KRA and Schedule KRA-T.
• Businesses filing Form PTE or 725 must complete Schedule KRA-SP and Schedule KRA-T.

Include only one incentive project in each KRA package.

What you'll need

Have the following information and schedules ready:

• Your entity name, federal identification number, Kentucky Corporation/LLET account number, and taxable year ending date.
• The project number, location, incentive agreement activation date, and approved costs under the agreement.
• Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
• Project income, Kentucky gross receipts, and Kentucky gross profits records needed to calculate the credit.
• Schedule KRA-T, updated with the current year's approved costs and credits claimed.
• Schedule L-ECON for the project's LLET calculation, where applicable. General partnerships do not complete the LLET lines on Schedule KRA-SP.
• Schedule TCS to report tax credits.

If you have operations besides the KRA project, attach schedules showing the required project income and, for corporations, project gross receipts and gross profits calculations. If you use a Department of Revenue-approved allocation formula or alternative accounting method, attach a copy of the approval letter.

How to file

1. Complete a separate KRA package for each project. Use Schedule KRA for Form 720 or 720U filers, or Schedule KRA-SP for Form PTE or 725 filers.
2. Update Schedule KRA-T with current-year information and attach it to Schedule KRA or KRA-SP. Also attach a copy to the Wage Assessment Report and Annual Reconciliation.
3. Attach the applicable supporting schedules and approval letters. Enter tax credits on Schedule TCS.
4. Attach the KRA package to Form 720, 720U, PTE, or 725.

Pass-through entities should first complete Form PTE to determine income, losses, and deductions from their entire operations, then complete Schedule KRA-SP. They must use Form PTE(K) to exclude KRA project net income from owners' distributive share income.

The supplied text does not give mailing, e-filing, or delivery-address instructions.

Common mistakes

• Combining projects in one package. Include only one incentive project per KRA package and maintain a separate Schedule KRA-T for each project.
• Claiming incentives outside the agreement term. First- and last-year incentives must be prorated to cover only the agreement term.
• Passing the credit or project losses through to owners. KRA credits and project losses do not pass through to partners, members, or shareholders.
• Ignoring prior project losses. On Schedule KRA-SP, subtract the project's net operating loss carried forward from prior years before calculating the credit.
• Entering both credit and estimated-payment amounts. Schedule KRA-SP, line 10 allows an entry on either line 10(a) or 10(b), never both.
• Exceeding the tax limits. Total credits claimed cannot reduce LLET below $175 or income tax liability below zero. Credits must be claimed in the prescribed order.
• Adding the two tax credits together for tracking. Schedule KRA-T, Column E records the greater of the credit claimed against LLET or income tax, not their sum.

Questions people ask

What taxes can the KRA credit offset?

For corporations, the credit applies against Kentucky corporation income tax and/or LLET attributable to the project. For pass-through entities, it applies against Kentucky income tax and/or LLET attributable to the project.

How is the credit limited?

For projects with preliminary approval before February 1, 2010, incentives cannot exceed the lesser of the project's tax liability or unrecovered approved costs. For projects with preliminary approval on or after February 1, 2010, the limit is the least of project tax liability, 20% of total approved costs, or unrecovered approved costs.

Can a pass-through entity choose an estimated tax payment instead of the credit?

Yes. The entity may make an annual election to apply an amount equal to the allowable credit as an estimated tax payment. Enter the amount on Schedule KRA-SP, line 10(b), and complete Part II. The instructions state that owners are not entitled to claim any portion of this payment against their Kentucky income tax liability.

How long must I maintain Schedule KRA-T?

Maintain a separate Schedule KRA-T for the duration of each KRA project. Start with the first taxable year of the reinvestment agreement and use a separate line for each tax year.

Official sources

• https://revenue.ky.gov/Forms/PKG%20KRA%202024.pdf