KRA: Kentucky Reinvestment Act (KRA) Tax Credit (2025)
Kentucky · Kentucky DOR · Used for tax years 2025
The Kentucky Reinvestment Act (KRA) package reports approved tax incentives for a business entity’s reinvestment project. It includes schedules to calculate the allowable KRA tax credit and track the balance of approved costs and tax credits.
Who files this form
Use the 2025 KRA package to report Kentucky Reinvestment Act tax incentives approved for your business by the Cabinet for Economic Development. You must have received preliminary or final approval to determine the credit allowed.
- 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 business name, federal identification number, Kentucky Corporation/LLET account number, and taxable year ending date.
- The project location, project number, and incentive agreement activation date.
- Approved costs under the agreement, prior-year approved-cost balances, and credits claimed, for Schedule KRA-T.
- Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
- Schedule L-ECON to calculate the project's separate limited liability entity tax (LLET), when applicable. Attach a separate Schedule L-ECON for each project's LLET calculation.
- Supporting schedules showing project income and, when required, Kentucky gross receipts and gross profits if the business has other operations.
- A copy of the Department of Revenue approval letter if you use an approved allocation formula for an expansion or an approved alternative accounting method.
Pass-through entities must also use Form PTE(K) to exclude KRA project net income from the owners' distributive share income.
How to file
- Complete Schedule KRA for a business filing Form 720 or 720U, or Schedule KRA-SP for a business filing Form PTE or 725.
- Update a separate Schedule KRA-T for each project with the current year's information. Attach it to Schedule KRA or KRA-SP.
- Enter tax credits on Schedule TCS, Tax Credit Summary Schedule.
- Attach the KRA package and required supporting schedules to Form 720, 720U, PTE, or 725.
Also attach a copy of the updated Schedule KRA-T to the Wage Assessment Report and Annual Reconciliation.
The supplied text does not give a mailing address or e-filing directions.
Common mistakes
- Combining projects. 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-year and last-year incentives must be prorated. Separate period accounting is recommended; a proration factor may be used if it is unavailable.
- Passing the credit through to owners. KRA credits do not pass through to members, partners, or shareholders. Project losses do not flow through either.
- Entering both choices on Schedule KRA-SP, line 10. Enter an amount on either line 10(a) for the credit or line 10(b) for the estimated tax payment, not both.
- Completing LLET lines for a general partnership. General partnerships should not complete Schedule KRA-SP, lines 5 and 6.
- Claiming more credit than allowed. Total credits claimed cannot reduce LLET below $175 or income tax liability below zero.
- Using an incomplete account number. The Kentucky Corporation/LLET account number must have nine digits. Add leading zeros if it has six digits.
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. Schedule KRA-SP determines the credit against Kentucky income tax and/or LLET attributable to a pass-through entity's project.
What is Schedule KRA-T for?
It tracks approved costs and tax credits throughout the agreement. Use a separate line for each tax year and maintain a separate schedule for each project.
What if the income tax credit and LLET credit are different amounts?
For tracking purposes, record the greater of the credit claimed against LLET or income tax in Schedule KRA-T, Column E. Do not add the two credits together.
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. Enter the amount on Schedule KRA-SP, line 10(b), and complete the election in Part II. The instructions state that partners, members, and shareholders are not entitled to claim any portion of this payment against their Kentucky income tax liability.