KREDA: Kentucky Rural Economic Development Act (KREDA) Tax Credit (2024)
Kentucky · Kentucky DOR · Used for tax years 2024
This package reports approved Kentucky Rural Economic Development Act (KREDA) tax incentives and calculates the allowable tax credit. It includes schedules to track project debt service payments or approved costs, wage assessments, and tax credits.
Who files this form
Use the 2024 KREDA package only if your business has received approval for the KREDA credit from the Cabinet for Economic Development. The package states that preliminary or final approval must have been received on or before June 26, 2009.
The package reports approved KREDA tax incentives:
- Businesses filing Form 720 or 720U must complete Schedule KREDA and Schedule KREDA-T.
- Businesses filing Form PTE or 725 must complete Schedule KREDA-SP and Schedule KREDA-T.
Use a separate package for each incentive project. Incentives may be claimed only during the term of the incentive agreement.
What you'll need
Have these records and schedules available:
- Your business name, federal identification number, Kentucky Corporation/LLET account number, and taxable year ending date.
- The project number, location, activation date, and financing or tax incentive agreement.
- Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
- Records of project income, Kentucky gross receipts and gross profits, debt service payments or approved costs, employee wage assessments, and credits claimed.
- Schedule KREDA-T, including prior-year information needed to calculate the carryforward balance.
Attach Schedule L–ECON for each project's LLET calculation when applicable. General partnerships do not complete the LLET lines on Schedule KREDA-SP.
If your business has other operations, attach schedules showing the required project-only calculations. If you use an approved allocation percentage for an expansion project or an approved alternative accounting method, attach the Department of Revenue's approval letter.
Corporations also approved for STICA or MCC must attach the applicable Bluegrass State Skills Corporation certifications. Corporations approved for KSBTC or KSFTC must attach the applicable Kentucky Economic Development Finance Authority certification.
How to file
- Complete one KREDA package for each project.
- Complete Schedule KREDA-T with current-year information to determine the credit limitation.
- Complete Schedule KREDA if filing Form 720 or 720U, or Schedule KREDA-SP if filing Form PTE or 725.
- Attach the updated Schedule KREDA-T to Schedule KREDA or KREDA-SP, and attach the package to your Kentucky return. Include any required supporting schedules and approval letters.
- Enter tax credits on Schedule TCS, the Tax Credit Summary Schedule.
Also attach an updated copy of Schedule KREDA-T to the Wage Assessment Report and Annual Reconciliation.
The package does not provide a mailing address or e-file directions.
Common mistakes
- Combining projects. Include only one incentive project per package and maintain a separate Schedule KREDA-T for each project.
- Claiming a full year's incentives outside the agreement term. First- and last-year incentives must be prorated accordingly.
- Passing credits or project losses through to owners. KREDA 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.
- Entering both choices on Schedule KREDA-SP, line 9. Enter either the tax credit on line 9(a) or the estimated tax payment on line 9(b), never both.
- Claiming too much credit. Total credits claimed cannot reduce LLET below $175 or income tax liability below zero. Schedule KREDA-T also warns that Column F exceeding Column E means the eligible credit amount has been exceeded.
- Adding the two tax credits together for tracking. Schedule KREDA-T records the greater credit claimed against LLET or income tax, not their combined amount.
Questions people ask
What taxes can the KREDA credit offset?
For corporations, the credit applies against Kentucky corporation income tax and/or the limited liability entity tax (LLET) attributable to the project. Schedule KREDA-SP determines the credit against Kentucky income tax and/or LLET attributable to a pass-through entity's project.
How is the corporation's allowable credit limited?
Schedule KREDA, Part III, uses the lesser of the tax liability attributable to the project or the credit limitation from Schedule KREDA-T, Column E.
Do pass-through entity owners receive the KREDA credit?
No. The credits do not pass through to members, partners, or shareholders. The entity must use Form PTE(K) to exclude the project's net income from their distributive share income.
Can a pass-through entity choose an estimated tax payment instead?
Yes. The approved company may elect annually to apply an amount equal to the allowable credit as an estimated tax payment instead. Complete Schedule KREDA-SP, 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 Schedule KREDA-T be maintained?
Maintain a separate tracking schedule for the duration of each project. Beginning with the first tax year of the agreement, use a separate line for each year and update the schedule with current-year information.