Schedule QR: Qualified Research Facility Tax Credit (2025)

Who files this form

Taxpayers claiming Kentucky’s Qualified Research Facility Tax Credit use Schedule QR to calculate the credit and record the amount claimed each tax year. The credit applies against individual income tax, corporation income tax, and limited liability entity tax (LLET).

Submit a copy each year until the full credit is used or the 10-year carryforward period expires. Complete a separate schedule each year that a new project qualifies.

What you'll need

• Attach a schedule of the tangible, depreciable property included in construction and equipment costs. List each item’s purchase date, date placed in service, description, and cost.
• Have the entity name, federal identification number, entity type, and Kentucky Corporation/LLET Account Number, if applicable.
• Provide the research facility’s Kentucky location, county, completion date, and whether the project is new construction or an expansion.
• Have the amounts of credit used and remaining balances for income tax and LLET to complete the credit history.

A pass-through entity must include each partner’s, member’s, shareholder’s, or beneficiary’s share of the approved credit on their Schedule K-1.

How to file

Attach Schedule QR to Form 720, 720U, PTE, 725, 740, 740-NP, or 741, as applicable. The supplied text does not give a mailing address or e-file directions.

• Part I: Enter qualified construction and equipment costs, add them, and multiply the total by 5% to calculate the allowable credit. Attach the required property schedule.
• Part II: Enter the current-year credit claimed for each applicable tax. Transfer the LLET credit to Schedule TCS, Part II, Column E, and the corporation income tax credit to Column F. Enter the individual income tax credit on Form 740, 740-NP, or 741.
• Part III: Record the month and year the credit is taken, the credit used, and the remaining balances separately for LLET and income tax.

Submit a copy annually until the credit is fully used or the 10-year carryforward period expires.

Common mistakes

• Including replacement property costs. Amounts paid or incurred for replacement property do not qualify.
• Claiming the credit before property is placed in service. The credit becomes available once the tangible, depreciable property is placed in service.
• Combining income tax and LLET balances. Calculate the credit claimed and remaining balance separately for each tax. A balance for one tax cannot be used against the other. Once a balance reaches zero, no further credit is allowed against that tax.
• Reducing LLET below its minimum. This credit cannot reduce LLET below $175.
• Leaving a zero-use entry blank. In Part III, Column C, enter -0- if no credit was used for that year.
• Omitting the property schedule. Attach the required itemized schedule for the costs on Part I, Lines 1 and 2.

Questions people ask

What types of projects qualify?

Construction, remodeling, equipping, or expansion of facilities in Kentucky for qualified research can qualify. Only tangible, depreciable property is included, and replacement property is excluded. Qualified research means research as defined in Internal Revenue Code Section 41.

How much is the allowable credit?

The allowable credit is 5% of the total qualified construction and equipment costs entered in Part I.

When does the credit become available?

The credit is available once the tangible, depreciable property is placed in service.

Can the amounts claimed against corporation income tax and LLET differ?

Yes. The amounts can differ, and the credit claimed and remaining balance must be calculated separately for income tax and LLET.

How long must I keep submitting Schedule QR?

Submit a copy each year until the full credit is used or the 10-year carryforward period expires.

Official sources

• https://revenue.ky.gov/Forms/Schedule%20QR%20(10-25).pdf