R&D Tax Credits


The Qualified Research Facility Tax Credit can help a wide variety of businesses offset and reduce their income tax liability, in addition to providing many other benefits.

The Kentucky Qualified Research Facility Tax Credit is available to businesses that invest in the construction of research facilities for authorized research, and it is equal to 5% percentage of the eligible costs incurred. The credit cannot be refunded, which means that it can only be used to offset the tax liability of the business. In other words, the credit cannot result in a direct payment or refund to the business. It’s important for companies to understand the eligibility requirements for this credit and the types of costs that qualify as eligible expenses. By taking advantage of this tax credit, businesses can reduce their overall tax liability and potentially reinvest those savings back into research and development activities.

To claim the Qualified Research Facility Tax Credit in Kentucky, the Schedule QR must be attached and submitted along with the income tax return. It is important to note that this tax credit is non-refundable and cannot be transferred to other entities.

A business may carry forward an excess tax credit for up to 10 years if it claims more tax credits than it owes in a given tax year. However, if the tax credit is not used within this time frame, it will expire, and the business will lose the credit.

The federal Research and Development (R&D) Tax Credit, available to companies nationwide, is an activities-based credit that incentivizes reinvestment and innovation and is refundable. The Kentucky qualified research facility tax credit is limited to the costs of constructing, expanding, remodeling, and equipping facilities that conduct research as defined by Section 41 of the Internal Revenue Code, and does not include the ability to include expenses related to the research activity itself.

Qualified Research Facility Tax Credit in Kentucky

Kentucky provides a tax credit to businesses that invest in constructing research facilities within the state.. It’s important for businesses to understand the eligibility requirements and criteria for this tax credit, as well as the types of expenses that are considered eligible. By investing in research facilities and conducting research in Kentucky, businesses can benefit from this tax credit and potentially reduce their tax liability. This, in turn, can allow them to allocate more resources towards research and development initiatives, driving growth and innovation. Overall, the tax credit provides an incentive for businesses to invest in Kentucky’s research and development infrastructure, which can have a positive impact on the state’s economy.

What Goes into the Kentucky Qualified Research Facility Tax Credit as a Qualified Research Expense?

The Kentucky qualified research facility tax credit allows for businesses to claim a percentage of the qualified costs of construction of research facilities.

In order for an expense to qualify it must meet specific research criteria:

The activities conducted in the facility must meet the following test:

  • Products, services, processes, or software must be new or improved for performance, quality, function or reliability purposes
  • There must be uncertainty at the beginning of the project
  • The research must be intended to eliminate the uncertainty using a systematic process
  • The research must be technological

The types of expenses that are applicable to claim under the credit include the following:

Expenses related to constructing, remodeling, and equipping facilities or expanding facilities in the state where qualified research occurs. Qualified expenses include only tangible, depreciable property and does not include any amounts paid or incurred for replacement property.

Take Advantage of the
R&D Tax Credit with Source Advisors

Most states offer R&D tax credits as well with many of them being more lucrative than the federal credit. At Source Advisors, we can help assess your company’s federal R&D tax credit opportunity and also determine any state R&D tax credit availability. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.