Kentucky · research and development / Facility · KY-QRF-001
Qualified Research Facility Tax Credit
Publication revised September 24, 2026. Sourcebook page 124.
Credit amount / calculation
5% of qualified construction, remodeling and equipment costs; nonrefundable with 10-year carryforward.
Business fit and eligible activity
A business constructing/remodeling/equipping a research facility can claim a straightforward credit. Research facilities and qualifying capital costs; not ordinary production equipment.
Eligibility and practical use
A wood-products company can miss this credit by assuming that "research" means white coats and laboratories. In practice, qualifying work can arise in process engineering, product development, automation, drying, recovery, and software. A logging company has a narrower path, but equipment-control, software, or process-development work can sometimes qualify if it satisfies the same technical tests.
Illustrative business benefit
A hardwood mill spends $320,000 on a documented project to improve recovery from low-grade logs using scanner changes, controlled test runs, software adjustments, and revised sawing patterns. Assume $200,000 is ultimately treated as the relevant qualified or excess research base. At 5%, the state credit would be about $10,000 before program caps and tax-liability limits. The company would need records showing the uncertainty, alternatives tested, people involved, and results - not simply a year-end estimate of 'engineering time.'
Timing / first action
Tax-year claim: document the eligible expense, hire or placed-in-service date and meet any separate certification deadline. Identify the technical uncertainty and start contemporaneous project records before trying to calculate the credit.
Official sources
Related programs
Historic Rehabilitation Tax Credit
Percentage of qualified rehabilitation expenditures subject
Certified historic mills and industrial properties can qualify for a state rehabilitation credit.
Kentucky Business Investment Credit
Project-specific approved tax credits
New or expanding manufacturers can receive negotiated income/limited are met.
Kentucky Reinvestment Act Credit
Credit against corporate income/limited liability entity
Existing manufacturers can receive credits for qualifying reinvestment/modernization projects.
Clean Electricity Investment Credit (Internal Revenue Code §48E)
Generally
Potentially relevant when a forest-products facility owns qualifying zero-emission generation or energy-storage property.
Clean Electricity Production Credit (Internal Revenue Code §45Y)
Production-based
Alternative to the investment credit for owners/operators of qualifying clean-electricity facilities; potentially relevant to qualifying on-site generation.
Credit for Increasing Research Activities (Internal Revenue Code §41)
Regular research-credit method
A sawmill, secondary manufacturer or biomass business can qualify when it performs genuine technological experimentation to improve a product or process.