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New Tax Credit Available for Kentucky Small Businesses

9/30/20 – Ryan Redleski

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Co-authored by Christine Bieniosek, Senior Accountant, CPA

Are you one of the many Kentucky small businesses leaving thousands of dollars on the table? Since the inception of the Kentucky Small Business Tax Credit (KSBTC) in July 2020, the state has awarded $8.8 million to Kentucky small businesses. According to the Kentucky Cabinet for Economic Development, the KSBTC program has resulted in 2,634 new jobs and $25.9 million invested by companies.

What does this mean for my business?

The driving force behind the KSBTC is job creation, with an ultimate goal of economic growth.  When a business creates or fills one or more eligible positions and invests $5,000 or more in qualifying equipment or technology, the program provides a credit ranging from $3,500 to $25,000 per calendar year. This credit is available to for-profit businesses having 50 or fewer full-time Kentucky employees. It is important to note that an employee who works in Kentucky, but resides outside of the state, is not included in the small business employment calculation. Thus, if a business has 60 employees but, 20 of them reside outside the state of Kentucky, the business is still eligible for the credit.  The credit is open to nearly any type of industry.  Other program requirements include the following:

  1. At least one position has been created and filled for 12 consecutive months; the employee must work full-time and have an hourly wage of at least $10.88.  The position must be subject to Kentucky individual income tax.  Note that the total number of employees must have increased as a result.  If a new position is created and filled but a different employee leaves and is not replaced, the base number of employees will not have increased and the new position will not count for the credit.
  2. The investment of $5,000 in qualifying equipment or technology; defined as a life greater than one year (i.e. computers, equipment, furniture, fixtures, software, vehicles).  It does not include real property, buildings, or consumable supplies.

Once the application is complete, it is submitted to a state committee with an application fee of 1% of the expected credit.  Upon approval, your business will be awarded a non-refundable tax credit applied to the tax year in which it is received.  Any unused credit amount can then be carried forward to future returns for up to five years.  According to the Kentucky Cabinet for Economic Development, the average award is $14,157. 

If you think your business meets the aforementioned criteria, contact VonLehman today to see how you can qualify for this credit. rredleski@vlcpa.com  |  800.887.0437