{"data":{"id":"us-ky/krs-171.398","jurisdiction":"us-ky","citation":"KRS 171.398","heading":"Rehabilitation of certified historic structures -- Qualified rehabilitation","body":"expenses -- Tax credit for applications on or after April 30, 2026 -- Penalty --\nAdministrative regulations.\n(1) This section applies to applications received on or after  April 30, 2026, but before\nApril 15, 2027, and on or after each April 15 thereafter.\n(2) (a) There shall be allowed as a credit against the taxes imposed in KRS 136.320,\n136.330, 136.340, 136.350, 136.370, 136.390, 304.3 -270, 141.020 or 141.040\nand 141.0401.\n(b) The amount of the credit shall be equal to:\n1. Thirty percent (30%) of the qualified rehabilitation expenses, in the case\nof owner-occupied residential property;\n2. Thirty percent (30%) of the qualified rehabilitation expenses if the\ncommercial res idential property is affordable to households earning\neighty percent (80%) of the median family income or less; or\n3. Twenty percent (20%) of the qualified rehabilitation expenses, in the\ncase of all other property.\n(c) In the case of an exempt entity that  has incurred qualified rehabilitation\nexpenses, the credit provided in this subsection shall be available to transfer\nor assign as provided under subsection (8) of this section.\n(d) The credit shall be ref undable if the taxpayer makes an election under\nsubsection (3)(b) of this section.\n(e) An insurance company claiming a tax credit against the insurance premiums\ntax is not required to pay additional retaliatory tax levied pursuant to KRS\n304.3-270.\n(3) (a) 1. A taxpayer seeking the credit provided under subsection (2) of this\nsection shall file an application for a preliminary determination of\nmaximum credit eligibility before:\na. April 15; or\nb. August 15;\nof the year in which the proposed project will begin.\n2. The certified rehabilitation credit cap shall be allocated as follows,\nincluding any amounts added to the certified rehabilitation credit cap\npursuant to paragraph (c) of this subsection:\na. Fifty million dollars ($50,000,000) for applications rece ived\nbefore the date established in subparagraph 1.a. of this paragraph,\nexcept that the amount shall not exceed one hundred million\ndollars ($100,000,000), including any amounts added under\nparagraph (c) of this subsection from a prior allocation period; and\nb. Fifty million dollars ($50,000,000) for applications received\nbefore the date established in subparagraph 1.b. of this paragraph,\nexcept that the amount shall not exceed one hundred million\ndollars ($100,000,000), including any amounts added under\nparagraph (c) of this subsection from a prior allocation period.\n3. In the event the full allocation in subparagraph 2.a. of this paragraph is\nnot utilized for applications received by April 15, the remainder shall be\nmade available for applications receive d in accordance with\nsubparagraph 1.b. of this paragraph, not to exceed fifty percent (50%) of\nthe total credit cap allocated in each application round under\nsubparagraph 2. of this paragraph.\n4. If the total amount of preliminary approvals for all applica tions received\nin a single application round under subparagraph 1.a. or 2.a. of this\nparagraph exceeds the cap of fifty million dollars ($50,000,000) plus\nany amounts added to the credit cap, the council shall apportion the\ncertified rehabilitation credit cap as follows:\na. The certified rehabilitation credit cap for the application round\nunder consideration shall be multiplied by a fraction, the\nnumerator which is the approved credit amount for an individual\ntaxpayer for an application round and the denomi nator which is\nthe total approved credits for all taxpayers for an application\nround; and\nb. Each taxpayer shall receive no more than their pro rata share of the\ncertified rehabilitation credit cap allocated for the corresponding\napplication round.\n5. Applications submitted for preliminary approval shall be reviewed in the\norder in which they are received based on the date of the application.\n6. The application shall describe the project and shall include\ndocumentation supporting the qualification of the pr oject for the credit,\nthe proposed start date, the proposed completion date, the projected\nqualified rehabilitation expenses, and any other information the council\nmay require.\n7. The council shall determine the preliminary maximum credit available\nfor each taxpayer and shall notify the taxpayer of that amount by:\na. June 30 for applications received on or before April 15 of the year\nin which the application was filed; or\nb. October 30 for applications received on or before August 15 of the\nyear in which the application was filed.\n(b) 1. An application for a final determination of credit shall be submitted to\nthe council upon completion of the project. A taxpayer who is no longer\nthe owner of the certified historic structure may apply for final\ndetermination of credit as long as the taxpayer received preliminary\napproval under paragraph (a)7. of this subsection and substantially\nrehabilitated the certified historic structure.\n2. The application shall include an irrevocable election by the taxpayer to:\na. Use the credit, in which case, the credit shall be refundable; or\nb. Transfer the credit in accordance with subsection (8) of this\nsection, in which case the credit shall be nonrefundable.\n3. The council shall determine the final amount of credit approved for each\ntaxpayer based upon the actual expenditures, preliminary determination\nof maximum credit, and a determination that the expenditures are\nqualified rehabilitation expenses.\n4. The council shall notify the taxpayer and Department of Revenue of the\nfinal approved credit amount within sixty (60) days of the receipt of a\ncompleted application from the taxpayer.\n(c) 1. If the total amount of credits finally approved for a taxpayer under\nparagraph (b) of this subsection is less than the amount of the credits\ninitially approved for a taxpayer under paragraph (a) of this subsection,\nthe difference between the two (2) amount s shall be added to the\ncertified rehabilitation credit cap for the next calendar year, except that\nin no case shall the amount allocated under paragraph (a)2.a. or b. of this\nsubsection exceed one hundred million dollars ($100,000,000),\nincluding any amou nts added to the certified rehabilitation credit cap\nfrom prior calendar years. Any amount exceeding the one hundred\nmillion dollars ($100,000,000) threshold is null and void as a carryover\nto any other allocation period.\n2. If the total amount of credits approved under paragraph (a) of this\nsubsection in any calendar year is less than the certified rehabilitation\ncredit cap, the difference between the credits actually awarded and the\ncertified rehabilitation credit cap shall be added to the certified\nrehabilitation credit cap for the next calendar year.\n3. If the entire credit cap allocated for applications in paragraph (b) of this\nsubsection is not entirely utilized for preliminary applications received\nunder paragraph (a) of this subsection, the remaining  portion shall be\nmade available for all other properties having submitted preliminary\napplications within the same application round regardless of property\ntype.\n(4) (a) The maximum credit which may be claimed with regard to owner -occupied\nresidential property shall be one hundred twenty thousand dollars ($120,000)\nsubject to subsection (6) of this section. The credit in this section shall be\nclaimed for the taxable year in which the certified rehabilitation is completed.\n(b) The maximum credit which may b e claimed with regard to all other property\nthat is not owner -occupied residential shall be ten million dollars\n($10,000,000) subject to subsection (6) of this section. The credit in this\nsection shall be claimed for the taxable year in which the certified\nrehabilitation is completed.\n(5) In the case of two (2) spouses filing separate returns or filing separately on a joint\nreturn, the credit may be taken by either or divided equally, but the combined credit\nshall not exceed one hundred twenty thousand doll ars ($120,000) if subject to the\nlimitation in subsection (4)(a) of this section, or ten million dollars ($10,000,000) if\nsubject to the limitation in subsection (4)(b) of this section, subject to the provisions\nof subsection (6) of this section.\n(6) The credit amount approved for a calendar year for all taxpayers under subsection\n(3)(a) of this section shall be limited to the certified rehabilitation credit cap.\n(7) (a) The credit shall apply against the tax imposed by:\n1. KRS 141.020 or 141.040 and the li mited liability entity tax imposed by\nKRS 141.0401, with the ordering of the credits as provided in KRS\n141.0205; and\n2. KRS 136.320, 136.330, 136.340, 136.350, 136.360, 136.370, 136.390,\nor 304.3-270.\n(b) If the taxpayer is a pass -through entity not subject to the tax imposed by KRS\n141.040, the taxpayer shall apply the credit at the entity level against the\nlimited liability entity tax imposed by KRS 141.0401, and shall also pass the\ncredit through in the same proportion as the distributive share of incom e or\nloss is passed through.\n(8) (a) Credits received under this section may be transferred or assigned if an\nelection is made under subsection (3)(b) of this section, for some or no\nconsideration, along with any related benefits, rights, responsibilities,  and\nliabilities to any person or entity subject to the taxes imposed in:\n1. KRS 141.020 or 141.040 and 141.0401; or\n2. KRS 136.320, 136.330, 136.340, 136.350, 136.360, 136.370, 136.390,\nor 304.3-270.\n(b) Within thirty (30) days of the date of any transfer  of credits, the party\ntransferring the credits shall notify the Department of Revenue of:\n1. The name, address, employer identification number, and bank routing\nand transfer number, of the party to which the credits are transferred;\n2. The amount of credits transferred; and\n3. Any additional information the Department of Revenue deems\nnecessary.\n(c) Any taxpayer receiving transferred credit under this subsection may carry\nforward unused credit for a period not to exceed seven (7) taxable years from\nwhich the certified rehabilitation was complete.\nThe provisions of this subsection shall apply to any credits that pass through to a\nsuccessor or beneficiary of a taxpayer.\n(9) For purposes of this section, a lessee of a certified historic structure shall be tre ated\nas the owner of the structure if the remaining term of the lease is not less than the\nminimum period promulgated by administrative regulation by the council.\n(10) The taxes imposed in KRS 141.020, 141.040, and 141.0401 shall not apply to any\nconsideration received for the transfer, sale, assignment, or use of a tax credit\napproved under this section.\n(11) (a) The Department of Revenue shall assess a penalty in an amount equal to one\nhundred percent (100%) of the tax credit allowed on the rehabilitation  on any\ntaxpayer or exempt entity that:\n1. Performs disqualifying work, as determined by the Kentucky Heritage\nCouncil, on a certified historic structure for which a rehabilitation has\nbeen certified; and\n2. If credit allowed based on affordability, fails to maintain compliance\nwith the commercial residential property requirement established in\nKRS 171.396(5), as determined by the council and the Kentucky\nHousing Corporation.\n(b) Any penalties shall be assessed under paragraph (a) of this subsection shall be\nassessed against the property owner and not against any transferee of the\ncredits.\n(12) The council may impose fees for processing applications for tax credits, not to\nexceed the actual cost associated with processing the applications.\n(13) The council may authorize a local government to perform an initial review of\napplications for the credit allowed under this section and forward the applications to\nthe council with its recommendations.\n(14) The council an d the Department of Revenue may promulgate administrative\nregulations in accordance with the provisions of KRS Chapter 13A to implement\nthis section.","path":["KRS Chapter 171"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=56938","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:51:22Z","sha256":"a0b17a9ffe044d58c524a153ad7bb1bf030835ffb6190ccf48c4a8a98d0125a7","source_id":"us-ky","stale":false,"prev":"us-ky/krs-171.397","next":"us-ky/krs-171.399"},"notice":"GroundRules: Original legal text. Not legal advice."}