A wage-based tax credit buried in HB869 could put money back in your pocket—but only if you apply before a hard deadline.
Most Kentucky manufacturers don't realize that HB869, signed into law as part of this year's fiscal legislation, includes a refundable income and Limited Liability Entity Tax (LLET) credit worth up to $4 million per year. The credit is designed to reward companies that create or retain full-time jobs, but the rules are specific—and the window to qualify is narrow.
Under Section 1 of HB869, approved manufacturers, agribusinesses, and nonretail service or technology firms can claim a refundable tax credit equal to a percentage of wages paid to full-time employees. The rate depends on where the project is located:
The credit is capped at $4 million total per taxable year across all eligible claimants statewide. This means early applicants who meet the requirements will capture a larger share of the available credit pool.
Timing is everything. The credit applies to taxable years beginning on or after January 1, 2026. However, to qualify, your company must receive preliminary approval after July 1, 2026. Projects approved before that date do not qualify for this credit.
If you're considering a new facility or expansion, this means you have a window between July 1, 2026, and the end of the year to pursue preliminary approval and lock in eligibility. Once that preliminary approval is granted, you can begin claiming the credit on eligible wages in the 2026 taxable year and beyond.
The credit is available to:
Retail businesses are explicitly excluded. The credit applies only to wages paid to full-time employees at projects in Kentucky.
If you're planning a capital investment or job creation initiative, this credit could meaningfully reduce your state tax liability. A 2.25% credit on wages in a heritage county—or 1.25% elsewhere—adds up quickly for companies with significant payrolls. Because the credit is refundable, you can claim it even if you have no state income tax liability.
The $4 million annual cap is important to understand: it's not a per-company limit, but a statewide pool. Early applicants who secure preliminary approval will have priority access. If you're in a heritage county, your rate is also higher, making the credit more valuable per dollar of wages.
If this credit applies to your business, the time to act is now. Contact your economic development authority or tax advisor to understand the preliminary approval process and timeline. The July 1, 2026, deadline is firm, and missing it means forgoing eligibility entirely.
Source: HB869—AN ACT relating to fiscal matters and declaring an emergency, Section 1, Page 1.