A wage-based tax credit buried in Kentucky's fiscal bill could mean cash payments for restaurants that meet eligibility requirements—but only if you apply after July 1, 2026.
Most Kentucky restaurant owners have never heard of the wage-based economic development tax credit tucked into HB869, the state's fiscal matters bill. Yet it could put real money back into your business if you operate in the right county and meet the requirements.
HB869 creates a refundable income and limited liability entity tax (LLET) credit for "approved companies" based on wages paid to full-time employees. The credit rate depends on where your restaurant operates:
Because this is a refundable credit, it works differently than a standard tax deduction. If your credit exceeds your actual tax liability in a given year, the state can issue you a cash payment for the difference. That means the credit can generate money beyond simply reducing what you owe.
The credit is administered by the Kentucky Economic Development Finance Authority (KEDFA). To qualify, your restaurant must receive preliminary approval from KEDFA. Critically, preliminary approval must occur after July 1, 2026 for you to claim the credit.
The credit applies to taxable years beginning on or after January 1, 2026—but the timing of your KEDFA approval determines whether you can actually use it. If you receive preliminary approval before July 1, 2026, you won't qualify under this provision.
The credit is capped at $4 million per year statewide, meaning it's a limited resource. Once the state reaches that cap, no additional credits will be awarded for that year.
If your restaurant is in a heritage county and you have full-time employees, this credit could be worth tracking. A restaurant with 20 full-time employees earning an average of $30,000 annually would have $600,000 in qualifying wages, translating to a potential $13,500 annual credit (2.25% of $600,000). For restaurants in other counties, the same scenario yields $7,500.
However, this isn't automatic. You'll need to apply for preliminary approval through KEDFA after July 1, 2026, and meet whatever criteria the Authority establishes for "approved companies." Those criteria have not yet been publicly detailed, so it's worth monitoring KEDFA's announcements as the effective date approaches.
The provision appears in Section 1, Page 1 of HB869.
If your restaurant is considering expansion or has questions about whether you might qualify, it's worth staying informed as KEDFA develops the application process. The Kentucky Restaurant Association and your local chamber of commerce may have additional guidance as details emerge.
Source: HB869—AN ACT relating to fiscal matters and declaring an emergency, Section 1, Page 1.