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Direct Financial Incentives

Small business loans:
The Kentucky Economic Development Finance Authority (KEDFA) also offers a small business loan program. Loans up to $100,000 are available to businesses with no more than 50 employees that are engaged in manufacturing, service, technology, or agribusiness and will create at least one new job.

Skills training:
The Bluegrass State Skills Corporation (BSSC) works with business and industry and the state's educational institutions to establish programs of skills training. BSSC can partially reimburse the cost of instruction performed by an educational institution, an in-house instructor, or a consultant, including the necessary texts and supplies. BSSC reimburses companies for 50 percent of eligible costs. Under the Train-the-Trainer Program, BSSC can also provide assistance with travel-related expenses for new and expanding industries for an employee to travel to another company facility or equipment vendor location and return to train others at the Kentucky plant.

The Skills Training Investment Credit Act allows companies to recover up to 50 percent of approved costs for occupational and skills upgrade training through an income tax credit limited to $500 per employee not to exceed $100,000 per company per biennium. Credits can be carried forward for three successive years. Training can be given by company employees, instructors from educational institutions, or consultants on contract. Companies can participate in BSSC regular grants and investment credit program but cannot address the same expenses in both programs.

Tax incentives:
State income tax credits are available for up to 15 years for investments in qualifying manufacturing, distribution, services, and headquarters operations. The Kentucky Rural Economic Development Act (KREDA) is available in counties with higher than state average unemployment. KREDA offers approved manufacturing operations up to 100 percent credit against the Kentucky income tax liability on taxable income generated by the project, limited to the approved investment costs in connection with the eligible project. Land, buildings, equipment, and fixtures are included as eligible project costs. This tax credit remains in place until the approved investment costs are recovered for a maximum term of 15 years. An approved company also may utilize the Job Development Assessment Fee (JDAF), which entails a withholding equal to 4 percent of gross wages from the employees hired as a result of the KREDA-approved project. The employees recoup the JDAF through a state income credit equal to the amount JDAF withheld. KREDA benefits are negotiated under the above guidelines.

The Kentucky Industrial Development Act (KIDA) offers approved manufacturing operations up to 100 percent credit against the Kentucky income tax liability generated by the project or a 3 percent Job Development Assessment Fee (JDAF). Either option is limited to approved investment costs in connection with the eligible project costs for a period not to exceed 10 years. Land, buildings, fixtures, and equipment (equipment costs limited to $20,000 tax credit for every full-time job created) for new and expanding manufacturing companies are considered eligible costs. KIDA benefits are negotiated under the above guidelines.

The Kentucky Jobs Development Act (KJDA) offers tax credits to service or technology-related companies that provide more than 75 percent of their services as generated through revenues to persons located outside the state. Approved companies are eligible for tax credits that can equal up to 50 percent of the startup costs associated with furnishing and equipping the facility and up to 50 percent of the annual rent costs. Maximum approved startup costs are $10,000 per new full-time job for Kentucky residents subject to personal income tax. The company may receive a 100 percent credit against the state income tax arising from the project and a wage assessment of up to 5 percent of the increased gross payroll of the new employment resulting from the project. Tax credits can be taken for up to 10 years. KJDA benefits are negotiated under the above guidelines.

The Incentives for Energy Independence Act (IEIA) requires a capital investment of at least $25 million for an alternative fuel facility using biomass, or an investment of at least $100 million for an alternative fuel facility using coal, as its primary feedstock. A capital investment of at least $1 million is required for a renewable power facility that meets minimum electric output standards based upon the power source. The negotiated incentives cannot exceed 50 percent of the capital expenditures and may include a reimbursement of sales and use taxes paid on tangible personal property; a tax credit of the income tax and limited liability entity tax owed by the company; and, wage assessment incentives up to four percent of gross wages of each employee whose job was created as part of the project. Advanced disbursements may also be available.

Kentucky Enterprise Initiative Act (KEIA):
The KEIA is a sales and use tax refund program available to new or expanded service or technology, manufacturing or tourism attraction projects for construction materials, building fixtures, and research and development equipment. The minimum investment is $500,000,and includes land acquisition, construction costs, and research and development equipment. Project life is 18 months from receiving approval.

High-Tech Small Business SBIR-STTR Matching Program:
The Department of Commercialization and Innovation, within the Cabinet for Economic Development, will match Phase 1 and Phase 2 federal SBIR and STTR awards received by Kentucky businesses (or those willing to relocate to Kentucky). This would include matching awards of up to $100,000 to support Phase 1 exploration of the technical merit or feasibility of an idea or technology. Phase 2 federal awards, which support full-scale research and development, can be matched by the commonwealth up to the first $500,000 in each year of the federal award for up to two years.