Kentucky Direct Financial Incentives 2010
The Kentucky economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include the Kentucky New Energy Ventures Fund (KNEV), Kentucky Business Investment (KBI) Program, Kentucky Reinvestment Act (KRA), and Kentucky Enterprise Initiative Act (KEIA).
The Kentucky Economic Development Finance Authority (KEDFA) offers a direct loan program at below-market interest for fixed-asset financing for agribusiness, tourism, industrial ventures or the service industry. Loans up to $500,000, with up to 50 percent participation, are available. The number of jobs created and wages paid are factors in determining the level of participation.
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.
The Cabinet for Economic Development's Bluegrass State Skills Corporation (BSSC) works with business, 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. 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. Eligible train-the-trainer activities also include company employees traveling from other locations to the applicant's site.
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.
Kentucky Business Investment (KBI) Program:
Eligible companies must be engaged in one of the following activities: manufacturing; agribusiness; be a regional or national headquarters operation; or certain non-retail service or technology activities. The minimum requirements for eligible projects are as follows: it must create a minimum of 10 new, full-time jobs for Kentucky residents; the entity must incur at least $100,000 in costs; and meet a minimum level of wages and benefits. The tax incentives involved with this program are available for up to 15 years for enhanced incentive counties or up to 10 years for all other counties. The incentive may be taken as: up to 100 percent of the Kentucky Income tax imposed on corporate income or limited liability entity tax arising from the project, and a wage assessment of up to five percent of the gross wages of each employee in enhanced counties or up to four percent (including up to one percent required local participation) of the gross wages of each employee in other counties.
Kentucky Reinvestment Act (KRA):
KRA is available for eligible companies that are permanent Kentucky companies engaged in manufacturing. Requirements of the program include: incurring eligible equipment and related costs of at least $2,500,000; establishing an employment retention base of at least 85 percent of existing employment; not having received incentives under the Kentucky Industrial Revitalization Act (KIRA) within the previous five years; and the applicant certifying that the project would not be economically feasible without the incentives. Approved costs for recovery include eligible equipment and related costs up to: 50 percent of the eligible equipment and related costs and 100 percent of the job skills upgrade training costs. The incentive is available for up to 10 years and may be recovered via Kentucky income tax credits of up to 100 percent of tax imposed on the corporate income or limited liability tax generated by or arising from the project.
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 energy 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 Kentucky 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):
A KEIA approved company, with a minimum investment of $500,000 is eligible to receive a refund of sales and use tax paid for the following items purchased during the term of the project and not to exceed the approved recovery amount authorized in the KEIA agreement:
- Building and construction materials
- Research and development equipment
- Electronic processing equipment costing a minimum of $50,000
The term of the agreement is negotiated with the Kentucky Economic Development Finance Authority (KEDFA) and may be extended by approval of the KEDFA for good cause shown. However, the term shall not be extended beyond seven years from the date of approval. The maximum sales and use tax refund incentive available for commitment by KEDFA in each fiscal year for all projects is limited to $20 million for building and construction materials and $5 million for equipment used for research and development or electronic processing.
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 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 in each year of the federal award for up to two years.
High-Tech Investment Pool:
The Department of Commercialization and Innovation provides funds to help further the commercialization of a product or new and improved process. Incentives awarded are typically in the form of forgivable loans, with the amount of the loan primarily based on the applicant company's projected high-tech job creation.
Kentucky New Energy Ventures Fund (KNEV):
Supports the development and commercialization of alternative fuel and renewable energy products, processes and services in Kentucky. Companies must have a unique and competitive product, technology or process that can be protected in the commercial marketplace. KNEV will provide grants as well as equity investments. Companies must match the fund's investment on a one-to-one dollar ratio.
Commonwealth Seed Capital, LLC (CSC):
CSC is dedicated to creating high-tech jobs by providing needed seed capital for high-growth potential, high-tech companies. Businesses that receive investments from CSC are based on innovation, have a meaningful Kentucky presence, and are expected to generate significant profits for investors. CSC also invests in seed and venture capital funds that actively invest in these types of companies in Kentucky.
Kentucky State Contact:
Kentucky Cabinet for Economic Development
Old Capitol Annex
300 West Broadway
Frankfort, KY 40601
Fax: (502) 564-3256
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.