Kentucky Direct Financial Incentives 2012
Kentucky's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include direct state loans, small business loans, and skills training grants.
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 Kentucky Small Business Investment Credit (KSBIC)
The KSBIC program is designed to encourage small business growth and job creation by providing a nonrefundable tax credit to eligible businesses hiring one or more eligible individuals and investing at least $5,000 in qualifying equipment or technology. With certain exceptions, most for-profit businesses with 50 or fewer full-time employees are considered eligible for this program. The KSBIC program is limited to allocating a total of $3 million in tax credits per state fiscal year.
Skills training grants:
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 textbooks 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.
Skills Training Investment Credit Act:
Existing companies may 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 may be carried forward for three successive years. Training may be given by company employees, instructors from educational institutions, or consultants on contract.
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 an eligible project is that it must create a minimum of 10 new, full-time jobs for Kentucky residents, 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 tax credits against Kentucky income tax imposed on corporate income or limited liability entity tax arising from the project (up to 100 percent). A wage assessment of up to five percent of the gross wages of each employee whose job was created by the project in enhanced counties or up to 4 percent (including up to 1 percent required local participation) of the gross wages of each employee whose job was created by the project in other counties may also be available.
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 $2.5 million; 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 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 entity tax generated by or arising from the project.
Incentives for Energy Independence Act (IEIA):
IEIA requires a capital investment of at least: 1) $25 million for an alternative fuel facility using biomass as its primary feedstock, 2) $100 million for an alternative fuel facility using coal as its primary feedstock, 3) $25 million is required for an alternative fuel facility that produces a homogeneous fuel from processes designed to densify coal, waste coal or biomass resources, and 4) $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 4 percent of gross wages of each employee whose job was created as part of the project. Advanced disbursements may also be available.
Kentucky Industrial Revitalization Act (KIRA):
Investments in the rehabilitation of manufacturing or coal mining and processing operations that are in imminent danger of permanently closing or that have closed temporarily may qualify for tax credits. An eligible company shall also include one that has closed but resumes mining operations. Eligible entities include manufacturing companies that save or create 25 jobs and coal mining and processing companies that intend to employ a minimum of 500 persons and have a raw production of at least three million tons from the economic revitalization project facility.
Kentucky Investment Fund Act - KIFA
KIFA provides tax credits to individuals and companies that invest in approved venture capital funds. Investors in KIFA approved funds are entitled to a 40% credit against Kentucky individual or corporate income tax or Kentucky corporate license tax. KEDFA (see above) approves investment funds and fund
Kentucky Environmental Stewardship Act (KESA)
For companies manufacturing products that have a substantial positive impact on human health and the environment. Companies with projects approved under KESA must have at least $5 million in eligible cost and can potentially recover up to 25% of the projects fixed asset cost and 100% of employee skills training. The tax incentive is available for recovery over a 10-year period.
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 not to exceed the approved recovery amount authorized in the KEIA agreement for the following items purchased during the term of the project:
• Building and construction materials
• Research and development equipment
• Electronic processing equipment costing a minimum of $50,000