Kentucky's pro-business climate provides a number of incentives for businesses. The
Kentucky Economic Development Finance Authority (KEDFA), established within the
Cabinet for Economic Development to encourage economic development, business
expansion, and job creation, provides financial support through an array of financial
assistance and tax credit programs. Helping businesses in this way furthers the
commonwealth's goals of achieving long-term economic growth and employment
opportunities for its citizens.
On June 26, 2009, Governor Steve Beshear signed into law House Bill 3, known as Incentives for the New
Kentucky (INK) streamlining and modernizing Kentucky's business incentive programs.
This legislation provides a program for existing manufacturers who need to make a
significant capital investment in Kentucky facilities in order to remain competitive;
consolidates KIDA, KREDA, KJDA & KEOZ into a single, more flexible tax incentive
program for new and expanding businesses; provides a sales and use tax refund for
companies that are heavy users of computer and telecommunications equipment; and,
expands KEIA to allow sales tax refunds for the purchase of electronic processing
systems costing $50,000 or more.
For a comparison of the old and new programs click here.
KEDFA approval is required for participation in the loan and tax incentive programs,
except the Skills Training Investment credits, which are approved by the Bluegrass
State Skills Corporation (BSSC). KEDFA meets the last Thursday of each month.
Projects must be received by the last Friday of the month prior to the KEDFA meeting
date in order to be considered.
Click here to view projects
approved by KEDFA for incentives.
Click here to view a list of active state participation Tax Increment Financing projects.
To find out if your business qualifies contact the
Department for Business Development
where a professional economic development agent will be assigned to work with you. Your agent
can answer your questions and guide you through the application processes.
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Bluegrass State Skills Corporation Skills Training Investment
Credit
Provides credit against Kentucky income tax to existing businesses that sponsor
occupational or skills upgrade training programs for the benefit of their employees.
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Incentives for Energy Independence Act – IEIA (PDF)
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% 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 4% of gross wages of each
employee whose job was created as part of the project.
Advanced disbursements may also be available.
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Kentucky Business Investment (KBI) Program – (PDF)
Provides income tax credits and wage assessments to new and existing agribusinesses,
regional and national headquarters, manufacturing companies, and non-retail service
or technology related companies that locate or expand operations in Kentucky.
Projects locating in certain counties may qualify for enhanced incentives.
Click here to view a map of the
enhanced incentive counties.
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Kentucky Reinvestment Act (KRA) - (PDF)
Provides tax credits to any existing Kentucky company engaged in manufacturing and
related functions on a permanent basis for a reasonable period of time who will be
investing in eligible equipment and related costs of at least $2,500,000.
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Kentucky Environmental Stewardship Act (KESA) (PDF)
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.
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Kentucky Investment Fund Act - KIFA (PDF)
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 managers.
Other Business Incentives and Financial Programs
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Bluegrass State Skills Corporation Grant Reimbursement Program
Provides matching grant funds for customized business and industry-specific training programs.
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Direct Loan Program (KEDFA) (PDF)
KEDFA encourages economic development business expansion and job creation by providing
business loans to supplement other financing. The Direct Loan Program provides loans at
below-market interest rates (subject to the availability of state revolving loan funds) for
fixed asset financing for agribusiness, tourism, industrial ventures, or the service
industry. Retail projects are not eligible.
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High-Tech Investment / Construction Pools (PDF)
The Department of Commercialization and Innovation provides funds to help further the commercialization of a product, process,
or other innovation. Incentives awarded are in the form of forgivable loans, with the amount of the loan primarily based on the
applicant company’s projected high-tech job creation. These forgivable loans typically range from $150,000 to $400,000 depending
upon the project.
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Small Business Loan Program (PDF)
The Small Business Loan Program is designed to helps small businesses acquire funding
needed to start or grow their small business. A small business must be engaged in
manufacturing, agribusiness, or service and technology. Loan funds may be used to acquire land
and buildings, purchase and install equipment, or for working capital. The minimum loan amount is
$15,000 and the maximum is $100,000. The approved company must create one new full-time job
within one year of the loan closing. KEDFA can fund up to 100% of the project costs and the loan can
be used in conjunction with other lenders. The term of the loan can range from 3-10 years.
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Kentucky Enterprise Initiative Act (KEIA)(PDF)
For new or expanded service or technology, manufacturing, or tourism attraction project in Kentucky.
KEIA provides a refund of Kentucky sales and use tax paid by approved companies for building and
construction materials permanently incorporated as an improvement to real property. It is also available
for Kentucky sales and use tax refunds for eligible equipment used for research and development and data
processing equipment.
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Kentucky Industrial Revitalization Act (KIRA) PDF
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 intend on having a raw production of at
least three million tons from the economic revitalization project facility.
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Tax Increment Financing (TIF)(PDF)
Tax increment financing (TIF) is a tool to use future gains in taxes to finance the current improvements that
will create those gains. The state participates with local governments and eligible agencies in three TIF programs:
the Commonwealth Participation Program for State Real Property Ad Valorem Tax Revenues, the Signature Project Program,
and the Commonwealth Participation Program for Mixed-Use Redevelopment in Blighted Urban Areas.
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TIF Loan Support Program(PDF)
Any agency with a Tax Increment Financing Signature Project approved by the former Tax Increment Financing Commission and which
executed its tax incentive agreement prior to January 1, 2008 may apply for The Tax Increment Financing (TIF) Loan Support Program.
The Loan Support Program facilitates a supplemental reserve fund to cover debt service related to the bond financing of the TIF project.
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Local Redevelopment TIF (PDF)
The program is available for use to redevelop blighted areas into mixed use development by using the incremental
additional local taxes such as property or occupational taxes realized as a result of the development. The community
or agency can request state participation in this program with certain additional requirements.
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Local Vacant Land TIF (PDF)
This program is available to develop vacant land by using the additional incremental local taxes, such as property or
occupational taxes, realized as a result of the new development (example: construction of infrastructure at a local
industrial park). State tax increment is not available for this type of development area.
- Industrial Revenue Bonds - IRB (PDF)
IRBs issued by state and local governments in Kentucky can be used to finance
manufacturing projects and their warehousing areas, major transportation and communication
facilities, most health care facilities, and mineral extraction and processing projects.