Incentives

Kentucky offers a variety of flexible incentives for companies considering location to Kentucky, as well as expansion of existing businesses. If you fit one of the following categories, you could be eligible to receive incentives from the state. The incentives attract a wide range of businesses, whether large or small, to Kentucky:  

The following information is meant to be a summary guide to Kentucky’s Incentive Programs as presented by the Kentucky Economic Development Finance Authority (KEDFA). As with all state administered tax incentive programs, any inducement offered to an eligible company is negotiated by the Cabinet for Economic Development officials.

There is an array of incentives and we’d be more than happy to coordinate the incentive discussion. Contact us today to learn more about which incentives would work for you.

Kentucky Business Investment Program (KBI)

Eligible Companies:

Any business entity engaged in one or more of the following activities: Manufacturing, agribusiness, or regional and national headquarters (regardless of the underlying business activity).

Non-retail service or technology activities must be: designed to serve a multistate, national or international market; provided to a customer base that includes more than 50% non-residents; and may include, but are not limited to, call centers, centralized administrative or processing centers, telephone or internet sales order or processing centers, distribution or fulfillment centers, data processing centers, research and development facilities and other similar activities.

Eligible company does not include companies where the primary activity to be conducted within the Commonwealth is forestry, fishing, mining, coal or mineral processing, the provision of utilities, construction, wholesale trade, retail trade, real estate, rental and leasing, educational services, accommodation and food services or public administration services.

Eligible Projects:

An eligible project must create a minimum of 10 new, full-time jobs for Kentucky residents and maintain an annual average of at least 10 new, full-time jobs for Kentucky residents. At least 90% of the new, full-time Kentucky resident employees must receive base hourly wages of at least $10.88 (150% of the federal minimum wage). Kentucky resident employees must receive total hourly compensation (base hourly wages plus employee benefits) of at least $12.51. Also required are minimum eligible costs of at least $100,000.

Eligible Costs:

Eligible costs will only include costs incurred after the date of preliminary approval. For a project to be considered an “owned” project, the approved company or an affiliate either owns the project in fee simple or possesses the project pursuant to a capital lease. Eligible costs for owned projects include 100 percent of the land, building, site development and startup costs.

For a project to be considered a “leased” project, the approved company occupies the site of the project pursuant to an operating lease agreement with an unrelated entity that reflects an arms’ length transaction. Eligible costs for leased projects include 100 percent of the start-up costs and 50 percent of the estimated annual rent payments for each year of the tax incentive agreement.  Start-up costs include the costs incurred to furnish and equip a facility, such as computers, furnishings, office equipment, manufacturing equipment, fixtures, relocation of out-of-state equipment and nonrecurring costs of fixed telecommunication equipment. The cost of equipment eligible for recovery as an eligible cost is limited to $20,000 for each new, full-time job for Kentucky residents created as of the activation date.

Incentives:

Tax incentives are available for up to 10 years via tax credits up to 100 percent of tax paid on corporate income or limited liability entity tax arising from the project. Wage assessment incentives up to four percent (including up to one percent required local participation) of gross wages of each employee. If the local community does not have a local occupational fee, then an alternative form of participation should be provided. The employees recoup the wage assessment through a state income tax credit equal to the amount of the wage assessment withheld. The tax incentives remain in place until the authorized recovery amount (approved cost) is realized or for the term of the tax incentive agreement, whichever occurs first. Unused credits that have been authorized for the project may be carried forward for the term of the tax incentive agreement, however, unused credits expire at the maturity of the agreement.

For more information on the KBI program, please visit:
www.thinkkentucky.com/KBI

Back to incentive list

Kentucky Revitalization Act (KRA)

Eligible Companies:

Any Kentucky company engaged in manufacturing and related functions at a location operating within the Commonwealth on a permanent basis for a reasonable period of time preceding the request for assistance.

Eligible Projects:

The project must involve a minimum of eligible equipment and related costs of at least $2,500,000. Eligible equipment and related costs must be related to a qualifying Reinvestment Project which includes the acquisition, construction, and installation of new equipment and the construction, rehabilitation, and installation of improvement to facilities necessary to house the new equipment; and the development of an occupational training program to train or retrain the full-time employees of the company to support the Reinvestment Project. Eligible equipment and related costs does not include costs related to the replacement or repair of existing machinery or equipment resulting from normal wear and usage.

Projects must also agree to maintain a full-time employment base of at least 85% of employment at the facility as of the date of preliminary approval. Companies cannot have been awarded incentives under the Kentucky Industrial Revitalization Act (KIRA) within the previous five years.

Eligible Costs:

Eligible costs include eligible equipment and related costs incurred after the date of preliminary approval that are approved by KEDFA for recovery and may be up to 50% of the eligible equipment and related cost and 100% of the job skills upgrade training costs incurred in connection with an occupational training program for full-time employees specifically related to training or retraining employees as part of the reinvestment project. The minimum requirements of incurring eligible equipment and related cost expenditures of at least $2,500,000 and maintaining 85% of the full-time employment level at the facility must be achieved in order to proceed with final approval.

Incentives:

A tax incentive is available for up to 10 years from the date of final approval via tax credits up to 100% of tax paid on corporate income or limited liability entity tax generated by or arising from the project. The tax incentive remains in place until the authorized incentive amount is realized or for the term of the reinvestment agreement, however, unused credits expire at the maturity of the agreement.

For more information on the KBI program, please visit:
www.thinkkentucky.com/KRA

Back to incentive list

Kentucky Enterprise Initiative Act (KEIA)

Eligible Companies:

Any business entity that establishes a new or expanded service or technology, manufacturing, or tourism attraction activity in Kentucky.

Eligible Projects:

The project must involve a minimum investment of $500,000.  Eligible investment costs include expenditures for research and development equipment, acquisition of real property, building, and construction materials, construction, installation, and rehabilitation of fixtures and facilities, necessary or desirable for improvement of real estate owned, used, or occupied by the approved company.

Tax Incentives:

A KEIA approved company is eligible to receive a refund of sales and use tax paid for construction materials and building fixtures and for equipment used in research and development purchased during the life of the project not to exceed the amount authorized in the memorandum of agreement. An approved company has 18 months from the date of KEDFA approval to purchase materials eligible for refund. KEDFA may grant a 12 month extension for good cause. The total tax refund incentive available for commitment by KEDFA for all projects, for each fiscal year, is limited to $20,000,000 for building and construction materials and $5,000,000 for equipment used for research and development.  Sales tax paid on expenditures made prior to KEDFA approval as an “approved company” will not be refunded.

For more information on KEIA, please visit:
http://thinkkentucky.com/kyedc/pdfs/keia.pdf

Back to incentive list

Kentucky Economic Development Finance Authority (KEDFA)

KEDFA offers a mortgage loan program to work in conjunction with private financing.  The program is designed to allow businesses to obtain the long term financing needed to encourage growth.

Program Guidelines:

Projects financed must be agribusiness, tourism, industrial ventures, or service industry. No retail projects are eligible. KEDFA may participate in projects with loans ranging from $25,000 to $500,000. The amount of KEDFA participation is dependant on the project fixed asset cost, based on the following:

Project Cost KEDFA Participation

Up to $200,000 50%
$200,000 to $500,000 40%
Above $500,000 30%

The project owners must inject a minimum of 10% toward the fixed assets.  KEDFA financing may be combined with a Community Development Block Grant, however, in no case will the total involvement from both exceed 33% of the project cost. KEDFA financing may be combined with SBA 504 financing. Projects must create new jobs or have a significant impact on the economic growth of a community.

Only fixed assets (land, building, and equipment) may be financed. No refinancing will be undertaken. Term and repayments are based on that of the private lending institution. Personal guarantees are required of the company's owners who control at least 20% of the stock of the company.

The borrower must provide KEDFA proof that the project is underway (invoices, etc.) within 4 months of the approval date, or the commitment will expire.  KEDFA funds are not disbursed until the entire project, as outlined in the application, is complete.

Interest Rates and Fees:

The interest rate is fixed, and is tied to the term of the loan. Rates are as follows:
Term Interest Rate
3 yrs. 1.0%
5 yrs. 2.0%
7 yrs. 3.5%
10 yrs. 5.0%

For more information on KEDFA, please visit:
http://thinkkentucky.com/kyedc/pdfs/SmallBusinessLoanProgram.pdf

Back to incentive list

Bluegrass State Skills Corporation (BSSC)

Workforce training is vital for new and existing businesses to stay competitive in the marketplace.  The Bluegrass State Skills Corporation acts as a coordinator and funding source for job training in Kentucky.

For more details on BSSC, please visit:
www.thinkkentucky.com/BSSC

Back to incentive list

Department of Commercialization and Innovation – Forgivable Loan Program

The Department of Commercialization and Innovation (DCI) has been charged with leading the commonwealth’s new economy efforts. By building and promoting technology-driven and research-intensive industries, the Cabinet for Economic Development works through DCI to create high-tech job opportunities and develop clusters of technological innovation throughout the state. DCI’s mission includes recruiting and retaining high-tech companies that produce jobs, new products and services, and develop new and improved processes. DCI recommends funding on behalf of eligible, applicant companies to the Kentucky Economic Development Finance Authority (KEDFA).

In most instances, incentives awarded through DCI are in the form of forgivable loans, with the amount of the loan being determined by DCI, primarily based on the applicant company’s projected high-tech job creation. Forgivable loans recommended by DCI typically range from $100,000 to $250,000 depending upon the specifics of the project. The determination of the loan amount to be recommended is at the sole discretion of DCI. Loan forgiveness and/or payback will be based on the company meeting the job and salary requirements as well as maintaining the same for the duration of the maintenance period.

The first step in the consideration process for funding from the High-Tech Pool is the company’s submission of a preliminary project assessment (PPA) form (available from DCI) as well as an up-to-date business plan.

Security

All companies awarded forgivable loans will be required to provide security on the loan. A letter of credit is the preferred form of security; however, DCI may, at its sole discretion, consider other forms of security such as real estate, certificates of deposit, or a lien on new or existing unencumbered equipment (equipment is required at 1.5x the loan amount due to depreciation). While DCI will work with the company to identify appropriate security, there will be no exceptions to the security requirement.

High-Tech Jobs

High-tech jobs are those which would be considered as:

1. Research and development related;
2. Highly technical in nature; or
3. Upper-level management positions (within a high-tech industry).

Further, the positions to be created must:

1. Pay a salary of at least $40,000 per year (exclusive of commissions and bonuses); and
2. Be filled by Kentucky residents who pay Kentucky income taxes.

In order to participate in this program, a company must create a minimum of seven new, high-tech jobs within three years and maintain those positions for three additional years. Technical experience and minimum educational requirements, such as post-secondary degrees, will also be factors considered by DCI. Complete job descriptions will be required.

Eligibility

As a general rule, a company seeking funding from DCI must fit into one or more of the following five focus areas:

1. Human Health and Development;
2. Information Technology and Communications;
3. Biosciences;
4. Environmental and Energy Technologies;
5. Materials Science and Advanced Manufacturing.

DCI may also consider the following in making a recommendation for funding:

1. The viability of the research and development component (Will a new product or new/improved process result?);
2. The creation of intellectual property and subsequent ownership;
3. The potential for spin off companies and opportunities;
4. The amount of the committed funding matched from the company and other sources (private, state, federal funds);
5. Company/project revenue (both past and projected);
6. The type of collateral to be provided by or on behalf of the company.

Allowable Expenses

The funds provided by DCI must be used for purposes that help to further the commercialization of a product, process, or other innovation. DCI staff will assist the company with creating a budget for the loan funds.
Examples of common, allowable expenses include:

1. Purchase of specialized equipment;
2. Facility “up-fit”;
3. Certain license and certification expenses;
4. Intellectual property protection;
5. Other uses as determined by DCI.

Examples of expenses NOT allowed:

1. Land and/or building construction;
2. Basic office equipment (desks, chairs, etc.);
3. Salaries of those high-tech positions to be created;
4. Other payroll expenses.

For more details on the Forgivable Loan Program, please visit:
http://thinkkentucky.com/dci/pdfs/DCIFactSheet.pdf

Back to incentive list

Commonwealth Seed Capital Fund

Commonwealth Seed Capital, LLC, (CSC) is an independent,non-profit fund that makes debt or equity investments in early-stage Kentuckybusiness entities to facilitate the commercialization of innovative ideas and technologies.

 Investments are typically made in these specified innovation areas: health and human development; information technology and communications;bioscience; environmental and energy technologies; and materials science and advanced manufacturing.

 CSC invests in companies that have a significant Kentuckypresence, the prospect for substantial growth, and the potential to generate an appropriate rate of return. For more information, contact:

Back to incentive list

Kentucky Innovation and Commercialization Centers

The Kentucky Innovation and Commercialization Centers (ICC) are dedicated to creating and growing high-growth, knowledge driven companies. Six regional offices comprise the network and are administered by the Kentucky Science and Technology Corporation (KSTC) under contract with the Cabinet for Economic Development. The ICC network provides business-building talent and related services to the Commonwealth’s entrepreneurs, faculty, and scientists using a best practices model.

For more details about the Lexington ICC, please visit:
http://www.uky.edu/econdev/lexington-innovation-commercialization-center

Back to incentive list

SBIR/STTR Matching Program

A Small Business Innovation Research/Small Business Technology Transfer incentive program will encourage small businesses to explore their technological potential and maximize profit from commercialization.  DCI will currently match all Phase 1 and Phase 2 federal awards received by Kentucky businesses after January 1, 2009.  This would include matching awards of up to $100,000 to sup-port Phase 1 exploration of the technical merit or feasibility of an idea or technology. Phase II federal awards, which support full-scale research and development, can be up to $750,000, and would be matched by the Commonwealth up to the first $500,000.

For more details about the Match Program, please visit:
www.thinkkentucky.com/MatchProgram

Back to incentive list

Kentucky Enterprise Fund

The Kentucky Enterprise Fund, Rural Innovation Fund, and Kentucky New Energy Ventures provide seed stage capital that focus on the early-stage commercialization of a technology-based product or process. By encouraging the commercialization of innovative ideas, these funds foster competitive, profitable companies that create high paying jobs and wealth in Kentucky. This fund provides grants up to $30,000 to assist businesses and individuals at the earliest stages of project feasibility and concept development, and is administered by the KSTC.

Companies seeking capital go through a rigorous due diligence process and are judged in terms of industry fit, return on investment and economic development goals.

Investments are made in small to medium-sized, innovative, technology-based companies in Kentucky that are poised for exponential growth and are: working to commercialize innovative technology in biosciences, environmental & energy technologies, human health & development, information technology & communications, materials science & advanced manufacturing; working to commercialize innovative alternative fuel/energy technology; working in collaboration with Kentucky colleges and universities; and/or located in rural areas of Kentucky (outside Fayette and Jefferson Counties).

For more information about ICC’s, KSTC, SBIR/STTR Matching, or the Enterprise Fund, please visit: www.startupkentucky.com

Back to incentive list