SPOTLIGHT PROGRAMS

Kentucky Business Investment (KBI) Program:  Provides income tax credits and wage assessments (i.e., incentives calculated as a percentage of employee taxable income) to businesses with new or existing agribusinesses, headquarters, manufacturing, alternative fuel, gasification, energy-efficient alternative fuels, renewable energy production, carbon dioxide transmission pipelines, non-retail services, or technology related companies that locate or expand operations in Kentucky. Projects which locate in certain counties may qualify for enhanced incentives. The incentives, negotiated with Kentucky Economic Development Finance Authority, of up to 100% of corporate income tax liability and up to 4.5% of taxable wages, claimed for up to 15 years depending on project location and other project factors.  

Kentucky Reinvestment Act (KRA): Existing Kentucky manufacturers that invest $1 million for leased projects and $2.5 million for all others in capital expenditures and who employ at least 25 full-time employees as a result of the project may qualify for a corporate income tax credit.  The value of the credit may equal up to 100% of corporate income tax liability arising from the project, and credits may be claimed for up to 10 years.  Approved companies must retain at least 85% of their employees at the time of approval.

‍

‍

‍

TAX CREDITS & REFUNDS

Kentucky Enterprise Initiative Act (KEIA): This program is for new or expanded companies primarily engaged in manufacturing, non-retail service or technology activities, agribusiness, alternative fuel, gasification, energy-efficient alternative fuels, renewable energy production companies, carbon dioxide transmission pipelines, or for headquarters or tourism attraction projects in Kentucky. The program provides a refund of sales and use tax paid by approved companies for building and construction materials permanently incorporated as an improvement to real property, as well as equipment used for research and development equipment, data processing, or flight simulation. Eligible companies must make a capital investment of at least $500,000.  

Kentucky Small Business Tax Credit (KSBTC): An eligible small business is any business organized for profit with 50 or fewer full-time employees that is not an affiliate or subsidiary of a larger corporate structure.  To be eligible for an income tax credit during the year of approval, not to exceed $25,000, the company must: 1) create at least one new, full-time job that must be in place for 12 months and pay no less than 150 percent of the federal minimum wage; and 2) expend at least $5,000 on qualifying equipment or technology.  An eligible company may not apply until one year after both of the minimum requirements are met. The credit can be carried forward for up to 5 years.  

Kentucky Collateral Support Program (KYCSP): Provides a pledged asset (cash collateral account) to an enrolled lender of up to 20% of a loan in order to enhance the collateral coverage of a small business borrower that is otherwise qualified but unable to meet the lender’s security requirements.  The cash account may be pledged as collateral on behalf of the borrower and placed on deposit at the participating lending institution or designated insured depository financial institution.

‍

‍

TAX EXEMPTIONS

Property tax exemption: Kentucky taxes all real property that is not specifically exempted by the state constitution and tangible personal property unless it has been exempted by the legislature. Local taxing jurisdictions in Kentucky include counties, cities, school districts, and special taxing districts (fire protection districts, sanitation districts, watershed districts, etc.) Local governments are prohibited from taxing certain classes of property, such as manufacturing machinery, raw materials inventory, and work-in-process.  Manufacturing machinery is subject to a reduced state tax rate of $0.15 per $100 of assessed valuation.

Non-Refundable Tax Credit: Provides tax credit for tax paid on inventory to offset income and limited liability entity taxes. The credit is phased-in as follows: 2018 – 25% of tax paid on inventory; 2019 – 50% of tax paid on inventory; 2020 – 75% of tax paid on inventory; 2021 and thereafter – 100% of tax paid on inventory.

‍

‍

‍

JOB TRAINING

Bluegrass State Skills Corporation Skills Training Investment Credit (STIC): Provides a credit against income tax liability for businesses that sponsor occupational or skills upgrade training programs for employees. Tax credits are equivalent to $500 per full-time employee trained up to $75,000.

Bluegrass State Skills Corporation Grant-in-Aid Program: Provides matching grant funds for customized business and industry-specific training programs. The training grants can reimburse up to 50% of eligible training costs, capped at the lesser of 50% of approved training costs, $2,000 per employee, or $75,000.

‍

‍

‍

Last Updated: May 2023