High-Tech Construction and Investment Pool
Download Fact Sheet on High-Tech Pools
The Department of Commercialization and Innovation (DCI), in the Cabinet for Economic
Development, administers two pools of funds:
- The High-Tech Construction Pool is used for projects with special emphasis on the creation
of high-tech jobs and knowledge-based companies. The commissioner recommends funding of
companies to KEDFA for approval; and
- The High-Tech Investment Pool is used to build and promote technology-driven industries and
research-intensive industries with the goal of creating clusters of innovation-driven
industries in Kentucky. The commissioner recommends funds to be used to support loans and
grants, or secure an equity or related position to KEDFA for approval. (KRS 154.12-278)
Research, Innovation & Technology Businesses
The Council on Postsecondary Education (CPE) plays a major role in attracting research and
development work and in supporting innovation and inventions through the following four
programs, collectively called the Kentucky Enterprise Fund:
- The Kentucky Research and Development Voucher Program provides state funds on a match basis
to small and medium-size companies to undertake research and development work with a Kentucky
university, with a maximum voucher award of $200,000 over two years. (KRS 164.6019 and
164.6021)
- The Kentucky Rural Innovation Program provides seed funds to small rural Kentucky-based
businesses to undertake research and development and entrepreneurial innovation in
partnership with a Kentucky postsecondary institution or unaffiliated third party, with a
maximum voucher award of $100,000 over two years. (KRS 164.6027 and 164.6029). This program
is generally divided into 2 phases - $25,000 and a follow-on of $75,000.
- The ICC Concept pool provides grants up to $25,000 to assist businesses and individuals at
the earliest stages of project feasibility and concept development. (KRS 154.12-300 to
154.12-315)
- The Gap Fund/Executive in Residence Program provides follow-on funding of up to $400,000 for
previously funded high-performing qualified companies within KSTC's investment portfolio
(via CPE-funded programs 1 through 3 above) and must be matched by the company, which occurs
generally as part of a new, minimum $1M round.
The Kentucky Science and Technology Corporation manages these funds under contract with the CPE.
For more information on funding guidelines, see
www.startupkentucky.com
Kentucky Innovation and Commercialization Centers
The Kentucky Innovation and Commercialization Centers (ICCs) are public-private partnerships
dedicated to creating and growing high-growth, knowledge driven companies that are primarily
seeking private investments through angels and venture capitalists. Six regional ICCs and 7
local Innovation Centers (ICs) comprise the main network, which is administered by the Kentucky
Science and Technology Corporation (KSTC) under contract with DCI in the Cabinet for Economic
Development. See
www.startupkentucky.com to locate
the offices serving each region.
The ICC and IC network is the statewide infrastructure that provides business-building talent
and related services to Kentucky’s entrepreneurs, faculty and scientists using a best practices
model. The centers also link scientists and entrepreneurs with the innovation–related funding
tools created under the Kentucky Innovation Act. See discussion above on Funds.
Commonwealth Seed Capital LLC
The Commonwealth Seed Capital LLC (CSC) provides early-stage seed funds to facilitate the
commercialization of innovative ideas and technologies developed in Kentucky. CSC will invest
state capital in Kentucky technology companies.
Kentucky Science and Engineering Foundation
Small businesses having their principal business located in Kentucky are eligible to apply for
R&D Excellence Program awards under the “emerging technologies” category, with awards ranging
from $20,000 to $50,000 per year. The R&D Excellence Program makes proactive investments in
existing and emerging areas of research leading to innovation and technology development in five
state-identified focus areas through a peer-review system. Emerging technologies are the subject
of research and development activities, which are conducted to help the company further define
and develop a new product or process technology. (KRS 154.12-320)
The Foundation also administers the SBIR/STTR Phase 0 and Phase 00 program. This is a seed
grant program to assist Kentucky’s small companies in developing competitive, high quality Phase
I and Phase II proposals to any of the federal agencies participating in the Small Business
Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Companies
are eligible to apply for up to $4,000 to assist the preparation of a federal proposal. The goal
of the Phase 0 and Phase 00 program is to increase the number of winning proposals funded for
Kentucky companies. Each year the Foundation offers SBIR conferences with panels from
participating federal agencies and workshops on SBIR/STTR proposal writing for interested
companies.
The Foundation also administers the Kentucky Commercialization Fund Program which provides seed
funds to Kentucky university’s faculty members for commercializing products, processes, or
services developed through research and development work undertaken at a Kentucky university,
with a maximum grant of $225,000 over three years. (KRS 164.6035 and 164.6037)
The Foundation is managed by the Kentucky Science and Technology Corporation under a contract
with the Council on Postsecondary Education. For more information go to
http://ksef.kstc.com
Research Facilities State Income Tax Credit
A state income tax credit is provided for investment in facilities used to pursue research. The
income tax credit is equal to 5 percent of the qualified cost for "construction of research
facilities" for “qualified research” as defined in Internal Revenue Code Section 41. The credit
is available to new and existing businesses that construct, remodel, expand, or equip research
facilities, but does not include replacement property. Any unused credit may be carried forward
for 10 years. (KRS Chapter 141.395)
Small Business Innovation Research and Technology Transfer Incentive Program
The Department for Commercialization and Innovation will match all Phase I and Phase II federal
SBIR and STTR awards received by Kentucky Businesses. This would include matching awards of up
to $100,000 to support Phase I exploration of the technical merit or feasibility of an idea or
technology. Starting in July 2007, 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 in each year of the federal award.
Statewide Business Plan Competition and Awards Program
The program will encourage entrepreneurship and develop new high-growth ventures in the
Commonwealth. The winners will receive cash awards totaling up to $100,000.
Kentucky Investment Fund Act
The Kentucky Investment Fund Act encourages venture capital formation by certifying privately
operated venture funds. Certified funds entitle their investors to tax credits equal to 40
percent of their capital contributions to the fund, not to exceed 50 percent of the initial
approved aggregate credit amount proportionally available to an investor for any one tax year.
Unused credits may be carried forward for up to 15 years. Tax credits may be taken against state
income, corporation license, insurance premiums, bank franchise, and savings and loan association
taxes. Nonprofit entities may transfer tax credits for some or no consideration. Criteria for
certification include an evaluation of the business plan, analysis of the investment strategy,
and past experience of the fund manager. Separate requirements exist for initial fund
capitalization, as well as ceilings on cash contributions and total credits authorized. Total
qualified investments made by each fund in any single small business may not exceed 25 percent
of that fund. Investment funds may be approved by KEDFA allowing investments up to 100 percent
in a single knowledge-based entity. To qualify a small business must have:
-
a net worth of less than $5 million ($10 million for knowledge-based businesses) or its net
income in each of the prior two years is less than $3 million; and
-
100 or fewer employees; and
-
more than 50 percent of its assets, operations, and employees must be located in Kentucky.
(KRS 154.20-250 to 154.20-284)
Any investment not in a qualified small business may be made by a fund, but shall not be eligible
for the tax credits. www.thinkkentucky.com/kyedc/pdfs/kybusinc.pdf Kentucky offers a number
of progressive incentives for businesses. The following list should be considered as a general summary.
Additional information on each business incentive is available.