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 full employment for its citizens.
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.
To find out if your business qualifies, contact the program representative, one of the three
Regional Offices, or the
Department for New 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 and approval processes.
Tax Credit Programs
-
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.
-
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 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 income tax and limited liability
entity tax owed by the company; and, wage assessment incentives up to four percent of gross wages of each
employee whose job was created as part of the project. Advanced disbursements may also be available.
-
Kentucky Rural Economic Development Act - KREDA (PDF)
For new and expanding manufacturing projects in qualified KREDA designated counties.
Companies with projects approved under KREDA may potentially receive state income tax
credits and job assessment fees for up to 100% of their capital investment for up to 15
years on land, buildings, site development, building fixtures and equipment used in a
project.
-
Kentucky Jobs Development Act - KJDA (PDF)
For new and expanding service and technology related projects. KJDA projects may
receive a 100% credit against the state income tax arising from a project and may collect a
job assessment fee of up to 5% of the gross wages of each employee whose job is created by
the project and who is subject to Kentucky income tax. Amounts can be up to 50% of project
start-up cost and up to 50% of annual facility rental cost or rental value for up to 10
years. The local community must approve the project prior to the submission of an
application.
-
Kentucky Industrial Development Act - KIDA (PDF)
For new and expanding manufacturing projects. Projects approved under KIDA may receive
state income tax credits for up to 100% of its capital investment for up to 10 years on land,
buildings, site development, building fixtures and equipment used in a project. Or, the
company may collect a job assessment fee of 3% of the gross wages of each employee whose
job is created by the approved project and who is subject to Kentucky income tax.
-
Kentucky Environmental Stewardship Act (KESA) (PDF)
For manufacturing environmental stewardship products that are unique products having a
substantial positive impact on the environment. Companies with projects approved under KESA
must have at least $5,000,000 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 Economic Opportunity Zone Program - KEOZ (PDF)
Counties, urban county governments, or cities of the first class apply through KEDFA
(see above) for certification of an Opportunity Zone based on qualifying census tract
information. New or expanding manufacturing or service/technology companies may be permitted
the following inducements under the KEOZ program:
-
An income tax credit of up to 100% of the Kentucky income tax liability on income generated
by or arising out of the project; and
-
A job development assessment fee of up to 5% of gross wages
-
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.
-
Quick Reference Chart for KJDA,
KREDA, KEOZ & KIDA (PDF)
Other Business Incentives and Financial Programs
-
Bluegrass State Skills Corporation Grant Reimbursement Program
Provides matching grant funds for customized business and industry-specific training programs.
-
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.
-
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.
-
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
of $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. The Kentucky Economic Development Finance Authority
(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.
-
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 sales and use tax paid by approved companies
for construction materials and building fixtures. It is also available for sales and use
tax refunds for equipment used in research and development.
-
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.
-
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.
-
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.