Kentucky offers a variety of incentives to attract businesses and stimulate economic development in key industries such as manufacturing, energy, technology, and logistics.  These programs aim to create high-quality jobs, encourage innovation, and foster business growth throughout the state.  Below are some of the key business incentives available in Kentucky.

Kentucky Business Investment Program (KBI)

Overview

The KBI program is a performance-based incentive designed to encourage businesses to locate or expand in Kentucky.  It offers a combination of tax credits and financial assistance to companies that create significant numbers of jobs and invest in capital improvements.

Eligibility

• Businesses must invest in physical facilities or machinery and equipment.

• At least 10 new full-time jobs must be created, with wages and benefits meeting a minimum threshold.

• The investment must be a significant capital expenditure, typically over $500,000.

Incentive Value

• The KBI program provides a combination of income tax credits, wage assessments, and other incentives.

• The tax credits can be used against Kentucky income and payroll taxes for up to 10 years.

Application Process

Businesses must apply through the Kentucky Economic Development Finance Authority (KEDFA) and provide details of their investment and job creation plans.

Kentucky Reinvestment Act (KRA)

Overview

The KRA is designed to help existing Kentucky businesses upgrade their facilities and equipment to remain competitive in the global marketplace.  The program offers incentives for businesses making substantial reinvestments in their operations.

Eligibility

• Businesses must reinvest in facilities or equipment used in their current operations.

• The reinvestment must lead to increased productivity, job retention, and other economic benefits.

Incentive Value

• The program offers a state income tax credit for up to 5% of the eligible reinvestment costs.

• The credit can be applied over a 10-year period and is aimed at reducing the financial burden of reinvestment.

Application Process

Applications must be submitted to KEDFA, detailing the scope of the reinvestment project and the expected economic impact.

Kentucky Enterprise Initiative Act (KEIA)

Overview

The KEIA provides sales and use tax incentives to businesses involved in qualifying activities such as construction, expansion, and renovation.  The program is designed to reduce the upfront costs of major capital investments.

Eligibility

• Businesses must be engaged in qualifying activities such as construction, expansion, or renovation of facilities in Kentucky.

• The project must involve significant capital expenditures and the creation of new jobs.

Incentive Value

• The program provides sales and use tax rebates on construction materials, machinery, and equipment.

• Businesses may receive a refund of the sales tax paid on eligible purchases, which can be used to offset project costs.

Application Process

Businesses must apply through the Kentucky Department of Revenue (KDR), submitting documentation of their project and associated costs.

Kentucky Investment Fund Act (KIFA)

Overview

The KIFA supports early-stage investment in Kentucky businesses by offering tax credits to investors who fund small businesses in targeted sectors such as technology and life sciences.  The program helps attract venture capital and stimulate innovation.

Eligibility

• Businesses must be in their early stages and focused on innovation or high-growth industries such as technology, health care, or advanced manufacturing.

• Investors must contribute funds to eligible businesses within the state.

Incentive Value

• Investors can receive a 40% state income tax credit on their investment in qualifying businesses.

• The credit is capped at $200,000 per investor and can be carried forward for up to 10 years.

Application Process

Investors and businesses must apply through the Kentucky Economic Development Cabinet (KEDC), providing details about the business and the proposed investment.

Kentucky New Markets Development Program (NMDP)

Overview

The NMDP provides financial incentives for businesses in low-income communities by offering state income tax credits to investors who provide funding to these businesses.  The goal is to stimulate economic growth in underserved areas.

Eligibility

• Businesses must be located in designated low-income areas of Kentucky.

• The program targets businesses that are expanding or starting new operations in these areas.

Incentive Value

• Investors can receive a tax credit of up to 39% of their investment in qualified businesses.

• The credit can be used to offset Kentucky income taxes over a 7-year period.

Application Process

Businesses must apply to KEDC, which will determine eligibility based on location and economic impact.

Kentucky Workforce Investment Program (WIP)

Overview

The WIP offers funding for businesses to train their workforce and increase employee skills.  The program is aimed at helping companies adapt to changing market demands and develop a more competitive workforce.

Eligibility

• Businesses must provide training programs for their employees in high-demand skills.

• Training must be targeted at improving productivity, technical skills, and other workforce-related areas.

Incentive Value

• The program provides grants to cover up to 50% of training costs, including tuition, training materials, and employee certifications.

• Grants are awarded on a competitive basis.

Application Process

Businesses must apply through the Kentucky Labor Cabinet, detailing the scope of the training program and the number of employees to be trained.

Kentucky Renewable Energy Tax Incentive

Overview

The Kentucky Renewable Energy Tax Incentive promotes the use of renewable energy technologies by offering tax credits for businesses that invest in renewable energy systems.  The program encourages sustainable energy practices and reduces the environmental impact of industrial operations.

Eligibility

• Businesses must install renewable energy systems such as solar, wind, or geothermal systems.

• The energy systems must be used for commercial or industrial purposes.

Incentive Value

• The program offers tax credits up to 30% of the cost of qualifying renewable energy systems.

• The credit can be applied to Kentucky state income taxes.

Application Process

Businesses must apply to KDR, providing details about the renewable energy systems and the installation costs.

Kentucky State Sales Tax Exemption for Manufacturing Equipment

Overview

This program provides a sales tax exemption for businesses that purchase manufacturing equipment, machinery, and other tangible personal property used in the manufacturing process.  The goal is to reduce operational costs and encourage investment in manufacturing operations.

Eligibility

• Businesses must purchase machinery or equipment that will be used in manufacturing processes.

• The exemption is available for both new and existing businesses in Kentucky.

Incentive Value

• The program offers a full exemption from Kentucky state sales tax on qualified equipment purchases.

• This can significantly reduce the upfront costs of expanding or upgrading manufacturing operations.

Application Process

Businesses must apply to KDR and provide proof that the equipment will be used for manufacturing purposes.