Kentucky's General Assembly passed new legislation in 2009 combining the KIDA, KJDA, and KREDA incentive programs into one streamlined incentive program called the Kentucky Business Investment Program or KBI. Also included is a new incentive program for existing businesses for capital expenditures, the Kentucky Reinvestment Act or KRA. 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 Cabinet for Economic Development officials. For more information on Kentucky's incentives, visit www.thinkkentucky.com.
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). 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. Find out more details on-line.
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. 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. Find out more details about this incentive on-line.
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. For more information, visit www.thinkkentucky.com.
Bluegrass State Skills Corporation (BSSC)
The Bluegrass State Skills Corporation acts as a coordinator and funding source for job training in Kentucky. For more details on BSSC, visit www.thinkkentucky.com.
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. 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.
Through Commerce Lexington Inc. and the state's Cabinet for Economic Development, three major incentives are available to firms considering a Lexington area location. For more information, contact our economic development division at (859) 226-1600.
Business Taxes
SOLE PROPRIETORSHIPS & PARTNERSHIPS
The tax on income of sole proprietorships and partnerships is paid by the owners as state individual income tax. The amount paid is based on the proprietors or partners proportionate share of income.
ORGANIZATIONAL TAX
Companies that incorporate in Kentucky pay an organizational tax to the Commonwealth's Secretary of State. The tax is based on the number of shares authorized in the articles of incorporation. The tax is also levied on extra shares of capital stock by amended articles of incorporation and on additional shares created by merger or consolidation. The following numbers depict the per-share tax for businesses incorporating in Kentucky.
SHARES OF STOCK...............Tax per Share
First 20,000...............................$0.010
Next 180,000.............................$0.005
Excess of 200,000......................$0.002
Minimum Tax.............................$10.00
Source: Kentucky Revenue Cabinet
STATE CORPORATION INCOME TAX
Kentucky corporations and foreign corporations are subject to income tax due to a "doing business" standard that includes being organized under the laws of this state; having a commercial domicile in this state; owning or leasing property in this state; having one (1) or more individuals performing services in this state; maintaining an interest in a general partnership doing business in this state; deriving income from or attributable to sources within this state, including deriving income directly
or indirectly from a trust doing business in this state; or directing activities at Kentucky customers for the purpose of selling them goods or services. Exempted are banks and trust companies other than bankers' banks, savings and loan associations, production credit associations, insurance companies, corporations exempted from federal income tax under section 501 of the U.S. Internal Revenue Code, and other nonprofit religious, educational, and charitable corporations. Kentucky has adopted the United States
Internal Revenue Code definition of corporation, which includes associations, joint-stock companies, and insurance companies. Kentucky has broadened the definition of corporation to include LPs, LLCs, S-corps, LLPs, REITs and other legal entities. "Corporation" shall not include any public traded partnership as defined by Section 7704(b) of the IRC that is treated as a partnership under IRC Section 7704(c). [(KRS 141.010(24)]
TAXABLE INCOME...............TAX RATE
First $50,000.............................4.00%
$50,000 to $100,000.....................5.00%
$100,001-plus (After 1/1/07)...........6.00%
$100,001-plus (Before 1/1/07).......7.00%
Excess of $250,000......................8.25%
TANGIBLE PROPERTY TAX
Kentucky businesses are required to file a Tangible Property Tax Return with the Property Valuation Administrator annually by May 15th. Tangible property consists of items such as office furniture, office machines, store fixtures, professional trade and business fixtures, leasehold equipment, machinery and equipment (both manufacturing and non-manufacturing), freestanding signs, raw materials, inventories of all kinds, and many other personal items that may have value and utility. For more information
about tangible property tax, call the Fayette County Property Valuation Administrator at (859) 246-2722.
ADDITIONAL INFORMATION:
Like most other states and localities, other taxes exist besides those listed above. It is recommended that you consult an attorney, accountant, or other professionals about Kentucky tax matters. For further information regarding state taxes, contact the Kentucky Revenue Cabinet or Taxpayer Assistance at (502) 564-4580. For more information about local taxes, call the Division of Revenue at (859) 258-3340.