Many Kentucky business owners are delightfully surprised to learn about the generous incentives offered to business. These incentives and tax credits are available for typical day to day activities, such as hiring new staff and technology upgrades and improvements to less common business activities, like large-scale recycling endeavors. To help Kentucky companies take advantage of these incentives, we have outlined a few of the more common opportunities available. While this is not a comprehensive list, it does provide insight into the benefits Kentucky business owner can realize. (For an additional list of incentives, see our previous blog post for a list on other available state tax incentives).
Important Kentucky Incentives:
- Kentucky Small Business Investment Credit – Any for-profit business with 50 or fewer full-time employees that is not an affiliate or subsidiary of a large corporate entity (more than 50 employees) is eligible for this income tax incentive, not to exceed $25,000. To meet approval by KEDFA, you must create at least one new, full-time job that is in place for 12 months, pay no less than 150% of the federal minimum wage, and expend at least $5,000 on qualifying equipment or technology. If you are eligible, you may apply one year after both of the minimum requirements are achieved. The maximum credit available for commitment by KEDFA in each fiscal year for all projects is $3M.
- Kentucky Industrial Revitalization Act (KIRA) – To leverage this credit, a company must invest in the rehabilitation of either a manufacturing or agribusiness operation that is in immediate danger of closing temporarily or permanently. In addition, a coal mining and process facility that has closed, been temporarily suspended, or was severely reduced. To be eligible, the revitalized manufacturing or agribusiness company must retain or create 25 jobs; coal mining and processing companies must intend to employ a minimum of 500 people and have a raw production of at least three million tons from the facility. Once approved, companies can recover up to 75% of the costs for rehabilitation or construction of buildings and updated machinery and equipment. The incentive is available for up to 10 years and may be recovered via up to 100% credit against the Kentucky income tax imposed on corporate income or limited liability entity tax arising from the project or as a wage assessment of up to 5% of the gross wages of each employee whose job is preserved or created.
- Corporate Income Tax Credit for Use of Kentucky Coal – After installing or converting your industrial heating or processing to coal-burning units, you may qualify for a corporation income tax credit worth up to 4.5% of the value of Kentucky coal (excluding transportation costs). The credit is allowed for 10 years but cannot exceed the corporation’s income tax liability minus other credits. Unused credits cannot be carried forward.
- Major Recycling Project Tax Credit – Earn tax credit and help the environment at the same time. To be eligible for this incentive, a company must invest more than $10M in recycling or composting equipment, have 750 or more full-time employees, pay more than 300% of the federal minimum wage, and have a plant and equipment with a total cost of over $500M. Once qualified, a company is entitled to an income tax credit for up to 10 years and up to 50% of the installation costs of the equipment. In each taxable year, the amount of credits you can claim for all major recycling projects is limited to 50% of the total above the baseline tax liability of the taxpaying entity or $2,500,000, whichever is less. If you have one or more projects, you will be entitled to a tax credit equal to the total for each major recycling project, but you’re unable to take the standard recycling credit and the major project credit on the same equipment.
- Certified Historic Structures Income Tax Credit – This income tax credit, or franchise tax for financial institutions, is available for the rehabilitation of a certified historic structure. The credit is 30% of the qualifying expenses for an owner-occupied property and 20% for all other properties. The maximum credit an owner-occupied property owner may take is $60,000, but any unused credit can be carried forward for a period of seven years.
To find out if your company qualifies for these or other state incentives, please contact us today!