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The Kentucky Business Investment Program

On November 22nd, the KEDFA small business loan program was discussed on our blog. Let's take a look at another valuable financial resource for Kentucky businesses: the Kentucky Business Investment Program ("KBI"), also administered by the Kentucky Economic Development Finance Authority.

KBI was enacted in 2009 and consolidated several existing business incentives programs. The program allows a business which is engaged in manufacturing, agribusiness, nonretail service or technology, or national or regional headquarters operations claim a credit against up to 100% of its state income tax liability arising from a new or expanded economic development project for a period up to ten years. In an "enhanced incentive" county, the incentive is available up to fifteen years. There are several qualifications a county must meet to be qualified as an "enhanced incentive" locale.

In addition to the credit, a business may retain up to 5% of the wages of its employees whose jobs are created as a result of the project. The amounts withheld from the wages may be claimed by the employees as full credit against the withholding taxes that they would otherwise owe at the local and state level. The total amount of the incentives claimed and wages withheld may not exceed the total costs incurred to acquire, construct, and equip the project.

To be eligible for KBI incentives, an economic development project must satisfy numerous requirements, including:

· Creating at least 10 new, full-time jobs for Kentucky residents.

· Maintaining an annual average of at least 10 new, full-time jobs for Kentucky residents.

· Incurring eligible costs of at least $100,000.

· For enhanced incentive counties, at least 90% of the new, full-time Kentucky resident employees must receive hourly wages at an hourly wage of at least $9.06; for non-incentive counties, the hourly wage must be $10.88.

· The new, full-time Kentucky resident employees must also receive employee benefits equal to 15% of the required minimum hourly wage (or, alternatively, utilize a combination of wages and employee benefits equivalent to 115% of the required minimum hourly wage).

Not only do the minimum requirements have to be met, the business must pass the "but for" test - meaning that the business will be required to certify that the project could reasonably and efficiently locate outside the Commonwealth, and but for the incentives offered, the project would likely locate outside the Commonwealth. If an expansion of an existing facility is involved, the business must certify that the incentives are necessary for the project to occur.

Qualifying for the KBI Program is a detailed and complex process. The knowledge and experience of a corporate attorney can be instrumental to a business's approval. If you would like to know more about the program, the attorneys at McBrayer are ready to answer your questions and assist you with the financing of your economic development project.

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James H. Frazier, III is the Managing Member of the firm, a position he has held for over 18 years. Mr. Frazier's practice focuses on real estate, bankruptcy, mergers and acquisitions and general corporate practice with special emphasis on mineral and energy law. He can be reached at jfrazier@mmlk.com or (859) 231-8780, ext. 303.

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