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New Administrative Regulation Incorporates Application for Kentucky Business Investment Programs

08.21.2009

The Kentucky Department of Revenue (“Department”) recently proposed Administrative Regulation, 307 KAR 1:010 (“Regulation”), which adopts the application and provides the fee structure for economic development tax incentives created by KRS 154.32.  The Department simultaneously promulgated the same regulation as an Emergency Regulation, 307 KAR 1:010E, which is effective immediately.

KRS 154.32-020 provides tax credits of up to one hundred percent (100%) against the Kentucky income and limited liability entity tax of eligible companies for the location or expansion of manufacturing facilities, agribusiness operations, nonretail service or technology facilities, and regional or national corporate headquarters in Kentucky, as well as provides for wage assessments (i.e., refunds) against the gross wages of each new employee subject to Kentucky income tax.

To qualify for the tax credits, an approved company must: (1) incur eligible costs of at least one hundred thousand dollars ($100,000); (2) create at least ten (10) new full-time jobs and maintain an annual average number of at least ten (10) new full-time jobs; (3) pay at least ninety percent (90%) of all new full-time employees whose jobs were created as a result of the economic development project, a minimum wage of one hundred twenty-five percent (125%) to one hundred fifty percent (150%) the federal minimum wage, depending on the county; and (4) provide employee benefits for all new full-time jobs equal to at least fifteen percent (15%) of the minimum wage target established by the tax incentive agreement.

The application incorporated by the Regulation provides that businesses applying for the economic incentives must notify the Department of Business Development within the Cabinet for Economic Development.  A project manager will be assigned to each applicant to assist in determining the incentives for which the applicant qualifies.  The Regulation and application also provide for a $500 application fee for incentives under the Kentucky Enterprise Initiative Act and fees in the following amounts for incentives under the Kentucky Business Investment Program: (1) $500 for applications filed July to December 2009; (2) $750 for applications filed January to December 2010; and (3) $1000 for applications filed January 2011 and thereafter.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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