Incentives

Paducah and McCracken County aggressively recruit companies seeking to make a significant investment in both capital and jobs in the Paducah area. To this end, Paducah and McCracken County work with the Commonwealth of Kentucky to customize incentive packages that positively impact the bottom line of companies seeking to relocate or expand. The Greater Paducah Economic Development Council would be pleased to discuss potential incentive packages for your company’s next project.

Income Tax Incentives and Credits

• Approved companies may collect a cash rebate for up to 3 percent of the gross wages of each employee whose job is created by a project and who is subject to Kentucky’s individual income tax OR take credits for up to one hundred (100) percent of approved costs, for up to ten (10) years, on land, buildings, site development, and building fixtures and equipment used in new or expanded manufacturing operations. These incentives are available under the Kentucky Industrial Development Act (KIDA). Companies must create at least fifteen (15) new full-time jobs and invest at least $100,000.
• Credits for up to fifty (50) percent of start-up costs and fifty (50) percent of annual rental costs or rental value, over a ten (10) year period, for new or expanding service and technology intensive projects that provide more than seventy-five (75) percent of their services to out-of-state customers and create at least fifteen (15) jobs for Kentucky residents are available under the Kentucky Jobs Development Act (KJDA).
• Credits for up to seventy-five (75) percent of the costs of upgrading manufacturing plants and equipment to prevent the closing of outdated facilities are available under the Kentucky Industrial Revitalization Act (KIRA). The credit can also be extended to corporation license taxes.
• Credits for up to fifty (50) percent of the costs of equipment used to recycle or compost business or consumer waste materials and machinery used to manufacture products from recycled waste materials.
• A credit of $100 for each unemployed person hired for at least 180 consecutive days.
• Any taxpayer that is an electric power company or an entity operating a coal-fired electric generating plant may receive a $2 per ton tax credit for each ton of Kentucky coal burned. Coal purchases in excess of the base year 1999 calendar year are eligible for the credit. (KRS 141.0405)
• A credit for up to 4.5 percent of the value of Kentucky coal (excluding transportation costs) usedfor industrial heating or processing, for ten (10) years following either the installation or conversion to coal burning units. (KRS 141.041)
• A credit of up to $1,500 for ten (10) percent of the wages paid to certain unemployed or low-income individuals that are hired by qualifying enterprise zone businesses.
• A credit is allowed to investors in certified venture capital funds equal to forty (40) percent of their proportional ownership share of all qualified investments made by the fund, not to exceed fifty (50) percent of their credit in any one (1) year.
• A skills training investment tax credit may be awarded by Bluegrass State Skills Corporation as a nonrefundable credit for a company’s occupational or skills upgrade training program. The credit is equal to fifty (50) percent of the approved cost incurred and may not exceed $500 per employee and $100,000 per company.
• The Kentucky Economic Opportunity Zone Act (KEOZ) focuses on development of areas with high unemployment and poverty levels. Eligible companies include new or expanded manufacturing, services, or technology industries, which must invest at least $100,000 in the project and create at least ten (10) new full-time jobs for residents of the zone. An approved company may receive up to one hundred (100) percent credit against Kentucky income tax liability on taxable income generated by the project(s). The credit over the term of the agreement shall be limited to the total approved incentive amount. The approved company may carry forward credits during the agreement term, which shall be for ten (10) years.
• An employer is entitled to an income tax credit for a portion of released time given to assist an employee in obtaining a high school equivalency diploma. The credit is calculated by multiplying fifty (50) percent of the hours released by the student’s hourly salary. The credit shall not exceed $1,250.
• A state income tax credit equal to 5 percent of the qualified cost is available to new and existing businesses that construct, remodel, expand, or equip research facilities, but does not include replacement property. Any unused credit may be carried forward for ten (10) years.
• A state income tax credit for producers or blenders of a “biodiesel” or “blended biodiesel” with a blend of at least 2%. “Biodiesel” or “blended biodiesel” producers receive a $1 credit per gallon produced or blended. This credit is limited to a maximum annual state-wide credit of $1.5 million. Unused credits cannot be carried forward.
• An income tax credit not to exceed $150,000 over a 10-year period on taxpayer expenditures made at a “Qualifying Voluntary Environmental Remediation Property (QVERP).” QVERP is contaminated real property in which the Environmental and Public Protection Cabinet has determined that the responsible parties are financially unable to carry out the obligations to clean up the environmental or toxic damage and the property has been sold to a bona fide purchaser. (KRS 224-01-400 and KRS 224.01-405). The purchaser agrees to clean up the property and receive the credit and the Environmental and Public Protection Cabinet grants the taxpayer a covenant not to sue. The maximum allowable credit is $150,000 and for any one year is $37,500.
• The “Kentucky Environmental Stewardship Act” provides for an income tax credit for up to 10 years if approved by the Kentucky Economic Development Finance Authority (KEDFA) for 100% of the costs of providing the necessary skills training needed to produce the product and up to 25% of the investment in construction, equipment, and related expense. The costs must go towards the construction, rehabilitation or improvement of facilities necessary to produce an “Environmental Stewardship Product,” which is defined as any new or improved product that has a reduced adverse affect on human health or environment when compared to a current product. The maximum claimed for any one year is 25% of the total authorized inducement; and an approved company under this agreement is not entitled to take a recycling tax credit.
• The “Kentucky Clean Coal Incentive Act” provides for an income, license or public service corporation property tax credit for new clean coal facilities constructed after January 1, 2005, at a cost exceeding $150 Million and used for purposes of generating electricity. Before the credit is given, the Environmental and Public Protection Cabinet must certify that a facility as reducing emissions of pollutants released during electric generation through the use of clean coal equipment and technologies. The amount of credit will be $2.00 per ton of coal mined in Kentucky and used in the facility and not already receiving tax credit. Any unused portions of this credit shall not be carried forward.
• A “Certified Historic Structures” tax credit on income, license or franchise tax for financial institutions 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. There is a seven-year carry forward for any unused credit. The maximum credit an owner that is also occupying the home may take is $60,000. The credit is capped for all taxpayers at $3 million per calendar year.

Property Tax Exemptions/Reductions

• Private leasehold interests in property owned and financed by a governmental unit through industrial revenue bonds are taxed by the state at $0.015 per $100 of leasehold value with approval from KEDFA. The same KEDFA approval will exempt the leasehold value from local property taxes. Exemption from local property taxes only on the leasehold value (no state property taxes included), does not require KEDFA approval. Businesses leasing real estate or personal property from a tax-exempt owner, other than property financed by industrial revenue bonds, must pay full state and local property taxes on their leasehold value.
• Cities may exempt the property of new manufacturing facilities from city property taxes for up to five (5) years as an inducement for the location of a plant in the city. This exemption cannot be granted by the state, by counties, by special districts, or by school districts.
• Tangible personal property located in a federally designated and activated foreign trade zone (or sub-zone) are exempt from all local property taxes , provided that the zone is activated in accordance with the regulations of the United States Customs Service and the Foreign Trade Zones Board. The state rate is only 1/10 of 1 cent per $100 of assessed value.
• City and county governments may grant a moratorium on increases in the assessed value of property taxes of older commercial structures for up to five (5) years following their rehabilitation, repair, restoration, or stabilization by owners or lessees. Structures must be at least twenty (25) years old to qualify. The project becomes eligible for a second assessment moratorium after a three (3) year waiting period.
• State law allows for favorable tax treatment for finished goods inventories. The state rate on finished goods inventory is only five (5) cents per $100 of assessed value. Cities, counties, and urban-county governments may exempt or levy rates on these business inventories that are less than the prevailing rate of taxation on other tangible personal property.

• Personal property placed in a warehouse or distribution center for subsequent distribution to an out-of-state location within six months is exempt from state, city, county, and school district personal property taxe s. Finished goods at the end of the manufacturing process that are placed in a warehouse or distribution area for subsequent shipment out-of-state, may qualify for the in transit goods property tax rate.

State Income Tax Exemptions

• Trucks weighing over 44,000 pounds are exempt from the motor vehicle usage tax and sales tax on repair and replacement parts. The sales tax exemption is limited to parts for trucks, including any towed unit, used exclusively in interstate commerce for the conveyance of property or passengers for hire.
• Items purchased for resale.
• Machinery for new and expanded industry.
• Raw materials, industrial supplies, and industrial tools.
• Energy and energy producing fuels, to the extent that they exceed three (3) percent of the cost of production.
• Certified pollution control equipment.
• Industrial machinery sold and delivered out-of-state to manufacturers or processors for use out-of-state.
• Containers, packaging, and wrapping materials.
• Motor fuels for highway use.