Financial Incentives Programs October 18, 2012

1. Financial Incentives Programs October 18, 2012

2. West Kentucky Office • Support new business site selection across the Commonwealth in 120 counties • Support existing businesses in 47 counties • Corky Peek, Senior Project Manager • Patty Lockhart, Project Manager • Jamie Bundren, Project Manager

3. Tax Incentive Programs • Kentucky Business Investment Program • Kentucky Reinvestment Act • Kentucky Enterprise Initiative Act

4. Kentucky Business Investment (KBI) Program

5. KBI Program With the enactment of HB 3 in 2009, the following programs were replaced by one new, flexible, consolidated program for new and expanding industry : Kentucky Rural Economic Development Act (KREDA) Kentucky Industrial Development Act (KIDA) Kentucky Jobs Development Act (KJDA) Kentucky Economic Opportunity Zone (KEOZ)

6. KBI – Eligible Companies • Manufacturing • Agribusiness • Service and technology(activities provided predominately outside the commonwealth; regional/ multinational/international market) • Regional and multinational headquarters

7. Minimum Qualifications: $100,000 investment 10 new, full-time Kentucky resident jobs 90% of new jobs must be paid minimum wage requirement depending on location All Projects: Must achieve 90% of the established jobs target and the established wage target by activation date and maintain those averages or better through the term to maximize approved costs May be owned or leased KBI Requirements

8. KBI Projects in Enhanced Incentive Counties • Same criteria used to determine enhanced incentives counties as formerly used to determine KREDA counties • $9.06/$10.42 hourly wage/fringe requirement • 15 year term for tax incentive agreement • Wage assessment of 5% (all state) and corporate income tax credit/LLET available for recovery of incentives • Equipment expense unlimited as part of approved costs • Counties maintain eligibility for enhanced benefits for 3 years after certification lapses

9. KBI Projects in Other Counties • Ten year term for tax incentive agreement • $10.88/$12.51 hourly wage/fringe requirement • Eligible for up to 4% wage assessment (3% state/1% local assessment fee) and corporate income/LLET tax credits as recovery methods • Local jurisdictions with an occupational fee may offer less than the full amount available, and the state wage assessment portion will be pro-rata; if no local occupational fee is assessed, then another form of participation will be expected • Equipment expense is limited to $20,000 for new, full-time Kentucky resident jobs created as part of the total approved costs

11. KBI Eligible Costs • For OWNED projects, including those with capital leases, eligible costs include 100% of the cost of land, building, and attendant construction, labor, installation, etc. costs, and start up costs, including equipment (subject to $20,000 per job created in other counties) • For LEASED projects, eligible costs include start up costs and 50% of estimated annual rent for each year of the tax incentive agreement

12. KBI Approved Costs • KEDFA will set approved costs at final approval, however, all expenditures must be made by activation and it is the “confirmed approved costs” that will be the final, eligible recovery amount • Annual recovery limits will be set in the agreement and may be adjusted annually to reflect a company’s success in meeting job and wage targets

13. KBI Administrative Matters • Application Process/Preliminary Approval • Fees • Final Approval/Activation • Disclosure • Monitoring • Ongoing reporting requirements

14. Kentucky Reinvestment Act (KRA) • Assists existing manufacturers who need to make significant capital investments in order to remain competitive • Requires minimum $2.5 million in new investment

15. KRA Program • Existing manufacturers may recover: • Up to 50% of the cost of new equipment • Up to 100% of eligible skills upgrade training costs • Recovery of approved costs will be through corporate income/LLET tax credits • Cabinet to negotiate minimum number of jobs to be retained, with 85% of pre-project base being the statutory floor • An approved company will have 3 years from preliminary in which it must enter into a final reinvestment agreement

16. KRA Program, continued • The term of the Reinvestment Agreement is limited to 10 years • The maximum annual recovery is limited to 20% of approved costs, plus tax credit carry forwards • The company may not have received benefits under KIRA within the last 5 years

17. KRA Administrative Matters • Application Process/Preliminary Approval • Fees • Final Approval • Disclosure • Monitoring • Ongoing reporting requirements

18. Kentucky Enterprise Initiative Act (KEIA) • Sales & Use Tax Refund Program • No job or wage requirement • Minimum $500,000 project investment • Project term is negotiated, but may not exceed 7 years including any extensions

19. KEIA Eligibility Who is eligible? • New or Expanded Manufacturing Projects • New or Expanded Service & Technology • Regional or headquarter operations • Tourism Attraction

20. KEIA Investment Minimum Investment includes: • Acquisition of Real Property • Building Fixtures • Construction Materials • Cost associated with construction, installation, and rehabilitation of fixtures • Research & Development Equipment • Electronic Processing Equipment ($50,000 minimum)

21. The Financial Incentives Searchable Database • This database is accessible from the cabinet’s website: www.thinkkentucky.com • It is also accessible through the state’s transparency portal, http://opendoor.ky.gov/Pages/default.aspx

22. KEDFA Tax Incentive Programs QUESTIONS? Corky Peek, Senior Project Manager West Kentucky Office Madisonville Corky.Peek@ky.gov 270-210-0033