Kentucky Business Climate Boosted by State Incentives
Kentucky’s economic development successes are written in INK, thanks to the surge in investments and job creation that are being encouraged by the state’s Incentives for a New Kentucky programs.
The Incentives for a New Kentucky (INK) programs, signed into law in 2009 by Gov. Steve Beshear, modernize and streamline Kentucky business incentives and offer several new and revised programs to provide tax incentives to businesses locating, expanding or reinvesting in the state. The legislation includes programs that, for the first time, allow the Bluegrass State to offer tax credits for film production, as well as to small businesses hiring just one new employee while making a $5,000 investment.
Kentucky Tax Incentives, Credits
The state’s return on investments has been tremendous, says Larry Hayes, secretary of the Kentucky Cabinet for Economic Development, the state's lead economic development organization. At latest count, nearly 230 businesses had received preliminary approval through one or more INK programs. Those businesses were implementing or considering active projects representing a potential investment of more than $2 billion across Kentucky. Those projects could create more than 13,500 jobs and help retain nearly 4,800 existing jobs.
“Our 2010 end-of-the-year job numbers nearly doubled that of the previous year, while our investment numbers more than doubled. This growth can largely be attributed to the success of our INK programs aimed at not only attracting new business to the state but at the retention and expansion of our existing industries. In fact, almost 85 percent of the announcements in 2010 stemmed from existing Kentucky industries that either expanded or made investments to retool Kentucky operations,” says Hayes.
INK incentives are encouraging a variety of businesses, from Tennessee-based retailer Tractor Supply Co. to auto industry supplier Martinrea, to invest millions of dollars and create jobs in Kentucky.
Kentucky Incentives Support Business Growth
Tractor Supply is investing more than $53.1 million for a new 840,000-square-foot regional distribution facility in Franklin. The new operation will create 216 new jobs within three years of operation to expand its Kentucky facilities.
Martinrea Heavy Stampings is investing $12 million to expand its Shelbyville operation to provide metal stampings and assemblies for production of the next generation of the Ford Escape in Louisville. Martinrea’s expansion will create 150 jobs.
Martinrea Hopkinsville, which manufactures technologically advanced automotive components and assemblies for the global auto industry, is investing $13.7 million to expand its facility in that city. The investment enables the company to strengthen its client base, increase efficiencies and to maintain its current 438 employees, says General Manager Kurt Spencer.
“With the support from the state of Kentucky and local representatives, Martinrea made the decision to expand the Hopkinsville operation. With the current stress on automakers and their supply base, we are fortunate in this market to be able to expand our business and better secure the future for our employees,” he says.
Automotive supplier American Howa Kentucky Inc. is expanding its Bowling Green operation, creating 86 jobs. The nearly $11.5 million investment will add 56,000 square feet to the company's existing 138,000-square-foot facility. The Kentucky Economic Development Finance Authority gave approval for tax incentive benefits to American Howa Kentucky up to $900,000 through the Kentucky Business Investment program. Another automotive supplier, Curtis Maruyasu America, is retooling its facility in Lebanon, investing nearly $11 million and preserving more than 416 jobs. The Kentucky Economic Development Finance Authority approved tax benefits up to $1 million under the Kentucky Reinvestment Act.
Also with INK’s encouragement, Polyair selected its Bardstown operation for a $5.6 million investment that allows the company to consolidate operations from out of state and create 21 new jobs in Kentucky. The plant manufactures polyethylene foam protective packaging products.
“The INK program made for a smooth process,” says Plant Manager Rick Potter.
INK Program Promotes Investment in Kentucky
Incentives for a New Kentucky programs modernize and streamline Kentucky’s business incentives. The business incentive package includes several new and revised programs to provide tax incentives to businesses locating, expanding or reinvesting in Kentucky. The primary business incentive programs include:
· The Kentucky Reinvestment Act (KRA): KRA benefits existing manufacturers that need to make a significant capital investment in Kentucky facilities to remain competitive. Companies must invest at least $2.5 million in an existing Kentucky manufacturing facility and maintain at least 85 percent of the full-time employment base to claim the tax credit. The company may also recover up to 100 percent of eligible skills upgrade training costs.
· The Kentucky Business Investment Program (KBI): Eligible companies include any business engaged in manufacturing, agribusiness, regional and national headquarters, or nonretail service or technology activities that conducts a new project, with a minimum investment of $100,000 in the state, that creates a minimum of 10 full-time jobs with minimum required wages and benefits. Available tax credits include up to 100 percent of corporate income or a limited liability entity’s tax liability arising from the project and wage assessment incentives. Projects in counties with high unemployment are eligible for additional incentives.
· The Kentucky Enterprise Initiative Act (KEIA): Eligible companies are primarily engaged in manufacturing, service, technology activities, or in operating or developing a tourism attraction. Incentives are available for an investment of at least $500,000 in an economic development project. Available incentives include a refund of sales and use tax paid for building and construction materials, R&D equipment or electronic processing equipment.
· Kentucky Small Business Investment Credit (KSBIC): The KSBIC program is designed to spur job creation by providing a nonrefundable state income tax credit to small businesses. The program provides state income tax credits ranging from $3,500 to $25,000 per eligible small business that creates, fills and maintains one or more new eligible jobs and invests at least $5,000 in qualifying equipment or technology. With certain exceptions, most for-profit small businesses with 50 or fewer employees are considered eligible for the program.
· Kentucky Film Office Tax Credit: The program is designed to encourage increased production activity in Kentucky. Companies spending at least $500,000 to produce feature films or television shows in Kentucky, $200,000 to make commercials or $50,000 to produce documentaries are eligible for a refundable income tax credit of 20 percent of approved expenditures. Broadway shows produced in Kentucky for national tour are also eligible for incentives, with at least $50,000 in qualified expenditures.
Over the past three years, Kentucky’s tax incentive initiatives helped its business tax climate improve more than any other state's, according to the Tax Foundation's annual State Business Tax Climate Index. In 2006, Kentucky ranked 34th among the states. By 2011, Kentucky’s ranking improved 15 places to 19th. The State Business Tax Climate Index is a tool for gauging how each state’s tax system compares with competing states.