The Derby. The Corvette Museum. Basketball. Specific Development Taxes.
All of these are special to Kentucky - but the last is probably the most complicated, and least fun for payroll professionals and residents alike. Here are some examples of specific development taxes and tax incentives in Kentucky.
Kentucky Rural Economic Development Act (KREDA)
KREDA offers tax incentives for businesses that establish new manufacturing plants or expand existing ones in qualifying Kentucky counties (Montgomery, Marshall, Somerset). A KREDA approved company is eligible to receive state income tax credits of 4% of the gross wage of each employee whose job is created via KREDA.
Tax Increment Financing (TIF)
TIF is an economic development tool used by Kentucky public agencies to finance improvements for infrastructure projects, such as city and highway streets. The TIF tool allots future tax gains for companies that aid in the improvements. Agencies using the TIF tool may see an impact on taxes, including individual income taxes. Boone and Williamstown Ark Encounter counties are subject to TIF taxes, for example.
Kentucky Business Investment (KBI)
Companies involved in manufacturing and agribusiness can be eligible for incentives made available by the KBI program. Counties with an average annual unemployment rate exceeding the state rate for five preceding years, counties with an unemployment rate greater than 200% of the statewide rate for one preceding year, and counties identified as one of the sixty most distressed counties are all eligible for enhanced incentives through the KBI program, as well. These incentives include up to 5% of gross wages of each employee within an 'enhanced incentive county' or up to 4% of gross wages for employees in other eligible companies, such as previously state manufacturing and agribusiness ones. Employees receive credits for fees against state income taxes. An example of a qualifying 'enhanced incentive county' that would receive credits is Franklin City county.
Kentucky Jobs Development Act (KJDA)
To help bolster employment in the service or technology industries, Kentucky’s legislature passed the Kentucky Jobs Development Act. Companies approved by the KJDA will receive employee tax credits per each employee hired. If the approved company uses the wage assessment portion of the KJDA program, each employee is entitled to an income tax credit against Kentucky’s state income tax up to ⅘ of the total wage assessment.
Jobs Development Incentive Program (JDIP)
The JDIP program is similar to the KJDA, but limited to new or existing services in the technology and industrial industries in Bowling Green, Kentucky. For a company to qualify for the JDIP, it must create jobs that produce a minimum of $10,000 annually in city withholding tax. The credit for companies doing this is a withholding credit withheld from their employees over a predetermined period.
Inter-Modal Transportation Authority/ITA Taxing District (ITA)
The Inter-Modal Transportation Authority introduced the Kentucky TriModal Transpark, a project to help create jobs in predetermined industrial areas, in 2005 in Bowling Green, Kentucky. Bowling Green will return one fourth of the revenue (or occupational tax) created by jobs in the Transpark area. The city would also give up 1% of its occupational tax to companies within the Kentucky TriModal Transpark. Half a percent of the wages from employees in the Kentucky TriModal Transpark would go back to the ITA - the body who introduced the Transpark.
Louisville Metro Revenue Commission (METR)
The METR is a municipal corporation created in 1851 in Louisville, Kentucky. It serves as the bond agent for Louisville's general obligation debt. Today, its most important function is to collect occupational license fees and taxes on behalf of the following: The Louisville Metro Government, the Jefferson County Board of Education, and the Anchorage Board of Education, and the Transit Authority of River City.