Incentives for Energy Independence

Find more information on the guidelines of this program here.

In August 2007 Kentucky established the Incentives for Energy Independence Act to promote the development of renewable energy and alternative fuel facilities, energy efficient buildings, alternative fuel vehicles, research & development activities and other energy initiatives. For renewable energy facilities, the bill provides incentives to companies that build or renovate facilities that utilize renewable energy, which may include:

•  Tax Credits: up to 100% of the Kentucky income tax or the limited liability entity tax
• Sales and Use Tax:  tax incentives of up to 100%
• Wage assessment: incentives of up to 4% for associated employees
• Advanced disbursement:  Based on the proportion of labor utilization of Kentucky residents

A renewable energy facility is defined as one that generates at least 50 kW of electricity from solar power or at least 1 MW from wind power, biomass resources, landfill gas, hydropower or similar renewable resources. The electricity must be sold to an unrelated party. The minimum investment in any renewable energy facility must be $1 million in capital expenditure which is defined to include various non-capital costs such as labor.

Approved companies may also require that employees whose jobs were created as a result of the associated project, as a condition of employment, agree to pay a wage assessment of up to 4% of their gross wages. Employees will be allowed a Kentucky income tax credit equal to the assessment withheld from their wages.

The maximum recovery for a single project from all incentives, including the income and liability entity tax credit, sales tax refund and the wage assessment, may not exceed 50% of the capital investment.

Prior to making any capital investments in a project, each eligible company must submit an application for incentives to the Kentucky Economic Development Finance Authority. Each incentive contract is negotiated on a case-by-case basis to determine the conditions and termination date of the project, not to exceed 25 years from the project’s activation date. 

There is a $1,000 non-refundable application fee payable upon submission of the application. There is also a 0.25% administrative fee assessed after the final incentives package is settled (capped at $50,000).