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Kentucky Investment Fund Act (KIFA) –KRS 154.20-250 to 154.20-284

 

  • Kentucky Investment Fund Act was established to encourage capital investment in the Commonwealth, to encourage the establishment or expansion of small businesses in Kentucky, and to create more jobs.

  • "Investment fund" means any entity that is organized by an investment fund manager in compliance with applicable state and federal securities laws and regulations, and is approved by the Cabinet for Economic Development to make qualified investments pursuant to KRS 154.20-256.

 

  • A person or entity seeking approval as an investment fund manager to operate one or more investment funds must submit a written application to the Cabinet for Economic Development.

 

  • An investor in a qualified investment fund shall be entitled to a nonrefundable credit equal to 40% of the investor's proportional ownership share of all qualified investments made by its investment fund.

 

  • The tax credit available to any investor may not exceed 40% of the cash contribution made by the investor.

 

  • Credits may be applied against: income tax imposed by KRS 141.020 or 141.040, and the limited liability entity tax imposed by KRS 141.0401; the corporation license tax imposed by KRS 136.070; the insurance taxes imposed by KRS 136.320, 136.330, and 304.3270; and the taxes on financial institutions imposed by KRS 136.300, 136.310 and 136.505. Insurance and financial institutions tax returns are reviewed by their respective section and any credits claimed on those returns are verified by the Tax Credits Section. To verify the credits, a representative from the insurance and/or financial institution taxing section(s) is required to contact the Tax Credits Section.

 

  • An investor may not claim more than 50% of the initial approved aggregate credit in any tax year.

 

  • An investor may first claim the credit in the year following the year in which the credit was granted.

  • Unused tax credit may be carried forward however credits not used within 15 years of the approval shall be lost.

  • Committed cash contributions to an investment must equal $500,000 or more before tax credits are granted.

 

  • Investment fund must have at least four (4) investors and no investor may own or have a capital interest in more than 40% of the investment fund's capitalization.

  • Only investments made in small businesses in Kentucky are eligible for the tax credits.

 

  • The definition of a "small business" for purposes of this credit is outlined in KRS 154.20-254 (19).

 

  • The investment fund will lose all unused credits if qualified investments are not made within one year of the agreement.

 

  • Total tax credits available for all investors in all investment funds shall not exceed
    $40,000,000.

 

  • Total tax credits available to any single investment fund shall not exceed, in aggregate, $8,000,000 for all investors and all tax years.

The Kentucky Department of Revenue conducts work
under the authority of the Finance and Administration Cabinet.