AN ACT relating to the Kentucky Business Investment Program.

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AN ACT relating to the Kentucky Business Investment Program. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 154.32-010 is amended to read as follows: 3
(1) "Activation date" means the date established in the tax incentive agreement that is 4
within two (2) years of final approval; 5
(2) "Affiliate" means the following: 6
(a) Members of a family, including only brothers and sisters of the whole or half 7
blood, spouse, ancestors, and lineal descendants of an individual; 8
(b) An individual, and a corporation more than fifty percent (50%) in value of the 9
outstanding stock of which is owned, directly or indirectly, by or for that 10
individual; 11
(c) An individual, and a limited liability company of which more than fifty 12
percent (50%) of the capital interest or profits are owned or controlled, 13
directly or indirectly, by or for that individual; 14
(d) Two (2) corporations which are members of the same controlled group, which 15
includes and is limited to: 16
1. One (1) or more chains of corporat ions connected through stock 17
ownership with a common parent corporation if: 18
a. Stock possessing more than fifty percent (50%) of the total 19
combined voting power of all classes of stock entitled to vote or 20
more than fifty percent (50%) of the total value of shares of all 21
classes of stock of each of the corporations, except the common 22
parent corporation, is owned by one (1) or more of the other 23
corporations; and 24
b. The common parent corporation owns stock possessing more than 25
fifty percent (50%) of the total combined voting power of all 26
classes of stock entitled to vote or more than fifty percent (50%) of 27
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the total value of shares of all classes of stock of at least one (1) of 1
the other corporations, excluding, in computing the voting power 2
or value, stock owned directly by the other corporations; or 3
2. Two (2) or more corporations if five (5) or fewer persons who are 4
individuals, estates, or trusts own stock possessing more than fifty 5
percent (50%) of the total combined voting power of all classes of stock 6
entitled to vote or more than fifty percent (50%) of the total value of 7
shares of all classes of stock of each corporation, taking into account the 8
stock ownership of each person only to the extent the stock ownership is 9
identical with respect to each corporation; 10
(e) A grantor and a fiduciary of any trust; 11
(f) A fiduciary of a trust and a fiduciary of another trust, if the same person is a 12
grantor of both trusts; 13
(g) A fiduciary of a trust and a beneficiary of that trust; 14
(h) A fiduciary of a trust and a beneficiary of another trust, if the same person is a 15
grantor of both trusts; 16
(i) A fiduciary of a trust and a corporation more than fifty percent (50%) in value 17
of the outstanding stock of which is owned, directly or indirectly, by or for the 18
trust or by or for a person who is a grantor of the trust; 19
(j) A fiduciary of a trust and a limited liability company more than fifty percent 20
(50%) of the capital interest, or the interest in profits, of which is owned 21
directly or indirectly, by or for the trust or by or for a person who is a grantor 22
of the trust; 23
(k) A corporation, a partnership, or a limited partnership if the same persons own: 24
1. More than fifty percent (50%) in value of the outstanding stock of the 25
corporation; and 26
2. More than fifty percent (50%) of t he capital interest, or the profits 27
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interest, in the partnership or limited partnership; 1
(l) A corporation and a limited liability company if the same persons own: 2
1. More than fifty percent (50%) in value of the outstanding stock of the 3
corporation; and 4
2. More than fifty percent (50%) of the capital interest or the profits in the 5
limited liability company; 6
(m) A partnership or limited partnership and a limited liability company if the 7
same persons own: 8
1. More than fifty percent (50%) of the capital inter est or profits in the 9
partnership or limited partnership; and 10
2. More than fifty percent (50%) of the capital interest or the profits in the 11
limited liability company; 12
(n) An S corporation and another S corporation if the same persons own more 13
than fifty percent (50%) in value of the outstanding stock of each corporation; 14
S corporation designation being the same as that designation under the 15
Internal Revenue Code of 1986, as amended; 16
(o) An S corporation and a C corporation, if the same persons own more tha n 17
fifty percent (50%) in value of the outstanding stock of each corporation; S 18
and C corporation designations being the same as those designations under the 19
Internal Revenue Code of 1986, as amended; or 20
(p) Two (2) or more limited liability companies, if t he same persons own more 21
than fifty percent (50%) of the capital interest or are entitled to more than fifty 22
percent (50%) of the capital profits in the limited liability companies; 23
(3) "Agribusiness" means the processing of raw agricultural products, incl uding but not 24
limited to timber and industrial hemp, or the performance of value -added functions 25
with regard to raw agricultural products; 26
(4) "Alternative fuel production" mea ns a Kentucky operation that primarily produces 27
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alternative transportation fuels for sale. The alternative fuel production may 1
produce electricity as a by-product if the primary function of the operations remains 2
the production and sale of alternative transportation fuels; 3
(5) "Alternative transportation fuels" has the same meaning as in KRS 152.715; 4
(6) "Approved company" means an eligible company that has received final approval 5
to receive incentives under this subchapter; 6
(7) "Approved costs" means the amount of eligible costs approved by the authority at 7
final approval; 8
(8) "Authority" means the Kentucky Economic Development Finance Authority 9
established by KRS 154.20-010; 10
(9) "Biomass resources" has the same meaning as in KRS 152.715; 11
(10) "Capital leas e" means a lease classified as a capital lease by the Statement of 12
Financial Accounting Standards No. 13, Accounting for Leases, issued by the 13
Financial Accounting Standards Board, November 1976, as amended; 14
(11) "Carbon dioxide or hydrogen transmission pi peline" means the in-state portion of a 15
pipeline, including appurtenant facilities, property rights, and easements, that is 16
used exclusively for the purpose of transporting carbon dioxide or hydrogen to the 17
point of sale, storage, or other carbon or hydrogen management applications; 18
(12) "Coal severing and processing" means activities resulting in the eligible company 19
being subject to the tax imposed by KRS Chapter 143; 20
(13) "Commonwealth" means the Commonwealth of Kentucky; 21
(14) "Confirmed approved costs" means: 22
(a) For owned economic development projects, the documented eligible costs 23
incurred on or before the activation date; or 24
(b) For leased economic development projects: 25
1. The documented eligible costs incurred on or before the activation date; 26
and 27
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2. Estimated rent to be incurred by the approved company throughout the 1
term of the tax incentive agreement. 2
For both owned and leased economic development projects, "confirmed approved 3
costs" may be less than approved costs, but shall not be more than approved costs; 4
(15) "Department" means the Department of Revenue; 5
(16) "Economic development project" means: 6
(a) The acquisition, leasing, or construction of a new facility; 7
(b) The acquisition, leasing, rehabilitation, or expansion of an existing facility; or 8
(c) The installation and equipping of a facility; 9
by an eligible company. "Economic development project" does not include any 10
economic development project that will result in the replacement of facilities 11
existing in the Commonwealth, except as provided in KRS 154.32-060; 12
(17) (a) "Eligible company" means any corporation, limited liability company, 13
partnership, limited partnership, sole proprietorship, business trust, or any 14
other entity with a proposed economic development project that is engaged in 15
or is planning to be engaged in one (1) or more of the following activities 16
within the Commonwealth: 17
1. Manufacturing; 18
2. Agribusiness; 19
3. Nonretail service or technology; 20
4. Headquarters operations, regardless of the underlying business activity 21
of the company; 22
5. Alternative fuel, gasification, energy -efficient alternative fuel, or 23
renewable energy production; 24
6. Carbon dioxide or hydrogen transmission pipeline; 25
7. Coal severing and processing; or 26
8. Hospital operations. 27
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(b) "Eligible company" does not include companies where the primary activity to 1
be conducted within the Commonwealth is forestry, fishing, the provision of 2
utilities, construction, wholesale trade, retail trad e, real estate, rental and 3
leasing, educational services, accommodation and food services, or public 4
administration services; 5
(18) "Eligible costs" means: 6
(a) For owned economic development projects: 7
1. Start-up costs; 8
2. Nonrecurring obligations incurred for labor and nonrecurring payments 9
to contractors, subcontractors, builders, and materialmen in connection 10
with the economic development project; 11
3. The cost of acquiring land or rights in land and any cost incidental 12
thereto, including recording fees; 13
4. The cost of contract bonds and of insurance of all kinds that may be 14
required or necessary for completion of an economic development 15
project which is not paid by a contractor or otherwise provided for; 16
5. All costs of architectural and engineering service s, including test 17
borings, surveys, estimated plans and specifications, preliminary 18
investigations, and supervision of construction, as well as for the 19
performance of all the duties required for construction of the economic 20
development project; 21
6. All costs which are required to be paid under the terms of any contract 22
for the economic development project; 23
7. All costs incurred for construction activities, including site tests and 24
inspections; subsurface site work; excavation; removal of structures, 25
roadways, cemeteries, and other surface obstructions; filling, grading, 26
and providing drainage and storm water retention; installation of utilities 27
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such as water, sewer, sewage treatment, gas, electric, communications, 1
and similar facilities; off -site construction of utility extensions to the 2
boundaries of the real estate; construction and installation of railroad 3
spurs as needed to connect the economic development project to existing 4
railways; or similar activities as the authority may determine necessary 5
for construction of the economic development project; and 6
8. All other costs of a nature comparable to those described in this 7
paragraph,[above] including but not limited to investments in: 8
a. Laboratory equipment; 9
b. Computer servers; 10
c. Software; 11
d. Capitalized leases; and 12
e. Leasehold improvements; 13
when the costs are integral to the operation of research and 14
development, headquarters, high -technology operations, or service 15
sector facilities; and 16
(b) For leased economic development projects: 17
1. Start-up costs; 18
2. Building/leasehold improvements;[ and] 19
3. Fifty percent (50%) of the estimated annual rent for each year of the tax 20
incentive agreement; and 21
4. Investments in: 22
a. Laboratory equipment; 23
b. Computer servers; 24
c. Software; and 25
d. Capitalized leases; 26
when the costs are directly related to the establishment or expansion of 27
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research and development, headquarters, high -technology operations, 1
or service sector facilities. 2
Notwithstanding any other provision of this subsection, for economic development 3
projects that are not in enhanced incentive counties, the cost of equipment eligible 4
for recovery as an eligible cost shall not exceed twenty thousand dollars ($20,000) 5
for each new full-time job created as of the activation date; 6
(19) "Employee benefits" means pay ments by an approved company for its full -time 7
employees for health insurance, life insurance, dental insurance, vision insurance, 8
defined benefits, 401(k), or similar plans; 9
(20) "Energy-efficient alternative fuel production" means a Kentucky operation th at 10
produces for sale energy-efficient alternative fuels; 11
(21) "Energy-efficient alternative fuels" means homogeneous fuels that: 12
(a) Are produced from processes designed to densify feedstock coal, waste coal, 13
or biomass resources; and 14
(b) Have an energy co ntent that is greater than the feedstock coal, waste coal, or 15
biomass resource; 16
(22) "Enhanced incentive counties" means counties certified by the authority pursuant to 17
KRS 154.32-050; 18
(23) "Final approval" means the action taken by the authority authorizi ng the eligible 19
company to receive incentives under this subchapter; 20
(24) (a) "Full-time job" means a job held by a person who: 21
1. Is required to work a minimum of thirty-five (35) hours per week; and 22
2. a. Is subject to the Kentucky individual income tax imposed by KRS 23
141.020; or 24
b. Works remotely away from the economic development project if 25
the job meets all of the following conditions: 26
i. Is held by a Kentucky resident; 27
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ii. Was created as a result of the economic development project; 1
and 2
iii. The payro ll of this job is expensed to the economic 3
development project. 4
(b) "Full-time job" does not include a job held by a resident of any state with a 5
reciprocal agreement between the Commonwealth and the other state as 6
described in KRS 141.070; 7
(25) "Gasification process" means a process that converts any carbon -containing 8
material into a synthesis gas composed primarily of carbon monoxide and 9
hydrogen; 10
(26) "Gasification production" means a Kentucky operation that primarily produces for 11
sale: 12
(a) Alternative transportation fuels; 13
(b) Synthetic natural gas; 14
(c) Chemicals; 15
(d) Chemical feedstocks; or 16
(e) Liquid fuels; 17
from coal, waste coal, coal -processing waste, or biomass resources, through a 18
gasification process. The gasification production may prod uce electricity as a by -19
product if the primary function of the operations remains the production and sale of 20
alternative transportation fuels, synthetic natural gas, chemicals, chemical 21
feedstocks, or liquid fuels; 22
(27) "Headquarters" means the principal o ffice where the principal executives of the 23
entity are located and from which other personnel, branches, affiliates, offices, or 24
entities are controlled; 25
(28) "Hospital" means a facility licensed by the Cabinet for Health and Family Services 26
under KRS Chap ter 216B for the operation of a hospital and the basic services 27
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provided by a hospital; 1
(29) "Incentives" means the incentives available under this subchapter, as listed in KRS 2
154.32-020(3); 3
(30) "Job target" means the annual average number of new full -time jobs that the 4
approved company commits to create and maintain at the economic development 5
project, which shall not be less than ten (10) new full-time jobs; 6
(31) "Kentucky gross receipts" has the same meaning as in KRS 141.0401; 7
(32) "Kentucky gross profits" has the same meaning as in KRS 141.0401; 8
(33) "Lease agreement" means an agreement between an approved company and an 9
unrelated entity conveying the right to use a facility, the terms of which reflect an 10
arms' length transaction. "Lease agreement" does not include a capital lease; 11
(34) "Leased project" means an economic development project site occupied by an 12
approved company pursuant to a lease agreement; 13
(35) "Manufacturing" means any activity involving: 14
(a) Processing, assembling, or production of any property, including the 15
processing resulting in a change in the conditions of the property and any 16
activity related to the processing, assembling, or production of property, 17
together with the storage, warehousing, distribution, and related office 18
facilities; or 19
(b) Production of vital medications, personal protective equipment, or equipment 20
necessary to produce personal protective equipment; 21
(36) (a) "Nonretail service or technology" means any activity where service or 22
technology is provided predominant ly outside the Commonwealth and 23
designed to serve a multistate, national, or international market. 24
(b) "Nonretail service or technology" includes but is not limited to call centers, 25
centralized administrative or processing centers, telephone or Internet sa les 26
order or processing centers, distribution or fulfillment centers, data processing 27
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centers, research and development facilities, and other similar activities; 1
(37) "Owned project" means an economic development project owned in fee simple by 2
the approved company or an affiliate, or possessed by the approved company or an 3
affiliate pursuant to a capital lease; 4
(38) "Personal protective equipment" means protective clothing, helmets, gloves, face 5
shields, goggles, face masks, respirators, and other equipment designed to protect 6
the user from injury or the spread of infection or illness; 7
(39) "Preliminary approval" means the action taken by the authority preliminarily 8
approving an eligible company for incentives under this subchapter; 9
(40) "Renewable energy pr oduction" means a Kentucky operation that utilizes wind 10
power, biomass resources, landfill methane gas, hydropower, solar power, or other 11
similar renewable resources to generate electricity for sale to unrelated entities; 12
(41) "Rent" means the actual annua l rent or fee paid by an approved company under a 13
lease agreement; 14
(42) "Start-up costs" means nonrecurring costs incurred to furnish and equip a facility 15
for an economic development project, including costs incurred for: 16
(a) Computers, furnishings, office equipment, manufacturing equipment, and 17
fixtures; 18
(b) The relocation of out-of-state equipment;[ and] 19
(c) Cost of fixed telecommunications equipment; and 20
(d) Investments in: 21
1. Laboratory equipment; 22
2. Computer servers; 23
3. Software; 24
4. Capitalized leases; and 25
5. Leasehold improvements; 26
when the costs are necessary to accommodate research and development, 27
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headquarters, high-technology operations, or service sector facilities; 1
as certified to the authority in accordance with KRS 154.32-030; 2
(43) "Synthetic natural gas" means the same thing as in KRS 152.715; 3
(44) "Tax incentive agreement" means the agreement entered into pursuant to KRS 4
154.32-040 between the authority and an approved company; 5
(45) "Term" means the period of ti me for which a tax incentive agreement may be in 6
effect, which shall not exceed fifteen (15) years for an economic development 7
project located in an enhanced incentive county, or ten (10) years for an economic 8
development project not located in any other county; 9
(46) "Vital medications" means any drug or biologic used to prevent or treat a serious 10
life-threatening disease or medical condition for which there is no other available 11
source with sufficient supply of that drug or biologic or alternative drug or biologic; 12
(47) "Wage" means the per hour earnings of a full-time employee, including wages, tips, 13
overtime, bonuses, and commissions, as reflected on the employee's federal form 14
W-2 wage and tax statement, but excludes employee benefits; and 15
(48) "Wage target" means the average total hourly compensation amount, including the 16
minimum wage and employee benefits, that the approved company commits to 17
meet for all new full -time jobs created and maintained as a result of the economic 18
development project, which shall not be less than: 19
(a) One hundred twenty -five percent (125%) of the federal minimum wage in 20
enhanced incentive counties; or 21
(b) One hundred fifty percent (150%) of the federal minimum wage in all other 22
counties. 23