When undergoing financial due diligence for a start-up project within the Commonwealth of Kentucky, the potential for the United States Immigrant Investor Program, or the “EB-5” visa, should be considered along with an economic incentive package administered by the Kentucky Cabinet for Economic Development (the “Cabinet”) through its development agency, the Kentucky Economic Development Finance Authority (“KEDFA”).
Eligible projects for EB-5 visa investment must meet the criteria set forth in the empowering regulations of the Code of Federal Regulations and include, amongst others, that the investment must be in a new commercial enterprise. The commercial enterprise can be any for profit activity and must create or preserve ten full-time jobs for qualifying U.S. workers within two years of the immigrant investor’s admission to the United States. Further, the investment by the EB-5 investor into the commercial enterprise must meet the minimum level of investment. Such level is generally $1,00,000 U.S., but can decrease to $500,000 if the investment is completed through a regional center and within a targeted employment area or a rural area. Eligible investment projects can seek funding for its start-up capital requirements with a portion of EB-5 investor dollars so long as the investor program criteria have been met.
Further, any start-up project within the Commonwealth of Kentucky should seek an economic incentive package through the Cabinet. Such packages can be in the form of industrial revenue bonds, tax increment financing or tax abatement incentives. Generally, new facilities with at least $100,000 U.S. in eligible costs and creating a minimum of ten new full-time jobs for Kentucky residents may qualify for the generous tax breaks. Such tax abatements can be in the form of a reduction in state payroll withholdings for the approved projects or tax credits for Kentucky sourced income tax. The Kentucky Business Investment Act (“KBIA”) sets forth certain other minimum requirements such as minimum employee benefits for the project’s employees.
The employee benefits definition is “non-mandated payments by an approved company for its full-time employees for health insurance, life insurance, dental insurance, vision insurance, defined benefits, 401(k), or similar plans.” To qualify for the KBIA incentives administered by KEDFA, an application showing the company information, project details including lease or land/building costs, equipments costs and employee information must be submitted. Such application should be optimized in order to gain the highest possible tax incentives. If a company commits to establishing a project within the Commonwealth of Kentucky prior to being an approved project company within the state, then such company may be ineligible for the tax incentive benefits offered by the Cabinet. The KBIA is fundamentally an inducement to attract new investments to Kentucky.
Any new start-up project within the Commonwealth of Kentucky should examine the feasibility of utilizing EB-5 Visa dollars in combination with the best possible tax incentive package. Since it is currently difficult for companies to access conventional financing, EB-5 investors may be the source of bridge financing to get needed projects launched.