The Commonwealth of Kentucky recognizes the tourism industry as a vital component to its economic well-being. To encourage the private development of tourism activities, the State of Kentucky provides financial incentives for approved projects. There are currently two incentive programs available for major tourism projects, The Kentucky Tourism Development Act and Tax Increment Financing.

Kentucky Tourism Development Act

This legislation is the first of its kind in the nation and provides the opportunity for developers of approved projects to recover up to 25% of their development costs over a ten-year period. While other states have attempted to duplicate this legislation, none have experienced the success of Kentucky. Projects utilizing the program include a $32 million aquarium, a $100 million speedway, and a $4 million glass artisan's facility, among others. This program has encouraged the development of privately owned tourism attractions having investments totaling in excess of $372 million.

The Incentive

The incentive for developers of approved new or expansion tourism projects is the ability to recover 25% of the cost of the project. On an annual basis the Kentucky Revenue Cabinet will return to developers of approved projects the state sales tax paid by visitors to the attraction on admission tickets, food and gift sales and lodging costs. Developer has ten years to reach the 25% threshold. An expanding attraction receives the incentive on increased sales tax due to the expansion.

Eligible Projects

The Act defines tourism attractions as:

• Cultural or historical sites;
• Recreation or entertainment facilities;
• Areas of scenic beauty or distinctive natural phenomena;
• Entertainment destination centers;
• Kentucky crafts and products centers;
• Theme Restaurant Destination Attractions; and,
• Lodging, when:
  • built in conjunction with a tourism attraction and the tourism attraction cost more than the lodging facility;
  • built on state or federal parks and recreational lands; or
  • involves restoration or rehabilitation of a historic structure.
  • involves the restoration, rehabilitation, or upgrade of lodging facilities having no less than 500 rooms with project costs exceeding $10,000,000.

Projects that do not qualify are strictly retail businesses and recreational facilities that are used primarily by local residents and are not a likely destination for out-of-state travelers.

The Application Process

Applications are submitted to the Secretary of the Tourism Development Cabinet for an initial review. Should the Secretary decide the project will likely meet all the broad requirements of the Act, the application will be forwarded to the Kentucky Tourism Development Finance Authority with the recommendation the project be given preliminary approval. The Authority is attached to the Tourism Development Cabinet.

Should preliminary approval be granted by the Authority, an independent consultant selected by the Tourism Development Cabinet will do an in-depth study on the proposed project. Study cost will be the responsibility of the developer.

A public hearing on each project is required between preliminary and final approval. Based on the consultant's study, related materials and the report from the public hearing, the Secretary will determine whether to request final approval by the Authority. Upon final approval by the Authority, an agreement will be signed between the state and the project developers allowing the developer to recover the state sales tax during the first ten years of operation or until the 25% limit is reached.

For a project to be eligible, it must receive approval from the state before construction commences on the project.

The Consultant's Study

For the project to be considered for final approval, the consultant's report must determine that the project:

• will attract by fourth year of operation at least twenty-five percent (25%) of its visitors from out-of-state;
• will cost more than one million dollars;
• will have a significant and positive economic impact on the Commonwealth by considering, among other factors, the extent to which the tourism attraction project will compete directly with existing tourism attractions in the Commonwealth and the amount by which increased tax revenues from the tourism attraction project will exceed the refund given to the approved company;
• will be open to the public for a minimum of one hundred (100) days per year;
• will not adversely affect existing employment in the Commonwealth; and,
• will, if an Entertainment Destination Center, be using the state sales tax refund for a public infrastructure purpose.

More Information

For more information or to request an application, contact the Deputy Secretary of the Tourism Development Cabinet at the following address:

Todd Cassidy, Economic Development Representative
Kentucky Tourism Development Cabinet
2200 Capital Plaza Tower, 500 Mero Street
Frankfort, Kentucky 40601
Phone: (502) 564-0678
Fax: (502) 564-1512
Email: Todd.Cassidy@mail.state.ky.us




Tax Increment Financing

For projects of a larger scale, Kentucky continues to show its support through Tax Increment Financing. This program provides the developer of an approved project the ability to recoup up to 25% of their project costs over a twenty-year period. Two projects totaling $200 million have received approval under this legislation.

Recover 25% of Development Costs
Projects approved for participation under this legislation are eligible to recover up to 25% of their development costs over a twenty-year period. This is accomplished through the annual refund of up to 80% of state and local incremental taxes generated in the approved area. Taxes that may be considered in the refund include sales and use, income, property (excluding school and fire district property taxes), local insurance premium, occupational license fees, and other taxes as determined by the Kentucky Revenue Cabinet. Applications must be submitted through a local government entity.

Eligible Projects

Projects applying for benefit under the Tax Increment Financing legislation must meet the following requirements:

• be a tourism attraction, recreational or commercial facility;
• represent new economic activity in the Commonwealth;
• have a minimum capital investment of $10,000,000;
• create no less that twenty-five new full time jobs for Kentucky residents;
• have a net positive economic impact for the state of Kentucky;
• generate no less that twenty-five percent of its annual revenues through out-of-state visitors;
• result in a unique contribution to or preservation of the economic vitality and quality of life of a region of the Commonwealth; and
• not be primarily devoted to the retail sale of goods.

Todd Cassidy, Economic Development Representative
Kentucky Tourism Development Cabinet
2200 Capital Plaza Tower, 500 Mero Street
Frankfort, Kentucky 40601
Phone: (502) 564-8067
Fax: (502) 564-7588
Email: Todd.Cassidy@mail.state.ky.us


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Last Updated - 4/4/03