Kentucky Investment Fund Act (KIFA)

About this programme

The Kentucky Investment Fund Act (KIFA) is a state tax credit program administered by the Kentucky Cabinet for Economic Development, through the Kentucky Economic Development Finance Authority (KEDFA). Its purpose is to encourage capital investment in Kentucky, encourage the establishment of small businesses, add jobs, and encourage the development of new products and technologies through capital investment. It is governed by KRS 154.20-250 to 154.20-284.

Rather than investing directly in a company, an investor puts money into a KEDFA-approved investment fund, which in turn makes qualified investments in eligible Kentucky businesses. After KEDFA allocates credits to a fund, the credits are granted proportionately to the fund's investors as the fund completes those qualified investments.

How it works

KIFA offers a nonrefundable tax credit against Kentucky tax liability, capped at a share of the investor's proportional ownership of the fund's qualified investments: up to 40% for investment funds approved for incentives before January 1, 2023, and up to 25% for funds approved on or after January 1, 2023.

An investor cannot claim more than 50% of their allocated credit in any one tax year. For qualified investments approved on or after January 1, 2022, an investor may first claim the credit on the return for the tax year the fund made the qualified investment, and can carry forward unused credit for up to 15 years.

Fund managers find the investors and make all investment decisions; qualified investments must be equity or near-equity cash investments (common/preferred stock, partnership interests, SAFE agreements, or convertible debt) of at least $10,000 per business.

The total tax credits available to any single investment fund cannot exceed $8,000,000 in aggregate across all investors and years, and cannot exceed $1,000,000 in any calendar year from 2022 onward. No more than 30% of a fund's committed cash can go into a single business. The statewide program cap is $3,000,000 in total credits allocated to all funds in a calendar year.

An investment fund loses its unused credits if it fails to make a qualified investment within one year of signing its Investment Agreement with KEDFA, or within any subsequent one-year period during the agreement's term.

Who can apply

Qualified investments must go to Kentucky-based businesses with fewer than 100 employees.

At the time of investment, the business must have more than 50% of its assets, operations, and employees in Kentucky, and either a net worth of $5 million or less ($10 million for a knowledge-based business) or net income of $3 million or less in each of the prior two years.

The business must be actively and principally engaged in a 'qualified activity' in Kentucky: a knowledge-based activity such as bioscience, environmental and energy technology, health and human development, information technology and communications, materials science and advanced manufacturing, or another technological advance approved by the Office of Entrepreneurship and Small Business Innovation. Financial institutions, credit companies, investment advisors and funds, charitable and religious institutions, oil and gas exploration, insurance companies, residential housing developers, and retail establishments do not qualify.

The investment must be made through a KEDFA-approved KIFA investment fund. To be approved, a fund must have a minimum size of $500,000 in committed cash contributions and four or more unaffiliated investors, with no investor or fund manager (including close family) holding more than 40% of the fund's total capitalization.

A qualified investment cannot go to a business already owned more than 20% by an investor, officer, director, partner, member, manager, trustee, or employee of the fund or fund manager, or that employs a fund investor.

Investors convicted of violating Kentucky's tax laws within the past 10 years are ineligible to receive KIFA credits.

How to apply

1. The fund manager (not the individual small business) completes and submits the KIFA application to Cabinet for Economic Development staff, along with a non-refundable $2,000 application fee.
2. The total incentive amount recommended for the fund is negotiated with the Cabinet, along with any fund-specific terms.
3. The fund is presented to KEDFA for approval; if approved, KEDFA and the fund sign an investment fund agreement setting out the terms and conditions.
4. Before signing the agreement, the fund pays an administrative fee equal to 0.1% of its approved KIFA tax credits, plus all legal fees for preparing the agreement.
5. The fund makes its required annual qualified investments in eligible Kentucky small businesses, and its manager files disclosure forms with KEDFA within 80 days of each qualified investment.
6. The fund pays an annual fee equal to 0.1% of its allocated tax credits, due within 90 days of its fiscal year end, and submits annual reporting throughout the agreement's term to remain compliant.

Documents you’ll typically need

• KIFA application (submitted by the fund manager, with $2,000 application fee)
• Investment fund agreement with KEDFA
• Annual disclosure forms (within 80 days of each qualified investment)
• Annual financial statements and reports (within 90 days of fiscal year end)

Frequently asked

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Reviewed 2026-09-25. Programmes change, so check eligibility, amounts and deadlines on the official page before you apply. CapEasy is a private firm and is not part of any government body.