Tax Exemption for Large-Scale Renewable Energy Projects

July 31, 2020


In August 2007 Kentucky established the Incentives for Energy Independence Act (IEIA) to promote the development of renewable energy and alternative fuel facilities, energy efficient buildings, alternative fuel vehicles, research & development activities, and other energy initiatives. For renewable energy facilities, IEIA provides incentives to companies that build or renovate facilities that utilize renewable energy. A renewable energy facility is defined as one that generates at least 50 kW of electricity from solar power or at least 1 MW from wind power, biomass, landfill gas, hydropower or similar renewable resources. The electricity must be sold to an unrelated party. The minimum investment in any renewable energy facility must be $1 million in capital expenditure which is defined to include various non-capital costs such as labor.

Companies may receive a sales tax incentive of up to 100% of the Kentucky sales and use tax paid (on or after the activation date) on materials, machinery and equipment used to construct, retrofit or upgrade an eligible project.

Approved companies may also require that employees whose jobs were created as a result of the associated project, as a condition of employment, to pay a wage assessment of up to 4% of their gross wages. Employees will be allowed a Kentucky income tax credit equal to the assessment withheld from their wages.

The maximum recovery for a single project from all incentives, including the income and liability entity tax credit, sales tax refund and the wage assessment, may not exceed 50% of the capital investment.

Prior to making any capital investments in a project, each eligible company must submit an application ($1000 fee) for incentives to the Kentucky Economic Development Finance Authority. Each incentive contract is negotiated on a case-by-case basis to determine the conditions and termination date of the project, not to exceed 25 years from the project's activation date.

Program Overview

Implementing Sector: State
Category: Financial Incentive
State: Kentucky
Incentive Type: Sales Tax Incentive
Web Site:
Administrator: Office of Energy Policy
Start Date: 1/1/2008
Eligible Renewable/Other Technologies:
  • Solar Thermal Electric
  • Solar Photovoltaics
  • Wind (All)
  • Biomass
  • Hydroelectric
  • Landfill Gas
Incentive Amount: Up to 100% of sales and use tax
Maximum Incentive: For all state tax incentives: 50% of capital investment in the eligible project
Equipment Requirements: 50 kW minimum for solar power, 1 MW minimum for wind power, biomass, landfill gas, hydropower or similar resource
Minimum Capital Investment for a renewable energy facility: $1,000,000


This program has 1 incentives
Technologies: Solar Thermal Electric, Solar Photovoltaics, Wind (All), Biomass, Hydroelectric, Landfill Gas
Sectors: Commercial
Parameters: The incentive is 100.00 %


Name: KRS § 154.27-010 et seq.
Date Enacted: 8/30/2007
Effective Date: 1/1/2008
Name: 103 KAR 31:190
Name: KRS § 139.517


Name: Don Goodin
Organization: Kentucky Cabinet for Economic Development
Address: Old Capitol Annex
Frankfort KY 40601
Phone: (502) 564-4554
Name: Ricky Haven
Organization: Kentucky Department of Revenue
Address: 501 High Street
Frankfort KY 40620
Phone: (502) 564-6828

This information is sourced from DSIRE; the most comprehensive source of information on incentives and policies that support renewables and energy efficiency in the United States. Established in 1995, DSIRE is operated by the N.C. Clean Energy Technology Center at N.C. State University.