Kentucky Investment Fund Act (KIFA)

Kentucky Investment Fund Act (KIFA)

Offers investors a transferable credit for investing in funds that back Kentucky small businesses through KEDFA.

The Kentucky Investment Fund Act (KIFA) is a tax credit program administered by KEDFA under the Kentucky Cabinet for Economic Development. Authorized by KRS 154.20-250 to 154.20-284, the program encourages both individual and corporate investors to direct capital into KEDFA-approved venture funds that in turn deploy that capital into Kentucky-based small businesses. The program's stated objectives include job creation, development of new products and technologies, and the establishment of small businesses in the Commonwealth.

Investors — whether personal or corporate — receive a credit equal to 40% of their investment in an enhanced-incentive county (high unemployment) or 25% elsewhere. Target portfolio companies must have fewer than 100 employees and engage in technology-related activities. For qualifying investments approved on or after January 1, 2022, investors may first claim the KIFA credit in the tax year the approved venture fund makes the underlying qualifying investment. No investor may apply more than 50% of their total credit in any single tax year; the remainder carries forward for up to 15 years.

KEDFA allocates credits to approved investment funds through an application process coordinated by the Cabinet for Economic Development. Unlike the angel credit (KAITC), which covers direct investor-to-startup transactions, KIFA operates at the fund level — the vehicle deploying capital must first receive KEDFA approval, and only then can its investors claim credits. This fund-level gating makes KIFA most suitable for institutionalized Kentucky venture fund operators seeking to attract limited-partner capital from individuals and corporations that want a Kentucky tax offset.