Kentucky has suspended tax breaks to the Ark Encounter, saying it breached a deal that provides the religious-themed attraction with $18 million in state tax incentives.

The Northern Kentucky theme park, dubbed the "Ark Park" because it features a 510-foot-long model of Noah's Ark, was notified by state officials on Tuesday that the owners have violated an agreement with Kentucky by transferring the property from a for-profit company to a nonprofit company.

The Freedom From Religion Foundation, a national group that promotes separation of church and state, released a July 18 letter from the state Tourism, Arts and Heritage Cabinet notifying the Ark Encounter that it is in violation of its agreement for the tax incentives. The agreement provides Ark Encounter with up to $18 million in subsidies through annual tax rebates, the foundation said.

A spokesman for Ark Encounter said Friday it did not believe it was in violation of the agreement.

"We don't believe that the transfer of the property created a default, but we will comply with the concerns that the tourism department may have related to the transfer," said spokesman Mark Looy. He added the Ark Park officials "look forward to maintaining a positive relationship with the state long into the future."

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The tourism cabinet's letter says state officials learned July 10 that owners had transferred the park from Ark Encounter LLC, a for-profit company, to Crosswater Canyon, a nonprofit subsidiary of Answers in Genesis, a Christian creationist ministry that runs the Creation Museum in Petersburg. The cabinet suspended the tax breaks effective June 28, the date of the property transfer, the letter said.

The property was transferred for $10.

If the property is deeded back to the for-profit entity within 30 days, the tax incentive will be restored, said Laura Brooks, spokeswoman for the tourism cabinet.

Earlier in the week, Mike Zovath, chief action officer with Answers in Genesis and principal of Crosswater Canyon, couldn't say why the property was transferred to a nonprofit.

"However this works out, we want to do things that are in the best interest of the Ark Encounter, Crosswater Canyon and everybody that's involved here and works here," he told The Cincinnati Enquirer.

But Williamstown Mayor Rick Skinner fears the move was taken to avoid paying taxes.

"We're skeptical of their thinking and their lack of communication right now," Skinner said.

The deed to transfer the property to a nonprofit could exempt it from property taxes. The city already gets a limited amount of the tax money from Ark Encounter. The creation of a tax-increment finance district means 75 percent of the state and local property taxes generated by the ark go back into the site.

To pay for police and fire services, Williamstown imposed a 50 cent per ticket fee. Based on Ark Encounter projections of 1 million to 2 million visitors a year, city officials hope the fee will generate $715,000 a year.

The Ark Encounter owners appealed to the city for an exemption because they claimed Crosswater Canyon was a charity. But the city rejected that appeal.

Contact reporter Deborah Yetter at 502-582-4228 or at dyetter@courier-journal.com. Cincinnati Enquirer reporter Scott Wartman contributed to this story.

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