Keystone Opportunity Zones

(The following outline is based on a presentation originally given by Timothy M. Anstine to the Lawrence County Chamber of Commerce on September 8, 2000, and amendments to the legislation since that date)

Keystone Opportunity Zone and Keystone Opportunity Expansion Zone Act, 73 P.S. ¤820.101 et seq.

1. Enacted in 1998 and amended in 2000. 
2. Keystone Opportunity Zones (KOZs) are geographic areas designated by local communities and approved by the Department of Community and Economic Development as tax-free zones. There are 12 KOZs, each of which may comprise up to 12 subzones, and total not more than 5000 acres. The tax benefits within these zones may extend to either December 31, 2008,  December 31, 2010 or December 31, 2013, at the option of the local political subdivision. The designations of the Keystone Opportunity Zones have already been made by the Department of Community and Economic Development.
3. 2000 legislation authorized the creation of 12 Keystone Opportunity Expansion Zones, each of which may comprise not more than 8 "expansion subzones,"  and total not more than 1,500 acres. The tax benefits within these zones may extend to either December 31, 2010 or December 31, 2013, at the option of the local political subdivision. The designations of the the Keystone Opportunity Expansion Zones are to be made by the Department of Community and Economic Development by March 30, 2001 and will be effective as of January 1, 2001.
4. Businesses and residents living in these defined areas benefit from the virtual elimination of all state and local taxes for 12 years.
5. Businesses relocating from out of state into a KOZ or KOEZ need only to own or lease property within the zone.
6. Businesses already in Pennsylvania can move into a KOZ or KOEZ and benefit if they either increase full-time employment by 20% in their first year in the KOZ or KOEZ or make a capital investment equal to 10% of their previous yearâs gross revenues.
7. State taxes waived:
   
   Corporate net income tax and Capital stock and foreign franchise taxöcredit for tax liability attributable to business activity conducted within the KOZ or KOEZ, determined by an apportioned percentage of property, payroll and sales.
   
   Personal Income Tax-income earned by a qualified business in a KOZ or KOEZ is not subject to tax when passed through to nonresident shareholder, partner, etc. Salaries paid to those who do not live in the KOZ or KOEZ are not exempt. For those living in a KOZ or KOEZ for a minimum of 184 consecutive days, an exemption of state income taxes for all compensation and wages; net income from a business conducted in a zone; net gains from sale or disposition of real estate or personal property within a zone; net gains on income from rentals of real estate or other property located in a KOZ or KOEZ; dividends; interest; income from estates or trusts. Applies also to income producing property such as rental property and net gains from the sale of real estate (pro rated for period in the KOZ or KOEZ)
   
   Sales and Use Tax (on purchases consumed and used by qualified businesses in the zone, not including motor vehicles)
   
   
8. Local taxes waived:
   
   Earned Income/Net Profits Tax
   
   Business Gross Receipts, Business Occupancy, Business Privilege and Mercantile Tax
   
   Local Real Property Tax-property owners must be in compliance with local zoning, building and housing laws, ordinances or codes and state and local tax provisions.
   
   Local Sales and Use Tax
   
   
9. 200 amendments  allow banks and insurance companies to receive massive tax breaks for setting up branches in poor neighborhoods.
10. Exemption is not automaticöproperty owner must apply to Department of Community and Economic Development.
11. Projects in KOZs and KOEZs receive the lowest interest rates on PIDA loans and priority consideration from the Department of Community and Economic Development for financial assistance.