An Act providing for the creation of keystone opportunity dairy zones to facilitate the economic development of Pennsylvania's dairy industry; authorizing expenditures; providing for tax exemptions, tax deductions, tax abatements and tax credits; creating additional obligations of the Commonwealth and local governmental units; prescribing powers and duties of certain State and local departments, agencies and officials; and imposing penalties.

PRINTER'S NO. 857
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 177
Session of
2025
INTRODUCED BY LAWRENCE, OWLETT, KENYATTA, GREINER, JAMES, SMITH,
REICHARD AND MOUL, MARCH 10, 2025
REFERRED TO COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS,
MARCH 10, 2025
AN ACT
Providing for the creation of keystone opportunity dairy zones
to facilitate the economic development of Pennsylvania's
dairy industry; authorizing expenditures; providing for tax
exemptions, tax deductions, tax abatements and tax credits;
creating additional obligations of the Commonwealth and local
governmental units; prescribing powers and duties of certain
State and local departments, agencies and officials; and
imposing penalties.
TABLE OF CONTENTS
Chapter 1. Preliminary Provisions
Section 101. Short title.
Section 102. Legislative findings.
Section 103. Definitions.
Chapter 3. Keystone Opportunity Dairy Zones
Section 301. Keystone opportunity dairy zones.
Section 302. Application.
Section 303. Review.
Section 304. Criteria for authorization of zone.
Section 305. Zone limitations.
Section 306. Residency.
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Section 307. Qualified businesses.
Section 308. Forms.
Chapter 5. State Taxes
Subchapter A. General Provisions
Section 501. State taxes.
Subchapter B. Particular State Taxes
Section 511. Sales and use tax.
Section 512. Personal income tax.
Section 513. Residency considerations.
Section 514. Corporate net income tax.
Chapter 7. Local Taxes
Section 701. Local taxes.
Section 702. Real property tax.
Section 703. Local earned income and net profits taxes and
business privilege taxes.
Section 704. Mercantile license tax.
Section 705. Local sales and use tax.
Chapter 9. Administration of Tax Provisions
Section 901. Transferability.
Section 902. Recapture.
Section 903. Delinquent or deficient State or local taxes.
Section 904. Code compliance.
Section 905. Appeals.
Section 906. Notice requirements.
Section 907. Application time.
Chapter 11. Procedures for Zones
Section 1101. Keystone opportunity dairy zone prioritizations.
Section 1102. Reporting.
Section 1103. Other Commonwealth tax credits.
Section 1104. Monitoring data.
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Chapter 13. Miscellaneous Provisions
Section 1301. Illegal activity.
Section 1302. Rules and regulations.
Section 1303. Compliance.
Section 1304. Penalties.
Section 1305. Construction.
Section 1306. Severability.
Section 1307. Repeals.
Section 1308. Applicability.
Section 1309. Effective date.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
CHAPTER 1
PRELIMINARY PROVISIONS
Section 101. Short title.
This act shall be known and may be cited as the Keystone
Opportunity Dairy Zone Act.
Section 102. Legislative findings.
The General Assembly finds and declares as follows:
(1) Dairy farmers are a vital, integral and
irreplaceable part of the agricultural heritage of this
Commonwealth.
(2) Dairy farmers contribute to the continued economic
health of this Commonwealth's agricultural sector, provide
jobs and pay taxes, provide local and sustainable food
products for nourishment and enjoyment and promote the
preservation of farmland in the public interest of all
residents of this Commonwealth.
(3) The continued viability of dairy farming is in the
best interest of the residents of this Commonwealth.
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(4) In light of continued economic forces and market
pressures, the long-term viability of dairy farming requires
coordinated efforts by private and public entities to ensure
economic viability and ensure the continuation of the
significant contributions dairy farmers make to the economic
and social life of this Commonwealth.
(5) The long-term economic viability of dairy farming
requires the cooperative involvement of residents,
businesses, State and local elected officials and community
organizations.
(6) It is in the best interest of this Commonwealth to
assist and encourage the creation of zones to accomplish the
purposes of this act.
Section 103. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Applicant." An individual or business that submits or
intends to submit a zone application to the department.
"Business." An association, partnership, cooperative,
corporation, sole proprietorship, limited liability company or
employer.
"Dairy processing facility." A factory or plant directly and
primarily involved in processing, refining or manufacturing raw
milk that is at least 75% Pennsylvania milk or Pennsylvania milk
products into milk, butter, milk powder, cheese, yogurt, ice
cream, sour cream or a value-added dairy product intended for
the wholesale or retail market.
"Department." The Department of Community and Economic
Development of the Commonwealth.
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"Domicile." The place where an individual has a true and
fixed home and principal establishment for an indefinite time
and to which, whenever absent, that individual intends to
return. Domicile continues until another place of domicile is
established.
"Keystone opportunity dairy zone" or "zone." A defined
geographic area comprised of one or more political subdivisions
or portions of political subdivisions as designated by the
department under section 301.
"Opportunity plan." A written plan that addresses the
criteria and meets the requirements under section 302(a)(2).
"Pennsylvania dairy farm." A farm that produces Pennsylvania
milk.
"Pennsylvania milk." Raw milk produced by the milking of
cows physically located on a farm within the geographic
boundaries of this Commonwealth and certified as such by the
Pennsylvania Milk Board.
"Pennsylvania milk product." A food or beverage made from or
primarily made from at least 75% Pennsylvania milk, or a value-
added dairy product, processed within this Commonwealth that
utilized 75% or more Pennsylvania milk in its manufacture.
"Political subdivision." A county, city, borough, township,
town or school district with taxing jurisdiction in a defined
geographic area within this Commonwealth.
"Qualified business." A business authorized to do business
in this Commonwealth that is located or partially located within
a zone.
"Qualified political subdivision." A political subdivision
that has real property within its jurisdiction that has been
designated by the department as a zone.
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"Resident." An individual who is domiciled and resides in an
area that is designated a zone.
"Small scale dairy processing facility." A factory, plant or
operation that exclusively utilizes Pennsylvania milk produced
from a single Pennsylvania dairy farm with a total average herd
size of 250 milking cows or fewer, or a combination of
Pennsylvania dairy farms with a total collective average herd
size of 250 milking cows or fewer, and that is directly and
primarily involved in processing, refining or manufacturing raw
Pennsylvania milk or Pennsylvania milk products into milk,
butter, milk powder, cheese, yogurt, ice cream, sour cream or a
value-added dairy product intended for the wholesale or retail
market.
"Tax Reform Code of 1971." The act of March 4, 1971 (P.L.6,
No.2), known as the Tax Reform Code of 1971.
"Value-added dairy product." Pennsylvania milk or a
Pennsylvania milk product that has been additionally processed,
improved, shredded, combined, aged, flavored, separated,
condensed or otherwise prepared to provide additional value or
convenience for the wholesale or retail market.
CHAPTER 3
KEYSTONE OPPORTUNITY DAIRY ZONES
Section 301. Keystone opportunity dairy zones.
(a) Establishment.--The department may designate up to 30
zones in accordance with this section, with up to 15 Class A
zones and up to 20 Class B zones.
(b) Zone authorization.--The department shall authorize not
more than 30 zones in this Commonwealth. Individuals and
businesses within an authorized zone that are qualified under
this act shall be entitled to all tax exemptions, deductions,
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abatements or credits provided under this act for a period not
to exceed 10 years beginning no sooner than one year from the
effective date of this subsection and no later than three years
from the effective date of this subsection. The department
shall, upon approval, specify the precise beginning and ending
dates for the tax exemptions, deductions, abatements or credits
provided under this act.
(c) Authorization for local tax exemption.--Every political
subdivision within which a proposed zone is located, whether in
whole or in part, is authorized to provide tax exemptions,
deductions, abatements or credits to individuals and businesses
qualified under this act. The political subdivision shall agree
to provide exemptions, deductions, abatements or credits from
all local taxes provided under this act in order to qualify to
be designated a zone. The exemptions, deductions, abatements or
credits shall be effective on the date determined by the
department. The exemptions, deductions, abatements or credits
shall be binding upon the political subdivision for the duration
of the zone designation.
(d) Authorization to extend duration of zone.--A zone may
request to extend its designation for a period of three years.
The request to extend a zone designation shall be made on a
zone-by-zone basis. A qualified political subdivision having an
approved zone within its jurisdiction and seeking to extend the
zone designation shall pass the required ordinances, resolutions
or other required action of the qualified political subdivision
for the necessary exemptions, deductions, abatements or credits
under this act, and shall submit copies of the ordinance,
resolution or other action to the department. The department may
grant the request to extend provided all the proper binding
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ordinances, resolutions or other governing documents are passed
by all qualified political subdivisions within the zone
extending the necessary exemptions, deductions, abatements and
credits to the entire zone. The department shall approve or deny
the request for extension of duration of a subzone within 90
days of receipt and shall provide written notice, irrespective
of whether approved or denied, to each qualified applicant,
political subdivision, resident and qualified business affected.
Upon approval of a request for extension of duration of a zone,
the exemptions, deductions, abatements or credits shall be
binding upon the qualified political subdivision as provided in
subsection (c).
Section 302. Application.
(a) Initial application.--An applicant may apply to the
department to designate a parcel as a zone. The application
shall contain the following:
(1) The geographic area of the proposed zone, including
the specific political subdivision or subdivisions.
(2) An opportunity plan, which shall include the
following:
(i) A detailed map of the proposed zone, including
geographic boundaries, total area and present use and
conditions of the land and structures of the proposed
zone.
(ii) Evidence of support from and participation of
local government, school districts and other educational
institutions, business groups, community organizations
and the public.
(iii) A detailed proposal outlining the proposed
improvements in the zone, including, but not limited to,
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proposed capital investment, job creation and increased
dairy processing capacity for Pennsylvania milk or
Pennsylvania milk products according to the
specifications of this act.
(iv) A description of anticipated activity in the
proposed zone, including, but not limited to, site
improvements.
(v) Evidence of potential private and public
investment in the proposed zone.
(vi) The role of the proposed zone in economic
development of the dairy industry in this Commonwealth
and the anticipated impacts to dairy farmers producing
Pennsylvania milk.
(vii) Any other information deemed appropriate by
the department or by the Secretary of Agriculture in
consultation with the department.
(3) The duration of the proposed zone, including the
anticipated beginning and end date.
(4) A formal, binding ordinance or resolution passed by
every political subdivision in which the proposed zone is
located that specifically provides for all local tax
exemptions, deductions, abatements or credits for businesses
provided in this act.
(5) Evidence that the proposed zone meets the required
criteria under this act.
Section 303. Review.
(a) Action of department.--The department, in consultation
with the Secretary of Agriculture, shall review all completed
applications submitted under section 302. An application for
authorization as a zone must be received by a date to be
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determined by the department in order to be considered by the
department. The date to be determined by the department shall
not be sooner than 120 days after the effective date of this
subsection, nor later than two years after the effective date of
this subsection.
(b) Process.--The department shall authorize up to 30 zones
from applications meeting the criteria under section 304 based
upon need, likelihood of success, potential for increased dairy
processing capacity and overall impact on the market for
Pennsylvania milk or Pennsylvania milk products. The department
may not alter the geographic boundaries of a zone described in
an application unless mutually agreed upon between the
department, the applicant and any affected local municipality.
The department shall not deny an application due to an
applicant's prior receipt of or consideration for any other
State community and economic development program funding.
(c) Authorizations.--Any zone approved shall be approved no
later than three years after the effective date of this
subsection.
Section 304. Criteria for authorization of zone.
(a) Class A zones.--
(1) A class A zone shall:
(i) Be not less than five acres, unless contiguous
to or co-located with an existing or proposed dairy
processing facility.
(ii) Be not more than 150 acres.
(2) In order to qualify for authorization as a class A
zone under this section, an application shall:
(i) Provide specific geographic information on the
proposed zone location.
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(ii) Show anticipated private investment of $10
million or more in a dairy processing facility.
(iii) Create 25 or more new jobs as defined by the
department.
(iv) Demonstrate an exceptional and meaningful
opportunity for the expansion of dairy processing
capacity within this Commonwealth.
(b) Class B zones.--A class B zone shall:
(1) Be not less than five acres, unless contiguous to or
co-located with an existing or proposed dairy processing
facility.
(2) Be not more than 25 acres, unless co-located with a
Pennsylvania dairy farm directly supplying Pennsylvania milk
for an existing or proposed small-scale dairy processing
facility.
(3) In order to qualify for authorization as a class B
zone under this section, an application shall:
(i) Provide specific geographic information on the
proposed zone location.
(ii) Show anticipated private investment of $100,000
or more in a small-scale dairy processing facility.
(iii) Demonstrate an exceptional and meaningful
opportunity for the expansion of small-scale, boutique or
locally based dairy processing capacity within this
Commonwealth.
Section 305. Zone limitations.
A zone shall not encompass an entire political subdivision.
Section 306. Residency.
In order to qualify each year for a tax exemption, deduction,
abatement or credit under this act, an individual shall be
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domiciled and shall reside in a zone for a period of 184
consecutive days during each taxable year.
Section 307. Qualified businesses.
In order to qualify each year for a tax exemption, deduction,
abatement or credit under this act, a qualified business shall
be incorporated under the laws of this Commonwealth and own or
lease real property in a zone from which the qualified business
actively operates a dairy processing facility or small scale
dairy processing facility as certified by the department. The
qualified business shall obtain annual renewal of the
certification from the department to continue to qualify under
this section. The following shall apply:
(1) For a class A zone, the certification form shall
include, but not be limited to, all of the following:
(i) The duration of the zone designation.
(ii) The number of jobs created.
(iii) The number of jobs retained.
(iv) The amount of capital investment.
(v) The gross value of Pennsylvania milk products
produced in the past year.
(vi) The percentage of Pennsylvania milk utilized in
the production of Pennsylvania milk products.
(vii) Any other information, conditions or
requirements reasonably required by the department.
(2) For a class B zone, the certification form shall
include all of the following:
(i) The duration of the zone designation.
(ii) The gross value of Pennsylvania milk products
produced in the past year.
(iii) Any other information, conditions or
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requirements required by the department.
Section 308. Forms.
Applications for authorization as a zone shall be on forms
prescribed by the department. The department shall make
application forms available on the department's publicly
accessible Internet website, or upon request by a potential
applicant on paper forms or another method as determined by the
department.
CHAPTER 5
STATE TAXES
SUBCHAPTER A
GENERAL PROVISIONS
Section 501. State taxes.
(a) Application.--An individual who is a resident of, or a
qualified business located in, a zone shall receive the
exemptions, deductions, abatements or credits as provided in
this chapter and Chapter 7 for the duration of the zone
designation. Exemptions, deductions, abatements or credits shall
expire on the date of expiration of the zone.
(b) Administration.--The Department of Revenue shall
administer, construe and enforce the provisions of this chapter
consistent with Articles II, III, IV, VI, VII, IX and XV of the
Tax Reform Code of 1971.
SUBCHAPTER B
PARTICULAR STATE TAXES
Section 511. Sales and use tax.
Sales at retail of services or tangible personal property,
other than motor vehicles, to a qualified business or a
construction contractor under a construction contract with a
qualified business, landowner or lessee for the exclusive use,
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consumption and utilization of the tangible personal property or
service by the qualified business at the qualified business's,
landowner's or lessee's facility located within a zone are
exempt from the sales and use tax imposed under Article II of
the Tax Reform Code of 1971. An exemption shall not be permitted
for sales conducted prior to designation of the real property as
part of a zone.
Section 512. Personal income tax.
(a) Exemption.--An individual shall be allowed an exemption
from personal income tax for:
(1) Compensation received during the time period when
the individual was a resident of a zone.
(2) Net income from the operation of a qualified
business received by a resident or nonresident of a zone
attributable to business activity conducted within a zone,
determined in accordance with section 514, except that any
business that operates both within and outside this
Commonwealth, before computing its zone exemption, shall
first determine its Pennsylvania activity over its activity
everywhere by applying the three-factor apportionment formula
as provided in Department of Revenue personal income tax
regulations applicable to income apportionment in connection
with a business, trade or profession carried on both within
and outside this Commonwealth.
(3) All of the following:
(i) Net gains or income, less net losses, derived by
a resident or nonresident of a zone from the sale,
exchange or other disposition of real or tangible
personal property located in a zone as determined in
accordance with accepted accounting principles and
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practices. The exemption provided in this subparagraph
shall not apply to the sale, exchange or other
disposition of any stock of goods, merchandise or
inventory or any operational assets unless the transfer
is in connection with the sale, exchange or other
disposition of all of the assets in complete liquidation
of a qualified business located in a zone. This
subparagraph shall apply to intangible personal property
employed in a trade, profession or business in a zone,
but only when transferred in connection with a sale,
exchange or other disposition of all of the assets in
complete liquidation of the qualified business in the
zone.
(ii) Net gains, less net losses, realized by a
resident of a zone from the sale, exchange or disposition
of intangible personal property or obligations issued on
or after February 1, 1994, by the Commonwealth, a public
authority, commission, board or other Commonwealth
agency, political subdivision or authority created by a
political subdivision or by the Federal Government as
determined in accordance with accepted accounting
principles and practices.
(iii) The exemption from income for gain or loss
provided for in subparagraphs (i) and (ii) shall be
prorated based on the following:
(A) In the case of gains, less net losses, in
subparagraph (i), the percentage of time, based on
calendar days, the property located in a zone was
held by a resident or nonresident of the zone during
the time period the zone was in effect in relation to
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the total time the property was held.
(B) In the case of gains, less net losses, in
subparagraph (ii), the percentage of time, based on
calendar days, the property was held by the taxpayer
while a resident of a zone in relation to the total
time the property was held.
(4) Net gains or income derived from or in the form of
rents received by an individual, whether a resident or
nonresident of a zone, to the extent that income or loss from
the rental of real or tangible personal property is allocable
to a zone. For purposes of calculating this exemption:
(i) Net rents derived from real or tangible personal
property located in a zone are allocable to a zone.
(ii) If the tangible personal property was used both
within and without the zone during the taxable year, only
the net income attributable to use in the zone is exempt.
The net rental income shall be multiplied by a fraction,
the numerator of which is the number of days the property
was used in the zone and the denominator of which is the
total days of use.
(5) Dividends received during the time the individual
was a resident of a zone.
(6) Interest received during the time period the
individual was a resident of a zone.
(b) Pass-through entities.--The exemptions provided for in
subsection (a)(2), (3)(i) and (4) shall apply to all of the
following:
(1) The income or gain of a partnership or association.
The partner or member shall be entitled to the exemptions
under this section for the partner's or member's share,
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whether or not distributed, of the income or gain received by
the partnership or association for its taxable year.
(2) The income or gain of a Pennsylvania S corporation.
The shareholder shall be entitled to the exemptions under
this section for the shareholder's pro rata share, whether or
not distributed, of the income or gain received by the
corporation for its taxable year ending within or with the
shareholder's taxable year.
(c) Limitation.--A partnership, association, Subchapter S
corporation, cooperative, resident or nonresident may not apply
an exemption from income under this act for any class of income
against any other classes of income or gain. A partnership,
association, Subchapter S corporation, cooperative, resident or
nonresident may not carry back or carry forward any exemption
under this act from year to year. The credit allowed under this
section shall not exceed the tax liability of the taxpayer under
Article III of the Tax Reform Code of 1971 for the tax year.
Section 513. Residency considerations.
If an individual completes the residency requirements under
section 306 or if a nonresident realizes income attributable to
business activity or property within a zone, the individual may
claim the exemptions from income for the items provided under
section 512 for that portion of the tax year that the individual
was a resident or for that portion of the tax year during which
the area is designated as a zone.
Section 514. Corporate net income tax.
(a) Credits.--For the tax years that begin on or after
January 1, 2025, a corporation that is a qualified business
under this act may claim a credit against the tax imposed by
Article IV of the Tax Reform Code of 1971 for tax liability
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attributable to business activity conducted within the zone in
the taxable year. A credit may not be claimed for activities
conducted prior to designation of the real property as part of a
zone. The business activity must be conducted directly by a
corporation in the zone in order for the corporation to claim
the tax credit.
(b) Tax liability determinations.--The corporate tax
liability attributable to business activity conducted within a
zone shall be determined by multiplying the corporation's
taxable income that is attributable to business activity
conducted within the zone by the rate of tax imposed under
Article IV of the Tax Reform Code of 1971 for the taxable year.
(c) Determinations of attributable tax liability.--Tax
liability attributable to business activity conducted within a
zone shall be computed, construed, administered and enforced in
conformity with Article IV of the Tax Reform Code of 1971 and
with specific reference to the following:
(1) If the entire business of a corporation in this
Commonwealth is transacted wholly within the zone, the
taxable income attributable to business activity within a
zone shall consist of the Pennsylvania taxable income as
determined under Article IV of the Tax Reform Code of 1971.
(2) If the entire business of a corporation in this
Commonwealth is not transacted wholly within the zone, the
taxable income of the corporation in a zone shall be
determined upon the portion of the Pennsylvania taxable
income of the corporation attributable to business activity
conducted within the zone and apportioned in accordance with
subsection (d).
(d) Income apportionment.--The taxable income of a
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corporation that is a qualified business shall be apportioned to
a zone by multiplying the Pennsylvania taxable income by a
fraction, the numerator of which is the property factor plus the
payroll factor and the denominator of which is two, in
accordance with the following:
(1) The property factor is a fraction, the numerator of
which is the average value of the taxpayer's real and
tangible personal property owned or rented and used in the
zone during the tax period and the denominator of which is
the average value of all the taxpayer's real and tangible
personal property owned or rented and used in this
Commonwealth during the tax period but shall not include the
security interest of any corporation as seller or lessor in
personal property sold or leased under a conditional sale,
bailment lease, chattel mortgage or other contract providing
for the retention of a lien or title as security for the
sales price of the property.
(2) (i) The payroll factor is a fraction, the numerator
of which is the total amount paid in the zone during the
tax period by the taxpayer for compensation and the
denominator of which is the total compensation paid in
this Commonwealth during the tax period.
(ii) Compensation is paid in the zone if:
(A) the person's service is performed entirely
within the zone;
(B) the person's service is performed both
within and without the zone, but the service
performed without the zone is incidental to the
person's service within the zone; or
(C) some of the service is performed in the zone
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and the base of operations or, if there is no base of
operations, the place from which the service is
directed or controlled is in the zone, or the base of
operations or the place from which the service is
directed or controlled is not in any location in
which some part of the service is performed, but the
individual's residence is in the zone.
(e) Computation.--A corporation shall compute its
Commonwealth taxable income in conformity with Article IV of the
Tax Reform Code of 1971 with no adjustments or subtractions for
zone taxable income.
(f) Limitation on amount of credit.--The credit allowed
under this section shall not exceed the tax liability of a
taxpayer under Article IV of the Tax Reform Code of 1971 for the
tax year.
(g) Credit not applicable to certain businesses.--The
following shall apply:
(1) Any portion of a taxpayer's taxable income that is
attributable to the operation of any of the following may not
be used to calculate a credit under this section:
(i) A corporation that qualifies as a regulated
investment company under Article IV of the Tax Reform
Code of 1971.
(ii) A holding company as defined in Article VI of
the Tax Reform Code of 1971.
(2) The prohibition under paragraph (1) shall not apply
to the portion of a qualified business engaged in
manufacturing or processing.
CHAPTER 7
LOCAL TAXES
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Section 701. Local taxes.
Every political subdivision in which a designated zone is
located shall exempt, deduct, abate or credit local taxes in
accordance with ordinances and resolutions adopted under section
301(c), as is applicable. Failure to exempt, deduct, abate or
credit local taxes shall result in the revocation of the zone
designation.
Section 702. Real property tax.
(a) Local rule.--Notwithstanding the act of May 22, 1933
(P.L.853, No.155), known as The General County Assessment Law,
and 53 Pa.C.S. (relating to municipalities generally) each
qualified political subdivision shall by ordinance or resolution
abate 100% of the real property taxes on the assessed valuation
of property in an area designated as a zone within this
Commonwealth during the taxable years determined by the
department. The real property tax abatement provided for in this
section shall apply to all real property located in a zone,
irrespective of the business activity, if any, made of the real
property by its owner, when this act is in effect. An abatement
may not be provided prior to designation of a zone by the
department.
(b) Interest and penalties.--If the department or a
political subdivision finds that an individual or business
claimed an abatement of real property tax to which the
individual or business was not entitled under this act, the
individual or business shall be liable for the abated taxes and
subject to the applicable interest and penalty provisions
provided by law.
(c) Calculations for education subsidy for school
districts.--In determining the market value of real property in
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each school district, the State Tax Equalization Board shall
exclude any increase in value above the base value prior to the
effect of the abatement of local taxes to the extent and during
the period of time that real estate tax revenues attributable to
such increased value are not available to the school district
for general school district purposes.
Section 703. Local earned income and net profits taxes and
business privilege taxes.
(a) General exemption.--
(1) If a qualified political subdivision has enacted any
tax on the privilege of engaging in any business or
profession, measured by gross receipts or on a flat rate
basis, earned income or net profits, as defined in the act of
December 31, 1965 (P.L.1257, No.511), known as The Local Tax
Enabling Act, imposed within the boundaries of a zone, the
qualified political subdivision shall exempt from the
imposition or operation of the local tax ordinances,
statutes, regulations or otherwise:
(i) The business gross receipts for operations
conducted by a qualified business within a zone.
(ii) The earned income received by a resident of a
zone.
(iii) The net profits of a qualified business
attributable to business activity conducted within a zone
when imposed by the qualified political subdivision where
that qualified business is located.
(2) An exemption may not be granted for operations
conducted for earned income received or for activities
conducted prior to designation of the real property as part
of a zone.
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(b) Additional exemptions.--
(1) Paragraph (2) shall apply if a qualified political
subdivision has enacted a tax on the privilege of engaging in
a profession or business, on wages or compensation, on net
profits from the operation of a business or profession or
other activity or on the occupancy or use of real property
under any of the following:
(i) The act of August 5, 1932 (Sp.Sess. P.L.45,
No.45), referred to as the Sterling Act.
(ii) The act of March 10, 1949 (P.L.30, No.14),
known as the Public School Code of 1949.
(iii) The act of August 24, 1961 (P.L.1135, No.508),
referred to as the First Class A School District Earned
Income Tax Act.
(iv) The act of August 9, 1963 (P.L.640, No.338),
entitled "An act empowering cities of the first class,
coterminous with school districts of the first class, to
authorize the boards of public education of such school
districts to impose certain additional taxes for school
district purposes, and providing for the levy, assessment
and collection of such taxes."
(v) The act of May 30, 1984 (P.L.345, No.69), known
as the First Class City Business Tax Reform Act.
(vi) The act of June 5, 1991 (P.L.9, No.6), known as
the Pennsylvania Intergovernmental Cooperation Authority
Act for Cities of the First Class.
(2) If there is an enactment under paragraph (1), the
qualified political subdivision shall provide an exemption,
deduction, abatement or credit from the imposition and
operation of the local tax ordinance or resolution for all of
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the following:
(i) The privilege of engaging in a business or
profession within a zone by an individual or qualified
business, whether a resident or nonresident of the zone.
(ii) Salaries, wages, commissions, compensation or
other income received for services rendered or work
performed by a resident of a zone.
(iii) The gross or net income or gross or net
profits realized from the operation of a qualified
business to the extent attributable to business activity
conducted within a zone.
(iv) The occupancy or use of real property located
within the zone.
(c) Calculation for education subsidy for school district.--
In determining the personal income valuation of a school
district, the Secretary of Revenue shall exclude any increase in
the valuation as defined in section 2501(9.1) of the Public
School Code of 1949, above the base value prior to the abatement
of local taxes in a zone located within the school district to
the extent and during the period of time that personal income
revenues attributable to the increase in the personal income
valuation are not available to the school district for general
school district purposes. An exemption under this section may
not be granted to an individual or qualified business prior to
designation of the real property as part of a zone.
(d) Determination of exemption.--For the purposes of
determining an exemption under this section, a tax on or
measured by any of the following shall be attributed to business
activity conducted within a zone by applying the apportionment
factors under section 514(d):
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(1) Business gross receipts.
(2) Gross or net income.
(3) Gross or net profits.
Section 704. Mercantile license tax.
An individual or qualified business in a zone shall not be
required to pay any fee authorized pursuant to a mercantile
license tax imposed under the act of June 20, 1947 (P.L.745,
No.320), entitled "An act to provide revenue for school
districts of the first class A by imposing a temporary
mercantile license tax on persons engaging in certain
occupations and businesses therein; providing for its levy and
collection; for the issuance of mercantile licenses upon the
payment of fees therefor; conferring and imposing powers and
duties on boards of public education, receivers of school taxes
and school treasurers in such districts; saving certain
ordinances of council of certain cities, and providing
compensation for certain officers, and employes and imposing
penalties."
Section 705. Local sales and use tax.
(a) Exemption.--A political subdivision shall exempt sales
at retail of services or tangible personal property, except
motor vehicles, to a qualified business or a construction
contractor under a construction contract with a qualified
business, landowner or lessee for the exclusive use, consumption
and utilization of the tangible personal property or service by
the qualified business at the qualified business's, landowner's
or lessee's facility located within a zone from a city or county
tax on purchase price authorized under Article XXXI-B of the act
of July 28, 1953 (P.L.723, No.230), known as the Second Class
County Code and the act of June 5, 1991 (P.L.9, No.6), known as
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the Pennsylvania Intergovernmental Cooperation Authority Act for
Cities of the First Class. An exemption may not be granted for
sales occurring prior to designation of the real property as
part of a zone.
(b) Definition.--As used in this section, the term "sales at
retail of services or tangible personal property" shall be as
specified under Article II of the Tax Reform Code of 1971.
CHAPTER 9
ADMINISTRATION OF TAX PROVISIONS
Section 901. Transferability.
Any exemption, deduction, abatement or credit provided to any
individual or qualified business under Chapter 5 or 7 is
nontransferable and cannot be applied, used or assigned to any
other individual, business or tax account.
Section 902. Recapture.
(a) Refund.--If any qualified business located within a zone
has received an exemption, deduction, abatement or credit under
this act and subsequently relocates outside of the zone within
the first nine years of locating in a zone, the qualified
business shall refund to the State and political subdivision
that granted the exemption, deduction, abatement or credit
received in accordance with the following:
(1) If a qualified business relocates within five years
from the date of first locating in a zone, 66% of all the
exemptions, deductions, abatements or credits attributed to
that qualified business's participation in the zone shall be
refunded to the Commonwealth and the political subdivision.
(2) If a qualified business relocates within five to
nine years from the date of first locating in a zone, 33% of
all exemptions, deductions, abatements or credits attributed
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to that qualified business's participation in the zone shall
be refunded to the Commonwealth and the political
subdivision.
(b) Waiver.--The department, in consultation with the
Department of Revenue, the Secretary of Agriculture and the
political subdivision, may waive or modify recapture
requirements under this section if the department determines
that the business relocation was due to circumstances beyond the
control of the business, including, but not limited to:
(1) natural disaster;
(2) unforeseen industry trends; or
(3) loss of a major supplier or market.
Section 903. Delinquent or deficient State or local taxes.
(a) Individuals.--An individual may not claim or receive an
exemption, deduction, abatement or credit under this act unless
that individual is in full compliance with all State and local
tax laws, ordinances and resolutions.
(b) Qualified business.--
(1) A qualified business may not claim or receive an
exemption, deduction, abatement or credit under this act
unless that qualified business is in full compliance with all
State and local tax laws, ordinances and resolutions.
(2) A qualified business may not claim or receive an
exemption, deduction, abatement or credit under this act if
any individual or business with a 20% or greater interest in
that qualified business is not in full compliance with all
State and local tax laws, ordinances and resolutions.
(c) Later compliance and eligibility.--An individual or
qualified business that is not eligible to claim an exemption,
deduction, abatement or credit due to noncompliance with any
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State or local tax law may become eligible if that individual or
qualified business subsequently comes into full compliance with
all State and local tax laws to the satisfaction of the
Department of Revenue or the political subdivision within the
calendar year in which the noncompliance first occurred. If full
compliance is not attained by February 5 of the calendar year
following the calendar year during which noncompliance first
occurred, that individual or qualified business is precluded
from claiming any exemption, deduction, abatement or credit for
that calendar year, whether or not full compliance is achieved
subsequently.
Section 904. Code compliance.
(a) Applicability.--An individual or qualified business
shall be precluded from claiming an exemption, deduction,
abatement or credit provided under this act if the individual or
qualified business owns real property in a zone and the real
property is not in compliance with all applicable State and
local zoning, building and housing laws, ordinances or codes.
(b) Opportunity to achieve compliance.--An individual or
qualified business who is not in compliance under subsection (a)
shall have until December 31 of the calendar year following
designation of the real property as part of a zone to be in
compliance in order to claim any State exemptions, deductions,
abatements or credits for that year. If full compliance is not
attained by December 31 of that calendar year, the individual or
qualified business is precluded from claiming any exemption,
deduction or credit for that calendar year, whether or not
compliance is achieved in a subsequent calendar year. The
political subdivision may extend the time period in which an
individual or qualified business must come into compliance with
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a local ordinance or building code for a period not to exceed
one year if the political subdivision determines that the
individual or qualified business has made and shall continue to
make a good faith effort to come into compliance and that an
extension will enable the individual or qualified business to
achieve full compliance. A qualified political subdivision is
required to notify the Department of Revenue in writing of all
individuals or qualified businesses not in compliance with this
subsection within 30 days following the end of each calendar
year.
Section 905. Appeals.
An individual or qualified business shall be deemed to be in
compliance with any State or local tax for purposes of this
section if that individual or qualified business had made a
timely administrative or judicial appeal for that particular tax
or has entered into and is in compliance with a duly authorized
deferred payment plan with the Department of Revenue or
political subdivision for that particular tax.
Section 906. Notice requirements.
(a) Requirement.--After compliance reviews have been
conducted by appropriate Commonwealth and local authorities, the
department shall notify each zone applicant by regular mail each
year of the department's approval or denial of the applicant's
zone application. No zone is entitled to any tax benefits unless
it receives approval from the department.
(b) Transmittal.--The department or its designated official
shall, within 15 business days of receipt of a zone application
made under this act, forward a copy of the application to the
Department of Revenue, the Secretary of Agriculture, the
Pennsylvania Milk Board and any other appropriate Commonwealth
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and local authorities for review and processing.
Section 907. Application time.
(a) Requirement.--Except as provided under subsection (b),
an applicant shall file an application in a manner prescribed by
the department by December 31 of each calendar year for which
the applicant claims any exemption, deduction, abatement or
credit under this act.
(b) Extension or waiver.--Upon request of the applicant, the
department may extend or waive the application deadline for good
cause shown if the political subdivision does not object to the
waiver or extension.
(c) Approval.--An exemption, deduction, abatement or credit
may not be claimed or received for that calendar year until
approval has been granted by the department.
CHAPTER 11
PROCEDURES FOR ZONES
Section 1101. Keystone opportunity dairy zone prioritizations.
(a) Reduced interest.--Projects in a zone that is approved
for Pennsylvania Industrial Development Authority or Small
Business First financing shall receive the lowest interest rate
extended to borrowers.
(b) Priority consideration.--Projects in a zone shall
receive priority consideration for State assistance under State
community and economic development programs and for necessary
approval required from the Department of Environmental
Protection.
(c) Local governments.--The department shall provide
technical assistance to political subdivisions relating to
taxation, implementation of the opportunity plan, establishing
annual benchmarks and annual reporting requirements.
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Section 1102. Reporting.
The department shall report every four years to the General
Assembly on the economic effects of this act in each zone.
Section 1103. Other Commonwealth tax credits.
(a) Entitled to claim credit.--An individual or qualified
business that is entitled to claim an exemption, deduction,
abatement or credit in accordance with the provisions of this
act shall not be entitled to claim or accumulate any of the
following exemptions, deductions, abatements or credits that it
may otherwise have qualified for due to activity in the zone:
(i) under the Tax Reform Code of 1971:
(A) a research and development tax credit under
Article XVII-B; or
(B) a neighborhood assistance tax credit under
Article XIX-A;
(ii) a job creation tax credit under the act of June 29,
1996 (P.L.434, No.67), known as the Job Enhancement Act.
(b) Application to income.--The individual or qualified
business may apply the exemptions, deductions, abatements or
credits to income realized from activity or transactions outside
the zone, but only for the taxable year to which the exemptions,
deductions, abatements or credits apply. The provisions of this
section shall apply only to the taxes provided in Chapters 5 and
7.
Section 1104. Monitoring data.
In addition to any other requirements of this act, the
department shall monitor all of the following:
(1) Verifiable job creation and job retention data.
(2) Information on the types of jobs created and average
hourly wages.
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(3) The number of years in the zone.
(4) Annual, unduplicated public and private capital
investment amounts.
(5) A description of dairy processing activities.
(6) Types and amounts of other economic development
assistance received from the department, if any.
CHAPTER 13
MISCELLANEOUS PROVISIONS
Section 1301. Illegal activity.
Any funds or other forms of consideration received by an
individual or qualified business conducting any type of illegal
activity shall not be eligible for any of the exemptions,
deductions, abatements and credits or any other benefits that
are created under this act.
Section 1302. Rules and regulations.
The department, Department of Revenue and Department of
Agriculture may promulgate regulations necessary to effectuate
the provisions of this act.
Section 1303. Compliance.
An individual or qualified business eligible for an
exemption, deduction or credit under this act shall comply with
all reporting, filing and compliance requirements under the Tax
Reform Code of 1971 unless otherwise provided for in this act.
Section 1304. Penalties.
(a) Civil penalty.--
(1) In addition to any penalties authorized by the Tax
Reform Code of 1971 for violations of that act, the
Department of Revenue may impose an additional administrative
penalty not to exceed $50,000 for any act or violation of
this act relating to State and local taxes, including the
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filing of any false statement, return or document.
(2) The department may impose a civil penalty not to
exceed $50,000 for a violation of this act, including the
filing of any false statement, return or document.
(b) Criminal penalty.--In addition to any criminal penalty
under the Tax Reform Code of 1971, any individual or qualified
business who knowingly violates any of the provisions of this
act commits a misdemeanor of the third degree.
Section 1305. Construction.
This act shall be interpreted to ensure that all provisions
relating to State and local tax exemptions, deductions,
abatements and credits are strictly construed in favor of the
Commonwealth.
Section 1306. Severability.
The provisions of this act are severable. If any provision of
this act or its application to any individual or circumstance is
held invalid, the invalidity shall not affect other provisions
or applications of this act which can be given effect without
the invalid provision or application.
Section 1307. Repeals.
All acts and parts of acts are repealed insofar as they are
inconsistent with this act.
Section 1308. Applicability.
The provisions of this act shall be applied prospectively. An
individual or business may not claim any exemption, deduction,
abatement or credit until the individual or business becomes
qualified under this act and, in the case of a business,
receives certification from the department that the business is
qualified.
Section 1309. Effective date.
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This act shall take effect immediately.
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