An Act providing for the creation of keystone opportunity dairy zones to facilitate the economic development of Pennsylvania's dairy industry; authorizing expenditures; providing 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. 395
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No. 384
Session of
2025
INTRODUCED BY MASTRIANO, ARGALL, SCHWANK, J. WARD, CULVER,
MILLER AND DUSH, MARCH 17, 2025
REFERRED TO COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT,
MARCH 17, 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 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. Annual certification.
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." A resident 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 which 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 a resident has a true and fixed
home and principal establishment for an indefinite time and to
which, whenever absent, that resident intends to return.
Domicile continues until another place of domicile is
established.
"Keystone opportunity dairy zone." A defined geographic area
comprised of one or more qualified political subdivisions or
portions of qualified political subdivisions as designated by
the department under section 301.
"Opportunity plan." A written plan that meets the
requirements and addresses the criteria under section 302 and
304.
"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 by the
Pennsylvania Milk Marketing 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, which
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 incorporated under the laws
of this Commonwealth and authorized to do business in this
Commonwealth that owns or leases real property in a zone from
which the qualified business actively operates a dairy
processing facility or small scale dairy processing facility as
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certified by the department.
"Qualified political subdivision." A political subdivision
which has real property within its jurisdiction which has been
designated by the department as a zone.
"Resident." A resident 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.
"Subzone." A parcel within an authorized zone.
"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.
"Zone." A keystone opportunity dairy zone.
CHAPTER 3
KEYSTONE OPPORTUNITY DAIRY ZONES
Section 301. Keystone opportunity dairy zones.
(a) Establishment.--The department may designate up to 30
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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. Residents and
businesses within an authorized zone that are qualified under
this act shall be entitled to all tax exemptions, deductions,
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.--Each 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 residents and qualified
businesses 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 qualified political subdivision for
the duration of the zone designation.
(d) Authorization to extend the duration of a zone.--The
political subdivision or subdivisions comprising a zone may
request to extend the 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
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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 the duration of the designation of
the zone provided all the proper binding 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, qualified
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.
(b) Content.--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 that shall include the
following:
(i) A detailed map of the proposed zone, including
geographic boundaries, total area and present use and
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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 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 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
each 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
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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
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 colocated with an existing or proposed dairy
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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.
(ii) Show anticipated private investment of
$10,000,000 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
colocated with an existing or proposed dairy processing
facility.
(2) Be not more than 25 acres, unless colocated 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
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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, a resident shall be
domiciled and shall reside in a zone for a period of 184
consecutive days during each taxable year.
Section 307. Annual certification.
(a) Qualification.--In order to qualify each year for a tax
exemption, deduction, abatement or credit under this act, a
qualified business shall obtain annual renewal of the
certification from the department.
(b) Requirements.--For a class zone, the following shall
apply:
(1) For a Class A zone, the certification form shall
include at least 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.
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(ii) The gross value of Pennsylvania milk products
produced in the past year.
(iii) Any other information, conditions or
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 other method as determined by the
department.
CHAPTER 5
STATE TAXES
SUBCHAPTER A
GENERAL PROVISIONS
Section 501. State taxes.
(a) Receipt and expiration.--A resident 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) Construction.--The Department of Revenue shall
administer, construe and enforce the provisions of this chapter
in conjunction 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,
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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,
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) Exemptions.--A resident shall be allowed an exemption
for:
(1) Compensation received during the time period when
the resident was a resident of a zone.
(2) (i) 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.
(ii) A business that operates both within and
outside this Commonwealth, before computing the
business's zone exemption, shall first determine the
business's Pennsylvania activity over the 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
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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
practices. The following shall apply:
(A) The exemption under 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.
(B) This subparagraph shall apply to intangible
personal property employed in a trade, profession or
business in a zone 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
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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
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 a resident, 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 resident was
a resident of a zone.
(6) Interest received during the time period the
resident was a resident of a zone.
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(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,
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 Subchapter 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 a resident completes the residency requirements under
section 306 or if a nonresident realizes income attributable to
business activity or property within a zone, the resident may
claim the exemptions from income for the items provided under
section 512 for that portion of the tax year that the resident
was a resident or for that portion of the tax year during which
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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
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 the 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 the corporation in this
Commonwealth is not transacted wholly within the zone, the
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taxable income of a corporation in a zone shall be determined
by 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
corporation that is a qualified business shall be apportioned to
the 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:
(i) 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; and
(ii) 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.
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(ii) Compensation is paid in the zone if:
(A) the resident's service is performed entirely
within the zone;
(B) the resident's service is performed both
within and without the zone, and the service
performed without the zone is incidental to the
resident's service within the zone; or
(C) some of the service is performed in the zone
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, and the
resident's residence is in the zone.
(e) Computation.--A corporation shall compute the
corporation's 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 the
taxpayer under Article IV of the Tax Reform Code of 1971 for the
tax year.
(g) Limitation on applicability.--
(1) Any portion of the 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.
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(ii) A holding company as the term is used 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
Section 701. Local taxes.
Each qualified political subdivision 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) Abatement.--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 taxation 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 under this section
shall apply to all real property located in a zone, irrespective
of the business activity, if any, made of the realty by the
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 a resident or business claimed
an abatement of real property tax to which the resident or
business was not entitled under this act, the resident or
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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
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
the 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) Exemption.--
(1) If a political subdivision has enacted a tax on the
privilege of engaging in a business or profession, measured
by gross receipts or on a flat rate basis, earned income or
net profits, as used 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 the following 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
the qualified business is located.
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(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.
(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.
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(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
the following:
(i) The privilege of engaging in a business or
profession within a zone by a resident 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 personal income 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 a resident or qualified
business prior to designation of the real property as part of a
zone.
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(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):
(1) Business gross receipts.
(2) Gross or net income.
(3) Gross or net profits.
Section 704. Mercantile license tax.
A resident or qualified business in a zone shall not be
required to pay any fee authorized under 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) Sales and use tax 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,
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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 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 phrase "sales
at retail of services or tangible personal property" shall be as
the phrase "sales at retail" is used 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 a
resident or qualified business under Chapter 5 or 7 is
nontransferable and cannot be applied, used or assigned to any
other resident, business or tax account.
Section 902. Recapture.
(a) Repayment to State and political subdivision.--If a
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 which 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
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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 between five to
nine years from the date of first locating in a zone, 33% of
all 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.
(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:
(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) Residents.--A resident may not claim or receive an
exemption, deduction, abatement or credit under this act unless
that resident 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 a
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resident 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.--A resident or
qualified business that is not eligible to claim an exemption,
deduction, abatement or credit due to noncompliance with any
State or local tax law may become eligible if that resident 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 resident 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) Compliance required.--A resident or qualified business
shall be precluded from claiming an exemption, deduction,
abatement or credit provided under this act if the resident 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.--A resident or
qualified business that 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
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attained by December 31 of that calendar year, the resident 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 a
resident or qualified business must come into compliance with a
local ordinance or building code for a period not to exceed one
year if the political subdivision determines that the resident
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 resident or qualified business to achieve full
compliance. A qualified political subdivision is required to
notify the Department of Revenue in writing of each resident or
qualified business not in compliance with this subsection within
30 days following the end of each calendar year.
Section 905. Appeals.
A resident or qualified business shall be deemed to be in
compliance with any State or local tax for purposes of this
section if that resident 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. A zone is not entitled to any tax benefits
unless the zone receives approval from the department.
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(b) Transmittal.--The department or the department's
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 Milk Marketing Board and any other appropriate
Commonwealth 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 an 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
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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.
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) Limitation.--A resident 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 the resident or qualified
business may otherwise have qualified for due to activity in the
zone:
(1) Provisions under the Tax Reform Code of 1971 of the
following:
(i) Article XVII-B relating to research and
development tax credits.
(ii) Article XIX-A relating to neighborhood
assistance tax credits.
(2) A job creation tax credit under the act of June 29,
1996 (P.L.434, No.67), known as the Job Enhancement Act.
(b) Non-zone income.--The resident or qualified business may
apply the exemptions, deductions, abatements or credits to
income realized from activity or transactions outside the zone
only for the taxable year to which the exemptions, deductions,
abatements or credits apply. This subsection shall apply only to
the taxes provided in Chapters 5 and 7.
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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.
(3) Number of years in the program.
(4) Annual, unduplicated public and private capital
investment amounts.
(5) 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 a
resident 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
this act.
Section 1303. Compliance.
A resident 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.
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(a) Civil penalty.--
(1) In addition to any penalties authorized for
violations under the Tax Reform Code of 1971, 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 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, a resident or qualified
business that knowingly violates any provision 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 a resident 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. A
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resident or business may not claim an exemption, deduction,
abatement or credit until that resident 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.
This act shall take effect immediately.
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