Pennsylvania Act 2003-51 — KEYSTONE OPPORTUNITY ZONE AND KEYSTONE OPPORTUNITY EXPANSION ZONE ACT - OMNIBUS AMENDMENTS

Act text

KEYSTONE OPPORTUNITY ZONE AND KEYSTONE OPPORTUNITY EXPANSION ZONE ACT -
                            OMNIBUS AMENDMENTS
                  Act of Dec. 23, 2003, P.L. 360, No. 51              Cl. 72
                             Session of 2003
                               No. 2003-51

     HB 521

                                  AN ACT

     Amending the act of October 6, 1998 (P.L.705, No.92), entitled,
        as amended, "An act providing for the creation of keystone
        opportunity zones and keystone opportunity expansion zones to
        foster economic opportunities in this Commonwealth, to
        facilitate economic development, stimulate industrial,
        commercial and residential improvements and prevent physical
        and infrastructure deterioration of geographic areas within
        this Commonwealth; authorizing expenditures; providing tax
        exemptions, tax deductions, tax abatements and tax credits;
        creating additional obligations of the Commonwealth and local
        governmental units; and prescribing powers and duties of
        certain State and local departments, agencies and officials,"
        further providing for short title, for definitions, for
        keystone opportunity zones, for keystone opportunity
        expansion zones, for keystone opportunity improvement zones,
        for application, for review, for criteria, for authorization
        of keystone opportunity zone, for residency, for qualified
        businesses and for corporate net income tax.

        The General Assembly of the Commonwealth of Pennsylvania
     hereby enacts as follows:

        Section 1.  Section 101 of the act of October 6, 1998
     (P.L.705, No.92), known as the Keystone Opportunity Zone and
     Keystone Opportunity Expansion Zone Act, amended December 20,
     2000 (P.L.841, No.119), is amended to read:
      Section 101.  Short title.
        This act shall be known and may be cited as the Keystone
     Opportunity Zone [and], Keystone Opportunity Expansion Zone and
     Keystone Opportunity Improvement Zone Act.
        Section 2.  The definitions of "deteriorated property,"
     "qualified business," "qualified political subdivision" and
     "resident" in section 103 of the act, amended December 20, 2000
     (P.L.841, No.119), are amended to read:
      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:
        * * *
        "Deteriorated property."  Any blighted, impoverished area
     containing residential, industrial, commercial or other real
     property that is abandoned, unsafe, vacant, undervalued,
     underutilized, overgrown, defective, condemned, demolished or
     which contains economically undesirable land use. The term
     includes property adjacent to deteriorated property that is
     significantly undervalued and underutilized due to the proximity
     of the deteriorated property and property which has been
     designated as deteriorated property in accordance with any other
     act.
        * * *
        "Qualified business."  A business authorized to do business
     in this Commonwealth [that] which is located or partially
     located within a subzone [or], expansion subzone or improvement
     subzone and is engaged in the active conduct of a trade or
     business in accordance with the requirements of section 307 for
     the taxable year. An agent, broker or representative of a
     business is not engaged in the active conduct of trade or
     business for the business.
        "Qualified political subdivision."  A political subdivision
     [that] which has real property within its jurisdiction which has
     been designated by the department as a subzone [or], expansion
     subzone or improvement subzone.
        "Resident."  A person who is domiciled and resides in an area
     that is designated a subzone [or], expansion subzone or
     improvement subzone and who meets the requirements of section
     306.
        * * *
        Section 3.  Sections 301(f), 301.1(e), 301.2(c), 302(a.1) and
     (c), 303(a), (b), (c) and (d) and 304(c) of the act, amended or
     added December 9, 2002 (P.L.1727, No.217), are amended to read:
      Section 301.  Keystone opportunity zones.
        * * *
        (f)  Authorization to enhance [existing] subzones.--Unless as
     a result of a request the limitation on size established in
     subsection (a) would be exceeded, a subzone [of a keystone
     opportunity zone] may request to enhance its size. The request
     to enhance a subzone must be made on a subzone-by-subzone basis.
     A qualified political subdivision [having an approved] which is
     seeking a subzone within its jurisdiction [which is seeking to
     enhance its size] must pass the required ordinances, resolutions
     or other required action of the qualified political subdivision
     for the necessary exemptions, deductions, abatements or credits
     pursuant to this act for the period beginning on [the date of
     designation and ending on the date the subzone expires and must
     submit copies] January 1, 2004, and ending on December 31, 2010,
     or December 31, 2013. Copies of the ordinance, resolution or
     other action must be submitted to the department by [June 1,
     2003] May 1, 2004.
      Section 301.1.  Keystone opportunity expansion zones.
        * * *
        (e)  Authorization to enhance [existing] expansion
     subzones.--Unless as a result of a request the limitation on
     size established in subsection (a) would be exceeded, an
     expansion subzone [of a keystone opportunity expansion zone] may
     request to enhance its size. The request to enhance [the] an
     expansion subzone must be made on a subzone-by-subzone basis. A
     qualified political subdivision [having an approved] which is
     seeking an expansion subzone within its jurisdiction [which is
     seeking to enhance its size] must pass the required ordinances,
     resolutions or other required action of the qualified political
     subdivision for the necessary exemptions, deductions, abatements
     or credits pursuant to this act for the period beginning on [the
     date of designation and ending on the date the expansion subzone
     expires and must submit copies] January 1, 2004, and ending on
     December 31, 2010, or on December 31, 2013. Copies of the
     ordinance, resolution or other action must be submitted to the
     department by [June 1, 2003] May 1, 2004.
      Section 301.2.  Keystone opportunity improvement zones.
        * * *
        (c)  Application.--By June 1, [2003] 2004, a political
     subdivision may apply to the department for approval of the
     designation of the deteriorated property as an improvement
     subzone for the period designated under subsection (b). The
     application must be on a form provided by the department and
     must include a copy of an ordinance, resolution or other
     required action from the governing body of the political
     subdivision exempting or providing the deductions, abatement or
     credits required by Chapter 7 to qualified persons and qualified
     businesses within the proposed improvement subzone. Except as
     provided in section [309] 1309, all appropriate ordinances and
     resolutions must be effective for the period specified in the
     executive order, and must be binding and nonrevocable on the
     political subdivision.
        * * *
      Section 302.  Application.
        * * *
        (a.1)  Enhancement application.--One or more political
     subdivisions within [an existing] a keystone opportunity zone or
     keystone opportunity expansion zone, or a designee of one or
     more political subdivisions within [an existing] a keystone
     opportunity zone or keystone opportunity expansion zone, may
     apply to the department to designate deteriorated property
     within the political subdivision or portions of the political
     subdivision as enhancements to a subzone or an expansion
     subzone. The application must satisfy the requirements of
     subsection (a)(1), (2), (3), (5) and (6).
        * * *
        (c)  Application limitation.--A political subdivision may
     submit only one application to the department for authorization
     as a keystone opportunity zone. A political subdivision may
     submit only one application to the department for authorization
     as a keystone opportunity expansion zone. A political
     subdivision may submit only one application to the department
     for designation of enhancements to [existing] keystone
     opportunity zones and keystone opportunity expansion zones. If a
     political subdivision seeks to enhance its [existing keystone
     opportunity zone] subzone under section 301(f) or its [existing
     keystone opportunity expansion zone] expansion subzone under
     section 301.1(e) and the Governor has designated an improvement
     subzone located within the political subdivision under section
     301.2(b), the political subdivision [shall] must submit one
     application containing both the request required by section
     301(f) or 301.1(e) and the application required by section
     301.2(c).
      Section 303.  Review.
        (a)  Action of department.--The department, in consultation
     with the Department of Revenue, shall review all completed
     applications submitted under this act. An application for
     authorization as a keystone opportunity zone and designation of
     subzones [shall] must be received by the department on or before
     September 30, 1998, in order to be considered by the department.
     An application for authorization as a keystone opportunity
     expansion zone and designation of expansion subzones [shall]
     must be received by the department on or before February 28,
     2001, in order to be considered by the department. An
     application for enhancement of [an existing] a keystone
     opportunity zone or of [an existing] a keystone opportunity
     expansion zone and designation of enhancements to subzones and
     to expansion subzones must be received by the department on or
     before June 1, [2003] 2004.
        (b)  Process.--The department shall authorize up to 12
     keystone opportunity zones from applications meeting the
     criteria in section 304 based upon need and likelihood of
     success. The department shall authorize up to 12 keystone
     opportunity expansion zones from applications meeting the
     criteria in section 304 based upon need and likelihood of
     success. Additionally, the department shall not alter the
     geographic boundaries of a subzone or expansion subzone or the
     duration of a subzone or expansion subzone described in an
     application. The department shall [designate] authorize
     additional enhancements to [existing] keystone opportunity zones
     and keystone opportunity expansion zones from applications
     meeting the criteria in section 304 based upon need and
     likelihood of success as determined by the department.
        (c)  Authorizations.--The department shall authorize all
     keystone opportunity zones by November 30, 1998. The department
     shall authorize all keystone opportunity expansion zones by
     March 30, 2001. The department shall [designate] authorize all
     enhancements to [existing] keystone opportunity zones and
     keystone opportunity expansion zones by [October 1, 2003] June
     30, 2004.
        (d)  Effective date of designation.--The designation of a
     subzone under this act shall take effect on January 1, 1999. The
     designation of an expansion subzone under this act shall take
     effect on January 1, 2001. The designation of enhancements to
     [existing keystone opportunity zones and keystone opportunity
     expansion zones] subzones and expansion subzones under this act
     shall take effect January 1, 2004. The designation of an
     improvement subzone under this act shall take effect on the date
     the property is designated an improvement subzone.
        * * *
      Section 304.  Criteria for authorization of keystone
                    opportunity zone.
        * * *
        (c)  Tax exemption ordinances.--An area shall not be
     authorized as a keystone opportunity zone or a keystone
     opportunity expansion zone unless, as a part of the application,
     each political subdivision in which the proposed subzone or
     proposed expansion subzone is to be located adopts and provides
     a copy of an ordinance, resolution or other required action from
     the governing body of each political subdivision that exempts or
     provides deductions, abatements or credits to qualified persons
     and qualified businesses from local taxes upon designation of
     the area as a subzone or expansion subzone. All appropriate
     ordinances and resolutions shall be effective on or before
     January 1, 1999, if designation as a subzone is granted. All
     appropriate ordinances and resolutions shall be effective on
     January 1, 2001, if designation as an expansion subzone is
     granted. All appropriate ordinances and resolutions shall be
     effective January 1, 2004, if designation of enhancements to [an
     existing keystone opportunity zone or keystone opportunity
     expansion zone] a subzone or expansion subzone are granted.
     Except as provided in section 309, the resolution, ordinance or
     other required action shall be binding and nonrevocable on the
     qualified political subdivisions for the duration of the
     opportunity plan.
        * * *
        Section 4.  Section 306 of the act, amended December 20, 2000
     (P.L.841, No.119), is amended to read:
      Section 306.  Residency.
        In order to qualify each year for a tax exemption, deduction,
     abatement or credit under this act, a person shall be domiciled
     and shall reside in a subzone [or], expansion subzone or
     improvement subzone for a period of 184 consecutive days during
     each taxable year, which may begin on the date of designation by
     the department or on the date the person first resides within
     the subzone [or], expansion subzone or improvement subzone.
        Section 5.  Sections 307(b) and 515(d)(3) of the act, amended
     December 9, 2002 (P.L.1727, No.217), are amended to read:
      Section 307.  Qualified businesses.
        * * *
        (b)  Relocation.--Any business that relocates from outside a
     subzone, improvement subzone or expansion subzone into a
     subzone, improvement subzone or expansion subzone shall not
     receive any of the exemptions, deductions, abatements or credits
     set forth in this act unless that business [either] does one of
     the following:
            (1)  increases full-time employment by at least 20% in
        the first full year of operation within the subzone,
        improvement subzone or expansion subzone; [or]
            (2)  makes a capital investment in the property located
        within [a] the subzone, improvement subzone or expansion
        subzone at least equivalent to 10% of the gross revenues of
        that business in the immediately preceding calendar or fiscal
        year[.]; or
            (3)  enters into a lease agreement for property located
        within the subzone, improvement subzone or expansion subzone:
                (i)  for a term at least equivalent to the duration
            of the subzone, improvement subzone or expansion subzone;
            and
                (ii)  with aggregate payment under the lease
            agreement at least equivalent to 5% of the gross revenues
            of that business in the immediately preceding calendar or
            fiscal year.
     The department, in consultation with the Department of Revenue,
     may waive or modify the requirements of this subsection, as
     appropriate.
      Section 515.  Corporate net income tax.
        * * *
        (d)  Income apportionment.--The taxable income of a
     corporation that is a qualified business shall be apportioned to
     the subzone, improvement subzone or expansion subzone by
     multiplying the Pennsylvania taxable income by a fraction, the
     numerator of which is the property factor plus the payroll
     factor plus the sales factor and the denominator of which is
     three, in accordance with the following:
            * * *
            (3)  The sales factor is a fraction, the numerator of
        which is the total sales of the taxpayer in the subzone,
        improvement subzone or expansion subzone during the tax
        period and the denominator of which is the total sales of the
        taxpayer in this Commonwealth during the tax period.
                (i)  Sales of tangible personal property are in the
            subzone, improvement subzone or expansion subzone if the
            property is delivered or shipped to a purchaser that
            takes possession within the subzone, improvement subzone
            or expansion subzone regardless of the F.O.B. point or
            other conditions of the sale.
                (ii)  Sales other than sales of tangible personal
            property are in the subzone, improvement subzone or
            expansion subzone if:
                    (A)  the income-producing activity is performed
                in the subzone, improvement subzone or expansion
                subzone; or
                    (B)  the income-producing activity is performed
                both within and without the subzone, improvement
                subzone or expansion subzone and a greater proportion
                of the income-producing activity is performed in the
                subzone, improvement subzone or expansion subzone
                than in any other location, based on costs of
                performance.
        * * *
        Section 6.  This act shall take effect immediately.

     APPROVED--The 23rd day of December, A. D. 2003.

     EDWARD G. RENDELL