Pennsylvania Act 2008-79 — KEYSTONE OPPORTUNITY ZONE, KEYSTONE OPPORTUNITY EXPANSION ZONE AND KEYSTONE OPPORTUNITY IMPROVEMENT ZONE ACT - OMNIBUS AMENDMENTS

Act text

KEYSTONE OPPORTUNITY ZONE, KEYSTONE OPPORTUNITY EXPANSION ZONE AND
      KEYSTONE OPPORTUNITY IMPROVEMENT ZONE ACT - OMNIBUS AMENDMENTS
                 Act of Jul. 10, 2008, P.L. 1014, No. 79              Cl. 72
                             Session of 2008
                               No. 2008-79

     SB 1412

                                  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,"
        defining "unoccupied parcel"; providing for extensions for
        unoccupied parcels, for additional keystone opportunity
        expansion zones, for substitution of parcels outside a
        subzone and for payments; prohibiting illegal alien labor in
        zones; and further providing for sales and use tax, for
        corporate net income tax and for local earned income net
        profits taxes, local sales and use tax and business privilege
        taxes.

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

        Section 1.  Section 103 of the act of October 6, 1998
     (P.L.705, No.92), known as the Keystone Opportunity Zone,
     Keystone Opportunity Expansion Zone and Keystone Opportunity
     Improvement Zone Act, is amended by adding a definition 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:
        * * *
        "Unoccupied parcel."  A parcel that is not occupied on the
     effective date of this definition. Construction activity on a
     parcel shall not constitute occupation of the parcel.
        Section 2.  The act is amended by adding sections to read:
      Section 301.3.  Extension for unoccupied parcels.
        (a)  Extension.--The department may approve an application to
     extend the exemptions, deductions, abatements and credits under
     this act as follows:
            (1)  One of the following:
                (i)  For a parcel in a keystone opportunity zone,
            keystone opportunity expansion zone or keystone
            opportunity improvement zone that is an unoccupied parcel
            on the effective date of this section, for a period of
            seven years from the expiration date of the zone.
                (ii)  For a parcel in a keystone opportunity zone or
            keystone opportunity expansion zone that is an unoccupied
            parcel on the effective date of this section, for a
            period of ten years from the date of occupancy, provided
            that the parcel is occupied on or before December 31,
            2015.
            (2)  The extension of exemptions, deductions, abatements
        or credits authorized under this section, except exemptions
        for sales and use tax under section 511(a) or 705(a), shall
        take effect only upon occupancy.
        (b)  Real estate tax abatement.--The owner of an unoccupied
     parcel in a keystone opportunity zone, keystone opportunity
     expansion zone or keystone opportunity improvement zone that has
     expired but that receives an extension of tax abatement
     eligibility following the original expiration date of the
     keystone opportunity zone, keystone opportunity expansion zone
     or keystone opportunity improvement zone under subsection (a)
     shall not receive an abatement of real property tax until the
     parcel becomes occupied or developed.
        (c)  Application.--Except as provided in subsection (d), in
     order to extend the tax benefits for unoccupied parcels under
     subsection (a), the department must receive an application from
     a political subdivision or its designee no later than June 30,
     2009. The application must contain the information required
     under section 302(a)(1), (2), (3), (5) and (6). The application
     must include all ordinances, resolutions or other required
     action adopted by all political subdivisions in which the
     unoccupied parcel is located adopting the extension of all tax
     exemptions, deductions, abatements and credits authorized under
     Chapter 7. The department, in consultation with the Department
     of Revenue, shall review the application and, if approved, issue
     a certification of all tax exemptions, deductions, abatements or
     credits under this part for the unoccupied parcel within three
     months of receipt of the application. The certification shall be
     effective on the day following the expiration date of the
     existing subzone.
        (d)  Applications for certain zones.--For a keystone
     opportunity zone that expires December 31, 2008, an application
     may be submitted to the department to temporarily delay the
     expiration of the exemptions, deductions, abatements and credits
     for the zone until June 30, 2009. The application must be
     submitted by November 30, 2008, and include all ordinances,
     resolutions or other required action from all affected political
     subdivisions approving the requested delay in the expiration of
     the keystone opportunity zone. The department shall certify the
     delay in the expiration by December 31, 2008. If the expiration
     of a keystone opportunity zone is delayed under this subsection,
     a political subdivision or its designee may apply for an
     extension pursuant to subsection (c), provided that the
     application shall be submitted by May 1, 2009, and approved by
     the department no later than June 30, 2009. If an extension is
     granted under subsection (c), the extension shall be deemed to
     be effective January 1, 2009.
        (e)  Expiration.--All extensions of an unoccupied parcel
     certified under subsection (a)(1)(i) shall expire no later than
     seven years following the expiration date of the existing
     keystone opportunity zone, keystone opportunity expansion zone
     or keystone opportunity improvement zone. All extensions of an
     unoccupied parcel certified under subsection (a)(1)(ii) shall
     expire no later than ten years following the date of occupancy
     of the unoccupied parcel.
      Section 301.4.  Additional keystone opportunity expansion
     zones.
        (a)  Establishment.--
            (1)  In addition to any designations under section 301.1,
        the department may designate up to 15 additional keystone
        opportunity expansion zones in accordance with this section.
        Each additional keystone opportunity expansion zone shall:
                (i)  Not be less than ten acres in size, unless
            contiguous to an existing zone.
                (ii)  Not exceed, in the aggregate, a total of 350
            acres.
                (iii)  Be comprised of parcels that meet any of the
            following criteria:
                    (A)  Are deteriorated, underutilized or
                unoccupied on the effective date of this clause.
                    (B)  Are occupied by a business that:
                        (I)  Creates or retains at least 1,400 full-
                    time jobs in this Commonwealth within three years
                    of the designation of the keystone opportunity
                    expansion zone; and
                        (II)  Makes a capital investment of at least
                    $750,000,000 in the additional keystone
                    opportunity enhancement zone within three years
                    of the designation of the keystone opportunity
                    expansion zone.
            (2)  The department shall immediately notify political
        subdivisions located within the area designated.
        (b)  Authorization.--Persons and businesses within an
     additional keystone opportunity expansion zone authorized under
     subsection (a) shall be entitled to all tax exemptions,
     deductions, abatements or credits set forth under this act,
     except exemptions for sales and use tax under section 511(a) or
     705(a), for a period of ten years beginning January 1, 2010, and
     ending on December 31, 2020. Exemptions for sales and use taxes
     under sections 511 and 705 shall commence upon designation of
     the zone by the department.
        (c)  Application.--In order to receive a designation under
     subsection (a), the department must receive an application from
     a political subdivision or its designee no later than May 1,
     2009. The application must contain the information required
     under section 302(a)(1), (2)(i) and (ix) and (6). The
     application must include all ordinances, resolutions or other
     required action adopted by all political subdivisions in which
     the keystone opportunity expansion zone is located providing the
     tax exemptions, deductions, abatements and credits authorized
     under Chapter 7. The department, in consultation with the
     Department of Revenue, shall review the application and, if
     approved, issue a certification of all tax exemptions,
     deductions, abatements or credits under this part for the
     additional keystone opportunity expansion zone within three
     months of receipt of the application. The department shall act
     on an application under this subsection by June 30, 2009.
      Section 301.5.  Expansion for new parcels.
        (a)  Expansion.--A political subdivision or its designee may
     apply for an expansion to add up to 15 acres of deteriorated
     property to an existing keystone opportunity expansion zone,
     keystone opportunity improvement zone or a subzone of a keystone
     opportunity zone for parcels that are contiguous to the existing
     zone or subzone.
        (b)  Application.--In order to receive a designation under
     this section, the department must receive an application from a
     political subdivision or its designee no later than December 31,
     2008. The application must contain the information required
     under section 302(a)(1), (2)(i) and (ix), (5) and (6). The
     application must include all ordinances, resolutions or other
     required action adopted by all political subdivisions in which
     the keystone opportunity expansion zone, keystone opportunity
     improvement zone or a subzone of a keystone opportunity zone is
     located adopting all tax exemptions, deductions, abatements and
     credits authorized under Chapter 7 to the expanded area. The
     department, in consultation with the Department of Revenue,
     shall review the application and, if approved, issue a
     certification of all tax exemptions, deductions, abatements or
     credits under this act for the expansion authorized under
     subsection (a) within two months of the receipt of the
     application.
        (c)  Applications for certain zones.--For a keystone
     opportunity zone that expires December 31, 2008, but is seeking
     an extension under section 301.3, the application shall include
     the request for an expansion under subsection (a). The
     application must be submitted by December 31, 2008, and include
     all ordinances, resolutions or other required action from all
     affected political subdivisions approving the addition of the
     acreage. If the expiration of a keystone opportunity zone is
     delayed under this subsection, a political subdivision or its
     designee may apply for an extension under section 301.3 and an
     expansion under this section. If an extension is granted under
     section 301.3, the extension and the expansion shall be deemed
     to be effective January 1, 2009.
        (d)  Authorization.--Persons or businesses within the
     expanded area shall be entitled to all tax exemptions,
     deductions, abatements or credits set forth under this act,
     except for sales and use taxes under section 511(a) or 705(a),
     for the period set forth in subsection (e). Exemptions for sales
     and use taxes under sections 511 and 705 shall commence upon
     approval of the expansion by the department.
        (e)  Expiration.--All expansions under this section shall
     expire on the same date as the keystone opportunity expansion
     zone, keystone opportunity improvement zone or subzone of a
     keystone opportunity zone.
      Section 301.6.  Substitution of parcels outside a subzone.
        (a)  Approval.--If a portion of an existing subzone is
     affected by a governmental prohibition of an environmental
     nature which has a substantial adverse effect on development,
     the department may approve a substitution of other parcels for
     those affected acres in the existing subzone, creating a new
     subzone if the new subzone is substantially similar in acreage
     size and is within five miles and in the same county as the
     original subzone.
        (b)  Application and approval.--Applications to substitute
     parcels under this section shall be made to the department no
     later than May 31, 2009. Applications under this section shall
     be made to the department in accordance with section 302(a)(1),
     (2), (3), (5) and (6). The department shall certify the
     substitutions by June 30, 2009.
      Section 310.  Payments.
        The following shall apply to an agreement between a business
     and a political subdivision entered into after the effective
     date of this section in exchange for the approval of, or
     otherwise relating to, the establishment of a keystone
     opportunity zone, keystone opportunity expansion zone or
     keystone opportunity improvement zone under this act, to include
     an extension under section 301.2:
            (1)  Except as otherwise required or authorized by law, a
        business may not provide payments to a political subdivision
        in exchange for the approval of, or otherwise relating to,
        the designation or extension of a keystone opportunity zone,
        keystone opportunity expansion zone or keystone opportunity
        improvement zone in excess of 110% of the amount of real
        property taxes payable to the political subdivision for the
        tax year immediately prior to the year in which the
        designation or extension is granted. The limitation on
        payments set forth under this paragraph may increase by the
        percentage increase in the payments that would occur if the
        property was not exempt from local real property taxes.
            (2)  Except as provided under paragraph (3), payments
        made under paragraph (1) may be increased based on a taxpayer
        assessment appeal or as necessary to correct any errors or
        omissions in the county's assessment records. Payments may be
        increased following a county wide reassessment based on
        improvements to the property made prior to the approval of
        the designation or expansion.
            (3)  Payments may not be increased for the duration of
        the designation or expansion based on an increase in the
        assessed value of property due to improvements to the
        property made subsequent to designation.
            (4)  Any agreement to make payments under this section
        shall be in writing and approved by a majority vote of the
        governing body of the political subdivision at a meeting that
        is subject to 65 Pa.C.S. Ch. 7 (relating to open meetings).
      Section 311.  Prohibition on illegal alien labor.
        (a)  General rule.--No person or business that receives a tax
     exemption, deduction, abatement or credit under this act shall
     knowingly permit the labor services of an illegal alien under a
     contract to which the person or business is a party in the
     applicable keystone opportunity zone, keystone opportunity
     expansion zone or keystone opportunity improvement zone. A
     person shall be deemed to have knowingly employed or knowingly
     permitted the prohibited services if he shall have active
     knowledge of or have reason to know that such services have been
     provided under the contract in the applicable keystone
     opportunity zone, keystone opportunity expansion zone or
     keystone opportunity improvement zone.
        (b)  Reimbursement.--As a condition of the receipt of a tax
     exemption, deduction, abatement or credit under this act, the
     department or political subdivision that awards the tax
     exemption, deduction, abatement of credit under this act shall
     require full repayment of the value or amount of the tax
     exemption, deduction, abatement or credit if subsection (c)
     applies.
        (c)  Violations.--
            (1)  Repayment under subsection (b) is required if any of
        the following apply:
                (i)  The person or business that received the tax
            exemption, deduction, abatement or credit under this act
            is sentenced under Federal law for an offense involving
            knowing use of labor by an illegal alien under the
            contract in the applicable keystone opportunity zone,
            keystone opportunity expansion zone or keystone
            improvement zone.
                (ii)  All of the following apply:
                    (A)  A contractor to a person or business that
                received the tax exemption, deduction, abatement or
                credit under this act is sentenced under Federal law
                for an offense involving knowing use of labor by an
                illegal alien on the contract.
                    (B)  The person knew or had reason to know of the
                contractor's knowing use of labor by an illegal alien
                on the contract.
            (2)  Any person who is required to repay the department
        or political subdivision under this section shall be
        ineligible to apply for any tax exemption, deduction,
        abatement or credit under this act for a period of two years.
            (3)  It shall be an affirmative defense to a violation of
        this section, if the person or business contracts with a
        contractor to provide labor under the contract in the
        applicable keystone opportunity zone, keystone opportunity
        expansion zone or keystone opportunity improvement zone and
        establishes that the person has required the contractor to
        certify compliance with the requirements of section 274A of
        the Immigration Reform and Control Act of 1986 (Public Law
        99-603, 8 U.S.C. § 1324A) with respect to the hiring,
        recruiting or referral for employment of an alien in the
        United States and has notified the appropriate Federal
        authority, if the person knew that the contractor used labor
        by an illegal alien.
        (d)  Definition.--As used in this section, "illegal alien"
     means a noncitizen of the United States who is violating Federal
     immigration laws and is providing compensated labor within this
     Commonwealth.
        Section 3.  Section 511 of the act, amended December 9, 2002
     (P.L.1727, No.217), is amended to read:
      Section 511.  Sales and use tax.
        (a)  Exemption.--Sales at retail of services or tangible
     personal property, other than motor vehicles, to a qualified
     business or a construction contractor pursuant to 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 [its]
     the qualified business's, landowner's or lessee's facility
     located within a subzone, improvement subzone or expansion
     subzone are exempt from the sales and use tax imposed under
     Article II of the Tax Reform Code of 1971. No person shall be
     allowed an exemption for sales conducted prior to designation of
     the real property as part of a subzone or expansion subzone.
        [(b)  Construction contracts.--For any construction contract
     performed in a subzone, improvement subzone or expansion
     subzone, the exemption provided in subsection (a) shall only
     apply to the sale at retail or use of building machinery and
     equipment to a qualified business, or to a construction
     contractor pursuant to a construction contract with a qualified
     business, for the exclusive use, consumption and utilization by
     the qualified business at its facility in a subzone, improvement
     subzone or expansion subzone. For the purposes of the subzone,
     improvement subzone or expansion subzone exemption, building
     machinery and equipment shall include distribution equipment
     purchased for the exclusive use, consumption and utilization in
     a subzone, improvement subzone or expansion subzone facility.]
        Section 4.  Section 515(d) introductory paragraph and (3) of
     the act, amended December 23, 2003 (P.L.360, No.51), are amended
     to read:
      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] two, 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 5.  Section 703 of the act is amended by adding a
     subsection to read:
      Section 703.  Local earned income and net profits taxes;
                    business privilege taxes.
        * * *
        (g)  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 subzone, improvement zone or
     expansion zone by applying the apportionment factors under
     section 515(d):
            (1)  Business gross receipts.
            (2)  Gross or net income.
            (3)  Gross or net profits.
        Section 6.  Section 705 of the act, amended December 9, 2002
     (P.L.1727, No.217), is amended to read:
      Section 705.  Local sales and use tax.
        (a)  General rule.--The political subdivision shall exempt
     sales at retail of services or tangible personal property,
     except motor vehicles, to a qualified business or a construction
     contractor pursuant to 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 [its] the qualified business's,
     landowner's or lessee's facility located within a subzone,
     improvement subzone or expansion subzone 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, as amended, 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, as amended. No
     exemption may be granted for sales occurring prior to
     designation of the real property as part of a subzone or
     expansion subzone.
        (b)  [Construction contracts.--For any construction contract
     performed in a subzone, improvement subzone or expansion
     subzone, the exemption provided in subsection (a) shall only
     apply to the sale at retail or use of building machinery and
     equipment to a qualified business, or to a construction
     contractor pursuant to a construction contract with a qualified
     business, for the exclusive use, consumption and utilization by
     the qualified business at its facility in a subzone, improvement
     subzone or expansion subzone. For the purposes of the subzone,
     improvement subzone or expansion subzone exemption, building
     machinery and equipment shall include distribution equipment
     purchased for the exclusive use, consumption and utilization in
     a subzone, improvement subzone or expansion subzone facility.]
     (Reserved).
        (c)  Definition.--Sales at retail of tangible personal
     property and services shall be defined in accordance with
     Article II of the Tax Reform Code of 1971.
        Section 7.  The amendment of sections 515 and 703 of the act
     shall apply to taxable years beginning after December 31, 2008.
        Section 8.  This act shall take effect in 60 days.

     APPROVED--The 10th day of July, A. D. 2008.

     EDWARD G. RENDELL