KOZs: a Hidden Advantage for PA-based Businesses
If you want to set up a business in the state of Pennsylvania, you may qualify to operate virtually tax-free for over a decade. Parcel-based exemptions are available at a dozen locations across the state through the Keystone Opportunity Zone (KOZ) Program.
The Program is a partnership between state and local governments designed to revitalize and develop vacant and underused land and buildings. Businesses that qualify to operate in KOZ locales receive a litany of both state and local tax breaks:
The Program’s legislation was first passed in 1998 by former Pennsylvania Governor Tom Ridge. Since then, according to the Pennsylvania Department of Community and Economic Development (DCED), KOZ-participant firms have created close to 20,000 jobs and generated about $8.01 billion in real estate capital investments.
These successes have encouraged Congress to incrementally expand the KOZ Program. Passed in 2012, the most recent amendments to the legislation
- permit the DCED to create 15 new zones, each no larger than 15 acres;
- repeal the pre-existing December 2019 close date for all abatements provided by the KOZ Program;
- enable the DCED to extend the close date of KOZs that expired at the end of 2013 and later by as much as 10 years, and;
- authorize future extensions of the KOZ Program on an “as applied/as needed basis.”
Pennsylvania’s 12 KOZ locales break down further into 350-acre subzones. Local governments decide which parcels and firms get the exemptions inside each of those subzones.
The specifics of the breaks firms receive vary by local political whim. But economic development agency CAN DO, based in Hazleton Pennsylvania, provides the following example analysis of a mid-sized firm that successfully applies for KOZ exemptions in Hazle Township:
Importantly, you don’t have to be from out of town to participate. Suppose you wish to relocate your business to a KOZ within limits of the township, borough or municipality in which you currently operate.
The stipulation is that firms which relocate to a KOZ from within a given locale must either
- increase the number of full-time positions at their firm within the first year of operation in a KOZ, or;
- make an investment in that locale equal to or greater than 10% of the area’s gross revenues from the previous year.
Page nine of the DCED’s March 2014 KOZ brochure provides potential applicants up-to-date contact information for officials at each of the Program’s 12 subzones.