The Pennsylvania Keystone Opportunity Zone Program was created in 1998 as part of the Keystone Opportunity Zone, Keystone Opportunity Expansion Zone and Keystone Opportunity Improvement Zone Act.  

The program is administered by the Department of Community and Economic Development, and is a partnership between state and local government in collaboration with the Department of Revenue and the Department of Labor and Industry.  

The goal of the Keystone Opportunity Zone Program is to revitalize economically distressed urban and rural communities by eliminating taxes through credits, waivers and abatements.  

There are 12 regional Keystone Opportunity Zones (KOZ) in 61 Pennsylvania counties. Each KOZ is administered through the same local community or economic development agency.

In order for a business to receive the benefit, it must submit an application to the Department of Community and Economic Development by December 31st of the year for which benefits are sought.

Through tax credits, waivers and broad-based abatements, total taxes on economic activity in Keystone Opportunity Zones are significantly reduced. These benefits can be applied to the following taxes:

State level:

• Corporate Net Income tax
• Capital Stock and Foreign Franchise tax
• Personal Income tax
• Sales and Use tax
• Mutual Thrift Institution tax
• Bank and Trust Company Shares tax
• Insurance Premiums tax

Local level:

• Earned Income/Net Profits tax
• Sales and Use tax
• Property tax
• Business Gross Receipts, Business Occupancy, Business Privilege and Mercantile tax

Keystone Opportunity Zone Program Eligibility Requirements

• Qualified businesses must receive certification from the Department of Community and Economic Development that the business is located in and is in the active conduct of a trade, profession or business in a Keystone Opportunity, Keystone Opportunity expansion or Keystone Opportunity improvement subzone.
  
  
• Qualified businesses must obtain annual renewal of the certification to remain qualified for benefits.
  
  
• Pennsylvania businesses relocating to a Keystone Opportunity Zone or Keystone Opportunity Expansion Zone must either:
  
  → Increase full-time employment by 20% within the first full year of operation.
  → Make a 10% capital investment in the property used in the zone based on prior year’s gross revenues.
  → Enter into a lease agreement for property located within a subzone, expansion subzone or improvement subzone for a term equal to the duration of the subzone, expansion subzone or improvement subzone in which the aggregate lease payments equal at least 5% of the business’s gross revenue for the immediately preceding calendar or fiscal year.
  
  
• Applications are reviewed by the Department of Community and Economic Development and, once approved, are forwarded to the Department of Revenue and Department of Labor and Industry to determine tax compliance.
  
  
• Qualified businesses will receive an approval letter from the Department of Community and Economic Development; this is verification of eligibility to receive KOZ benefits from state and local entities.
  
  
• Any qualified business located within a KOZ and receiving exemptions, deductions, abatements or credits under the Act, relocating outside of the Zone within the first five years of locating in a Zone, may be required to refund all tax benefits received to state and local authorities. In addition, any business that fails to meet the relocation obligations will also be subject to revocation of future benefits and repayment of benefits previously received.

Navigating The Keystone Opportunity Zone Program

As reported by the Pennsylvania Department of Community and Economic Development, since the inception of the Keystone Opportunity Zone Program in 1999, 19,707 new jobs have been created and $1,503,765,974 of private capital investment in real estate have been made.  

Due to the tremendous success of the program, there have been multiple opportunities for local communities to designate additional subzones.

The Pennsylvania Keystone Opportunity Zone Program is set to expire on December 31, 2020.

To take advantage of this tax benefit program, it’s recommended that you contact an outsourced tax consultant who is well-versed in Pennsylvania state employment incentives. A tax expert guides you through the program details and develops a solid plan for capturing the tax incentives, from meeting eligibility requirements to accurately filing applications.

Ready to learn more about the benefits of partnering with an outsourced tax consultant? Schedule your 30-minute, no-cost consultation with a tax expert at CTI.