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Wouldn't it be great if you didn't have to
pay ANY state or local business taxes through 2010? Better
yet, how about no taxes through 2013? Time to pinch
yourself and see if you're dreaming, right?
 Wrong.
Because this tax fantasy can become reality in the Penn's
Northeast region when you locate your company in either
a Keystone
Opportunity Zone (KOZ) or Keystone Opportunity Expansion
Zone (KOEZ).
Thanks to an initiative started in 1998, local counties, municipalities
and school districts were allowed to designate certain properties
within their jurisdictions as special tax-free zones. All
three taxing bodies had to agree to total local tax forgiveness
for a property to receive either KOZ or KOEZ status.
To search
for KOZ or KOEZ properties now, click here.
The good news is that there are many excellent
sites in the Penn's Northeast region that have received either
KOZ (expires December 31, 2010) or KOEZ (expires December
31, 2013) status. So how do you qualify and how much
money can you actually expect to save?
Eligibility
Well, first of all, to be eligible you must
have a project that dramatically impacts the local economy
and/or its workforce. If a Pennsylvania-based company is
relocating an operation from a non-KOZ/KOEZ into
one of the zones, then it must:
- either increase its full-time
employment by at least 20% in the first full year of operation
- or make a capital investment in
the zone equal to at least 10% of the gross revenues of
the business in the preceeding calendar or fiscal year.
A business relocating from outside Pennsylvania
into a KOZ/KOEZ is not subject to the relocation provisions.
Such a business must simply own or lease real property in
a KOZ/KOEZ from which it actively conducts a trade, profession,
or business, and obtain annual certification from the Pennsylvania
Department of Community and Economic Development.
Tax Exemptions
Some of the local and state taxes from which
an eligible business that moves into a KOZ/KOEZ will be
exempt include:
- Local real estate taxes
- Local business privilege or mercantile
taxes (if any)
- Pennsylvania's Corporate Net Income Tax
- Pennsylvania's Capital Stock & Franchise
Tax
- State Sales Tax on the purchase of
taxable property or services (excluding motor vehicles)
that are used and consumed by the business within the
zone.
- State Sales Tax on telephone and
electric service used by a business in the zone
- State Sales Tax on "building
machinery and equipment" purchased by a contractor
in conjunction with a construction contract
- The Bank and Trust Company Shares Tax
or the Mutual Thrift Institutions Tax, subject to
certain limitations, for liabilities attributable to business
activity conducted within a zone. Only banks, trust companies
and mutual thrift institutions are subject to these taxes.
- The Insurance Premiums Tax - an insurance
company that is a qualified business may take a Job Tax
Credit, subject to certain limitations, against this tax
liability attributable to business activity conducted
within a zone.
- Personal Income Tax on a qualified sole
proprietorship, partnership, or PA S-
Corporation - income earned by a qualified business
inside a zone is not subject to this tax when passed through
to the resident/nonresident shareholder, partner, member,
etc…
Members of Penn's Northeast, Inc. recently
asked national accounting firm KPMG LLP to estimate the
approximate tax savings certain companies would realize
by moving into a KOZ/KOEZ zone. KPMG made certain assumptions
and allowed for ranges in real estate taxes, etc… The
scenarios presented to KPMG LLP and the firm's estimated
savings (rounded by Penn's Northeast) for each scenario
follow in the chart below...
To obtain a copy of KPMG's
detailed analyses please contact Penn's
Northeast at info@pennsnortheast.com
or phone 1-800-317-1313.
| Scenario |
Est.
KOZ Savings |
*NPV |
Est.
KOEZ Savings |
NPV |
Retail
Distribution Ctr.
1 million square feet
500 employees
|
$5.5
to $11.4 million |
$4.1
to $8.5 million |
$6.7
to $14.0 million |
$4.7
to $9.8 million |
Insurance
Company
Claims Office/Financial Ctr.
100,000 square feet
500 employees
|
$6.9
to $11.8 million |
$5.2
to $8.8 million |
$8.1
to $14.2 million |
$6.0
to $10.1 million |
Plastics
Company
Laminated plastics mfg.
200,000 square feet
300 employees
|
$1.4
to $3.0 million |
$1.0
to $2.2 million |
$1.6
to $3.5 million |
$1.2
to $2.5 million |
Electronics
Company
Consumer electronics mfg.
200,000 square feet
300 employees
|
$4.2
to $5.8 million |
$3.1
to $4.3 million |
$5.0
to $7.0 million |
$3.6
to $5.0 million |
Metal
Fabrication Co.
Industrial metal products mfg.
100,000 square feet
150 employees
|
$.79
to $1.5 million |
$.60
to $1.1 million |
$.94
to $1.8 million |
$.68
to $1.3 million |
Pharmaceutical
Company
Pill mfg., pkg. and dist.
200,000 square feet
500 employees
|
$20.0
to $23.8 million |
$14.7 to $17.8 million |
$24.3 to $29.1 million |
$17.4
to $20.7 million |
Software
Developer
Office
10,000 square feet
50 employees
|
$.23
to $.57 million |
$.18
to $.43 million |
$.27
to $.68 million |
$.20
to $.49 million |
| |
*NPV
= Net Present Value |
Even if you don't locate in a KOZ/KOEZ, we
have plenty of incentives to make your move into Penn's
Northeast as affordable and successful as possible. Just
visit our Incentives
Page on this web site for a quick preview.
And take special notice of the Opportunity Grant, Job Creation
Tax Credits, Customized Job Training, Pennsylvania Industrial
Development Authority (PIDA) and Machinery & Equipment
Loan (MELF) programs. They are the perennial favorites of
companies that undertake expansion projects in Penn's Northeast.
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