SB 384 — An Act providing for the creation of keystone opportunity dairy zones to facilitate the economic development of Pennsylvania's dairy industry; authorizing expenditures; providing tax exemptions, tax deductions, tax abatements and tax credits; creating additional obligations of the Commonwealth and local governmental units; prescribing powers and duties of certain State and local departments, agencies and officials; and imposing penalties.

PRINTER'S NO.   395

                    THE GENERAL ASSEMBLY OF PENNSYLVANIA



                       SENATE BILL
                       No. 384
                                              Session of
                                                2025

     INTRODUCED BY MASTRIANO, ARGALL, SCHWANK, J. WARD, CULVER,
        MILLER AND DUSH, MARCH 17, 2025

     REFERRED TO COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT,
        MARCH 17, 2025


                                   AN ACT
 1   Providing for the creation of keystone opportunity dairy zones
 2      to facilitate the economic development of Pennsylvania's
 3      dairy industry; authorizing expenditures; providing tax
 4      exemptions, tax deductions, tax abatements and tax credits;
 5      creating additional obligations of the Commonwealth and local
 6      governmental units; prescribing powers and duties of certain
 7      State and local departments, agencies and officials; and
 8      imposing penalties.
 9                            TABLE OF CONTENTS
10   Chapter 1.   Preliminary Provisions
11   Section 101.   Short title.
12   Section 102.   Legislative findings.
13   Section 103.   Definitions.
14   Chapter 3.   Keystone Opportunity Dairy Zones
15   Section 301.   Keystone opportunity dairy zones.
16   Section 302.   Application.
17   Section 303.   Review.
18   Section 304.   Criteria for authorization of zone.
19   Section 305.   Zone limitations.
20   Section 306.   Residency.
 1   Section 307.    Annual certification.
 2   Section 308.    Forms.
 3   Chapter 5.    State Taxes
 4      Subchapter A.    General Provisions
 5   Section 501.    State taxes.
 6      Subchapter B.    Particular State Taxes
 7   Section 511.    Sales and use tax.
 8   Section 512.    Personal income tax.
 9   Section 513.    Residency considerations.
10   Section 514.    Corporate net income tax.
11   Chapter 7.    Local Taxes
12   Section 701.    Local taxes.
13   Section 702.    Real property tax.
14   Section 703.    Local earned income and net profits taxes and
15                 business privilege taxes.
16   Section 704.    Mercantile license tax.
17   Section 705.    Local sales and use tax.
18   Chapter 9.    Administration of Tax Provisions
19   Section 901.    Transferability.
20   Section 902.    Recapture.
21   Section 903.    Delinquent or deficient State or local taxes.
22   Section 904.    Code compliance.
23   Section 905.    Appeals.
24   Section 906.    Notice requirements.
25   Section 907.    Application time.
26   Chapter 11.    Procedures for Zones
27   Section 1101.    Keystone opportunity dairy zone prioritizations.
28   Section 1102.    Reporting.
29   Section 1103.    Other Commonwealth tax credits.
30   Section 1104.    Monitoring data.

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 1   Chapter 13.    Miscellaneous Provisions
 2   Section 1301.    Illegal activity.
 3   Section 1302.    Rules and regulations.
 4   Section 1303.    Compliance.
 5   Section 1304.    Penalties.
 6   Section 1305.    Construction.
 7   Section 1306.    Severability.
 8   Section 1307.    Repeals.
 9   Section 1308.    Applicability.
10   Section 1309.    Effective date.
11      The General Assembly of the Commonwealth of Pennsylvania
12   hereby enacts as follows:
13                                  CHAPTER 1
14                           PRELIMINARY PROVISIONS
15   Section 101.    Short title.
16      This act shall be known and may be cited as the Keystone
17   Opportunity Dairy Zone Act.
18   Section 102.    Legislative findings.
19      The General Assembly finds and declares as follows:
20          (1)     Dairy farmers are a vital, integral and
21      irreplaceable part of the agricultural heritage of this
22      Commonwealth.
23          (2)     Dairy farmers contribute to the continued economic
24      health of this Commonwealth's agricultural sector, provide
25      jobs and pay taxes, provide local and sustainable food
26      products for nourishment and enjoyment and promote the
27      preservation of farmland in the public interest of all
28      residents of this Commonwealth.
29          (3)     The continued viability of dairy farming is in the
30      best interest of the residents of this Commonwealth.

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 1          (4)     In light of continued economic forces and market
 2      pressures, the long-term viability of dairy farming requires
 3      coordinated efforts by private and public entities to ensure
 4      economic viability and ensure the continuation of the
 5      significant contributions dairy farmers make to the economic
 6      and social life of this Commonwealth.
 7          (5)     The long-term economic viability of dairy farming
 8      requires the cooperative involvement of residents,
 9      businesses, State and local elected officials and community
10      organizations.
11          (6)     It is in the best interest of this Commonwealth to
12      assist and encourage the creation of zones to accomplish the
13      purposes of this act.
14   Section 103.    Definitions.
15      The following words and phrases when used in this act shall
16   have the meanings given to them in this section unless the
17   context clearly indicates otherwise:
18      "Applicant."    A resident or business that submits or intends
19   to submit a zone application to the department.
20      "Business."    An association, partnership, cooperative,
21   corporation, sole proprietorship, limited liability company or
22   employer.
23      "Dairy processing facility."     A factory or plant directly and
24   primarily involved in processing, refining or manufacturing raw
25   milk which is at least 75% Pennsylvania milk or Pennsylvania
26   milk products into milk, butter, milk powder, cheese, yogurt,
27   ice cream, sour cream or a value-added dairy product intended
28   for the wholesale or retail market.
29      "Department."    The Department of Community and Economic
30   Development of the Commonwealth.

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 1      "Domicile."   The place where a resident has a true and fixed
 2   home and principal establishment for an indefinite time and to
 3   which, whenever absent, that resident intends to return.
 4   Domicile continues until another place of domicile is
 5   established.
 6      "Keystone opportunity dairy zone."    A defined geographic area
 7   comprised of one or more qualified political subdivisions or
 8   portions of qualified political subdivisions as designated by
 9   the department under section 301.
10      "Opportunity plan."    A written plan that meets the
11   requirements and addresses the criteria under section 302 and
12   304.
13      "Pennsylvania dairy farm."    A farm that produces Pennsylvania
14   milk.
15      "Pennsylvania milk."    Raw milk produced by the milking of
16   cows physically located on a farm within the geographic
17   boundaries of this Commonwealth and certified by the
18   Pennsylvania Milk Marketing Board.
19      "Pennsylvania milk product."     A food or beverage made from or
20   primarily made from at least 75% Pennsylvania milk, or a value-
21   added dairy product, processed within this Commonwealth, which
22   utilized 75% or more Pennsylvania milk in its manufacture.
23      "Political subdivision."    A county, city, borough, township,
24   town or school district with taxing jurisdiction in a defined
25   geographic area within this Commonwealth.
26      "Qualified business."    A business incorporated under the laws
27   of this Commonwealth and authorized to do business in this
28   Commonwealth that owns or leases real property in a zone from
29   which the qualified business actively operates a dairy
30   processing facility or small scale dairy processing facility as

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 1   certified by the department.
 2      "Qualified political subdivision."     A political subdivision
 3   which has real property within its jurisdiction which has been
 4   designated by the department as a zone.
 5      "Resident."    A resident who is domiciled and resides in an
 6   area that is designated a zone.
 7      "Small scale dairy processing facility."     A factory, plant or
 8   operation that exclusively utilizes Pennsylvania milk produced
 9   from a single Pennsylvania dairy farm with a total average herd
10   size of 250 milking cows or fewer, or a combination of
11   Pennsylvania dairy farms with a total collective average herd
12   size of 250 milking cows or fewer, and that is directly and
13   primarily involved in processing, refining or manufacturing raw
14   Pennsylvania milk or Pennsylvania milk products into milk,
15   butter, milk powder, cheese, yogurt, ice cream, sour cream or a
16   value-added dairy product intended for the wholesale or retail
17   market.
18      "Subzone."    A parcel within an authorized zone.
19      "Tax Reform Code of 1971."     The act of March 4, 1971 (P.L.6,
20   No.2), known as the Tax Reform Code of 1971.
21      "Value-added dairy product."     Pennsylvania milk or a
22   Pennsylvania milk product that has been additionally processed,
23   improved, shredded, combined, aged, flavored, separated,
24   condensed or otherwise prepared to provide additional value or
25   convenience for the wholesale or retail market.
26      "Zone."     A keystone opportunity dairy zone.
27                                 CHAPTER 3
28                      KEYSTONE OPPORTUNITY DAIRY ZONES
29   Section 301.    Keystone opportunity dairy zones.
30      (a)    Establishment.--The department may designate up to 30

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 1   zones in accordance with this section, with up to 15 Class A
 2   zones and up to 20 Class B zones.
 3      (b)   Zone authorization.--The department shall authorize not
 4   more than 30 zones in this Commonwealth. Residents and
 5   businesses within an authorized zone that are qualified under
 6   this act shall be entitled to all tax exemptions, deductions,
 7   abatements or credits provided under this act for a period not
 8   to exceed 10 years beginning no sooner than one year from the
 9   effective date of this subsection and no later than three years
10   from the effective date of this subsection. The department
11   shall, upon approval, specify the precise beginning and ending
12   dates for the tax exemptions, deductions, abatements or credits
13   provided under this act.
14      (c)   Authorization for local tax exemption.--Each political
15   subdivision within which a proposed zone is located, whether in
16   whole or in part, is authorized to provide tax exemptions,
17   deductions, abatements or credits to residents and qualified
18   businesses under this act. The political subdivision shall agree
19   to provide exemptions, deductions, abatements or credits from
20   all local taxes provided under this act in order to qualify to
21   be designated a zone. The exemptions, deductions, abatements or
22   credits shall be effective on the date determined by the
23   department. The exemptions, deductions, abatements or credits
24   shall be binding upon the qualified political subdivision for
25   the duration of the zone designation.
26      (d)   Authorization to extend the duration of a zone.--The
27   political subdivision or subdivisions comprising a zone may
28   request to extend the designation for a period of three years.
29   The request to extend a zone designation shall be made on a
30   zone-by-zone basis. A qualified political subdivision having an

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 1   approved zone within its jurisdiction and seeking to extend the
 2   zone designation shall pass the required ordinances, resolutions
 3   or other required action of the qualified political subdivision
 4   for the necessary exemptions, deductions, abatements or credits
 5   under this act, and shall submit copies of the ordinance,
 6   resolution or other action to the department. The department may
 7   grant the request to extend the duration of the designation of
 8   the zone provided all the proper binding ordinances, resolutions
 9   or other governing documents are passed by all qualified
10   political subdivisions within the zone extending the necessary
11   exemptions, deductions, abatements and credits to the entire
12   zone. The department shall approve or deny the request for
13   extension of duration of a subzone within 90 days of receipt,
14   and shall provide written notice, irrespective of whether
15   approved or denied, to each qualified applicant, qualified
16   political subdivision, resident and qualified business affected.
17   Upon approval of a request for extension of duration of a zone,
18   the exemptions, deductions, abatements or credits shall be
19   binding upon the qualified political subdivision as provided in
20   subsection (c).
21   Section 302.     Application.
22      (a)   Initial application.--An applicant may apply to the
23   department to designate a parcel as a zone.
24      (b)   Content.--The application shall contain the following:
25            (1)   The geographic area of the proposed zone, including
26      the specific political subdivision or subdivisions.
27            (2)   An opportunity plan that shall include the
28      following:
29                  (i)   A detailed map of the proposed zone, including
30            geographic boundaries, total area and present use and

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 1        conditions of the land and structures of the proposed
 2        zone.
 3              (ii)    Evidence of support from and participation of
 4        local government, school districts and other educational
 5        institutions, business groups, community organizations
 6        and the public.
 7              (iii)    A detailed proposal outlining the proposed
 8        improvements in the zone, including proposed capital
 9        investment, job creation and increased dairy processing
10        capacity for Pennsylvania milk or Pennsylvania milk
11        products according to the specifications of this act.
12              (iv)    A description of anticipated activity in the
13        proposed zone, including site improvements.
14              (v)    Evidence of potential private and public
15        investment in the proposed zone.
16              (vi)    The role of the proposed zone in economic
17        development of the dairy industry in this Commonwealth
18        and the anticipated impacts to dairy farmers producing
19        Pennsylvania milk.
20              (vii)    Any other information deemed appropriate by
21        the department or by the Secretary of Agriculture in
22        consultation with the department.
23        (3)   The duration of the proposed zone, including the
24    anticipated beginning and end date.
25        (4)   A formal, binding ordinance or resolution passed by
26    each political subdivision in which the proposed zone is
27    located that specifically provides for all local tax
28    exemptions, deductions, abatements or credits for businesses
29    provided in this act.
30        (5)   Evidence that the proposed zone meets the required

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 1      criteria under this act.
 2   Section 303.     Review.
 3      (a)   Action of department.--The department, in consultation
 4   with the Secretary of Agriculture, shall review all completed
 5   applications submitted under section 302. An application for
 6   authorization as a zone must be received by a date to be
 7   determined by the department in order to be considered by the
 8   department. The date to be determined by the department shall
 9   not be sooner than 120 days after the effective date of this
10   subsection, nor later than two years after the effective date of
11   this subsection.
12      (b)   Process.--The department shall authorize up to 30 zones
13   from applications meeting the criteria under section 304 based
14   upon need, likelihood of success, potential for increased dairy
15   processing capacity and overall impact on the market for
16   Pennsylvania milk or Pennsylvania milk products. The department
17   may not alter the geographic boundaries of a zone described in
18   an application unless mutually agreed upon between the
19   department, the applicant and any affected local municipality.
20   The department shall not deny an application due to an
21   applicant's prior receipt of or consideration for any other
22   State community and economic development program funding.
23      (c)   Authorizations.--Any zone approved shall be approved no
24   later than three years after the effective date of this
25   subsection.
26   Section 304.     Criteria for authorization of zone.
27      (a)   Class A zones.--
28            (1)   A Class A zone shall:
29                  (i)   Be not less than five acres, unless contiguous
30            to or colocated with an existing or proposed dairy

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 1          processing facility.
 2                (ii)    Be not more than 150 acres.
 3          (2)   In order to qualify for authorization as a Class A
 4    zone under this section, an application shall:
 5                (i)    Provide specific geographic information on the
 6          proposed zone location.
 7                (ii)    Show anticipated private investment of
 8          $10,000,000 or more in a dairy processing facility.
 9                (iii)    Create 25 or more new jobs as defined by the
10          department.
11                (iv)    Demonstrate an exceptional and meaningful
12          opportunity for the expansion of dairy processing
13          capacity within this Commonwealth.
14    (b)   Class B zones.--A Class B zone shall:
15          (1)   Be not less than five acres, unless contiguous to or
16    colocated with an existing or proposed dairy processing
17    facility.
18          (2)   Be not more than 25 acres, unless colocated with a
19    Pennsylvania dairy farm directly supplying Pennsylvania milk
20    for an existing or proposed small scale dairy processing
21    facility.
22          (3)   In order to qualify for authorization as a Class B
23    zone under this section, an application shall:
24                (i)    Provide specific geographic information on the
25          proposed zone location.
26                (ii)    Show anticipated private investment of $100,000
27          or more in a small scale dairy processing facility.
28                (iii)    Demonstrate an exceptional and meaningful
29          opportunity for the expansion of small scale, boutique or
30          locally based dairy processing capacity within this

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 1            Commonwealth.
 2   Section 305.     Zone limitations.
 3      A zone shall not encompass an entire political subdivision.
 4   Section 306.     Residency.
 5      In order to qualify each year for a tax exemption, deduction,
 6   abatement or credit under this act, a resident shall be
 7   domiciled and shall reside in a zone for a period of 184
 8   consecutive days during each taxable year.
 9   Section 307.     Annual certification.
10      (a)   Qualification.--In order to qualify each year for a tax
11   exemption, deduction, abatement or credit under this act, a
12   qualified business shall obtain annual renewal of the
13   certification from the department.
14      (b)   Requirements.--For a class zone, the following shall
15   apply:
16            (1)   For a Class A zone, the certification form shall
17      include at least the following:
18                  (i)    The duration of the zone designation.
19                  (ii)    The number of jobs created.
20                  (iii)    The number of jobs retained.
21                  (iv)    The amount of capital investment.
22                  (v)    The gross value of Pennsylvania milk products
23            produced in the past year.
24                  (vi)    The percentage of Pennsylvania milk utilized in
25            the production of Pennsylvania milk products.
26                  (vii)    Any other information, conditions or
27            requirements reasonably required by the department.
28            (2)   For a Class B zone, the certification form shall
29      include all of the following:
30                  (i)    The duration of the zone designation.

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 1                 (ii)    The gross value of Pennsylvania milk products
 2            produced in the past year.
 3                 (iii)   Any other information, conditions or
 4            requirements required by the department.
 5   Section 308.    Forms.
 6      Applications for authorization as a zone shall be on forms
 7   prescribed by the department. The department shall make
 8   application forms available on the department's publicly
 9   accessible Internet website, or upon request by a potential
10   applicant, on paper forms or other method as determined by the
11   department.
12                                   CHAPTER 5
13                                  STATE TAXES
14                                  SUBCHAPTER A
15                               GENERAL PROVISIONS
16   Section 501.    State taxes.
17      (a)   Receipt and expiration.--A resident who is a resident
18   of, or a qualified business located in, a zone shall receive the
19   exemptions, deductions, abatements or credits as provided in
20   this chapter and Chapter 7 for the duration of the zone
21   designation. Exemptions, deductions, abatements or credits shall
22   expire on the date of expiration of the zone.
23      (b)   Construction.--The Department of Revenue shall
24   administer, construe and enforce the provisions of this chapter
25   in conjunction with Articles II, III, IV, VI, VII, IX and XV of
26   the Tax Reform Code of 1971.
27                                  SUBCHAPTER B
28                             PARTICULAR STATE TAXES
29   Section 511.    Sales and use tax.
30      Sales at retail of services or tangible personal property,

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 1   other than motor vehicles, to a qualified business or a
 2   construction contractor under a construction contract with a
 3   qualified business, landowner or lessee for the exclusive use,
 4   consumption and utilization of the tangible personal property or
 5   service by the qualified business at the qualified business's,
 6   landowner's or lessee's facility located within a zone are
 7   exempt from the sales and use tax imposed under Article II of
 8   the Tax Reform Code of 1971. An exemption shall not be permitted
 9   for sales conducted prior to designation of the real property as
10   part of a zone.
11   Section 512.     Personal income tax.
12      (a)   Exemptions.--A resident shall be allowed an exemption
13   for:
14            (1)   Compensation received during the time period when
15      the resident was a resident of a zone.
16            (2)   (i)    Net income from the operation of a qualified
17            business received by a resident or nonresident of a zone
18            attributable to business activity conducted within a
19            zone, determined in accordance with section 514.
20                  (ii)   A business that operates both within and
21            outside this Commonwealth, before computing the
22            business's zone exemption, shall first determine the
23            business's Pennsylvania activity over the activity
24            everywhere by applying the three-factor apportionment
25            formula as provided in Department of Revenue personal
26            income tax regulations applicable to income apportionment
27            in connection with a business, trade or profession
28            carried on both within and outside this Commonwealth.
29            (3)   All of the following:
30                  (i)    Net gains or income, less net losses, derived by

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 1        a resident or nonresident of a zone from the sale,
 2        exchange or other disposition of real or tangible
 3        personal property located in a zone as determined in
 4        accordance with accepted accounting principles and
 5        practices. The following shall apply:
 6                    (A)   The exemption under this subparagraph shall
 7             not apply to the sale, exchange or other disposition
 8             of any stock of goods, merchandise or inventory or
 9             any operational assets unless the transfer is in
10             connection with the sale, exchange or other
11             disposition of all of the assets in complete
12             liquidation of a qualified business located in a
13             zone.
14                    (B)   This subparagraph shall apply to intangible
15             personal property employed in a trade, profession or
16             business in a zone only when transferred in
17             connection with a sale, exchange or other disposition
18             of all of the assets in complete liquidation of the
19             qualified business in the zone.
20             (ii)    Net gains, less net losses, realized by a
21        resident of a zone from the sale, exchange or disposition
22        of intangible personal property or obligations issued on
23        or after February 1, 1994, by the Commonwealth, a public
24        authority, commission, board or other Commonwealth
25        agency, political subdivision or authority created by a
26        political subdivision or by the Federal Government as
27        determined in accordance with accepted accounting
28        principles and practices.
29             (iii)    The exemption from income for gain or loss
30        provided for in subparagraphs (i) and (ii) shall be

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 1        prorated based on the following:
 2                     (A)   In the case of gains, less net losses, in
 3              subparagraph (i), the percentage of time, based on
 4              calendar days, the property located in a zone was
 5              held by a resident or nonresident of the zone during
 6              the time period the zone was in effect in relation to
 7              the total time the property was held.
 8                     (B)   In the case of gains, less net losses, in
 9              subparagraph (ii), the percentage of time, based on
10              calendar days, the property was held by the taxpayer
11              while a resident of a zone in relation to the total
12              time the property was held.
13        (4)   Net gains or income derived from or in the form of
14    rents received by a resident, whether a resident or
15    nonresident of a zone, to the extent that income or loss from
16    the rental of real or tangible personal property is allocable
17    to a zone. For purposes of calculating this exemption:
18              (i)    Net rents derived from real or tangible personal
19        property located in a zone are allocable to a zone.
20              (ii)    If the tangible personal property was used both
21        within and without the zone during the taxable year, only
22        the net income attributable to use in the zone is exempt.
23        The net rental income shall be multiplied by a fraction,
24        the numerator of which is the number of days the property
25        was used in the zone and the denominator of which is the
26        total days of use.
27        (5)   Dividends received during the time the resident was
28    a resident of a zone.
29        (6)   Interest received during the time period the
30    resident was a resident of a zone.

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 1      (b)   Pass-through entities.--The exemptions provided for in
 2   subsection (a)(2), (3)(i) and (4) shall apply to all of the
 3   following:
 4            (1)   The income or gain of a partnership or association.
 5      The partner or member shall be entitled to the exemptions
 6      under this section for the partner's or member's share,
 7      whether or not distributed, of the income or gain received by
 8      the partnership or association for its taxable year.
 9            (2)   The income or gain of a Subchapter S corporation.
10      The shareholder shall be entitled to the exemptions under
11      this section for the shareholder's pro rata share, whether or
12      not distributed, of the income or gain received by the
13      corporation for its taxable year ending within or with the
14      shareholder's taxable year.
15      (c)   Limitation.--A partnership, association, Subchapter S
16   corporation, cooperative, resident or nonresident may not apply
17   an exemption from income under this act for any class of income
18   against any other classes of income or gain. A partnership,
19   association, Subchapter S corporation, cooperative, resident or
20   nonresident may not carry back or carry forward any exemption
21   under this act from year to year. The credit allowed under this
22   section shall not exceed the tax liability of the taxpayer under
23   Article III of the Tax Reform Code of 1971 for the tax year.
24   Section 513.    Residency considerations.
25      If a resident completes the residency requirements under
26   section 306 or if a nonresident realizes income attributable to
27   business activity or property within a zone, the resident may
28   claim the exemptions from income for the items provided under
29   section 512 for that portion of the tax year that the resident
30   was a resident or for that portion of the tax year during which

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 1   the area is designated as a zone.
 2   Section 514.    Corporate net income tax.
 3      (a)   Credits.--For the tax years that begin on or after
 4   January 1, 2025, a corporation that is a qualified business
 5   under this act may claim a credit against the tax imposed by
 6   Article IV of the Tax Reform Code of 1971 for tax liability
 7   attributable to business activity conducted within the zone in
 8   the taxable year. A credit may not be claimed for activities
 9   conducted prior to designation of the real property as part of a
10   zone. The business activity must be conducted directly by a
11   corporation in the zone in order for the corporation to claim
12   the tax credit.
13      (b)   Tax liability determinations.--The corporate tax
14   liability attributable to business activity conducted within a
15   zone shall be determined by multiplying the corporation's
16   taxable income that is attributable to business activity
17   conducted within the zone by the rate of tax imposed under
18   Article IV of the Tax Reform Code of 1971 for the taxable year.
19      (c)   Determinations of attributable tax liability.--Tax
20   liability attributable to business activity conducted within a
21   zone shall be computed, construed, administered and enforced in
22   conformity with Article IV of the Tax Reform Code of 1971 and
23   with specific reference to the following:
24            (1)   If the entire business of the corporation in this
25      Commonwealth is transacted wholly within the zone, the
26      taxable income attributable to business activity within a
27      zone shall consist of the Pennsylvania taxable income as
28      determined under Article IV of the Tax Reform Code of 1971.
29            (2)   If the entire business of the corporation in this
30      Commonwealth is not transacted wholly within the zone, the

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 1      taxable income of a corporation in a zone shall be determined
 2      by the portion of the Pennsylvania taxable income of the
 3      corporation attributable to business activity conducted
 4      within the zone and apportioned in accordance with subsection
 5      (d).
 6      (d)    Income apportionment.--The taxable income of a
 7   corporation that is a qualified business shall be apportioned to
 8   the zone by multiplying the Pennsylvania taxable income by a
 9   fraction, the numerator of which is the property factor plus the
10   payroll factor and the denominator of which is two, in
11   accordance with the following:
12             (1)   The property factor:
13                   (i)    is a fraction, the numerator of which is the
14             average value of the taxpayer's real and tangible
15             personal property owned or rented and used in the zone
16             during the tax period and the denominator of which is the
17             average value of all the taxpayer's real and tangible
18             personal property owned or rented and used in this
19             Commonwealth during the tax period; and
20                   (ii)    shall not include the security interest of any
21             corporation as seller or lessor in personal property sold
22             or leased under a conditional sale, bailment lease,
23             chattel mortgage or other contract providing for the
24             retention of a lien or title as security for the sales
25             price of the property.
26             (2)   (i)    The payroll factor is a fraction, the numerator
27             of which is the total amount paid in the zone during the
28             tax period by the taxpayer for compensation and the
29             denominator of which is the total compensation paid in
30             this Commonwealth during the tax period.

20250SB0384PN0395                        - 19 -
 1                  (ii)    Compensation is paid in the zone if:
 2                         (A)   the resident's service is performed entirely
 3                  within the zone;
 4                         (B)   the resident's service is performed both
 5                  within and without the zone, and the service
 6                  performed without the zone is incidental to the
 7                  resident's service within the zone; or
 8                         (C)   some of the service is performed in the zone
 9                  and the base of operations or, if there is no base of
10                  operations, the place from which the service is
11                  directed or controlled is in the zone, or the base of
12                  operations or the place from which the service is
13                  directed or controlled is not in any location in
14                  which some part of the service is performed, and the
15                  resident's residence is in the zone.
16      (e)   Computation.--A corporation shall compute the
17   corporation's Commonwealth taxable income in conformity with
18   Article IV of the Tax Reform Code of 1971 with no adjustments or
19   subtractions for zone taxable income.
20      (f)   Limitation on amount of credit.--The credit allowed
21   under this section shall not exceed the tax liability of the
22   taxpayer under Article IV of the Tax Reform Code of 1971 for the
23   tax year.
24      (g)   Limitation on applicability.--
25            (1)   Any portion of the taxpayer's taxable income that is
26      attributable to the operation of any of the following may not
27      be used to calculate a credit under this section:
28                  (i)    A corporation that qualifies as a regulated
29            investment company under Article IV of the Tax Reform
30            Code of 1971.

20250SB0384PN0395                        - 20 -
 1                  (ii)   A holding company as the term is used in
 2            Article VI of the Tax Reform Code of 1971.
 3            (2)   The prohibition under paragraph (1) shall not apply
 4      to the portion of a qualified business engaged in
 5      manufacturing or processing.
 6                                    CHAPTER 7
 7                                   LOCAL TAXES
 8   Section 701.     Local taxes.
 9      Each qualified political subdivision shall exempt, deduct,
10   abate or credit local taxes in accordance with ordinances and
11   resolutions adopted under section 301(c), as is applicable.
12   Failure to exempt, deduct, abate or credit local taxes shall
13   result in the revocation of the zone designation.
14   Section 702.     Real property tax.
15      (a)   Abatement.--Notwithstanding the act of May 22, 1933
16   (P.L.853, No.155), known as The General County Assessment Law,
17   and 53 Pa.C.S. (relating to municipalities generally), each
18   qualified political subdivision shall by ordinance or resolution
19   abate 100% of the real property taxation on the assessed
20   valuation of property in an area designated as a zone within
21   this Commonwealth during the taxable years determined by the
22   department. The real property tax abatement under this section
23   shall apply to all real property located in a zone, irrespective
24   of the business activity, if any, made of the realty by the
25   owner, when this act is in effect. An abatement may not be
26   provided prior to designation of a zone by the department.
27      (b)   Interest and penalties.--If the department or a
28   political subdivision finds that a resident or business claimed
29   an abatement of real property tax to which the resident or
30   business was not entitled under this act, the resident or

20250SB0384PN0395                      - 21 -
 1   business shall be liable for the abated taxes and subject to the
 2   applicable interest and penalty provisions provided by law.
 3      (c)   Calculations for education subsidy for school
 4   districts.--In determining the market value of real property in
 5   each school district, the State Tax Equalization Board shall
 6   exclude any increase in value above the base value prior to the
 7   effect of the abatement of local taxes to the extent and during
 8   the period of time that real estate tax revenues attributable to
 9   the increased value are not available to the school district for
10   general school district purposes.
11   Section 703.     Local earned income and net profits taxes and
12                  business privilege taxes.
13      (a)   Exemption.--
14            (1)   If a political subdivision has enacted a tax on the
15      privilege of engaging in a business or profession, measured
16      by gross receipts or on a flat rate basis, earned income or
17      net profits, as used in the act of December 31, 1965
18      (P.L.1257, No.511), known as The Local Tax Enabling Act,
19      imposed within the boundaries of a zone, the qualified
20      political subdivision shall exempt the following from the
21      imposition or operation of the local tax ordinances,
22      statutes, regulations or otherwise:
23                  (i)    The business gross receipts for operations
24            conducted by a qualified business within a zone.
25                  (ii)    The earned income received by a resident of a
26            zone.
27                  (iii)    The net profits of a qualified business
28            attributable to business activity conducted within a zone
29            when imposed by the qualified political subdivision where
30            the qualified business is located.

20250SB0384PN0395                       - 22 -
 1          (2)   An exemption may not be granted for operations
 2    conducted, for earned income received or for activities
 3    conducted prior to designation of the real property as part
 4    of a zone.
 5    (b)   Additional exemptions.--
 6          (1)   Paragraph (2) shall apply if a qualified political
 7    subdivision has enacted a tax on the privilege of engaging in
 8    a profession or business, on wages or compensation, on net
 9    profits from the operation of a business or profession or
10    other activity or on the occupancy or use of real property
11    under any of the following:
12                (i)    The act of August 5, 1932 (Sp.Sess., P.L.45,
13          No.45), referred to as the Sterling Act.
14                (ii)    The act of March 10, 1949 (P.L.30, No.14),
15          known as the Public School Code of 1949.
16                (iii)    The act of August 24, 1961 (P.L.1135, No.508),
17          referred to as the First Class A School District Earned
18          Income Tax Act.
19                (iv)    The act of August 9, 1963 (P.L.640, No.338),
20          entitled "An act empowering cities of the first class,
21          coterminous with school districts of the first class, to
22          authorize the boards of public education of such school
23          districts to impose certain additional taxes for school
24          district purposes, and providing for the levy, assessment
25          and collection of such taxes."
26                (v)    The act of May 30, 1984 (P.L.345, No.69), known
27          as the First Class City Business Tax Reform Act.
28                (vi)    The act of June 5, 1991 (P.L.9, No.6), known as
29          the Pennsylvania Intergovernmental Cooperation Authority
30          Act for Cities of the First Class.

20250SB0384PN0395                     - 23 -
 1            (2)   If there is an enactment under paragraph (1), the
 2      qualified political subdivision shall provide an exemption,
 3      deduction, abatement or credit from the imposition and
 4      operation of the local tax ordinance or resolution for all of
 5      the following:
 6                  (i)    The privilege of engaging in a business or
 7            profession within a zone by a resident or qualified
 8            business, whether a resident or nonresident of the zone.
 9                  (ii)    Salaries, wages, commissions, compensation or
10            other income received for services rendered or work
11            performed by a resident of a zone.
12                  (iii)    The gross or net income or gross or net
13            profits realized from the operation of a qualified
14            business to the extent attributable to business activity
15            conducted within a zone.
16                  (iv)    The occupancy or use of real property located
17            within the zone.
18      (c)   Calculation for education subsidy for school district.--
19   In determining the personal income valuation of a school
20   district, the Secretary of Revenue shall exclude any increase in
21   the personal income valuation as defined in section 2501(9.1) of
22   the Public School Code of 1949, above the base value prior to
23   the abatement of local taxes in a zone located within the school
24   district to the extent and during the period of time that
25   personal income revenues attributable to the increase in the
26   personal income valuation are not available to the school
27   district for general school district purposes. An exemption
28   under this section may not be granted to a resident or qualified
29   business prior to designation of the real property as part of a
30   zone.

20250SB0384PN0395                       - 24 -
 1      (d)   Determination of exemption.--For the purposes of
 2   determining an exemption under this section, a tax on or
 3   measured by any of the following shall be attributed to business
 4   activity conducted within a zone by applying the apportionment
 5   factors under section 514(d):
 6            (1)   Business gross receipts.
 7            (2)   Gross or net income.
 8            (3)   Gross or net profits.
 9   Section 704.    Mercantile license tax.
10      A resident or qualified business in a zone shall not be
11   required to pay any fee authorized under a mercantile license
12   tax imposed under the act of June 20, 1947 (P.L.745, No.320),
13   entitled "An act to provide revenue for school districts of the
14   first Class A by imposing a temporary mercantile license tax on
15   persons engaging in certain occupations and businesses therein;
16   providing for its levy and collection; for the issuance of
17   mercantile licenses upon the payment of fees therefor;
18   conferring and imposing powers and duties on boards of public
19   education, receivers of school taxes and school treasurers in
20   such districts; saving certain ordinances of council of certain
21   cities, and providing compensation for certain officers, and
22   employes and imposing penalties."
23   Section 705.    Local sales and use tax.
24      (a)   Sales and use tax exemption.--A political subdivision
25   shall exempt sales at retail of services or tangible personal
26   property, except motor vehicles, to a qualified business or a
27   construction contractor under a construction contract with a
28   qualified business, landowner or lessee for the exclusive use,
29   consumption and utilization of the tangible personal property or
30   service by the qualified business at the qualified business's,

20250SB0384PN0395                    - 25 -
 1   landowner's or lessee's facility located within a zone from a
 2   city or county tax on purchase price authorized under Article
 3   XXXI-B of the act of July 28, 1953 (P.L.723, No.230), known as
 4   the Second Class County Code and the act of June 5, 1991 (P.L.9,
 5   No.6), known as the Pennsylvania Intergovernmental Cooperation
 6   Authority Act for Cities of the First Class. An exemption may
 7   not be granted for sales occurring prior to designation of the
 8   real property as part of a zone.
 9      (b)   Definition.--As used in this section, the phrase "sales
10   at retail of services or tangible personal property" shall be as
11   the phrase "sales at retail" is used under Article II of the Tax
12   Reform Code of 1971.
13                                 CHAPTER 9
14                      ADMINISTRATION OF TAX PROVISIONS
15   Section 901.    Transferability.
16      Any exemption, deduction, abatement or credit provided to a
17   resident or qualified business under Chapter 5 or 7 is
18   nontransferable and cannot be applied, used or assigned to any
19   other resident, business or tax account.
20   Section 902.    Recapture.
21      (a)   Repayment to State and political subdivision.--If a
22   qualified business located within a zone has received an
23   exemption, deduction, abatement or credit under this act and
24   subsequently relocates outside of the zone within the first nine
25   years of locating in a zone, the qualified business shall refund
26   to the State and political subdivision which granted the
27   exemption, deduction, abatement or credit received in accordance
28   with the following:
29            (1)   If a qualified business relocates within five years
30      from the date of first locating in a zone, 66% of all the

20250SB0384PN0395                    - 26 -
 1      exemptions, deductions, abatements or credits attributed to
 2      that qualified business's participation in the zone shall be
 3      refunded to the Commonwealth and the political subdivision.
 4            (2)   If a qualified business relocates between five to
 5      nine years from the date of first locating in a zone, 33% of
 6      all exemptions, deductions, abatements or credits attributed
 7      to that qualified business's participation in the zone shall
 8      be refunded to the Commonwealth and the political
 9      subdivision.
10      (b)   Waiver.--The department, in consultation with the
11   Department of Revenue, the Secretary of Agriculture and the
12   political subdivision, may waive or modify recapture
13   requirements under this section if the department determines
14   that the business relocation was due to circumstances beyond the
15   control of the business, including:
16            (1)   natural disaster;
17            (2)   unforeseen industry trends; or
18            (3)   loss of a major supplier or market.
19   Section 903.    Delinquent or deficient State or local taxes.
20      (a)   Residents.--A resident may not claim or receive an
21   exemption, deduction, abatement or credit under this act unless
22   that resident is in full compliance with all State and local tax
23   laws, ordinances and resolutions.
24      (b)   Qualified business.--
25            (1)   A qualified business may not claim or receive an
26      exemption, deduction, abatement or credit under this act
27      unless that qualified business is in full compliance with all
28      State and local tax laws, ordinances and resolutions.
29            (2)   A qualified business may not claim or receive an
30      exemption, deduction, abatement or credit under this act if a

20250SB0384PN0395                       - 27 -
 1      resident or business with a 20% or greater interest in that
 2      qualified business is not in full compliance with all State
 3      and local tax laws, ordinances and resolutions.
 4      (c)   Later compliance and eligibility.--A resident or
 5   qualified business that is not eligible to claim an exemption,
 6   deduction, abatement or credit due to noncompliance with any
 7   State or local tax law may become eligible if that resident or
 8   qualified business subsequently comes into full compliance with
 9   all State and local tax laws to the satisfaction of the
10   Department of Revenue or the political subdivision within the
11   calendar year in which the noncompliance first occurred. If full
12   compliance is not attained by February 5 of the calendar year
13   following the calendar year during which noncompliance first
14   occurred, that resident or qualified business is precluded from
15   claiming any exemption, deduction, abatement or credit for that
16   calendar year, whether or not full compliance is achieved
17   subsequently.
18   Section 904.    Code compliance.
19      (a)   Compliance required.--A resident or qualified business
20   shall be precluded from claiming an exemption, deduction,
21   abatement or credit provided under this act if the resident or
22   qualified business owns real property in a zone and the real
23   property is not in compliance with all applicable State and
24   local zoning, building and housing laws, ordinances or codes.
25      (b)   Opportunity to achieve compliance.--A resident or
26   qualified business that is not in compliance under subsection
27   (a) shall have until December 31 of the calendar year following
28   designation of the real property as part of a zone to be in
29   compliance in order to claim any State exemptions, deductions,
30   abatements or credits for that year. If full compliance is not

20250SB0384PN0395                   - 28 -
 1   attained by December 31 of that calendar year, the resident or
 2   qualified business is precluded from claiming any exemption,
 3   deduction or credit for that calendar year, whether or not
 4   compliance is achieved in a subsequent calendar year. The
 5   political subdivision may extend the time period in which a
 6   resident or qualified business must come into compliance with a
 7   local ordinance or building code for a period not to exceed one
 8   year if the political subdivision determines that the resident
 9   or qualified business has made and shall continue to make a good
10   faith effort to come into compliance and that an extension will
11   enable the resident or qualified business to achieve full
12   compliance. A qualified political subdivision is required to
13   notify the Department of Revenue in writing of each resident or
14   qualified business not in compliance with this subsection within
15   30 days following the end of each calendar year.
16   Section 905.   Appeals.
17      A resident or qualified business shall be deemed to be in
18   compliance with any State or local tax for purposes of this
19   section if that resident or qualified business had made a timely
20   administrative or judicial appeal for that particular tax or has
21   entered into and is in compliance with a duly authorized
22   deferred payment plan with the Department of Revenue or
23   political subdivision for that particular tax.
24   Section 906.   Notice requirements.
25      (a)   Requirement.--After compliance reviews have been
26   conducted by appropriate Commonwealth and local authorities, the
27   department shall notify each zone applicant by regular mail each
28   year of the department's approval or denial of the applicant's
29   zone application. A zone is not entitled to any tax benefits
30   unless the zone receives approval from the department.

20250SB0384PN0395                  - 29 -
 1      (b)   Transmittal.--The department or the department's
 2   designated official shall, within 15 business days of receipt of
 3   a zone application made under this act, forward a copy of the
 4   application to the Department of Revenue, the Secretary of
 5   Agriculture, the Milk Marketing Board and any other appropriate
 6   Commonwealth and local authorities for review and processing.
 7   Section 907.    Application time.
 8      (a)   Requirement.--Except as provided under subsection (b),
 9   an applicant shall file an application in a manner prescribed by
10   the department by December 31 of each calendar year for which
11   the applicant claims an exemption, deduction, abatement or
12   credit under this act.
13      (b)   Extension or waiver.--Upon request of the applicant, the
14   department may extend or waive the application deadline for good
15   cause shown if the political subdivision does not object to the
16   waiver or extension.
17      (c)   Approval.--An exemption, deduction, abatement or credit
18   may not be claimed or received for that calendar year until
19   approval has been granted by the department.
20                                 CHAPTER 11
21                            PROCEDURES FOR ZONES
22   Section 1101.   Keystone opportunity dairy zone prioritizations.
23      (a)   Reduced interest.--Projects in a zone that is approved
24   for Pennsylvania Industrial Development Authority or Small
25   Business First financing shall receive the lowest interest rate
26   extended to borrowers.
27      (b)   Priority consideration.--Projects in a zone shall
28   receive priority consideration for State assistance under State
29   community and economic development programs and for necessary
30   approval required from the Department of Environmental

20250SB0384PN0395                   - 30 -
 1   Protection.
 2      (c)   Local governments.--The department shall provide
 3   technical assistance to political subdivisions relating to
 4   taxation, implementation of the opportunity plan, establishing
 5   annual benchmarks and annual reporting requirements.
 6   Section 1102.        Reporting.
 7      The department shall report every four years to the General
 8   Assembly on the economic effects of this act in each zone.
 9   Section 1103.        Other Commonwealth tax credits.
10      (a)   Limitation.--A resident or qualified business that is
11   entitled to claim an exemption, deduction, abatement or credit
12   in accordance with the provisions of this act shall not be
13   entitled to claim or accumulate any of the following exemptions,
14   deductions, abatements or credits that the resident or qualified
15   business may otherwise have qualified for due to activity in the
16   zone:
17            (1)   Provisions under the Tax Reform Code of 1971 of the
18      following:
19                  (i)    Article XVII-B relating to research and
20            development tax credits.
21                  (ii)    Article XIX-A relating to neighborhood
22            assistance tax credits.
23            (2)   A job creation tax credit under the act of June 29,
24      1996 (P.L.434, No.67), known as the Job Enhancement Act.
25      (b)   Non-zone income.--The resident or qualified business may
26   apply the exemptions, deductions, abatements or credits to
27   income realized from activity or transactions outside the zone
28   only for the taxable year to which the exemptions, deductions,
29   abatements or credits apply. This subsection shall apply only to
30   the taxes provided in Chapters 5 and 7.

20250SB0384PN0395                       - 31 -
 1   Section 1104.   Monitoring data.
 2      In addition to any other requirements of this act, the
 3   department shall monitor all of the following:
 4          (1)   Verifiable job creation and job retention data.
 5          (2)   Information on the types of jobs created and average
 6      hourly wages.
 7          (3)   Number of years in the program.
 8          (4)   Annual, unduplicated public and private capital
 9      investment amounts.
10          (5)   Description of dairy processing activities.
11          (6)   Types and amounts of other economic development
12      assistance received from the department, if any.
13                                 CHAPTER 13
14                        MISCELLANEOUS PROVISIONS
15   Section 1301.   Illegal activity.
16      Any funds or other forms of consideration received by a
17   resident or qualified business conducting any type of illegal
18   activity shall not be eligible for any of the exemptions,
19   deductions, abatements and credits or any other benefits that
20   are created under this act.
21   Section 1302.   Rules and regulations.
22      The department, Department of Revenue and Department of
23   Agriculture may promulgate regulations necessary to effectuate
24   this act.
25   Section 1303.   Compliance.
26      A resident or qualified business eligible for an exemption,
27   deduction or credit under this act shall comply with all
28   reporting, filing and compliance requirements under the Tax
29   Reform Code of 1971 unless otherwise provided for in this act.
30   Section 1304.   Penalties.

20250SB0384PN0395                   - 32 -
 1      (a)   Civil penalty.--
 2            (1)   In addition to any penalties authorized for
 3      violations under the Tax Reform Code of 1971, the Department
 4      of Revenue may impose an additional administrative penalty
 5      not to exceed $50,000 for any act or violation of this act
 6      relating to State and local taxes, including the filing of
 7      any false statement, return or document.
 8            (2)   The department may impose a civil penalty not to
 9      exceed $50,000 for a violation of this act, including the
10      filing of any false statement, return or document.
11      (b)   Criminal penalty.--In addition to any criminal penalty
12   under the Tax Reform Code of 1971, a resident or qualified
13   business that knowingly violates any provision of this act
14   commits a misdemeanor of the third degree.
15   Section 1305.    Construction.
16      This act shall be interpreted to ensure that all provisions
17   relating to State and local tax exemptions, deductions,
18   abatements and credits are strictly construed in favor of the
19   Commonwealth.
20   Section 1306.    Severability.
21      The provisions of this act are severable. If any provision of
22   this act or its application to a resident or circumstance is
23   held invalid, the invalidity shall not affect other provisions
24   or applications of this act which can be given effect without
25   the invalid provision or application.
26   Section 1307.    Repeals.
27      All acts and parts of acts are repealed insofar as they are
28   inconsistent with this act.
29   Section 1308.    Applicability.
30      The provisions of this act shall be applied prospectively. A

20250SB0384PN0395                      - 33 -
1   resident or business may not claim an exemption, deduction,
2   abatement or credit until that resident or business becomes
3   qualified

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