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General KOZ Questions
What's the Catch?
There is no catch. If you own property in the KOZ or locate your business in a KOZ, you will pay little or no business taxes until either 12/31/10, 12/31/13 or 12/31/18 depending on which subzone you are located.
The only requirements are:
It’s that simple!
I plan to lease space in a KOZ. Am I eligible for the KOZ benefits?
Yes. Assuming you are certified, you will be eligible for all the tax benefits that apply to your operations.
No. This may well be the least bureaucratic program you will ever see. The application is simple.
Is the KOZ like other Zones where everyone in a certain geographic area is included and eligible for the KOZ benefits?
No. Unlike the state Enterprise Zone or federal Empowerment Zone where very specific boundaries are established and any business located within those boundaries is eligible for the benefits, the KOZ is parcel-specific. That is, the KOZ is broken into general geographic areas called Subzones. But only specific properties within those general areas are designated as KOZ parcels. For example, in the “American Street Subzone,” 1602 N. American Street is in the KOZ; the next KOZ property would be 2001 N. American Street and then 1640 N. Hancock Street etc.
The KOZ legislation limited the number and size of subzones. Given those parameters, the City chose (almost exclusively) vacant industrial land and vacant outdated industrial buildings in key geographic areas throughout the City. In addition, for reasons of fairness, no existing businesses were included, as a rule.
In the case of KOIZs, the governor designated the sites to be included. The designation however required local approval.
No. The State KOZ legislation prohibits the addition of properties once the KOZs have been designated.
Check the Designated Properties section of this website.
They are the same except for their respective expiration dates. KOZs expire on 12/31/10, Keystone Opportunity Expansion Zones (KOEZs) expire on 12/31/13, and Keystone Opportunity Improvement Zones (KOIZ) expire 12/31/18.
KOEZs were a second round of KOZ designations. KOIZs were in effect a third round, and were designated by the governor.
The KOEZ and KOIZ terms are generally being phased out. When we use the term KOZs we are referring to KOZs, KOEZs and KOIZs.
Check the Designated Properties section of this website.
You may find a copy of the KOZ enabling legislation, and additional information on the statewide KOZs, on the State’s KOZ website.
Fill out a KOZ application and submit it online.
To be eligible you must file by December 31 of the year for which you are applying for KOZ benefits.
The County Code is 51 and the School Code is 51500
Click on the Designated Properties Tab
on the website for a complete listing of the Tax Parcel ID (under
Both the City and State Revenue Departments will review your application for compliance. Upon this verification, you will receive a letter from the Pennsylvania Department of Community and Economic Development certifying you as a KOZ business, or property owner. Within a few weeks business applicants will receive their KOZ tax-exempt certificate and number.
If you are not certified, you will be notified of the problem and given contacts to help you address the issue.
Normally, the process takes less than 60 days. However, in the very beginning of each year, in particular when all of the renewal applications come in at once, the process may take 90 days.
I have moved in but am just applying now, does that mean I can not take advantage of the KOZ benefits while my application is being processed?
The KOZ benefits are retroactive to January 1 of the application year or the date you moved into the KOZ, which ever is later. Once you are certified, you may file for a refund on any eligible tax paid during the time between January 1/move-in date and official notification of approval.
For refund information and forms, call the KOZ Hotline at (215) 683-2021.. SAVE YOUR RECEIPTS!
No. You must file by 12/31 for the year in which you are applying. Should you miss that deadline, the law prohibits you from taking KOZ benefits for that year.
No. You will be told what the specific problem is and whom to contact to remedy the issue. You will be given a reasonable amount of time to rectify the problem. If you are deemed out of compliance this year, for example, and thus rejected for KOZ benefits, you may reapply for the KOZ benefits for that year and the subsequent years if you rectify the compliance matter.
You must have all of your outstanding issues resolved by February 5 of the following year for which you have applied for KOZ benefits to be eligible to receive KOZ benefits.
No, in a landlord/tenant situation, an innocent party will not be held liable because of the actions of others.
While it is your responsibility to re-file each year, as a courtesy, we automatically send previously certified applicants a renewal notice each year. You may file on line at http://koz.newpa.com .
You should always consult a qualified tax accountant to determine how the KOZ benefits apply to your particular business!
Yes. You must continue to file all of your tax forms. See below for how to take the KOZ credits or abatements on various tax filings.
You should attach a copy of your approval letter and tax exemption certificate to every filing and correspondence.
What if I have one site in the KOZ and another site outside the KOZ? Are taxes waived on all of my business?
No. The taxes are abated on only the portion of work or sales, that is directly attributable to activities at the KOZ site.
Yes, unless they live within one of Pennsylvania's twelve KOZ. The wage tax abatement is based on where the employee lives NOT where he/she works. Philadelphia has elected to not include any residential properties it its KOZ program.
Yes. Once certified, 100% of your real estate taxes are abated on your KOZ property for that year.
Since your real estate tax bill will often be mailed before you are certified for a given year, your account will be adjusted to reflect the KOZ exemption when you are certified. If you do not get certified for that year, you are responsible for all real estate taxes.
In late February or early March, a separate KOZ schedule will be sent to every KOZ-certified business so that they may calculate the KOZ credit. This schedule gets filed with the regular BPT/NPT filing.
Once KOZ-certified, 100% of your U&O Tax on your KOZ site is waived.
The new U&O tax forms have a line right on the return for you to take your KOZ credit.
It is planned that you will file your tax returns as normal. A separate schedule has been added so you may take the KOZ credit on your return.
No. Principals of a Subchapter S corporation will not be required to pay State personal income tax on the distributions. All principals must be listed on the KOZ certification form.
How does a qualified business claim a Corporate Net Income Tax and/or Capital Stock and Franchise Tax Credit?A qualified business may take a tax credit, subject to certain limitations, against the Corporate Net Income Tax and/or the Capital Stock and Franchise Tax for the tax liability attributable to business activity conducted within a KOZ/KOEZ.
Purchases of taxable property or services, other than motor vehicles, by a qualified KOZ business may be exempt from state and local Sales and Use Tax. These purchases must be used within a KOZ location by a qualified business. These items include everything from paper clips to racking and shelving used in the operation of your business at the KOZ site
No. The sale or lease of motor vehicles licensed for over-the-road use, including special mobile equipment, are subject to Sales and Use Tax, even when used in an approved KOZ/KOEZ.
Must a KOZ/KOEZ business continue to charge and collect state and local Sales Tax from its customers?
Yes. A business located in a KOZ/KOEZ must continue to charge and collect Sales Tax from its customers, unless purchase is otherwise exempt.
No. The waiver only applies to what a business inside a KOZ consumes in the KOZ, such as building materials, office supplies, etc. The state will issue you a "KOZ Tax Exemption Certificate" which you will be able to use when purchasing these eligible goods and services.
Does the Sales Tax waiver apply to services such as computer maintenance or equipment repair contracts?
Yes. If this work is done in the KOZ for a KOZ certified business use.
How do owners operating a qualified sole proprietorship, partnership or PA S-Corporation within a KOZ/KOEZ receive KOZ/KOEZ tax benefits?
Income earned by a qualified business in a KOZ/KOEZ is not subject to PA Personal Income Tax when passed through to the resident/nonresident shareholder, partner, member, etc. Income earned by a qualified sole proprietor is exempt from the individual owner’s PA taxable income. If you have any other income that you earned or realized from outside a KOZ/KOEZ, you are liable for PA Personal Income Tax on that income.
Other KOZ Benefits
First, don’t let the “alphabet soup” of government agencies intimidate and confuse you!
Call the Commerce Department’s "The Office of Business Services" at (215) 683-2100 and an OBS representative will be you personal liaison to guide you through the maze and bring the appropriate “players” to the table to assist you.