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        PRIOR PRINTER'S NOS. 2065, 2141               PRINTER'S NO. 2266

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 1412 Session of 2008


        INTRODUCED BY PIPPY, A. WILLIAMS, PUNT, PILEGGI, O'PAKE, HUGHES,
           RAFFERTY, KITCHEN, GORDNER, ORIE, COSTA, D. WHITE, ERICKSON,
           ROBBINS, C. WILLIAMS AND REGOLA, MAY 14, 2008

        AS AMENDED ON THIRD CONSIDERATION, JUNE 27, 2008

                                     AN ACT

     1  Amending the act of October 6, 1998 (P.L.705, No.92), entitled,
     2     as amended, "An act providing for the creation of keystone
     3     opportunity zones and keystone opportunity expansion zones to
     4     foster economic opportunities in this Commonwealth, to
     5     facilitate economic development, stimulate industrial,
     6     commercial and residential improvements and prevent physical
     7     and infrastructure deterioration of geographic areas within
     8     this Commonwealth; authorizing expenditures; providing tax
     9     exemptions, tax deductions, tax abatements and tax credits;
    10     creating additional obligations of the Commonwealth and local
    11     governmental units; and prescribing powers and duties of
    12     certain State and local departments, agencies and officials,"
    13     defining "unoccupied parcel"; providing for extensions for
    14     unoccupied parcels, for additional keystone opportunity
    15     expansion zones, for substitution of parcels outside a
    16     subzone and for payments; prohibiting illegal alien labor in
    17     zones; and further providing for sales and use tax, for
    18     corporate net income tax and for local earned income net
    19     profits taxes, LOCAL SALES AND USE TAX and business privilege  <--
    20     taxes.

    21     The General Assembly of the Commonwealth of Pennsylvania
    22  hereby enacts as follows:
    23     Section 1.  Section 103 of the act of October 6, 1998
    24  (P.L.705, No.92), known as the Keystone Opportunity Zone,
    25  Keystone Opportunity Expansion Zone and Keystone Opportunity
    26  Improvement Zone Act, is amended by adding a definition to read:


     1  Section 103.  Definitions.
     2     The following words and phrases when used in this act shall
     3  have the meanings given to them in this section unless the
     4  context clearly indicates otherwise:
     5     * * *
     6     "Unoccupied parcel."  A parcel that is not occupied on the
     7  effective date of this definition. Construction activity on a
     8  parcel shall not constitute occupation of the zone PARCEL.        <--
     9     Section 2.  The act is amended by adding sections to read:
    10  Section 301.3.  Extension for unoccupied parcels.
    11     (a)  Extension.--The department may approve an application
    12  for extension of TO EXTEND the exemptions, deductions,            <--
    13  abatements and credits under this section ACT as follows:         <--
    14         (1)  One of the following:
    15             (i)  For a parcel in a keystone opportunity zone,
    16         keystone opportunity expansion zone or keystone
    17         opportunity improvement zone that is an unoccupied parcel
    18         on the effective date of this section, for a period of
    19         seven years from the expiration date of the zone. The      <--
    20         extension may not be approved for a parcel that is
    21         certified solely on the basis of being underutilized.
    22             (ii)  For a parcel in a keystone opportunity zone or
    23         keystone opportunity expansion zone that is an unoccupied
    24         parcel on the effective date of this section, for a
    25         period of ten years from the date of occupancy, provided
    26         that the parcel is occupied on or before December 31,
    27         2015. The extension may not be approved for a parcel that  <--
    28         is certified solely on the basis of being underutilized.
    29         (2)  The extension of exemptions, deductions, abatements
    30     or credits authorized under this section, EXCEPT EXEMPTIONS    <--
    20080S1412B2266                  - 2 -     

     1     FOR SALES AND USE TAX UNDER SECTION 511(A) OR 705(A), shall
     2     take effect only upon occupancy.
     3     (b)  Real estate tax abatement.--The owner of an unoccupied
     4  parcel in a keystone opportunity zone, keystone opportunity
     5  expansion zone or keystone opportunity improvement zone that has
     6  expired but that receives an extension of tax abatement
     7  eligibility following the original expiration date of the
     8  keystone opportunity zone, keystone opportunity expansion zone
     9  or keystone opportunity improvement zone under subsection (a)
    10  shall not receive an abatement of real property tax until the
    11  parcel becomes occupied or developed.
    12     (c)  Application.--In EXCEPT AS PROVIDED IN SUBSECTION (D),    <--
    13  IN order to extend the tax benefits for unoccupied parcels under
    14  subsection (a), the department must receive an application from
    15  a political subdivision or its designee no later than July 31,    <--
    16  JUNE 30, 2009. The application must contain the information       <--
    17  required under section 302(a)(1), (2), (3), (5) and (6). The
    18  application must include all ordinances, resolutions or other
    19  required action adopted by all political subdivisions in which
    20  the unoccupied parcel is located adopting the extension of all
    21  tax exemptions, deductions, abatements and credits authorized
    22  under Chapter 7. The department, in consultation with the
    23  Department of Revenue, shall review the application and, if
    24  approved, issue a certification of all tax exemptions,
    25  deductions, abatements or credits under this part for the
    26  unoccupied parcel within three months of receipt of the
    27  application. The certification shall be effective on the day
    28  following the expiration date of the existing subzone.
    29     (c.1)  Application for licensed facilities within cities of
    30  first class.--No person shall be eligible to apply for any tax
    20080S1412B2266                  - 3 -     

     1  exemption, deduction, abatement, credit or other tax benefit
     2  under this act or the act of December 1, 1977 (P.L.237, No.76),
     3  known as the Local Economic Revitalization Tax Assistance Act,
     4  for any parcel within a city of the first class that is
     5  contiguous with a navigable waterway, if the parcel is to be
     6  used in whole or in part for a licensed facility as defined in 4
     7  Pa.C.S. § 1103 (relating to definitions) unless the following
     8  conditions have been satisfied:
     9         (1)  the applicant has obtained an easement, right-of-
    10     way, license or lease pursuant to an act of the General
    11     Assembly, enacted following the effective date of this
    12     subsection, for the use, occupancy or development of the
    13     contiguous submerged lands; and
    14         (2)  the applicant has made payment to the Commonwealth
    15     for the use, occupancy or development of the contiguous
    16     submerged lands in an amount established by the General
    17     Assembly.
    18     (d)  Applications for certain zones.--For a keystone
    19  opportunity zone that expires December 31, 2008, an application
    20  may be submitted to the department to temporarily delay the
    21  expiration of the exemptions, deductions, abatements and credits
    22  for the zone until June 30, 2009. The application must be
    23  submitted by November 30, 2008, and include all ordinances,
    24  resolutions or other required action from all affected political
    25  subdivisions approving the requested delay in the expiration of
    26  the keystone opportunity zone. THE DEPARTMENT SHALL CERTIFY THE   <--
    27  DELAY IN THE EXPIRATION BY DECEMBER 31, 2008. If the expiration
    28  of a keystone opportunity zone is delayed under this subsection,
    29  a political subdivision or its designee may apply for an
    30  extension under subsection (a) PURSUANT TO SUBSECTION (C),        <--
    20080S1412B2266                  - 4 -     

     1  PROVIDED THAT THE APPLICATION SHALL BE SUBMITTED BY MAY 1, 2009,
     2  AND APPROVED BY THE DEPARTMENT NO LATER THAN JUNE 30, 2009. If
     3  an extension is granted under subsection (a) (C), the extension   <--
     4  shall be deemed to be effective January 1, 2009.
     5     (e)  Expiration.--All extensions of an unoccupied parcel
     6  certified under subsection (a)(1)(i) shall expire no later than
     7  seven years following the expiration date of the existing
     8  keystone opportunity zone, keystone opportunity expansion zone
     9  or keystone opportunity improvement zone. All extensions of an
    10  unoccupied parcel certified under subsection (a)(1)(ii) shall
    11  expire no later than ten years following the date of occupancy
    12  of the unoccupied parcel under subsection (c).                    <--
    13  Section 301.4.  Additional keystone opportunity expansion zones.
    14     (a)  Establishment.--
    15         (1)  In addition to any designations under section 301.1,
    16     the department may, by December 31, 2009, designate up to 15   <--
    17     additional keystone opportunity expansion zones in accordance
    18     with this section. Each additional keystone opportunity
    19     expansion zone shall:
    20             (i)  Not be less than ten acres in size, unless
    21         contiguous to an existing zone.
    22             (ii)  Not exceed, in the aggregate, a total of 350
    23         acres.
    24             (iii)  Be comprised of parcels that meet any of the
    25         following criteria:
    26                 (A)  Are deteriorated, underutilized or
    27             unoccupied on the effective date of this clause.
    28                 (B)  Are occupied by a business that:
    29                     (I)  Creates or retains at least 1,400 full-
    30                 time jobs in this Commonwealth within three years
    20080S1412B2266                  - 5 -     

     1                 of the designation of the keystone opportunity
     2                 expansion zone; and
     3                     (II)  Makes a capital investment of at least
     4                 $750,000,000 in the additional keystone
     5                 opportunity enhancement zone within three years
     6                 of the designation of the keystone opportunity
     7                 expansion zone.
     8         (2)  The department shall immediately notify political
     9     subdivisions located within the area designated.
    10     (b)  Authorization.--Persons and businesses within an
    11  additional keystone opportunity expansion zone authorized under
    12  subsection (a) shall be entitled to all tax exemptions,
    13  deductions, abatements or credits set forth under this part ACT,  <--
    14  EXCEPT EXEMPTIONS FOR SALES AND USE TAX UNDER SECTION 511(A) OR
    15  705(A), for a period of ten years beginning January 1, 2010 and
    16  ending on December 31, 2020. EXEMPTIONS FOR SALES AND USE TAXES   <--
    17  UNDER SECTIONS 511 AND 705 SHALL COMMENCE UPON DESIGNATION OF
    18  THE ZONE BY THE DEPARTMENT.
    19     (c)  Application.--In order to receive a designation under
    20  subsection (a), the department must receive an application from
    21  a political subdivision or its designee no later than May 1,
    22  2009. The application must contain the information required
    23  under section 302(a)(1), (2), (3), (5) (2)(I) AND (IX) and (6).   <--
    24  The application must include all ordinances, resolutions or
    25  other required action adopted by all political subdivisions in
    26  which the keystone opportunity expansion zone is located
    27  adopting the extension of all PROVIDING THE tax exemptions,       <--
    28  deductions, abatements and credits authorized under Chapter 7.
    29  The department, in consultation with the Department of Revenue,
    30  shall review the application and, if approved, issue a
    20080S1412B2266                  - 6 -     

     1  certification of all tax exemptions, deductions, abatements or
     2  credits under this part for the additional keystone opportunity
     3  expansion zone within three months of receipt of the
     4  application. The department shall act on an application under
     5  this subsection by June 30, 2009.
     6     (D)  PROHIBITION.--THE DEPARTMENT SHALL BE PROHIBITED FROM     <--
     7  DESIGNATING ANY PARCEL OF LAND WITHIN A CITY OF THE FIRST CLASS
     8  AS A KEYSTONE OPPORTUNITY ZONE, KEYSTONE OPPORTUNITY EXPANSION
     9  ZONE, KEYSTONE OPPORTUNITY IMPROVEMENT ZONE OR A KEYSTONE
    10  OPPORTUNITY INNOVATION ZONE IF ANY PROJECT INVOLVING A PARCEL,
    11  WITHIN A 1,001-FOOT RADIUS AS MEASURED FROM THE CENTER OF THE
    12  PROPOSED PARCEL TO BE DESIGNATED, HAS RECEIVED OR HAS BEEN
    13  DESIGNATED TO RECEIVE IN EXCESS OF $20,000,000 IN FUNDING FROM
    14  THE COMMONWEALTH WITHIN THE LAST FOUR YEARS. THE DEPARTMENT
    15  SHALL BE PROHIBITED FROM PROVIDING ANY STATE FINANCIAL
    16  ASSISTANCE, INCLUDING LOANS, GRANTS OR ANY TAX ABATEMENTS,
    17  CREDITS, DEDUCTIONS OR EXEMPTIONS PROVIDED UNDER THIS ACT OR ANY
    18  OTHER STATE LAW TO A PARCEL LOCATED WITHIN THE AREA DESCRIBED IN
    19  THIS SUBSECTION NOR SHALL THE DEPARTMENT OR THE GOVERNING BODY
    20  OF THE CITY OF THE FIRST CLASS PROVIDE ANY TAX EXEMPTION,
    21  DEDUCTION, ABATEMENT, CREDIT OR OTHER TAX BENEFIT UNDER THE ACT
    22  OF DECEMBER 1, 1977 (P.L.237, NO.76), KNOWN AS THE LOCAL
    23  ECONOMIC REVITALIZATION TAX ASSISTANCE ACT, FOR ANY PROJECT
    24  INVOLVING A PARCEL LOCATED WITHIN THE AREA DESCRIBED IN THIS
    25  SUBSECTION.
    26  SECTION 301.5.  EXPANSION FOR NEW PARCELS.
    27     (A)  EXPANSION.--A POLITICAL SUBDIVISION OR ITS DESIGNEE MAY
    28  APPLY FOR AN EXPANSION TO ADD UP TO 15 ACRES OF DETERIORATED
    29  PROPERTY TO AN EXISTING KEYSTONE OPPORTUNITY EXPANSION ZONE,
    30  KEYSTONE OPPORTUNITY IMPROVEMENT ZONE OR A SUBZONE OF A KEYSTONE
    20080S1412B2266                  - 7 -     

     1  OPPORTUNITY ZONE FOR PARCELS THAT ARE CONTIGUOUS TO THE EXISTING
     2  ZONE OR SUBZONE.
     3     (B)  APPLICATION.--IN ORDER TO RECEIVE A DESIGNATION UNDER
     4  THIS SECTION, THE DEPARTMENT MUST RECEIVE AN APPLICATION FROM A
     5  POLITICAL SUBDIVISION OR ITS DESIGNEE NO LATER THAN DECEMBER 31,
     6  2008. THE APPLICATION MUST CONTAIN THE INFORMATION REQUIRED
     7  UNDER SECTION 302(A)(1), (2)(I) AND (IX), (5) AND (6). THE
     8  APPLICATION MUST INCLUDE ALL ORDINANCES, RESOLUTIONS OR OTHER
     9  REQUIRED ACTION ADOPTED BY ALL POLITICAL SUBDIVISIONS IN WHICH
    10  THE KEYSTONE OPPORTUNITY EXPANSION ZONE, KEYSTONE OPPORTUNITY
    11  IMPROVEMENT ZONE OR A SUBZONE OF A KEYSTONE OPPORTUNITY ZONE IS
    12  LOCATED ADOPTING ALL TAX EXEMPTIONS, DEDUCTIONS, ABATEMENTS AND
    13  CREDITS AUTHORIZED UNDER CHAPTER 7 TO THE EXPANDED AREA. THE
    14  DEPARTMENT, IN CONSULTATION WITH THE DEPARTMENT OF REVENUE,
    15  SHALL REVIEW THE APPLICATION AND, IF APPROVED, ISSUE A
    16  CERTIFICATION OF ALL TAX EXEMPTIONS, DEDUCTIONS, ABATEMENTS OR
    17  CREDITS UNDER THIS ACT FOR THE EXPANSION AUTHORIZED UNDER
    18  SUBSECTION (A) WITHIN TWO MONTHS OF THE RECEIPT OF THE
    19  APPLICATION.
    20     (C)  APPLICATIONS FOR CERTAIN ZONES.--FOR A KEYSTONE
    21  OPPORTUNITY ZONE THAT EXPIRES DECEMBER 31, 2008, BUT IS SEEKING
    22  AN EXTENSION UNDER SECTION 301.3, THE APPLICATION SHALL INCLUDE
    23  THE REQUEST FOR AN EXPANSION UNDER SUBSECTION (A). THE
    24  APPLICATION MUST BE SUBMITTED BY DECEMBER 31, 2008, AND INCLUDE
    25  ALL ORDINANCES, RESOLUTIONS OR OTHER REQUIRED ACTION FROM ALL
    26  AFFECTED POLITICAL SUBDIVISIONS APPROVING THE ADDITION OF THE
    27  ACREAGE. IF THE EXPIRATION OF A KEYSTONE OPPORTUNITY ZONE IS
    28  DELAYED UNDER THIS SUBSECTION, A POLITICAL SUBDIVISION OR ITS
    29  DESIGNEE MAY APPLY FOR AN EXTENSION UNDER 301.3 AND AN EXPANSION
    30  UNDER THIS SECTION. IF AN EXTENSION IS GRANTED UNDER SECTION
    20080S1412B2266                  - 8 -     

     1  301.3, THE EXTENSION AND THE EXPANSION SHALL BE DEEMED TO BE
     2  EFFECTIVE JANUARY 1, 2009.
     3     (D)  AUTHORIZATION.--PERSONS OR BUSINESSES WITHIN THE
     4  EXPANDED AREA SHALL BE ENTITLED TO ALL TAX EXEMPTIONS,
     5  DEDUCTIONS, ABATEMENTS OR CREDITS SET FORTH UNDER THIS PART,
     6  EXCEPT FOR SALES AND USE TAXES UNDER SECTION 511(A) OR 705(A),
     7  FOR THE PERIOD SET FORTH IN SUBSECTION (E). EXEMPTIONS FOR SALES
     8  AND USE TAXES UNDER SECTIONS 511 AND 705 SHALL COMMENCE UPON
     9  APPROVAL OF THE EXPANSION BY THE DEPARTMENT.
    10     (E)  EXPIRATION.--ALL EXPANSIONS UNDER THIS SECTION SHALL
    11  EXPIRE ON THE SAME DATE AS THE KEYSTONE OPPORTUNITY EXPANSION
    12  ZONE, KEYSTONE OPPORTUNITY IMPROVEMENT ZONE OR SUBZONE OF A
    13  KEYSTONE OPPORTUNITY ZONE.
    14  Section 301.5 301.6.  Substitution of parcels outside a subzone.  <--
    15     (a)  Approval.--If a portion of an existing subzone is
    16  affected by a governmental prohibition of an environmental
    17  nature which has a substantial adverse effect on development,
    18  the department may approve a substitution of other parcels for
    19  those affected acres in the existing subzone, creating a new
    20  subzone if the new subzone is substantially similar in acreage
    21  size and is within five miles and in the same county as the
    22  original subzone.
    23     (b)  Application and approval.--Applications to substitute
    24  parcels under this section shall be made to the department no
    25  later than May 31, 2009. Applications under this section shall
    26  be made to the department in accordance with section 302(a)(1),
    27  (2), (3), (5) and (6). The department shall certify the
    28  substitutions by June 30, 2009.
    29  Section 310.  Payments.
    30     The following shall apply to an agreement between a business
    20080S1412B2266                  - 9 -     

     1  and a political subdivision entered into after the effective
     2  date of this section in exchange for the approval of, or
     3  otherwise relating to, the establishment of a keystone
     4  opportunity zone, keystone opportunity expansion zone or
     5  keystone opportunity improvement zone under this act, to include
     6  an extension under section 301.2:
     7         (1)  Except as otherwise required or authorized by law, a
     8     business may not provide payments to a political subdivision
     9     in exchange for the approval of, or otherwise relating to,
    10     the designation or extension of a keystone opportunity zone,
    11     keystone opportunity expansion zone or keystone opportunity
    12     improvement zone in excess of 110% of the amount of real
    13     property taxes payable to the political subdivision for the
    14     tax year immediately prior to the year in which the
    15     designation or extension is granted. The limitation on
    16     payments set forth under this paragraph may increase by the
    17     percentage increase in the payments that would occur if the
    18     property was not exempt from local real property taxes.
    19         (2)  Except as provided under paragraph (3), payments
    20     made under paragraph (1) may be increased based on a taxpayer
    21     assessment appeal or as necessary to correct any errors or
    22     omissions in the county's assessment records. Payments may be
    23     increased following a county-wide reassessment based on
    24     improvements to the property made prior to the approval of
    25     the designation or expansion.
    26         (3)  Payments may not be increased for the duration of
    27     the designation or expansion based on an increase in the
    28     assessed value of property due to improvements to the
    29     property made subsequent to designation.
    30         (4)  Any agreement to make payments under this section
    20080S1412B2266                 - 10 -     

     1     shall be in writing and approved by a majority vote of the
     2     governing body of the political subdivision at a meeting that
     3     is subject to 65 Pa.C.S. Ch. 7 (relating to open meetings).
     4  Section 311.  Prohibition on illegal alien labor.
     5     (a)  General rule.--No person or business that receives a tax
     6  exemption, deduction, abatement or credit under this act shall
     7  knowingly permit the labor services of an illegal alien under a
     8  contract to which the person or business is a party in the
     9  applicable keystone opportunity zone, keystone opportunity
    10  expansion zone or keystone opportunity improvement zone. A
    11  person shall be deemed to have knowingly employed or knowingly
    12  permitted the prohibited services if he shall have active
    13  knowledge of or have reason to know that such services have been
    14  provided under the contract in the applicable keystone
    15  opportunity zone, keystone opportunity expansion zone or
    16  keystone opportunity improvement zone.
    17     (b)  Reimbursement.--As a condition of the receipt of a tax
    18  exemption, deduction, abatement or credit under this act, the
    19  department or political subdivision that awards the tax
    20  exemption, deduction, abatement of credit under this act shall
    21  require full repayment of the value or amount of the tax
    22  exemption, deduction, abatement or credit if subsection (c)
    23  applies.
    24     (c)  Violations.--
    25         (1)  Repayment under subsection (b) is required if any of
    26     the following apply:
    27             (i)  The person or business that received the tax
    28         exemption, deduction, abatement or credit under this act
    29         is sentenced under Federal law for an offense involving
    30         knowing use of labor by an illegal alien under the
    20080S1412B2266                 - 11 -     

     1         contract in the applicable keystone opportunity zone,
     2         keystone opportunity expansion zone or keystone
     3         improvement zone.
     4             (ii)  All of the following apply:
     5                 (A)  A contractor to a person or business that
     6             received the tax exemption, deduction, abatement or
     7             credit under this act is sentenced under Federal law
     8             for an offense involving knowing use of labor by an
     9             illegal alien on the contract.
    10                 (B)  The person knew or had reason to know of the
    11             contractor's knowing use of labor by an illegal alien
    12             on the contract.
    13         (2)  Any person who is required to repay the department
    14     or political subdivision under this section shall be
    15     ineligible to apply for any tax exemption, deduction,
    16     abatement or credit under this act for a period of two years.
    17         (3)  It shall be an affirmative defense to a violation of
    18     this section, if the person or business contracts with a
    19     contractor to provide labor under the contract in the
    20     applicable keystone opportunity zone, keystone opportunity
    21     expansion zone or keystone opportunity improvement zone and
    22     establishes that the person has required the contractor to
    23     certify compliance with the requirements of section 274A of
    24     the Immigration Reform and Control Act of 1986 (Public Law
    25     99-603, 8 U.S.C. § 1324A) with respect to the hiring,
    26     recruiting or referral for employment of an alien in the
    27     United States and has notified the appropriate Federal
    28     authority, if the person knew that the contractor used labor
    29     by an illegal alien.
    30     (d)  Definition.--As used in this section, "illegal alien"
    20080S1412B2266                 - 12 -     

     1  means a noncitizen of the United States who is violating Federal
     2  immigration laws and is providing compensated labor within this
     3  Commonwealth.
     4     Section 3.  Section 511 of the act, amended December 9, 2002
     5  (P.L.1727, No.217), is amended to read:
     6  Section 511.  Sales and use tax.
     7     (a)  Exemption.--Sales at retail of services or tangible
     8  personal property, other than motor vehicles, to a qualified
     9  business or a construction contractor pursuant to a construction
    10  contract with a qualified business, landowner or lessee for the
    11  exclusive use, consumption and utilization of the tangible
    12  personal property or service by the qualified business,           <--
    13  landowner or lessee or the construction contractor at [its] the
    14  qualified business's, landowner's or lessee's facility located
    15  within a subzone, improvement subzone or expansion subzone are
    16  exempt from the sales and use tax imposed under Article II of
    17  the Tax Reform Code of 1971. No person shall be allowed an
    18  exemption for sales conducted prior to designation of the real
    19  property as part of a subzone or expansion subzone.
    20     [(b)  Construction contracts.--For any construction contract
    21  performed in a subzone, improvement subzone or expansion
    22  subzone, the exemption provided in subsection (a) shall only
    23  apply to the sale at retail or use of building machinery and
    24  equipment to a qualified business, or to a construction
    25  contractor pursuant to a construction contract with a qualified
    26  business, for the exclusive use, consumption and utilization by
    27  the qualified business at its facility in a subzone, improvement
    28  subzone or expansion subzone. For the purposes of the subzone,
    29  improvement subzone or expansion subzone exemption, building
    30  machinery and equipment shall include distribution equipment
    20080S1412B2266                 - 13 -     

     1  purchased for the exclusive use, consumption and utilization in
     2  a subzone, improvement subzone or expansion subzone facility.]
     3     Section 4.  Section 515(d) introductory paragraph and (3) of
     4  the act, amended December 23, 2003 (P.L.360, No.51), are amended
     5  to read:
     6  Section 515.  Corporate net income tax.
     7     * * *
     8     (d)  Income apportionment.--The taxable income of a
     9  corporation that is a qualified business shall be apportioned to
    10  the subzone, improvement subzone or expansion subzone by
    11  multiplying the Pennsylvania taxable income by a fraction, the
    12  numerator of which is the property factor plus the payroll
    13  factor [plus the sales factor] and the denominator of which is
    14  [three] two, in accordance with the following:
    15         * * *
    16         [(3)  The sales factor is a fraction, the numerator of
    17     which is the total sales of the taxpayer in the subzone,
    18     improvement subzone or expansion subzone during the tax
    19     period and the denominator of which is the total sales of the
    20     taxpayer in this Commonwealth during the tax period.
    21             (i)  Sales of tangible personal property are in the
    22         subzone, improvement subzone or expansion subzone if the
    23         property is delivered or shipped to a purchaser that
    24         takes possession within the subzone, improvement subzone
    25         or expansion subzone regardless of the F.O.B. point or
    26         other conditions of the sale.
    27             (ii)  Sales other than sales of tangible personal
    28         property are in the subzone, improvement subzone or
    29         expansion subzone if:
    30                 (A)  the income-producing activity is performed
    20080S1412B2266                 - 14 -     

     1             in the subzone, improvement subzone or expansion
     2             subzone; or
     3                 (B)  the income-producing activity is performed
     4             both within and without the subzone, improvement
     5             subzone or expansion subzone and a greater proportion
     6             of the income-producing activity is performed in the
     7             subzone, improvement subzone or expansion subzone
     8             than in any other location, based on costs of
     9             performance.]
    10     * * *
    11     Section 5.  Section 703 of the act is amended by adding a
    12  subsection to read:
    13  Section 703.  Local earned income and net profits taxes;
    14                 business privilege taxes.
    15     * * *
    16     (g)  Determination of exemption.--For the purposes of
    17  determining an exemption under this section, a tax on or
    18  measured by any of the following shall be attributed to business
    19  activity conducted within a subzone, improvement zone or
    20  expansion zone by applying the apportionment factors under
    21  section 515(d):
    22         (1)  Business gross receipts.
    23         (2)  Gross or net income.
    24         (3)  Gross or net profits.
    25     Section 6.  The amendment of sections 515                      <--
    26     SECTION 6.  SECTION 705 OF THE ACT, AMENDED DECEMBER 9, 2002   <--
    27  (P.L.1727, NO.217), IS AMENDED TO READ:
    28  SECTION 705.  LOCAL SALES AND USE TAX.
    29     (A)  GENERAL RULE.--THE POLITICAL SUBDIVISION SHALL EXEMPT
    30  SALES AT RETAIL OF SERVICES OR TANGIBLE PERSONAL PROPERTY,
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     1  EXCEPT MOTOR VEHICLES, TO A QUALIFIED BUSINESS OR A CONSTRUCTION
     2  CONTRACTOR PURSUANT TO A CONSTRUCTION CONTRACT WITH A QUALIFIED
     3  BUSINESS, LANDOWNER OR LESSEE FOR THE EXCLUSIVE USE, CONSUMPTION
     4  AND UTILIZATION OF THE TANGIBLE PERSONAL PROPERTY OR SERVICE BY
     5  THE QUALIFIED BUSINESS AT [ITS] THE QUALIFIED BUSINESS'S,
     6  LANDOWNER'S OR LESSEE'S FACILITY LOCATED WITHIN A SUBZONE,
     7  IMPROVEMENT SUBZONE OR EXPANSION SUBZONE FROM A CITY OR COUNTY
     8  TAX ON PURCHASE PRICE AUTHORIZED UNDER ARTICLE XXXI-B OF THE ACT
     9  OF JULY 28, 1953 (P.L.723, NO.230), KNOWN AS THE SECOND CLASS
    10  COUNTY CODE, AS AMENDED, AND THE ACT OF JUNE 5, 1991 (P.L.9,
    11  NO.6), KNOWN AS THE PENNSYLVANIA INTERGOVERNMENTAL COOPERATION
    12  AUTHORITY ACT FOR CITIES OF THE FIRST CLASS, AS AMENDED. NO
    13  EXEMPTION MAY BE GRANTED FOR SALES OCCURRING PRIOR TO
    14  DESIGNATION OF THE REAL PROPERTY AS PART OF A SUBZONE OR
    15  EXPANSION SUBZONE.
    16     (B)  [CONSTRUCTION CONTRACTS.--FOR ANY CONSTRUCTION CONTRACT
    17  PERFORMED IN A SUBZONE, IMPROVEMENT SUBZONE OR EXPANSION
    18  SUBZONE, THE EXEMPTION PROVIDED IN SUBSECTION (A) SHALL ONLY
    19  APPLY TO THE SALE AT RETAIL OR USE OF BUILDING MACHINERY AND
    20  EQUIPMENT TO A QUALIFIED BUSINESS, OR TO A CONSTRUCTION
    21  CONTRACTOR PURSUANT TO A CONSTRUCTION CONTRACT WITH A QUALIFIED
    22  BUSINESS, FOR THE EXCLUSIVE USE, CONSUMPTION AND UTILIZATION BY
    23  THE QUALIFIED BUSINESS AT ITS FACILITY IN A SUBZONE, IMPROVEMENT
    24  SUBZONE OR EXPANSION SUBZONE. FOR THE PURPOSES OF THE SUBZONE,
    25  IMPROVEMENT SUBZONE OR EXPANSION SUBZONE EXEMPTION, BUILDING
    26  MACHINERY AND EQUIPMENT SHALL INCLUDE DISTRIBUTION EQUIPMENT
    27  PURCHASED FOR THE EXCLUSIVE USE, CONSUMPTION AND UTILIZATION IN
    28  A SUBZONE, IMPROVEMENT SUBZONE OR EXPANSION SUBZONE FACILITY.]
    29  (RESERVED).
    30     (C)  DEFINITION.--SALES AT RETAIL OF TANGIBLE PERSONAL
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     1  PROPERTY AND SERVICES SHALL BE DEFINED IN ACCORDANCE WITH
     2  ARTICLE II OF THE TAX REFORM CODE OF 1971.
     3     SECTION 7.  THE AMENDMENT OF SECTIONS 515 and 703 of the act
     4  shall apply to taxable years beginning after December 31, 2008.
     5     Section 7 8.  This act shall take effect in 60 days.           <--

















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