PRIOR PRINTER'S NO. 1416 PRINTER'S NO. 2828
No. 1256 Session of 1995
INTRODUCED BY GLADECK, HASAY, LESCOVITZ, FLEAGLE, GODSHALL,
FICHTER, BAKER, HENNESSEY, DEMPSEY, PITTS, LYNCH, J. TAYLOR,
BUNT, GEIST, ARMSTRONG, FLICK, E. Z. TAYLOR, KING,
HUTCHINSON, CHADWICK, HERMAN, DURHAM, DRUCE, SEMMEL, MARSICO,
MILLER, LEH, HERSHEY, STERN, DALEY, ADOLPH, S. H. SMITH,
TRELLO, B. SMITH, RAYMOND, CLARK, CORNELL, PHILLIPS,
L. I. COHEN, RUBLEY, SERAFINI, BOSCOLA, MERRY AND BROWN,
MARCH 20, 1995
AS REPORTED FROM COMMITTEE ON URBAN AFFAIRS, HOUSE OF
REPRESENTATIVES, AS AMENDED, NOVEMBER 21, 1995
AN ACT
1 Establishing A DEMONSTRATION tax-free development zones ZONE <--
2 PROGRAM; providing for a land value tax and for businesses
3 that qualify for tax exemptions; and requiring audits.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the Tax-Free
8 Development Zone DEMONSTRATION PROGRAM Act. <--
9 Section 2. Legislative findings and declaration of purpose.
10 (a) Legislative findings.--The General Assembly finds and
11 declares as follows:
12 (1) A recent study of existing state enterprise zone
13 programs in the United States concluded that:
14 (i) Notable improvements occurred in many zones.
15 (ii) Job growth rates were higher than the national
1 average over a comparable period of time in many zones.
2 (iii) The typical zone experienced the additional
3 investment of several new and expanding businesses.
4 (iv) New firms and the expansion of existing
5 establishments accounted for more than 80% of the
6 establishments in which investments occurred.
7 (v) Manufacturing activities accounted for 73% of
8 all zone investment activity and job gains.
9 (vi) The state and local incentives, including tax
10 incentives, were relatively low-cost inducements and
11 quite small in relation to job gains.
12 (vii) A significant number of state-sponsored
13 enterprise zones have achieved notable successes in
14 revitalizing some of their economically distressed areas.
15 (2) In spite of this, the study cautioned that:
16 (i) The selection of only zones that meet the
17 designation criteria for the most severely distressed
18 areas may result in the choosing of zones with limited
19 development potential.
20 (ii) The good intentions of some incentives for
21 businesses to locate or expand in an enterprise zone were
22 lost by severely restrictive qualification criteria.
23 (3) A recent Statewide survey of Pennsylvania businesses
24 concerning this Commonwealth's economy concluded that:
25 (i) The current system of local services and taxes
26 is a cause of dissatisfaction among many firms in this
27 Commonwealth.
28 (ii) Few firms are using existing State economic
29 development programs.
30 (iii) State economic development programs must be
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1 redesigned to accommodate the new directions and
2 activities being undertaken by businesses in this
3 Commonwealth.
4 (4) While the Commonwealth's existing Enterprise
5 Development Area Program, administered by the Department of
6 Community Affairs since 1982, has been successful in
7 stimulating economic and community development in this
8 Commonwealth's designated enterprise zone communities, this
9 program is notably deficient because:
10 (i) Municipalities must apply and be approved for
11 participation, which results in waiting lists, time
12 delays and administrative expenses.
13 (ii) State program financial assistance targeted to
14 these approved designated zones, including tax credits,
15 is limited by the Commonwealth's financial resources
16 available during any given fiscal year.
17 (iii) There is a need to increase the business tax
18 incentives available to encourage new businesses to
19 locate in these zones and for existing businesses already
20 located in these zones to expand.
21 (iv) There is a need to expedite the process of
22 private sector investment in all of this Commonwealth's
23 urban centers, not only in existing designated zones
24 under the Enterprise Development Area Program currently
25 administered by the Department of Community Affairs.
26 (5) Expediting economic development activities in urban
27 areas of this Commonwealth would implement the
28 recommendations made by the Select Committee on Land Use and
29 Growth Management of the House of Representatives in its
30 final report to the General Assembly in June 1992, which
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1 encouraged increased commercial, industrial and housing
2 development in this Commonwealth's urban centers where
3 infrastructure needed to support new development is already
4 in place, thus preserving this Commonwealth's limited
5 farmland, open space and natural resources.
6 (b) Declaration of purpose.--Based on the findings under
7 subsection (a), it is the purpose of this act to:
8 (1) Establish tax-free zones in this Commonwealth's
9 urban centers as an inducement to expedite private sector
10 investment, the result of which will be increased community
11 and economic development activities, including the creation
12 of new employment and housing opportunities.
13 (2) Indicate the size of the municipality that would be
14 eligible to participate.
15 (3) Specify the type of area which would qualify as a
16 tax-free zone.
17 (4) Simplify the application process, qualification
18 criteria and administrative procedures currently associated
19 with the Commonwealth's existing Enterprise Development Area
20 Program for tax-free zone designation under this act.
21 (5) Provide a list of the business taxes which would be
22 exonerated in these zones.
23 (6) Establish municipal qualification and implementation
24 procedures, including the initiation of a land value tax
25 system in the municipality.
26 (7) Establish a municipal certification process for
27 businesses that qualify for the tax exemptions.
28 (8) Require Department of Revenue audits for
29 participating municipalities and qualified businesses.
30 Section 3. Definitions.
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1 The following words and phrases when used in this act shall
2 have the meanings given to them in this section unless the
3 context clearly indicates otherwise:
4 "Business income." Income arising from transactions and <--
5 activity in the regular course of the taxpayer's trade or
6 business and income from tangible and intangible property if the
7 acquisition, management and disposition of the property
8 constitute integral parts of the taxpayer's regular trade or
9 business operations.
10 "Department." The Department of Revenue of the Commonwealth.
11 "BUSINESS ENTITY" OR "BUSINESS." ANY CORPORATION, <--
12 PARTNERSHIP, SOLE PROPRIETORSHIP OR OTHER ENTITY AUTHORIZED TO
13 DO BUSINESS IN THIS COMMONWEALTH AND SUBJECT TO ANY OF THE TAXES
14 IMPOSED BY ARTICLE III, IV OR VI OF THE ACT OF MARCH 4, 1971
15 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971.
16 "BUSINESS INCOME." BUSINESS INCOME AS DEFINED IN SECTION 401
17 2(A)(1)(A) OF ARTICLE IV OF THE ACT OF MARCH 4, 1971 (P.L.6,
18 NO.2), KNOWN AS THE TAX REFORM CODE OF 1971.
19 "JOINT TAX-FREE ZONE." A TAX-FREE ZONE ESTABLISHED BY TWO OR
20 MORE CONTIGUOUS MUNICIPALITIES WHICH INCLUDES AREAS IN EACH
21 MUNICIPALITY.
22 "Municipal corporation" or "municipality." Any FIRST CLASS, <--
23 SECOND CLASS, SECOND CLASS A OR THIRD CLASS city, borough,
24 incorporated town, township or home rule municipality which is <--
25 not a county with a total population of 30,000 3,000 or more. <--
26 "Population." The number of persons in each municipality as
27 finally determined by the United States Census Bureau of the
28 United States Department of Commerce in its most recent
29 population estimate report.
30 "Tax-free zone." A specific area with identifiable
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1 boundaries within a qualified municipality that has been
2 designated as a tax-free zone.
3 Section 4. Establishment of tax-fee development zones.
4 (a) Establishment.--A municipality OR MUNICIPALITIES may <--
5 establish a specific geographic area or areas within its
6 boundaries as a tax-free zone OR A JOINT TAX-FREE ZONE, under <--
7 the requirements of section 5 6. <--
8 (b) Requirements.--While there is no limitation on the size
9 of the tax-free zone or zones which a municipality may
10 designate, areas so designated shall at the time of the zone's
11 establishment:
12 (1) Be predominately zoned commercial and/or industrial
13 or, where there is no zoning, have a current land use in the
14 designated area reflective of the same.
15 (2) Be economically distressed in terms of lacking
16 adequate employment opportunities within the designated area
17 or areas.
18 (3) Show signs of existing physical deterioration of
19 buildings and structures in the area or have significant
20 potential for the same without new investment in the area.
21 (4) SHOW SIGNS OF BLIGHT AND UNSAFE, UNSANITARY AND <--
22 INADEQUATE CONDITIONS OF THE DWELLINGS, EXCESSIVE LAND
23 COVERAGE BY THE BUILDINGS AND ECONOMICALLY AND SOCIALLY
24 UNDESIRABLE LAND USES.
25 (4) (5) Have the potential of being a catalyst for the <--
26 creation of a positive economic climate in the community
27 resulting in the formation of new businesses and the
28 expansion of existing businesses within the area.
29 (5) (6) Have the potential of being a catalyst for an <--
30 improved quality of life in the municipality, including
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1 expanded affordable housing opportunities, which would result
2 from new and expanded development in the area.
3 (6) (7) Provide new jobs and increased employment <--
4 opportunities for disadvantaged citizens and displaced and
5 unemployed workers within the municipality.
6 (7) (8) Have commercial business and/or industrial sites <--
7 and structures available within the designated zone or zones
8 at competitive prices with adequate infrastructure and energy <--
9 availability, capable of supporting new and expanded
10 development.
11 (8) (9) Have existing commercial businesses and/or <--
12 industries ready and willing to reinvest and expand within
13 the area, if the area was designated as a tax-free zone.
14 (c) Location.--An area designated as a tax-free zone under
15 this act may be located within an existing enterprise zone
16 approved by the Department of Community Affairs under the
17 Commonwealth's existing Enterprise Development Area Program.
18 (d) Tax exemptions.--A business located or locating in tax-
19 free zones under this act, upon the municipality meeting the
20 requirements under section 5 6, shall be entitled to ELIGIBLE <--
21 FOR the applicable tax exemptions EXONERATIONS under section 8 <--
22 9.
23 SECTION 5. CERTIFICATION BY DEPARTMENT OF COMMUNITY AFFAIRS. <--
24 (A) CONSIDERATION.--UPON SUBMITTAL BY A MUNICIPALITY OF A
25 PRELIMINARY DESCRIPTION OF A TAX-FREE ZONE UNDER SECTION
26 6(A)(1), THE DEPARTMENT OF COMMUNITY AFFAIRS MAY CERTIFY THE
27 PROPOSED ZONE GENERALLY AND EACH BUSINESS RECOMMENDED FOR TAX
28 EXONERATION SPECIFICALLY. THE CERTIFICATION SHALL BE BASED ON
29 WHETHER OR NOT THE AREA CHOSEN BY THE MUNICIPALITY AND THE
30 BUSINESSES WITHIN THAT AREA COMPLY WITH THE INTENT OF THE ACT AS
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1 EXPRESSED IN SECTION 2.
2 (B) CRITERIA.--
3 (1) THE DEPARTMENT OF COMMUNITY AFFAIRS SHALL PROMULGATE
4 CRITERIA WHICH OBJECTIVELY MEASURES THE FOLLOWING:
5 (I) THE PROPOSED ZONE'S COMPLIANCE WITH THE INTENT
6 OF THE ACT AS EXPRESSED IN SECTION 2.
7 (II) THE FISCAL STATUS OF THE ENTIRE MUNICIPALITY
8 PROPOSING THE ZONE.
9 (III) THE COMPLIANCE OF EACH BUSINESS WITH THE
10 INTENT OF THE ACT AS EXPRESSED IN SECTION 2.
11 (2) THE DEPARTMENT OF COMMUNITY AFFAIRS SHALL LIMIT ITS
12 CERTIFICATION OF BUSINESSES WITHIN THE TAX-FREE ZONE TO
13 RETAIL, COMMERCIAL AND INDUSTRIAL BUSINESSES AND SHALL DENY
14 CERTIFICATION TO BUSINESSES WHOSE REGULAR COURSE OF TRADE
15 CONSISTS OF REAL PROPERTY SPECULATION THAT DOES NOT COMPLY
16 WITH THE INTENT OF THE ACT EXPRESSED IN SECTION 2.
17 (3) THE DEPARTMENT OF COMMUNITY AFFAIRS SHALL BASE ITS
18 DECISION TO CERTIFY OR WITHHOLD CERTIFICATION A TAX-FREE ZONE
19 OR THE BUSINESSES IN IT BASED ON THESE CRITERIA.
20 (C) TAX EXONERATIONS.--WHEN A TAX-FREE ZONE AND THE
21 BUSINESSES IN IT HAVE BEEN CERTIFIED BY THE DEPARTMENT OF
22 COMMUNITY AFFAIRS, THE DEPARTMENT OF COMMUNITY AFFAIRS SHALL
23 SEND THE FOLLOWING INFORMATION TO THE DEPARTMENT OF REVENUE:
24 (1) A LIST OF ALL CERTIFIED BUSINESSES IN THE ZONE; AND
25 (2) THE ESTIMATED AMOUNT OF TAX EXONERATION EACH
26 BUSINESS IS ELIGIBLE FOR.
27 (D) RESUBMITTAL.--ANY MUNICIPALITY WHOSE PRELIMINARY
28 DESCRIPTION IS NOT CERTIFIED MAY ADDRESS THE CONCERNS THAT THE
29 DEPARTMENT OF COMMUNITY AFFAIRS BASED ITS DECISION ON AND
30 RESUBMIT THE AMENDED PRELIMINARY DESCRIPTION FOR CERTIFICATION.
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1 (E) TIME LIMITATION.--IF THE DEPARTMENT OF COMMUNITY AFFAIRS
2 HAS NOT NOTIFIED THE MUNICIPALITY OF ITS DECISION WITHIN 60 DAYS
3 OF THE SUBMITTAL, THE PRELIMINARY DESCRIPTION SHALL BE DEEMED TO
4 BE CERTIFIED.
5 Section 5 6. Implementation procedure. <--
6 (a) Requirements.--A municipality wishing to designate an
7 area or areas within the municipality as a tax-free zone shall:
8 (1) SUBMIT A PRELIMINARY DESCRIPTION OF THE AREA OR <--
9 AREAS TO BE DESIGNATED AS A TAX-FREE ZONE OR ZONES AND THE
10 SPECIFIC BUSINESSES TO RECEIVE TAX EXONERATIONS TO THE
11 DEPARTMENT OF COMMUNITY AFFAIRS, OR ITS SUCCESSOR AGENCY OR
12 ASSIGNS, TO BE CERTIFIED UNDER SECTION 5. THE PRELIMINARY
13 DESCRIPTION SUBMITTED MUST BE A FAITHFUL REPRESENTATION OF
14 THE TAX-FREE ZONE TO BE INCLUDED IN THE ORDINANCE REQUIRED IN
15 PARAGRAPH (2). IN PREPARING THE PRELIMINARY DESCRIPTION, THE
16 MUNICIPALITY SHALL CONSULT WITH NONPROFIT COMMUNITY
17 DEVELOPMENT CORPORATIONS LOCATED WITHIN THE MUNICIPALITY IN
18 ORDER TO GAIN THEIR INPUT ON WHAT GEOGRAPHICAL AREAS ARE BEST
19 SUITED TO TAX-FREE ZONE STATUS.
20 (1) (2) Pass an ordinance indicating a desire to <--
21 designate an area or areas within the corporate boundaries of
22 the municipality as a tax-free zone or zones under the
23 requirements of this act.
24 (2) (3) Indicate in the ordinance that the area or areas <--
25 to be so designated meet the qualification requirements of
26 section 4 for a tax-free zone designation.
27 (3) (4) Include as part of the ordinance a clear and <--
28 complete narrative description of the boundaries of the
29 proposed zone or zones, accompanied by a map. Both the
30 description and the map shall indicate the names of all
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1 perimeter and interior streets, bridges, streams and creeks,
2 as well as other natural and manmade landmarks and monuments.
3 The approximate total acreage or square mileage for the
4 proposed zone or zones shall also be included.
5 (4) (5) Include as part of the ordinance a map <--
6 indicating each parcel of real property located within the
7 zone or zones to be designated as tax-free zones. Vacant land
8 and vacant OR UNDERUTILIZED buildings shall be so indicated <--
9 on the map identifying the parcels of real property within
10 each zone. Parcels on which an existing operating business is
11 located shall also be indicated.
12 (6) INCLUDE AS PART OF THE ORDINANCE A SPECIFIC PLAN THE <--
13 MUNICIPALITY WILL IMPLEMENT TO ATTRACT AND RETAIN BUSINESSES
14 WITHIN THE ZONE.
15 (7) INCLUDE AS A PART OF THE ORDINANCE A LIST OF THE
16 BUSINESSES THE MUNICIPALITY WILL RECOMMEND TO THE DEPARTMENT
17 OF COMMUNITY AFFAIRS FOR THE TAX EXONERATIONS GRANTED UNDER
18 THIS ACT.
19 (b) Changes.--Subsequent changes to the boundaries of tax-
20 free zones may be made by a municipality following the initial
21 establishment of the zones. Any changes made shall be reflected
22 in the information required to be submitted to the department <--
23 DEPARTMENT OF REVENUE under section 7 8. <--
24 Section 6 7. Land value tax. <--
25 A municipality wishing to designate an area or areas within
26 the municipality as a tax-free zone shall MAY, prior to passing <--
27 the ordinance required by section 5, levy separate and different
28 rates of taxation for municipal purposes on all real estate
29 classified as land, exclusive of the buildings thereon, and on
30 all real estate classified as buildings. When real estate tax
19950H1256B2828 - 10 -
1 rates are so levied:
2 (1) The rates shall be determined by the requirements of
3 the municipal budget as approved by the governing body.
4 (2) A higher rate shall be levied on the land than on
5 the buildings situated on the land.
6 (3) The combined rate shall in the aggregate not exceed
7 the maximum rate allowed by law on both land and buildings.
8 (4) The rates shall be uniform as to all real estate
9 within the municipality.
10 Section 7 8. Municipal certification of businesses that qualify <--
11 for tax exemptions.
12 (a) Tax filing.--A municipality that has enacted an
13 ordinance under section 5 6 shall file with the department <--
14 DEPARTMENT OF REVENUE AND THE DEPARTMENT OF COMMERCE by December <--
15 31 of each year the following:
16 (1) For the first year only, following enactment of the
17 ordinance, a copy of the municipal ordinance establishing a
18 tax-free zone or zones.
19 (2) For the first year following enactment of the
20 ordinance and for each subsequent year:
21 (i) A parcel identification map for each tax-free
22 zone established, indicating each parcel occupied by a
23 business that qualifies for a tax exemption allowed under
24 section 8 9. <--
25 (ii) A list corresponding to the parcel
26 identification map, which indicates:
27 (A) The name and mailing address of each
28 qualified business indicated on the map.
29 (B) The name and mailing address of the owner or
30 owners of each qualifying business indicated on the
19950H1256B2828 - 11 -
1 map.
2 (C) The State tax identification number issued
3 by the department for each qualifying business
4 indicated on the map.
5 (b) Reporting requirements.--It shall be the responsibility <--
6 of any business located in a municipal tax-free zone established
7 under this act, no later than October 31 of each year, to inform
8 the municipality of the fact that it qualifies for the tax
9 exemptions provided for under section 8 and to show proof of
10 same.
11 (c) Applicability.--The reporting requirement under
12 subsection (b) shall apply to new businesses that locate in a
13 designated tax-free zone as well as to existing businesses that
14 qualify for tax exemptions pursuant to their meeting the
15 qualification requirements under section 8.
16 (d) Apportionment.--Tax exemptions shall be apportioned for
17 businesses whose corporate headquarters are not located in a
18 tax-free zone but which have branch offices or facilities
19 located in such zones as follows:
20 (1) All business income shall be apportioned to the tax-
21 free zone by multiplying the income by a fraction, the
22 numerator of which is the property factor plus the payroll
23 factor plus the sales factor and the denominator of which is
24 three.
25 (2) The property factor is a fraction, the numerator of
26 which is the average value of the taxpayer's real and
27 tangible personal property owned or rented and used in the
28 tax-free zone during the tax period and the denominator of
29 which is the average value of all the taxpayer's real and
30 tangible personal property owned or rented and used during
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1 the tax period. The property factor shall not include the
2 security interest of any corporation as seller or lessor in
3 personal property sold or leased under a conditional sale,
4 bailment lease, chattel mortgage or other contract providing
5 for the retention of a lien or title as security for the sale
6 price of the property.
7 (3) Property owned by the taxpayer is valued at its
8 original cost. Property rented by the taxpayer is valued at
9 eight times the net annual rental rate. Net annual rental
10 rate is the annual rental rate paid by the taxpayer less any
11 annual rental rate received by the taxpayer from subrentals.
12 (4) The average value of property shall be determined by
13 averaging the values of the beginning and ending of the tax
14 period, but the tax administrator may require the averaging
15 of monthly values during the tax period if reasonably
16 required to reflect properly the average value of the
17 taxpayer's property.
18 (5) The payroll factor is a fraction, the numerator of
19 which is the total amount paid in the tax-free zone during
20 the tax period by the taxpayer for compensation and the
21 denominator of which is the total compensation paid
22 everywhere during the tax period.
23 (6) The sales factor is a fraction, the numerator of
24 which is the total sales of the taxpayer in the tax-free zone
25 during the tax period and the denominator of which is the
26 total sales of the taxpayer everywhere during the tax period.
27 (B) APPORTIONMENT.--IN CASE THE ENTIRE BUSINESS OF ANY <--
28 BUSINESS ENTITY ELIGIBLE FOR TAX EXONERATION IS NOT TRANSACTED
29 WITHIN A TAX-FREE ZONE, THE TAX EXONERATIONS PROVIDED BY THIS
30 ACT SHALL BE APPORTIONED AS FOLLOWS:
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1 (1) TAX EXONERATIONS SHALL BE APPORTIONED BY A FRACTION,
2 THE NUMERATOR OF WHICH IS THE PROPERTY FACTOR PLUS THE
3 PAYROLL FACTOR AND THE DENOMINATOR OF WHICH IS TWO. THE
4 PROPERTY FACTOR AND THE PAYROLL FACTOR SHALL BE DETERMINED IN
5 ACCORDANCE WITH ARTICLE IV OF THE ACT OF MARCH 4, 1971
6 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971.
7 (2) FOR THE PURPOSE OF CONSTRUING THIS SUBSECTION, WHEN
8 THE FOLLOWING WORDS AND PHRASES ARE USED IN ARTICLE IV OF THE
9 TAX REFORM CODE, THEY SHALL HAVE THE MEANINGS GIVEN TO THEM
10 IN THIS PARAGRAPH UNLESS THE CONTEXT CLEARLY INDICATES
11 OTHERWISE:
12 "CORPORATION." ANY CORPORATION, PARTNERSHIP, SOLE
13 PROPRIETORSHIP OR OTHER ENTITY AUTHORIZED TO DO BUSINESS
14 IN THIS COMMONWEALTH AND SUBJECT TO ANY OF THE TAXES
15 IMPOSED BY ARTICLES III, IV OR VI OF THE TAX REFORM CODE
16 OF 1971.
17 "STATE" OR "COMMONWEALTH." A TAX-FREE ZONE AS
18 PROVIDED BY THIS ACT.
19 Section 8 9. Taxes exonerated in tax-free development zones. <--
20 (a) Exoneration.--In accordance with section 2(b)(iii) of
21 Article VIII of the Constitution of Pennsylvania, new and <--
22 existing businesses which are located within tax-free zones MEET <--
23 THE CRITERIA OF SUBSECTION (E) shall be exonerated ELIGIBLE FOR <--
24 EXONERATION from certain taxes as provided for under subsections <--
25 (b) and (c) SUBSECTION (B). <--
26 (b) New business.--Any new business which locates in a tax- <--
27 free development zone created by a municipality in accordance
28 with the provisions of this act shall be exempt from the taxes
29 imposed by Articles III, IV and VI of the act of March 4, 1971
30 (P.L.6, No.2), known as the Tax Reform Code of 1971, as long as
19950H1256B2828 - 14 -
1 they are located within the tax-free development zone. For
2 purposes of this subsection, the term "new business" means any
3 business which locates in a tax-free development zone after it
4 is created by a municipality.
5 (c) Existing businesses.--Any existing business which is
6 located in a tax-free development zone created by a municipality
7 under the provisions of this act shall be exempt from the taxes
8 (B) SCHEDULE.--A BUSINESS SHALL BE EXONERATED FROM THE TAXES <--
9 imposed by Articles III, IV and VI of the Tax Reform Code of
10 1971 in accordance with the following exemption schedule:
11 (1) 20% of total taxes due shall be exempt ELIGIBLE FOR <--
12 EXONERATION in the first year in which the existing business
13 is located in a tax-free development zone.
14 (2) 40% of total taxes due shall be exempt ELIGIBLE FOR <--
15 EXONERATION in the second year in which the existing business
16 is located in a tax-free development zone.
17 (3) 60% of total taxes due shall be exempt ELIGIBLE FOR <--
18 EXONERATION in the third year in which the existing business
19 is located in a tax-free development zone.
20 (4) 80% of total taxes due shall be exempt ELIGIBLE FOR <--
21 EXONERATION in the fourth year in which the existing business
22 is located in a tax-free development zone.
23 (5) 100% of total taxes due shall be exempt ELIGIBLE FOR <--
24 EXONERATION in the fifth year in which the existing business <--
25 is located in a tax-free development zone and in each year
26 thereafter.
27 For purposes of this subsection, the term "existing business" <--
28 means a business that was located within the boundaries of a
29 tax-free development zone prior to the establishment of the tax-
30 free zone by a municipality.
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1 (d) (C) Reinvestment.--For purposes of obtaining the phased- <--
2 in tax exemptions under subsection (c), an existing (B), A <--
3 business must have reinvested into its business WITHIN THE TAX- <--
4 FREE ZONE an amount equivalent to the amount of tax liability
5 exempted in any given year or years or have in the aggregate
6 reinvested the total amount of the tax liability for the four
7 years prior to being totally tax exempt in year five as provided
8 for under subsection (c) (B). Where the equivalent reinvestment <--
9 is not made annually, an amount equal to the tax liability
10 waived shall be annually placed in an escrow account, and the
11 amount in the escrow account must be reinvested in the property
12 by the end of year four or encumbered or under contract for
13 reinvestment in the property by the end of year four, for the
14 property to be tax exempt in year five as provided for under
15 subsection (c) (B). <--
16 (D) LIMITATION.--THE EXONERATION PROVIDED FOR IN THIS <--
17 SECTION SHALL BE EFFECTIVE FOR A 15-YEAR PERIOD.
18 (E) ELIGIBILITY.--BUSINESSES LOCATED IN THE TAX-FREE ZONE AT
19 THE TIME THE ZONE IS ESTABLISHED AND NEW BUSINESSES WITHIN THE
20 ZONE ARE ELIGIBLE FOR THE EXONERATION PROVIDED FOR IN THIS
21 SECTION. BUSINESSES RELOCATING TO A TAX-FREE ZONE FROM OTHER
22 AREAS IN THIS COMMONWEALTH SHALL NOT BE ELIGIBLE FOR THE
23 EXONERATION PROVIDED FOR IN THIS SECTION.
24 SECTION 10. AMOUNT OF EXONERATION.
25 (A) LIMIT ON BUSINESS.--THE AMOUNT OF TAX EXONERATIONS
26 GRANTED IN THE FIRST FISCAL YEAR FOLLOWING ENACTMENT OF THIS ACT
27 SHALL BE $21,000,000. IN EACH SUBSEQUENT YEAR THE TAX
28 EXONERATIONS SHALL BE IN THE FOLLOWING AMOUNTS:
29 (1) $21,000,000 IN NEW EXONERATIONS TO ELIGIBLE
30 BUSINESSES THAT HAVE NOT YET RECEIVED AN EXONERATION; AND
19950H1256B2828 - 16 -
1 (2) AN AMOUNT NECESSARY TO FUND THE EXONERATIONS GRANTED
2 IN PREVIOUS YEARS IN ACCORDANCE WITH SECTION 9.
3 (B) LOCATION OF BUSINESS.--THE AMOUNT OF EXONERATIONS
4 GRANTED TO BUSINESSES IN A SINGLE MUNICIPALITY UNDER SUBSECTION
5 (A)(1) MAY NOT EXCEED 10% OF THE TOTAL ANNUAL AMOUNT GRANTED
6 UNDER SUBSECTION (A).
7 SECTION 11. RECAPTURE.
8 ANY BUSINESS RECEIVING A TAX EXONERATION UNDER SECTION 9 THAT
9 RELOCATES OUT OF THE TAX-FREE ZONE WITHIN TEN YEARS OF RECEIVING
10 THE EXEMPTION MUST REPAY A PORTION OF THE AMOUNT EXONERATED
11 ACCORDING TO THE FOLLOWING SCHEDULE:
12 (1) RELOCATION WITHIN FOUR YEARS - 70%;
13 (2) FOUR YEARS TO FIVE YEARS - 60%;
14 (3) FIVE YEARS TO SIX YEARS - 50%;
15 (4) SIX YEARS TO SEVEN YEARS - 40%;
16 (5) SEVEN YEARS TO EIGHT YEARS - 30%;
17 (6) EIGHT YEARS TO NINE YEARS - 20%; AND
18 (7) NINE YEARS TO TEN YEARS - 10%.
19 SECTION 12. PRIORITY.
20 THE DEPARTMENT OF COMMERCE AND THE DEPARTMENT OF COMMUNITY
21 AFFAIRS, OR ITS SUCCESSOR AGENCY OR ASSIGNS, SHALL GIVE
22 MUNICIPALITIES WITH TAX-FREE ZONES PRIORITY CONSIDERATION IN ANY
23 ASSISTANCE PROGRAMS FOR WHICH THEY ARE ELIGIBLE.
24 Section 9 13. Audits. <--
25 (a) Municipalities.--The department DEPARTMENT OF REVENUE <--
26 shall conduct periodic audits of municipalities that establish
27 tax-free zones as often as deemed necessary to insure compliance
28 with the provisions of this act.
29 (b) Businesses.--The department DEPARTMENT OF REVENUE shall <--
30 conduct periodic audits of businesses which municipalities have
19950H1256B2828 - 17 -
1 indicated are located in tax-free zones and qualify for tax
2 exemptions under section 8 9 as often as deemed necessary to <--
3 insure compliance with the provisions of this act.
4 Section 10 14. Regulations. <--
5 The department DEPARTMENT OF REVENUE is authorized to adopt <--
6 any forms, procedures, rules and regulations as may be necessary
7 to implement and insure compliance with the provisions of this
8 act.
9 SECTION 15. SUNSET. <--
10 (A) FIVE YEAR EXPIRATION DATE.--FIVE YEARS AFTER ITS
11 EFFECTIVE DATE THE GENERAL ASSEMBLY SHALL EITHER TERMINATE OR
12 REESTABLISH THE ACT. IF THE GENERAL ASSEMBLY TERMINATES THE ACT,
13 ALL REGULATIONS PROMULGATED UNDER IT SHALL EXPIRE.
14 (B) DUTY OF DEPARTMENT OF COMMUNITY AFFAIRS TO COLLECT
15 DATA.--WITHIN TWO YEARS OF THE EFFECTIVE DATE OF THIS ACT, THE
16 DEPARTMENT OF COMMUNITY AFFAIRS SHALL BEGIN TO COLLECT DATA ON
17 THE EFFECT THE ACT HAS HAD ON THE MUNICIPALITIES THAT HAVE
18 ESTABLISHED TAX-FREE ZONES. THE DEPARTMENT OF COMMUNITY AFFAIRS
19 SHALL PROMULGATE OBJECTIVE CRITERIA TO MEASURE THE EFFECT OF THE
20 PROGRAM. THE CRITERIA SHALL BE DESIGNED TO DETERMINE IF PRIVATE
21 INVESTMENT HAS OCCURRED IN THOSE MUNICIPALITIES THAT WOULD NOT
22 HAVE OCCURRED WITHOUT THE INCENTIVES PROVIDED BY THE ACT.
23 (C) DUTY OF DEPARTMENT OF COMMUNITY AFFAIRS TO MAKE
24 REPORT.--ONE YEAR PRIOR TO THE RECONSIDERATION OF THE ACT BY THE
25 GENERAL ASSEMBLY, THE DEPARTMENT OF COMMUNITY AFFAIRS SHALL
26 SUBMIT A REPORT TO THE GENERAL ASSEMBLY ON THE EFFECTIVENESS OF
27 THE ACT TO DATE. THE REPORT SHALL RECOMMEND ONE OF THE FOLLOWING
28 ACTIONS:
29 (1) EXTENSION OF THE ACT AS IT IS CURRENTLY WRITTEN FOR
30 A FIVE-YEAR PERIOD;
19950H1256B2828 - 18 -
1 (2) EXTENSION OF THE ACT WITH AMENDMENTS CONTAINED IN
2 THE REPORT FOR A FIVE-YEAR PERIOD; OR
3 (3) TERMINATION OF THE ACT.
4 (D) STATUS OF TAX EXONERATIONS UPON EXPIRATION.--UPON
5 TERMINATION OF THE ACT, TAX EXONERATIONS ALREADY GRANTED UNDER
6 THE ACT SHALL CONTINUE FOR THE 15-YEAR PERIOD CONTAINED IN THE
7 ACT.
8 Section 11 16. Effective date. <--
9 This act shall take effect in 60 days.
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