Regular Session 2021-2022 House Bill 0643 P.N. 0599

PRINTER'S NO. 599

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

643

Session of

2021

INTRODUCED BY SHUSTERMAN, DALEY, CIRESI, A. DAVIS, SANCHEZ,

HILL-EVANS, SCHLOSSBERG, PASHINSKI, HOHENSTEIN, LEE, DEASY,

FREEMAN, DRISCOLL, GALLOWAY, HOWARD, WEBSTER, O'MARA,

SCHWEYER, KIRKLAND, KINKEAD, STURLA, N. NELSON, KINSEY,

D. WILLIAMS, ROZZI, DAVIDSON, INNAMORATO, KIM AND MADDEN,

FEBRUARY 24, 2021

REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 24, 2021

AN ACT

Providing for food desert opportunity zones and for food desert

opportunity zone tax credits and imposing powers and duties

on the Department of Community and Economic Development and

the Department of Revenue.

TABLE OF CONTENTS

Chapter 1. Preliminary Provisions

Section 101. Short title.

Section 102. Definitions.

Chapter 3. Food Desert Opportunity Zones

Section 301. Food desert opportunity zones.

Section 302. Application.

Section 303. Review.

Section 304. Qualified healthy food retail outlet.

Section 305. Desertification.

Chapter 5. Tax Credit

Section 501. Food desert opportunity tax credit.

Section 502. Transferability.

Section 503. Recapture.

Section 504. Delinquent or deficient State or local taxes.

Section 505. Code compliance.

Section 506. Appeals.

Section 507. Notice requirements.

Section 508. Application time.

Chapter 7. Miscellaneous Provisions

Section 701. Illegal activity.

Section 702. Rules and regulations.

Section 703. Compliance.

Section 704. Penalties.

Section 705. Construction.

Section 706. Applicability.

Section 707. Effective date.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

CHAPTER 1

PRELIMINARY PROVISIONS

Section 101. Short title.

This act shall be known and may be cited as the Food Desert

Opportunity Zone Act.

Section 102. Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Department." The Department of Community and Economic

Development of the Commonwealth.

"Food desert." A low-income census tract where a substantial

number or share of residents have low access to a healthy food

retail outlet.

20210HB0643PN0599 - 2 -

"Healthy food retail outlet." A supermarket or large grocery

store.

"Low access to a healthy food retail outlet." The following:

(1) More than one mile from a supermarket or large

grocery store in urban areas.

(2) More than 10 miles from a supermarket or large

grocery store in rural areas.

"Low-income census tract." A census tract where:

(1) the poverty rate for that tract is at least 20%;

(2) for tracts not located within a metropolitan area,

the median family income for the tract does not exceed 80% of

Statewide median family income; or

(3) for tracts located within a metropolitan area, the

median family income for the tract does not exceed 80% of the

greater of Statewide median family income or the metropolitan

area median family income.

"Tax credit." A food desert opportunity tax credit under

section 501.

"Zone." A food desert opportunity zone established under

section 301(a).

CHAPTER 3

FOOD DESERT OPPORTUNITY ZONES

Section 301. Food desert opportunity zones.

(a) Establishment.--A program providing for food desert

opportunity zones is established within the department.

(b) Criteria for zone.--A zone shall be comprised of a low-

income census tract where at least 33% of the tract's population

or a minimum of 500 people in the tract have low access to a

healthy food retail outlet.

20210HB0643PN0599 - 3 -

more than 12 zones in this Commonwealth. Healthy food retail

outlets within a zone that are qualified under this act shall be

entitled to a tax credit for a period not to exceed five years

beginning January 1, 2022, and ending on or before December 31,

2026.

Section 302. Application.

(a) Initial application.--One or more political subdivisions

in a low-income census tract, or a designee of one or more

political subdivisions, may apply to the department to designate

the low-income census tract as a zone.

(b) Participation limitation.--A political subdivision shall

not be a part of more than one proposed zone, unless the

department agrees that two zones will bring additional benefit

to the residents of the political subdivision.

submit only one application to the department for the

authorization of a zone.

(d) Form and manner.--The application shall be in a form and

manner as prescribed by the department.

Section 303. Review.

(a) Action of department.--The department, in consultation

with the Department of Revenue, shall review all completed

applications submitted under section 302. An application for

authorization of a zone must be received by the department on or

before September 30, 2021, in order to be considered by the

department.

(b) Process.--The department shall authorize up to 12 zones

from applications meeting the criteria in section 301(b) based

upon need and likelihood of success. The department may not

alter the geographic boundaries of a zone.

20210HB0643PN0599 - 4 -

zones by November 30, 2021.

(d) Effective date of designation.--The designation of a

zone under this section shall take effect January 1, 2022.

(e) Extension.--The department may extend the deadline for

the receipt of applications for zones until December 31, 2021,

if all 12 zones have not been authorized and the extension is

necessary to allow eligible political subdivisions to apply. The

department shall authorize additional zones under this

subsection by February 28, 2022. The authorization shall take

effect January 1, 2022, or if the authorization occurs after

January 1, 2022, that subsequent authorization shall for all

purposes be retroactive to January 1, 2022. The zone

authorization shall end as provided in section 301(c).

Section 304. Qualified healthy food retail outlet.

(a) Qualifications.--In order to qualify each year for a tax

credit under Chapter 5, a healthy food retail outlet shall own

or lease real property in a zone from which the healthy food

retail outlet actively conducts business. The qualified healthy

food retail outlet shall receive certification from the

department that the healthy food retail outlet is located and is

in the active conduct of business within the zone. The healthy

food retail outlet shall obtain annual renewal of the

certification from the department to continue to qualify under

this section.

(b) Relocation.--Any healthy food retail outlet that

relocates from outside a zone shall not receive a tax credit

provided under Chapter 5 unless the healthy food retail outlet

does one of the following:

(1) increases full-time employment by at least 20% in

20210HB0643PN0599 - 5 -

the first full year of operation within the zone;

(2) makes a capital investment in the property located

within the zone equivalent to at least 10% of the gross

revenues of that healthy food retail outlet in the

immediately preceding calendar or fiscal year; or

(3) enters into a lease agreement for property located

within the zone:

(i) for a term equivalent to at least the duration

of the zone; and

(ii) with aggregate payment under the lease

agreement equivalent to at least 5% of the gross revenues

of that healthy food retail outlet in the immediately

preceding calendar or fiscal year.

with the Department of Revenue, may waive or modify the

requirements under subsection (b), as appropriate.

Section 305. Desertification.

(a) Application.--One or more political subdivisions, or a

designee of one or more political subdivisions, may apply to the

department to decertify and remove the designation of a zone.

The application shall be in a form and manner prescribed by the

department.

(b) Process.--The department may grant the request to

decertify and remove the designation of a zone after completed

applications have been submitted by all qualified political

subdivisions in which the zone is located.

CHAPTER 5

TAX CREDIT

Section 501. Food desert opportunity tax credit.

(a) Credits.--For tax years beginning on and after January

20210HB0643PN0599 - 6 -

1, 2022, a qualified healthy food retail outlet may apply to the

Department of Revenue for a tax credit against the tax imposed

by Article III of the act of March 4, 1971 (P.L.6, No.2), known

as the Tax Reform Code of 1971, for the taxable year. The

Department of Revenue shall prescribe the form and manner to

obtain the tax credit.

(b) Application of credit.--A qualified healthy food retail

outlet shall apply for a tax credit by January 15 for the

previous calendar year.

apportion a tax credit for a qualified healthy food retail

outlet that has not operated in a zone for a full fiscal year.

(d) Tax credit determinations.--The tax credit shall be

determined by multiplying the monthly average of all full-time

jobs at a qualified healthy food retail outlet by the allowance.

The allowance for purposes of the tax credit shall be $1,250 per

job.

(e) Notification of credit.--By March 15, the Department of

Revenue shall notify a qualified healthy food retail outlet of

the amount of the qualified healthy food retail outlet's tax

credit approved.

(f) Limitation on amount of credit.--The tax credit shall

not exceed 50% of the tax liability of the qualified healthy

food retail outlet under Article III of the Tax Reform Code of

1971 for the taxable year. A qualified healthy food retail

outlet may not carry back or carry forward a tax credit received

under this section.

(g) Allocation.--The total amount of tax credits approved by

the Department of Revenue shall not exceed $1,000,000 annually.

If the tax credits exceed the $1,000,000 cap in a given year,

20210HB0643PN0599 - 7 -

the tax credits will be allocated on a pro rata basis.

Section 502. Transferability.

A tax credit awarded to a qualified healthy food retail

outlet is nontransferable and cannot be applied, used or

assigned to any other person, business or tax account.

Section 503. Recapture.

(a) General rule.--If a qualified healthy food retail outlet

located within a zone received a tax credit and subsequently

relocates outside of the zone within the first five years of

locating in the zone, the qualified healthy food retail outlet

shall refund the Commonwealth in accordance with the following:

(1) If the qualified healthy food retail outlet

relocates within three years from the date of first locating

in a zone, 66% of the tax credits awarded to the qualified

healthy food retail outlet shall be refunded to the

Commonwealth.

(2) If the qualified healthy food retail outlet

relocates within three to five years from the date of first

locating in a zone, 33% of the tax credits awarded to the

qualified healthy food retail outlet shall be refunded to the

Commonwealth.

(3) If the qualified healthy food retail outlet was

located within a facility operated by a nonprofit

organization to assist in the creation and development of a

start-up business, no tax credit shall be refunded.

(b) Waiver.--The department, in consultation with the

Department of Revenue, may waive or modify recapture

requirements under subsection (a) if the department determines

that the relocation was due to circumstances beyond the control

of the qualified healthy food retail outlet, including, but not

20210HB0643PN0599 - 8 -

limited to:

(1) natural disaster;

(2) unforeseen industry trends; or

(3) loss of a major supplier or market.

Section 504. Delinquent or deficient State or local taxes.

(a) General rule.--The following shall apply:

(1) A qualified healthy food retail outlet may not claim

or receive a tax credit unless the qualified healthy food

retail outlet is in full compliance with all State and local

tax laws, ordinances and resolutions.

(2) A qualified healthy food retail outlet may not claim

or receive a tax credit if any person or business with a 20%

or greater interest in the qualified healthy food retail

outlet is not in full compliance with all State and local tax

laws, ordinances and resolutions.

(b) Later compliance and eligibility.--A qualified healthy

food retail outlet that is not eligible to claim a tax credit

due to noncompliance with any State or local tax law may become

eligible if the qualified healthy food retail outlet

subsequently comes into full compliance with all State and local

tax laws to the satisfaction of the Department of Revenue or the

political subdivision within the calendar year in which the

noncompliance first occurred. If full compliance is not attained

by February 5 of the calendar year following the calendar year

during which noncompliance first occurred, the qualified healthy

food retail outlet is precluded from claiming a tax credit for

that calendar year, whether or not full compliance is achieved

subsequently.

Section 505. Code compliance.

(a) General rule.--A qualified healthy food retail outlet

20210HB0643PN0599 - 9 -

shall be precluded from claiming a tax credit if the qualified

healthy food retail outlet owns real property in a zone and the

real property is not in compliance with all applicable State and

local zoning, building and housing laws, ordinances or codes.

(b) Opportunity to achieve compliance.--A qualified healthy

food retail outlet that is not in compliance under subsection

(a) shall have until December 31 of the calendar year following

designation of the real property as part of a zone, to be in

compliance in order to claim a tax credit for that year. If full

compliance is not attained by December 31 of that calendar year,

the qualified healthy food retail outlet is precluded from

claiming a tax credit for that calendar year, whether or not

compliance is achieved in a subsequent calendar year. The

Department of Revenue may extend the time period in which a

qualified healthy food retail outlet must come into compliance

with a local ordinance or building code for a period not to

exceed one year if the Department of Revenue determines that the

qualified healthy food retail outlet has made and shall continue

to make a good faith effort to come into compliance and that an

extension will enable the qualified healthy food retail outlet

to achieve full compliance. Political subdivisions in a zone

shall notify the Department of Revenue in writing of all

qualified healthy food retail outlets not in compliance with

this subsection within 30 days following the end of each

calendar year.

Section 506. Appeals.

A qualified healthy food retail outlet shall be deemed to be

in compliance with any State or local tax for purposes of this

chapter if the qualified healthy food retail outlet has made a

timely administrative or judicial appeal for that particular tax

20210HB0643PN0599 - 10 -

or has entered into and is in compliance with a duly authorized

deferred payment plan with the Department of Revenue or

political subdivision for that particular tax.

Section 507. Notice requirements.

(a) Requirement.--After compliance reviews have been

conducted by appropriate Commonwealth and local authorities, the

department shall notify each zone applicant by regular mail each

year of the department's approval or denial of the zone

application. No qualified healthy food retail outlet zone is

entitled a tax credit unless the zone receives approval from the

department.

(b) Notice.--The department shall provide a one-time

notification to every current zone real property owner by June

1, 2021. Failure to receive departmental notification under this

section shall not extend or restrict any benefits or rights real

property owners possess under this act.

shall, within 15 business days of receipt of a zone application

made under this act, forward a copy of the application to

appropriate Commonwealth and local authorities for review and

processing.

Section 508. Application time.

(a) General rule.--Except as provided under subsection (b),

an applicant for a tax credit must file an application in a

manner prescribed by the department by December 31 of each

calendar year for which the applicant claims a tax.

(b) Extension or waiver.--Upon request of the applicant, the

department may extend or waive the application deadline for good

cause shown.

20210HB0643PN0599 - 11 -

for that calendar year until approval has been granted by the

department.

CHAPTER 7

MISCELLANEOUS PROVISIONS

Section 701. Illegal activity.

Any funds or other forms of consideration received by a

qualified healthy food retail outlet conducting any type of

illegal activity shall not be eligible for a tax credit or any

other benefits that are created under this act.

Section 702. Rules and regulations.

The following shall apply:

(1) The Department of Revenue may promulgate regulations

necessary to effectuate the provisions of this act.

(2) The department may promulgate regulations necessary

to effectuate the provisions of this act.

Section 703. Compliance.

A qualified healthy food retail outlet eligible for a tax

credit shall comply with all reporting, filing and compliance

requirements under the act of March 4, 1971 (P.L.6, No.2), known

as the Tax Reform Code of 1971, unless otherwise provided for in

this act.

Section 704. Penalties.

(a) Civil penalty.--The following shall apply:

(1) In addition to any penalties authorized by the act

of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code

of 1971, for violations of that act, the Department of

Revenue may impose an additional administrative penalty not

to exceed $10,000 for any act or violation of this act,

including the filing of any false statement, return or

document.

20210HB0643PN0599 - 12 -

(2) The department may impose a civil penalty not to

exceed $10,000 for a violation of this act, including the

filing of any false statement, return or document.

(b) Criminal penalty.--In addition to any criminal penalty

under the Tax Reform Code of 1971, a qualified healthy food

retail outlet that knowingly violates any of the provisions of

this act commits a misdemeanor of the third degree.

Section 705. Construction.

This act shall be interpreted to ensure that all provisions

relating to tax credits are strictly construed in favor of the

Commonwealth.

Section 706. Applicability.

The provisions of this act shall be applied prospectively. A

qualified healthy food retail outlet may not claim a tax credit

until the qualified healthy food retail outlet becomes qualified

under this act.

Section 707. Effective date.

This act shall take effect in 60 days.

20210HB0643PN0599 - 13 -