Building for the Future - PA's KOZ Program

One of the most difficult challenges facing developers in today’s fast paced world of construction is this: balancing a budget vs. developing in the right places. A large number of projects have taken place in parts of the country where real estate is at a premium in an already busy market… so what is the advantage of developing elsewhere?

In order to incentivize development in underperforming, and oftentimes-vacant parts of the state, the state government in Pennsylvania put into place the Keystone Opportunity Zone program.

Started back in 1998 by Governor Tom Ridge, the KOZ program laid out an initiative that would allow both state and local business taxes incurred at the site to be suspended for a set period of years, which would make the prospect at its development more tempting. In Philadelphia alone there are 150 properties that fall into this category, and mostly in struggling areas. Such revitalization has the potential to essentially turn the neighborhood around by infusing jobs and capital into a difficult area.

The terms of the incentive are as follows, Pennsylvania businesses relocating to a KOZ/KOEZ must either:

Increase their full-time employment by 20% within the first full year of operation, or
Make a 10% capital investment in the KOZ/KOEZ property based on their prior year’s gross revenues

Eligibility for benefits is based upon annual certification. In order to receive benefits, any entity applying must be compliant with all local and state taxes and building and zoning codes.

Programs such as this have had their share of ups and down with mixed reviews of success and as always, under scrutiny by the public. Many would argue with programs like this that the playing field should be equal no matter where development is taking place, while others argue that the distressed areas benefit more initially with this kind of tax relief.

For more information about PA's KOZ program, visit the DCED website. If you'd like code, zoning or permitting assistance with an upcoming project located in PA, contact the Philadelphia office of Milrose Consultants.