KOZ- Keystone Opportunity Zone
You have probably heard a lot about KOZ, KOEZs and KOIZs in the past few months and years and you may have some (or a lot of) questions about it. What does KOZ stand for? How does the program work? Does my business qualify? We’ve provided a crash-course overview of everything you need to know to understand KOZs.
The Keystone Opportunity Zone program was created by the Commonwealth of Pennsylvania in 1999 as an effort to encourage investment and economic development in areas throughout the state where little to no development has taken place. While it may seem confusing, the program is actually rather simple. KOZs are defined, parcel-specific areas where property owners and businesses located within the KOZ (whether they are the property owner or leasing space) enjoy significant tax benefits (see list below). Specific state and city taxes are waived until your KOZs expiration date:
Waived State Taxes:
- Corporate Net Income
- Capital Stock & Foreign Franchise Tax
- Personal Income Tax (Partnerships & Sole Proprietors)
- Sales & Use Tax
- Mutual Thrift Institutions Tax
- Insurance Premiums Tax
Waived City Taxes:
- Business Privilege Tax
- Net Profits Tax
- Real Estate Taxes
- Sales and Use Tax
There are specific requirements in order to be eligible for KOZ benefits. Firstly, your business must be up-to-date on all of your City and State taxes and be in compliance with all City and State laws. You must also file a KOZ application annually. The application takes about 60 days to process, (per Philadelphia’s KOZ Website) and the benefits are retroactive. Additionally, your business must do one of the following three things:
- Increase employment by 20% in first year of being located in a KOZ
- Invest the equivalent of 10% of the previous year’s gross revenues in capital improvements to the KOZ Property
- Enter into a lease agreement for property within a KOZ for a term at least equivalent to the duration of the KOZ property and with an aggregate payment under the lease at least equivalent to 5% of the gross revenues of that business in the immediately preceding calendar or fiscal year.
The KOZ program proved to be very successful so the Commonwealth expanded the program in 2001 by authorizing a second set of KOZ designated areas and parcels which are referred to as KOEZs or Keystone Opportunity Expansion Zones. A third round of KOZs were authorized by the governor in 2003, which are referred to as KOIZs- Keystone Opportunity Improvement Zones. The state authorized the extension of the terms for vacant parcels and added several new properties to the KOZ program in 2009 and again in 2012. The map included in this post points to all of the KOZ parcels in Philadelphia.
KOZ– Keystone Opportunity Zone- Established in 1999- Tax benefits until 12/31/2010
KOEZ– Keystone Opportunity Expansion Zone- Established in 2001- Tax benefits until 12/31/2013
KOIZ- Keystone Opportunity Improvement Zone- Established in 2003- tax benefits until 12/31/2018
For more information on the KOZ program, visit Philadelphia’s KOZ Website.
Related: Navy Yards to Office Spaces