State Sen. Dan Laughlin wants to boost tax credits for businesses that invest in Pennsylvania’s most distressed, low-income communities.
Laughlin, R-Erie, has introduced Senate Bill 944 to increase tax credits for companies that invest in federally designated opportunity zones created by the federal Tax Cuts and Jobs Act in 2017.
Pennsylvania’s 300 Qualified Opportunity Zones (QOZ) are identified based on distressed economic activity, recommendations from locals and likelihood of private investment in designated distressed census tracts. The program utilizes a federal capital gains tax incentive that allows for the deferral and investment of capital gains in those areas, and Laughlin wants to increase the potential credit.
“We need to have more tools to promote job creation in Pennsylvania, and my bill would provide one such tool,” Laughlin said. “This legislation would add an additional $500 per job for each qualifying job created in a QOZ.”
SB 944 reads, “A company may claim a tax credit of $1,500 per new job created in a federally designated opportunity zone, or $3,000 per each new job created in a federally designated opportunity zone if the newly created job is filled by a veteran or an unemployed individual, up to the maximum job creation tax credit amount specified in the commitment letter.”
“The commonwealth has historically provided approved businesses $1,000 to $2,500 per new family sustaining job created within Pennsylvania,” Laughlin said. “It’s time to boost the credit to encourage regrowth throughout the state.”
The legislation is co-sponsored by Sens. Steven Santarsiero, D-Bucks, and John Gordner, R-Bloomsburg.
Pennsylvania’s QOZ program is administered through the Pennsylvania Department of Community & Economic Development, which offers a map of eligible areas throughout the state. Any taxpayer with eligible capital gains subject to federal capital gains taxes can invest in QOZ projects, properties and businesses.
The investments are not tied to any minimum or maximum participation thresholds or job retention or creation commitments, but are restricted to certain uses, according to a state fact sheet.
“Taxpayers interested in deferring capital gains and investing in Qualified Opportunity Zone projects need to invest in a Qualified Opportunity Fund to take advantage of the QOZ tax benefits,” the document reads. “All QOZ investments must occur within a QOZ. Most industrial, commercial, residential, and direct business investments are eligible. However, certain businesses such as massage parlors, tanning salons, liquor stores, golf courses, country clubs, and gambling facilities are not.”
The Opportunity Zones Database maintains a directory of 298 Qualified Opportunity Zone Funds with a total investment capacity of $62 billion. The database identifies a dozen QOZ funds that specifically identify Pennsylvania as a target market, ranging in size from $5 million to $500 million.
The Pennsylvania specific funds involve a variety of different property types, including residential and workforce housing, student housing, energy development, hotels and offices, farmland, industrial and multifamily housing projects.
SB 944 is assigned to the Senate Finance Committee.