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Challenges

Is KOZ Constitutional

 

KOZ. IS IT CONSTITUTIONAL? THREE MAJOR AREAS OF CONCERN


Creation of the Keystone Opportunity Zones in the Commonwealth of PA was done by an act of the General Assembly.

HB 2328 was signed in the House, Sept. 29, 1998.
The House concurred in Senate amendments, Sept. 29, 1998.
Senate and House signed final Sept. 29, 1998.

The legislation was approved by Governor Tom Ridge, Oct. 6, 1998 as Act No. 92

KEYSTONE OPPORTUNITY ZONE:
IS IT CONSTITUTIONAL? AREA NUMBER ONE

PENNSYLVANIA CONSTITUTION

Article VIII Section 2 b(ii)

Taxation and Finance

No exemption or special provision shall be made under this clause with respect to taxes upon the sale or use of personal property,
and no exemption from any tax upon real property shall be granted,
by the General Assembly under this clause
unless the General Assembly shall provide for the reimbursement of local taxing authorities
by or through the Commonwealth for revenue losses occasioned by such exemption.

Ask school board members, County commission board members, and state representatives and senators of Pennsylvania:

Would you be able to provide, or cite, the area of KOZ legislation that shows PA will provide for the reimbursement of local taxing authorities for the revenue losses? If so, what state revenues garnered through state taxation of citizens will be used to provide for such reimbursement. If not, has the General Assembly passed an amendment to the state Constitution which allows for non-reimbursement? When did that occur? KOZ: IS IT CONSTITUTIONAL? AREA NUMBER TWO

Article VIII
Section 5

EXEMPTION FROM TAXATION RESTRICTED

All laws exempting property from taxation, other than the property above enumerated, shall be void.


Ask your local and state representatives:

Please explain the constitutionality of KOZ legislation given this section of the state Constitution.


Refer to Article VIII Section 2 for constitutional listing of the property above enumerated which would be constitutionally able to be exempted from taxation.

After numerous attempts to contact the state Dept. of Community and Economic Development, finally, on March 4, 1999 this reply was sent:

"Thank you for your inquiry regarding the PA Keystone Opportunity Zone Act (Act 92). Please be advised that the Constitutional provision under which the local property tax exemption is permitted is Article VIII Section 2. (b) (iii).

The General Assembly may by law exempt from taxation:

(iii) Establish standards and qualification by which local taxing authorities may make uniform special tax provisions applicable to a taxpayer for a limited period of time to encourage improvement of deteriorating property or areas by an individual, association, or corporation, or to encourage industrial development by a non-profit corporation...

Consistent with the constitutional limitations, Section 301 of Act 92 provides that (a) keystone opportunity zone shall be comprised of deteriorated property... In addition, Act 92 places a time limitation on any exemption that shall not exceed 12 years beginning January 1, 1999, and ending on or before December 31, 2010.

As you can see, the exemptions provided pursuant to Act 92 fall within the confines of the Pennsylvania Constitution.

END COMMUNICATION FROM DCED


Citizens of Pennsylvania

Read the referenced section carefully. Read the OFFICIAL'S reply.

Note the wording: by which local taxing authorities may make uniform special tax provisions applicable to a taxpayer...

KEY WORD = UNIFORM


Now read:

My response

The KOZ legislation does not enable the local taxing bodies to make uniform special tax provisions. The legislation creates Opportunity Zones which exclude many muncipalities and school districts and the county itself as a taxing body from making and applying uniform special tax provisions.

Only residential homeowners and businesses locating within the established zone or subzones can be offered the special tax provisions of full tax forgiveness on certain local taxes.

Homeowners and businesses outside of the established zone are denied access to this special 100 percent tax exemption on real property.

Local taxing authorites that adopted resolutions to exempt certain local taxes, including local property taxes, are prevented by the KOZ legislation from applying the special tax provisions in a uniform manner.

Therefore, the KOZ legislation is not in compliance with the Constitutional provision that the local taxing authorities may make uniform special tax provisions.

Therefore, the General Assembly did not comply with the PA Constitutional duty to:

Establish standards and qualifications by which local taxing authorities may make uniform special tax provisions applicable to a taxpayer...

KOZ: IS IT CONSTITUTIONAL? AREA NUMBER THREE.

Article VIII Section 6 TAXATION OF CORPORATIONS The power to tax corporations and corporate property shall not be surrendered or suspended by any contract or grant to which the Commonwealth shall be a party.

Inquire of your elected public servants:

Isn't the Commonwealth a party with the REGIONAL ORGANIZATION by providing a quarter of a million dollars in start up costs, and overall start up costs, for the KOZ program? Through that regional organization, businesses locating in the KOZ designated area will not pay property taxes.

Explain how the KOZ legislation is constitutional given this section of the state Constitution.

Has Governor Ridge used an executive order to implement the KOZ legislation?


No one seems to want to answer whether this legislation is part of TEAM PENNSYLVANIA. Please check it out. Ask questions. Here's the PA legislation: http://www.legis.state.pa.us/WU01/LI/BI/BT/1997/0/HB2328P3614.HTM


Obtain a copy of Act No. 92

In an Associated Press article from Pittsburgh, published Wednesday December 29, 1999, Monongahela Valley Hospital and its parent corporation, Mon-Vale Health Resources Inc. filed a lawsuit in November in Commonwealth Court. Reportedly in December the complaint was amended. According to the report, the lawsuit contends that the designation of the tax-exempt zones is unconstitutional because the tax breaks are not given to all businesses regardless of where they locate.

Another article in the Friday, March 3, 2000 Tribune-Review offers us an opportunity to watch the game unfold. Check it all out Hospital challenges constitutionality of state's enterprise zones

Hospital has courageKOZ Challenged


PA CONSTITUTION IGNORED? PENNSYLVANIA CONSTITUTION THIS IS WHAT'S IN PA CONSTITUTIONArticle VIII

TAXATION AND FINANCE

Uniformity of Taxation

Section 1.

All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws. ARTICLE VIII SECTION 5 All laws exempting property from taxation, other than the property above enumerated, shall be void. Creation of the Keystone Opportunity Zones in the Commonwealth of PA was done by an act of the General Assembly.

HB 2328 was signed in the House, Sept. 29, 1998. The House concurred in Senate amendments, Sept. 29, 1998. Senate and House signed final Sept. 29, 1998.

The legislation was approved by Governor Tom Ridge, Oct. 6, 1998 as Act No. 92

Obtain a copy of Act No. 92

WHAT THE KOZ ACT 92 SAYS Section 702. Real property tax. (a) General rule.--Notwithstanding the act of May 22, 1933 (P.L.853, No.155), known as The General County Assessment Law, and the act of May 21, 1943 (P.L.571, No.254), known as The Fourth to Eighth Class County Assessment Law, each qualified political subdivision for taxable years beginning on or after January 1, 1999, shall by ordinance or resolution abate 100% of the real property taxation on the assessed valuation of deteriorated property in an area designated as a keystone opportunity zone within this Commonwealth.


The Fayette County commissioners unanimously adopted a resolution on December 10, 1998.
The resolution states:

This is a resolution contingently exempting certain persons, property and businesses from taxation in specified areas in the county of Fayette to be designated as portions of a Keystone Opportunity Zone in order to foster job and economic growth, promote industrial and business development, and improve the quality of life of our residents.

The key phrasing in the PA Constitution is Article VIII Section 1. Uniformity of Taxation:
All taxes shall be uniform, upon the same class of subjects, WITHIN THE TERRITORIAL LIMITS OF THE AUTHORITY levying the tax...

The central question remains: how is this resolution and the KOZ legislation constitutional given Article VIII Section 1 and Section 5 of the state Constitution?
The Fayette County commissioners are the authority levying the tax.
The school boards which passed KOZ resolutions are also the authority levying the tax.
Both the county and school board obviously have territorial limits.
In the case of Fayette County, the territorial limits of the county would be all of the land known as Fayette County.

BE AWARE This statement is on the DCEDKOZ page: "Severance clauses will be written into KOZ legislation to prevent tax challenges that could expand waived taxes to outside a designated KOZ. A sales tax waiver will be put in place for purchases that are used and consumed by businesses in the zone. This exclusion does not apply to retail sales by those businesses. A person must establish, at least, 184 day residence within a KOZ for state and local income to not be taxed."

How will a severance clause prevent tax challenges?

PA Dept. Community & Economic Development: Keystone Opportunity Zone Act
PA Dept. Community & Economic Development: Keystone Opportunity Zone$ Implemented
PA Dept. Community & Economic Development: Keystone Opportunity Zone$ Feb. 25, 1999
PA Dept. Community & Economic Development: Keystone Opportunity Zone$ Defined