1. Update on Changes to the KIZ Tax Credit Guidelines and Application Process June 2011

2. Guidance on Ineligible Gross Revenues –Rent Collected –Sale of Tax Credits New Section on Gross Revenue Attribution Formula –Moved from Application –Details Types of Eligible/Ineligible Compensation for The Payroll Factor

3. Eligible Compensation –Clarified the following constitutes compensation if it appears on the owner’s personal or the company’s federal tax returns net profits of the company paid to the company’s owner included as part of the owner’s compensation paid to company’s officers receive guaranteed payments or dividends given to the company’s partners receive the cost of labor (provided the workers are directly employed by the company)

4. Eligible Compensation (continued) –Compensation does not include any individual not employed directly by the KIZ Company including (but not limited too): Contracted employees (i.e., employees of a third party entity contracted to perform work at the KIZ company) Consultants Independent sales people, etc.

5. Document Requirements The following documents must accompany the application: –Signed tax forms that were filed for the Base and Comparable taxable years (or verification of electronic filing) PA Income Tax Front pages and signature pages (if different from the front page) of Federal Income Tax forms Pages of tax forms indicated on the Excel worksheets –Other documents identified on the worksheets Financial statements W3s

6. Reporting Requirements The KIZ Company must have submitted their online semi-annual KIZ reports in accordance with the KIZ guidelines Please plan ahead! Application is now through DCED’s Electronic Single Application - paper applications will no longer be accepted.

7. Deadline Requirements –Applications must be submitted on or before September 15 th –Each application will be reviewed as submitted. Applications that are deficient or missing required information or documentation will be determined to be ineligible. –All state and federal filed tax returns must be submitted with this application. Extensions will not be taken into consideration in the review of the KIZ Tax Credit application. –No time extensions will be granted.

8. New Required KIZ Tax Credit Worksheets Four Tabs –Gross Revenues –Comparable Taxable Year (payroll and property factors figures) –Base Taxable Year (payroll and property factors figures) –Calculation Sheet Automatically calculates the payroll and property factors, and the estimated award amounts Must be submitted with the application

9. Gross Revenue Tab Gross Revenues for the Comparable Tax Year Comparable Tax Year (Comp Year)2010(Line 1) Gross Revenues for the Comp Year$0(Line 2) Less revenues from non-KIZ targeted activities$0(Line 3) Subtotal (line 2 minus line 3)$0(Line 4) Less revenues from the sales of tax credits$0(Line 5) Total gross revenues for the Comp Year$0(Line 6) How many days was the Company located in the KIZ Zone in the Comp Year (Line 7) Are the revenues prorated for the time in the KIZ Zone? (Line 8)

11. Taxable Year Tabs – Property Factor Comparable Tax Year Worksheet (Within the KIZ) Property Factor Calculation ItemAmount Document Information Tax Form # or Document NameLine #Page # Annual Rent, Lease, Mortgage $0 Property Value Factorx 8 Rent, Lease, Mortgage Subtotal$0 Buildings, Equipment & Other Depreciable Assets Beginning of Year End of Year Sum$0  Building & Equipment Subtotal$0 Property Factor (Total of All Property) Within the KIZ $0 (Line A) You must fill in the document name, line #, and page #, prior to entering the amount !

14. Payroll Factor Calculation ItemAmount Document Information Tax Form # or Document NameLine #Page # Salaries/wages of employees of the company Compensation of officers Guaranteed payments to partners Dividends paid to partners Net profits paid to the owner of the company and included as part of the owners federal personal tax returns. Commissions and fees paid to employees of the company working in the zone Cost of labor (provided the workers are directly employed by the company) Payroll Factor (Total of All Wages) Within the KIZ$0 (Line B) Taxable Year Tabs – Payroll Factor You must fill in the document name, line #, and page #, prior to entering the amount !

16. Part A Gross Revenues of the company for the Comparable Tax Year attributable to targeted industry activities within the KIZ. Enter the Comparable Tax Year 2010 Property Factor Property within KIZ (from line A) $0  Property within PA (from line C)$0=0.00%(Line 1) Payroll Factor Payroll within KIZ (from line B) $0  Payroll within PA (from line D)$0=0.00%(Line 2) Total (Line 1 + Line 2) 0.00%(Line 3) KIZ Apportionment (From Line 3)0.00%  2 = 0.00%(Line 4) Pennsylvania Gross Revenues in target industry in Comparable Year $0.00(Line 5) Comparable Year’s Gross Revenues attributable to the KIZ (Line 5 x Line 4) $0.00 (Line 6) Calculation Tab

17. Part C Comparable Tax Year 2010 (Line 13) Base Tax Year 2009 (Line 14) Comparable Tax Year Gross Revenues of the company attributable to target industry activities in the KIZ for the year in Line 6 $0.00 (Line 15) Base Tax Year Gross Revenues of the company attributable to target industry activities in the KIZ for the year in Line 12 $0.00 (Line 16) Increase in Gross Revenues (Line 16 – Line 17) $0.00 (Line 17) 50% of amount on Line 17 $0.00 (Line 18) Amount of KIZ Tax Credit for which the Company is applying $0.00 (Line 19) Note: If the total for all qualified applications received by DCED exceeds the annual allocation, the amount awarded will be reduced from the amount listed on this application.

18. Tax Credit Sales Application Changes Moved to New KIZ Tax Credit Sales Program Guidelines Remains a paper Application - not an online application Requires a company official to sign that the company has filed its taxes prior to submitting the sales application Only the verification forms of filed taxes are required – complete tax return no longer needed.

19. Contact Info: Colton S. Weber (717) 214-5422 cweber@pa.gov cweber@pa.gov