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Philadelphia Law Firm Fights For Second Shot At Pennsylvania Tax Break Program


UPDATE, MARCH 10, 9:47 A.M.: Dechert has subleased 35K SF from CDI Corp. at 1735 Market St., according to the Philadelphia Business Journal. The law firm reportedly hasn't figured out what to do with the space, which unnamed sources told the PBJ it took strategically as part of its overall hunt for new space. One possibility would have Dechert splitting its back-office functions from the rest of its headquarters to save money.

ORIGINAL STORY: Dechert LLP is suing the state of Pennsylvania for rejecting its application for tax exemptions for its planned new Philadelphia headquarters since it already enjoyed more than a decade's worth of benefits from a Keystone Opportunity Zone at its current location. 

The law that created the zones doesn't expressly prohibit "zone-hopping," or moving from one opportunity zone to another to gain new tax breaks, according to the Philadelphia Inquirer. However, state officials and former lawmaker Joseph Gladeck, the main sponsor of the bill that established KOZs, said the practice was not what the law intended to promote. 

"We never thought somebody would go from one zone to another," Gladeck told the newspaper. 

Dechert's current 200K SF home is at Brandywine Realty Trust's Cira Centre development in University City. Its lease is up in 2021, and the law firm is planning to move to Brandywine's $3.5B Schuylkill Yards project under construction in the same neighborhood. KOZ benefits are based on location.   

If it doesn't receive the tax credits, Dechert intends to move to a "significantly less expensive" location, the Philadelphia Business Journal reports

As Cira Centre's KOZ designation was coming to an end in 2018, officials from the Pennsylvania Department of Community and Economic Development "noticed an uptick in relocation applications, which could potentially undermine the purpose of the program," the Inquirer said. As a result, the state enacted a rule against "zone hopping." 

The newspaper noted that Cira Centre businesses received at least $400M in tax breaks from the KOZ, excluding the landlord's property tax abatement. Even with the tax breaks, Dechert's staffing at its Cira Centre headquarters fell 34% from 461 last year from 700 when it moved to the property in 2005, according to the Inquirer. 

Dechert was founded in Philadelphia in 1875, and employs more than 900 lawyers at 26 offices worldwide. A firm spokesperson didn't immediately respond to a request for comment for this story.

It isn't clear when the Commonwealth Court will rule on the case.