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What Are Opportunity Zones?

An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation authority to the Internal Revenue Service. They were created by the Tax Cuts and Jobs Act on December 22, 2017. (Source: IRS.gov)

Goals

Opportunity Zones are a tool for economic development, designed to connect distressed, low-income communities (urban and rural) with private investment capital, resulting in economic growth and job creation.

  • Promote entrepreneurship and new business formation
  • Revitalize historic downtowns and city centers
  • Connect the public, private, and philanthropic sectors
  • Encourage workforce development to meet new job creation
  • Diversify location of new businesses and investment

Incentives

Opportunity Zones incentivize investors through tax benefits. By investing capital in Opportunity Funds, they will be able to take advantage of these benefits.

  • Investors can defer tax on any prior gains until the earlier of the date on which an investment is sold or exchanged
  •  If the investor holds the investment in the Opportunity Fund for at least ten years, the investor would be eligible for an increase in basis equal to the fair market value of the investment on the date that the investment is sold or exchanged
  • All tax incentives relate to the treatment of capital gains
  • Investment returns a higher return rate the longer it remains invested
  • Funds can benefit a variety of projects: real estate, infrastructure, affordable housing and more

Resources

Opportunity Zones are part of a new program that we are all still learning out. Please consult the below sources for further information and stay tuned for updates.

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