We first wrote about the new Opportunity Zone Program in February, sharing our research on some of the program’s basics: goals, eligibility, designation. Since then, most states have announced their designated zones, and the economic development world is starting to buzz. One of the most exciting early aspects of this program is that it can be layered with local incentives, such as tax increment financing, to enhance the appeal of districts already targeted for redevelopment.
Camoin Associates is working with development organizations, attorneys, and local economic development professionals to identify how the Opportunity Zone tax incentives can be used at the local level to accelerate private investment. At the same time, we are gathering educational and informational resources to share with our website and newsletter audiences, so “watch this space” for periodic updates.
In this update, we have posted links to two maps identifying communities and census tracts that have been designated as Opportunity Zones, and linked to information from the Council of Development Finance Agencies and attorneys Hawkins Delafield & Wood LLP.
OPPORTUNITY ZONE ESSENTIALS
The goal is to encourage private entities to reinvest capital gains in low-income communities, stimulating investment in disadvantaged areas, through the use of federal tax incentives.
Governors nominate existing low-income census tracts for inclusion according to federal criteria:
- Individual poverty rate of at least 20%
- Median family income of up to 80% of the area median
An Opportunity Fund is created to invest capital gains from activities in an Opportunity Zone, into programs for Opportunity Zones. Three tax incentives are offered:
- Temporary deferral of inclusion in taxable income for capital gains invested in an Opportunity Zone Fund.
- Step-up basis for capital gains that have been invested in the Opportunity Zone Fund.
- Permanent exclusion from taxable income of capital gains from sale or exchange of investing in an Opportunity Fund if held for 10+ years.