What is an Opportunity Zone
• As part of the Tax Cuts and Jobs Act of 2017, opportunity zones were created to encourage private investment in low-income and distressed communities across the United States.
• Each governor was asked to nominate a certain number of census tracts that qualify as “low income communities”. The Department of Treasury then designated Opportunity Zones in a percentage of the nominated zones in each state.
• Investors that wish to defer capital gains recognized upon a sale or exchange of an asset to an unrelated party on or prior to December 31 can invest the capital gain into a “Qualified Opportunity Fund” (QOF)
• Any eligible taxpayer (any taxpayer that recognizes capital gain for federal tax purposes), including individuals, C corporations, or partnerships can invest in an Opportunity Zone.
• Eligible gains must be treated as: a capital gain for federal income tax purposes, recognized no later than Dec. 31 20202, recognized as a result of a sale or exchange engaged by the tax payer with an unrelated person.
Who and What Qualifies
•Under the code, a QOF must be “organized as a corporation or a partnership” for the purpose of investing in “qualified opportunity zone property”.
•In order to qualify as a QOF, an entity must hold at least 90 percent of its assets in “qualified opportunity zone property” (“QOZ property”).
•To qualify as a QOF, the entity will need to complete a self-certification form and attach that form to the entity’s federal income tax return for that year. No pre-approval by the IRS is required.
•QOZ property means any of the following: qualified opportunity zone business property, qualified opportunity zone stock, and qualified opportunity zone partnership interests.
Read the rules and regulations from the IRS by clicking the link below:
What are the Benefits to Investors
1.) Deferral of Capital Gains:
Eligible taxpayer receives a temporary deferral of any eligible gains invested into a QOF as long as the gains are invested within the 180 day period and the taxpayer makes the gain-deferral election
2.) Elimination of a Portion of Deferred Gains After 5 and 7 Years:
If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%.
3.) No Gain Tax Upon Sale or Exchange of QOF after 10th Anniversary of Investment:
Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged
What are the Benefits for Communitites
• Opportunity Zones are meant to drive economic development in low-income and impoverished communities that have experienced little to no growth since the conclusion of the recession.
• In order to attract further developments to these areas, it is necessary to give incentive to those who have the means of spurring development in the area.
• The Opportunity Zones legislation will not only spur developments across the housing, retail, commercial, and infrastructure industries for years to come, but it will also open up jobs in each of those categories.
• Through economic development in struggling areas, significant job creation, and increased property values, Opportunity Zones can transform an entire city for generations to come.
Erin E. Stewart
- Director of Economic Development
- Director of Municipal Development
OUR OPPORTUNITY ZONES
- Myrtle Street Area
- Downtown Area
- East Main Street Area
- Beehive Bridge
- Columbus Commons
- 57 Court Street
- Energy & Innovation Park
- 222 Main Street
- 235 Main Street
- 267 Main Street
- New Brite Plaza