The Treasury Department released more information about the “Opportunity Zone” project. Lawmakers hope it will revitalize distressed regions across the country — and give ethical investors an attractive tax break option. A relatively straightforward and common sense program, the government will waive substantial taxes for qualifying businesses that move into designated areas.
Though the bill’s backers announced broad strokes a few months back, officials had yet to define parameters. But lawmakers recently issued more details. According to the New York Times:
“An investor who rolls capital gains into an opportunity fund can eventually avoid up to 15 percent of the taxes otherwise owed on those investment gains. And the investor will never pay taxes on any gains the fund accrues in its investments in the opportunity zones, provided that the investment is held longer than 10 years.”
If A Zone Loses Its Designation, You Keep Your Tax Break
Potential investors were most worried about how the program would treat regional status changes. What would happen, potential investors wondered, if regions lost their “opportunity zone” designations? Would they also lose their tax benefits? According to the recent Treasury guidance, no, they wouldn’t. Investors will retain their tax benefits, related to the program, in perpetuity. Moreover, the guidelines stipulate that investors have 30 months to improve zone properties.
What Rules Do We Know So Far?
- Investors can only use capital gains for the program.
- To qualify for the Opportunity Zone tax break, 90 percent of the investment must be concentrated in a qualified track.
- Seventy percent of a business must have tangible assets in an opportunity zone track to reap the program benefits.
Officials will continue to work on the specifics and will likely publish the final draft sometime in the spring, at which point there will be a 60-day period of public comment. And though there is little talk of the opportunity zone project in the mainstream press, investors, businesses, and financial institutions are quickly building collectives and developing projects under the guidelines.
Treasury Secretary Steve Mnuchin has said he expects the program to attract $100 billion investment dollars, which will allow “all Americans to experience the dynamic opportunities being generated” by current economic policies.
We should note that not everyone is eager about the Opportunity Zone initiative. Proponents believe the program will be a win-win for under-performing regions. Opponents, however, predict that the scheme will just lead to more gentrification and tax breaks that only serve the wealthy.
Time will tell who’s right. In the meantime, ethical investors looking for opportunities to give back, profit, and enjoy a few tax breaks, should consider the Opportunity Zone project.
Is The Opportunity Zone Program Right For You?
Everybody in Illinois with capital gains to invest should be considering the Opportunity Zone project. To learn more about putting your money to work, while simultaneously slashing your tax burden, get in touch today.Connect With An Illinois Investment Lawyer »