Opportunity Knocks – Who Will Respond?
Created by the 2017 Tax Cuts and Jobs Act, Opportunity Zones encapsulated a pro-active government policy that can stimulate private sector involvement in resolving economic disparities appearing in some of the most depressed regions, while also recognizing seminal efforts to invest in development in these areas. The Economic Innovation Group’s fact sheet, coupled with the IRS Q&A, succinctly summarize the tax benefits potentially afforded an investor in properties connected to investments in Opportunity Zone funds. With the intention of stimulating investment in lower income, distressed communities throughout the United States, the Opportunity Zone program’s incentives include the deferral or exclusion of taxable income from capital gains taxation, or a tax deferral in the form of a basis step-up. Realizing the tax benefits of these investments depends upon the length of time the investment is held to encourage a long-term commitment to these geographical regions of the United States.
Working with the U.S. Treasury, such as the Ohio Development Services Agency, selected “winning” census tracts based on input, with prescribed rules, from local government, development officials and development organizations. Final selections emerged from assessing economic need with existing investment initiatives and potential for the area. For the country as a whole, average poverty rates and median income levels in the selected 8,700 zones rest well below national averages according to the Economic Innovation Group. The well-being of a nation’s citizens rests not only on the behaviors of individual players, but on broad-based policy initiatives that incentivize capital investment, and the labor demand that accompanies it, in the areas in dire need of capital injections. The ripple effect within the populace might indeed become one of the well-known economic success stories of the 21st century in America.