What is an Opportunity Zone?
By Opportunity Zone Expo Staff
Opportunity Zones are low-income communities around the country that have been chosen by the governors of each state to attract investment funds by offering tax incentives to investors.
It was created under the Tax Cuts and Jobs Act, passed by the U.S. Congress in 2017 to encourage investment in distressed local economies. The zones – which are in urban, suburban and rural areas -could provide tax benefits to investors and entrepreneurs. Investors can defer capital gains tax by 10 percent after 5 years, 15 percent after 7 years or pay no tax after 10 years.
There is a total of 8,700 designated zones, which are census tracts, in the 50 U.S. states, five territories and Washington, D.C. To qualify, each zone had to be nominated by the state and then certified by the Secretary of the U.S. Treasury. The Opportunity Zones have an average poverty rate of more than 30 percent, an average median family income of less than 60 percent of its area median and includes 1.6 million places of business, 24 million jobs and 35 million Americans.Under the current legislation, the zones are scheduled to expire in 2028.
Any business that has 70 percent of its tangible property and at least 50 percent of its income originating from within an Opportunity Zone is eligible to accept investments. Funds can also be pooled into Qualified Opportunity Funds. Investors and entrepreneurs have 180 days after a sale to reinvest the funds in an Opportunity Zone.
Opportunity Zones are designed to fuel economic development and job creation. It is predicted that more than $100 billion of capital could be invested into Opportunity Zones, according to Treasury Secretary Steven Mnuchin.