Small Business News
Opportunity Zones Encourage Private Sector Investments
Published: Wednesday, April 1, 2020
By: Shaun Sappenfield
The Tax Cuts and Jobs Act of 2017 amended the Internal Revenue Code of 1986, by reducing tax rates for businesses and individuals. One provision within the Tax Cuts and Jobs Act offered an innovative approach to spurring long-term private sector investment in low-income communities nationwide. The new community investment tool is known as Opportunity Zones, or Opportunity Fund which is the investment vehicle that is set up as either a partnership or corporation for investing in eligible property within the qualified Opportunity Zone. The concept is simple, encourage the investment of unrealized capital gains into long-term investment projects by offering a tax deferral to the investor. This new incentive tool targets underserved areas in both metro and non-metro areas of the country. Currently, there are over 8,700 Opportunity Zones around the nation, and 161 designated zones in Missouri.
The Opportunity Zone provides the following tax benefits for qualified investments. A temporary deferral of inclusion in taxable income for capital gains reinvested into an Opportunity Fund, a step-up in basis for capital gains reinvested in an Opportunity Funds, and the potential for a permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if held for at least 10 years.
In 2018, the Jefferson City Area Chamber of Commerce applied for Opportunity Zone designation on behalf of the City of Jefferson. Based on 2010 census tract data, three contiguous census tracts were identified as eligible areas and received formal designation in December, 2018. The three census tracts encompass a large portion of the downtown area, southside, and parts of the central west end.
As the Jefferson City Area Chamber of Commerce, together with the City of Jefferson, look to expand the local economy by encouraging new capital investments as well as reinvestment in underserved areas of the community. The potential benefits offered by the Opportunity Zone program, coupled with existing development/redevelopment incentives, may afford a “tipping point” for potential development projects as they are being vetted very early in the planning process.
For additional information regarding Opportunity Zones, please visit the Chamber’s website and click on the community development tab or call Shaun Sappenfield, Existing Business Manager at 573-638-3586.