Opportunity Zone Program: First New Federal Community Development Tax Incentive Program Since Clinton Administration

An Early Overview of Opportunity Zone Details and What’s Ahead for States, Communities and Investors

The Opportunity Zone Program is the first new community development tax incentive program enacted since the Clinton administration.

The Opportunity Zone Program provides an opportunity for mainstream private investors to support businesses and distressed communities.

The expectation is that Opportunity Funds, the new class of investment vehicles authorized to aggregate and deploy private investment into an Opportunity Zone, will ease the execution of “impact investments” for investors. It is expected that tax benefits derived from these investments will increase participation in the Opportunity Zones Program.

Given the tight timeline of less than 90 days that is left, it is very helpful that Enterprise has both analyzed and shared the following highlights of the Opportunity Zone Program:

  • Each state’s governor is authorized to designate a certain number of Opportunity Zones into which private investment can flow through Opportunity Funds. This provides an opportunity for New Jersey’s new Governor Phil Murphy.
  • U.S. investors are eligible to receive a temporary tax deferral and other tax benefits when they rollover unrealized capital gains into Opportunity Funds for a minimum of five years.
  • Opportunity Funds are authorized to invest in Opportunity Zone Property:
    • Stock in a domestic corporation
    • Capital or profits interest in a domestic partnership
    • Tangible property used in a trade or business of the Opportunity Fund that substantially improves the property.
  • This opportunity is very timely and time sensitive. Governors have 90 days from the date of enactment which was December 22, 2017 to submit Opportunity Zone recommendations to Treasury.
  • The U.S. Treasury Department has not released guidance on the process for certifying Opportunity Funds.
  • Enterprise anticipates the Opportunity Zones Program will be fully implemented by Q4 2018 or Q1 2019. Many factors could influence this timeline. Look for additional coverage on Enterprise’s blog.

Originally introduced in the Investing in Opportunity Act (IIOA), the Opportunity Zones Program was enacted as part of the 2017 tax reform package (Tax Cuts and Jobs Act). The program is designed to drive long-term capital to rural and low-income urban communities throughout the nation and uses tax incentives to encourage private investment in impact funds.

In 2015, the Economic Innovation Group (EIG) – a bipartisan public policy firm – developed the Opportunity Zone concept, which was conceived as a systematic approach to helping address the uneven economic recovery and persistent lack of growth that have left too many American communities behind.

The concept was introduced in the Investing in Opportunity Act (IIOA) during the 114th Congress and reintroduced in the 115th Congress by Senators Tim Scott (R-S.C.) and Cory Booker (D-N.J.) and Congressmen Pat Tiberi (R-Ohio) and Ron Kind (D-Wis.), gaining nearly 100 congressional cosponsors in 2017.

Interactive Map

Opportunity Zone Overview

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