Opportunity Zone program expected to boost investment in low income areas of Baton Rouge
Rules for a federal Opportunity Zone program that aims to boost private investment in low-income areas are expected to be released at the end of the month.
U.S. Sen. Bill Cassidy, R-Baton Rouge, speaking Tuesday at a Baton Rouge Area Chamber event, discussed the program and opportunities that exist for investment. The program was part of the tax reform package passed last year that was backed by President Donald Trump.
“Louisiana has issues, like a high rate of poverty and communities where people are no longer there,” Cassidy said. “This is specifically for communities that have not done as well.”
Earlier this year, 150 low-income census tract areas across Louisiana were nominated for the program. This includes 44 in metro New Orleans, 33 in metro Baton Rouge, 20 in Acadiana and 10 in Houma-Thibodaux, said Mandi Mitchell, assistant secretary of Louisiana Economic Development, which helped identify the tracts.
The primary attraction for investing in Opportunity Zones is deferring and lowering federal taxes on capital gains.
For a qualified investment, capital gains taxes may be deferred the first five years; after that, taxes may be canceled on 10 percent of the original capital gains investment and deferred for the remainder.
In year seven through year 10, taxes may be canceled on 15 percent of the original capital gains investment, and the remainder may be deferred through 2026.
For Opportunity Zones investments lasting longer than 10 years, investors are exempt from capital gains taxes on the investment itself, in addition to the other benefits for capital gains carried into the investment.
The goal is to couple private dollars with existing programs, such as New Market Tax Credits, Enterprise Zones and Low Income Housing Credits, because the law allows for benefits to be stacked on top of each other.
Michael Kressig, a partner with Novogradac & Co., of St. Louis, who specializes in community development and affordable housing, said the aim is to get passive capital back into the economy. Kressig said there are more than $6 trillion in unrealized capital gains from the stock market alone.
Because the Opportunity Zones are looking for tangible investments, place-based businesses are ideal for the program, such as franchise restaurants and manufacturing, Kressig said.
Steven LeBlanc, vice president of Baton Rouge-based Stonehenge Capital Co., said the program won’t conjure a deal out of thin air, investors still need to rely on lenders and the market to make it work.
“Louisiana is well-positioned to benefit from Opportunity Zones,” he said.
LeBlanc noted there are Opportunity Zones in areas such as north Baton Rouge, Ascension and St. James parishes, where there are numerous large-scale petrochemical plants. “They’re set up to attract ancillary businesses to build upon the industry that we have here,” he said.