Recap: Unlocking the Opportunity in Opportunity Zones
Earlier this year, 150 census tracts in Louisiana were approved for the federal Opportunity Zones Program, including 33 in the Capital Region. Designed to spark investment in distressed communities, under certain conditions these zones are eligible for tax-advantaged investment. This preferential tax treatment is represented by deferred and, depending on investment period, reduced federal capital gains tax to encourage private investment.
On August 7, BRAC welcomed Senator Bill Cassidy, Mandi Mitchell of LED, Michael Kressig of Novogradac & Company LLP, and Steven Leblanc of Stonehenge Capital Company to its Signature Speaker Event sponsored by Georgia-Pacific to shed light on the new federal Opportunity Zones Program.
Read the top seven takeaways from the event below.
- According to the IRS, “An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation authority to the Internal Revenue Service.”
- John Bel Edwards nominated 150 census tracts in Louisiana to be certified as qualified Opportunity Zones. Of the 150 tracts nominated and approved, 33 are located in the Capital Region: 22 tracts in East Baton Rouge Parish, three tracts in Livingston Parish, two tracts each in Ascension Parish and Pointe Coupee Parish, and individual tracts in East Feliciana Parish, Iberville Parish, St. Helena Parish, and West Baton Rouge Parish.
- Every U.S. state, including the District of Columbia, submitted census tracts for the Opportunity Zones Program. Because of this, competition for investors will be more intense, therefore aggressive and creative marketing is vital to landing these investors in Louisiana.
- Eligible census tracts were those with poverty rates of at least 20 percent, or those with median family incomes of no more than 80 percent of statewide or metro area family income.
- The holding period of an Opportunity Zone reduces the invested capital gain by: zero basis points if held zero to five years, 10 basis points if held for six years (90 percent of the invested capital gain is recognized), and 15 basis points if held for 7 or more years (85 percent of the capital gain is recognized). In all cases, if held for 10 years, no additional capital gain is recognized on the Opportunity Zone investment itself.
- A Qualified Opportunity Fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in an Opportunity Zone and that utilizes the investor’s gains from a prior investment for funding the Opportunity Fund.
- As this is a new tax law, the fine details are still being assembled. All of the panelists from the event agreed that they are waiting on the U.S. Treasury and the IRS to write out specific policies, guidelines, regulations, or even FAQs to better understand what the next steps are.
Want to learn more about the Opportunity Zones Program? Visit the IRS’s website for more information.