In Spring of 2018, Gov. John Bel Edwards nominated 150 census tracts in Louisiana to be certified as qualified Opportunity Zones, an economic development tool designed as part of the recent federal tax changes, to spark investment in the hopes of growing distressed communities. 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.
But what are these Opportunity Zones? And what purpose do they serve? According to irs.gov, an opportunity zone is defined as “an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.” This preferential tax treatment is represented by deferred and, depending on investment period, reduced federal capital gains tax to encourage private investment.
BRAC, in collaboration with our regional economic development partners in the nine-parish Capitol Region, submitted 30 census tracts to Louisiana Economic Development for consideration for the Opportunity Zone nomination. Some of the approved tracts are ripe for investment, including Census Tract 310 in Ascension Parish which might attract investment for a multi-use facility creating new parks, retail stores, and housing for an otherwise economically distressed community. Other tracts submitted by BRAC include the LSU Innovation Park and the Louisiana Technology Park, hotspots for innovation and entrepreneurialism and therefore shovel-ready for investment.
The infrastructure allowing use of Opportunity Zones is still being built. Investment can only be made through a vehicle called a Qualified Opportunity Fund – a partnership or corporation set up for the sole purpose of investing in eligible Opportunity Zone Projects that uses prior gains from prior investment as fund capital. Once reinvested in the Opportunity Zone, the prior capital gains become tax deferred and can be reduced based on the holding period as of December 31, 2026. The holding period 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.
With 33 tracts chosen in the Capital Region, the Opportunity Zone Program provides a major opening for revitalization in the areas of our community battling economic struggle. For more information on Opportunity Zones and Opportunity Funds, please visit the Opportunity Zone Resource page provided by the U.S. Department of the Treasury or the Louisiana Opportunity Zones site from LED.