Tucked into the sprawling 2017 tax law was a provision for the creation of “Opportunity Zones” that offer investor tax incentives intended to draw long-term investment to struggling areas of the country.
Since 2015, a group of lawmakers have advocated for tax incentives for those who invest in low-income communities, recognizing that the benefits from the economic recovery have largely bypassed those communities. Their efforts were rewarded when their proposed opportunity zone program was included as Subchapter Z of the 2017 tax law overhaul that was passed in December.
The potential is significant: Between unrealized capital gains from both U.S. households and corporations, the tax bills tap into a market of more than $6 trillion of investment funding.
Opportunity Zones are meant to be more flexible than previous tax incentive programs. This means Opportunity funds can go towards expanding businesses, affordable housing, infrastructure, commercial developments – almost anything that creates productive economic activity in urban, suburban and rural areas of need across the county.
First, here’s how the new law works: A taxpayer with capital gains can defer capital gains tax if they sell their appreciated assets and, within six months, roll over the proceeds into a “qualified opportunity fund.”
Investors in the qualified opportunity fund who hold their investment for at least 5 years will have their basis bumped up by 10% of the deferred gain (thus reducing their capital gains tax), and by another 5% if they hold it for 7 years. But if they hold their investment for 10 years, their basis is bumped up to the market value of their investment, which means their capital gains tax is eliminated completely.
Salt Lake City Department of Economic Development’s Deputy Director Ben Kolendar and Local Business and Entrepreneurship Manager Roberta Reichgelt briefed the City Council on Salt Lake City’s Opportunity Zones recommendations to the Governor. As of April 20th, the City learned that it had seven tracts nominated by the Governor to the US Dept. of Treasury for official Opportunity Zone designation. Those designated tracts and associated neighborhoods are as follows:
- 49035113906 – Salt Lake City/Magna (NWQ)
- 49035102701 – Glendale area
- 49035100600 – Fairpark
- 49035102702 – Poplar Grove area
- 49035114000 – Granary and Downtown
- 49035102500 – Depot and Downtown
- 49035114500 – Salt Lake City/West Valley City (directly South of the airport, East of NWQ)
May 21st is the Presidents’ deadline for announcing the official selections. Once rewarded these Low Income Community census tracts will be eligible to receive private investment through the Opportunity Zones Program over the next decade. We believe this can be an effective way to significantly move the needle toward a more inclusive economy.