What is an Opportunity Zone? Emily Clark asked the Salt Lake City Department of Economic Development about it on Good Morning Utah.
Included below is some of what was discussed:
What is the purpose behind Opportunity Zones and when were they established?
- Created under the Tax Cuts and Jobs Act of December 2017 with bipartisan support
- Intends to draw long-term investment to underserved urban and rural communities
- Provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds
- Tax deferral for 5 years
- Tax reduction of 10% on gains accrued if the investment is held in the fund for 5 years.
- Tax reduction of 15% on gains accrued if the investment is held in the fund for 7 years.
- Tax forgiveness of additional gain if the investment stays in the fund for 10 years
What types of assets can be invested in?
- Equity of new/expanding business
- Real estate (significant improvements)
- Business assets
Example: someone is building affordable housing and would likely apply for the low income housing tax credit, if they are building in an Opportunity Zone they can also create an Opportunity Fund to use as capital for the project and get the additional tax incentive of deferring capital gains tax for that project.
The City strategically selected zones where they have RDA project, New Markets Tax Credits and Community Development Block Grant Eligibility to be able to overlay incentives for development.
Round II Updates
We can be expecting H.U.D to create an OZ council that will publish a best practice guide for OZ’s and will include all federal programs that are active in OZ’s which will help communities and entrepreneurs and investors get the most out of their investment.
The second set of Opportunity Zone Guidance released on April 17th, 2019 provides needed guidance that had been missing specific to investing in operating businesses versus real estate development.
How is this good for Salt Lake City?
We hope that investors take advantage of this program to provide much needed investment into the designated zones that are parts of the City that do not garner as much attention for investment
We specifically chose the Opp Zones in areas that the City can play as roll because of our RDA project areas. This means the City has already invested in the area and can provide further incentive to investors.
What are the City’s priorities for the tax incentive program?
The City has recently developed an Opportunity Zones Prospectus which is a marketing tool for investors to help them understand the investment opportunities available.
We focused our Prospectus around the Life Sciences Corridor where we hope to use Opp Zones to build on the momentum of LS companies investing in Salt Lake. This includes building more space for innovation, accelerators and companies in the LS industry.