Opportunity Zone Facts
Fifty-two million Americans live in economically distressed communities. These urban, rural, and suburban communities are located in every corner of the United States and its territories. Despite the growing national economy, these communities are plagued by high levels of poverty, failing schools, job scarcity, unsafe neighborhoods, and a lack of investment capital. In response, our historic Tax Cuts and Jobs Act included a powerful new tax incentive—Opportunity Zones—to spur economic development and job creation by encouraging long-term investment in low-income communities nationwide.
Opportunity Zones: Creating Economic Impact & Investment Opportunity.
WHAT IS THE OPPORTUNITY ZONE PROGRAM? The increasingly globalized economy has meant prosperity for many, yet millions of Americans have been overlooked, devoid of the same benefits or the potential for upward mobility that comes from widespread investment. Fifty-two million Americans live in economically distressed communities, including the thirty-five million who reside in Opportunity Zones. A lack of investment has contributed to this economic distress, and a lack of access to economic opportunity can lead to negative outcomes in the vital measures that matter to all communities, including high unemployment rates, stagnant wages, low graduation rates, unsafe neighborhoods, and shorter life expectancy. To help these communities, Opportunity Zones were introduced in the Tax Cuts and Jobs Act, which President Donald J. Trump signed into law in December of 2017.
Why Opportunity Zones?
The Opportunity Zone tax incentive provides a tremendous way to bring investments, jobs, business expansion, and new business development to your community. Qualified Opportunity Zones were created by the 2017 Tax Cuts and Jobs Act. These zones are designed to spur economic development and job creation in distressed communities throughout all 50 States, the District of Columbia, and the five U.S. territories by providing tax benefits to investors who invest eligible capital into these communities.
What Are Opportunity Zones?
Opportunity Zones are economically distressed communities, defined by individual census tract, nominated by America’s governors, and certified by the U.S. Secretary of the Treasury via his delegation of that authority to the Internal Revenue Service. Under certain conditions, new investments in Opportunity Zones may be eligible for preferential tax treatment. There are 8,764 Opportunity Zones in the United States, many of which have experienced a lack of investment for decades. The Opportunity Zones initiative is not a top-down government program from Washington but an incentive to spur private and public investment in America’s underserved communities.
Opportunity Zones By The Numbers
Over a Million lives have already been impacted by Opportunity Zones
Designated Opportunity Zones
(Nationwide, Guam, Puerto Rico & US Virgin Islands)
Estimated Opportunity Funds Established To Date
New Opportunity Zone Funds Created In The Last 3.5 Years
Trillion In Unrealized Capital Gains
Amount of Unrealized Capital Gains in the US and growing each year.
Billion Already Invested Into Opportunity Zones
Have Already Been Reinvested In To Community Revitalization Because Of The Program
How OZ Investors Benefit
The Opportunity Zone tax incentive will spur capital investment and economic development in low-income communities. First, investors can defer the taxation of certain prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in the QOF is sold or exchanged, or December 31, 2026. Second, if the QOF investment is held for at least 5 years, 10% of the gain that was originally deferred is eliminated completely. Third, if the investor holds the QOF investment at least ten years, when the investor sells or exchanges the investment, the investor is eligible to eliminate the gain on the QOF investment from any increase in value of the QOF investment during the investor’s holding period.
INVESTOR SELLS ASSET FOR A CAPITAL GAIN
The investor sells some sort of asset that creates either a short term or long-term capital gain.
180 DAY IDENTIFICATION PERIOD
From the day the qualifying asset is sold, the investor has 180 days to place the capital gained in a qualifying investment fund.
DEFER CAPTIAL GAINS TAX UNTIL 2026
Taxes on initial capital gains taxes deferred are due on December 31st, 2026. They would also be due if the asset was sold previous to this date.
CAPITAL GAINS ELIMINATED
If the investment into the opportunity zone fund is held for ten (10) years, all of the growth on the original capitals are tax free. You receive a full step up in basis to fair market value at time of exit.
Opportunity Zone Timeline
Breaking down the Opportunity Zone timeline. Puts the program into perspective.
2015 - 2016
The Birth Of The Opportunity Zone Program The idea of opportunity zones is drafted and details on how to get it passed thru congress was worked out with bi-partisan support from congress. The idea was drafted under the Obama Administration and picked up and finalized with the Trump Administration.
The Opportunity Zone Program Is Signed Into Legislation By Congress and The President. Tax Cut & Jobs Act (TJCA) was officially passed into law on December 31st, 2017. The 900+ page bill included the initial language establishing the opportunity zone program.
April The IRS issues the first opportunity zone press release to the public. Late June Official IRC guidance is released by the Internal Revenue Service. Thus pulling the trigger for the opportunity zone program to officially start across America. December 12th On December 12, 2018, President Donald J. Trump signed Executive Order 13853, which established the White House Opportunity and Revitalization Council (Council), to carry out the Administration’s plan to target, streamline, and coordinate Federal resources to be used in Opportunity Zones and other economically distressed communities.
January GOVERNMENT SHUT DOWN delays 1st tranche of guidance being released to the public. April Tranche 1 guidance officially released. (500+ pages) Primarily focused on answering the questions around real estate usage from developers. Established the 31 month working capital safe harbor provisions for real estate assets. December 19th Tranche 2 guidance officially released. (500+ pages) Primarily focused on answering the questions around business usage from startups and zone businesses. Established the 60 month working capital safe harbor provisions for qualified opportunity zone businesses. December 31st 5% additional step up in basis on the tax due on the deferred capital gains expires for investors.
January President Trump talks about Opportunity Zones during the State Of the Union Address. Specifically mentioning an opportunity zone business. January - March Opportunity Now events were happening across the country promoting Opportunity Zones by the Whitehouse, Hud & SBA March-April Covid-19 hits the world as a global pandemic. Causing a massive shutdown across the country. Forcing the entire focus of the government to shift away from opportunity zones. Massive stock market exit creates $700B in new capital gains. 65+ million American’s unemployed. Massive business shutdowns. November Whitehouse releases an official announcement. $75+Billion has been invested into opportunity zones. Over 1 Million people impacted so far. Additionally, the Community Reinvestment Act guidance was updated to reflect CDFI tracks and Opportunity Zones for purposes of the CRA credits for banking institutions. December Several announcements were made by the SEC in regards to Crowd Fundraising, who has to register as a broker dealer, new accredited investor thresholds were released and changes to the Volker rule all have behind the scenes positive impact on opportunity zones and funds.
Change in US President President Biden acknowledges keeping the Opportunity Zone program but wants enhanced reporting requirements March A 2 year extension bill on the tax deferment due date is introduced in Congress to extend to 2028 vs 2026. Additionally, new Census data was updated and is showing changes in extensions to designated opportunity zones. We are currently waiting on additional guidance on how this will impact the opportunity zone program. March 31st Program Extensions due to Covid19 expired for investors with capital gains dating back to 2019. December 31st 10% Step up in basis for capital gain investors investing in opportunity funds expires.
May - Congress announces new Opportunity Zone legislation with bipartisan support.
Multiple Federal Agencies Support The Opportunity Zone Program In Various Way.
The Full Weight Of The US Government Supports Opportunity Zones
We really want to put the control back in the arms of the local community. They know a lot more about what needs to be done in order to address the needs of the whole community than a bunch of bureaucrats in Washington, D.C
Dr. Ben CarsonFrmr. United States Secretary of Housing and Urban Development
This will unlock lots of capital that was tied up that never would have been sold to reinvest in these communities. We want all Americans to experience the dynamic opportunities being generated in Opportunity Zones.
Steven MnuchinFrmr. Treasury Secretary U.S. Department of the Treasury
The Opportunity Zone program will allow us to revitalize communities, so that people can fulfill their potential, and neighborhoods can begin to thrive again.
Scott TurnerFrmr. Executive Director of the White House Opportunity & Revitalization Council
Opportunity Zones: Maximizing Community Redevelopment
Very Simply Put…Investors have the next 16 years to place capital gains into opportunity zone funds. And the next 26 years to grow 100% TAX FREE!
TCJA Establishes Program
Deferred Capital Gains Tax Due
Last Date An Investor Can Invest
Opportunity Zone Program Expires