The State of North Carolina has recommended to the Unites States Treasury that 252 areas in the state be certified as Opportunity Zones, potentially opening a new source of investment capital for regions of the state that need it the most. The state submitted its recommendations on Friday, April 20 and final certification from the federal government is expected later this year.
“We’re optimistic that the Opportunity Zones program will attract new investments for our most distressed rural and urban areas,” said N.C. Commerce Secretary Anthony M. Copeland, “These investments will lead to new jobs, development of more affordable housing, and other economic benefits.”
Recently passed federal legislation, known as The Tax Cuts and Jobs Act (H.R.1), created the Opportunity Zone program and authorized each state to designate up to 25 percent of its total low-income census tracts as qualified Opportunity Zones. Low-income census tracks are areas where the poverty rate is 20 percent or greater and/or family income is less than 80% of the area’s median income. The legislation creates a tax break for qualified investors who wish to re-invest unrealized capital gains, avoiding standard capital gain tax obligations.
North Carolina has just over 1,000 low-income census tracts. Since February, the North Carolina Department of Commerce has been coordinating the state’s multi-phase and collaborative approach to identify which of these areas to nominate for federal consideration. Guided by data and driven by local priorities, the process has included an extensive review of census data, public input collected from the Department’s website and direct outreach, and close collaboration with local officials from across the state.
To reach the number of zones allowed under the federal law, the state followed a set of guiding principles:
- Maintain an open submission process: Solicit tract and program recommendations using N.C. Commerce’s public website and direct outreach
- Opportunity for all: Aim for at least one Opportunity Zone in every county
- Accommodate as many submissions as possible: Aim to allow each county 25% of their total low-income tracts
- Prioritize local recommendations and development goals
- Prioritize state industrial site development initiatives
More than 450 unique North Carolina census tracts were identified for further review, following the public comment and outreach period. The final list of 252 candidate zones includes at least one low-income census tract in all 100 counties, and tracts that touch the state’s major industrial site development areas and hurricane-impact areas were also given priority.
Taken together, the 252 tracts feature:
- A total population over 1.1 million North Carolinians
- Nearly 45,000 families with children in poverty
- Over 50,000 business establishments
- Over $580 million already invested in these areas, from both public and private sources over the past five years.
The U.S. Department of the Treasury is still in the process of developing criteria and guidelines to define key aspects of the Opportunity Zone program. Treasury has not released a timeline for when capital may begin to flow, but earliest estimates point to late 2018 or early 2019.
The Department of Commerce has published a website, public.nccommerce.com/oz/ offering more information on the program.