This new tool for community and economic development is designed to provide tax incentives for qualified investors to reinvest unrealized capital gains into low-income communities.
“We’re optimistic that the Opportunity Zones program will bring a much-needed infusion of investment to our most distressed rural and urban areas,” said N.C. Commerce Secretary Anthony M. Copeland, “These investments will result in job creation, affordable housing and other economic activity.”
Recently passed federal legislation, known as The Tax Cuts and Jobs Act (H.R.1), authorize 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.
North Carolina has just over 1,000 qualifying low-income census tracts, and accordingly, is authorized to designate up to 251 census tracts as Opportunity Zones. N.C. Commerce is currently reviewing data to develop the list of recommended census tracts. Recommendations are due to the U.S. Department of the Treasury on March 20, 2018.
The Department of Commerce has published a website, http://public.nccommerce.com/oz/ offering more information on the program and inviting recommendations for the development of North Carolina’s proposed Opportunity Zones program or designation of specific census tracts. Interested parties can also contact Business Link North Carolina (BLNC) at (800) 228-8443. All public comments are due by March 8, 2018.
The U.S. Department of the Treasury is still in the process of developing criteria to determine how qualified Opportunity Funds will be certified, and the process they will follow to certify those funds. The U.S. Department of the Treasury has not released a timeline for when capital may begin to flow, but earliest estimates point to late 2018 or early 2019.
The tax advantages for investors are expected to draw significant interest in the program. Qualified investments made by designated Opportunity Funds into Opportunity Zones will receive three key federal tax incentives to encourage investment in low-income communities including:
• A temporary tax deferral for capital gains reinvested in an Opportunity Fund
• A step-up in basis for capital gains reinvested in an Opportunity Fund
• A permanent exclusion from taxable income of long-term capital gains
For more information about the Opportunity Zones Program and related legislation, visit public.nccommerce.com/oz/.