Opportunity Zones Program is an innovative approach to encourage long-term private sector investments in low-income communities within the U.S.
The concept was originally introduced in a 2015 paper, “Unlocking Private Capital to Facilitate Economic Growth in Distressed Areas,”. The goal was to address the persistent poverty and uneven recovery that left too many American communities behind. The idea has since been championed by a wide-ranging coalition of investors, entrepreneurs, community developers, economists, and other stakeholders.
Indeed many studies have showed over the past years a decline in local businesses development throughout distressed community while the rest of the country has recorded strong growth. The goal of this program is to revitalize economically distressed communities using private investments rather than taxpayer dollars.
Opportunity Zones have been designated in all 50 states in the US, the District of Columbia and US possessions. Up to 25% of low-income neighborhoods that meet the income qualifications of the program in each area were designated as Opportunity Zones.
The Tax Cut and Jobs Act enables now investors with capital gains and tax liabilities to benefit from a favorable tax treatment for investing in Opportunity Funds.
Investments in Opportunity Funds can qualify for three principal tax benefits: a temporary deferral of capital gains that are reinvested in a qualified opportunity fund within 180 days after the recognition of such gains (“reinvested gain”), an exclusion of up to 15% of such reinvested gain, and a permanent exclusion of all gain, other than reinvested gain, realized on an investment in a qualified opportunity fund that is held for a ten-year period.
An opportunity fund is a corporation or a partnership certified by the U.S. Treasury Department that hold at least 90% of their assets in Qualified Opportunity Zone Property.
