By Jordan Rose and Dan Gauthier | Rose Law Group
As you have read, Opportunity Zones are a federal community development program enacted as part of the Tax Cuts and Jobs Act, with the primary purpose of incentivizing long-term investment in zones set aside by each state.
Arizona has 168 Opportunity Zones, designated by Governor Ducey and certified in April.
Private investors can work with municipal governments to get the most out of Opportunity Zone investments.
The Opportunity Zone program offers significant tax incentives for investors and promises to benefit low-income urban and rural census tracts designated by each states’ governor. Investments into Funds may look even more attractive to investors because of the recent volatility in the stock market. Guidance from the Treasury Department’s recent is expected to push forward investments into opportunity funds and spur fund investments into designated zones across the country.
With the regulatory framework taking shape, fund managers and investors will look to partner with community leaders and entrepreneurs to identify projects to qualify under the program. How efficient the process will be is likely to depend both on public officials’ readiness to work with the available funds in their respective jurisdictions.
Expect cities to create investment prospectuses that highlight the distinctive advantages of their zones over others, such as proximity to infrastructure or areas of present or recent economic growth and demographics.
It is not uncommon for publicly owned land to constitute the largest share of property in a city. Cities will be inventorying their property.
With more than 8,700 Zones across the country, competition is heavy. In Tampa Bay, Florida and Oakland, California, officials and Fund sponsors are digging into whether they can fund the development of new baseball stadiums for the Devil Rays and Athletics, respectively, where potential stadium locations are in opportunity zones.
Cities and states will benefit greatly from fund investments, but it is important to recognize funds will invest in projects where public officials are actively seeking investment through the program.
Cities and states stand to lose zero tax dollars by investments through the program versus traditional investment. That’s because the benefits only apply to federal income taxes, meaning the potential upside when public officials properly position their city or state is massive, whereas the downside is limited.
