Opportunity Zones were created under The Tax Cuts and Jobs Act of 2017 to encourage private investment in distressed communities around the United States.
The new regime creates certain tax benefits that are available to investors with capital gains, who invest those gains in a Qualified Opportunity Fund (“QOF”), which in turn invests in so-called “qualified opportunity zone property.”
An investor may obtain three types of U.S. federal income tax benefits as a result of investing a capital gain in a QOF:
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Opportunity Zone Program in New York State
New York State is participating in the new Opportunity Zone community development program, offered through the Tax Cuts and Job Acts of 2017. The federal program encourages private investment in low-income urban and rural communities. Based on analyses by Empire State Development (ESD), New York State Homes and Community Renewal (HCR), New York State Department of State (DOS) and the state’s Regional Economic Development Councils (REDCs), New York State has recommended 514 census tracts to the U.S. Department of the Treasury for designation as Opportunity Zones.
Click here to view the list of the 514 approved and designated tracts.
Use the map below to view approved and designated tracts:
The Opportunity Zones incentive is a new community investment tool ... Explore the map below to see which communities have been designated as Opportunity Zones: ... to more American communities and empower state and local leaders to build .... and higher levels of job-creating investment in underserved communities.
The Opportunity Zones tax incentive was enacted as part of the Tax Cuts and Jobs Act of 2017 to help spur investments in historically underserved communities. ... The Empowerment Zone (EZ) program, created in 1993, enabled businesses located in low-income communities selected by HUD and USDA to claim certain tax benefits.
Q: What is an Opportunity Zone?
A: An Opportunity Zone is a low-income census tract with an individual poverty rate of at least 20 percent and median family income no greater than 80 percent of the area median.
Q: What is the benefit of an Opportunity Zone?
A: An Opportunity Zone can receive funds from Opportunity Funds. Opportunity Funds provide investors the chance to put that money to work rebuilding the low to moderate income communities. The fund model will enable a broad array of investors to pool their resources in Opportunity Zones, increasing the scale of investments going to underserved areas.
Q: How many Opportunity Zones may a state nominate?
A: Each state may nominate a minimum of 25 total eligible census tracts but no more than 25 percent of the total number of eligible census tracts within the state. The nominations must be made by the Governor no later than April 20, 2018. When finalized, the U.S. Department of the Treasury will approve the nominated census tracts and administer the Opportunity Zone Program.
Q: What areas are eligible for nomination to Opportunity Zones?
A: Click here to see eligible census tracts. Zoom in on New York State and click on “2011-2015 LIC Census Tract and Opportunity Zone Eligible Continuous Tract.”
Q: Where can I find more information about Opportunity Zones?
A: Check the following for more details and information:
Q: How will Governor Cuomo determine which zones to nominate?
A: The Governor has asked Empire State Development and Homes and Community Renewal in conjunction with the Regional Economic Development Councils to research and outline all possible areas which could be designated as Opportunity Zones. The final recommendation of opportunity zones will be determined based on the information provided by ESD, HCR and the REDCs.
Q: Why was my tract not chosen?
A: Unfortunately, all tracts could not be chosen. The 514 recommended Census tracts – which represent 25 percent of the more than 2,000 tracts deemed eligible by the Federal government – were selected based on recommendations from the Regional Economic Development Councils, local input, prior public investment and the ability to attract private investment.
Q: How do I start or find Opportunity funds?
A: The final guidelines for the Opportunity Funds have not been released by the U.S. Treasury. Open questions about the nature of the investments or fund formation should be included in these guidelines. Like NYS, the U.S. Treasury has a process for submitting comments located at https://www.cdfifund.gov/pages/opportunity-zones.aspx.
Q: What are the New York State tax implications of the recently enacted federal tax benefits for investment in the Opportunity Zone Program?
A: Investor must invest in a qualified opportunity fund which holds at least 90% of its assets in qualified opportunity zone property. A qualified opportunity fund is an investment vehicle organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property. There are two main incentives to encourage investment in qualified opportunity funds. First, taxpayers can temporarily defer the inclusion in gross income of capital gains that are reinvested in a qualified opportunity fund. Taxpayers can also permanently exclude capital gains from the sale or exchange of an investment in a qualified opportunity fund held for more than 10 years. Generally, both the deferral and exclusion of the capital gains from federal income will flow through to New York State. This means those gains will also be deferred and excluded from New York taxable income
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It is anticipated that in Year Four, 124% of your initial investment will be returned and in most cases will not be a taxable event. Furthermore, the investor will continue to own his original pro rata share of the investment going forward.
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