What’s the Latest on Opportunity Zones?

Next City

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By Oscar Perry Abello

August 20, 2019

Parts of Erie, Pennsylvania, can soon thank Opportunity Zones for free WiFi, even though the city itself was never guaranteed to see a dime of investment via the new federal tax incentive. 

As part of its strategy to court investors and businesses, Erie itself is investing in free WiFi for its eight designated Opportunity Zones, GovTech reported. It’s one of the rarer tactics that various cities, counties and states are using to stand out from the crowd as they vie for attention from the relatively small slice of people and corporations who have the requisite net worth to take advantage of the tax break.

And it is quite a crowd so far. Some 8,700 census tracts around the country received designation as Opportunity Zones last year, making them eligible for investment via the new tax break on capital gains income. Only one city — Boulder, Colorado — took the extraordinary step of telling developers and investors to hold their horses while it updated the zoning and land use regulations in its lone Opportunity Zone census tract. The city is now ahead of schedule to lift its temporary moratorium on Opportunity Zone construction and demolition permits later this month.

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Madera Farmer Initiates Opportunity Zone Fund

The Business Journal

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By Edward Smith

August 14, 2019

Before William Pitman, president of Benton Enterprises, LLC, knew where the opportunity zones in California were, he thought the federally approved tax shelters were all in urban areas. He soon found out his almond farm and processing plant in Madera lies right in the middle of one of the census tracts for tax incentives.

Now, he’s executed one of the first opportunity funds in the Central Valley, and he hopes the designation will send investors his way to make his method of processing foods into a “game changer” for the entire food industry.

Pitman owns Heart Ridge Farms, which uses a special pasteurization method for processing pistachios and almonds. He believes the technology could have applications for a variety of foods, from spices to leafy greens. He even started a separate entity, Adaptable Technology Systems, to market the pasteurization process.

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“This program will either be a boom or a bust:” State senator has plans to redesign Opportunity Zones

The Real Deal

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By Erin Hudson

August 12, 2019

New York State senator James Sanders Jr. is laying groundwork in New York to modify the federal Opportunity Zone program.

“This program will either be a boom or a bust to the community. You’ll either come in as pirates or partners. And my job is to see if we can’t create a partnership,” he said to an audience of real estate developers and investors gathered at the Marriott Hotel in Brooklyn Friday to attend the Opportunity Zone Expo, an event dedicated to the program.

The OZ program aims to boost investment in designated low-income areas across the country by allowing investors to defer taxes on capital gains they invest in a project inside a zone until 2026, and reduce that payment by up to 15 percent, so long as they hold the position for 10 years. Those same investors, who stay in the project for a decade, would also pay no taxes on profits from their investment.

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How Opportunity Zones Are Helping AI Startups Thrive in Low-Income Communities

Forbes

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By Annette White-Klososky

August 7, 2019

Opportunity zones have the potential to unlock an entirely new class of investors and bring high-tech, high-return AI companies to lower income communities in order to create jobs in and move capital to areas of poverty. 

For investors in startups focusing on advanced technology such as AI that might take decades to develop, exit or go public, opportunity zone investment provides an amazing, low-risk opportunity. 

The intention of the opportunity zone program is to “recycle capital into the economy that would otherwise be ‘frozen’ in place due to investors’ reluctance to trigger capital gains taxes,” and “bring investment and development to lower income areas that do not otherwise receive a great deal of attention.” 

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From ‘Dead Zone’ To Teachers Village

Forbes

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July 31, 2019

When Ron Beit wanted to build a residential development from the ground up in Newark, all he heard was that it couldn’t work. But Beit saw an opportunity to confront a major problem in Newark: only a small fraction of teachers can afford to live close to the schools they work in. Reflecting on his motivations, Beit says, “I knew this was the future. I knew people were wrong about this city.” A year after its completion, Beit’s success with Teachers Village is an inspiring perspective for community-focused investments in Opportunity Zones.

When Beit paid a visit to a Newark charter school in 2008 he was blown away by “the energy of the teachers and the energy of the students.” But some of those educators were working six days a week, with hours-long commutes. With studies finding a relationship between commute times, well-being and job satisfaction, and urban schools suffering from higher rates of teacher turnover, it’s not hard to imagine how housing costs and commute times take a toll on Newark’s school system.

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Opportunity Zones Will Be Center Stage At The Presidential Debates

Forbes

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By Joshua Pollard

July 30, 2019

The average American does not know what an Opportunity Zone is yet. The average American is, however, very aware that a presidential election will occur next year. Opportunity Zones are about to take center stage at the presidential debates, increasing awareness and potentially putting new legislative energy around this important, new economic tool. 

Over the next two nights 20 Democratic candidates will debate “regular” topics ranging from border security to health care, but there is one topic that is likely to make fresh headlines for the average American: Opportunity Zones. 

Opportunity Zones are low- to moderate-income neighborhoods that governors from every state chose in 2018 based on tax laws that went into effect in December 2017. Inside these Opportunity Zones investors are offered generous tax advantages for making longer term investments. Some experts project that Opportunity Zones will deliver enormous benefits to private-sector investors and economic growth for low-income communities.

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$11M Santa Rosa housing project tests new opportunity zones for real estate investment

North Bay Business Journal

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By Jeff Quackenbush

July 24, 2019

A four-story mixed-use building under construction in central Santa Rosa is on the leading edge of a new way to attract investors to projects in California and nationwide in economically challenged areas.

A local funder of Hugh Futrell Corporation’s Art House project at Seventh and Riley streets used an investment vehicle that rolled out with the 2017 federal Tax Cuts and Jobs Act and recently has come to fruition in Cailfornia and other states. The midrise building is in one of 879 qualified opportunity zones in California, including 21 in the North Bay, designated by Treasury Department in April 2018.

The Internal Revenue Service only this past April released guidelines on how qualified opportunity funds for tax-deferred investment in those zones would work. That regulatory clarity seems to be generating activity.

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Revival of naval shipyard gets California governor’s attention

North Bay Business Journal

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By Chase Difeliciantonio

July 23, 2019

An official of the governor’s economic development team Tuesday toured the cavernous hangers where workers turn out premanufactured homes in what once was a Naval shipyard. 

“We’re very interested in regions of the state that are trying to help create new opportunities for the residents, both in terms of jobs creation and housing production and in terms of good community engagement,” said Chief Economic and Business Advisor and head of the Governor’s Office of Business and Economic Development Lenny Mendonca before touring the Mare Island facilities of Factory_OS in Vallejo. 

Abandoned as a naval shipyard in 1996, Mare Island’s large facilities lay dormant for years. But activity has picked up as some businesses returned. The island is designated an opportunity zone, which are government-designated, economically disadvantaged census tracts where financiers can invest capital gains like stock payouts through pools called opportunity funds.

In return, they receive tax breaks that improve the longer they keep their money in an investment. Opportunity funds are required to hold 90% of their assets in qualified opportunity zone property.

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We Believe In Opportunity Zones. Here’s Why You Should Too.

Forbes

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By Jim Sorenson

July 17, 2019

At the Sorenson Impact Center, we believe in the tremendous potential of opportunity zones (OZs) to deliver real, meaningful and lasting change to people and communities throughout our country. If we want to create a truly prosperous economic future for all, investment needs to flow to every part of our country, from the lands of the Makah tribe in the Pacific Northwest to Newark, New Jersey. OZs represent the means through which to do this by matching the ideas and potential of communities with the underutilized capital gains of investors.

There are, and will always be, those who approach OZs with less than altruistic motives. For these actors, the court of public opinion and final tranche of OZ related Treasury regulations awaits. However, for the rest of us, maintaining an unwavering commitment to the spirit of OZs for the equitable revitalization of distressed communities will be critical to their long term success.

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Made in California - Episode 3, Opportunity Zones

Made in California

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July 12, 2019

Opportunity Zones; heard of them? We’re talking about them on this episode of Made in California.

We spent our first two episodes talking about inequality so that we’re all grounded in the fact that our economy, right now, isn’t working for everyone.

This episode, we’re going to start looking at some of the ways we can deal with that. One idea that’s gotten a lot of attention recently is the opportunity zone program, which is a new tax incentive designed to re-invest private sector capital into low-income communities, communities which are too often neglected when it comes to investment and development.

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OZs by the Numbers, from Financial Stability to Life Expectancy

Forbes

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July 2, 2019

Opportunity Funds are launchingintrigued investors are beginning to liquidate capital gainslawyers are getting involved, and communities are proactively working to court investors. Interest in Opportunity Zones — a federal tax incentive designed to stimulate economic investment in economically distressed communities across America — has never been greater. Much of this interest and excitement stems from the sheer potential of the Opportunity Zone initiative to breathe new life into struggling communities; as much $6 trillion in unrealized capital gains will be eligible for investment in 8,762 census tracts across all 50 states. For communities with little investment capital, Opportunity Zones could become the most impactful economic intervention since the New Deal. 

We want to make the most of Opportunity Zones. That’s why the Sorenson Impact Center collaborated with Forbes to create The Forbes OZ 20: Top OZ Catalysts. In support of this effort, we analyzed indicators from 7,500 Opportunity Zones, including education, housing costs, and life expectancy. Although our current findings are only preliminary, they’re revealing: when compared to non-designated census tracts within the same state, Opportunity Zones tend to have worse economic, educational and health-related outcomes, despite some variation across states. Our observations, further detailed below, serve to highlight the challenges that distressed communities face in stimulating economic development, as well as the importance of this initiative’s success.

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The Education Opportunity in Opportunity Zones

EducationNext

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By John Bailey

July 2, 2019

More than 8,700 newly created Opportunity Zones are now racing to attract a portion of the $6 trillion in capital that may flow under a provision of the new tax law enacted in 2017. The law uses a package of tax incentives to jumpstart economic development in distressed communities by financing local startups, building small businesses, or developing properties—but there are also opportunities for education institutions and workforce-development programs.

A growing body of research has revealed geographic prosperity gaps across the United States. Recent economic growth is concentrated in large, metropolitan areas with populations of over 1 million, which have experienced 72 percent of the nation’s job growth since the financial crisis. Nearly half of the net increase in business establishments from 2007 to 2016 took place in just two cities: Washington, D.C., and New York City. 

Millions of Americans now live in distressed communities characterized by higher rates of poverty and lower levels of income, educational attainment, and workforce participation. Pockets of the country also struggle with higher rates of “deaths of despair” due to suicide, drugs, and alcohol—symptomatic of a larger sense of lost opportunity.

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Opportunity Zones Can Drive Development Of US Renewable Energy

Forbes

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By James Ellsmoor

July 2, 2019

In the United States, Opportunity Zones (OZs) have provided developers with new possibilitiesThe race is now on to determine whether renewable energy developers can catch up to their real estate counterparts in utilizing this new tool. Opportunity Zones are defined as:

“economically-distressed communities where new investments, under certain conditions, may be eligible for preferential tax treatment.”

OZs are located in 8,700 communities across all 50 states and the 5 US territories, including 878 in California and 862 in Puerto Rico. With over 30 million people living within these areas, this incentive creates one of the largest development markets in the United States.

Opportunity Zones give both individuals and corporations the chance to re-invest existing capital gains into Qualified Opportunity Zone Funds (“QOFs”) in order to receive tax breaks for helping fund investment in impoverished areas. The tax incentive is maximized for the investor over time; the longer the investor keeps their money in the QOF, the better the benefits. This gives investors a chance to make large and lasting commitments that can improvethe socioeconomic outcomes of poor communities.

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State Incentives Crucial to Success of Community Development

Novogradac

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By Michael Novogradac

July 1, 2019

State (and local) tax incentives play an often underappreciated role in the success of federal tax incentives.

The low-income housing tax credit (LIHTC), new markets tax credit (NMTC), historic tax credit (HTC), renewable energy investment tax credit (ITC) and production tax credit (PTC), and opportunity zones (OZ) incentive are all part of the federal tax code, but state incentives to complement them make a significant difference.

This issue of the Novogradac Journal of Tax Credits highlights various state-level tax incentives and how they interact with the federal versions. Two things are obvious: State tax incentives are important and certain types are more successful.

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