Opportunity Zone Funds to Deliver a Tax Break

(Barron’s)

An abandoned home is seen with the Detroit skyline in the background.  GETTY IMAGES

An abandoned home is seen with the Detroit skyline in the background. GETTY IMAGES

Investors are anxiously awaiting guidance from the U.S. Treasury department on how they can invest in community development and get a break on capital gains taxes.

The potential investments that individuals, foundations, and corporations will be able to make are in “qualified opportunity zones”—8,700 economically distressed areas identified by each state and approved by the Treasury department. Generally, the designated communities have an average poverty rate of nearly 32% and an unemployment rate of 13%, according to the Urban Institute, a U.S. think tank.

The tax act that was signed into law late last year included provisions for funneling capital gains into these opportunity zones, allowing investors to defer paying taxes on those gains, and eventually, to pay fewer taxes on investments made for five years or more. In an interview with The Hill earlier this week, U.S. Treasury Secretary Steve Mnuchin predicted the new zones will attract $100 billion in capital.