Greening Opportunity Zones

October 2019—This is an opportunity for municipalities to lift up their disadvantaged areas, for businesses to get a tax break, and investors to put their money where their mouth is.

The Opportunity Zones program offers three tax benefits for investing in low-income communities through a qualified Opportunity Fund. The first is a temporary deferral of inclusion in taxable income for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the date on which the opportunity zone investment is disposed of or December 31, 2026. The second tax benefit is a step-up in basis for capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the taxpayer holds the investment in the Opportunity Fund for at least 5 years and by an additional 5% if held for at least 7 years, thereby excluding up to 15% of the original gain from taxation. The third tax benefits is a permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years. This exclusion only applies to gains accrued after an investment in an Opportunity Fund.

Opportunity Zones are areas designated as needing economic development. Almost all of Puerto Rico is an example. Now impact investors are organizing to help lift up these communities.

This could be a way to knit back our country. Rural communities and those tied to 20th Century technologies like coal feel left behind. Learn more in this paper.