As part of the recent federal tax reform law, Congress created “Qualified Opportunity Zones” that provide a new potential source of financing incentives for businesses looking to relocate or expand. Through the program, each state identifies a select number of low-income communities —no more than a quarter of its distressed census tracts as certified by the U.S. Treasury Department —which are eligible for new investments and incentives that encourage businesses to locate or expand in those areas.
Recently, Ohio Governor John Kasich announced that he has nominated 320 census tracts across Ohio to be designated as Opportunity Zones, and the Ohio Development Services Agency released a map of those areas. The U.S. Treasury Department is now considering those nominations and is expected to release its list of certified zones in 30 days.
Wondering if Opportunity Zones could benefit your growth plan? Here are three things you should know about this new program:
- Investments by “Qualified Opportunity Funds.” Investors can defer or eliminate gains on the sale of stock or property by investing the sale proceeds in a “Qualified Opportunity Fund” within 180 days of the date of sale. A Qualified Opportunity Fund can be structured in various ways to raise capital, but it must be certified by the U.S. Treasury Department. The funds can then be invested in development projects located in Qualified Opportunity Zones, providing a new source of capital for businesses that locate there.
- Standards for qualifications are straightforward. To be qualified, an Opportunity Fund must hold at least 90% of its assets in Opportunity Zone businesses or business property, or else pay a monthly penalty until the fund meets the investment requirement.
- Details from the U.S. Treasury Department are still to come. Before you can take advantage of this new program for your development project, two things must occur. The U.S. Treasury Department must (1) certify eligible Opportunity Zones, and (2) issue guidance and develop rules that will govern how Opportunity Funds will operate and be certified. These are important considerations to take into account when determining the timeline for your project.
KJK will continue to monitor developments in the program for investors, businesses and neighborhoods wishing to capitalize on Opportunity Zone investment and incentive opportunities.
Want to learn more about how Opportunity Zones or other economic development incentives could help with your business’s long-term expansion or relocation goals? Contact Laura Englehart at firstname.lastname@example.org or 216.736.7270.
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