Opportunity Zones: Promoting Development Through Long-Term Investment
By: Trevor J. Brown
Dated: June 27, 2019
On May 3, 2018, Governor Chris Sununu nominated 27 New Hampshire census tracts, from Colebrook to Seabrook, to be designated as “Opportunity Zones.” Included as part of the 2017 Tax Cuts and Jobs Act, the “Opportunity Zone” tax incentive program is designed to encourage economic development and investment in low income areas across the country by offering tax incentives for long-term investing. The program offers three distinct tax incentives for investors through the use of “Opportunity Funds” – private sector investment vehicles that invest at least 90 percent of their capital in Opportunity Zones.
First, investors can opt for a temporary deferral of inclusion in taxable income for capital gains reinvested into an Opportunity Fund. The deferred gain must be recognizes either when the Opportunity Zone investment is disposed of, or on December 31, 2026, whichever comes sooner. Alternatively, an investor can opt for a step-up in basis for capital gains re-invested in an Opportunity Fund. The basis is increased if the investment is held by the taxpayer for 5 years or more. Finally, the Opportunity Zone incentive allows for a permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if it is held for at least 10 years. Long-term investments maintained for over 10 years do not have to pay additional capital gains taxes on earnings from Opportunity Zone investments; however, this exclusion only applies to gains that have accrued after an investment in an Opportunity Fund.
The IRS has certified the Governor’s nomination and designated the 27 tracts as “Qualified Opportunity Zones” under Internal Revenue Code Section 1400Z-1(b)(1)(B).
At Sulloway & Hollis, our attorneys are well-versed in various state and federal tax-advantage financing programs. We are able to develop creative strategies for successful projects, ensuring that the interests of clients and investors are well-protected. To learn more about the Opportunity Zones program or for assistance in maximizing your tax incentives through the program, contact Sulloway & Hollis’s Real Estate, Development and Environmental Practice Group at (603) 223-2800, or email firstname.lastname@example.org.