Opportunity Zones in Jonesboro

No cost for the seminar, but pre-registration is suggested by calling Tonya Hottel at 870-336-7195 or email at thottel@jonesboro.org

Opportunity Zones Seminar flyer february 27, 2020


Summary: The federal Opportunity Zone (OZ) program is designed to incentivize persons who have capital gains to invest in lower income areas in order to spur economic activity.


Jonesboro Opportunity Zone Maps: Maps, Jonesboro Opportunity Zones (PDF)


Jonesboro Redevelopment Resources


Jonesboro Unlimited (partner in economic development): www.jonesborounlimited.com


Other local organizations:


Contact: Mike Downing CEcD, Chief of Staff, City of Jonesboro, 870-932-1052, mdowning@jonesboro.org


Frequently Asked Questions: (See also here and here)

What is an Opportunity Zone?

An opportunity zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.


Where are Jonesboro’s Opportunity Zone areas?

There are three – Downtown, A-State area and the Industrial area.


What are the incentives for investing in Opportunity Zones?

Opportunity Zones are designed to incentivize new equity investments in low-income communities nationwide. All of the underlying incentives relate to the tax treatment of capital gains, and all are tied to the longevity of an investor’s stake in a qualified Opportunity Fund. There are three core tax incentives:

 

Temporary deferral: A temporary deferral of inclusion in taxable income for capital gains reinvested into 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.

 

Step-up in basis: A step-up in basis for the deferred capital gains reinvested in an Opportunity Fund. The basis is increased by 10% if the investment in the Opportunity Fund is held by the taxpayer 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 deferred gain from taxation.

 

Permanent exclusion: 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 on investments made through an Opportunity Fund. There is no permanent exclusion possible for the initially deferred gain.


What is an Opportunity Fund?

A qualified Opportunity Fund is any investment vehicle organized as a corporation or partnership with the specific purpose of investing in Opportunity Zone assets. The private sector is responsible for establishing Opportunity Funds.


Who can establish an Opportunity Fund?

The statute allows for broad participation in the creation of Opportunity Funds with the goal of drawing a wide array of investors to support the broad variety of needs in low income communities nationwide. Any entity, from large banks to a community development financial institution, from a venture capital group to a developer consortium, as well as regional economic development organizations and even individual tax payers can establish a fund as long as they follow the guidelines set out by the statute and Treasury.


How is an Opportunity Fund established?

To become a qualified Opportunity Fund, an eligible taxpayer self-certifies by completing a form (Form 8996) and submitting the form with the taxpayer’s federal income tax return for the taxable year. The IRS has released the certification form as well as instructions.


Opportunity Funds must hold at least 90 percent of their assets in qualifying Opportunity Zone Property (defined below), and will be tested at the 6-month and year-end points to ensure compliance (final guidance on the initial timing of this test is forthcoming).


What can an Opportunity Fund invest in?

The policy enables funds to be responsive to the needs of different communities, allowing for investment in operating businesses, equipment, and real property. For example, funds can make equity investments in new or expanding businesses by purchasing original-issue stock of the company if substantially all of the company’s tangible property is and remains located in an Opportunity Zone. Funds can take original interests in partnerships that meet the same criteria. Funds can also invest directly in qualifying property, such as real estate or infrastructure, if the property is used in the active conduct of a business, and if either the original use of the property commences with the fund or the fund substantially improves the property by investing at least as much as the investor’s basis in refurbishments.


Can an Opportunity Fund invest in multiple Opportunity Zones?

Yes. An Opportunity Fund must invest at least 90 percent of its assets in qualified Opportunity Zone property, whether in one zone or across multiple zones.


Can I invest my capital gains directly in an Opportunity Zone business or property, without going through an Opportunity Fund, and qualify for the tax incentives?

No. In order to qualify for the tax incentives, investors must invest through a qualified Opportunity Fund.


What is the current state of program rules and regulations?

 The U.S. Department of the Treasury released final regulations on December 19, 2019 which can be found here.