Although a federal program, it is the individual obligation of cities and towns with certified opportunity zones to promote and attract investment.
To give you some context about Qualified Opportunity Zones and how your city or town can articulate tax savings to investors, here's an explanation:
1. Any recent capital gains (usually through sale of real estate, 1031 exchanges, or even capital gains from stocks) can be tax deferred for 10 years if the gains go towards an opportunity fund for investment in property/properties in an opportunity zone.
2. The developer (or the city) must set up an Opportunity Fund using recent capital gains. Here is a great resource for setting up a fund: https://fundrise.com/opportunity-fund
3. The original deferred tax amount is reduced by 10% after 5 years of ownership. That reduction in original taxable amount grows to 15% after 7 years. After 10 years, you do not have to pay any taxes on that original amount even if you sell the property. If the property is sold before 10 years, the original deferral will be taxed regularly unless it is owned more than 5 or 7 years (10% and 15% on taxable amount).
Because it is the cities or towns responsibility to promote Opportunity Zones, we see some cities creating entire sections of their website devoted to Opportunity Zones.
Step 1 - Readiness: Make sure zoning is conducive to Opportunity Zones. Consider subdivisions or zoning changes to accommodate the program. You can also display your opportunity zones on your municipality’s mapping site (North Attleboro, MA Example)
Step 2 - Promotion: You may want to consider adding a section about Opportunity Zones to your municipality’s website. Cities who can successfully promote themselves as those that welcome development as part of an opportunity fund will be more likely to attract investment.
Step 3 - Results: Below is an example of a graphic we made demonstrating the success investors could have with Opportunity Fund projects. This is an incredibly powerful way to promote the Opportunity Zone program in your municipality to investors.
At a minimum, your municipality should have an informative graphic quickly demonstrating the potential benefits for investors. You may want to put this on the Economic Development section of your cities website if you don’t have a homepage for Opportunity Zones.
Sample infographic we created - you should include graphics like this one above on your economic development site as an investor resource.
Important notes on Opportunity Zones:
Opportunity funds can be joint ventures, and you also do not have to buy an entire property...you simply need to invest (improve, etc.) in a property within an opportunity zone.
The program goes beyond 2026. If you buy a property in 2020, for example, you can still claim a 15% reduction in original taxed amounts in seven years.
For more information about Opportunity Zones, download our webinar recording, “Land of Opportunity Zones - Kickstart Investment Using Maps!”