What They Are. How They Work. Why to Invest. Who They Benefit.

Opportunity Zones

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406.257.7711 | 44 2nd Avenue West | Kalispell, MT

The Overview

http://www.kalispellcoreandrail.com/Opportunity Zones (OZ or O-Zones) were created as part of the 2017 tax reform deal, originally introduced in the Investing in Opportunity Act (IIOA) and enacted in 2017 as part of the Tax Cuts and Jobs Act. The initial concept was to bring forth a systematic approach to help solve the economic woes that have plagued many American communities – areas where investment is historically low and poverty is higher than the national average. Early in 2018, Governors across the nation designated certain census tracts in their state as Opportunity Zones, and by June, Opportunity Zones in all 50 states, 5 territories and Washington D.C. were approved by the Treasury Department creating 8,760 eligible investment opportunities.

This community development tax incentive program will provide opportunity for private investors to support businesses in distressed communities by allowing them to place their unrealized capital gains into Opportunity Funds to develop new real estate projects or businesses.

The benefits of investing in Opportunity Fund projects are considerable. All taxes due on the capital gains are deferred until the investment is withdrawn from the Opportunity Fund. If the investment in the new project is for five years, the taxes due are reduced by 10%. If withdrawn after seven years, the taxes are reduced by 15%, and if left in the Opportunity Fund for 10 years all of the taxable income on the new investment will have permanent exclusion.

In the Flathead Valley, an Opportunity Zone was designated by Governor Steve Bullock in April of 2017, making the areas on either side of Main Street eligible for investment tax credits. The tax benefits combined with the opportunity to invest in the Kalispell Core Area around the new trail are likely to spur property sales and new construction in 2019 in the areas surrounding the train tracks. With removal of the tracks in 2019 and the trail to be built in 2020, the population growth and expanding businesses in those sections of Kalispell will likely develop into high density housing, commercial and mixed use buildings bringing jobs, prosperity and increasing investment opportunities along the Kalispell Core Area.

Montana West Economic Development is well-positioned to assist and make connections for the acceleration of investment and development into Opportunities Zones in Kalispell, Montana. Give us a call today for an in-depth discussion.

 

Key Facts

  • First introduced in the Investing in Opportunity Act (IIOA)
  • Reintroduced in the 115th Congress by Senators Tim Scott (R-S.C.), Cory Booker (D-N.J.), and Congressmen Pat Tiberi (R-Ohio) and Ron Kind (D-Wis.), gaining nearly 100 congressional cosponsors in 2017
  • Signed into law as part of the tax overhaul bill in late 2017
  • Officially named “Opportunity Zones” by the U.S. Treasury
  • Designed to channel more equity capital into overlooked, low-income markets to catalyze growth and opportunity through long-term private sector investment
  • Low-income census tracts are places with an individual poverty rate of at least 20% and a median family income no great than 80% of the area median
  • Temporary Tax Deferral – taxes paid at the earlier of withdrawl from fund or December 31, 2026
  • Reduced Tax Liability – 10% for 5 year investment, 15% for a 7 year investment
  • Permanent Exclusion from taxable income after 10 year investment
  • Eligible assets for Opportunity Zone investment include business or real property such as:  stock of a qualified OZ corporation, partnership interest in a qualized OZ partnership, or business property used in qualifed O-Zones
  • 90% of Opportunity Fund investments must be in qualified O-Zone business or assets
  • Businesses must have 70% of tangible property in the O-Zone
  • Substantial improvements must be made
  • Qualified Opportunity Funds have 31 months to improve property in the O-Zones
  • LT tax benefits remain, even if area loses O-Zone status
  • The statue does limit the number of Opportunity Funds that can be created, not does it provide instruction on the nature of the investments
  • Pooling capital through an Opportunity Fund structure provides an opportunity for a broad range of investors
  • Investors can defer their original tax bill until December 31, 2026 at the latest, or until they sell their Opportunity Fund investments, if earlier
  • Overview of Opportunity Zone PowerPoint Presentation by Molly McCabe of Hayden Tanner
  • Check out the Kalispell Core & Rail Redevelopment Project which will “spur growth across multiple sectors of the economy, implement critical infrastructure, and provide diversity in housing options. Simultaneously, it will serve to enhance pedestrian and motorist safety, and add incentives and services for a growing workforce.”

Hep drive money into distressed communities, generating economic growth and jobs

Give your vision the space to grow.

Contact us about expanding your business in the Flathead Valley / Glacier Park region:

406.257.7711 | DoBusinessInMontana.com