How Does It Work?
The Opportunity Zones program offers three tax incentives for investing in low-income communities through a qualified Opportunity Fund.
FAQ
What is an opportunity zone?
Opportunity Zones are a new community development program established by Congress in the Tax Cuts and Jobs Act of 2017. This program encourages long-term investment in low-income urban and rural communities nationwide by providing a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing in Opportunity Zones.
How many tracts are there?
Kingsport has two opportunity zones. One is in Sullivan County, covering a large portion of the downtown region. The second is in Hawkins County, and roughly half the size.
What are the advantages?
Investors in Opportunity Funds receive three tax incentives for their long-term investment. Investors who choose to leave their investments in Opportunity Funds for longer periods of time receive more tax benefits, with the maximum incentive available for investors who leave their investments in place for at least 10 years. Investors must place their investments with an Opportunity Fund to realize any tax benefits.
How can I learn more?
Have questions? Ready to get started? Fill out the contact form below and we will walk you through the process and answer any questions you may have.
How are they established?
IOpportunity Zones can be established in qualified census tracts that meet certain levels of poverty or other measures of economic distress, and are designated by the Governor.
How do I invest?
Investments in Opportunity Zones must be made through Qualified Opportunity Funds. There are very few limitations on what kinds of organizations can create and manage an Opportunity Fund, though the actual investment entity must be organized as a partnership or a corporation, and the Fund must be established and managed according to regulations created by the United States Department of Treasury.
How do opportunity funds benefit opportunity zones?
At least 90 percent of the dollars placed in Opportunity Funds must be spent in census tracts designated as Opportunity Zones. Funds can be used to meet the needs of each community, and can be invested in operating businesses, equipment and real estate. Each fund will be set up to respond to community needs and the interests of the Fund’s managers and investors. Opportunity Funds will not provide grants but could provide repayable loans or equity investments to projects located within an Opportunity Zone. Opportunity Funds have the potential to direct project financing to areas of the community where it can otherwise be challenging to access traditional capital.
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.
A step-up in basis for 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 gain from taxation.
A permanent exclusion from taxable income of capital gains for 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 after an investment in an Opportunity Fund.
See What Kingsport Has To Offer
