Download to read offline
More Related Content
Similar to Centergy Opportunity Zone Program Overview
More from Alex Rudie
Centergy Opportunity Zone Program Overview
- 1.
- 2. OPPORTUNITY ZONES Opportunity Zones arelow income census tracts nominated by governors and certified by the U.S. Department of the Treasury into which investors can now put capital to finance new projects and enterprises in exchange for certain federal capital gains tax advantages. 2
- 3. 120 DESIGNATED OPPORTUNITY ZONES IN WISCONSIN Created Throughthe TaxCutsAnd JobsAct Of 2017 Governor In Each State Designated Up To25% of the State’s Low- IncomeCensus Tracts as Opportunity Zones 3
- 4. REGIONAL OPPORTUNITY ZONES Regional mapimage 4 • Merrill • Wausau (2) • Stevens Point (2) • Marshfield • Wisconsin Rapids • Port Edwards • Nekoosa
- 5.
- 6.
- 7.
- 8.
- 9.
- 10.
- 11.
- 12. HOWIT WORKS Taxpayers canget capital gains tax deferral (&more) Qualified Opportunity Funds for making timely investments in Qualified Opportunity Zone Business/Property which invest in 12 Graphic Source: Fikri, Kenan. Economic Innovation Group, “Opportunity Zone Program Overview.” Opportunity Zone Program Conference. Denver, CO. June2018.
- 13. BUSINESS BENEFITS 1. Increased Accessto EquityCapital 2. DiscountedCapital for Businesses 3. Potential to Combine with OtherIncentives TIF Federal New MarketsTaxCredits(NMTC) State and Federal HistoricTaxCredits Wisconsin Economic DevelopmentCorporation (WEDC) and other StateTaxCredits State and Federal HousingTaxCredits 13
- 14. COMMUNITY BENEFITS 14 Injection ofResources IncreasedTaxBase Expanded JobOpportunities Attraction of New Businesses & Start-Ups LoweredTIFDemands
- 15. WHATARE CAPITALGAINS? A CapitalGain is a rise in the value of a capital asset (such as an investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. Gains may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes. 15
- 16. INVESTOR BENEFITS 1. Gain Deferral Temporarydeferral of inclusion for any capital gains tax on money reinvested into an OpportunityFund. 2. Partial Forgiveness Up to 15% reduction in capital gains tax obligation due to a step-up in basis if the investment is held in the Opportunity Zone for 5 to 7years. 3. Exemption from AdditionalGains Permanent exclusion from taxable income of capital gains from the sale or exchange of Opportunity Fund investment if that investment is held for at least 10 years. 16
- 17. CORE ELEMENTS Zones: States and territoriesdesignated up to 25 percent of Low-Income Community Census tracts in their state to be certified by Treasury as OpportunityZones. Funds: Opportunity Funds are self-certified investment vehicles organized as corporations or partnerships for the purpose of investing in qualifiedOpportunityZone assets. All investments that seek to take advantage of the provision must flow through Funds. Investments: Funds make equity investments into businesses and property in OpportunityZones. Qualified assets are the stocks of qualified companies, interests of qualified partnerships, or direct ownership of qualifying tangible property. 17
- 18. OPPORTUNITY FUNDS Opportunity Funds areprivate sector investment vehicles that invest at least 90 percent of their capital in OpportunityZones. 18
- 19. OPPORTUNITY FUNDS Self-Certification Process– No IRSApprovalRequired Opportunity Funds must be Formed as Corporationsor Partnerships Individuals with Capital Gains can Create theirown Opportunity Fund Real Estate Developers canCreate ProjectSpecific Opportunity Funds Large Institutions are Creating Multi-investor/Multi-asset Opportunity Funds All Funds Must Pass AssetsTest – 90% of Assets mustbe Invested in Qualified OpportunityZoneProperty 19
- 20. THEPLAYERS Who Is CreatingAnd Managing OpportunityFunds? Banks & Financial Institutions Real Estate Developers FinancialServices PublicAccountingGroups Municipalities Non-profits/InterestGroups Individuals 20
- 21. OPPORTUNITY FUND INVESTMENTS FocusedOn Equity– RatherThanDebt ThreeTypes ofQualifiedOpportunityZone Property Stock Partnership Interest Tangible Business Property 21
- 22. TYPES OF POTENTIAL INVESTMENTS CommercialReal Estate Development and Renovation in OpportunityZones Opening New Businesses in Opportunity Zones Expansion of Existing Businesses Into Opportunity Zones Large Expansions of Businesses AlreadyWithin Opportunity Zones 22 Graphic Source: Fikri, Kenan. Economic Innovation Group, “Opportunity Zone Program Overview.” Opportunity Zone Program Conference. Denver, CO. June2018.
- 23. OPPORTUNITY FUND INVESTMENTS QualifiedOpportunity ZoneBusiness A business that owns or leases substantially all (70 %) of its tangible property in Qualified Opportunity Zone Business Property. Must also generate at least 50 percent of its total gross income from active business conduct with a substantial portion of the intangible property of the business used in the active conduct of any such business. Less than 5 percent of the average of the aggregate unadjusted bases of the property can be attributable to nonqualified financial property. Additionally, private clubs, golf courses, and certain vice businesses are not eligible for investment by an Opportunity Fund. 23
- 24. ALLOWABLE INVESTMENTS: TANGIBLE BUSINESS PROPERTY Opportunity Zone BusinessProperty is tangible property acquired after Dec. 31, 2017 that is used in a QualifiedOpportunity Zone trade or businessand either the use of the property in the Qualified OpportunityZone originates with the fund, or the fund substantially improves the property. Substantially Improves: Measured by the Opportunity Fund’s additions to the adjusted basis of the building Does not include land 24
- 25. INVESTMENT EXAMPLE Source: Economic InnovationGroup, “The Tax Benefits of Investing in Opportunity Zones,” January 2018. 25
- 26. EQUIVALENT PRE-TAX ROI COMPARISON Opportunity Zone Standard Investment 7% 10.5% 4.3%7% 2.9% 5% Opportunity Zones allow investors to accept lower annual returns to achieve the same post-tax value per dollar invested. 26
- 27. WHAT’SNEXT? First IRSGuidance ReleasedOct. 19,2018 More interpretation and clarification expectedApril 2019 Solidify the ProgramTimeframe PrepareCommunityProspectus Create Companion IncentivePrograms Identifying Potential Projects EstablishingOpportunityFunds CreativeOpportunity ZoneDeals 27
- 28. OPPORTUNITY ZONE TIMELINE *PERCURRENTIRS GUIDANCE 28 Deadline for 15%Increase in Basis (7 YearBenefit)2019 2021 2026 2047 Deadline for 10% Increase in Basis (5YearBenefit) Deadline to PayTax on DeferredGain Can Continue to Hold Investment in Opp. Zone until Dec. 31,2047
- 29. www.wheda.com/opportunity-zones Wisconsin Housing andEconomic DevelopmentAuthority https://Inwisconsin.com/doing-business-in- wisconsin Wisconsin Economic DevelopmentCorporation www.acceleratorforamerica.com/OZGuide Accelerator forAmerica www.ncsha.org NationalCouncil of State HousingAgencies www.novoco.com Novogradac USEFUL RESOURCES
- 30. CONTACTS 30 Gordon Crow, IOM ExecutiveDirector Centergy [email protected] 715.551.6650 Scott Harrington,AICP Principal Planner Vandewalle &Associates [email protected] 608-255-3988 Barb Fleisner LaMue,CEcD,EDFP Vice President, Business & Community Development Wisconsin Economic DevelopmentCorporation [email protected] 608.210.6760 KateWolf Business and Community EngagementTechnical Officer Wisconsin Housing and Economic DevelopmentAuthority [email protected] (414) 227-2291