The Latest Rage in Commercial Real Estate – Opportunity Zones

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The Treasury finally announced more precise rules for the eagerly anticipated Opportunity Zone program and billions in capital are lining up to invest in real estate development within these zones.  Part of President Trump’s Tax Plan, the program is intended to serve a catalyst for economic development in blighted areas across the country in areas designated Opportunity Zones. Opportunity Zone tax break rules offer flexibility to developers and favorable treatment to investors deferring, and possibly eliminating capital gains, which can be transferred from other investments tax-free.

$100 Billion  Today’s program promises to deliver over $100 billion. Kemp’s Enterprise Zones and Clinton’s Empowerment Zones were responsible for less than $2 billion in small business incentives across 200 zones.

8,700 The number of zones selected by each State’s Governor. These zones cover nearly 12% of the United States.
$9.4 Billion The projected reduction in Federal revenue between 2018 and 2022 according to the Joint Committee on Taxation.

$35 Million  The number of people that live in the opportunity zones. If Secretary Mnuchin’s conservative estimate is right; it will translate to an average of more than $7,300 in investment for each household in these communities.

80%  The increase in sales of development sites in opportunity zones nationwide during the first three quarters of 2018 over last year according to Real Capital Analytics.  Asking prices are being increased by more than 50% according to a recent article in the Wall Street Journal.
2   The number of key benefits to investors. First, they can roll capital gains from an unrelated investment into a zone and defer those capital-gains taxes until the end of 2026.   Those taxes can be reduced by as much as 15% if investors hold on to their zone investments long enough.  Second, taxes on capital gains from investments in the zones can be avoided if the investments are held for at least 10 years.

427   The number of zones in Florida.   The full list of Florida census tracts nominated by Florida Governor Scott can be found HERE.

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