Treasury Department rules relating to a program that could see a substantial commercial investment in economically troubled communities across the country are expected to give a clearer definition of that program’s parameters.
The Opportunity Zone program was revealed late last year as part of the Tax Cuts and Jobs Act of 2017 passed by Congress.
The concept behind the program centers on preferential tax treatments for new investments in areas defined as economically distressed, pinpointing in particular neighborhoods where businesses have closed up and moved out, leaving in their wake abandoned buildings and empty lots.
Such areas have to be first nominated by the states in which they exist, with those nominations subsequently certified by the Treasury Department.
To date, the governors of every state have designated a variety of areas as potential Opportunity Zones, with just under 8,800 winning final approval in Washington.
Treasury Secretary Steven Mnuchin has since predicted that the creation and approval of the zones could lead to up to $100 billion in new capital investments.
The new Treasury Department rules will govern both the establishment and operation of special funds to be used as part of the program, as well as the tax breaks for capital gains that will be available.
One of the rules will require that 70 percent of any given company’s property has to be used within the defined zone.
Another rule in the program is stipulating that any company or business operating within an Opportunity Zone will have up to 31 months to use the capital provided from what is called an Opportunity Fund.
In a statement, Mnuchin predicted that the establishment of the Opportunity Zones will “foster economic revitalization and promote sustainable economic growth.”
A second, more detailed, set of rules related to the program is expected to be announced sometime in December.
By Garry Boulard