Rural Communities May See Increasing Outside Investment Soon

(WASHINGTON, DC) Thousands of communities throughout the U.S. could soon see an influx of capital and investment, thanks to a new federal tax incentive program included in the 2017 tax reform law. The Opportunity Zones initiative targets more than 8,700 communities—the vast majority of which are low-income—in all 50 states, the District of Columbia and five U.S. territories. The thinking behind the program is to drive investment capital into communities that need it by allowing taxpayers to invest capital gains into qualified “opportunity funds.” By making such an investment, the taxpayer is able to defer capital gains tax through 2026, or whenever the investment in a qualified opportunity fund is sold or exchanged, whichever comes first. If the investment is held for longer than five years, taxpayers will realize a 10 percent exclusion of their deferred gain; if it is held for more than seven years, an additional five percent is excluded. In addition, assuming the investment is held 10 years, any additional gain that the taxpayer realizes on the investment itself is not taxed.