CHANDLER ECONOMIC DEVELOPMENT UPDATE : APRIL 25, 2018
Opportunity Zone Designation Offers New Benefits for Investing in Chandler
Two Census tracts in Chandler have been selected to participate in a new federal program to spur economic development. The Opportunity Zones program was established by Congress in the Tax Cuts and Jobs Act of 2017. The program offers
federal tax benefits to encourage private investment in low-income areas throughout the U.S., as defined by median family income and poverty rate.
Under the law, each governor may nominate up to 25 percent of their state's qualifying Census tracts as Opportunity Zones. Arizona had 669 qualifying Census tracts and could nominate 168.
The governor's office looked to the Arizona Commerce Authority for guidance, which in turn requested nominations from individual municipalities, counties and tribes throughout Arizona. The City of Chandler was asked to nominate two of Chandler's nine qualifying Census tracts. On March 8th, the Chandler City Council passed a resolution authorizing the nomination of two Census tracts in Chandler. The City's nominations were included in the 168 tracts submitted for Arizona, which were approved by the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) on April 9th.
The Opportunity Zones program will enable investors to defer and partially eliminate taxes on capital gains that are reinvested into Qualified Opportunity Funds. Eligible fund activities include investing in real estate projects, seeding new businesses, and expanding businesses located in Opportunity Zones. Federal tax benefits increase the longer the investment is held. After five years, the taxable amount of the capital gains reinvested is reduced by 10 percent. After 10 years, the taxable amount of the original capital gain is reduced by 15 percent and taxes on earnings from the investment in the Opportunity Fund are eliminated completely.
Treasury and the IRS plan to issue additional information on Qualified Opportunity Funds. The additional guidance will address the certification of Opportunity Funds, which will likely be required before any Opportunity Zone-based investment activity can take place.