The federal Tax Cuts and Jobs Act – which according to the mainstream media primarily benefits those with high incomes – has a provision to create opportunity zones in low-income census tracts.
City Councilmember Justin Outling discovered this little publicized program on a trip to Washington, DC, and is anxious to get portions of Greensboro on the list of areas that will qualify for these special tax incentives.
The governor of each state has been charged with designating 25 percent of the low-income census tracts in the state as opportunity zones where tax breaks for investors will be available.
A low-income census tract is defined as an area where the poverty rate is 20 percent or higher, or where the average family income is less than 80 percent of the area’s median income.
Three federal tax incentives will apply in these areas to encourage investment.
If an investment in the opportunity zone is held for at least 10 years, it will be exempt from capital gains taxes. Unrealized capital gains can be invested and the payment of the taxes due deferred until 2026, and the tax is reduced by 15 percent and there is no capital gains tax on the investment itself if it is held for at least 10 years.
If it is held for less than 10 years, the investor would owe capital gains tax on the investment but would still have the original capital gains tax reduced by 15 percent.
If the investment is held for only five years the reduction is 10 percent.
The Greensboro City Council has as one of its goals to increase economic activity in east Greensboro, and this federal tax incentive will give the city another tool to encourage that investment.
Because of all the other moving parts of the Tax Cuts and Jobs Act, this portion of the bill was never discussed on the floor of the House or Senate.
It was added to the bill by South Carolina Sen. Tim Scott and sailed through untouched while everyone argued about how much billionaires should pay in taxes. Since it was never an issue while there were so many other issues in the bill, it has never received much publicity – but news about it is starting to bubble up.
Outling said that even the lobbyist for the City of Greensboro didn’t know about this aspect of the new tax law. He said he is hoping that lack of publicity will allow Greensboro to get in the front of the line when Gov. Roy Cooper is designating the opportunity zones for the state.
He said that encouraging development in economically deprived areas was not something he expected to find in the new tax law, but it’s there.