A large part of east Greensboro was officially designated as a North Carolina opportunity zone on Friday, May 18, offering unique tax incentives for those who make a significant investment in the area.
The opportunity zones were created by the Republican Tax Cut and Jobs Act, which became law late last year. In that legislation, along with the federal income tax cuts, was a provision for states to designate opportunity zones in areas where the poverty rate is over 20 percent or family income is less than 80 percent of the area’s median income.
Ten census tracks in Greensboro were submitted and all were approved. Almost all of downtown Greensboro is included in the opportunity zone, with most of the property east of Edgeworth Street and Freeman Mill Road and north to Cone Boulevard being included. To the south the boundary is roughly Alamance Church Road and I-85/I-40 and to the east of Youngs Mill Road and Rankin Mill Road.
Those are rough boundaries but do give an indication of the extent of the opportunity zone.
Mayor Nancy Vaughan said, “I think this is an exciting tool that investors can use to invest in economically distressed areas in our city.”
Vaughan said, “Certainly the News & Record property falls within the opportunity zone, so the timing for that is perfect, as it is for any other large development in the downtown area.”
She noted that investments in designated areas of east Greensboro would also qualify for city tax incentives.
Being designated an opportunity zone allows qualified investors to avoid standard capital gains tax obligations by investing unrealized capital gains into an opportunity development fund that invests in an opportunity zone. So this particular incentive for investors in high poverty areas won’t involve local money, but it gives investors another method to avoid paying capital gains taxes, which are currently about 23 percent.
A qualified investor by investing in an opportunity zone for at least seven years can exclude up to 15 percent of the original investment from capital gains tax.
Also, the profit made on an investment in the opportunity zone receives a permanent exclusion from the capital gains tax if the investment is held for at least 10 years.
The rules for the opportunity funds have not been written, so the exact process for taking advantage of this investment tool is not known, but those rules are expected to be in place by the end of 2018.
The purpose is not only to encourage development in economically depressed areas but also to tap into some of the estimated $2 trillion in unrealized capital gains. The program gives the investor a method of investing those capital gains in a new project without paying capital gains taxes, which are deferred and reduced for an investment of less than 10 years, and if the money is invested for 10 years or more then the capital gains tax is deferred permanently.
Vaughan said that all 10 census tracts nominated by the city were approved, which will give investors a large area to consider. The part of east Greensboro that suffered so much tornado damage is in an opportunity zone and Vaughan said that it could help bring new investment to that area.