Opportunity Zone

A portion of the City of Centralia has been designated as an Opportunity Zone. The Tax Cuts and Jobs Act passed at the end of December 2017 allowing Governors in each state to designate certain census tracts as Opportunity Zones. The Opportunity Zone program was enacted to spur economic development and job creation by providing tax benefits to investors encouraging long-term private sector investments in low-income communities. 

 

How do Opportunity Zones spur economic development?

 

Opportunity Zones are designed to spur economic development by providing tax benefits to investors. First, investors can defer tax on any prior gains invested in a Qualified Opportunity Fund (QOF) until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026. If the QOF investment is held for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%. Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the gains realized become tax free (does not include original gain).

 

How do I take advantage of the benefits of the Opportunity Zone?

 

When you sell an investment you can take the proceeds and invest them in a business or property within Centralia’s Opportunity Zone. This investment allows you to defer paying tax on the proceeds of your gain by reinvesting it in Opportunity Zone property and therefore improving the community. If you keep your investment in the Opportunity Zone property or businesses for longer than 5 years, there is a 10% exclusion of the deferred gain. If held for more than 7 years, the 10% becomes 15%. If you keep your investment in the Opportunity Fund for ten years, you would become eligible for an increase in basis equal to the fair market value of the investment when you sell or exchange it, in essence, the gains realized become tax free.

 

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