A little-noticed provision tucked into the monumental tax reform act that Congress passed at the end of 2017 has the potential to deliver big benefits for historic preservation—but only if advocates act fast. Preservationists have until March 21 to convince their governors to include underinvested historic neighborhoods on the lists of areas that will be eligible for a new tax incentive sometimes known as the Opportunity Zone Program.
It creates tax incentives for investment in areas that meet the same low-income criteria as the New Market Tax Credit (NMTC) program, although only 25 percent of NMTC tracts in a state can be selected. State governors have been instructed to make their designations by mid-March.
With this program comes the chance to kickstart economic recovery in regions experiencing a significant opportunity divide: rural America. There is a disparity between urban and rural economies in America that continues to widen.
The new program was added to H.R. 1 (also known as the Tax Cuts and Jobs Act) through an amendment proposed by Sen. Tim Scott, R-S.C., that was adopted with bipartisan support. It creates so-called Qualified Opportunity Zones (QOZs), which offer significant tax breaks to investors seeking to defer or abate their capital gains taxes.
Eligible investments include those in new buildings and the substantial improvement of existing ones—including historic buildings—as well as other companies and projects. Corporations, real estate companies, and individuals looking to reduce their capital gains tax liabilities are all possible investors.
The benefits for investors are potentially huge. Taxpayers can defer short or long-term capital gains by reinvesting the capital gain portion in a “qualified opportunity fund” within 180 days. That fund must, in turn, invest the proceeds in “qualified opportunity zone property.”
REVITALIZATION thanks Linda Shetabi of the University of Glasgow for notifying us of this.
Photo of Iolani Palace in Honolulu via Adobe Stock.
See full article by Andrew Potts in Saving Places.
Read article in The Hill on the potential of Opportunity Zones to help revitalize rural America.