12B — August 9 - 22, 2019 — New Jersey — M id A tlantic
Real Estate Journal
www.marej.com
N ew J ersey
By Ronald M. Shapiro, Rutgers Business School A great social policy or a tax subsidy for the rich-Opportunity Zone investing in NJ
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within 180 days of selling their capital asset. These QOFs are private sector cre- ated and managed investment vehicles organized as LLCs, corporations or partnerships. While this law has been modified, updated and clari- fied via two regulations in October 2018 and April 2019, the critical feature of this law is that depending on the taxpayer’s investment holding period, this law offers deferred and potential elimination of federal income taxes on a tax payer’s capital gains invested in a QOF. In addition, taxpay- ers can also exclude any gains realized from the appreciation of the QOF if the investment is held in the fund for at least 10 years. WHERE’S THE BEEF As mentioned above, the primary objective of this law is to redeploy private capital and invest these monies into under- served or impoverished areas across the country generating economic growth. Examples of such growth would be creating new businesses, renovating abandoned buildings, devel- oping affordable housing, or creating new jobs. You would be hard pressed to find any specific require- ment in this law that speaks to creating any of these eco- nomic or social benefits for any qualified opportunity zone community. How is this pos- sible? What assurances do our federal government have that these investments will result in the intended benefits just mentioned? Have local busi- ness and community leaders provided input as to how best to utilize the invested money in their neighborhoods? What -- dance studios, air hockey tables, bean bag chairs to name a few Co-working has also affected the design of the modern workplace. They vary in type- some house large cor- porations much like a standard office complex, simply saving the client the cost of fit-out and facility maintenance. The other, which focuses on Start- Ups with short term leases, is the place to look for modern design solutions. (Sarma). Small business, start-ups and self-employed individuals now have the opportunity to labor in a “real” workplace for a por- tion of the cost of leasing an entire office. These co-working
department inside the federal government is responsible to verify that the investors will comply with the intended pur- poses of this law? Who will monitor these activities? In other words, where is the over- sight? At this time, the answer is; there is none!!! In NJ, we have many job creation and retention incen- tive programs such as the Grow NJ Assistance Program, New Jobs Investment Tax Credit, Urban Enterprise Zone Em- ployees Tax Credit, and the NJ Neighborhood Revitalization Tax Credit. These programs are designed to promote eco- nomic vitality in our state. Each of these programs have specific requirements that must be met in order for the taxpayer or business to receive the promised benefits. There is oversight within these stimu- lus programs that insures NJ taxpayers that the economic and social benefits have or will occur. Look no further than the progress that has occurred in Camden, NJ. Notwithstanding the internal disputes among our state leaders and the methods that were employed to achieve these results, billions of dollars of tax credits were awarded to companies to incentivize them to relocate their offices to this once depressed city. New jobs were created and the city’s di- lapidated housing stock is get- ting a much needed makeover. Other related benefits include improvements in public safety, a lower crime rate, higher high school test scores and gradua- tion rates, increased sales and real estate tax revenues and new businesses opening up. An entrepreneurial spirit has facilities provide a concierge- like atmosphere-- with kitch- ens, conference centers, and community zones in addition to actual desks. As the office is moving towards technology driven space, healthy living, activity based open offices- how do the different generations in the workforce respond to this? The implication is that Mil- lennials embrace the spirit of collaboration but more senior employees reject “alternative” work styles. Approx. 30% of our current work force are Baby Boomers (Fry), coming of age in an era that the larger and more private your work
taken hold in Camden, NJ. IS THERE A SOLUTION IN THE HORIZON In order to answer this ques- tion, let’s first outline what information and data the fed- eral government should be receiving for each qualified opportunity zone project being built. Since the government is making the rules and distribut- ing the lucrative tax benefits, they should obtain answers from these ten questions: 1. What is the proposed property type and size of the project? 2. Where will the project be located? 3. How much will the total project cost? 4. How much will the pro- posed tax incentives be? 5. What effect will the con- struction and build out have on local roads and bridges including local services such as schools, police, fire, and sanitation? 6. How long will it take to complete the project? What are the proposed start and end dates? 7. Who is the owner and what is their real estate de- velopment track record? 8. What are the proposed economic and social benefits the project is supposed to ac- crue to the local town or city? 9. Which department inside the federal government will have overall responsibility and oversight for these proj- ects? 10. Howwill the federal gov- ernment make this info avail- able to the states and in turn to the local towns and cities? While these investments will be made by the private sector, the tax benefits will space was, the higher you were on the corporate ladder. Some millennials, about 50% of the current work force, have never even sat in a cubicle. Change management is criti- cal for these employees when dramatic alterations are made to a space. A facility manager can hire the best design team in the world, but if the staff are not prepared for open work sta- tions complaints will abound and no one will be happy The role as designer has al- ways expanded into counselor, peacemaker, ball-juggler and problem-solver. But now the counseling portion is a very specific and critical part of a
be funded by all US taxpay- ers. Therefore, the federal government should be able to assemble all relevant informa- tion concerning these projects and provide this information to all state and local entities that will be the recipients of these projects. Perhaps a uni- form set of reports should be created so that all interested parties can evaluate and com- pare the monetary, social and economic impact these capital investments will generate. It’s possible that additional resources to collect this data and monitor the projects may be required at the state and local level. In Newark, cor- porate and non-profit grants fromPrudential Financial and the Rockefeller Foundation have been received to help the city manage and monitor its investments. Hopefully, additional corporate and non – profit funding will be contrib- uted to other cities and towns for similar purposes. Nevertheless, this is a fed- eral law so it should start with the federal government. The government must quantify what the social impact will be of the capital invested and how the economic and social benefits will be established and monitored. Six trillion dollars is a lot to give away without any oversight and monitoring. Ronald M. Shapiro is an Assistant Professor of the Professional Prac- tice Finance and Econom- ics Department at Rut- gers Business School. He teaches real estate finance and financial management courses to undergraduate and graduate students. job’s scope. Programming and change-management must go hand-in hand if a facility is to be a success. Ask the right questions, and help the facility manager understand the chal- lenges that the modern office presents. It’s not just about square footage and headcount anymore, but a holistic ap- proach that will win the day. Call HF Planners, LLC today for new innovative ways to create an office space geared towards productivity while incorporating new innovative trends for the future! Casey Murphy, NICDQ is senior designer with HF Planners, LLC.
NTRODUCTION In December 2017, The Tax Cuts and Jobs Act
was signed into law. Thi s f ed- eral law pro- v i de s sub - stantial tax incentives to tax payers who re-invest their capital
Ronald Shapiro
gains in long term invest- ments in certain economic dis- tressed communities. These communities, designated as low income census tracts are called Qualified Opportu- nity Zones (“QOZ”). There are approximately 8700 QOZs located across the United States. There are 169 in New Jersey located in 75 munici- palities. What they all have in common is that they are all in need of private capital to spur economic development. It is estimated that $6 trillion in capital gains are waiting in the wings to be reinvested by taxpayers into these geo- graphic areas. THE KEY TAKAWAY OF THIS LAW This law contains many technical issues, provisions and rules that require the expertise and advice of a tax accountant and / or attorney. It is beyond the scope of this article to discuss the details and specifics of this law along with how the tax benefits affect individual tax payers. Thus, it is not intended to pro- vide tax advice to taxpayers. In order to obtain these tax benefits, a taxpayer must re- invest capital gains from their investment in a Qualified Opportunity Fund (“QOF”) working capabilities has al- tered the physical landscape of the office dramatically. In- corporating “alternate” work space styles is now the norm for most design projects. Rows and rows of cubicles, “pack them in” is very rare indeed. What is more common is 1:1.5 occupancy planning to allow for huddle pods, lounge seating and even sometimes, swings! Private office footprints get smaller or disappear. Because of work-from-home capabili- ties, employers want to entice employees to work in the space and are using enticing ameni- ties to recruit top new talent
Modern workplace trends to consider when planning your office space . . . continued from page 4B
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