Market Insight November 2018 (Opportunity Zones)


What you need to know about Qualified Opportunity Zones

Economic development tools and incentives are creating opportunities for Wichita developers who want to take advantage of tax incentives and temporary deferment of capital gains. Want to learn more?

As part of the 2017 Tax Cuts & Jobs Act, a program was enacted to help address uneven econom- ic distribution throughout communities. Qualified Opportunity Zones were set up to provide a new class of investments from private investors to be deployed in areas needing new ventures. How it Works

Zones. If an investor holds that property for five years, that property is eligible for 10% deferral on capital gains realized. If held for seven years, that property is eligible for a 15% deferral of short- term OR long-term capital gains taxes. After that seven-year period, where the program is set to end De- cember 31, 2026, the capital gain’s taxes must be paid,

reduced by the deferral amount related to the timeline of the invest- ment. An additional benefit, if the invest-

This initiative requires Qualified Opportunity Funds to be estab- lished within 180 days

of a sale resulting in a capital gain. Properties, or any

ment is held for ten years in a Qualified Opportunity Zone,

capital gains can be exchanged with the funds distributed to real estate in Qualified Opportunity Zones with the creation of a Qualified Opportunity

there are no taxes on profits accrued by the Qualified Opportunity Fund. The fund does not have to be a real estate sale, it can be any capital that has experi- enced gains.

Fund with tax deferral and avoidance of capital gains. All purchases in an opportu- nity zone must be through the creation of a Qualified Opportuni- ty Fund, that are required to be equity

Opportunity Zones There are nine tracts in Sedg- wick County, all in Wichita, that qualify.

financing - no debt financing. Establishing funds must be a new corporation or partnership with the requirement of putting 90% of that fund’s assets in Qualified Opportunity Zones. Those assets in Qual- ified Opportunity Zones can be in new or improved commercial buildings, multifamily complexes, and businesses operating in Qualified Opportunity

These nine tracts represent zones that qualified as low-income areas in the 2010 census. Eligi- ble Opportunity Zones were defined by “Tracts in which the poverty rate is at least 20%, or Tracts in which the median family income does not exceed 80% of the statewide median family income or the metropolitan area median family income, whichev-

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