Governors’ offices across the country are scrambling to meet the March 21 deadline to give the US Treasury Department their nominations for communities to take part in the new Opportunity Zone program. Created by last year’s tax bill, it offers investors tax breaks in exchange for investing in high-poverty communities. Governors can nominate up to a quarter of their state’s low-income census tracts, with Treasury expected to rubber-stamp the choices.
The program focuses on capital gains taxes paid on profits made selling investments like real estate or stocks, which are normally taxed at 20 percent plus a 3.8 percent surtax. Investors who roll their capital gains into an Opportunity Fund invested in the designated zones will be able to defer and reduce tax payments and avoid some taxes altogether.
Proponents say the program will free up some of the estimated $6 trillion in unrealized capital gains in stocks and mutual funds alone held by individuals and businesses while bringing needed investment to communities in need. The so-called “O-Funds” can invest in a wide variety of assets, from stocks of new companies to real estate. Kevin Hassett, chair of Trump’s Council of Economic Advisers, told the New York Times that “if it’s successful, we’ll look back 10 years from now and say this was one of the most important parts of the tax bill, and one we didn’t talk nearly enough about.”