Could the region benefit from Opportunity Zones?

Hank Hayes • Dec 3, 2018 at 6:30 PM

KINGSPORT – Curious business and government leaders filed into the MeadowView Marriott grand ballroom Monday morning to hear about a change in tax law billed as possibly “the largest economic development program in U.S. history.”

The Qualified Opportunity Zone community development benefit was created by The Tax Cuts and Jobs Act signed in 2017. The federal benefit is designed to encourage long-term investment in low-income communities through Qualified Opportunity Funds.

Investors choosing to re-invest their capital gains into opportunity funds can earn three types of federal capital gains tax benefits: temporary deferral, a step-up in basis, and permanent exclusion on capital gains accrued after the initial investment. Additionally, Opportunity Zone investments can be paired with almost any federal, state or local incentive. Qualifying investments include multifamily housing, industrial development, brownfield redevelopment, retail development, operating businesses and a variety of other investments.

Tennessee’s 176 tract designations are located across 75 counties that submitted recommendations to the Tennessee Department of Economic and Community Development. Four are in Sullivan County, including one along Industry Drive in Kingsport.

“There were certain pockets of the U.S. that were left out of the recovery, and left out of previous recoveries, too,” Alex Flachsbart, president and CEO of Opportunity Alabama, said of how the benefit was developed.

According to the Economic Innovation Group (EIG), the Opportunity Funds are private sector investment vehicles that invest at least 90 percent of their capital in Opportunity Zones.

“U.S. investors currently hold trillions of dollars in unrealized capital gains in stocks and mutual funds alone — a significant untapped resource for economic development,” EIG’s website says. “Opportunity Funds provide investors the chance to put that money to work rebuilding the nation’s left-behind communities. The fund model will enable a broad array of investors to pool their resources in Opportunity Zones, increasing the scale of investments going to underserved areas.”

“Never before has there been a federal incentive program that has been designed to capture the $6.1 trillion in unrealized capital gains … is this going to be a $6.1 trillion program? Probably not,” said Flachsbart.

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