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“Opportunity Zones: Boom or Bust?”

October 2021

Article by Steven Wyatt on “Opportunity Zones: Boom or Bust?”

Business Facilities

In an article published in the September / October issue of Business Facilities, Atlanta-based Senior Counsel Steve Wyatt discusses how opportunity zones allow investors with capital gains to sell those assets and reinvest the gain in a QOZ with a bigger after-tax return.

“Congress occasionally provides incentives aimed at encouraging economic growth and investment in distressed communities by providing Federal tax benefits to businesses located within designated boundaries, including empowerment zones, the District of Columbia Enterprise Zone, and the Gulf Opportunity Zone among others,” explains Wyatt.

The article further outlines how the specific opportunity zone idea first emerged in the form of the “Investing in Opportunity Act”, introduced in Congress in 2017. The bill sought to “provide tax incentives for investments in the [opportunity] zones, including deferring the recognition of capital gains that are reinvested in the zones.” Additionally, Congress created this tax-favored opportunity in the Tax Cuts and Jobs Act of 2017 to help address the belief that persistent poverty and uneven economic recovery left too many American communities behind.

“If you have significant unrealized capital gains, selling those assets, realizing the gain, and investing the gain in the right opportunity zone investment results in a greater after-tax return compared to simply selling the appreciated assets and paying the tax—assuming an identical reinvestment opportunity in terms of risk and return,” said Wyatt.

To view the September / October issue, you may click here.