The recently passed U.S. Tax Cut and Jobs Act of 2017 created the Opportunity Zone Program to provide incentives for investment in low income communities throughout the country. An Opportunity Zone is a designated geographic area, in which individuals can gain favorable tax treatment on their capital gains, by investing those funds (through a privately-created Opportunity Fund) into economic activities in the area.
The U.S. Treasury has designated 138 tracts in 79 Massachusetts communities as Opportunity Zones. The Opportunity Zone program presents an opportunity for private, tax-advantaged investment into areas of economic need, benefiting both residents living in the zones and private investors. Governor Charlie Baker announced the designations on May 18, 2018.
Gardner Ma. Is Approved with 2 Opportunity Zone Tract Number(s):Gardner: 25027707200, 25027707300. Within the Downtown Urban Renewal Plan Area.
Incentives for Development
There are three incentives for investors, which accumulate over the life of the investment. All three are federal incentives, and are non-competitive, so all qualified investors may claim them.
Temporary Deferral: Investors may defer capital gains on income reinvested into Opportunity Funds. The deferred gain must be recognized when the investor exits the fund, or on Dec. 31, 2026, whichever comes earlier.
Step-Up in Basis: If the investor remains within an Opportunity Fund for at least 5 years, their tax liabilities related to the original capital gains are reduced by 10 percent. If the investment is held in the Opportunity Fund for 7 years, this increases by an additional 5 percent, meaning that investors can reduce capital gains liability by 15 percent total.
Permanent Exclusion of Fund Gains: If an investor keeps their investment in an Opportunity Fund for 10 years, any gains from the Opportunity Fund are exempt from taxation.