The federal Opportunity Zone program represents one of the most comprehensive place-based economic and community development initiatives in decades. Passed as part of the Tax Cuts and Jobs Act of 2017, the program has the potential to unleash trillions of dollars in unrealized capital gains into underdeveloped census tracts nationwide.
At this month’s meeting of the Buffalo Niagara Partnership’s Development Advisory Council, members focused on the legal mechanics of the program, its tax advantages, and how our region’s municipal and county leaders plan to guide investment under the program.
- Pietra Zaffram, Member at Harris Beach, who detailed the legal underpinnings of the program, and outlined areas that will be clarified in upcoming IRS regulatory hearings
- Gregory Urban, Partner at Dopkins & Company, who illustrated the significant tax advantages of the program and provided real-world investment examples
- Maggie Hamilton-Winship, the Director of Strategic Planning at the Town of Amherst, and Alex Carducci, the Real Estate Financial Analyst at the City of Buffalo, each outlined what their respective municipalities are doing to attract and bolster potential investments into their municipality’s opportunity zones.
An overview of the Opportunity Zone Program
The Opportunity Zone program is designed to guide economic development and job creation by encouraging long term private investment in low-income communities that have experienced a lack of investment and business growth.
Qualified Opportunity Zones (QOZ) are low-income census tracts—nominated by governors and certified by the U.S. Department of the Treasury—into which investors can put capital to work financing new development projects and businesses in exchange for capital gains tax advantages.
The Opportunity Zone program is less restrictive than tax incentives. That’s because Qualified Opportunity Funds (QOF), the investment vehicle for investing in QOZs:
- can self-certify without IRS approval,
- will be predominantly privately managed, and
- have no limit on the total amount of tax credit available
What are the tax benefits of the Opportunity Zone Program?
Taxpayers with taxable capital gains from the sale of any asset who reinvest those gains within 180 days of the date of sale of the asset into a QOF will become eligible to receive significant tax benefits.
There are three primary tax benefits in the program:
- a temporary deferral of capital gains tax,
- a reduction in the total taxable amount of the reinvested capital gain, and
- elimination of tax liability on any capital gains accrued through the investment in the opportunity fund
How can the Opportunity Zone Program help Buffalo Niagara developers?
The Opportunity Zone program will unlock development potential and further propel the redevelopment of our legacy city. The Opportunity Zone program allows investment into parcels that are directly adjacent to a qualified Census tract. Additionally, many old or abandoned industrial sites are included within the opportunity zone designations, which will allow for additional redevelopment opportunities on those sites.
These maps shows the Opportunity Zone designations in Niagara and Erie Counties:
There are 32 opportunity zones in the Buffalo Niagara region, with 26 in Erie County and 6 in Niagara County.
Designated areas in the region are located in the Buffalo Central Business District, South Buffalo, the West Side, portions of Elmwood Village, the East Side, and portions of Amherst, Tonawanda, Lockport, and the city of Niagara Falls.