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U.S. Treasury offers guidance to states on Opportunity Zones
October 22, 2018
Media Contact: Katie Bach
517-335-4786 | firstname.lastname@example.org
October 22, 2018
LANSING, MICH. – Michigan’s doors are open to investment. That’s the message from state leaders promoting the state’s 288 Opportunity Zones, after reviewing proposed rules and regulations released last week by the U.S. Department of the Treasury and Internal Revenue Service (IRS).
The Tax Cuts and Jobs Act established Opportunity Zones -- areas eligible for tax benefits aimed at spurring private investment, economic growth and jobs in the state’s distressed communities. In April, all eligible Michigan census tracts zones nominated by Gov. Rick Snyder were approved, while formal guidance was pending.
“With the federal guidance in hand, Michigan is one step closer to realizing the power of this incentivized investment in eligible communities,” Gov. Snyder said. “I look forward to seeing how creative investors use this unique economic development tool.”
Friday’s regulations clarified what gains qualify for deferral, which taxpayers and investments are eligible, the parameters for Opportunity Funds, and other guidance.
“We have had a lot of interest in Opportunity Zone projects, so these new proposed regulations will help investors and opportunity fund sponsors begin the process of better understanding this uncharted arena to advance new development projects in these designated areas,” said Earl Poleski, Executive Director of the Michigan State Housing Development Authority.
According to U.S. Treasury, the Opportunity Zone incentive offers capital gains tax relief to investors for new investment in designated areas. Investment benefits include deferral of tax on prior gains as late as 2026 if the amount of the gain is invested in an Opportunity Fund. The benefits also include tax forgiveness on gains on that investment if the investor holds the investment for at least 10 years. Opportunity Zones retain their designation for 10 years, but under the proposed regulations, investors can hold onto their investments in Qualified Opportunity Funds through 2047 without losing tax benefits.
MSHDA and the Michigan Economic Development Corporation – the state’s leading economic and housing development drivers -- were instrumental in formulating the state’s application. The agencies are working collaboratively to aggressively promote Opportunity Funds because they could have a demonstrable impact on the provision of affordable housing and economic development in some communities for years to come.
“This new tool will assist in fostering economic revitalization and promote sustained growth in Michigan’s eligible communities,” said MEDC CEO Jeff Mason. “I’m excited to see this program support our communities across the state from the Upper Peninsula to Michigan’s southern border.”
Interested entities will have to apply to establish an Opportunity Fund with U.S. Treasury, which is expected to issue more guidance before year’s end.
To see the latest guidance from U.S. Treasury and the IRS or to learn more about Michigan’s Opportunity Zones initiative, visit Michigan.gov/MSHDA and search Opportunity Zones or click here.