Colorado eyes creating new opportunity zones

Colorado’s economic development office is scrambling to craft a list of areas in the state eligible for new federal tax breaks with the potential to funnel billions of dollars into struggling areas.

Congress established the Opportunity Zone program under the Tax Cut and Jobs Act late last month in an effort to assist low-income rural and urban areas left behind in the economic recovery.

The program allows investors to defer paying capital gains taxes provided they invest that money in lower-income census tracts that states designate. If held for more than 10 years, any capital gains taxes on the new investment are waived.

“It was buried in the tax bill, but it is a huge deal,” said Stephanie Copeland, director of the Colorado Office of Economic Development.

The program designates low-income areas as census tracts where 20 percent or more of the population live in poverty or where the median family income is at 80 percent or less of the state median.

Governors can designate up to a quarter of those lower-income areas as an opportunity zone. In Colorado, about 500 census tracts meet the criteria, and out of those, the state will have 125 to include in the program.

“Almost every community could have an opportunity zone,” said Jeff Kraft, the

state’s director of business funding and incentives.

But the analysis behind parsing the zones will be economic and not just geographic or political.

Some census tracts are so isolated or economically dormant that no kind of tax break would attract investment. Others may border redeveloping areas, like Denver’s River North neighborhood, which would win investment without tax breaks. Including them could also open the program to abuses.

The key will be including areas where the tax breaks might actually spur investment that wouldn’t have taken place otherwise. And all the while, Colorado will have to compete with zones in other states to win inves- tor interest.

The Economic Innovation Group, which has researched the benefits of the zone program, estimates that between 2010 and 2014, five metro areas alone accounted for half of the jobs gained in the U.S.

Conversely, about one in six Americans, around 52.3 million people, live in areas that are economically distressed. About half of those communities had fewer jobs and businesses in 2015 than they did in 2010. In Colorado, the Arkansas Valley represents a distressed area.

“We have three months to make this happen,” said Kraft, and a month already has passed. After Colorado submits its zones to the U.S. Treasurer, another 30 days are slotted for federal review.