Q&A WITH MATT CAMPBELL
Opportunity zones are powerful new tax savings opportunity
Q: As a result of new federal tax legislation, newly designated Opportunity Zones now exist throughout the U.S., including in downtown Oklahoma City, Tulsa and other areas throughout the state. What are the tax advantages of Opportunity Zones?
A: Any taxpayer that has capital gains from any source
(including stock sales) can defer their gain from federal taxation if they invest the capital gains in an Opportunity
Zone in a qualifying investment such as a new shovel-ready project or for a substantial rehabilitation of qualifying property. The tax deferral ends when the replacement investment is sold, or must be recognized no later than Dec. 31, 2026 (regardless of how long the investment is held).
Q: Are there any other benefits of the program?
A: This actually gets even better. If the replacement property is held for five years, the deferred tax bill is reduced 10 percent and if the replacement investment is held another two years, another 5 percent is trimmed off the deferred tax bill. If the replacement investment is held for a total of 10 years, the investor gets a step-up in basis to fair market value and the Opportunity Zone interest can be sold tax free. This is a must-consider, tax planning strategy for anyone with capital gains in the current year.
Q: Who is eligible to participate?
A: Treasury regulations are expected to be issued later this year, but for now any U.S. taxpayer with capital gain is eligible to take advantage of these benefits so long as the funds are deployed into a qualifying Opportunity Zone investment within 180 days of the capital gains triggering event. The purpose of the program is to allow investors an opportunity to access unrealized capital gains to stimulate investment in communities throughout the U.S. and its territories. These Opportunity Zones should not be confused with federal Empowerment Zones or other federal or state incentive zones that have their own specific requirements and benefits.
Q: Where are the zones in the Metro area?
A: In the Oklahoma City Metro, Opportunity Zones include the Central Business District, Innovation District, much of northeast Oklahoma City including the Adventure District, many parts of south Oklahoma City and sections of Midwest City, Spencer and Norman.
PAULA BURKES, BUSINESS WRITER