The Tax Cuts and Jobs Act of 2017 created a new class of private investment vehicles called Opportunity Funds to encourage capital investments in projects located in economically disadvantaged census tracts.
These funds must be invested in the following:
Projects that are in census tracts designated as Opportunity Zones
Substantially all (90%) of the fund’s holdings must be invested in a Qualified Opportunity Fund (QOF).
The Town of St. Johnsbury is made up of two census tracts; #9574 & #9575. Both census tracts are Opportunity Zones (see below):
How Do Opportunity Zones Work?
What are the incentives for investors?
Temporary Deferral: An investor can defer capital gains taxes until 2026 by rolling their gains directly over into an Opportunity Fund
Reduction: The deferred capital gains liability is effectively reduced by 10% if the investment in the Opportunity Fund is held for 5 years and another 5% if held for 7 years
An Exemption: Any capital gains on subsequent investments made through an Opportunity Fund accrue tax-free as long as the investor stays invested in the fund for at least 10 years.
What are the major components?
Investments: Opportunity Funds make equity investments in businesses and business property in Opportunity Zones.
Funds: Opportunity funds are investment vehicles organized as corporations or partnerships for the specific purpose of investing in qualified Opportunity Zones
Zones: States and territories designated 25 percent of their eligible low-income census tracts as Opportunity Zones.
Investing in an Opportunity Zone
Who can invest?
Investors can be anyone who:
has capital gains and
has filed form 8949 with the IRS to set up an Opportunity Fund and
complies with the deployment timing rules
What can they invest?
(1) Qualified Opportunity Zone Operating Businesses which must have at least 50% of :
Employees
Sales
Property in Opportunity Zones
(2) Qualified Opportunity Zone Property which must have been
For more information about Opportunity Zones please contact The Town of St. Johnsbury Economic Development Office at (802) 748-3926
ext. 5 or jkasprzak@stjvt.com