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Our Tribe!
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The ante is high as there is a massive amount of capital gains that could be invested in Opportunity Zones. Based on estimates that U.S. households and corporations possess over $6 trillion in unrealized capital gains, some officials contend that the program has great potential to trigger an influential change in distressed communities.
Even if a portion of that amount of money was committed, it could possibly mean billions of dollars for poor areas across the country. That is because the program is specifically designed to increase economic opportunity by incentivizing new development in low-income urban and rural areas, says Leslie Anderson, president and CEO of the New Jersey Redevelopment
The NJRA is a multimillion-dollar independent financing New Jersey authority created to transform urban communities through direct investment and technical support.
In New Jersey, where the NJRA is based, many of these designated neighborhoods are predominantly black and have suffered from systemic inequality, Anderson says.
How Low-Income Communities Could Benefit
Anderson says Opportunity Zones give residents in these communities a chance to benefit in several important ways. First, the program can create new development with the potential to generate increased employment opportunities, more affordable housing, improved property values, and more comprehensive and higher quality services.
Unfortunately, without incentives, Anderson says investors often see low-income areas as too high-risk, making it very difficult for needed projects to attract the capital necessary to move forward.
“Opportunity Zones offer investors an incentive to invest in projects that can help to redevelop and transform these neighborhoods,” explains Anderson.
Yet, concerns remain from community advocates who feel the program could create gentrification pitfalls in some neighborhoods populated by low-income residents and minority groups.
For instance, these advocates foresee rising prices for housing or other new real estate development in targeted Opportunity Zones forcing current residents to leave those areas.
Anderson says she understands those concerns as does New Jersey Gov. Phil Murphy and Lt. Gov. Sheila Oliver. She says that New Jersey created an inclusive process that intentionally engages the communities that have been designated as Opportunity Zones.
The governor’s office is holding a series of community forums to educate residents and local businesses, answer questions, understand community needs, and address concerns.
Additionally, the NJRA will meet with local mayors to advise them on leveraging Opportunity Zones to generate projects that directly impact the people who need them most.
Anderson says the NJRA has used its financial resources to leverage nearly $4 billion in new investments, helping to redevelop some of New Jersey’s most economically challenged neighborhoods.
“We are also working to ensure that community-based organizations and existing businesses are full participants in the local implementation of the program and can partake in development opportunities.”
Another issue the NJRA is addressing is one of investors mainly focusing on larger cities to the detriment of smaller urban areas.
“We are making a major strategic push to help investors understand the value and importance at looking at all of the designated zones in the 75 municipalities in the state of New Jersey,” Anderson says.
The NJRA, in partnership with the Governor’s Office and the Department of Community Affairs (DCA), recently launched a website that serves as an online mapping tool and a comprehensive resource for residents, local governments, and potential businesses and investors.
Information for Black Investors and Taxpayers
Black investors looking at Opportunity Zones may do well to ponder these questions:
How does one become an Opportunity Zone investor?
Is there a minimum amount of income or capital gain from the sale of stock or other assets they must have to become such an investor?
In order to invest in an Opportunity Zone, Anderson says an investor must create a Qualified Opportunity Zone Fund, which is any investment vehicle organized as a corporation or partnership with the specific purpose of investing in Opportunity Zone assets.
The fund must hold at least 90% of its assets in the qualifying Opportunity Zones property.
Any tax-paying individual or entity can create an Opportunity Fund, through a self-certification process, which is an IRS form submitted with the taxpayer’s federal income tax return for the taxable year.
Anderson says it is important for black investors to know that they can pool their resources and form a Qualified Opportunity Zone Fund, something the NJRA can assist with.
If you are interested in how such an investment may impact your portfolio and taxes, contact a tax attorney and also get more information here.
