Connecticut Scores Big On Opportunity Zone Designation
HARTFORD, CT —Connecticut batted a thousand, getting all 72 of the areas it nominated as Opportunity Zones to induce long-term investments in low-income communities approved by the U.S. Treasury Department.
Twenty-seven different municipalities earned the designation, topped by 10 in the city of Hartford and seven in New Haven and Bridgeport, five in East Hartford and five in Stamford.
The program provides a federal tax incentive for investors to reinvest unrealized capital gains into opportunity zones through opportunity funds.
Under the terms of the program, the governor of each state must submit a plan to the federal government designating up to 25 percent of the qualified census tracts in their state as opportunity zones, which is then subject to approval of the Secretary of the Treasury.
“Since day one, my administration recognized the critical need to revitalize our cities and turn them into engines for economic growth,” Governor Dannel P. Malloy said.
“Our urban centers are now ripe with potential, and the investments made possible through this program will further strengthen our resolve to foster growth in Connecticut cities,” Malloy added. With these approvals, we are pleased that all of Connecticut’s opportunity zones can now move forward.”
Qualified census tracts are those that have a poverty rate of at least 20 percent of a median income that does not exceed 80 percent of the area median income.
The opportunity fund model encourages investors to pool their resources in opportunity zones, increasing the scale of investments going to underserved areas. These funds may seed new businesses, expand existing firms, or undertake real estate development.
Qualifying investments may include a broad range of commercial and residential investments, such as transit-oriented development, affordable housing and mixed-use development, and energy efficiency and renewable energy projects on public and private assets.
In exchange for their investments, opportunity fund investors are able to decrease their federal tax burden through the preferential treatment of capital gains.
“These opportunity zones are a win for Connecticut and we can’t wait to see neighborhoods across the state benefit from this program, a joint statement issued by Connecticut’s Congressional delegation said.
“Well-executed public-private partnerships can create jobs, help new and growing businesses, and spur private investment throughout our state,” the Congressional joint statement continued.
Department of Economic and Community Development Commissioner Catherine Smith said the approval “is an important step forward in attracting new investment to these zones, which can spur a wide variety of revitalization, new investment and economic development throughout our state.”
Department of Housing Commissioner Evonne M. Klein said the Opportunity Zones will allow Connecticut to attract more investments in strategically targeted neighborhoods.
“Promoting economic growth means we’re investing across the board – in housing, in business, in transportation, and more,” Klein said. “With partnerships at every level of government and in the private sector, we’re promoting a state where residents will want to live, work, and raise a family.”
Treasury Secretary Steven Mnuchin said attracting private investment to these low-income communities “will lead to their economic revitalization, and ensure economic growth is experienced throughout the nation.”
The Trump administration “will continue working with States and the private sector to encourage investment and development in Opportunity Zones and other economically disadvantaged areas and boost economic growth and job creation,” he added.
Qualified Opportunity Zones retain this designation for 10 years. Investors can defer tax on any prior gains until no later than Dec. 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund, an investment vehicle organized to make investments in Qualified Opportunity Zones.
In addition, if the investor holds the investment in the Opportunity Fund for at least 10 years, the investor would be eligible for an increase in its basis equal to the fair market value of the investment on the date that it is sold.