Opportunity Zones & Funds: Good News for the Eastern Shore?
The US Congress on December 2, 2017 passed a substantial tax cut largely benefiting corporations and the very wealthy. Some temporary savings were also provided for those earning less. The legislation added another $1.4 trillion to the current deficit, but is credited with helping stimulate the American economy for the past year. Also included in the Act were sections creating the Opportunity Zones and Opportunity Funds.
The principal purpose of this provision was to attract capital gains realized on the sale of real property, stocks or art works, etc., by offering a reduction from the 23.8% federal tax. The amount saved varies from 10% to the total tax due, depending on the number of years the capital gains are kept in the Opportunity Funds (5, 7 and 10 years). At 10 years, the investor can recover their original investment plus any profit and pay no capital gains tax at all.
The US Treasury used census data to identify over 8000 geographic segments (the Opportunity Zones) that had yet to recover from the Great Recession. Thirty-one percent of the American population lives in the Zones. All 9 counties of Maryland’s Eastern Shore host an Opportunity Zone.
Under the Congressional Act, multiple Opportunity Funds can be organized as a legal entity in the Zones, and if approved by the US Treasury can receive unrealized capital gains of any amount.
These funds are to be used to make equity investments in the Zones aimed at economic development with clear community benefits, e.g. affordable housing, facilitating education and training, public transportation, health care, funding entrepreneurial start-ups, etc. The Funds’ investments are not grants and should deliver returns to the investors. The expectation is that large sums of money will be attracted to the Opportunity Funds and will be used to achieve substantial socio-economic advances.
There is no question that potentially the Zones and the Funds could be very good news for the Eastern Shore. However, success depends on how well organized the funds are, whether the founders understand their zones’ needs well and have access to others with financial expertise and marketing experience.
Common Sense for the Eastern Shore




