California's overall economic growth and increase in jobs has outpaced the U.S... in general, often ranking the state within the top five states in terms of its economic conditions. Most recently, California's $2.9 trillion GDP in 2018 has resulted in the state being ranked as having the fifth largest economy in the world. This success, however, has not been consistent throughout the state with many regions and certain population groups still experiencing recession-level poor economic conditions.
Federal tax provisions in the Tax Cuts and Jobs Act of 2017 could provide an incentive for investors to deploy capital in lower income neighborhoods. Section 1400Z of the Internal Revenue Code allows a taxpayer to defer tax liability by depositing capital gains in a qualified Opportunity Fund. These Opportunity Zones are comprised of low-income census tracts which were recommended by Governors and approved by the U.S. Treasury as meeting certain income and/or poverty requirements. [Disclaimer: The Assembly Jobs Committee does not provide tax, legal, or accounting advice. This website has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. ]
Governors were authorized to nominate up to 25% of their respective states’ eligible low-income census tracts for designation. Up to 5% of the 25% of the nominated census tracts could be from census tracts adjacent to the eligible low-income census tracts. Once approved by the US Treasury, census tracts remain designated for a term of 10 years. California has 879 of the nearly 9,000 designated Opportunity Zones in the U.S. This is a link to California census tracts designated as Opportunity Zones.
Many communities are looking at how they can leverage Opportunity Zones to bring new investments to these often overlooked neighborhoods. However, development in low-income areas has shown to be difficult and tax benefits can be eliminated if Opportunity Zone fund moneys are improperly deployed.
Communities will need to identify and remove, where possible, development impediments if they are to become investment ready and competitive with the nearly 9,000 census tracts outside of California which have been federally designated as Opportunity Zones. Recently enacted legislation, SB 635 (Hueso), calls for high level engagement by the Governor's Office of Business and Economic Development, among other agencies, on Opportunity Zones. One outcome is the establishment is a California Website to assist communities, investors, and community development partners. At this website, communities find information about how to prepare for Opportunity Zone investments. Investors can access tools for mapping Opportunity Zones in California and even identify featured California investment opportunities.
PROGRAM UPDATES *** PROGRAM UPDATES
Released Date: October 21, 2019
EDA Publishes FY 2020 Public Works and Economic Adjustment Assistance Programs Notice of Funding Opportunity. The federal Economic Development Administration (EDA) is soliciting applications for construction, non-construction, planning, technical assistance, and revolving loan fund projects under EDA’s Public Works program and Economic Adjustment Assistance program. This includes supporting projects in Opportunity Zones.
Released: July 16, 2019
SEC Staff provide guidence on federal and state securies laws.