Federal Opportunity Zones
Opportunity Zones are an economic development tool established by Congress in the Tax Cut and Jobs Act of 2017 to encourage long-term investments in low-income communities nationwide. The program provides a federal tax incentives for taxpayers who reinvest unrealized capital gains into "Opportunity Funds", which are specialized vehicles dedicated to investing in low-income areas called "Opportunity Zones".
Opportunity Funds are a new class of private sector investment vehicles authorized to aggregate and deploy private investment into Opportunity Zones. Opportunity Funds allow U.S. investors holding unrealized gains in stocks and mutual funds to pool their resources in projects located in Opportunity Zones, which will be invested in rebuilding low-income communities. Opportunity Funds pool investments in Opportunity Zones. U.S. investors are eligible to receive:
- A temporary tax deferral for capital gains invested in an Opportunity Fund.
- A step-up in basis for capital gains reinvested in an Opportunity Fund.
- A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a qualified opportunity zone fund if the investment is held for at least 10 years.
Opportunity Zone Sites
The City of St. Cloud has the following three census tracts designated as "Federal Opportunity Zones".
Zone includes U.S. Highway 10 (24,000+ VPD) and MN Highway 23 (15,000+ VPD) BNSF Railway, east side of St. Cloud’s downtown (outlined in yellow above), and “Certified Shovel Ready” St. Cloud Airport Business Park. This zone offers commercial investment opportunity in the east side of St. Cloud’s downtown identified as the East Side Art and Industrial Transition Districts in the City’s 2016 Comprehensive Plan, industrial investment opportunity in the St. Cloud Airport Business Park, and commercial investment opportunity along the U.S. Highway 10 and MN Highway 23 corridors.
Zone includes U.S. Highway 10 (25,000+ VPD), BNSF Railway, and St. Benedicts Senior Community. This zone offers investment opportunity in affordable housing and commercial and industrial investment along the U.S. Highway 10 corridor.
Zone includes MN Highway 23 (32,000+ VPD), west side of St. Cloud’s downtown (outlined in yellow above), River’s Edge Convention Center, and St. Cloud State University (daily population of 14,000+ students). This zone offers investment opportunity in multiple catalyst sites for office and hotel development (shown in black stars above) as identified in the City’s 2016 Comprehensive Plan.
U.S. Treasury Department released its first guidance for the Opportunity Zones tax incentive on October 19, 2018. That guidance includes 74 pages of proposed regulations, a five page revenue ruling, an updated Q&A document and both a draft of Form 8996 for qualified opportunity funds and instructions for that form. The U.S. Treasury Department also alerted the public that we should expect some additional guidance for Opportunity Zones later this year. See the U.S. Treasury Department press release. Taxpayers may submit comments electronically via the Federal Rulemaking Portal (IRS REG-115420-18) before January 10, 2019. Additionally, a public hearing about the proposed rules has been scheduled for January 10, 2019.
- Department of Treasury letter to Governor Dayton, February 8, 2018
- Economic Development in the New Tax Law - Opportunities and Concerns by Economic Innovation Group
- Form 8949 (draft) and Instructions
- International Economic Development Council
- IRS Opportunity Zone Frequently Asked Questions
- Opportunity Zones Resources - Department of Treasury, Community Development Financial Institutions Fund
- Revenue Procedure - Designation of Opportunity Zones
- Revenue Ruling: 26 USC 1400Z-2.--Special Rules for Capital Gains Invested in Opportunity Zones
Contact Cathy Mehelich, Economic Development Director at 320.650.3111 with any questions or to request more information.