Opportunity Zones are districts where investors can receive significant federal tax breaks and deferrals for investing in a variety of economic development projects.
The Federal Tax Cuts and Jobs Act of 2017 allowed each state’s governor to nominate certain census tracts as Opportunity Zones; Kentucky was one of the first states to have tracts approved.
Covington has five Opportunity Zones, providing unique possibilities throughout the City.
Opportunity Zones are effective for 10 years and are intended to assist both new and existing businesses.
Designation as an Opportunity Zone allows certain investors in these zones to realize significant federal tax advantages, specifically:
A temporary tax deferral for capital gains reinvested in an Opportunity Fund. The deferred gain must be recognized on the earlier of the dates on which the opportunity zone investment is sold or December 31, 2026.
A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis of the original investment is increased by 10% if the investment in the qualified opportunity zone fund is held by the taxpayer for at least 5 years, and by an additional 5% if held for at least 7 years, excluding up to 15% of the original gain from taxation.
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. (Note: this exclusion applies to the gains accrued from an investment in an Opportunity Fund, not the original gains).
Speak with an expert: The Federal Government has only released draft regulations for Opportunity Zones. We highly encourage interested parties to meet with their experienced tax accountant or tax attorney to discuss options and learn the most up to date regulations and amendments.
Set up a Qualified Opportunity Fund: Investments in Opportunity Zones must be made through Qualified Opportunity Funds – an investment vehicle set up as either a partnership or corporation for investing in eligible properties, projects, or businesses located in one or more Opportunity Zone.
Investors must contribute only money to Opportunity Funds that has been generated through prior investments.
To become a Qualified Opportunity Fund, an eligible taxpayer self-certifies (meaning, no approval or action by the IRS is required). To self-certify, a taxpayer merely completes a form (IRS Form 8996) and attaches that form to the taxpayer’s federal income tax return for the taxable year.
Keep checking back for additional information, important dates, and resources!
Covington Opportunity Zones
Opportunity Zone - 607
Opportunity Zone - 609
Opportunity Zone - 638
Opportunity Zone - 670
Opportunity Zone - 671
Cincinnati Enquirer: Opportunity Zones offer new investment options
New York Times: Opportunity Zones offer Tax Breaks and, Maybe, Help for Communities
Forbes: Opportunity Zones Offer Powerful Potential for Investors and Communities
U.S Dept. of Treasury: Guidance on Opportunity Zones
Kentucky Cabinet for Economic Development:
Think Kentucky Fact Sheet
Opportunity 360: Opportunity Zone Explorer