Through the Tax Cuts and Jobs Act of 2017, the U.S. government will be offering taxpayers certain incentives designed to encourage long-term investments in distressed communities and government partitioned low-income areas across the country.
These areas, called Opportunity Zones, are designated by the governor of each state and could literally be right in your surrounding area or next door to where you live.
If done correctly, investments in Opportunity Zones have the potential to pull millions of Americans out of poverty and generate both financial and social returns for investors.
These investments are pooled into certified investment vehicles called Opportunity Zone Funds, which are required to have at least 90% of their assets invested in these zones.
This is a significant incentive that should prove to be transformative for these communities and lucrative for investors.
Opportunity Zones are determined by the states and approved by the government.
However, governors are limited in their selections and can only name 25% of their state’s low-income areas as Opportunity Zones, which then hold the designation for 10 years.
However, this also means that very few guardrails are in place for these fund managers aside from applying the proper hold period and investing at least 90% of the Fund’s holdings within the designated Opportunity Zone boundaries.
Post-investment results for residents such as a higher quality of life, fueled by economic diversity and activity, enhanced by infrastructure and improved housing supply, more job opportunities that collectively help raise their standard of living.
Ultimately, the progress of these low-income regions rests upon not only the action of the investment community at large, but also and more importantly, on the fiduciaries, the stewards of capital, the future Opportunity Zone fund managers themselves who are gearing up to deploy investment into these regions.