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OpportunityZones101
OpportunityZoneCommunitiesSummit
April 2019
1
OPPORTUNITY
ZONES
Opportunity Zones are low income census tracts
nominated by governors and certified by the
U.S. Departme...
120
DESIGNATED
OPPORTUNITY
ZONES IN
WISCONSIN
 Created
Through the
TaxCutsAnd
JobsAct Of
2017
 Governor In
Each State
De...
REGIONAL
OPPORTUNITY
ZONES
 Regional map image
4
• Merrill
• Wausau (2)
• Stevens Point (2)
• Marshfield
• Wisconsin Rapi...
MERRILL
5
WAUSAU
6
STEVENS
POINT
7
MARSHFIELD
8
WISCONSIN
RAPIDS
9
PORT
EDWARDS
10
NEKOOSA
11
HOWIT
WORKS
Taxpayers
canget
capital gains
tax deferral
(& more)
Qualified
Opportunity
Funds
for making
timely
investments...
BUSINESS
BENEFITS
1. Increased Access to EquityCapital
2. DiscountedCapital for Businesses
3. Potential to Combine with Ot...
COMMUNITY
BENEFITS
14
 Injection of Resources
 IncreasedTaxBase
 Expanded JobOpportunities
 Attraction of New Business...
WHATARE
CAPITALGAINS?
 A Capital Gain is a rise in the value of
a capital asset (such as an investment or real
estate) th...
INVESTOR
BENEFITS
1. Gain Deferral
Temporary deferral of inclusion for any capital gains
tax on money reinvested into an O...
CORE
ELEMENTS
Zones:
States and territories designated up to 25 percent of Low-Income
Community Census tracts in their sta...
OPPORTUNITY
FUNDS
Opportunity Funds are private sector investment
vehicles that invest at least 90 percent of their
capita...
OPPORTUNITY
FUNDS
 Self-Certification Process – No IRSApprovalRequired
 Opportunity Funds must be Formed as Corporations...
THEPLAYERS
Who Is Creating And Managing OpportunityFunds?
 Banks & Financial Institutions
 Real Estate Developers
 Fina...
OPPORTUNITY
FUND
INVESTMENTS
 FocusedOn Equity – RatherThanDebt
 ThreeTypes ofQualifiedOpportunityZone
Property
 Stock
...
TYPES OF
POTENTIAL
INVESTMENTS Commercial Real
Estate
Development and
Renovation in
OpportunityZones
Opening New
Businesse...
OPPORTUNITY
FUND
INVESTMENTS
 QualifiedOpportunity ZoneBusiness
 A business that owns or leases substantially all (70 %)...
ALLOWABLE
INVESTMENTS:
TANGIBLE
BUSINESS
PROPERTY
Opportunity Zone Business Property is tangible
property acquired after D...
INVESTMENT
EXAMPLE
Source: Economic Innovation Group, “The Tax Benefits of Investing in Opportunity
Zones,” January 2018.
...
EQUIVALENT
PRE-TAX ROI
COMPARISON
Opportunity
Zone
Standard
Investment
7% 10.5%
4.3% 7%
2.9% 5%
Opportunity Zones allow in...
WHAT’SNEXT?
 First IRS Guidance ReleasedOct. 19,2018
 More interpretation and clarification expectedApril
2019
 Solidif...
OPPORTUNITY
ZONE
TIMELINE
*PERCURRENTIRS
GUIDANCE
28
Deadline for 15% Increase in Basis
(7 YearBenefit)2019
2021
2026
2047...
www.wheda.com/opportunity-zones
Wisconsin Housing and Economic DevelopmentAuthority
https://Inwisconsin.com/doing-business...
CONTACTS
30
Gordon Crow, IOM
Executive Director
Centergy
Gcrow@centergy.net
715.551.6650
Scott Harrington,AICP
Principal P...
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Centergy Opportunity Zone Program Overview

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This presentation gives an overview of the Centergy Opportunity Zone program as well as a brief overview of current opportunity zones.

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Centergy Opportunity Zone Program Overview

  1. 1. OpportunityZones101 OpportunityZoneCommunitiesSummit April 2019 1
  2. 2. OPPORTUNITY ZONES Opportunity Zones are low income census tracts nominated by governors and certified by the U.S. Department of the Treasury into which investors can now put capital to finance new projects and enterprises in exchange for certain federal capital gains tax advantages. 2
  3. 3. 120 DESIGNATED OPPORTUNITY ZONES IN WISCONSIN  Created Through the TaxCutsAnd JobsAct Of 2017  Governor In Each State Designated Up To25% of the State’s Low- IncomeCensus Tracts as Opportunity Zones 3
  4. 4. REGIONAL OPPORTUNITY ZONES  Regional map image 4 • Merrill • Wausau (2) • Stevens Point (2) • Marshfield • Wisconsin Rapids • Port Edwards • Nekoosa
  5. 5. MERRILL 5
  6. 6. WAUSAU 6
  7. 7. STEVENS POINT 7
  8. 8. MARSHFIELD 8
  9. 9. WISCONSIN RAPIDS 9
  10. 10. PORT EDWARDS 10
  11. 11. NEKOOSA 11
  12. 12. HOWIT WORKS Taxpayers canget capital gains tax deferral (& more) Qualified Opportunity Funds for making timely investments in Qualified Opportunity Zone Business/Property which invest in 12 Graphic Source: Fikri, Kenan. Economic Innovation Group, “Opportunity Zone Program Overview.” Opportunity Zone Program Conference. Denver, CO. June2018.
  13. 13. BUSINESS BENEFITS 1. Increased Access to EquityCapital 2. DiscountedCapital for Businesses 3. Potential to Combine with OtherIncentives  TIF  Federal New MarketsTaxCredits(NMTC)  State and Federal HistoricTaxCredits  Wisconsin Economic DevelopmentCorporation (WEDC) and other StateTaxCredits  State and Federal HousingTaxCredits 13
  14. 14. COMMUNITY BENEFITS 14  Injection of Resources  IncreasedTaxBase  Expanded JobOpportunities  Attraction of New Businesses & Start-Ups  LoweredTIFDemands
  15. 15. WHATARE CAPITALGAINS?  A Capital Gain is a rise in the value of a capital asset (such as an investment or real estate) that gives it a higher worth than the purchase price.  The gain is not realized until the asset is sold.  Gains may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes. 15
  16. 16. INVESTOR BENEFITS 1. Gain Deferral Temporary deferral of inclusion for any capital gains tax on money reinvested into an OpportunityFund. 2. Partial Forgiveness Up to 15% reduction in capital gains tax obligation due to a step-up in basis if the investment is held in the Opportunity Zone for 5 to 7years. 3. Exemption from AdditionalGains Permanent exclusion from taxable income of capital gains from the sale or exchange of Opportunity Fund investment if that investment is held for at least 10 years. 16
  17. 17. CORE ELEMENTS Zones: States and territories designated up to 25 percent of Low-Income Community Census tracts in their state to be certified by Treasury as OpportunityZones. Funds: Opportunity Funds are self-certified investment vehicles organized as corporations or partnerships for the purpose of investing in qualifiedOpportunityZone assets. All investments that seek to take advantage of the provision must flow through Funds. Investments: Funds make equity investments into businesses and property in OpportunityZones. Qualified assets are the stocks of qualified companies, interests of qualified partnerships, or direct ownership of qualifying tangible property. 17
  18. 18. OPPORTUNITY FUNDS Opportunity Funds are private sector investment vehicles that invest at least 90 percent of their capital in OpportunityZones. 18
  19. 19. OPPORTUNITY FUNDS  Self-Certification Process – No IRSApprovalRequired  Opportunity Funds must be Formed as Corporationsor Partnerships  Individuals with Capital Gains can Create theirown Opportunity Fund  Real Estate Developers canCreate ProjectSpecific Opportunity Funds  Large Institutions are Creating Multi-investor/Multi-asset Opportunity Funds  All Funds Must Pass AssetsTest – 90% of Assets mustbe Invested in Qualified OpportunityZoneProperty 19
  20. 20. THEPLAYERS Who Is Creating And Managing OpportunityFunds?  Banks & Financial Institutions  Real Estate Developers  FinancialServices  PublicAccountingGroups  Municipalities  Non-profits/InterestGroups  Individuals 20
  21. 21. OPPORTUNITY FUND INVESTMENTS  FocusedOn Equity – RatherThanDebt  ThreeTypes ofQualifiedOpportunityZone Property  Stock  Partnership Interest  Tangible Business Property 21
  22. 22. TYPES OF POTENTIAL INVESTMENTS Commercial Real Estate Development and Renovation in OpportunityZones Opening New Businesses in Opportunity Zones Expansion of Existing Businesses Into Opportunity Zones Large Expansions of Businesses AlreadyWithin Opportunity Zones 22 Graphic Source: Fikri, Kenan. Economic Innovation Group, “Opportunity Zone Program Overview.” Opportunity Zone Program Conference. Denver, CO. June2018.
  23. 23. OPPORTUNITY FUND INVESTMENTS  QualifiedOpportunity ZoneBusiness  A business that owns or leases substantially all (70 %) of its tangible property in Qualified Opportunity Zone Business Property.  Must also generate at least 50 percent of its total gross income from active business conduct with a substantial portion of the intangible property of the business used in the active conduct of any such business.  Less than 5 percent of the average of the aggregate unadjusted bases of the property can be attributable to nonqualified financial property.  Additionally, private clubs, golf courses, and certain vice businesses are not eligible for investment by an Opportunity Fund. 23
  24. 24. ALLOWABLE INVESTMENTS: TANGIBLE BUSINESS PROPERTY Opportunity Zone Business Property is tangible property acquired after Dec. 31, 2017 that is used in a QualifiedOpportunity Zone trade or businessand either the use of the property in the Qualified OpportunityZone originates with the fund, or the fund substantially improves the property.  Substantially Improves: Measured by the Opportunity Fund’s additions to the adjusted basis of the building  Does not include land 24
  25. 25. INVESTMENT EXAMPLE Source: Economic Innovation Group, “The Tax Benefits of Investing in Opportunity Zones,” January 2018. 25
  26. 26. EQUIVALENT PRE-TAX ROI COMPARISON Opportunity Zone Standard Investment 7% 10.5% 4.3% 7% 2.9% 5% Opportunity Zones allow investors to accept lower annual returns to achieve the same post-tax value per dollar invested. 26
  27. 27. WHAT’SNEXT?  First IRS Guidance ReleasedOct. 19,2018  More interpretation and clarification expectedApril 2019  Solidify the ProgramTimeframe  PrepareCommunityProspectus  Create Companion IncentivePrograms  Identifying Potential Projects  EstablishingOpportunityFunds  CreativeOpportunity ZoneDeals 27
  28. 28. OPPORTUNITY ZONE TIMELINE *PERCURRENTIRS GUIDANCE 28 Deadline for 15% Increase in Basis (7 YearBenefit)2019 2021 2026 2047 Deadline for 10% Increase in Basis (5YearBenefit) Deadline to PayTax on DeferredGain Can Continue to Hold Investment in Opp. Zone until Dec. 31,2047
  29. 29. www.wheda.com/opportunity-zones Wisconsin Housing and Economic DevelopmentAuthority https://Inwisconsin.com/doing-business-in- wisconsin Wisconsin Economic DevelopmentCorporation www.acceleratorforamerica.com/OZGuide Accelerator forAmerica www.ncsha.org NationalCouncil of State HousingAgencies www.novoco.com Novogradac USEFUL RESOURCES
  30. 30. CONTACTS 30 Gordon Crow, IOM Executive Director Centergy Gcrow@centergy.net 715.551.6650 Scott Harrington,AICP Principal Planner Vandewalle &Associates SHarrington@Vandewalle.com 608-255-3988 Barb Fleisner LaMue,CEcD,EDFP Vice President, Business & Community Development Wisconsin Economic DevelopmentCorporation Barb.lamue@wedc.org 608.210.6760 KateWolf Business and Community EngagementTechnical Officer Wisconsin Housing and Economic DevelopmentAuthority kate.wolf@wheda.com (414) 227-2291

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