Page 14 - September October 2018 Disruption Report Flip Book

TRUMP ADMINISTRATION SEJPATN.U-AORCYT.20210818
nominate their QOZs by 21 March, 2018 or to request a 30-day extension. Subsequent extensions were granted but the final approved list is expected to be published before the end of May 2018.
... The new tax provisions related to Opportunity Zones are unusual in that they are designed to incentivize investors to roll over their existing gains into neighborhoods, which may not otherwise capture their attention. The law is all about leveraging ‘patient capital’ to stimulate the redevelopment and revitalization of urban brownfields and rural areas lagging behind the national rate of economic expansion.
... The Trump Administration has encountered challenges in moving traditional infrastructure legislation through the Congress due to the absence of a dedicated revenue source to pay for the public works. We believe the Tax Cuts and Jobs Act, through the Opportunity Zone program, will leverage private sector capital very efficiently. The rehabilitation of distressed neighborhoods and communities may well represent the current Administration’s most significant contribution to infrastructure investment to date. Real Estate Markets, Jonathan Woloshin, Thomas McLaughlin and Andrew Lee, 05/18/18)
Anne Canfield, partner with Michael Best Stratgies and co-owner of Canfield Press, added:
“Often missed in the written discussions of the benefits afforded investors in Growth Opportunity Zones are the benefits of the Time Value of Money – i. e., the NPV implications of deferred tax liabilities.
Example: A taxpayer located in a state that follows Federal guidelines who has a $1,000,000 gain.
If the taxpayer paid the capital gains tax in 2018 (20% Fed LTCG, 3.8%
NIT, 5-6% State LTCG), the taxpayer would have an estimated tax liability
of almost $300,000 in 2018 dollars. However, if the taxpayer deferred the capital gains tax by investing in an Qualified Opportunity Fund and held the investment for 7 years, the taxpayer would wind up paying 30% on $850,000 or $255,000. (If the investment were held for 10 years or more, the capital gains tax would eliminated.)
At first glance, it might appear that taxpayers would realize a tax savings of $45,000, but that does not take into account the value of deferring the tax.
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