The Tax Cuts and Jobs Act passed at the end of December 2017 allows Governors in each state to designate certain census tracts as Opportunity Zones. The Opportunity Zone program was enacted to spur economic development by providing tax benefits to investors encouraging long-term private sector investments in low-income communities.
The IRS states that, "Opportunity Zones are designed to spur economic development by providing tax benefits to investors. First, investors can defer tax on any prior gains until the earlier of the date on which an investment is sold or exchanged, or December 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund. Second, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor would be eligible for an increase in basis equal to the fair market value of the investment on the date that the investment is sold or exchanged."
The City of Richmond census tract 376000, GEOID 06013376000 and census tract 365002, GEOID 06013365002, was granted designation by California's Governor as an Opportunity Zone. The below maps show City of Richmond owned Property, Richmond Housing Authority Property, Successor Agency Property, and vacant parcels located within both of Richmond's Opportunity Zone census tracts. Vacant parcels include residential, multifamily, commercial, and industrial parcels. Census tract 365002 spans both the City of Richmond and Unincorporated North Richmond.
DISCLAIMER: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
In early March of 2018, a preliminary recommendation of tracts were released for public comment. It included 798 tracts using the following criteria:
Focus on Poverty. Select only those tracts that meet the federal poverty criteria to focus efforts on those poorest areas of the state. In addition, within each county, focus on the poorest areas (top 30 percent of eligible tracts).
Areas with Business Activity. Designating tracts with at least 30 business establishments helps distinguish primarily residential tracts from those that are zoned to encourage more business investment.
Geographic Diversity. Include the tracts necessary for each county to have at least two designations.
After receiving public comments, Governor Brown recommended 879 tracts be designated as Opportunity Zones. Recommendations factored in the below information:
Adjust for High Median Incomes
Follow Local Guidance When Possible
Remove Tracts when Critiqued
Focus on Overlap with Existing Programs
Add Tracts When Requested
The U.S. Department of the Treasury has certified California's nominated eligible census tracts and has designated all 879 nominated tracts as Qualified Opportunity Zones under Internal Revenue Code (IRC) Section 1400Z-1(b)(1)(B).