Qualified Opportunity Zones
A portion of Fremont County falls into the category of Qualified Opportunity Zones, which is great news for our economy and for potential investors!
So what is a Qualified Opportunity Zone? Put simply, it’s an area designated for economic development with tax incentives attached to it. With these changes, Lander is set to take advantage of the new section of the tax code IRS: 1400Z-1 and 1400Z-2.
Timothy Scott (a Republican Senator and tech billionaire), and Sean Parker (the creator of the Economic Innovation Group think tank) created this program’s framework, which brought bipartisan support.
The new sections allow investors to get tax incentives both immediately and long term on their real estate investments. This helps stimulate economic growth in these select communities.
Deferral and gains – this is a win-win! In fact, treasury secretary Steve Mnuchin estimates that there will be around $100 billion flowing into these new opportunity zones because of these incentives.
Great! There is money to be made! So what do the actual numbers look like? How does this work in the real world?
First, you’ll want to start an Opportunity Fund. Qualified Opportunity Funds are the vehicles for investing in these Opportunity Zones. These funds need to hold at least 90% of the assets of the zone, but this allows for investors to pool funds and increase the project size. After the realized gain, investors have 180 days to invest those funds. This can be as straightforward as a Self Certified Corporation or Partnership.
Since this is a very simplified explanation, we recommend having a qualified accountant help you set yours up if you’re interested in doing so.
Then this tax season, tell your accountant to file showing capital gains rolling into your Opportunity Fund. On April 15, 2027 you would then pay the deferred gains. By December 2028, 10 years after the original investment, the Fund will be eligible for tax-free sale!
Here’s an example in numbers:
Invest $100,000 in 2019 → sell after 12/24 → pay taxes on $90,000
→ sell after 12/26 → pay taxes on $85,000
→ sell after 10 year hold → increase basis by 15%
Pay NO taxes on new gains.
Since we have no personal or corporate income tax, and low sales and property taxes, Wyoming is the ideal place to invest in this opportunity. As an added bonus, we also have one of the nation’s largest sovereign wealth funds.
What do these properties or businesses have to look like?
First, these investments have to be equity investments, not debt. Additionally, the property’s original use must commence with the Fund OR you must substantially improve the property within 30 months of acquisition. Here the focus is in encouraging value-adding renovations and ground up development.
Who benefits? Well, really, everyone! The community as a whole benefits, but in terms of investors, anyone who realized capital gains. There are many upsides to this opportunity; bringing work and new businesses to our area is a phenomenal prospect that benefits the entire area.
We are excited to see if anyone takes advantage of this opportunity. Roughly half of Lander falls into the Qualified Opportunity Zone, and we think there are great possibilities ahead!